UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2022

OR

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

Commission File Number: 001-33038

Alaunos Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	84-1475642
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
8030 El Rio Street Houston, TX 77054 (346) 355-4099 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	TCRT	The Nasdaq Stock Market LLC

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

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

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

Large Accelerated Filer	☐	Accelerated Filer	☐
Non-Accelerated Filer	☒	Smaller Reporting Company	☒
		Emerging Growth Company	☐

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

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

As of November 9, 2022, the number of outstanding shares of the registrant's common stock, $0.001 par value, was 216,182,042 shares.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, as amended. Forward-looking statements are all statements contained in this Quarterly Report that are not historical fact, and in some cases can be identified by terms such as: “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “target,” “will” and other words and terms of similar meaning.

These statements are based on management’s current beliefs and assumptions and on information currently available to management. These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this Quarterly Report include, but are not limited to, statements about:

•our ability to raise substantial additional capital to continue as a going concern, fund our planned operations and repay our existing indebtedness;

•estimates regarding our expenses, use of cash, timing of future cash needs and anticipated capital requirements;

•the development of our product candidates, including statements regarding the initiation, timing, progress and results of our preclinical studies, clinical trials and research and development programs;

•our ability to advance our product candidates through various stages of development, especially through pivotal safety and efficacy trials;

•the risk that final trial data may not support interim analysis of the viability of our product candidates;

•our expectation regarding the safety and efficacy of our product candidates;

•the timing, scope or likelihood of regulatory filings and approvals from the U.S. Food and Drug Administration, or FDA, or equivalent foreign regulatory agencies for our product candidates and for which indications;

•our ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existing license agreements;

•our ability to enter into partnerships or strategic collaboration agreements and our ability to achieve the results and potential benefits contemplated from relationships with collaborators;

•our ability to maintain and establish collaborations and licenses;

•our expectation of developments and projections relating to competition from other pharmaceutical and biotechnology companies or our industry;

•our estimates regarding the potential market opportunity for our product candidates;

•the anticipated rate and degree of commercial scope and potential, as well as market acceptance of our product candidates for any indication, if approved;

•the anticipated amount, timing and accounting of contract liabilities, milestones and other payments under licensing, collaboration or acquisition agreements, research and development costs and other expenses;

•our intellectual property position, including the strength and enforceability of our intellectual property rights;

•our ability to attract and retain qualified employees and key personnel; and

•the impact on our business from a pandemic, epidemic or outbreak, including the COVID-19 pandemic.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under Part II, Item 1A, “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

Unless the context requires otherwise, references in this Quarterly Report to “Alaunos,” the “Company,” “we,” “us” or “our” refer to Alaunos Therapeutics, Inc., and its subsidiaries.

i

We own or have rights to trademarks, service marks and trade names that we use in connection with the operation of our business, including our corporate name, logos and website names. We own the trademarks Alaunos™, Ziopharm® and hunTR™ as well as the graphic trademark found on our website. Other trademarks, service marks and trade names appearing in this Quarterly Report are the property of their respective owners. Solely for convenience, some of the trademarks, service marks and trade names referred to in this Quarterly Report are listed without the ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, service marks and trade names.

ii

SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS

Our business faces significant risks and uncertainties. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. You should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report. Some of the more significant risks include the following:

•We will require substantial additional financial resources to continue as a going concern, continue ongoing development of our product candidates and pursue our business objectives; if we are unable to obtain these additional resources when needed, we may be forced to delay or discontinue our planned operations, including clinical testing of our product candidates.

•Our plans to develop and commercialize non-viral adoptive cellular therapies based on T-cell receptor, or TCR, therapies can be considered as new approaches to cancer treatment, the successful development of which is subject to significant challenges.

•Our current product candidates are based on novel technologies and are supported by limited clinical data and we cannot assure you that our current and planned clinical trials will produce data that supports regulatory approval of one or more of these product candidates.

•We will need to attract, recruit and retain qualified personnel, and we will continue to rely on key scientific and medical advisors, and their knowledge of our business and technical expertise would be difficult to replace.

•Our existing indebtedness, together with our other financial obligations and contractual commitments, could adversely affect our financial condition and restrict our future operations. For instance, we were required to deposit a significant amount of cash into an account to be held as collateral.

•If we are unable to obtain the necessary United States or worldwide regulatory approvals to commercialize any product candidate, our business will suffer.

•Our product candidates are in various stages of clinical trials, which are very expensive and time-consuming. We cannot be certain when we will be able to submit a Biologics License Application, or BLA, to the FDA and any failure or delay in completing clinical trials for our product candidates could harm our business.

•Our cellular immuno-oncology product candidates rely on the availability of reagents, specialized equipment, and other specialty materials and infrastructure, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials, we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products.

•If we are unable either to create sales, marketing and distribution capabilities or enter into agreements with third parties to perform these functions, we will be unable to commercialize our product candidates successfully.

