Transcode Therapeutics Inc

(1) Nature of Business and Liquidity

TransCode Therapeutics, Inc. (the “Company” or “TransCode”) was incorporated on January 11, 2016, under the laws of the State of Delaware. TransCode is a biopharmaceutical company focused primarily on developing and commercializing innovative drugs for treating and identifying cancer. TransCode commenced its first clinical trial in August 2023. The Company’s lead therapeutic candidate, TTX-MC138, comprises an oligonucleotide conjugated to an iron oxide nanoparticle designed to be administered by infusion to inhibit the ability of metastatic tumor cells to survive. The goal of the therapy, if approved, is to achieve durable disease regression and long-term patient survival.

From its founding until mid-2021, the Company was engaged in organizational activities, including raising capital, and limited research and development (“R&D”) activities. On July 13, 2021, the Company completed the initial public offering (“IPO”) of its common stock, raising $28.75 million in gross proceeds. Since the IPO, the Company has increased its R&D activities, hired additional employees, and begun more traditional operations.

The Company has not generated revenues and has not yet achieved profitable operations, nor has it ever generated positive cash flows from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. The Company is subject to those risks associated with any early-stage biopharmaceutical company that requires substantial expenditures for research and development. There can be no assurance that the Company’s research and development projects will be successful, that products developed will obtain necessary regulatory approvals, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital.

Going Concern

These financial statements have been prepared under the assumption that the Company will continue as a going concern which contemplates the continuation of operations, realization of assets and liquidation of liabilities in the ordinary course of business. Due to the Company’s recurring and expected continuing losses from operations, the Company has concluded there is substantial doubt concerning its ability to continue as a going concern within one year of the issuance of these financial statements without additional capital becoming available. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.

To date, the Company has incurred substantial losses and negative cash flows from operations. It expects to continue to incur operating losses for the foreseeable future as it pursues development of its lead therapeutic candidate and other programs. Operating losses are expected to continue until such time, if ever, that the Company can generate significant revenue from product candidates currently in development. The Company is unable to predict the extent of any future losses or when the Company will become profitable, if ever.

For the nine months ended September 30, 2024, net cash used in operating activities was approximately $10.2 million and the Company’s net loss was approximately $10.8 million. As of September 30, 2024, the Company had an accumulated deficit of approximately $57.3 million and approximately $1.9 million in cash.

The Company plans to continue development of its lead therapeutic candidate and other candidates, and explore strategic partnerships. Management believes that current cash is sufficient to fund operations and capital requirements into the fourth quarter 2024, but does not believe that existing cash will be sufficient to fund requirements for a full 12 months from the date of these financial statements.

To support continued operations, the Company will require additional capital; however, the Company cannot be certain that additional funding will be available on acceptable terms, or at all. Through the date of these financial statements, the Company’s primary source of capital was from the sale of equity securities, previous sales of convertible promissory notes and funds received under an SBIR Award from April 2021 through March 2024. For the foreseeable

future, the Company plans to fund its operations by continuing to raise additional capital, primarily through sales of equity or debt, and from funds that may be awarded under government and other grants. In September 2024, the Company received its second NIH Award (the “2024 Award”), a Direct to Phase II SBIR Award, from the National Cancer Institute of the NIH. The 2024 Award is to support IND-enabling and clinical trial activities in the Company’s Phase1a clinical trial with its lead candidate, TTX-MC138, overtwo years. The total 2024 Award is for $1,999,972 of which $1,011,207 applies to the first year and $988,765 applies to the second year.

To the extent the Company raises additional funds by issuing equity securities, its stockholders may experience significant dilution. Any debt financing, if available, may include potentially dilutive features and include restrictive covenants that impact the Company’s ability to conduct business. If the Company is unable to raise additional capital when required or on acceptable terms, the Company may have to consider additional cost reduction strategies, which may include, among others, amending, delaying, limiting, reducing, or terminating development programs, and the Company may need to seek an in-court or out-of-court restructuring of its liabilities. In the event of such future restructuring activities, holders of the Company’s common stock and other securities will likely suffer a total loss of their investment.

(2) Summary of Significant Accounting Policies

The interim financial statements included herein are unaudited. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). In the opinion of management, these financial statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair presentation of the financial position of the Company at September 30, 2024, its results of operations for the three and nine months ended September 30, 2024 and 2023, and its cash flows for the nine months ended September 30, 2024 and 2023. The interim results of operations are not necessarily indicative of the results to be expected for a full year. These interim financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2023, and notes thereto contained in the Company’s Annual Report on Form 10-K, filed with the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to such rules and regulations relating to interim financial statements.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include but are not limited to the valuation of share-based compensation, income from grants, and accrued research and development costs. Future events and their effects cannot be predicted with certainty; accordingly, accounting estimates require the exercise of judgment. Accounting estimates used in the preparation of these financial statements change as new events occur, as more experience is acquired, as additional information is obtained and as the operating environment changes. Due to the uncertainty of factors surrounding the estimates or judgments used in the preparation of the financial statements, actual results may materially vary from these estimates.

