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Item 9A. Controls and Procedures

2023-03-15 compared with 2022-03-16 · 295 added, 118 removed, 376 unchanged (52% of the section changed)

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Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, including our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2021, the end of the period covered by this Annual Report.

Based on such evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of December 31, 2021 as a result of a material weakness in our internal control over financial reporting due to inadequate segregation of duties resulting from the size of our Company and our limited personnel.

To remediate the inadequate segregation of duties, our management (i) has engaged a third-party specialist to review our current internal controls and to recommend design improvements given the limited number of employees and (ii) has hired a controller to remediate the segregation of duties issue, who will commence employment in April 2022.

We can give no assurance that additional material weaknesses in our internal control over financial reporting will not be identified in the future.

As required by Rules 13a-15(e) and 15d-15(e) of the Exchange Act, our management, including our principal executive officer and our principal financial officer, conducted an evaluation as of the end of the period covered by this Form 10-K of the effectiveness of the design and operation of our disclosure controls and procedures.

In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this Form 10-K.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

We can give no assurance that material weaknesses in our internal control over financial reporting will not be identified in the future.

Our failure to implement and maintain effective internal control over financial reporting could result in errors in our financial statements that could result in a restatement of our financial statements and cause us to fail to meet our reporting obligations.

Management’s Annual Report on Internal Control over Financial Reporting

This Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.

Our management conducted an assessment of the evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria set forth in “Internal Control – Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this assessment, our management concluded that our internal control over financial reporting was effective as of December 31, 2022.

Attestation Report of the Registered Public Accounting Firm

This Form 10-K does not include an attestation report of our registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Additionally, our independent registered public accounting firm will not be required to opine on our internal control over financial reporting until we are no longer an emerging growth company.

This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to an exemption established by the JOBS Act for “emerging growth companies”.

Additionally, our independent

registered public accounting firm will not be required to opine on our internal control over financial reporting until we are no longer an emerging growth company.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period covered by this filing that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As previously reported, management recognized that the Company had material weaknesses in its internal control over financial reporting as of December 31, 2021.

We identified a material weakness as it relates to a lack of adequate segregation of accounting functions.

To remediate the inadequate segregation of duties, our management (i) engaged a third-party specialist to review our current internal controls and to recommend design improvements given the limited number of employees, (ii) hired a controller to remediate the segregation of duties issue, who commenced employment in April 2022 and (iii) implemented a quarterly financial statement close process that includes formal reviews of financial statement account balances and journal entries.

Accordingly, management believes it has remediated the material weakness related to inadequate segregation of duties.

Except as noted above, there were no additional changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) identified in connection with the evaluation of such internal control that occurred during the fourth quarter of our last fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Other Information.

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Directors, Executive Officers and Corporate Governance.

The information required by this Item will be included in the 2022 Proxy Statement and is incorporated herein by reference.

Set forth below are the names of our directors and officers and each of their principal occupations and employers, as applicable.

Additional information required by this Item will be included in the 2023 Proxy Statement and is incorporated herein by reference.

Luci — President and Chief Executive Officer, Director

Luci is our co-founder, President and Chief Executive officer and has served as Director since February 2018.

Luci previously served as our Managing Director from February 2018 until June 2021.

Previously, Mr.

Luci was the President and Chief Executive Officer of Dipexium Pharmaceuticals (Nasdaq:

DPRX), a pharmaceutical company focused on antibiotic drug development, from February 2010 until its sale to PLx Pharma Inc.

PLXP) in a merger valued at $69.0 million in April 2017.

From February 2009 to January 2010, Mr.

Luci served as a member of the board of directors of Access, where he also served as Chairman of the Audit Committee and Chairman of the Compensation Committee as well as serving in a consulting capacity following the acquisition of MacroChem.

From December 2007 through February 2009, Mr.

Luci served as a member of the board of directors and President of MacroChem.

Prior to that, Mr.

Luci served as Executive Vice President, Chief Financial Officer, General Counsel and Corporate Secretary of Bioenvision, Inc.

(or Bioenvision), an international biopharmaceutical company focused upon the development, marketing and commercialization of oncology products and product candidates.

Luci began his career with Ernst & Whinney LLP (now Ernst &Young LLP) in New York as a certified public accountant working in the Healthcare Practice Group.

He later practiced corporate law at Paul Hastings LLP in New York, where his practice encompassed all aspects of public and private mergers and acquisitions, corporate finance, restructurings and private equity transactions, with a core focus in the healthcare industry.

Luci graduated from Bucknell University with a degree as a Bachelor of Science in Business Administration with a concentration in Accounting and graduated from Albany Law School of Union University where he served as Managing Editor of the Journal of Science & Technology.

Luci became a certified public accountant in the State of Pennsylvania in 1990 (inactive) and is a member of the New York State Bar Association.

Luci was selected to serve on our board of directors because of his extensive experience in the pharmaceutical industry.

DeLuccia — Executive Chairman

DeLuccia is our co-founder and Executive Chairman and has served as Director since February 2018.

DeLuccia previously served as our Managing Partner from February 2018 until June 2021.

February 2018.

Previously, Mr.

DeLuccia was the Executive Chairman of Dipexium Pharmaceuticals (Nasdaq:

DPRX), a pharmaceutical company focused on antibiotic drug development, from February 2010 until its sale to PLx Pharma Inc.

PLXP) in a merger valued at $69 million in April 2017.

Previously, from 2004 to 2009, Mr.

DeLuccia served in several capacities at MacroChem, a development-stage, publicly traded pharmaceutical company using topical drug delivery technology for products in dermatology, podiatry, urology and cancer, including as Chairman of the board of directors, President and Chief Executive Officer.

Prior to joining MacroChem, Mr.

DeLuccia served as President and Chief Executive Officer of Immunomedics, Inc., a publicly-traded biopharmaceutical company focused on antibody-based therapeutic products and diagnostic imaging for cancer and infectious diseases.

DeLuccia also served as President of Sterling Winthrop, Inc.

(or Sterling Winthrop) (as an independent corporation and then as subsidiary of Eastman Kodak), and subsequently, upon acquisition, the U.S.

subsidiary of Sanofi-Aventis (or Sanofi) and currently serves as a member of the board of directors of IBEX Technologies Inc., which manufactures and markets proprietary enzymes (heparinases and chondroitinases) for use in pharmaceutical research and Heparinase I, used in many leading hemostasis monitoring devices.