•Our immuno-oncology product candidates may face competition in the future from biosimilars.

•If we or our licensors fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish and our ability to successfully commercialize our products may be impaired.

•Our stock price has been, and may continue to be, volatile.

iii

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	2
	Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	2
	Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	3
	Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021 (unaudited)	4
	Statements of Cash Flows for the nine months ended September 30, 2022 and 2021 (unaudited)	6
	Notes to Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	27
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59

1

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Alaunos Therapeutics, Inc.

BALANCE SHEETS

(unaudited)

(in thousands, except share and per share data)

	September 30,			December 31,
	2022			2021
ASSETS:
Current assets:
Cash and cash equivalents	$	37,807		$	76,054
Restricted cash		13,938			—
Receivables		2,911			1,111
Prepaid expenses and other current assets		849			1,666
Total current assets		55,505			78,831
Property and equipment, net		9,050			10,941
Right-of-use asset		2,247			4,420
Deposits		42			42
Other non-current assets		500			631
Total assets	$	67,344		$	94,865
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,984		$	1,368
Current portion of long-term debt		22,668			7,868
Accrued expenses		7,675			6,076
Lease liability, current		542			729
Total current liabilities		32,869			16,041
Long-term debt		—			16,250
Lease liability, non-current		2,334			4,518
Other non-current liabilities		28			—
Total liabilities	$	35,231		$	36,809
Commitments and contingencies (Note 9)
Stockholders' equity
Common stock $0.001 par value; 420,000,000 shares authorized, 216,182,042 shares issued and outstanding at September 30, 2022 and 350,000,000 shares authorized, 216,127,443 shares issued and outstanding at December 31, 2021		216			216
Additional paid-in capital		903,365			900,693
Accumulated deficit		(871,468	)		(842,852	)
Total stockholders' equity		32,113			58,057
Total liabilities and stockholders' equity	$	67,344		$	94,865

The accompanying notes are an integral part of these financial statements.

2

Alaunos Therapeutics, Inc.

STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2022			2021			2022			2021
Collaboration revenue	$	2,911		$	398		$	2,911		$	398
Operating expenses:
Research and development		7,893			14,521			19,411			41,427
General and administrative		3,282			8,173			10,217			25,469
Gain on lease modification		—			—			(133	)		—
Total operating expenses		11,175			22,694			29,495			66,896
Loss from operations		(8,264	)		(22,296	)		(26,584	)		(66,498	)
Other income (expense):
Interest expense		(841	)		(444	)		(2,266	)		(444	)
Other income (expense), net		254			7			279			(15	)
Other income (expense), net		(587	)		(437	)		(1,987	)		(459	)
Net loss	$	(8,851	)	$	(22,733	)	$	(28,571	)	$	(66,957	)
Basic and diluted net loss per share	$	(0.04	)	$	(0.11	)	$	(0.13	)	$	(0.31	)
Weighted average common shares outstanding, basic and diluted		215,098,995			214,542,465			215,015,377			214,310,349

The accompanying notes are an integral part of these financial statements.

3

Alaunos Therapeutics, Inc.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share and per share data)

For the Three Months Ended September 30, 2022

	Common Stock					Additional Paid in Capital		Accumulated Deficit			Total Stockholders' Equity
	Shares			Amount
Balance at June 30, 2022		216,174,542		$	216	$	902,536	$	(862,572	)	$	40,180
Stock-based compensation		—			—		808		—			808
Exercise of employee stock options		26,250			—		21		—			21
Repurchase of common stock		(18,750	)		—		—		(45	)		(45	)
Net loss		—			—		—		(8,851	)		(8,851	)
Balance at September 30, 2022		216,182,042		$	216	$	903,365	$	(871,468	)	$	32,113

The accompanying notes are an integral part of these financial statements.

For the Nine Months Ended September 30, 2022

	Common Stock					Additional Paid in Capital		Accumulated Deficit			Total Stockholders' Equity
	Shares			Amount
Balance at December 31, 2021		216,127,443		$	216	$	900,693	$	(842,852	)	$	58,057
Stock-based compensation		—			—		2,651		—			2,651
Restricted stock awards		280,000			—		—		—			—
Cancelled restricted common stock		(232,901	)		—		—		—			—
Exercise of employee stock options		26,250			—		21		—			21
Repurchase of common stock		(18,750	)		—		—		(45	)		(45	)
Net loss		—			—		—		(28,571	)		(28,571	)
Balance at September 30, 2022		216,182,042		$	216	$	903,365	$	(871,468	)	$	32,113

The accompanying notes are an integral part of these financial statements.

