What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-03-11 compared with 2021-03-12 · 199 added, 144 removed, 405 unchanged (46% of the section changed)

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

Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures are effective at the reasonable assurance level.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2021, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Controls Over Financial Reporting

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

In September 2020, we were the victim of an email-based wire fraud which involved two electronic communications impersonating one of our vendors, resulting in our sending wires totaling $1.9 million to accounts controlled by the impersonator.

As a result of the foregoing, we identified a material weakness due to our internal controls having not been adequately designed to prevent or timely detect unauthorized cash disbursements.

Specifically, certain members within our finance organization failed to exercise appropriate skepticism and oversight for disbursement of Company-owned funds , and our cash disbursement process was not adequately designed to identify unauthorized payment requests.

We do not believe that this breach had a material adverse effect on our business.

Management took immediate action to remediate the material weakness, including enhancing and formalizing cash disbursement controls to prevent and timely detect unauthorized cash disbursements and significantly enhancing our information technology infrastructure and security measures.

We have also added additional members to the finance and information technology teams with greater experience in the area of internal controls and security.

Management has concluded that the material was remediated during the fourth quarter of 2020 and, based on management’s assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in “Internal Control–Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission, concluded that, as of December 31, 2020, our internal control over financial reporting was effective .

Our management conducted an assessment of the effectiveness of our internal control over financial reporting 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, management concluded that, as of December 31, 2021, our internal control over financial reporting was effective.

Attestation Report of the Registered Public Accounting Firm

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Changes in Internal Control over Financial Reporting

Except for the remediation efforts described above taken to address the material weakness, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance.

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(1) Financial Statements:

Report of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm

Balance Sheets as of December 31, 2021 and 20 20

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Specimen Stock Certificate evidencing the shares of common stock

Stock Purchase Agreement, dated February 18, 2020, between BioXcel Corporation and BioXcel Therapeutics, Inc.

Second Amended and Restated Separation and Shared Services Agreement, dated March 6, 2020 , by and between BioXcel Corporation and BioXcel Therapeutics, Inc.

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Employment Agreement between Reina Benabou and BioXcel Therapeutics, Inc., dated June 21, 2020.

Separation Agreement and General Release between Reina Benabou and BioXcel Therapeutics, Inc., dated July 28, 2021.

Employment Agreement between Javier Rodriguez and BioXcel Therapeutics, Inc., dated February 15, 2021.

Employment Agreement between Matthew Wiley and BioXcel Therapeutics, Inc., dated January 12, 2022.

Non-Employee Director Compensation Program

Subsidiaries of BioXcel Therapeutics, Inc.

Consent of BDO USA, LLP

Consent of Ernst & Young LLP

C onsent of BDO USA, LLP;

Stamford, CT;

(PCAOB ID #243)

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document

XBRL Taxonomy Extension Definition Linkbase Document

XBRL Taxonomy Extension Label Linkbase Document

XBRL Taxonomy Extension Presentation Linkbase Document

Inline eXtensible Business Reporting Language (XBRL) Instance Document – the instance document does not appear in the Interactive Data File because its XBRL

tags are embedded within the Inline XBRL document

Inline XBRL Taxonomy Extension Schema Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Extension Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

† Indicates a management contract or any compensatory plan, contract or arrangement.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of BioXcel Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of BioXcel Therapeutics, Inc.

(the Company) as of December 31, 2021, the related statements of operations and stockholders' equity and cash flows for the year 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 at December 31, 2021, and the results of its operations and its cash flows for the year then ended in conformity with U.S.

generally accepted accounting principles.

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 audit.

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.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2021.

Stamford, Connecticut

March 10, 2022

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

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Opinion on the Financial Statements

We have audited the accompanying balance sheets of BioXcel Therapeutics, Inc.

(the “Company”) as of December 31, 2020 and 2019, the related statements of operations, changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2020, 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 at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020 , in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying balance sheet of BioXcel Therapeutics, Inc.

(the “Company”) as of December 31, 2020, the related statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2020, 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 at December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020 , in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2017 .

We served as the Company's auditor from 2017 to 2021.