Basic net loss per share is determined by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share includes the effect, if any, from the potential conversion, vesting or exercise of securities (“Contingent Securities”) such as convertible promissory notes, stock options and warrants which would result in the issuance of additional shares of common stock. The computation of diluted net loss per shares does not include the conversion or exercise of Contingent Securities when the effect of doing so would be antidilutive.

The Company classifies deposits in banks, money market funds and cash invested temporarily in various instruments with original maturities of three months or less as cash and cash equivalents. To date, the Company has not held any funds in money market funds or instruments with original maturities of three months or less. The Company holds significant cash balances in U.S. banks which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or lack of access to such funds could have a material adverse effect on the Company’s financial condition, results of operations, and cash flows.

The Company’s financial instruments at September 30, 2024, and December 31, 2023, included cash, prepaid expenses and other current assets, right-of-use asset, accounts payable and accrued expenses, deferred grant income, and current and long-term portion of lease liability. Cash is reported at fair value. The recorded carrying amount of prepaid expenses and other current assets, accounts payable and accrued expenses, deferred grant income, and current and long-term portion of lease liability approximate their fair value due to their short-term or fixed arrangements nature.

Research and development costs generally are expensed as incurred and primarily comprise expenses to discover, research and develop therapeutic candidates. These expenses may include personnel costs, share-based compensation expense, materials and supplies, allocated facility-related and depreciation expenses, third-party license fees, and costs under arrangements with third party vendors, such as contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and consultants. Non-refundable prepayments for goods or services that will be used or rendered for future research and development activities are recorded as prepaid expenses. Such amounts are recognized as expenses as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

The Company has entered into various research and development-related contracts with companies both inside and outside the United States. The related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research costs. When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ materially from the Company’s estimates.

Patent Costs

All legal fees and expenses and costs related to patent-related filings with governmental authorities incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses. Other patent costs are classified as R&D expenses.

Funds from grants are recognized as grant income in the statements of operations as and when earned for the specific research and development projects for which the grants are designated. In April 2021 and September 2024, the Company received awards (the “Awards”) from the National Cancer Institute in support of the Company’s lead therapeutic candidate. Since there is no transfer of ownership of the work performed under the Awards, and the Company does not lose control over the work performed under the Awards, the Company deems the Awards funds as a contribution. Grant payments received in excess of grant income earned are recorded as deferred grant income on the Company’s balance sheets until the related income has been earned. Grant income earned in excess of grant payments received is recorded as grant receivable on the Company’s balance sheets.

Share-based compensation, if any, for employees and non-employees is measured at the grant date based on the fair value of the award. The Company recognizes compensation expense, if any, for awards to employees and directors over the requisite service period, which is generally the vesting period of the respective award, and for awards to non-employees over the period during which services are rendered by such non-employees until completed. Generally, the Company issues awards with only service-based vesting conditions and records the expense for these awards using the straight-line method. The Company classifies share-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. Forfeitures are accounted for as they occur.

The estimated fair value of the common stock used by the Company to determine the expense of option awards is the closing Nasdaq price of the Company’s common shares on the date of each award. Other factors used in calculating the fair value of share-based awards represented management’s best estimates, some of which involve inherent uncertainties and the application of management’s judgment. As a result, if factors were to change and management were to use different assumptions, share-based compensation expense could be materially different.

Certain stock appraisal methodologies utilize, among other variables, the volatility of the stock price. When private, the Company lacked Company-specific historical and implied volatility information for its stock. Therefore, it estimated its expected stock price volatility based on the historical volatility of publicly-traded peer companies and expects to continue to do so until such time, if ever, as it has adequate historical data regarding the volatility of its own publicly-traded stock price. The expected life of options awarded was estimated using the simplified method because the Company has limited historical information on which to base reasonable expectations about future exercise patterns and post-vesting employment. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on its common stock and does not expect to pay cash dividends in the foreseeable future.

(i) Property and Equipment

Property and equipment are recorded at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the estimated useful life of each asset as follows:

When assets are retired or otherwise disposed of, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the statements of operations in the period of disposal. Expenditures for repairs and maintenance are charged to expense as incurred.

The Company provides for income taxes using the asset and liability approach. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of the dates of the Company’s balance sheets herein, the Company had a full valuation allowance against deferred tax assets.

The Company is subject to the provisions of ASC 740-10-25, “Income Taxes” (“ASC 740”). ASC 740 prescribes a more likely-than-not threshold for the financial statement recognition of uncertain tax positions. ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

There are currently no open federal or state tax audits. The Company has not recorded any liability for uncertain tax positions at the dates of the Company’s balance sheets herein.

The Company is an “emerging growth company” (“EGC”) as defined in the Jumpstart Our Business Startups Act (“JOBS Act”) and may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not EGCs. The Company may take advantage of these exemptions until it is no longer an EGC under Section 107 of the JOBS Act and has elected to use the extended transition period for complying with new or revised accounting standards. As a result of this election, the Company’s financial statements may not be comparable to companies that comply with public company FASB standards’ effective dates. The Company may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of a public offering or such earlier time that it is no longer an EGC.