DeLuccia began his career as a pharmaceutical sales representative for Pfizer, Inc.

(or Pfizer) and progressed to Director of Marketing, Pfizer Laboratories Division, and to Vice President Marketing and Sales Operations for Pfizer’s Roerig Division.

DeLuccia received a Bachelor of Business Administration with a concentration in Marketing and a Master’s Degree in Business Administration from Iona College.

DeLuccia was selected to serve as Chairman of our board of directors because of his extensive executive leadership and experience in the pharmaceutical industry.

Sailer — Director

Sailer has served as our director since October 2018.

Since May 2019, Mr.

Sailer has served as VP, Global Account Lead for Syneos Health (Nasdaq:

Previously, Mr.

Sailer served as VP, Sales and Marketing for Emisphere Technologies from October 2012 until March 2019, Vice President of Commercial Operations at New American Therapeutics from August 2010 to September 2012, and VP, Commercial Operations Akrimax Pharmaceuticals from May 2008 to July 2010.

Sailer started his career in various sales, marketing and sales management roles in the pharmaceutical and consumer products divisions of Bristol-Myers Squibb and Bayer Healthcare.

Sailer has over 25 years of experience as a commercial leader in the biopharmaceutical industry.

Sailer earned a Master of Business Administration from Hofstra University and a Bachelor of Science in Marketing from Seton Hall University, where he currently serves on the Advisory Board of the Market Research Center at the Stillman School of Business.

Sailer was selected to serve on our board of directors because of his extensive experience in the pharmaceutical and consumer goods industries.

Thomas Harrison — Director

Harrison has served as our director since July 2021.

Since June 2016, Mr.

Harrison has served as Chairman Emeritus of the Diversified Agency Services (“DAS”) division of Omnicom Group Inc.

OMC), the world’s largest group of marketing services companies, having previously served as its President, then Chairman and CEO.

DAS provides an unparalleled range of marketing communications services including public relations, crisis management, branding, sales promotion, customer relationship management and specialty communications including health care advertising.

With over 5000 worldwide clients, the DAS division under Mr.

Harrison had annual revenues of over $6.0 billion and became the largest business unit within Omnicom Group.

Harrison’s leadership, the DAS division grew from Omnicom’s smallest to its largest division and accounted for over 50% of Omnicom’s total revenues.

He acquired and led a group of companies which became the most influential in their respective disciplines and built the largest, most innovative, diverse and relevant group of specialized agencies.

Harrison’s multi-faceted career brought him to Omnicom in 1992 when Omnicom acquired the firm he co-founded, Harrison & Star Business Group, which was the most successful and rapidly growing agency group in the healthcare industry.

Harrison served as Chairman of the Harrison & Star Group and Chairman of Diversified Healthcare Communications, a group of eight healthcare agencies within Omnicom, until his appointment as President of DAS in 1997.

He was named Chairman and Chief Executive of DAS in 1998 and remained in this role until being named Chairman Emeritus in 2013.

With an advanced degree in cell biology and physiology, Mr.

Harrison began his business career at Pfizer Laboratories as a pharmaceutical sales representative His agency, Harrison & Star, was an entrepreneurial agency that fused high science with high creativity.

The agency became uniquely positioned in the market due to its understanding of the clinical and scientific underpinnings of prescription product promotion and its ability to communicate with practicing physicians using the language of science not sales.

Harrison brought his scientific acumen and career experience in healthcare, wellness, branding and communication to the evolving cannabis marketplace in 2015 when he joined the Board of Directors of Zynerba Pharmaceuticals, a leader in pharmaceutically produced transdermal cannabinoid therapies for rare and near-rare psychiatric disorders.

Harrison joined Merida Capital Partners in 2019 as Senior Operating Partner.

At Merida, he serves as a strategic and operational advisor across the firm’s portfolio companies.

Harrison is focused on contributing his expertise to this dynamic industry as it continues to unfold.

Harrison is a member of the Executive Committee of the Montefiore Health System and currently sits on the board of Fifth Street Asset Management (2014 – Present) where he serves as Lead Independent Director and Chairman of the Audit Committee.

He also serves on the board of Madison Logic, a digital business to business agency (2017 – Present).

Most recently, Mr.

Harrison was appointed to the board of MainStem, a cannabis-related supply company and also ACTV8me, a digital advertising attribution company.

Harrison is a past board member at ePocrates, a publicly traded healthcare information company, where he served from 2006 until its acquisition in 2013 and he has also served as a board member for The Morgans Hotel Group (2006 – 2013).

Harrison joined the board of Dipexium Pharmaceuticals in 2011 and served until its acquisition in 2017.

He was a board member of rVue, a digital out-of-home media company from 2013 until 2016 and sat on the board of Social Growth Technologies from 2014 until its acquisition in 2016.

Harrison was appointed to the board of directors of Zynerba Pharmaceuticals in 2015 serving as Chair of the Nominations and Corporate Governance Committee and as a member of the Compensation Committee until 2019 when he joined Merida Capital Partners.

Harrison earned an LH.D and Masters of Science in cell biology from West Virginia University, and a Bachelor of Science in cell biology and physiology from Shepherdstown University.

Harrison was selected to serve on our board of directors because of his extensive public company experience and his knowledge of the pharmaceutical industry.

Scodari — Director

Scodari has served as our director since July 2021.

Since October 2017, Mr.

Scodari has served as Chairman of the Board of Directors of Optinose (Nasdaq:

OPTN), a specialty pharmaceutical company focused on serving the needs of patients cared for by ear, nose and throat (“ENT”) and allergy specialists.

Scodari was previously Worldwide Chairman, Pharmaceuticals Group, of Johnson & Johnson, and a member of Johnson & Johnson’s Executive Committee from March 2005 until his retirement in March 2008.

From 2003 to March 2005, Mr.

Scodari was Company Group Chairman of Johnson & Johnson’s Biopharmaceutical Business.

Scodari joined Centocor in 1996 as President, Pharmaceutical Division and was named President and COO in 1998, a position that he served in until Conocor Inc.’s acquisition by Johnson & Johnson in 1999.

