| Organization and Summary of Significant Accounting Policies | 1. Organization and Summary of Significant Accounting Policies The Company Titan Pharmaceuticals, Inc. (“Titan” or the “Company” or “we,” “our” or “us”) is a pharmaceutical company that was previously developing therapeutics utilizing the proprietary long-term drug delivery platform, ProNeura ® Our first product based on the ProNeura technology was Probuphine ® In December 2021, we
announced our intention to work with our financial advisor to explore strategic alternatives to enhance stockholder value,
potentially including an acquisition, merger, reverse merger, other business combination, sales of assets, licensing, or other
transaction. In June 2022, we implemented a plan to reduce expenses and conserve capital that included a company-wide reduction
in salaries and a scale back of certain operating expenses to enable us to maintain sufficient resources as we pursued potential
strategic alternatives. In July 2022, David Lazar and Activist Investing LLC acquired an approximately 25% 0.4
25% On September 1, 2023 (the “Closing Date”), we closed on the sale of certain ProNeura assets, including our portfolio of drug addiction products, in addition to other early development programs based on the ProNeura drug delivery technology (the “ProNeura Assets”). In July 2023, we entered into an asset purchase agreement (the “Asset Purchase Agreement”) with Fedson, Inc., a Delaware corporation (“Fedson”), for the sale of the ProNeura Assets. Our addiction portfolio consisted of the Probuphine and Nalmefene implant programs. The ProNeura Assets constituted only a portion of our assets. In August 2023, we entered into an Amendment and Extension Agreement (the “Amendment”) to the Asset Purchase Agreement, pursuant to which Fedson agreed to purchase our ProNeura Assets for a purchase price of $2.0 million, consisting of (i) $500,000 in readily available funds, paid in full on the Closing Date, (ii) $500,000 in the form of a promissory note due and payable on October 1, 2023 (the “Cash Note”) and (iii) $1,000,000 in the form of a promissory note due and payable on January 1, 2024 (the “Escrow Note”). We will also be eligible to receive potential milestone payments of up to $50 million on future net sales of the products and certain royalties on future net sales of the products. As further consideration, Fedson assumed all liabilities related to a pending employment claim against us. On the Closing Date, Fedson delivered a written guaranty by a principal of Fedson of all of Fedson’s obligations under both the Cash Note and Escrow Note. The Cash Note included provisions, which Fedson has exercised, allowing Fedson to extend the payment of the Cash Note to November 1, 2023, and again to December 1, 2023 upon payment of $5,000 for each extension. The Cash Note and Escrow Note were paid in December 2023 and January 2024, respectively. We received the funds from the escrow account in February 2024. In
April 2024, David Lazar, our Chief Executive Officer, Kate Beebe DeVarney, Ph.D., our President and Chief Operating Officer and
a member of our Board of Directors, and three other members of our Board of Directors, Eric Greenberg, Matthew C. McMurdo and David Natan,
resigned their positions with the Company. Pursuant to the terms of their respective settlement agreements, we made payments in aggregate
of approximately $ 1.2 million. The Board of Directors subsequently
appointed Firdauz Edmin Bin Mokhtar and Francisco Osvaldo Flores García as independent directors of the Company to fill two of the
vacancies created by the resignations. In addition, Dato Seow Gim Shen was appointed as Chief Executive Officer and Principal Financial
Officer and continued to serve as the Company’s Chairman of the Board, which he had done since October 12, 2023. On
August 19, 2024, we entered into a Merger and Contribution and Share Exchange Agreement (the “Merger Agreement”)
regarding a business combination with TalenTec Sdn. Bhd. (formerly known as KE Sdn. Bhd.) (“TalenTec”). The Merger
Agreement was approved by our Board of Directors. If the Merger Agreement is approved by our stockholders and the stockholders of
TalenTec (and the other closing conditions are satisfied or waived in accordance with the Merger Agreement), and upon consummation
of the transactions contemplated by the Merger Agreement (the “Merger Closing”), Titan will be combined with
TalenTec in a “reverse merger” transaction consisting of two steps:
1. TTNP Merger Sub, Inc. (“Merger Sub”), a Delaware
corporation and a wholly owned subsidiary of BSKE Ltd. (“BSKE”), a Cayman Islands exempted company, will merge with
and into Titan (the “Merger”); the separate existence of Merger Sub will cease; and Titan will be the surviving corporation
of the Merger and a direct wholly owned subsidiary of BSKE.