(l)Reverse Stock Split

On January 16, 2024, the Company effected a reverse split of the Company’s common stock, either issued and outstanding or held by the Company as treasury stock, (the “2024 Reverse Split”) previously approved by the Board and stockholders of the Company. The 2024 Reverse Split was at a ratio ofone share for every 40 shares previously held with no change in the par value per share. The 2024 Reverse Split did not change the number of authorized shares of common stock. All common stock share and per share data, and exercise price data for applicable common stock equivalents, included in these financial statements have been retroactively adjusted to reflect the 2024 Reverse Split.

(m)Collaboration Agreements

When the Company enters into a collaboration agreement, it evaluates the arrangement against the requirements of ASC 808, “Collaborative Arrangements,” as well as ASU 2018-18 which clarifies the interaction between Topic 808 and Topic 606. ASU 2018-18 indicates that collaborative arrangements could be partially in the scope of other guidance, including ASC 606.

(n)Leases

The Company leases certain office and laboratory space. At inception, the Company determines if a contract or arrangement contains a lease. Leases are evaluated and classified as either operating or finance leases. A lease is classified as a finance lease if any of the following criteria are met: (i) ownership of the underlying asset transfers to the Company by the end of the lease term; (ii) the lease contains an option to purchase the underlying asset that the Company is reasonably expected to exercise; (iii) the lease term is for a major part of the remaining economic life of the underlying asset; (iv) the present value of the sum of lease payments and any residual value guaranteed by the Company equals or exceeds substantially all of the fair value of the underlying asset; or (v) the underlying asset is of a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease that does not meet any of the criteria to be classified as a finance lease is classified as an operating lease. Operating leases are included on the balance sheets as right-of-use (“ROU”) assets, net; current portion of operating lease liabilities; and operating lease liabilities. ROU assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at the commencement date. Where leases do not provide an implicit rate for use in determining the present value of future payments, the Company uses an incremental borrowing rate that represents the cost of borrowing on a collateralized basis for a period equal to the expected lease term. ROU assets also include any lease payments made and exclude any lease incentives and initial direct costs incurred. Lease terms may include periods under options to extend the lease or terminate the lease prior to expiration when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term, including rent abatement periods and rent holidays. While lease liabilities are not remeasured as a result of changes to these costs, changes are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred. Finance leases are included on the balance sheets as property and equipment, net; current maturities of long-term debt; and long-term debt. Finance lease costs are split between depreciation expense related to the asset and interest expense on the lease liability, using the effective rate charged by the lessor. The Company has elected to account for lease and non-lease components separately. Additionally, the Company has elected not to record short-term leases, those with expected terms of twelve months or less, on the balance sheets. Certain lease agreements include fixed escalations, while others include rental payments adjusted periodically for inflation.

(o) Warrant Accounting

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether

the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end-date while the warrants are outstanding.

For issued or modified warrants that meet all the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of warrants classified as liabilities are recognized as a non-cash gain or loss on the statements of operations.

As the warrants issued upon Company financings in 2023 and in the nine months ended September 30, 2024, meet the criteria for equity classification under ASC 815, those warrants were classified as equity as of September 30, 2024, and December 31, 2023.

(p) Recent Accounting Pronouncements

Accounting pronouncements issued but not effective until after September 30, 2024, are not expected to have a significant effect on the Company’s financial condition, results of operations, or cash flows.

In November 2023, the FASB issued ASU 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The purpose of the amendment is to enable investors to better understand an entity’s overall performance and assess potential future cash flows. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect the amendments in ASU 2023-07 will have on its segment disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 modifies the rules on income tax disclosures to require disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. The guidance is effective for annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect the amendments in ASU 2023-09 will have on its tax disclosures.

(3) Fair Value Measurements

ASC 820, “Fair Value Measurements”, provides guidance on the development and disclosure of fair value measurements. The Company follows this guidance for fair value measurements, which defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Level 3: Unobservable inputs which are supported by little or no market activity with values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of the dates of the Company’s balance sheets herein. The carrying amount of cash, prepaid expenses and other current assets, right-of-use asset, accounts payable and accrued expenses, deferred grant income, and current and long-term portion of lease liability approximated their fair value due to their short-term or fixed arrangements nature.

(4) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

(5) Property and Equipment

Property and equipment, net consisted of the following:

Depreciation expense for the three months ended September 30, 2024 and 2023, was $16,031 and $31,218, respectively, and $80,548 and $91,828, respectively, for the nine months ended September 30, 2024 and 2023.

(6) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following:

At September 30, 2024, and December 31, 2023, the Company’s outstanding payables to CROs or CMOs included above were $890,676 and $1,020,875, respectively.

See Note 8 for further information regarding the accrued license payments.

