10-Q: Tempest Therapeutics Amends Factor Bioscience Agreement

Tempest Therapeutics and Factor Bioscience Inc. have entered into a letter agreement to modify payment obligations under their Master Services Agreement, impacting future payments and a prior deposit.

Summary

• Tempest Therapeutics, Inc. and Factor Bioscience Inc. have entered into an Amended and Restated Master Services Agreement (MSA) and a related Letter Agreement.
• The Letter Agreement, dated May 11, 2026, modifies payment obligations under the MSA and Work Order No. 1.
• Factor Bioscience has agreed to permanently waive its right to the first $2,100,000 payable by Tempest.
• Factor will also return a $150,000 deposit made by Tempest under the Work Order, subject to certain conditions, with Tempest needing to repay this amount upon raising $5,000,000 through a Capital Raise Transaction.
• Tempest agrees to use its best efforts to promptly raise funds through public or private equity transactions.
• This agreement supersedes all prior agreements between the parties regarding its subject matter.

Sentiment

Score: 2

Explanation: StockSavvy.ai views this filing as negative due to the significant increase in net loss, substantial doubt about the company's ability to continue as a going concern, and the reliance on a related party for potential funding under uncertain terms.

Positives

• Factor Bioscience's waiver of $2.1 million in payments provides immediate financial relief to Tempest Therapeutics.
• The return of the $150,000 deposit offers a short-term cash flow benefit to Tempest, contingent on future fundraising.
• Tempest's commitment to raise funds through various equity transactions aims to improve its financial runway.
• The agreement clarifies and restates the terms between the two companies, providing a clear framework for future interactions.

Negatives

• Tempest Therapeutics' reliance on future capital raises to repay the $150,000 deposit highlights its ongoing liquidity concerns.
• The substantial amount of waived payments ($2.1 million) indicates the financial pressure Tempest is under.
• The uncertainty of Tempest's ability to raise the required $5,000,000 for the deposit repayment remains a risk.

Risks

• Tempest Therapeutics may not be successful in raising the necessary funds through public or private equity transactions, impacting its ability to meet its obligations.
• The terms and conditions of the funding commitment letter from Factor Bioscience may not be fully satisfied by Tempest, potentially limiting access to funds.
• The timing of any additional funding from Factor is uncertain, creating potential cash flow challenges for Tempest.
• The company's ability to continue as a going concern is subject to substantial doubt due to its limited cash resources and ongoing operating losses.

Future Outlook

Tempest Therapeutics expects its existing cash and cash equivalents to fund operating expenses for less than 12 months from the issuance date of the financial statements, indicating substantial doubt about its ability to continue as a going concern. The company is actively exploring options to raise additional funds, including reliance on the Funding Commitment from Factor Bioscience, though the terms and timing of this funding are uncertain. The company anticipates increased R&D expenses as it advances product candidates through clinical trials.

Management Comments

• Tempest Therapeutics is actively exploring a range of options to raise additional funds.
• There is significant uncertainty as to whether we will be able to satisfy the terms and conditions and other provisions set forth in the funding commitment letter with Factor, and if we are unable to do so, we may be limited in the amount of funding that we are able to access or we may not be able to access any funds.
• Adequate additional financing may not be available to us on acceptable terms, or at all.
• Our ability to raise additional capital has been adversely impacted by potential worsening global economic conditions, inflation expectations, and the recent disruptions to and volatility in the credit and financial markets.

Industry Context

StockSavvy.ai notes that this agreement highlights the challenging financial landscape for clinical-stage biotechnology companies, often requiring strategic financial maneuvers and partnerships to fund development. The reliance on external funding and the negotiation of payment terms with partners like Factor Bioscience are common strategies to extend cash runway.

Comparison to Industry Standards

• The net loss of $27.7 million for the quarter is significant for a clinical-stage biotech, but not uncommon given the high costs of drug development. Competitors in the CAR-T space, such as Kite Pharma (Gilead) and Novartis, also incur substantial R&D expenses.
• The decrease in R&D spending by 99% is a stark indicator of Tempest's financial constraints, potentially impacting the pace of its pipeline advancement compared to better-funded peers.
• The reliance on a funding commitment from a related party (Factor Bioscience, where the CEO is a majority owner) is a less common but sometimes necessary approach for companies facing severe liquidity issues, unlike larger, publicly funded biotechs that typically use ATM programs or follow-on offerings.

Related Party Transactions

• Matt Angel, Ph.D., the Company's CEO and a board member, is also the majority owner, CEO, and chairman of Factor Bioscience Inc.
• Tempest Therapeutics completed an Asset Acquisition involving Factor Bioscience in February 2026.
• Factor Bioscience invested $0.5 million in Tempest Therapeutics' private placement financing during the quarter ended March 31, 2026.
• An advisory agreement was approved with Andrew Fang, an immediate family member of the owner of Lotus, a major shareholder of the Company, to provide advisory services starting April 2026.

Stakeholder Impact

• Shareholders face continued uncertainty regarding the company's financial stability and ability to fund future development, with substantial doubt about its going concern status.
• Employees may be concerned about job security given the company's financial situation and past workforce reductions.
• Creditors and suppliers may face increased risk of delayed payments or non-payment due to Tempest's liquidity challenges.

Next Steps

• Tempest Therapeutics will use its best efforts to promptly raise funds through public or private equity transactions.
• Tempest Therapeutics must repay the $150,000 deposit to Factor Bioscience upon raising $5,000,000 through a Capital Raise Transaction.
• Tempest Therapeutics plans to meet with the FDA to discuss initiating a U.S. registrational study for TPST-2003 later this year.
• Tempest Therapeutics plans to pursue business development discussions to advance pivotal development for amezalpat (TPST-1120) in HCC.
• Tempest Therapeutics plans to initiate a Phase 2 study for TPST-1495 in familial adenomatous polyposis in 2026.

Key Dates

Recommendation

While the agreement with Factor Bioscience provides some short-term financial relief and clarifies payment terms, the company's overall financial precariousness, substantial doubt about its going concern status, and the uncertainty surrounding future funding necessitate a cautious approach. The positive clinical data for TPST-2003 offers a glimmer of hope, but the immediate financial hurdles outweigh the potential upside for a strong buy or sell recommendation at this juncture. A 'hold' allows investors to monitor fundraising efforts and clinical progress.

Keywords

Tempest Therapeutics, Factor Bioscience, Master Services Agreement, Letter Agreement, Capital Raise, Payment Obligation, Waiver, Deposit, Biotechnology, Clinical Stage