Scodari began his career in 1974 in sales for Winthrop Laboratories, Division of Sterling Drug.

He progressed through various management positions, eventually leading the Diagnostic Imaging Division for Winthrop and later Strategic Marketing at the corporate level for the Imaging business.

Scodari joined Rorer Pharmaceuticals (shortly thereafter, Rhône-Poulenc Rorer) in 1989 as Vice President of Marketing and Business Development.

He later served as Vice President and General Manager for the United States, and subsequently, North America, and finally as Senior Vice President and General Manager for the Americas.

Scodari previously served as a director of Actelion Pharmaceuticals, Ltd., Endo Health Solutions, Inc.

and Covance, Inc.

Scodari has served on various non-profit boards, including the University of the Health Sciences in Philadelphia, the Board of Overseers for the Robert Wood Johnson School of Medicine, and on the Board of Trustees for Gwynedd Mercy College.

He has also served on various industry association boards, including the NWDA Associate Member Board, the National Pharmaceutical Council, as Vice Chairman of the Biotechnology Industry Organization (“BIO”), and Chairman of PA BIO.

Scodari received a B.A.

from Youngstown State University.

Scodari was selected to serve on our board of directors because of his extensive experience in the pharmaceutical industry.

Dean, Ph.D., Sc.D.

(Hon.), DABT, Fellow ATS — Director

Dean has served as our director since July 2021.

He previously served as a director of our predecessor, Dipexium Pharmaceuticals (Nasdaq:

DPRX), a pharmaceutical company focused on antibiotic drug development from October 2010 until its sale to PLx Pharma Inc.

PLXP) in a merger valued at $69.0 million in April 2017.

Since 2006, Dr.

Dean has served as an advisor to the Executive Vice President of Drug Development for Sanofi, consulting on drug development strategy, drug safety issues and immunotoxicology through his company Drug Development Advisors, LLC where he serves as President.

Dean is also a research professor in the departments of Medical Pharmacology and Pharmacology/ Toxicology, Colleges of Medicine and Pharmacy, at University of Arizona in Tucson.

Prior to January 2006, Dr.

Dean served as the President, U.S.

Science and Medical Affairs (R&D), Sanofi in Malvern, Pennsylvania and the Global Director of Preclinical Development for Sanofi.

Dean joined Sterling Winthrop in 1988, as Director of the Department of Toxicology and was appointed Vice President, Drug Safety worldwide in 1989.

In addition, Dr.

Dean served as Director of the Sterling Winthrop Research Center in Alnwick, England from 1990 to 1992.

Dean was appointed Executive Vice President, Drug Development, in 1992 where he managed Non-Clinical and Clinical Development, and Regulatory Affairs.

Before joining Sterling Winthrop, Dr.

Dean headed the Department of Cellular and Molecular Toxicology, Chemical Industry Institute of Toxicology, Research Triangle Park, NC from 1982 to 1988.

Prior to 1982, he headed the Immunotoxicology Section, National Institute of Environmental Health Services and National Toxicology Program, NIH in Research Triangle Park.

From 1972 to 1979, Dr.

Dean was in the Department

of Immunology at Litton Bionetics (Department Director from 1975 to 1979) conducting research in tumor immunology.

Dean holds a Bachelor of Science in microbiology and a Master of Science in medical microbiology from California State University at Long Beach.

He earned a Ph.D.

in molecular biology and minor in biochemistry in 1972 from the College of Medicine, University of Arizona.

Dean held adjunct professorships at the University of North Carolina, Chapel Hill and Duke University from 1981 to 1988.

Dean was selected to serve on our board of directors because of his extensive experience in the pharmaceutical industry.

James Donohue — Director

Donohue has served as our director since July 2021.

Donohue has been a Vice President with Charles River Associates (Nasdaq:

CRAI), a leading global consulting firm specializing in economic, financial, and management consulting services, since April 2004.

Donohue has nearly 30 years of experience in valuation, damages, and forensic accounting.

Donohue is a Certified Public Accountant (CPA) in Maryland and has a Bachelor of Science degree in Accountancy from Villanova University.

He is also a Certified Valuation Analyst (CVA) and is Accredited in Business Valuation (ABV).

Donohue was selected to serve on our board of directors because of his expertise in financial accounting.

Robert Shawah — Chief Financial Officer

Shawah has served as our Chief Financial Officer since June 2021.

Shawah previously served as our Chief Accounting Officer and Vice President of Finance from February 2018 to June 2021.

Previously, Mr.

Shawah served as Chief Accounting Officer of Dipexium Pharmaceuticals, Inc.

DPRX) from 2014 until when Dipexium Pharmaceuticals was sold to PLX Pharma (Nasdaq:

PLXP) in a merger valued at $69.0 million in April 2017.

Shawah has served as Vice President of Baldwin Pearson & Co, Inc., a commercial real estate firm.

From August 2018 to December 2018, Mr.

Shawah served as a director for Ameri100, a software integration company.

Shawah graduated from Bucknell University with a degree as a Bachelor of Science in Business Administration with a concentration in Accounting.

Executive Compensation.

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Form of Common Stock Certificate.

Form of Series A Warrant

Form of Series B Warrant

Form of Pre-Funded Warrant.

Form of Placement Agent Warrant.

Description of Securities.

Form of Indemnification Agreement.

Form of Securities Purchase Agreement.

Form of Warrant.

Form of Common Stock Purchase Warrant.

Form of Securities Purchase Agreement.

Form of Investor Rights Agreement, by and between the Registrant and certain purchasers.

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Luci, dated May 25, 2021.

Amended and Restated Employment Agreement, by and between Acurx Pharmaceuticals, Inc.

and Robert Shawah, dated May 25, 2021.

Amended and Restated Employment Agreement, by and between Acurx

Exhibit Description

Pharmaceuticals, Inc.

and Robert Shawah, dated May 25, 2021.

Master Clinical Services Agreement, dated October 11, 2019, by and between Acurx Pharmaceuticals, Inc.

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Statements of Operations

Statements of Changes in Shareholders’ and Members’ Equity

Statements of Changes in Members’ and Shareholders’ Equity

Statements of Cash Flows

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

To the Board of Directors and Stockholders

Acurx Pharmaceuticals, Inc.

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We have audited the accompanying balance sheets of Acurx Pharmaceuticals, Inc.