(7)Grant Income

In April 2021, the Company received a Fast-Track Small Business Innovation Research, or SBIR, Award from the National Cancer Institute of the National Institutes of Health (the “NIH”). The Award was for up to $2,392,845 over three years to fund a two-phased research partnership between the Company and Massachusetts General Hospital. In May 2021, the Company received first-year funding of $308,861. In May 2022, second-year funding of $1,129,316 was made available to the Company. In April 2023, the Company received funding of $870,684 for the third year of the SBIR Award. Income under the grant was recognized as work under the grant was completed. The Company recognized

grant income of $11,953 and $27,441 for the three months ended September 30, 2024 and 2023, respectively, and $39,010 and $895,786, respectively, for the nine months ended September 30, 2024 and 2023. The Company recorded grant income receivable of $11,953 and $0 at September 30, 2024, and December 31, 2023, respectively. The Company had deferred grant income of $0 and $27,057 at September 30, 2024, and December 31, 2023, respectively.

In September 2024, the Company received its second NIH Award (the “2024 Award”), a Direct to Phase II SBIR Award, from the National Cancer Institute of the NIH. The 2024 Award is to support IND-enabling and clinical trial activities in the Company’s Phase1a clinical trial with its lead candidate, TTX-MC138, overtwo years. The total 2024 Award is for $1,999,972 of which $1,011,207 applies to the first year and $988,765 applies to the second year.

(8) Commitments and Contingencies

(a)Leases

In March 2021, the Company entered into an agreement with Massachusetts Biomedical Initiatives, Inc. (“MBI”) whereby the Company subleased approximately 2,484 square feet of laboratory space with room for minor administrative functions. The Company was also permitted to use shared laboratory equipment at the facility. The monthly rental was $6,521, and the Company paid an additional amount for its allocated share of operating expenses, which in 2022 was $3,105 per month. In 2022, the Company added the right to use cubicle space outside its laboratory area to its sublease for an additional $650 per month, resulting in total monthly rent of $10,276. The sublease terminated as of February 2023.

Operating Lease

Prior to February 1, 2023, the Company had no operating leases with maturities greater than one year. In December 2022, the Company signed an agreement to sublease 4,837 square feet of laboratory and office space in Newton, Massachusetts, from another biopharmaceutical company. The Company considers this sublease an operating lease with estimated right-of-use assets and lease liabilities of approximately $0.9 million recorded upon lease commencement on February 1, 2023. The sublease has a term of 24 months. The base monthly rent was $37,285 during the first 12 months of the lease and is $38,403 in the second 12 months. In addition, the Company is responsible for its share of operating expenses, real estate taxes, and utilities based on the actual costs of these items.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s operating lease for the nine months ended September 30, 2024. The Company does not recognize any variable lease costs or short-term lease costs in connection with the operating lease.

Rent expense for the three months ended September 30, 2024 and 2023, was $111,190 and $170,582, respectively, and $289,153 and $464,946, respectively, for the nine months ended September 30, 2024 and 2023.

(b)License Agreements

In November 2018, the Company licensed the exclusive rights to certain intellectual property to support development of its therapeutic candidates (“License”). The intellectual property licensed by the Company is owned by The General Hospital Corporation, d/b/a Massachusetts General Hospital, (“Licensor”). Payments by the Company under the license agreement included a one-time non-refundable fee of $50,000 paid after execution of the License; reimbursement of Licensor’s patent costs which, at execution of the License, were approximately $145,000; a minimum annual license fee of $25,000 payable within 60 days of each anniversary of the effective date of the License prior to the first commercial sale of a product or process covered by the License; milestone payments upon attainment of certain milestone events; royalties based on net sales of products covered by the patent-related rights; and a portion of any sublicense income received by the Company. The Company is responsible for the development and commercialization of the licensed assets and for meeting certain milestones set forth in the License.

The milestone payments the Company shall pay to Licensor shall not exceed $1,550,000 based upon and subject to the attainment of each milestone event indicated below. These payments are generally due within 60 days of achievement of the milestone.

At September 30, 2024, and December 31, 2023, no milestone events had been achieved.

The royalties to be paid to Licensor shall be assessed on net sales of licensed products on a country-by-country basis in an amount equal to 3.0% for therapeutic products or processes, and 6.0% for clinical diagnostic products and processes. The Company shall pay Licensor 30% of any and all sublicense income.

The Company has the right to terminate the License at any time by giving 90 days’ advance notice subject to the payment of any amounts due under the License at that time. The License may also be terminated for cause by either party upon the breach of the material obligations of the other party or the bankruptcy or liquidation of the other party. If the Company does not terminate the License, the term of the License shall continue until the latest of (i) the date on which all issued patents and filed patent applications subject to the License have expired or been abandoned; (ii) expiration of the last to expire regulatory exclusivity covering a covered product or process; or (iii)10 years after the first commercial sale. The License requires the Company to make royalty payments beyond the term of the License at 1.5%.

In November 2020, the Company and Licensor amended the November 2018 license. Under the amendment, the intellectual property licensed in 2018 was categorized as “Patent Family 1” and a provisional patent filing related to the Company’s nanoparticle technology was added to Patent Family 1. A second patent family (“Patent Family 2”) was created which includes Licensor intellectual property targeting PD-L1.