Stamford, Connecticut

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Cash and cash equivalents

Prepaid expenses and other current assets

Prepaid expenses

Other current assets

Total current assets

Property and equipment, net

Operating lease right-of-use asset

Operating lease right-of-use assets

LIABILITIES AND STOCKHOLDERS' EQUITY

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Accrued expenses

Due to Parent

Due to related party

Other current liabilities

Total current liabilities

Long-term portion of operating lease liability

Long-term portion of operating lease liabilities

Total liabilities

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Stockholders' equity

Common stock, $0.001 par value, 50,000 shares authorized;

Common stock, $ 0.001 par value, 100,000 and 50,000 shares authorized as of December 31, 2021 and December 31, 2020, respectively;

27,980 and 24,417 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively

Preferred stock, $ 0.001 par value, 10,000 shares authorized;

no shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively

Additional paid-in-capital

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Other income (expense)

Dividend and interest income

Interest income

Interest expense

Net loss per share - basic and diluted

Net loss and comprehensive loss

Basic and diluted net loss per share attributable to common stockholders

Weighted average shares outstanding - basic and diluted

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Issuance of common shares, net of issuance costs of $ 17,815

Purchase and cancellation of shares from BioXcel LLC

Stock-based compensation

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Issuance of common shares, net of issuance costs of $ 3,542

Purchase and cancellation of shares from BioXcel Corporation

Stock-based compensation

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Depreciation and amortization

Loss on disposal of equipment

Stock-based compensation expense

Changes in operating assets and liabilities:

Prepaid expenses, other assets and right of use assets

Accounts payable, accrued expenses, lease liabilities and other liabilities

Prepaid expenses and other assets

Operating lease right of use assets

Accounts payable, accrued expenses, and other liabilities

Operating lease liabilities

Net cash used in operating activities

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Proceeds from issuance of common stock, net of issuance costs

Purchase and cancellation of shares from BioXcel Corporation

Exercise of options

Purchase and cancellation of shares from BioXcel LLC

Exercise of stock options

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of the period

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Interest paid

Purchases of equipment and leasehold improvements in accounts payable and accrued expense

Operating right of use lease assets obtained in exchange for operating lease liabilities

Operating lease right of use asset and liability (non-cash adoption balances)

Purchases of property and equipment in accounts payable and accrued expenses

Operating lease ROU assets obtained in exchange for operating lease liabilities

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

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BioXcel Therapeutics, Inc.

is a clinical stage biopharmaceutical company focused on drug development that utilizes artificial intelligence to identify improved therapies in neuroscience and immuno-oncology.

(“BTI”) is a clinical stage biopharmaceutical company focused on drug development that utilizes artificial intelligence to identify improved therapies in neuroscience and immuno-oncology.

BTI's drug re-innovation approach leverages existing approved drugs and/or clinically validated product candidates together with big data and proprietary machine learning algorithms to identify new therapeutic indices.

BTI's two most advanced clinical development programs are BXCL501, a proprietary, orally dissolving, sublingual thin film formulation of the adrenergic receptor agonist dexmedetomidine (“Dex”), for the treatment of agitation and opioid withdrawal symptoms, and BXCL701, an orally administered, systemic innate immune activator for the treatment of aggressive forms of prostate cancer and advanced solid tumors that are refractory or treatment naïve to checkpoint inhibitors.

As used in these financial statements, unless otherwise specified or the context otherwise requires, the terms the “Company” or “BTI” refer to BioXcel Therapeutics, Inc., and “BioXcel” or “Parent” refer to BioXcel LLC and, its predecessor, BioXcel Corporation.

The Company is a minority-owned subsidiary of BioXcel and was incorporated under the laws of the State of Delaware on March 29, 2017.

As used in these financial statements, unless otherwise specified or the context otherwise requires, the terms the “Company” or “BTI” refer to BioXcel Therapeutics, Inc., and “BioXcel, LLC ” refer to BioXcel LLC and, its predecessor, BioXcel Corporation.

The Company was incorporated under the laws of the State of Delaware on March 29, 2017.

The Company’s principal office is in New Haven, Connecticut.

The Company incurred losses of $82,169 and $32,968 for the years ended December 31, 2020 and 2019, respectively.

The Company had an accumulated deficit of $138,857 as of December 31, 2020.

The Company has funded its operations primarily through the sale of equity securities.

Certain reclassifications have been made to the prior year financial information to conform to the current period presentation.

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Impact of COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of coronavirus, a global pandemic.

This outbreak has caused and is continuing to cause major disruptions to businesses and financial markets worldwide.

This may affect the Company’s operations and those of third parties on which the Company relies, including causing disruptions in the supply of the Company’s product candidates and the conduct of current and planned preclinical and clinical studies.

The Company may need to limit its operations and may experience limitations in employee resources.

There are risks that the COVID-19 pandemic may be more difficult to contain than currently anticipated in which case the risks described herein could increase significantly.