(formerly Acurx Pharmaceuticals, LLC) (the “Company”) as of December 31, 2021 and 2020, and the related statements of operations, changes in shareholders’ and members’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

(the “Company”) as of December 31, 2022 and 2021, and the related statements of operations, changes in members’ and shareholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021 and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The Company's Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has incurred recurring losses from operations since inception and has stated that substantial doubt exists about the Company's ability to continue as a going concern.

Management's evaluation of the events and conditions and management's plans regarding these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on these financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

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Prepaid Expenses

LIABILITIES AND SHAREHOLDERS’ AND MEMBERS’ EQUITY

LIABILITIES AND MEMBERS' AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Accounts Payable and Accrued Expenses

Paycheck Protection Program Loan

TOTAL CURRENT LIABILITIES

NONCURRENT LIABILITIES

Paycheck Protection Program Loan

TOTAL LIABILITIES

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ AND MEMBERS’ EQUITY

MEMBERS' AND SHAREHOLDERS' EQUITY

Members’ Equity, Class A

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Common Stock;

$ .001 par value, 200,000,000 shares authorized, 10,215,792 shares issued and outstanding at December 31, 2021

$ .001 par value, 200,000,000 shares authorized, 11,627,609 and 10,215,792 shares issued and outstanding at December 31, 2022 and 2021, respectively

Additional Paid-In Capital

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( 26,548,309 )

TOTAL SHAREHOLDERS’ AND MEMBERS’ EQUITY

TOTAL LIABILITIES AND SHAREHOLDERS’ AND MEMBERS’ EQUITY

TOTAL MEMBERS' AND SHAREHOLDERS’ EQUITY

TOTAL LIABILITIES AND MEMBERS' AND SHAREHOLDERS’ EQUITY

See accompanying notes to the financial statements.

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LOSS PER SHARE

Basic and diluted net loss per common share/units

Weighted average common shares/units outstanding basic and diluted

Basic and diluted net loss per common share

Weighted average common shares outstanding basic and diluted

See accompanying notes to the financial statements.

ACURX PHARMACEUTICALS, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ AND MEMBERS’ EQUITY

STATEMENTS OF CHANGES IN MEMBERS’ AND SHAREHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2022 AND 20201

Class A Membership

Class B Membership

Class A Membership Interests

Shareholders’

and Shareholders’

Balance at January 1, 2021

( 13,800,612 )

Private Placement Offerings, net of issuance costs of $ 51,409

Executive Compensation Settled with Membership Interests

Cancellation of Class B Issuance

Share-Based Compensation

Share-Based Payments to Vendors

Corporate Conversion

( 13,982,318 )

( 17,517,375 )

Initial Public Offering and underwriter warrants, net of $ 2,452,868 cash issuance costs

( 12,747,697 )

Balance at December 31, 2021

( 26,548,309 )

Executive Compensation Settled with Membership Interests

Cancellation of Class B Issuance

Share-Based Compensation

Share-Based Payments to Vendors

Corporate Conversion

( 13,982,318 )

( 17,517,375 )

Initial Public Offering and underwriter warrants, net of $ 2,452,868 cash issuance costs

Issuance of shares of common stock and pre-funded warrants in registered direct offering, net of $ 529,805 cash issuance costs

Cashless Warrant Exercise

Pre-funded Warrant Exercise

( 12,092,776 )

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Cash Flow from Financing Activities:

Proceeds from Paycheck Protection Program Loan

Proceeds from Initial Public Offering, net of issuance costs

Proceeds from Private Placement Offerings, net of issuance costs

Proceeds from Registered Direct Offering, net of issuance costs

Pre-funded Warrant Exercise

Net Cash Provided by Financing Activities

Net Increase in Cash

Net (Decrease) Increase in Cash

( 3,847,095 )

Cash at Beginning of Year

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NOTE 1 – NATURE OF OPERATIONS

Acurx Pharmaceuticals, Inc., a Delaware corporation, formerly Acurx Pharmaceuticals, LLC (the “Company”) is a publicly held, clinical stage biopharmaceutical company formed in July 2017, with operations commencing in February 2018.

Acurx Pharmaceuticals, Inc., a Delaware corporation, formerly Acurx Pharmaceuticals, LLC (the “Company”) is a clinical stage biopharmaceutical company formed in July 2017, with operations commencing in February 2018.

The Company is focused on developing a novel class of antibiotics that address serious or life threatening bacterial infections.

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The COVID-19 pandemic has disrupted, and the Company expects it will continue to disrupt, its operations.

The extent of the effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict.

The extent of the effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, direct and indirect economic effects as a result of inflation, supply chain disruptions and labor shortages all of which are uncertain and difficult to predict.

Although the Company is unable to estimate the financial effect of the pandemic, at this time, if the pandemic continues over a long period of time, it could have a material adverse effect on the Company’s business, results of operations, financial condition, and cash flows.

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The Company was also required to make certain milestone payments totaling $ 700,000 in aggregate if certain milestones are achieved, $ 50,000 of which has already been paid by the Company and royalty payments equal to 4 % of net sales for a period of time equal to the last to expire of any applicable patents, as defined in the asset purchase agreement.

The purchase of the Asset has resulted in our lead antibiotic product candidate, ibezapolstat, which targets the treatment of CDI.

The purchase of the Asset has resulted in our lead antibiotic product candidate, ibezapolstat, which targets the treatment of C.

difficile infections (“CDI”).

The Company’s primary activities since inception aside from organizational activities have included performing research and development activities relating to the development of its two antibiotic candidates and raising funds through equity offerings including its initial public offering (“IPO”) consummated in June 2021.

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On June 29, 2021, the Company completed the IPO, issuing 2,875,000 shares of common stock at a price of $ 6.00 per share, with gross proceeds of approximately $ 17.3 million.

As of December 31, 2021, the Company had a cash balance of approximately $ 13.0 million, which based on current estimates will be sufficient to meet our anticipated cash requirements for at least 12 months from the issuance of the financial statements for the year ended December 31, 2021.

On July 27, 2022, the Company completed a registered direct offering and a concurrent private placement, issuing 1,159,211 shares of common stock and 130,769 pre-funded warrants and series A warrants to purchase 1,289,980 shares of common stock and series B warrants to purchase 1,289,980 shares of common stock for gross proceeds of approximately $ 4.2 million.