The minimum annual license fee prior to the first commercial sale of a product or process covered by the License was increased from $25,000 per year to $30,000 per year for Patent Family 1 and a minimum annual license fee of $10,000 per year was added related to Patent Family 2. All other terms of the License including milestone payments,

royalties and payment terms related to sublicense income received by the Company remain the same as in the original License.

Accrued License Obligations

At September 30, 2024, and December 31, 2023, the Company had accrued $46,413 and $129,983, respectively, in license payments under the foregoing arrangements included in accounts payable and accrued expenses.

On July 29, 2022, the Company signed afive-year strategic collaboration agreement with The University of Texas M. D. Anderson Cancer Center (“MD Anderson”). Under the collaboration, the Company anticipated making certain expenditures with respect to Phase I and Phase II clinical trials in part through MD Anderson as a clinical site. MD Anderson was also expected to provide preclinical work under the collaboration. The details of clinical and preclinical work were to be mutually agreed by the parties prior to commencing work. The Company had agreed to fund up to $10 million over the term of the collaboration. In January 2023, the Company made an initial payment of $250,000 to MD Anderson recorded as a Prepaid Expense pending such time as payments under the collaboration became due. As a result of changes at MD Anderson and the Company, the Company and MD Anderson have agreed to terminate the collaboration but to continue the Company’s clinical trial currently underway at MD Anderson. Initial expenses of the clinical trial will be charged against the initial payment made to MD Anderson and for the three and nine months ended September 30, 2024 and 2023, were$0 in all periods.

Prior to the IPO, the Company entered into employment agreements with its executive officers which became effective on completion of the IPO. The employment agreements provide the employee with, among other things, severance payments upon termination of the agreement by the Company for any reason other than for cause, death or disability or by the employee for good reason. The maximum aggregate severance payments under the agreements, which arise in the event of termination involving a Change of Control (as defined in the agreements), are approximately $1,031,400.

The Company may from time to time be subject to claims by others under various legal disputes. The defense of such claims, or any adverse outcome relating to any such claims, could have a material adverse effect on the Company’s liquidity, financial condition, and cash flows. At September 30, 2024, and December 31, 2023, the Company did not know of any claims or actions pending against it or threatened, the ultimate disposition of which could have a material adverse effect on its results of operations or financial condition except a claim by an investment bank made in September 2023 that it is entitled to fees, a claim which the Company rigorously disputes.

In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners, and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors and executive officers that require the Company, among other things, to indemnify the parties against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any costs as a result of payments required by such indemnifications. The Company is not aware of any indemnification arrangements that could have a material adverse effect on its financial position, results of

operations or cash flows, and it has not accrued any liabilities related to such obligations in its financial statements, as of September 30, 2024, and December 31, 2023.

As geopolitical events such as wars in the Ukraine and the Middle East and major health issues such as SARS-CoV-2, or the coronavirus, continue to evolve, the extent to which they affect the Company’s operations directly or through parties on whom the Company depends is highly uncertain and cannot be predicted with confidence. The outcomes resulting from these or other events could delay the Company’s plans, increase its operating expenses and have a material adverse effect on its financial condition or results of operations.

(9) Stockholders’ Equity

The Company’s Certificate of Incorporation, originally filed on January 11, 2016, was amended on April 15, 2020, to increase the number of shares of common stock authorized and to authorize the issuance of preferred stock. The Company’s Certificate of Incorporation was further amended and restated on April 27, 2021, in anticipation of the IPO, on May 22, 2023, to effect a reverse split (the 2023 Reverse Split), and on January 16, 2024, to effect the 2024 Reverse Split. The total number of shares which the Company is authorized to issue is 300,000,000, each with a par value of $0.0001 per share. Of these shares,290,000,000 shall be common stock and 10,000,000 shall be preferred stock. At September 30, 2024, and December 31, 2023, the Company had 17,265,658 and 627,448 shares of common stock issued andoutstanding, respectively. The preferred stock is undesignated; no shares of preferred stock have been issued.

On February 16, 2023, the Company entered into a Securities Purchase Agreement with certain purchasers named therein pursuant to which the Company sold 3,558 shares of common stock in a registered direct offering at a purchase price of $421.60 per share (the “February RDO”). Net proceeds from the February RDO, after deducting fees payable to the placement agent and other offering expenses, were approximately $1.2 million. In connection with the February RDO, the Company also issued the placement agent warrants to purchase up to 249 shares of common stock (the “February Placement Agent Warrants”). The February Placement Agent Warrants became exercisable commencingsix months following the date of issuance, expire five years following the date of sale and have an exercise price per share of $527.00. See Note 10.

In April and May 2023, the Company sold an aggregate of 2,750 shares to White Lion Capital LLC (“White Lion”) under a Common Stock Purchase Agreement dated April 14, 2023, (the “White Lion Purchase Agreement”) between the Company and White Lion. Net proceeds to the Company were $518,844 after White Lion expenses but before aggregate legal and printing expenses the Company incurred of $75,418. The commitment period ended May 31, 2023.