4

For the Three Months Ended September 30, 2021

	Common Stock					Additional Paid in Capital		Accumulated Deficit			Total Stockholders' Equity
	Shares			Amount
Balance at June 30, 2021		215,559,148		$	216	$	896,390	$	(808,325	)	$	88,281
Stock-based compensation		—			—		2,371		—			2,371
Restricted stock awards		875,000			—		—		—			—
Cancelled restricted common stock		(288,344	)		—		—		—			—
Issuance of warrants		—			—		788		—			788
Net loss		—			—		—		(22,733	)		(22,733	)
Balance at September 30, 2021		216,145,804		$	216	$	899,549	$	(831,058	)	$	68,707

The accompanying notes are an integral part of these financial statements.

For the Nine Months Ended September 30, 2021

	Common Stock					Additional Paid in Capital			Accumulated Deficit			Total Stockholders' Equity
	Shares			Amount
Balance at December 31, 2020		214,591,906		$	215	$	887,868		$	(764,101	)	$	123,982
Stock-based compensation		—			—		9,857			—			9,857
Exercise of employee stock options		363,109			—		1,037			—			1,037
Restricted stock awards		1,601,224			1		(1	)		—			—
Cancelled restricted common stock		(410,435	)		—		—			—			—
Issuance of warrants		—			—		788			—			788
Net loss		—			—		—			(66,957	)		(66,957	)
Balance at September 30, 2021		216,145,804		$	216	$	899,549		$	(831,058	)	$	68,707

The accompanying notes are an integral part of these financial statements.

5

Alaunos Therapeutics, Inc.

STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	For the Nine Months Ended September 30,
	2022			2021
Cash flows from operating activities:
Net loss	$	(28,571	)	$	(66,957	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		2,065			1,892
Amortization of financing costs		634			148
Stock-based compensation		2,651			9,857
Decrease (increase) in the carrying amount of right-of-use assets		2,306			(529	)
Gain on lease modification		(133	)		—
(Increase) decrease in:
Receivables		(1,800	)		3,155
Prepaid expenses and other current assets		817			7,646
Other non-current assets		131			508
Increase (decrease) in:
Accounts payable		616			503
Accrued expenses		1,525			(3,169	)
Lease liabilities		(2,371	)		604
Other non-current liabilities		28			—
Net cash used in operating activities		(22,102	)		(46,342	)
Cash flows from investing activities:
Purchases of property and equipment		(100	)		(2,964	)
Net cash used in investing activities		(100	)		(2,964	)
Cash flows from financing activities:
Proceeds from long-term debt borrowing		—			25,000
Debt issuance costs		—			(75	)
Proceeds from the exercise of stock options		21			1,037
Repurchase of common stock		(45	)		—
Repayment of long-term debt		(2,083	)		—
Net cash provided by (used in) financing activities		(2,107	)		25,962
Net decrease in cash, cash equivalents and restricted cash		(24,309	)		(23,344	)
Cash, cash equivalents and restricted cash, beginning of period		76,054			115,069
Cash, cash equivalents and restricted cash, end of period	$	51,745		$	91,725
Supplementary disclosure of cash flow information:
Cash paid for interest	$	1,603		$	136
Amounts included in accrued expenses and accounts payable related to property and equipment	$	74		$	348

The accompanying notes are an integral part of these financial statements.

6

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

(unaudited)

1.Organization

Overview

Alaunos Therapeutics, Inc., which is referred to herein as “Alaunos,” or the “Company,” is a clinical-stage oncology-focused cell therapy company developing adoptive TCR-T cell therapies, designed to treat multiple solid tumor types in large cancer patient populations with unmet clinical needs. On January 25, 2022, the Company changed its corporate name from ZIOPHARM Oncology, Inc. to Alaunos Therapeutics, Inc. The Company is leveraging its proprietary, non-viral Sleeping Beauty gene transfer platform and its cancer hotspot mutation TCR library to design and manufacture autologous cell therapies that target neoantigens arising from shared tumor-specific mutations in key oncogenic genes, including KRAS, TP53 and EGFR.

The Company’s operations to date have consisted primarily of conducting research and development and raising capital to fund those efforts. In May 2021, the Company announced that it will be winding down its existing Controlled IL-12 clinical program. The Company continues to seek a partner for this program.

The accompanying 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. The Company follows the guidance of Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements - Going Concern, in order to determine whether there is substantial doubt about its ability to continue as a going concern for one year after the date its financial statements are issued.

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 September 30, 2022, the Company had approximately $37.8 million of cash and cash equivalents and $13.9 million of restricted cash related to the Company's debt agreement (see Note 4). The Company’s accumulated deficit at September 30, 2022 was approximately $871.5 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 2023. The Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, management may need to curtail its development efforts and planned operations to conserve cash.

Based on the current cash forecast, 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 financial statements, which raises substantial doubt as to the Company's ability to continue as a going concern. 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.

As of September 30, 2022, there were 216,182,042 shares of common stock outstanding and an additional 33,545,557 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and note disclosures required by generally accepted accounting principles in the United States, or GAAP, have been condensed or omitted pursuant to such rules and regulations.

It is management’s opinion that the accompanying unaudited interim 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 financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2021, included in