As of December 31, 2022, the Company had a cash balance of approximately $ 9.1 million, which based on current estimates will not be sufficient to meet our anticipated cash requirements for at least 12 months from the issuance of the financial statements for the year ended December 31, 2022.

Management believes that the Company will continue to incur losses for the foreseeable future and will need additional resources to sustain its operations until it can achieve profitability and positive cash flows, if ever.

Management plans to seek additional equity financing and grant funding, but cannot assure that such financing and funding will be available at acceptable terms, or at all.

These matters raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

There can be no assurance that the Company’s research and development will be successfully completed or that any Company product candidate will be approved by the Food and Drug Administration (“FDA”) or any other worldwide regulatory authority or become commercially viable.

There can be no assurance that the Company’s research and development will be successfully completed or that any Company product candidate will be approved by

the Food and Drug Administration (“FDA”) or any other worldwide regulatory authority or become commercially viable.

The Company is subject to risks common to companies in the biopharmaceutical industry including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with FDA and other governmental regulations and approval requirements .

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Use of Estimates

The preparation of financial statements in conformity with accounting standards generally accepted in the Unites States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

Actual results could differ from those estimates.

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Prior to the Company’s corporate conversion in June 2021, the Company was organized as a limited liability company.

As such, the Company was not a tax paying entity for federal income tax purposes and, therefore, no income tax expense has been recorded in the financial statements for the year ended December 31, 2020.

As such, the Company was not a tax paying entity for federal income tax purposes and, therefore, no income tax expense has been recorded in the financial statements.

Income or losses of the Company was passed through to the members for inclusion in their respective income tax returns.

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The Company incurred research and development expenses in the amount of $ 4,754,271 and $ 2,030,177 for the years ended December 31, 2022 and 2021, respectively.

Costs for certain research and development activities, such as the provision of services for clinical trial activity, are estimated based on an evaluation of the progress to completion of specific tasks which may use data such as subject enrollment, clinical site activations or information provided to the Company by its vendors with respect to their actual costs incurred.

Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as the case may be.

The estimates are adjusted to reflect the best information available at the time of the financial statement issuance.

Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company's estimate of the status and timing of services performed relative to the actual status and timing of services performed may vary.

Share-Based Compensation

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whichever is more readily determinable.

Such fair value is measured as of the date the services or the date performance by the other party is complete.

The Company recognizes the expense in the same period and in the same manner as if the Company had paid cash for the services.

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The Company continues to maintain this vendor relationship and anticipates incurring significant expenses with this vendor over the next 12 months.

The Company had an additional major vendor in 2021 that accounted for approximately 15 % of the research and development expenditures for the year ended December 31, 2021.

The same vendor did not account for any portion of accounts payable and accrued expenses.

The Company continues to maintain this vendor relationship and anticipates incurring significant expenses with this vendor over the next 12 months.

The Company had an additional major vendor that accounted for approximately 4 % and 15 % of the research and development expenditures for the years ended December 31, 2022 and 2021.

The same vendor did not account for any material portion of the total accounts payable and accrued expenses.

The Company will continue to maintain this vendor relationship over the next 12 months.

NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

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The Company was permitted to prepay the principal of the PPP Loan at any time without incurring any prepayment charges.

The PPP Loan carried an annual interest rate of 0.98 % and matures two (2) years from issuance.

The PPP Loan carried an annual interest rate of 0.98 % and a maturity date two (2) years from issuance.

The Company was not obligated to make any payments of principal or interest before the date on which the SBA remits the loan forgiveness amount to the lender or notifies the lender that no loan forgiveness is allowed.

On April 13, 2021, the SBA authorized the full forgiveness of the PPP Loan.

Accordingly, the Company reduced the full amount of the liability and recorded a gain in

the amount of $ 66,503 on the forgiveness of the PPP loan in the statements of operations for the year ended December 31, 2021.

Accordingly, the Company reduced the full amount of the liability and recorded a gain in the amount of $ 66,503 on the forgiveness of the PPP loan in the statements of operations for the year ended December 31, 2021.

NOTE 5 – EXECUTIVE COMPENSATION

The Company’s co-founders and original two executives received compensation pursuant to employment agreements effective January 2018 (the “Original Agreements”).

The Original Agreements stipulated that the executives would receive a base salary of $ 277,000 per annum, of which a portion was payable with the issuance of Class A Membership Interests of the Company at the most recent offering price when the service was rendered.

The Company also employed a third executive on a part-time basis for $ 7,500 per month, of which a portion was payable with the issuance of Class A Membership Interests during 2018.

The Company did no t issue any Class A Membership Interests to executives in 2019.

In 2019, the three executives executed waiver letters, deferring any unpaid compensation per their Original Agreements until the later to occur of (1) the date upon which the Company has raised $ 2.5 million from equity/debt offerings and/or grants equal to $ 2.5 million, and (2) January 15, 2020.

Accrued deferred compensation per their Original Agreements was recorded in the amount of $ 104,000 as of December 31, 2020.

In January 2020, the Company issued 312,680 Class A Membership Interests at $ 2.50 per unit, equal to the value of the most recent private placement, to its three executives to settle unpaid year-end compensation for 2019 and a year-end bonus award, which was approved by the board of directors.

The year-end bonus component was equal to 244,860 Class A Membership Interests.

In January 2021, the Company issued 57,430 Class A Membership Interests at $ 3.25 per unit, equal to the value of the most recent private placement, to two of its executives to settle unpaid year-end bonus award and deferred compensation, which was approved by the board of directors.

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The Company granted options to purchase 770,000 shares of the Company’s common stock in June 2021 to the three-member management team in replacement of the cancelled year-end grants described above.

The Company is currently managed by three executives, in each case pursuant to new employment agreements effective June 29, 2021.

The Company is currently managed by three executives, in each case pursuant to new employment agreements effective June 29, 2021 and a controller hired in April 2022.

NOTE 6 – ISSUANCE OF EQUITY INTERESTS

The Company consummated two private placement equity offerings in 2018 in a total of four closings.

These offerings were consummated at $ 1.00 per share and $ 1.50 per share, respectively, and both included 50 % warrant coverage.

Thereafter, on March 29, 2019, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $ 2.00 per unit.