On June 6, 2023, the Company entered into a Securities Purchase Agreement with a purchaser named therein pursuant to which the Company sold 2,475 shares of common stock,47,525 pre-funded warrants (“PFWs”), together with accompanying 50,000 Series A-1 Warrants to purchase common stock (the “Series A-1 Warrants”), and 50,000 Series A-2 Warrants to purchase common stock (the “Series A-2 Warrants”) in a registered direct offering at a purchase price of $140.00 per share (or $139.60 per PFW) (the “June RDO”). The Series A-1 Warrants and the Series A-2 Warrants are identical in all material respects. The Series A-1 Warrants and Series A-2 Warrants became exercisable commencing June 9, 2023, and are exercisable forthree years at an exercise price of $130.00 per share. Net proceeds from the June RDO, after deducting fees payable to the placement agent and other offering expenses, were approximately $6.1 million. The PFWs sold in the June RDO were exercisable at an exercise price of $0.40 per share. All the PFWs sold in the June RDO were exercised prior to the date of these financial statements. See Note 10. In connection with the June RDO, the Company also issued the placement agent warrants to purchase up to 3,500 shares of common stock (the “June Placement Agent Warrants”). The June Placement Agent Warrants became exercisable

commencing June 9, 2023, expire three years following the date of sale and have an exercise price per share of $175.00. See Note 10.

On September 26, 2023, the Company entered into an underwriting agreement with ThinkEquity LLC, as underwriter, pursuant to which it issued and sold 17,500 shares of common stock and 404,075 PFWs, including the partial exercise of the underwriter’s over-allotment option, in a public offering at a purchase price of $20.40 per share (or $20.00 per PFW) (the “September Offering”). The overallotment option provided the underwriter the right to purchase up to 58,480 shares or PFWs during the 45 days following the September Offering. The underwriter exercised the overallotment option to purchase 8,348 shares. The terms of the sale of shares or PFWs in the September Offering also applied to purchases made by the underwriter through exercises of the overallotment option. All September Offering PFWs had been exercised prior to the date of these financial statements. Net proceeds from the September Offering, after deducting underwriting discounts, commissions and fees paid to the underwriter and other offering expenses, were approximately $6.7 million. In connection with the September Offering, the Company also issued warrants to the underwriter to purchase up to 21,496 shares of common stock (the “September Underwriter Warrants”). The September Underwriter Warrants become exercisable commencing 180 days after issuance, expire five years following the date of sale and have an exercise price of $25.50 per share. See Note 10.

On December 4, 2023, the Company closed an offering under a Securities Purchase Agreement with certain purchasers named therein pursuant to which the Company sold 125,000 shares of common stock in a registered direct offering at a purchase price of $9.68 per share (the “December RDO”). Net proceeds from the December RDO, after deducting fees payable to the placement agent and other offering expenses, were approximately $0.9 million. In connection with the December RDO, the Company also issued the placement agent warrants to purchase up to 7,500 shares of common stock (the “December Placement Agent Warrants”). The December Placement Agent Warrants became exercisable on issuance, expire five years following the date of sale and have an exercise price per share of $12.10. See Note 10.

On January 22, 2024, the Company closed an offering under a Securities Purchase Agreement with certain purchasers named therein pursuant to which the Company sold 428,924 shares of common stock,5,513,699 pre-funded warrants (“PFWs”), and 11,885,246 Warrants to purchase common stock (the “January 2024 Warrants”), in a registered direct offering at a purchase price of $1.22 per share (or $1.21 per PFW) (the “January 2024 RDO”). The January 2024 Warrants became exercisable commencing on issuance and are exercisable forthree and one-half years from the date of issuance at an exercise price of $1.22 per share. Net proceeds from the January 2024 RDO, after deducting fees payable to the placement agent and other offering expenses, were approximately $6.1 million. The PFWs sold in the January 2024 RDO were exercisable at an exercise price of $0.01 per share. All of the PFWs sold in the January 2024 RDO were exercised prior to the date of these financial statements, and 643,605 January 2024 Warrants were exercised in May 2024. In connection with the January 2024 RDO, the Company also issued the placement agent warrants to purchase up to 356,558 shares of common stock (the “January 2024 Placement Agent Warrants”). The January 2024 Placement Agent Warrants became exercisable on issuance, expire three and one-half years following the date of sale and have an exercise price per share of $1.525. See Note 10.

On July 22, 2024, the Company entered into a Placement Agency Agreement with ThinkEquity LLC pursuant to which the Company issued and sold 10,000,000 shares of common stock in a best efforts public offering at a purchase price of $0.30 per share (the “July 2024 Offering”). Net proceeds from the July 2024 Offering, after deducting discounts, commissions and fees paid to the placement agents and other offering expenses, were approximately $2.4 million. In connection with the July 2024 Offering, the Company also issued warrants to the placement agent to purchase up to 500,000 shares of common stock (the “July Placement Agent Warrants”). The July Placement Agent Warrants become exercisable January 18, 2025, expire July 22, 2029, and have an exercise price of $0.375 per share. See Note 10.

**(b)**Common Stock

Subject to the rights of holders of any preferred stock, holders of common stock are entitled to receive dividends as may be declared from time to time by the Board. No cash dividends were declared or paid during the three and nine months ended September 30, 2024, nor at any other time through the date of these financial statements.