2. Within five business days of the filing by Titan and BSKE
of a proxy statement/prospectus relating to the proposed transaction, shareholders of TalenTec may elect to enter into a share exchange agreement
(the “Share Exchange Agreement”) with Titan and BSKE, pursuant to which, immediately following the Merger, each TalenTec shareholder
entering into the Share Exchange Agreement will contribute and exchange all of his TalenTec shares in exchange for ordinary shares of BSKE. Titan
may terminate the Merger Agreement if fewer than all TalenTec shareholders enter into the Share Exchange Agreement within the specified period. Dato
Seow Gim Shen, who served as our Chairman of the Board and Chief Executive Officer, was previously the holder of 47.4% of the outstanding
shares of TalenTec. In addition, Mr. Seow was previously the sole stockholder of The Sire Group Ltd. (“Sire”), which is the
holder of Series AA Preferred Stock, currently convertible into 150,087
shares of our common stock. Upon completion of
the Merger, the existing security holders of TalenTec and Titan (excluding Sire and current Titan directors and officers) expect to own
approximately 86.7%
and 13.3% ,
respectively, of the outstanding shares of the combined company. Such ownership percentages could be subject to proportional dilution
for any required financing in connection with the Merger Closing. Completion
of the Merger is subject to the approval of the Merger by our stockholders and the issuance of shares related to the Merger, approval
of the listing by Nasdaq of BSKE on the Nasdaq Capital Market, post-Merger, and satisfaction or waiver of other customary conditions
set forth in the Merger Agreement. Accordingly, there can be no assurance that the proposed Merger will be consummated. On
October 24, 2024, Dato Seow Gim Shen notified our Board of Directors of his decision to resign as Chief Executive Officer and Chairman
of the Board of the Company for personal reasons and not as a result of any disagreement with our Board or management on any matter relating
to our operations, policies or practices. We anticipate that
the resignation of Mr. Shen will not impact the Merger Closing with TalenTec. Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statement presentation. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, or any future interim periods. The balance sheet as of December 31, 2023, is derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and footnotes thereto included in the Titan Pharmaceuticals, Inc. Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission. The accompanying condensed financial statements have been prepared assuming we will continue as a going concern. As of September 30, 2024, we had cash of approximately $ 3.4 Going Concern Assessment We assess going concern
uncertainty in our condensed financial statements to determine if we have sufficient cash on hand and working capital, including
available borrowings on loans, to operate for a period of at least one year from the date the condensed financial statements are
issued or available to be issued, which is referred to as the look-forward period as defined by Accounting Standards Update
(“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern Based upon the above assessment, we concluded that, at the date of filing the condensed financial statements in this Quarterly Report on Form 10-Q for the nine months ended September 30, 2024, we have sufficient cash to fund our operations for the next 12 months without additional funds. Use of Estimates The preparation of condensed financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the amounts reported in the condensed financial statements and accompanying notes. Actual results could differ from those estimates. Stock-Based Compensation We recognize compensation expense using a fair-value based method for all stock-based payments including stock options and restricted stock awards and stock issued under an employee stock purchase plan. These standards require companies to estimate the fair value of stock-based payment awards on the date of grant using an option pricing model. See Note 2. Stock Plans Cash Our investment policy emphasizes liquidity and preservation of principal over other portfolio considerations. We select investments that maximize interest income to the extent possible given these two constraints. We satisfy liquidity requirements by investing excess cash in securities with different maturities to match projected cash needs and limit concentration of credit risk by diversifying our investments among a variety of high credit-quality issuers and limit the amount of credit exposure to any one issuer. The estimated fair values have been determined using available market information. We do not use derivative financial instruments in our investment portfolio. All investments with original maturities of three months or less are considered to be cash equivalents. We had no We maintain significant cash balances at financial institutions which throughout the year regularly exceed the federally insured limit of $250,000. Any loss incurred or a lack of access to such funds could have a significant adverse impact on our financial condition, results of operations, and cash flows. Restricted Cash In accordance with ASU No.
2016-18, Statement of Cash Flows (Topic 230): Restricted Cash Prepaid Expenses and Other Current Assets Prepaid Expenses and Other Current Assets consist primarily of prepaid insurance, prepaid rent, prepaid payroll, and other expenses. Prepaid expenses are recorded at cost and are amortized over the periods benefited using the straight-line method. The Company reviews prepaid expenses at each balance sheet date and adjusts the carrying amounts as necessary to reflect the remaining estimated benefit. Property and Equipment Property and equipment are
recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets ranging from three 3 5 Revenue Recognition We generated revenue principally from collaborative research and development arrangements and government grants. Grant
Revenue We had contracts with National Institute on Drug Abuse or NIDA, within the U.S. Department of Health and Human Services, the Bill & Melinda Gates Foundation, and other government-sponsored organizations for research and development related activities that provided for payments for reimbursed costs, which may have included overhead and general and administrative costs. We recognized revenue from these contracts as we performed services under these arrangements when the funding was committed. Associated expenses were recognized when incurred as research and development expense. Revenues and related expenses are presented gross in the condensed statements of operations. Receivables The following table presents the activity related to our receivables for the nine months ended September 30, 2024.
Schedule of activity related to our accounts receivable
(in
thousands of U.S. dollars)
Balance at January 1, 2024 $ 46
Deductions (8 )
Balance at September 30, 2024 $ 38 Research and Development Costs and Related Accrual Research and development expenses
include internal and external costs. Internal costs include salaries and employment related expenses, facility costs, administrative
expenses, and allocations of corporate costs. External expenses consist of costs associated with outsourced contract research organization
activities, sponsored research studies, product registration, and investigator sponsored trials. Significant judgments and estimates
must be made and used in determining the accrued balance in any accounting period. Actual results could differ from those estimates under
different assumptions. Revisions are charged to expense in the period in which the facts that give rise to the revision become known. Leases We determine whether the arrangement is or contains a lease at inception. Operating lease right-of-use assets and lease liabilities are recognized at the present value of the future lease payments at commencement date. The interest rate implicit in lease contracts is typically not readily determinable, and therefore, we utilize our incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. Lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on our condensed balance sheets as right-of-use assets, operating lease liabilities current and operating lease liabilities non-current. The operating lease expired on June 30, 2024, and was not renewed. Recent Accounting Pronouncements There are no recent
accounting pronouncements that will have a material impact on our condensed financial statements. Fair Value Measurements Financial instruments, including receivables, accounts payable and accrued liabilities, are carried at cost, and their fair values are approximated due to the short-term nature of these instruments. |