Each unit is comprised of one Class A Membership Interest and a warrant to purchase one -half of the total Class A Membership Interests purchased.

The Company issued and sold an aggregate of 277,000 units, comprised of 277,000 Class A Membership Interests and warrants to purchase up to 138,500 additional Class A Membership Interests for gross proceeds of $ 554,000 .

Each warrant, exercisable for 10 years from March 29, 2019, has an exercise price of $ 2.00 per Class A Membership Interest.

On August 8, 2019, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase

price of $ 2.00 per unit.

Each unit is comprised of one Class A Membership Interest and a warrant to purchase one -half of the total Class A Membership Interests purchased.

The Company issued and sold an aggregate of 1,248,750 units, comprised of 1,248,750 Class A Membership Interests and warrants to purchase up to 624,375 additional Class A Membership Interests for gross proceeds of $ 2,497,500 .

Each warrant, exercisable for 10 years from August 8, 2019, has an exercise price of $ 2.00 per Class A Membership Interest.

On October 18, 2019, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $ 2.00 per unit.

Each unit is comprised of one Class A Membership Interest and a warrant to purchase one -half of the total Class A Membership Interests purchased.

The Company issued and sold an aggregate of 483,501 units, comprised of 483,501 Class A Membership Interests and warrants to purchase up to 241,751 additional Class A Membership Interests for gross proceeds of $ 967,000 .

Each warrant, exercisable for 10 years from October 18, 2019, has an exercise price of $ 2.00 per Class A Membership Interest.

On January 6, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $ 2.50 per unit.

Each unit is comprised of one Class A Membership Interest and a warrant to purchase one -fourth of the total Class A Membership Interests purchased.

The Company issued and sold an aggregate of 182,002 units, comprised of 182,002 Class A Membership Interests and warrants to purchase up to 45,501 additional Class A Membership Interests for gross proceeds of $ 455,005 .

The proceeds were received in 2019 and were recorded as advanced receipts of equity subscriptions.

Each warrant, exercisable for 10 years from January 6, 2020, has an exercise price of $ 2.50 per Class A Membership Interest.

On July 20, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests at a purchase price of $ 3.25 per unit.

The Company issued and sold an aggregate of 533,900 Class A Membership Interests for gross proceeds of $ 1,735,175 .

There were no warrants included in this private placement.

On October 16, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests at a purchase price of $ 3.25 per unit.

The Company issued and sold an aggregate of 705,727 Class A Membership Interests for gross proceeds of $ 2,293,613 .

There were no warrants included in this private placement.

On June 23, 2021, Acurx Pharmaceuticals, LLC was converted into a corporation and renamed Acurx Pharmaceuticals, Inc.

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The outstanding Class A and Class B Membership Interests were converted to shares of common stock pursuant to a conversion ratio of one-for-two of the Membership Interests outstanding, resulting in the conversion of 14,082,318 Class A and Class B Membership Interests into 7,041,208 shares of common stock.

Warrants to purchase Class A Membership Interests were converted to warrants to purchase common stock at the same one-for two conversion ratio, resulting in 1,437,577 warrants to purchase common stock with a weighted average exercise price of $ 2.88 .

Warrants to purchase Class A

Membership Interests were converted to warrants to purchase common stock at the same one-for two conversion ratio, resulting in 1,437,577 warrants to purchase common stock with a weighted average exercise price of $ 2.88 .

In connection with the IPO, the Company issued 150,000 warrants to the underwriter.

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This amount was recorded as both an increase to additional paid-in capital and as a non-cash issuance cost of the offering.

On July 25, 2022, the Company entered into securities purchase agreements (the “Purchase Agreements”) with two of the Company’s executives and a member of the Company’s board of directors (collectively, the “Affiliate Investors”), and a single U.S.

institutional investor (the “Investor”) pursuant to which the Company issued and sold in a registered direct offering an aggregate of 1,159,211 shares of common stock, par value $ 0.001 per share and pre-funded warrants to purchase an aggregate of 130,769 shares of common stock.

The Affiliate Investors purchased an aggregate of 59,211 shares of common stock at a purchase price of $ 3.80 per share.

The Investor purchased an aggregate of 1,100,000 shares of common stock at a purchase price of $ 3.25 per share and an aggregate of 130,769 pre-funded warrants at a purchase price of $ 3.2499 per pre-funded warrant.

The pre-funded warrants sold to the Investor have an exercise price of $ 0.0001 , were immediately exercisable.

As of December 31, 2022, all of the pre-funded warrants were exercised.

The Company also issued to the Affiliate Investors and the Investor, series A warrants to purchase 1,289,980 shares of common stock and series B warrants to purchase 1,289,980 shares of common stock, all of which are deemed equity classified.

These warrants included 59,211 series A warrants and an aggregate of 59,211 series B warrants to the Affiliate Investors with an exercise price per share of $ 3.55 and an aggregate of 1,230,769 series A warrants and an aggregate of 1,230,769 series B warrants to the Investor with an exercise price per share of $ 3.25 .

The series A warrants will be exercisable commencing on January 27, 2023 and will expire on January 27, 2028.

The series B warrants will be exercisable commencing on January 27, 2023 and will expire on January 27, 2024.

The registered direct offering closed on July 27, 2022.

The gross proceeds to the Company from the registered direct offering were $ 4.2 million and net proceeds after deducting the placement agents’ fees and other offering expenses payable by the Company were approximately $ 3.7 million.

On July 25, 2022, the Company entered into a co-placement agent agreement (the “Placement Agent Agreement”), with two placement agents in connection with the registered direct offering pursuant to which the Company paid the Placement Agents a cash fee of $ 287,874 and issued to the Placement Agents an aggregate of 63,018 warrants to purchase shares of common stock.

The warrants have an exercise price of $ 3.60 per share (representing 110 % of the weighted average public offering price of the aggregate number of shares of common stock sold in the registered direct offering to the Investor and Affiliate Investors) and expire on July 27, 2027.

The Company used the Black-Scholes model to calculate the value of the warrants with an estimated fair value of $ 171,409 .

The inputs utilized in the calculation were as follows:

five year term, 2.82 % risk free rate, stock price at grant date of $ 3.70 and a 95 % volatility utilizing comparable companies.