Subject to the rights of holders of any preferred stock as to liquidation, upon the liquidation, dissolution or winding up of the Company, the remaining assets of the Company will be distributed to holders of common stock.

Holders of common stock are entitled toone vote for each share of common stock held but shall not be entitled to vote on any amendment to the Certificate of Incorporation that relates solely to the terms of any series of preferred stock. There is no cumulative voting.

(10) Warrants

In connection with the IPO, the Company granted the underwriters warrants (the “IPO Underwriter Warrants”) to purchase up to 391 shares of Company common stock at an exercise price of $4,000.00 per share, which amount is 125% of the initial public offering price. The IPO Underwriter Warrants have afive-year term and were not exercisable prior to January 9, 2022. All of the IPO Underwriter Warrants were outstanding at September 30, 2024. The Company accounts for these warrants as a component of stockholders’ equity.

In connection with the February RDO, the Company issued the February Placement Agent Warrants to purchase up to 249 shares of common stock. The February Placement Agent Warrants became exercisable commencing August 17, 2023, expire February 16, 2028, and have an exercise price per share of $527.00 per share. The Company accounts for these warrants as a component of stockholders’ equity.

In connection with an agreement the Company entered into with a consultant in February 2023, the Company agreed to issue warrants (the “Consultant Warrants”) to purchase up to 156 shares of common stock at $400.00 per share. These Consultant Warrants became exercisable any time after August 23, 2023, until February 23, 2028. The Company accounts for these warrants as a component of stockholders’ equity.

In connection with the June RDO, the Company issued 47,525 PFWs, together with 50,000 Series A-1 Warrants and 50,000 Series A-2 Warrants, at a purchase price of $139.60 per PFW. All of these PFWs were exercised prior to the date of these financial statements at $0.40 per share. The Series A-1 Warrants and Series A-2 Warrants became exercisable commencing June 9, 2023, expire three years following the date of sale and have an exercise price of $130.00 per share. The Company also issued warrants to the placement agent to purchase up to 3,500 shares of common stock. The June Placement Agent Warrants became exercisable commencing June 9, 2023, expire three years after issuance, and have an exercise price per share of $175.00 per share. The Company accounts for these warrants as a component of stockholders’ equity.

In connection with the September Offering, the Company issued 404,075 PFWs, at a purchase price of $20.00 per PFW. Each of these PFWs was exercisable at $0.40 per share. All the September Offering PFWs were exercised prior to the date of these financial statements. The Company also issued warrants to the underwriter to purchase up to 21,079 shares of common stock. The September Underwriter Warrants become exercisable commencing 180 days after issuance, expire five years following the date of sale and have an exercise price per share of $25.50. On October 5, 2023,

the underwriter partially exercised its overallotment option to purchase an additional 8,348 shares of common stock. As a result of the partial overallotment exercise, the Company also issued an additional 417 September Underwriter Warrants to the underwriter. The Company accounts for these warrants as a component of stockholders’ equity.

The December Placement Agent Warrants became exercisable on issuance, expire five years after issuance, and have an exercise price per share of $12.10 per share. The Company accounts for these warrants as a component of stockholders’ equity.

In connection with the January 2024 RDO, the Company issued 11,885,246 January 2024 Warrants,5,513,699 PFWs with no expiration date exercisable at $0.01 per share, and 356,558 January 2024 Placement Agent Warrants. The January 2024 Warrants became exercisable commencing on issuance and are exercisable forthree and one-half years from the date of issuance at an exercise price of $1.22 per share. All the PFWs sold in the January 2024 RDO, and 643,605 January 2024 Warrants were exercised prior to the date of these financial statements. The January 2024 Placement Agent Warrants became exercisable on issuance, expire three and one-half years following the date of sale and have an exercise price per share of $1.525. The Company accounts for these warrants as a component of stockholders’ equity.

The July 2024 Placement Agent Warrants become exercisable on January 18, 2025, expire on July 22, 2029, and have an exercise price per share of $0.375. The Company accounts for these warrants as a component of stockholders’ equity.

The following table summarizes the Company’s outstanding or issuable warrants at September 30, 2024:

(11) Share-Based Compensation

In April 2020, the Board approved the TransCode Therapeutics, Inc. 2020 Stock Option and Incentive Plan (the “2020 Plan”) providing for the issuance of options or other awards to purchase up to 3,791 shares of the Company’s common stock. The Board determined not to make any further awards under the 2020 Plan following the closing of the IPO. In March 2021, the Company’s 2021 Stock Option and Incentive Plan (the “2021 Plan”) was approved by the Company’s Board and stockholders and became effective upon the effectiveness of the IPO. The 2021 Plan initially provided for the issuance of options or other awards to purchase up to 6,250 shares of the Company’s common stock. The number of options or other awards available under the 2021 Plan increased 807 shares in January 2022;811 shares in January 2023;31,372 shares in January 2024; and 3,000,000 shares in June 2024.