The extent to which the COVID-19 pandemic impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others.

Additionally, while the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the coronavirus on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity, and the Company’s ability to complete its preclinical and clinical studies on a timely basis, or at all.

The ultimate impact of COVID-19 is highly uncertain and subject to change.

The Company does not yet know the full extent of potential delays or impacts on its business, financing, preclinical and clinical trial activities or the global economy as a whole.

However, these effects could have a material, adverse impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which the Company relies.

During the first quarter ended March 31, 2020, and continuing through December 31, 2021, the novel coronavirus disease, or COVID-19, was declared a pandemic and spread to multiple regions across the globe, including the United States and Europe.

The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred;

supply chains have been disrupted;

facilities and production have been suspended;

and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen.

To date we have taken steps in line with guidance from the U.S.

Centers for Disease Control and Prevention (“CDC”) and the State of Connecticut to protect the health and safety of our employees and the community.

In particular, we implemented a work-from-home policy for all employees and have restricted on-site activities to certain chemical, manufacturing and control (“CMC”) and clinical trial activities.

We continue to assess the impact of the COVID-19 pandemic to best mitigate risk and continue the operations of our business.

Beginning late in the second quarter of 2020, we began to slowly bring our staff, in very limited numbers, back to our office.

This modified return-to-work approach is continuing into 2022.

We have taken steps to protect our workforce and have instituted strict work rules to protect our employees.

We continue to work closely with our clinical sites to monitor the potential impact of the evolving COVID-19 pandemic.

We remain committed to our clinical programs and development plans.

Other than Phase 2 clinical trial evaluating BXCL501 in patients with delirium through December 31, 2021, we have not experienced any significant delays to our ongoing or planned clinical trials, except for challenges in accessing elderly care facilities and ICU settings;

however, this could rapidly change.

Basis of Presentation

The Company’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”).

The Company believes that its existing cash and cash equivalents will be sufficient to cover its cash flow requirements for at least the next twelve months from the issuance of these financial statements.

However, the Company’s future requirements may change and will depend on numerous factors.

Summary of Significant Accounting Policies

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Expenditures for maintenance and repairs which do not improve or extend the useful lives of respective assets are expensed as incurred.

When assets are sold or retired, the related cost and accumulated depreciation are removed from their respective accounts and any resulting gain or loss is include income (loss) from operations.

When assets are sold or retired, the related cost and accumulated depreciation are removed from their respective accounts and any resulting gain or loss is included within general and administrative expenses in net loss from operations in the statement of operations.

The Company follows the guidance provided by FASB ASC Topic 360-10, Property, Plant, and Equipment .

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Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

We determine if an arrangement is a lease at inception.

Operating leases are included in operating lease right-of-use (“ROU”) assets, other current liabilities, and the long-term portion of operating lease liabilities in our balance sheet.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

As our lease did not provide an implicit rate, we used an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

We use the implicit rate when readily determinable.

The operating lease ROU asset also includes any prepaid lease payments made and excludes lease incentives.

Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Renewal options were not included in our calculation of the related asset and liability.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Stock-Based Compensation

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The Company’s 2017 Equity Incentive Plan became effective in August 2017.

The Company’s 2020 Stock Plan became effective in May 2020.

The Company’s 2020 Incentive Award Plan (“2020 Plan”) became effective in May 2020.

Following the effective date of the Company's 2020 Stock Plan, the Company ceased granting awards under the 2017 Plan, however the terms and conditions of the 2017 Plan continue to govern any outstanding awards granted thereunder.

Both BioXcel and the Company’s stock option awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service period.

The Company’s stock option awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service period using the accelerated attribution method.

The estimated fair value of stock option awards was determined using the Black-Scholes option pricing model on the date of grant.

Significant judgment and estimates were used to estimate the fair value of these awards, as they were not publicly traded.

Prior to the IPO, significant judgment and estimates were used to estimate the fair value of these awards prior to the IPO.

Stock awards granted by the Company subsequent to the IPO are valued using market prices at the date of grant.

The Company adopted FASB ASU 2018-07 as of January 1, 2019 which allowed non-employee options to be expensed using the adoption date fair value.

ASC 718 requires companies to estimate the fair value of share-based awards on the date of grant using an option-pricing model.

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These subjective variables include, but are not limited to, the expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

The value of the award is recognized as an expense in the statement of operations over the requisite service period.

The periodic expense is then determined based on the valuation of the options.

The value of the award is recognized as an expense in the statement of operations over the requisite service period using the accelerated attribution method.