This amount was recorded as both an increase to additional paid-in capital and as a non-cash issuance cost of the offering.

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at December 31, 2022:

Weighted Average

Number of Warrants

Exercise Price

Balance, December 31, 2021

Balance, December 31, 2022

NOTE 7 – SHARE-BASED COMPENSATION

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The Plan became effective as of the completion of the corporate conversion.

The Plan currently reserves an aggregate of 2,000,000 shares of common stock, subject to adjustments as provided in the Plan, of which 239,305 are currently still available for issuance.

The Plan originally reserved an aggregate of 2,000,000 shares of common stock, subject to annual adjustments as provided in the Plan, which was 408,632 shares for 2022, of which 537,937 shares are currently still available for issuance as of December 31, 2022.

The purpose of the Plan is to attract, retain and incentivize directors, officers, employees, and consultants.

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The options were issued at an exercise price of $ 6.26 , with the employee options vesting 40 % upon issuance and the balance over 36 months , and the non-employee options vesting at grant date.

The Company recorded general and administrative expense of $ 2,019,325 for the year ended December 31, 2021 related to compensation expense for these options.

The Company recorded general and administrative expense of $ 726,880 and $ 2,019,325 for the years ended December 31, 2022 and 2021, respectively, related to compensation expense for these options.

In July 2021, the Company granted stock options to purchase a total of 1,550,000 shares of common stock to its three executives pursuant to their respective employment agreements, the independent directors, and one consultant, pursuant to the Plan.

The options were issued at an exercise price of $ 6.18 , the grant date fair value, with one -quarter of the executive’s options vesting upon issuance and the balance over 36 months , and the options granted to the directors and consultants vesting over 36 months .

The Company recorded general and administrative expenses of $ 1,963,667 and $ 2,379,833 for the years ended December 31, 2022 and 2021, respectively, related to compensation expense for these options.

In January 2022, the Company granted stock options to purchase a total of 80,000 shares of common stock to seven consultants pursuant to the Plan.

The options were issued at an exercise price of $ 4.44 , the grant date fair value, with one -quarter of the options vesting upon issuance and the balance over 36 months .

The Company recorded general and administrative expenses of $ 145,283 for the year ended December 31, 2022 related to compensation expense for these options.

Compensation expense associated with these awards is recognized over the vesting period based on the fair value of the option at the grant date determined based on the Black-Scholes model.

In April 2022, the Company granted stock options to purchase a total of 30,000 shares of common stock to a new employee pursuant to the Plan.

The options were issued at an exercise price of $ 3.79 , the grant date fair value, with one -

quarter of the options vesting upon issuance and the balance over 36 months .

The Company recorded general and administrative expenses of $ 35,850 for the year ended December 31, 2022 related to compensation expense for these options.

Compensation expense associated with these awards is recognized over the vesting period based on the fair value of the option at the grant date determined based on the Black-Scholes option pricing model.

Option valuation models require the input of highly subjective assumptions including the expected price volatility.

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Outstanding at the beginning of the period

Outstanding and expected to vest

Outstanding at the end of the period

The total compensation expense not yet recognized as of December 31, 2022 was $ 4,243,927 .

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The intrinsic value of the stock options as of December 31, 2022 was $ 5,700 , with a remaining weighted average contractual life of 8.53 years.

The weighted average grant date fair value is $ 4.72 as of December 31, 2021.

The weighted average grant date fair value of all options granted is $ 4.67 as of December 31, 2022.

The Company records the impact of any forfeitures of options as they occur.

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While the Company was a limited liability company in its pre-IPO phase of corporate development, the Company granted Class A Membership Interests to certain vendors in the ordinary course of business in exchange for consulting services relating to research and development activities and investor relations.

The Company granted 30,145 and 147,413 Class A Membership Interests for the years ended December 31, 2021 and 2020, respectively.

The Company granted 30,145 Class A Membership Interests for the year ended December 31, 2021.

The fair value of the Class A Membership Interests granted was equal to the value of the most recent private placement.

The Company recognized the expense in the same period and in the same manner as if the Company had paid cash for the services.

The Company recorded general and administrative expenses and research and development expenses for vendor equity grants in the amounts of $ 201,375 and $ 21,596 for the year ended December 31, 2021, respectively, and $ 338,802 and $ 233,311 for the year ended December 31, 2020, respectively.

The Company recorded general and administrative expenses and research and development expenses for vendor equity grants in the amounts of $ 0 for the year ended December 31, 2022 and $ 201,375 and $ 21,596 for the year ended December 31, 2021, respectively.

In October 2019, the Company granted a total of 150,000 restricted Class A Membership Interests to three consultants for investor relations consulting services performed in 2019 through October 2021.

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The conversion adjusted shares of common stock were issued in October 2021.

During 2020, the Company issued 10,077 warrants to an investment banker for services relating to the October 2020 private placement.

Each warrant vested upon issuance, is exercisable for 10 years from the date of issuance and has an exercise price of $ 3.25 per Class A Membership Interest.

The Company used the Black-Scholes model to calculate the fair value of the warrants.

The inputs utilized in the calculation were as follows:

10 -year term, 0.32 % risk-free rate, stock price at grant date of $ 3.25 , and a 94 % volatility utilizing comparable companies.

The Company reduced the amount of the respective equity issuance by $ 23,177 relating to the warrant issuance.

In the second quarter of 2021, the Company entered into a number of agreements with vendors pursuant to which the Company will make grants of a total of 175,000 shares of common stock, cash payments in the amount of $ 343,500 , and 100,000 options which were included as a part of the July 2021 grant.

In the second quarter of 2021, the Company entered into a number of agreements with vendors pursuant to which the Company made grants of a total of 175,000 shares of common stock with a grant date fair value of $ 6.26 , cash payments in the amount of $ 343,500 , and 100,000 options which were included as a part of the July 2021 grant.

These contracts have terms which range from six months to three years .

The common stock was valued based on the grant date fair value and the options valued utilizing Black-Scholes option pricing model.

The cash payments will be expensed over the service period and the equity component expensed consistent with the contractual vesting.

These shares and options were granted in the third quarter pursuant to the Plan.

In the third quarter of 2021, the Company granted vendors a total of 35,695 shares of common stock pursuant to the Plan.

The cash payments were expensed over the service period and the equity component expensed consistent with the contractual vesting.