Both Plans provide for grants of equity in the form of stock awards, stock options and other instruments to employees, members of the Board, officers and consultants of and advisors to the Company. The Plans are administered by the Board or, at the discretion of the Board, by a committee of the Board. The amount and terms of grants are determined by the Board. The terms of options granted under the Plans generally are for ten (10) years after date of grant and are exercisable in cash or as otherwise determined by the Board. The vesting period for equity-based awards is determined at the discretion of the Board and is generallytwo tofour years. If stock options granted under the 2021 Plan terminate, expire, or are surrendered or cancelled, the shares subject to such grants will again be available under the 2021 Plan.

The exercise price for incentive stock options is determined at the discretion of the Board but for grants to any person possessing less than 10% of the total combined voting power of all classes of stock may not have an exercise price less than 100% of the fair market value of the Common Stock on the grant date (110% for grants to any person possessing more than 10% of the total combined voting power of all classes of stock). The option term for incentive stock option awards may not be greater than ten years from the date of the grant (five years for grants to any person possessing more than 10% of the total combined voting power of all classes of stock).

Of options awarded under the 2021 Plan,1,915,218 were outstanding at September 30, 2024.

At September 30, 2024, there were 1,953 options outstanding under the 2020 Plan that were vested and exercisable and 1,330,435 options outstanding under the 2021 Plan that were vested and exercisable. Information about options to purchase common stock of the Company under both Plans is as follows:

The intrinsic value of the outstanding options as of September 30, 2024, was $0.

Option Valuation

Options to purchase 1,930,036 shares of common stock were granted in the nine months ended September 30, 2024. The assumptions that the Company used to determine the grant-date fair value of options granted in the nine months ended September 30, 2024, and the year ended December 31, 2023, were as follows:

The Company recorded share-based compensation expense of $204,482 and $1,531,229 during the three and nine months ended September 30, 2024, respectively, and $392,331 and $726,575 during the three and nine months ended September 30, 2023, respectively. Share-based compensation in all periods was entirely related to stock options. The remaining share-based compensation expense to be recognized in the future is $1,079,747 over approximately 1.2 years.

(12)** **Employee Stock Purchase Plan

In 2021, the Company adopted an Employee Stock Purchase Plan (the “ESPP”) to provide eligible employees of the Company with opportunities to purchase shares of the Company’s common stock. The ESPP initially provided for the purchase of an aggregate of up to approximately 188 shares of common stock. The number of shares of common stock available through the ESPP increases by approximately 113 shares in January of each year beginning in 2022.

(13) Net Loss per Share

The Company reported net losses for the three and nine months ended September 30, 2024 and 2023. Reported basic and diluted net loss per share attributable to common stockholders are the same for each period because shares issuable in connection with Contingent Securities have been excluded from the computation of diluted weighted-average shares outstanding. The effect of their inclusion would have been antidilutive.

In accordance with ASC 260-10-45-13, a pre-funded, or penny, warrant is an instrument that requires the holder to pay little or no consideration to receive the shares upon exercise of the warrant. Since the shares underlying the PFWs are issuable for little or no consideration, the Company considered them outstanding in the context of basic earnings per share.

The following table sets forth the computation of basic and diluted loss per share:

(14) Income Taxes

The Company’s income tax benefit (expense) was $0 for the three and nine months ended September 30, 2024 and 2023. The Company has recorded a full valuation allowance against its net deferred tax assets at September 30, 2024, and December 31, 2023, because the Company has determined that is it more likely than not that these assets will not be fully realized due to historic net operating losses incurred. Accordingly, the benefit of the net operating loss that would have been recognized in the three and nine months ended September 30, 2024 and 2023, was fully offset by changes in the valuation allowance.

At September 30, 2024, and December 31, 2023, the Company hadno accrued interest or penalties related to uncertain tax positions andno amounts have been recognized in the Company’s statements of operations.

(15) Subsequent Events

For its financial statements at September 30, 2024, the Company evaluated subsequent events through November 14, 2024, the date on which those financial statements were issued, and determined that there were none for which recognition or disclosure is warranted except:

In the third quarter 2024, the Company received three letters from the Nasdaq Stock Market (“Nasdaq”) Staff notifying the Company that it was not in compliance with Nasdaq Listing Rules 5550(a)(2) (the “Bid Price Rule”), 5550(b)(1) (the “Equity Rule”) or any of the alternative requirements in Listing Rule 5550(b), and 5635(d) (the “Shareholder Approval Rule”). As a result, the shares of the Company’s common stock are subject to delisting from The Nasdaq Capital Market. On October 1, 2024, the Company appealed the Staff’s determination to a Nasdaq Hearings Panel (the “Panel”). On November 4, 2024, the Company was informed that the Panel granted the Company a formal extension to regain compliance. Pending the Panel’s decision, suspension of the Company’s securities was stayed and the Company’s stock remains listed. There can be no assurance that the Company will be successful in regaining compliance during the extension period.

In October 2024, as a result of changes at MD Anderson and the Company, the Company and MD Anderson agreed to terminate their collaboration but to continue the Company’s clinical trial currently underway at MD Anderson. See Note 8.