The Company has elected to account for forfeitures as they occur, by reversing compensation cost when the award is forfeited.

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The Company expenses research and development costs as incurred.

Expenses Accrued Under Contractual Arrangements

As part of the process of preparing our financial statements, we are required to estimate our accrued expenses.

This process involves reviewing open contracts and purchase orders, communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost.

The majority of our service providers invoice us monthly in arrears for services performed.

We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time.

We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary.

We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple research institutions and contract research organizations that conduct and manage clinical trials on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones.

In accruing expenses, we estimate the time period over which services will be performed and the level of effort to be expended in each period, which is based on an established protocol specific to each clinical trial.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period.

Costs related to filing and pursuing patent applications are expensed as incurred as general and administrative costs as recoverability of such expenditures is uncertain.

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Directly or indirectly observable inputs as of the reporting date through correlation with market data, including quoted prices for similar assets and liabilities in active markets and quoted prices in markets that are not active.

are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Level 2 also includes assets and liabilities that are valued using models or other pricing methodologies that do not require significant judgment since the input assumptions used in the models, such as interest rates and volatility factors, are corroborated by readily observable data from actively quoted markets for substantially the full term of the financial instrument.

Unobservable inputs that are supported by little or no market activity and reflect the use of significant management judgment.

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The carrying amounts of cash and accounts payable approximate fair value due to the short-term nature of these instruments.

As of December 31, 2021, and December 31, 2020, the Company had $ 232,968 and $ 213,119 , respectively, in cash and U.S.

government money market accounts (included in cash and cash equivalents) which was valued based on Level

There were no transfers between levels within the hierarchy during the year ended December 31, 2021 and December 31, 2020.

Earnings (Loss) per Share

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Recent Accounting Pronouncements

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic:

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”).

2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity.

Key provisions include (i) the removal of separation models in ASC 470-20 for convertible instruments;

(ii) expanded disclosures about the terms and features of convertible instruments;

(iii) removed certain conditions for equity classification;

and (iv) updated earnings per share calculation with respects to convertible instruments, share settlement presumption, down round features and the earnings per share denominator.

2020-06 is effective for annual and interim reporting periods beginning after December 15, 2021, and the guidance is to be applied using the full or modified retrospective approach.

Earlier adoption is permitted for annual and interim reporting periods beginning after December 15, 2020.

The Company does not expect that the adoption of ASU No.

2020-06 new guidance will have a material impact on the Company’s financial statements.

In December 2019, the FASB issued ASU No.

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2019-12 is effective for fiscal years beginning after December 15, 2020.

The Company does not expect that the adoption of ASU No.

2019-12 will have a material impact on the Company’s financial statements.

The Company adopted ASU No.

2019-12 effective January 1, 2021.

The adoption of ASU No.

2019-12 did not have a material impact on the Company’s financial statements.

In August 2018, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That

Is a Service Contract .

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract .

We adopted this standard effective January 1, 2020 on a prospective basis.

2018-15 requires that certain implementation costs for cloud computing arrangements are capitalized and amortized over the term of associated hosted cloud computing arrangement service and that capitalized implementation costs are classified in prepaid expenses and other assets.

2018-15 requires that certain implementation costs for cloud computing arrangements are capitalized and amortized over the term of associated hosted cloud computing arrangement service.

2018-15 also provides classification guidance on these implementation costs as well as additional quantitative and qualitative disclosures.

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2018-15 did not have an effect on the Company’s financial statements.

Accounting Pronouncements effective in future periods

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments and subsequent amendments to the initial guidance:

2018-19, ASU No.

2019-04 and No.

ASU 2019-05 (collectively, “Topic 326”) .

Topic 326 requires measurement and recognition of expected credit losses for financial assets held.

Topic 326 was to be effective for reporting periods beginning after December 15, 2019, with early adoption permitted.

In November 2019, the FASB issued ASU No.

2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) , and Leases (Topic 842) Effective Dates, which deferred the effective dates for the Company, until fiscal year 2023.

The Company does not expect that the adoption of ASU No.

2016-13 will have a material impact on its financial statements.

Financing Activities

In May 2019, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company could offer and sell shares of its common stock, par value $0.001 per share (the “Common Stock”), having an initial offering price no greater than $20.0 million (the “Shares”), from time to time, through an “at the market offering” program under which Jefferies will act as sales agent.

The Company sold 66 shares under the Sale Agreement for proceeds of $387, net of issuance costs of $350.

The Sale Agreement was terminated by the Company on September 22, 2019.

In September 2019, the Company entered into an underwriting agreement with several underwriters in connection with the issuance and sale by the Company in a public offering of 2,303 shares of the Company’s common stock at a public offering price of $8.25 per share, less underwriting discounts and commissions, pursuant to an effective shelf registration statement on Form S-3 (Registration No.

333-230674) and a related prospectus supplement filed with the SEC (the “September 2019 Offering”).

The September 2019 Offering closed on September 30, 2019.

The Company received proceeds of approximately $17,423, net of issuance costs of $1,577 from the September 2019 Offering.

In February 2020, the Company sold in a registered offering 2,300 shares of its common stock at a public offering price of $32.00 per share.

In June 2021, the Company sold in a registered offering 3,155 shares of its common stock at a public offering price of $ 31.70 per share.

The Company received proceeds of $ 96,937 , net of issuance costs of $ 3,042 .

The Company used $9,024 of the proceeds to purchase and cancel 300 shares of common stock from BioXcel.

In May 2021, the Company entered into an Open Market Sale Agreement (the “Sale Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which the Company could offer and sell shares of its common stock, par value $ 0.001 per share (the “Common Stock”), having an aggregate offering price of up to $ 100,000 (the “Shares”), from time to time, through an “at the marketing offering” program under which Jefferies will act as sale agent.

The Company sold 124 shares under the Sale Agreement in June 2021.

As of December 31, 2021, the Company had received proceeds of $ 4,056 , net of issuance costs of $ 500 .

In July 2020, the Company sold in a registered offering 4,000 shares of its common stock at a public offering price of $ 50.00 .

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The Company intends to use the net proceeds of the offering to fund ongoing clinical trials, commercialization preparation and for general corporate purposes.

Transactions with BioXcel

The Company has entered into the Amended and Restated Asset Contribution Agreement, pursuant to which BioXcel agreed to contribute BioXcel’s rights, title and interest in BXCL501, BXCL701, BXCL502 and BXCL702, and all of the assets and liabilities associated in consideration for (i) 9,480 shares of our common stock, (ii) $1,000 upon completion of an initial public offering, (iii) $500 upon the later of the 12 month anniversary of an initial public offering and the first dosing of a patient in the bridging bioavailability/ bioequivalence study for the BXCL501 program, (iv) $500 upon the later of the 12 month anniversary of an initial public offering and the first dosing of a patient in the Phase 2 proof of concept open label monotherapy or combination trial with Keytruda for the BXCL701 program and (v) a one-time payment of $5,000 within 60 days after the achievement of $50,000 in cumulative net sales of any product or combination of products resulting from the development and commercialization of any one of the Candidates or a product derived therefrom.

Upon the completion of the Company’s IPO in March 2018, $1,000 was charged to Research and Development costs in connection with (ii) above and was paid on April 5, 2018.

The Company paid $500 to BioXcel in connection with (iii) above in April 2019.

In July 2019, the Company completed the first dosing of a patient in the combination trial of BXCL701 with Keytruda, and as a result the Company paid $500 to BioXcel in connection with (iv) above in July 2019.

The Company entered into a Separation and Shared Services Agreement with BioXcel that took effect on June 30, 2017, as amended and restated, or the Services Agreement, pursuit to which services provided by BioXcel through its

subsidiaries in India and the United States will continue indefinitely, as agreed upon by the parties.

In February 2020, the Company sold in a registered offering 2,300 shares of its common stock at a public offering price of $ 32.00 per share.

The Company received proceeds of $ 68,811 , net of issuance costs of $ 4,789 .

The Company used $ 9,024 of the proceeds to purchase and cancel 300 shares of common stock from BioXcel LLC.

Transactions with BioXcel LLC

The Company entered into a Separation and Shared Services Agreement with BioXcel LLC that took effect on June 30, 2017, as amended and restated, or the Services Agreement, pursuit to which services provided by BioXcel LLC through its subsidiaries in India and the United States will continue indefinitely, as agreed upon by the parties.

These services are primarily for drug discovery, chemical, manufacturing and controls cost, and administrative support.

Service charges recorded under this agreement were $1,262 and $862 for the years ended December 31, 2020 and 2019, respectively.

Under the Services Agreement, the Company has an option, exercisable until March 12, 2023, to enter into a collaborative services agreement with BioXcel pursuant to which BioXcel shall perform product identification and related services for us utilizing EvolverAI.

The parties are obligated to negotiate the collaborative services agreement in good faith and to incorporate reasonable market-based terms, including consideration for BioXcel reflecting a low, single-digit royalty on net sales and reasonable development and commercialization milestone payments, provided that (i) development milestones shall not exceed $10 million in the aggregate and not be payable prior to proof of concept in humans and (ii) commercialization milestones shall be based on reaching annual net sales levels, be limited to 3% of the applicable net sales level, and not exceed $30 million in the aggregate.

BioXcel shall continue to make such product identification and related services available to us at least September 30, 2024.

The Company paid $9,024 in February 2020 for the purchase and subsequent cancellation of 300 shares owned by BioXcel.

Service charges recorded under this agreement for the year ended December 31, 2021 and 2020 were comprised as follows:

Year Ended December 31,

Research and development

General and administrative

As of December 31, 2021 and 2020, $ 204 and $ 157 related to these service charges is included in due to related parties in the Company’s balance sheet, respectively.

Under the Services Agreement, the Company has an option, exercisable until March 12, 2023, to enter into a collaborative services agreement with BioXcel LLC pursuant to which BioXcel LLC shall perform product identification and related services for us utilizing EvolverAI.

The parties are obligated to negotiate the collaborative services agreement in good faith and to incorporate reasonable market-based terms, including consideration for BioXcel LLC reflecting a low, single-digit royalty on net sales and reasonable development and commercialization milestone payments, provided that (i) development milestones shall not exceed $ 10 million in the aggregate and not be payable prior to proof of concept in humans and (ii) commercialization milestones shall be based on reaching annual net sales levels, be limited to 3 % of the applicable net sales level, and not exceed $ 30 million in the aggregate.

BioXcel LLC shall continue to make such product identification and related services available to us through at least September 30, 2024.

As of December 31, 2021, this option has not been exercised.

The Company paid $ 9,024 in February 2020 for the purchase and subsequent cancellation of 300 shares owned by BioXcel LLC.

Earnings (Loss) Per Share

Basic earnings (loss) per share (“EPS”) is calculated in accordance with ASC 260, “Earnings Per Share,” by dividing net income or loss attributable to common stockholders by the weighted average common stock outstanding.

Diluted EPS is calculated by adjusting weighted average common shares outstanding for the dilutive effect of common stock options and warrants.

Diluted EPS is calculated by adjusting weighted average common shares outstanding for the dilutive effect of common stock options.

In periods in which a net loss is recorded, no effect is given to potentially dilutive securities, since the effect would be antidilutive.

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Basic and diluted net loss per share

Potentially dilutive securities outstanding consists solely of stock options.

The Company had options outstanding to purchase 4,000 and 3,798 shares of common stock as of December 31, 2021 and 2020, respectively.

Property and Equipment, net

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Other accrued expenses

Capital Structure

Authorized Capital

The Company is authorized to issue up to 10,000 preferred shares with a par value of $0.001 per share of which no shares were issued and outstanding as of December 31, 2020 and 2019.

The Company is authorized to issue up to 50,000 shares of common stock with a par value of $0.001 per share.

The Company had 24,417 and 18,087 shares of common stock outstanding as of December 31, 2020 and December 31, 2019, respectively.

Description of Common Stock

Each share of common stock has the right to one vote.

The holders of common stock are entitled to dividends when funds are legally available and when declared by the board of directors.

Stock-Based Compensation

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2020 Incentive Award Plan

The Company’s 2020 Incentive Award Plan (the “2020 Plan”) was approved and became effective at the Company’s 2020 annual meeting of Shareholders on May 20, 2020 and unless, earlier terminated by the Board of Directors, will remain in effect until March 26, 2030.

The Company’s 2020 Plan was approved and became effective at the Company’s 2020 annual meeting of Shareholders on May 20, 2020 and unless, earlier terminated by the Board of Directors, will remain in effect until March 26, 2030.

The 2020 Plan originally authorized for issuance the sum of (i) 911 shares of the Company’s common stock authorized for issuance and (ii) 233 shares of the Company’s common stock, which represents the number of shares that remained available for issuance under the 2017 Plan as of immediately prior to the approval of the 2020 Plan by the Company’s shareholders.

Any shares of Common Stock which, as of immediately prior to the approval of the 2020 Plan by the Company’s stockholders, were subject to awards granted under the 2017 Plan that are forfeited or lapse unexercised and are not issued under the 2017 Plan will increase the number of shares of common stock available for grant under the 2020 Plan.

In addition, the number of shares available for issuance under the 2020 Plan will increase on the first day of each calendar year beginning January 1, 2021 and ending on and including January 1, 2030 by a number of shares equal to the lesser of (A) 4% of the aggregate number of shares of the Company’s common stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of shares of common stock as is determined by the Board of Directors.

On January 1, 2021, the shares available for issuance under the 2020 Plan increased by 977 shares.

In addition, the number of shares available for issuance under the 2020 Plan will increase on the first day of each calendar year beginning January 1, 2021 and ending on and including January 1, 2030 by a number of shares equal to the lesser of (A) 4 % of the aggregate number of shares of the Company’s common stock outstanding on the final day of the immediately preceding calendar year and (B) such smaller number of shares of common stock as determined by the Board of Directors.

On January 1, 2021, the shares available for issuance under the 2020 Plan increased by 977 shares and on January 1, 2022, the shares available for issuance under the 2020 Plan increased by 1,119 additional shares pursuant to this provision.

Options granted under the 2020 Plan have a term of ten years with the vesting schedule determined by the Board of Directors, which is generally four years .

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The total intrinsic value of stock options exercised for the years ended December 31, 2021 and 2020 was $ 11,942 and $ 11,629 , respectively.

The total intrinsic value of stock options exercisable for the years ended December 31, 2021 and 2020 was $ 39,794 and $ 99,054 , respectively.

The weighted average grant date fair value of options granted in 2021 and 2020 was $ 28.81 and $ 32.71 , respectively.

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The weighted average remaining contractual life is 6.3 years for options exercisable.

The weighted average remaining contractual life is 8.8 years for options outstanding.

Stock-Based Compensation

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Prior to the Company’s IPO, it did not have a history of market prices of its common stock and, as such, volatility is estimated using historical volatilities of similar public companies.

In 2021, the Company began using a combination of the historical volatility of similar public companies and the limited historical information related to the Company’s common stock.

The expected term of the employee awards is estimated based on the simplified method, which calculates the expected term based upon the midpoint of the term of the award and the vesting period.

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The risk-free interest rates are based on the United States Treasury yield curve in effect at the time of grant, with maturities approximating the expected term of the stock options.

The Company recognized stock-based compensation expense of $14,590 and $3,070 for the years ended December 31, 2020 and 2019, respectively.

The fair value of the underlying common stock is generally determined as the closing price of the Company’s common stock on the Nasdaq Capital Market on the grant date, with consideration of whether there is material nonpublic information that could impact that estimated fair value when it is released.

The Company recognized stock-based compensation expense under the 2017 Plan and the 2020 Plan of $ 19,455 and $ 14,611 for the years ended December 31, 2021 and 2020, respectively.

Unrecognized compensation expense related to unvested awards as of December 31, 2021 was $ 18,738 and will be recognized over the remaining vesting periods of the underlying awards.

The weighted-average period over which such compensation is expected to be recognized is 1.7 years.

BioXcel Charges

BioXcel has granted stock options to Company employees under its own Equity Incentive Plan (“BioXcel Plan”).

Stock-based compensation expense from the BioXcel Plan is allocated to the Company over the period over which those stock option awards vest and are based the on the percentage of time spent on Company activities compared to BioXcel activities.

The BioXcel stock option awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service period.

The estimated fair value of these BioXcel stock option awards was determined using the Black Scholes option pricing model on the date of grant.

Significant judgment and estimates were used to estimate the fair value of these awards, as they are not publicly traded.

Stock-based compensation expense, net of forfeitures, recognized by the Company in its statements of operations related to BioXcel equity awards totaled approximately $21 and $72 for the years ended December 31, 2020 and 2019, respectively.

Total stock-based compensation charges were approximately $ 19,455 and $ 14,611 for the years ended December 31, 2021 and 2020, respectively.

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The purchase price will be determined by the administrator of the ESPP and, for purposes of the Section 423 Component, shall not be less than 85 % of the fair market value of a share on the first trading day or on the last trading day of the applicable offering period, whichever is lower.

On January 1, 2021, the shares available for issuance under the 2020 ESPP increased by 244 shares.

On January 1, 2021, the shares available for issuance under the 2020 ESPP increased by 244 shares and 344 shares were available at December 31, 2021 and on January 1, 2022, the shares available for issuance under the ESPP increased by 156 additional shares pursuant to this provision.

To date, no shares have been sold under the ESPP.

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The 12 th Floor Lease expires in February 2026.

Payments under the Company’s lease agreement are fixed.