These shares and options were granted in the third quarter of 2021 pursuant to the Plan.

In the third quarter of 2021, the Company granted vendors a total of 35,695 shares of common stock, which fully vested in 2021, pursuant to the Plan.

The Company recorded general and administrative expense of $ 208,270 , based on the respective grant date fair values, for the year ended December 31, 2021.

In October 2021, the Company entered into an agreement with a consultant to provide financial advisory services for a six-month term.

Pursuant to the agreement, the Company will grant $ 150,000 of common stock over the term of service.

The Company granted 13,889 shares of common stock at grant date fair value and recorded general and administrative expenses of $ 75,000 for the year ended December 31, 2021.

Pursuant to the agreement, the Company granted $ 150,000 of common stock over the term of service.

The Company granted total of 27,778 shares of common stock at grant date fair value and recorded general and administrative expenses of $ 75,000 for each of the years ended December 31, 2022, and 2021, respectively.

In March 2022, the Company entered into an agreement with a consultant to provide investor relation services for a six-month term.

Pursuant to the agreement, the Company granted 30,000 shares of common stock with a grant date fair value of $ 3.77 and paid $ 25,000 of cash compensation The cash component was expensed over the service period and the equity component was expensed consistent with the contractual vesting.

The Company recorded general and administrative expenses of $ 113,100 for the year ended December 31, 2022.

In September 2022, the Company entered into an agreement with a company to provide consulting services for a six-month term.

Pursuant to the agreement, the Company granted 36,000 shares of common stock with a grant date fair value of $ 3.53 , which was expensed consistent with the contractual vesting.

The Company recorded general and administrative expenses of $ 127,080 for the year ended December 31, 2022.

In the fourth quarter of 2022, the Company entered into a number of agreements with vendors pursuant to which the Company will make grants of a total of 43,186 share of common stock with a grant date fair values ranging from $ 3.30 to $ 3.67 , up to 10,096 of warrants, and cash payments.

These contracts have six-months terms with various contractual vesting periods.

The cash payments will be expensed over the service period and the equity component will be expensed consistent with the various contractual vesting periods.

The Company recorded general and administrative expenses of $ 115,500 for the year ended December 31, 2022.

NOTE 9 – INCOME TAXES

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This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The components of the net deferred income tax asset at December 31, 2021 are as follows:

The components of the net deferred income tax asset at December 31, 2022 and 2021 are as follows:

December 31, 2022

December 31, 2021

Deferred tax assets

Net operating loss carryforwards

Net operating loss carry forwards

Share-based compensation

Research and development credit carryforwards

Capitalized research and development

Gross deferred tax assets

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( 7,110,263 )

( 2,850,251 )

Net deferred tax asset

The Tax Cuts and Jobs Act of 2017 (TCJA) amended IRC Section 174 to require capitalization of all research and developmental (R&D) costs incurred in tax years beginning after December 31, 2021.

These costs are required to be amortized over five years if the R&D activities are performed in the U.S., or over 15 years if the activities were performed outside the U.S.

The Company capitalized approximately $ 4.3 million of R&D expenses incurred as of December 31, 2022.

In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that some portion or all the deferred tax assets will not be realized.

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After consideration of all the evidence, both positive and negative, the Company has recorded a full valuation allowance against their net deferred tax assets at December 31, 2022 because the Company has concluded that it is more-likely-than-not that these assets will not be realized.

A reconciliation of income tax expense (benefit) at the statutory Federal income tax rate and income taxes as reflected in the financial statements for both years ended December 31, 2021 is as follows:

December 31, 2022

December 31, 2021

Federal income tax expense at statutory rate

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and the State of New York.

The tax year 2021 is open and potentially subject to examination by the federal and state taxing authorities.

The Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years.

To the extent the Company utilizes any tax attributes from a tax period that may otherwise be closed due to statute expiration, the Internal Revenue Service, state tax authorities, or other governing parties may still adjust the tax attributes upon their examination of the future period in which the attribute was utilized.

The tax years 2022 and 2021 are open and potentially subject to examination by the federal and state taxing authorities.

The Company is currently not under examination by the Internal Revenue Service (“IRS”) or any other jurisdictions for any tax years and has no knowledge of any pending examinations by the IRS or any other jurisdictions.

To the extent the Company utilizes any tax attributes from a tax period that may otherwise be closed due to statute expiration, the IRS, state tax authorities, or other governing parties may still adjust the tax attributes upon their examination of the future period in which the attribute was utilized.

There are no uncertain tax positions recorded for any federal or state positions.

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Accordingly, the outstanding Class A and Class B Membership Interests were converted to shares of common stock using a conversion ratio of one-half of one share of common stock for each Class A membership interest or Class B membership interest, resulting in the conversion of 14,082,318 Class A and Class B Membership Interests into 7,041,208 shares of common stock.

Basic and diluted net loss per share of common stock for the 12 months ended December 31, 2021 was determined by dividing net loss by the weighted average shares of common stock outstanding during the period.

Basic and diluted net loss per share of common stock for the year ended December 31, 2022 was determined by dividing net loss by the weighted average shares of common stock outstanding during the period.

The Company’s potentially dilutive shares, consisting of 4,217,809 warrants, and 2,467,500 stock options, have not been included in the computation of diluted net loss per share for all periods as the result would be antidilutive.

The effects of the corporate conversion on the Company’s weighted average shares of common stock outstanding and net loss per share have been reflected for all periods presented retroactively.

NOTE 11 – RELATED PARTY TRANSACTIONS

During 2020, the Company engaged a former member of the board of directors to provide administrative services for a 12-month period for a total of $ 15,000 , $ 7,500 of which was expensed in 2020.

The Company paid and expensed $ 7,500 for these services during the third quarter of 2021, representing the balance of the services per the agreement.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

In conjunction with the Asset purchase in February 2018, the Company is required to make certain milestone payments related to the ongoing development of ACX-362E totaling $ 700,000 in the aggregate if certain milestones are achieved (which includes $ 50,000 already paid after the acquisition in February 2018).

There were no milestones reached during 2022 and 2021.

The Company is also obligated to make royalty payments equal to 4 % of net sales of ACX-362E for a period of time equal to the last to expire of any applicable patents, as defined in the purchase agreement.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures