GNPX 2017 Annual Report

F-7 Genprex, Inc. Notes to Financial Statements Note 1 – Description of Business and Basis of Presentation Genprex, Inc. ("we" or "the Company"), is a privately held, clinical-stage biopharmaceutical company developing immunogene therapies for cancer. Our first product candidate, branded as Oncoprex™, is in phase II clinical trials for lung cancer patients in the United States. We are subject to all the risks inherent in a start-up company in the biopharmaceutical industry. The biopharmaceutical industry is subject to rapid and technological change. We have numerous competitors, including major pharmaceutical and chemical companies, specialized biotechnology firms, universities and other research institutions. These competitors may succeed in developing technologies and products that are more effective than any that are being developed by us or that would render our technology and products obsolete and noncompetitive. Many of these competitors have substantially greater financial and technical resources than us. In addition, many of our competitors have significantly greater experience than us in pre-clinical testing and human clinical trials of new or improved pharmaceutical products and in obtaining FDA and other regulatory approvals on products for use in health care. Capital Requirements, Liquidity and Going Concern Considerations Our financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as shown in the accompanying financial statements, we have sustained substantial losses from operations since inception and have no current source of revenue. In addition, we have used, rather than provided, cash in our operations. We expect to continue to incur significant expenditures to further clinical trials for the commercial development of our patents. Management recognizes that we must obtain additional resources to successfully commercialize our intellectual property. To date, we have received funding in the form of equity and debt, and have recently secured a capital market transaction through an initial public offering. We plan to continue to raise funds to support or programs in 2018 and beyond. However, no assurances can be given that we will be successful in raising additional capital. If we are not able to timely and successfully raise additional capital, the timing of our clinical trials, financial condition and results of operations will continue to be materially affected. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. Note 2 – Summary of Significant Accounting Policies The accompanying audited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and reflect all adjustments, which are of a normal and recurring nature, that are, in the opinion of management, necessary for a fair presentation of our financial position and results of operations for the related periods. The results of operations for any interim periods are not necessarily indicative of results to be expected for the full year. A summary of our significant accounting policies consistently applied in the preparation of the accompanying financial statements follows. Capital Stock In connection with the Company’s completed IPO (see Subsequent Events Note) in April 2018, all of the Company’s Preferred Stock and Non-Voting Common Stock were converted into shares of the Company’s Common Stock. The Company’s Common Stock was then forward-split at a ratio of 6.6841954-to-1. Furthermore, prior to the closing of the IPO, the Company’s Certificate of Incorporation was amended and restated to provide the Company with the authority to issue up to 210,000,000 shares of stock consisting of 200,000,000 shares of Common Stock at a par value of $0.001 per share and 10,000,000 shares of Preferred Stock at a par value of $0.001 per share. Restatement of Balance Sheet at December 31, 2016 Subsequent to the auditors’ issuance of their report on our December 31, 2016 financial statements, management became aware of a scrivener’s error in the terms of certain options granted, resulting in a $136,810 increase in share-based compensation (accumulated deficit) and additional paid-in capital during the fourth quarter of 2016.