In August 2020, the Company entered into an amendment to the 12 th Floor Lease wherein the Company leased an additional 7,245 square feet of space on the 12 th floor of the building located at 555 Long Wharf Drive, New Haven, Connecticut (the “12 th Floor Lease Amendment”).

The 12 th Floor Lease Amendment expires in February 2026.

Payments under the Company’s lease amendment agreement are fixed.

The future minimum annual lease payments under these operating leases as of December 31, 2021 are as follows:

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The Company has an option to renew the lease for one additional five -year term at 95 % of the then-prevailing market rates but not less than the rental rate at the end of the initial lease term.

The renewal option is not included in the right-of-use asset.

Commitments and Contingencies

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As of December 31, 2021, there were no matters which would have a material impact on the Company’s financial results.

The Company received a demand letter pursuant to Section 220 of the Delaware General Corporation Law (“DGCL”) from a stockholder seeking disclosure of certain of the Company’s records.

The Company responded to those demands, stating its belief that the demand letter failed to fully comply with the requirements of Section 220 of the DGCL.

On June 15, 2021, the stockholder filed a complaint in Delaware Chancery Court seeking to compel inspection of books and records pursuant to Section 220 of the DGCL.

Pursuant to a negotiated settlement agreement, the matter was dismissed with prejudice on August 10, 2021.

There is no provision for income taxes because the Company has historically incurred operating losses and maintains a full valuation allowance against its net deferred tax assets.

The reported amount of income tax expense for the years differs from the amount that would result from applying domestic federal statutory tax rates to pretax losses primarily because of changes in valuation allowance.

Pursuant to incorporation of the Company as a C corporation on March 29, 2017, BioXcel became the sole owner of the Company, and contributed certain assets to the Company in a tax free transaction.

From the date of incorporation, the Company is a standalone C corporation subject to corporate income tax and the deferred taxes of the Company have been calculated accordingly.

The significant components of the Company’s net deferred tax assets at December 31, 2021 and 2020 are shown below.

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Based on this information the Company has provided a valuation allowance for the full amount of its net deferred tax asset because the Company has determined that it is more likely than not that it will not be realized.

Deferred tax assets:

Federal net operating losses

State net operating losses

Stock based compensation

Federal and state tax credits

Capitalized research and development costs

Stock options

Capitalized R&D

Accrued expense

Lease Accounting - ROU

Lease Accounting - liability

Unrealized gain

Valuation allowance

Net deferred tax assets

Total deferred tax assets

Deferred tax liabilities:

Right-of-use assets

Total deferred tax liabilities

Net deferred tax asset (liability)

The income tax benefit for the year ended December 31, 2021 differed from the amounts computed by applying the U.S.

federal income tax rate of 21 % to loss before tax benefit as a result of nondeductible expenses, tax credits generated and increases in the Company’s valuation allowance.

A reconciliation between the Company’s effective tax rate and the federal statutory rate for the years ended December 31, 2021 and 2020 are as follows:

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The Company also has approximately $ 6,445 of federal research and development credits which will begin to expire in 2037 if not utilized.

Our NOLs or credits may also be impaired under state law.

On March 27, 2020, the Coronavirus Aid Relief and Economic Security (“CARES”) Act was signed into law.

The Act contains several new or changed income tax provisions, including but not limited to the following:

increased limitation threshold for determining deductible interest expense, class life changes to qualified improvements (in general, from 39 years to 15 years) and the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years.

Most of these provisions are either not applicable or have no material effect on the Company.

Utilization of the net operating loss, or NOL, and research tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that has occurred or that could occur in the future, as required by Section 382 of the Code, as well as similar state and foreign provisions.

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as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups.

Furthermore, under the Tax Cuts and Jobs Act

of 2017 and modified by the CARES Act signed on March 27, 2020, although the treatment of NOLs arising on or before December 31, 2017 has generally not changed, NOLs arising on or after January 1, 2018 and beyond may only be used to offset 80% of taxable income for tax years beginning after December 31, 2020.

This change may require us to pay federal income taxes in future years despite generating a loss for federal income tax purposes in prior years.

To date, the company's NOL's have not been subject to the Section 382 limitation.

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns.

The Company has analyzed its tax positions and has concluded that as of December 31, 2021, there were no uncertain positions.

Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision.

There was no income tax related interest and penalties included in the income tax provision.

The Company's U.S.

federal and state net operating losses have occurred since its inception in 2017 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.

The Company did no t have any unrecognized tax benefits and has no t accrued any interest or penalties for the 12 months ended December 31, 2021 and 2020.

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