What changed in this filing

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Item 9A. Controls and Procedures

2023-03-16 compared with 2022-03-11 · 554 added, 298 removed, 306 unchanged (74% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

procedures as of December 31, 2022.

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

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, 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.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Annual Report on Internal Controls Over Financial Reporting

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Directors, Executive Officers, and Corporate Governance.

INFORMATION ABOUT OUR DIRECTORS & EXECUTIVE OFFICERS

The following information with respect to our Board of Directors (the "Board") and executive officers is presented as of March 15, 2023:

Position at BioXcel

Principal Employment

Vimal Mehta, Ph.D.

Chief Executive Officer and President, and Director

Richard Steinhart

Senior Vice President and Chief Financial Officer

Matthew Wiley

Senior Vice President and Chief Commercial Officer

Frank Yocca, Ph.D.

Senior Vice President and Chief Scientific Officer

Vincent O’Neill, M.D.

Senior Vice President and Chief Medical Officer

Javier Rodriguez

Senior Vice President, Chief Legal Officer and Corporate Secretary

Peter Mueller, Ph.D.

Chairman of the Board

President at Mueller Health Foundation, a private foundation tackling globally lethal infectious diseases

Former Senior Vice President, Global Regulatory Affairs and Medical Writing at Allergan, Inc., a pharmaceutical company

Sandeep Laumas, M.D.

Chief Business Officer and Chief Financial Officer at Instil Bio, Inc., a pharmaceutical company

Michael Miller

Former Executive Vice President, U.S.

Commercial at Jazz Pharmaceuticals, Inc., a pharmaceutical company

Krishnan Nandabalan, Ph.D.

President and Chief Executive Officer, InveniAI, a company focus on AI applications for drug discovery and development

Michael Votruba, M.D.

Director at the Gradus/RSJ Life Sciences Fund, a dedicated fund

The information required by this Item is incorporated herein by reference to the information that will be contained in our proxy statement related to our annual meeting of stockholders to be held in 2023 (the “2023 Annual Meeting of Stockholders”), which we intend to file with the SEC within 120 days of the year ended December 31, 2022.

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(1) Financial Statements:

Reports of Independent Registered Public Accounting Firm

Balance Sheets as of December 31, 2021 and 20 20

Statements of Operations for the Years Ended December 31, 2021 and 20 20

Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2021 and 20 20

Statements of Cash Flows for the Years Ended December 31, 2021 and 20 20

Notes to Financial Statements

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

Notes to C onsolidated Financial Statements

(2) Financial Statement Schedules:

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Specimen Stock Certificate evidencing the shares of common stock

Form of Warrant Agreement under the Credit Agreement and Guaranty, by and among BioXcel Therapeutic, Inc., Oaktree Fund Administration, LLC, the Subsidiary Guarantors from time to time party thereto and the Lenders from time to time party thereto, dated April 9, 2022

Registration Rights Agreement, dated April 19, 2022, among the Company and Oaktree-TCDRS Strategic Credit, LLC, Oaktree-Forrest Multi-Strategy, LLC, Oaktree-TBMR Strategic Credit Fund C, LLC, Oaktree-TBMR Strategic Credit Fund F, LLC, Oaktree-TBMR Strategic Credit Fund G, LLC, Oaktree-TSE 16 Strategic Credit, LLC, INPRS Strategic Credit Holdings, LLC, Oaktree Strategic Income II, Inc., Oaktree Specialty Lending Corporation, Oaktree Strategic Credit Fund, Oaktree GCP Fund Delaware Holdings, L.P., Oaktree Diversified Income Fund Inc., Oaktree AZ Strategic Lending Fund, L.P., Oaktree Loan Acquisition Fund, L.P., Oaktree LSL Fund Delaware Holdings EURRC, L.P., and Q Boost Holding LLC

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

F irst Amendment to Second Amended and Restated Separation and Shared Services Agreement, dated March 3, 2021, by and between BioXcel LLC and BioXcel Therapeutics Inc .

Amended and Restated Asset Contribution Agreement, effective November 7, 2017, by and between BioXcel Corporation and BioXcel Therapeutics, Inc.

Second Amendment to Second Amended and Restated Separation and Shared Services Agreement, dated March 3, 2021, by and between BioXcel LLC and BioXcel Therapeutics Inc.

Amended and Restated Asset Contribution Agreement, effective November 7, 2017,

by and between BioXcel LLC and BioXcel Therapeutics, Inc.

Lease Agreement, dated as of August 20, 2018, by and between Fusco Harbour Associates, LLC, as Landlord, and BioXcel Therapeutics, Inc., as Tenant

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Vincent O’Neill, M.D.

Employment Agreement between William Kane and BioXcel Therapeutics, Inc., dated May 15, 2020.

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.

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Non-Employee Director Compensation Program

BioXcel Trademark License Agreement, between the Company and BioXcel LLC

Credit Agreement and Guaranty, by and among BioXcel Therapeutic, Inc., Oaktree Fund Administration, LLC, the Subsidiary Guarantors from time to time party thereto and the Lenders from time to time party thereto, dated April 19, 2022

Revenue Interest Financing Agreement, between BioXcel Therapeutics, Inc., Oaktree Fund Administration, LLC and the Purchasers from time to time party thereto, dated April 19, 2022

Commercial Supply Agreement, between ARx, LLC and BioXcel Therapeutics, Inc., dated April 1, 2022

OnkosXcel Therapeutics, LLC and OnkosXcel Employee Holdings, LLC Management Incentive Plan

Form of Profits Interest Award Agreement under the Management Incentive Plan

Subsidiaries of BioXcel Therapeutics, Inc.

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.

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 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

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# Confidential treatment has been granted for portions omitted from this exhibit and those portions have been separately filed with the Securities and Exchange Commission.

& Annexes, schedules, and certain exhibits have been omitted pursuant to Item 601(a)(5)(b)(2) of Regulation S-K.

The Registrant hereby agrees to furnish supplementally a copy of any omitted annex, schedule or exhibit to the SEC upon request.

* Filed herewith.

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/s/ Vimal Mehta

Vimal Mehta, Ph.D.

Chief Executive Officer

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/s/ Richard Steinhart

Richard Steinhart, Chief Financial Officer

Richard Steinhart

Chief Financial Officer

(Principal Financial Officer)

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Vimal Mehta, Ph.D.

Chief Executive Officer, President, and Director (Principal Executive Officer)

Chief Executive Officer and Director (Principal Executive Officer)

March 15, 2023

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March 15, 2023

/s/ Michael Miller

Michael Miller

March 15, 2023

/s/ Krishnan Nandabalan

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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.

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

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

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with U.S.

generally accepted accounting principles.

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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.

Our responsibility is to express an opinion on the Company’s 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.

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.

We conducted our audits 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.

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.

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.

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 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.

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.

/s/ Ernst & Young LLP

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March 15, 2023

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

BIOXCEL THERAPEUTICS, INC.

New Haven, CT

Opinion on the Financial Statements

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

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.

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.

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/ BDO USA, LLP

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

Stamford, Connecticut

March 12, 2021

BIOXCEL THERAPEUTICS, INC.

BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except per share amounts)

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Cash and cash equivalents

Accounts receivable, net

Prepaid expenses

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Accrued expenses

Due to related party

Due to related parties

Accrued interest

Other current liabilities

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Long-term portion of operating lease liabilities

Derivative liabilities

Long-term debt

Total liabilities

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Stockholders' equity

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

no shares issued and outstanding as of December 31, 2022 and December 31, 2021

Common stock, $ 0.001 par value, 100,000 shares authorized as of December 31, 2022 and December 31, 2021;

28,147 and 27,980 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively

Additional paid-in-capital

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Total liabilities and stockholders' equity

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

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

BIOXCEL THERAPEUTICS, INC.

STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share amounts)

Year ended December 31,

Product revenue, net

Operating expenses

Cost of goods sold

Research and development

General and administrative

Selling, general and administrative

Total operating expenses

Loss from operations

Other income (expense)

Interest income

Other expense (income)

Interest expense

Net loss and comprehensive loss

Interest income

Other expense, net

Basic and diluted net loss per share attributable to common stockholders

Weighted average shares outstanding - basic and diluted

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

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

BIOXCEL THERAPEUTICS, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(amounts in thousands)

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

Purchase and cancellation of shares from BioXcel LLC

Stock-based compensation

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Balance as of December 31, 2021

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

Issuance of stock purchase warrants

Stock-based compensation

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Balance as of December 31, 2022

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

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

BIOXCEL THERAPEUTICS, INC.

STATEMENTS OF CASH FLOWS

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

Year ended December 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

OPERATING CASH FLOW ACTIVITIES:

Reconciliation of net loss to net cash used in operating activities

Depreciation and amortization

Loss on disposal of equipment

Accretion of debt discount and amortization of financing costs

Change in fair value of derivative liabilities

Stock-based compensation expense

Payable-in-kind interest on Credit Agreement

Loss on disposal of equipment

Changes in operating assets and liabilities

Prepaid expenses and other assets

Accounts receivable

Prepaid expenses, other current assets and other assets

Operating lease right-of-use assets

Accounts payable, accrued expenses, and other liabilities

Accounts payable, accrued expenses, and other current liabilities

Accrued interest

Operating lease liabilities

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of equipment and leasehold improvements

INVESTING CASH FLOW ACTIVITIES:

Purchases of property and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

FINANCING CASH FLOW ACTIVITIES:

Proceeds from long-term debt

Debt issuance costs

Proceeds from issuance of common stock, net of issuance costs

Purchase and cancellation of shares from BioXcel LLC

Exercise of stock options

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents, beginning of the period

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Supplemental cash flow information:

Issuance of stock purchase warrants

Interest paid

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.

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

BIOXCEL THERAPEUTICS, INC.

NOTES TO FINANCIAL STATEMENTS

(in thousands, except per share amounts)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except per share amounts and where otherwise noted)

Nature of the Business

BioXcel Therapeutics, Inc.

(“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, 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.

(“BTI” or the “Company”) is a biopharmaceutical company utilizing artificial intelligence (“AI”) approaches to develop transformative medicines in neuroscience and immuno-oncology.

The Company is focused on utilizing cutting-edge technology and innovative research to develop high-value therapeutics aimed at transforming patients’ lives.

BTI employs a unique AI platform to reduce therapeutic development costs and potentially accelerate timelines.

The Company’s approach leverages existing approved drugs and/or clinically evaluated product candidates together with big data and proprietary machine learning algorithms to identify new therapeutic indices.

BTI management believes this differentiated approach has the potential to reduce the expense and time associated with drug development in diseases with substantial unmet medical needs.

As used in these consolidated financial statements, unless otherwise specified or the context otherwise requires, the terms “BioXcel LLC” refers to the Company’s former parent and current significant stockholder, BioXcel LLC and, its predecessor, BioXcel Corporation.

“OnkosXcel” refers to BTI’s wholly owned subsidiary for its advanced immuno-oncology assets, OnkosXcel Therapeutics, LLC.

On April 6, 2022, BTI announced that the United States (“U.S.”) Food and Drug Administration (“FDA”) approved IGALMI (dexmedetomidine or “Dex”) sublingual film for the acute treatment of agitation associated with schizophrenia or bipolar I or II disorder in adults.

IGALMI is approved to be self-administrated by patients under the supervision of a health care provider.

The Company deployed the first phase of its sales team for high priority targets in May 2022.

Furthermore, on July 6, 2022, BTI announced that IGALMI, was commercially available in doses of 120 and 180 microgram through the Company’s third-party logistics provider and was available for order through wholesalers.

The Company’s most advanced clinical development program is BXCL501, an investigational proprietary, orally dissolving, film formulation of Dex for the treatment of agitation associated with psychiatric and neurological disorders.

BTI continues to conduct clinical trials evaluating BXCL501 for the acute treatment of agitation in Alzheimer’s disease patients, and for adjunctive treatment of patients with Major Depressive Disorder (“MDD”).

The Company is also planning clinical trials for the at-home use of BXCL501 for agitation associated with bipolar disorders and schizophrenia.

The Company’s advanced immuno-oncology asset, BXCL701, is an investigational, orally administered systemic innate immune activator for the treatment of a rare form of prostate cancer and advanced solid tumors that are refractory or treatment naïve to checkpoint inhibitors.

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

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

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

These reclassifications had no effect on the reported results of operations.

Impact of COVID-19 Pandemic

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.

The COVID-19 pandemic and responsive measures have significantly impacted, both directly and indirectly, businesses and commerce.

The Company continues to work closely with clinical sites to monitor the potential impact of the evolving COVID-19 pandemic and the spread of its variants.

To date, BTI has not experienced any significant delays in any of its ongoing or planned clinical trials, except for occasional COVID-19 related disruptions, such as to its TRANQUILITY II trial.

However, this could change rapidly.

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 accompanying consolidated financial statements include those of the Company and its subsidiaries after elimination of all intercompany accounts and transactions and have been prepared in conformity with United States (“U.S.”) Generally Accepted Accounting Principles (“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.

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Use of Estimates

The Company’s financial statements are prepared in accordance with GAAP.

The preparation of the Company’s financial statements requires it to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses in its financial statements and the accompanying notes.

The preparation of financial statements in accordance with U.S.

GAAP requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements and notes thereto.

Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may ultimately materially differ from these estimates.

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Cash and cash equivalents held at financial institutions may at times exceed federally insured amounts.

We believe we mitigate such risk by investing in or through major financial institutions.

BTI management believes it mitigates such risk by investing in or through major financial institutions.

Accounts Receivable, Net

Accounts receivable arise from sales of IGALMI and represent amounts due from distributors.

Payment terms generally range from 30 to 75 days from the date of the sale transaction, and accordingly, do not involve a significant financing component.

Receivables from product sales are recorded net of allowances which generally include distribution fees, prompt payment discounts, chargebacks, and credit losses.

Allowances for distribution fees, prompt payment discounts and chargebacks are based on contractual terms.

The Company estimated the current expected credit losses of its accounts receivable by assessing the risk of loss and available relevant information about collectability, existing contractual payment terms, actual payment patterns of its customers, individual customer circumstances, and reasonable and supportable forecast of economic conditions expected to exist throughout the contractual life of the receivable.

Based on its assessment, as of December 31, 2022, the Company determined that an allowance for credit losses was not required.

Concentrations of Credit Risk

The Company sells IGALMI through a drop-ship program under which orders from hospitals and similar health care institutions are processed through wholesalers, but shipments of the product are sent directly to the individual hospitals and similar health care institutions.

BTI also contracts directly with intermediaries such as group purchasing organizations (“GPOs”).

All trade accounts receivables are due from the distributor that fulfills orders on behalf of the Company.

Inventory is stated at the lower of cost or net realizable value.

Cost of inventory is determined on a first-in, first-out basis.

BTI capitalizes inventory costs associated with the Company’s products prior to regulatory approval, when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized;

otherwise, such costs are expensed as research and development expense in the Consolidated Statements of Operations.

The Company performs an assessment of the recoverability of capitalized inventory during each reporting period and writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified.

Such impairment charges, should they occur, will be recorded within cost of goods sold in the Consolidated Statements of Operations.

The determination of whether inventory costs will be realizable requires estimates by management.

If actual market conditions are less favorable than projected, write-downs of inventory may be required.

Property and Equipment

Property and equipment are recorded at cost and depreciated and amortized over the shorter of their remaining lease term or their estimated useful life on a straight-line basis as follows:

Equipment 3 - 5 years

Furniture 7 years

Leasehold improvements Lesser of life of improvement or lease term

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 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 .

Property and equipment are recorded at cost and depreciated over the shorter of their remaining lease term or their estimated useful life on a straight-line basis as follows:

Leasehold improvements

Lesser of life of improvement or lease term

Expenditures for maintenance and repairs which do not improve or extend the useful lives of the 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 included within selling, general and administrative expenses in the Consolidated Statements of Operations.

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future net cash flows expected to be generated from its use and disposition.

Impairment charges are recognized at the amount by which the carrying amount of an asset exceeds the fair value of the asset.

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 Company determines 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 the Consolidated Balance Sheets.

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

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

The Company uses the implicit rate when readily determinable.

As BTI’s leases do not provide an implicit rate, it used an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

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.

The Company’s leases may include options to extend the lease;

such options are included in determining the lease term when it is reasonably certain that BTI will exercise that option.

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

Debt and Detachable Warrants

Detachable warrants are evaluated for classification as either equity instruments, derivative liabilities, or liabilities depending on the specific terms of the warrant agreement.

In circumstances in which debt is issued with equity-classified warrants, the proceeds from the issuance of debt are first allocated to the debt and the warrants at their estimated fair values.

The portion of the proceeds allocated to the warrants are accounted for as paid-in capital and a debt discount.

The remaining proceeds, as further reduced by discounts created by the bifurcation of any embedded derivatives, are allocated to the debt.

Detachable warrants classified as derivative liabilities are accounted for as indicated under “ Derivative Assets and Liabilities ” section of this Note and as a debt discount.

The Company accounts for debt as liabilities measured at amortized cost and amortizes the resulting debt discount from the allocation of proceeds to interest expense using the effective interest method over the expected term of the debt instrument.

The Company considers

whether there are any embedded features in debt instruments that require bifurcation and separately accounts for them as derivative financial instruments.

The Company entered into financing arrangements, the terms of which involve significant assumptions and estimates, including future net product sales, in determining interest expense, amortization period of the debt discount, as well as the classification between current and long-term portions.

In estimating future net product sales, the Company assesses prevailing market conditions using various external market data against the Company’s anticipated sales and planned commercial activities.

Consequently, the Company imputes interest on the carrying value of the debt and records interest expense using an imputed effective interest rate.

The Company reassesses the expected payments during each reporting period and accounts for any changes through an adjustment to the effective interest rate on a prospective basis, with a corresponding impact to the classification of the Company’s current and long-term portions of the debt.

Derivative Assets and Liabilities

Derivative assets and liabilities are recorded on the Company`s Consolidated Balance Sheets at their fair value on the date of issuance and are revalued on each balance sheet date until such instruments are settled or expire, with changes in the fair value between reporting periods recorded as other income or expense within other expense, net in the Consolidated Statements of Operations.

The Company does not use derivative instruments for speculative purposes or to hedge exposures to cash-flow or market risks.

Certain financing facilities entered into by the Company include freestanding financial instruments and/or embedded features that require separate accounting as derivative assets and/or liabilities.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible.

Revenue Recognition

The Company’s revenues consist of product sales of IGALMI.

BTI recognizes revenue when its customers obtain control of promised goods or services, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.

To determine revenue recognition, BTI management performs the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price, including variable consideration, if any;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the Company satisfies a performance obligation.

Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options.

The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations.

The exercise of a material right may be accounted for as a contract modification or as a continuation of the contract for accounting purposes.

The Company assesses whether the goods or services promised within each contract are distinct to identify those that are performance obligations.

This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such goods and services are separable from the other aspects of the contractual relationship.

Promised goods and services are considered distinct provided that:

(i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and (ii) the Company’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.

The Company allocates the transaction price (the amount of consideration it expects to be entitled to from a customer in exchange for the promised goods or services) to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied.

The Company’s estimate of the transaction price for each contract includes all variable consideration to which the Company expects to be entitled.

BTI distributes IGALMI in the U.S.

through arrangements with a distributor, wholesalers, and GPOs.

The distributor and wholesalers help process and fulfill orders from hospitals on the Company’s behalf.

The Company believes the hospitals are its customers.

The Company recognizes product revenues, net of consideration payable to customers, as well as variable consideration related to certain allowances and accruals that are determined using either the expected value or most likely amount method, depending on the type of the variable consideration, in its consolidated financial statements at the point in time when control transfers to the customer, which is typically when the product has been delivered to the customer’s location.

The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur.

The Company’s only performance obligation identified for IGALMI is to deliver the quantity of product ordered to the location specified by the customer’s order.

The Company records shipping and handling costs associated with delivery of product to its customers within selling, general and administrative expenses on its Consolidated Statements of Operations.

Under the Company’s current product sales arrangements, BTI does not have contract assets (unbilled receivables), as it generally invoices its customer at the time of revenue recognition, and contract liabilities, as the Company generally does not receive prepayments from its customers prior to product delivery.

BTI sells IGALMI at wholesale acquisition cost and calculates product revenue net of variable consideration and consideration payable to third parties associated with distribution of product.

The Company records reserves, based on contractual terms, for the following components of consideration related to product sold during the reporting period.

Calculating these amounts involves estimates and judgments, and the Company reviews these estimates quarterly and records any material adjustments in the period they are identified, which affects net product revenue and earnings in the period such variances occur.

Trade Discounts and Allowances

The Company provides the distributor and wholesalers with discounts for prompt payment and pays fees to the distributor, wholesalers and GPOs related to distribution of the product.

BTI expects the relevant third parties to earn these discounts and fees, and therefore it deducts such amounts from gross product revenue and accounts receivable at the time it recognizes the related revenue.

Government Rebates

IGALMI is eligible for purchase by, or qualifies for reimbursement from, Medicaid and other U.S.

government programs that are eligible for rebates on the price they pay for the product.

To determine the appropriate amount to reserve for these rebates, BTI applies the applicable government discount to these sales, and estimates the portion of total rebates that it anticipates will be claimed.

The Company deducts certain government rebates from gross product revenue and accounts receivable at the time it recognizes the related revenue;

other government rebates are recognized as an accrued liability at the time BTI recognizes the related revenue.

BTI provides product discounts to hospitals associated with certain GPOs.

The Company estimates the chargebacks that it expects to be obligated to provide based upon the terms of the applicable arrangements.

BTI deducts such amounts from gross product revenue and accounts receivable at the time it recognizes the related revenue.

Product Returns

The Company provides contractual return rights to its customers including the right to return product within six months of product expiration and up to 12 months after product expiration, as well as for incorrect shipments, and damaged or defective product, which the Company expects to be rare.

Management expects product returns to be minimal, thus BTI recognizes a nominal allowance for product returns at the time of each sale.

In the future, if any of these factors and/or the history of product returns changes, the Company will adjust the allowance for product returns.

BTI classifies all fees paid to the distributor, other than those discussed above and those related to warehouse operations, as selling, general and administrative expenses on its Consolidated Statements of Operations.

Fees paid to the distributor for warehouse operations are classified as costs of goods sold on BTI’s Consolidated Statements of Operations.

Cost of Goods Sold

Cost of goods sold includes the cost of producing and distributing inventories that are related to product revenues during the respective period.

Cost of goods sold may also include costs related to excess or obsolete inventory adjustment charges, as well as costs related to warehouse operations paid to distributors.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718, “ Compensation—Stock Compensation, ” which requires the measurement and recognition of compensation expense based on estimated fair market values for all share-based awards made to employees and directors, including stock options.

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

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.

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.

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.

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

The Black-Scholes option-pricing model was used as its method of determining fair value.

This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables.

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 using the accelerated attribution method.

The Company measures and recognizes stock-based compensation expense based on estimated fair value for all share-based awards made to employees, non-employee service providers, and directors, including stock options and restricted stock units (“RSUs”).

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) became effective in August 2017.

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

Following the effective date of the 2020 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.

The Company’s stock-based awards are valued at fair value on the date of grant and that fair value is recognized as an expense in the Consolidated Statements of Operations over the requisite service period using the accelerated attribution method.

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

The Black-Scholes pricing model is affected by the Company’s stock price, as well as assumptions regarding variables including, but not limited to, the strike price of the instrument, the risk-free rate, the expected stock price volatility over the term of the awards, and expected term of the award.

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

Research and Development Costs

Research and development expenses include wages, benefits, facilities, supplies, external services, clinical study and manufacturing costs and other expenses that are directly related to the Company’s research and development activities.

Research and development expenses include wages, benefits, non-cash stock-based compensation, facilities, supplies, external services, clinical study, manufacturing costs related to clinical trials and other expenses that are directly related to the Company’s research and development activities.

At the end of the reporting period, the Company compares payments made to third-party service providers to the estimated progress toward completion of the research or development objectives.

Depending on the timing of payments to the service providers and the progress that the Company estimates has been made as a result of the service provided, the Company may record net prepaid or accrued expense relating to these costs.

Depending on the timing of payments to the service providers and the progress that the Company estimates has been made for the program as a result of the level of service provided, the Company may record net prepaid or accrued expense relating to these costs.

Such estimates are subject to change as additional information becomes available.

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.

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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.

Costs related to filing and pursuing patent applications are recorded in selling, general and administrative expenses and are expensed as incurred since recoverability of such expenditures is uncertain.

Fair Value of Financial Instruments

The Company applies the provisions of ASC 820, “ Fair Value Measurements and Disclosures ” for financial assets and liabilities measured on a recurring basis which requires disclosure that establishes a framework for measuring fair value.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources, or observable inputs, and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances, or unobservable inputs.

The Company measures certain financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company applies a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources, or observable inputs, and (2) an

entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances, or unobservable inputs.

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

ASC 820 requires that fair value measurements be classified and disclosed in one of three categories:

Fair value measurements must be classified and disclosed in one of the following three categories:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.

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In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as considering counterparty credit risk in its assessment of fair value.

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.

BTI uses an asset and liability approach for financial accounting and reporting of income taxes.

Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax basis assets and liabilities and are measured by applying enacted rates and laws to taxable years in which differences are expected to be recovered or settled.

Further, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that the rate changes.

A valuation allowance is required when it is “more likely than not” that all or a portion of deferred tax assets will not be realized.

GAAP prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return, including a decision whether to file or not file a return in a particular jurisdiction.

The Company’s financial statements reflect expected future tax consequences of such positions presuming the taxing authorities’ full knowledge of the position and all relevant facts.

The Company does not have any unrecognized tax benefits as of December 31, 2022 and 2021.

BTI reviews all tax positions to ensure the tax treatment selected is sustainable based on its technical merits and that the position would be sustained if challenged.

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.

Earnings (loss) per share (“EPS”) is calculated by dividing net income or loss attributable to common stockholders by the weighted average number of shares of common stock that were outstanding.

Diluted EPS is calculated by adjusting the weighted average number of shares of common stock that were outstanding for the dilutive effect of common stock equivalents.

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

Securities that could potentially dilute basic EPS in the future were not included in the computation of diluted EPS because to do so would have been antidilutive.

Segment Information

The Company operates in a single segment.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance.

To date, our chief operating decision maker has made such decisions and assessed performance at the company level as one segment.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making

decisions regarding resource allocation and assessing performance.

To date, the Company’s chief operating decision maker has made such decisions and assessed performance at the Company level as one segment.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12 , Income Taxes (Topic 740) which amends the existing guidance relating to the accounting for income taxes.

2019-12 is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles of accounting for income taxes and to improve the consistent application of GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance.

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

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 .

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.

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

Recently adopted accounting pronouncements

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU No.

2019-12”), which amends the existing guidance relating to the accounting for income taxes.

GAAP for other areas of accounting for income taxes by clarifying and amending existing guidance.

2019-12 was effective for interim and annual periods beginning after December 15, 2020.

The adoption of ASU No.

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

2019-12 on January 1, 2021 did not have a material impact on the Company’s consolidated financial statements.

Accounting Pronouncements effective in future periods

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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”) .

Measurement of Credit Losses on Financial Instruments , and subsequent amendments to the initial guidance (collectively, “Topic 326”).

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

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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 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 .

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 .

The Company received proceeds of approximately $ 186,974 , net of issuance costs of $ 13,026 .

Under the terms of the Underwriting Agreement entered into by the Company in connection with the July 2020 offering, certain stockholders of the Company granted the underwriters an option exercisable for thirty days to purchase up to an additional 600 shares of common stock at the public offering price less underwriting discounts and commissions, which was not exercised.

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

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 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.

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

Securities that could potentially dilute basic EPS in the future were not included in the computation of diluted EPS because to do so would have been antidilutive.

The calculations of basic and diluted net loss per share are as follows (in thousands, except per share amounts):

Net loss (numerator)

Weighted average share, in thousands (denominator)

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.

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

The Company does not expect the adoption of Topic 326 to have a material impact on its consolidated financial statements .

Inventory consists of the following:

Raw materials

Work-in-process

Finished goods

Total inventory

There were no write-downs of inventory for the year ended December 31, 2022.

The Company did not have commercial inventory as of December 31, 2021 .

Property and Equipment, net

A summary of property and equipment is as follows:

Computers and related equipment

Property and Equipment, net consists of the following:

Computers and equipment

Leasehold improvements

Work in process

Construction-in-process

Total property and equipment

Accumulated depreciation

Total property and equipment, net

Depreciation expense was $ 327 and $ 297 for the years ended December 31, 2022 and 2021, respectively .

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December 31, 2021

Research and development expenses

Accrued research and development expenses

Accrued compensation and benefits

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Other accrued expenses

Total accrued expenses

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 thereafter (the “Services Agreement”), pursuant to which services provided by BioXcel LLC, through its subsidiaries in India and the U.S., will continue indefinitely, as agreed upon by the parties.

These services are primarily for drug discovery, CMC and administrative support.

Service charges recorded under the Services Agreement for the years December 31, 2022 and 2021 were as follows:

Year ended December 31,

Research and development

Selling, general and administrative

As of December 31, 2022 and 2021, $ 310 and $ 204 , respectively, of these service charges are included in due to related parties in the Company’s Consolidated Balance Sheets.

Debt and Credit Facilities

Debt, net of unamortized discounts and financing costs, consists of the following:

December 31, 2022

Revenue Interest Financing Agreement ("RIFA")

RIFA accrued interest

RIFA payments

RIFA debt liability

Estimated portion of RIFA debt liability to be paid within one-year

RIFA long-term debt liability

Credit Agreement and Guaranty

Payable-in-kind interest on Credit Agreement and Guaranty

Total long-term debt liability

Unamortized debt discounts and issuance costs

Total long-term debt

On April 19, 2022 (the “Effective Date”), the Company entered into two strategic financing agreements:

(i) a Credit Agreement and Guaranty (the “Credit Agreement”) by and among the Company, as the borrower, certain subsidiaries of the Company from time to time party thereto as subsidiary guarantors, the lenders party thereto (the “Lenders”), and Oaktree Fund Administration LLC (“OFA”) as administrative agent, and (ii) a Revenue Interest Financing Agreement (the “RIFA”;

and together with the Credit Agreement, the “OFA Facilities”) by and among the Company, the purchasers party thereto (the “Purchasers”) and OFA as administrative agent.

Under the OFA Facilities, the Lenders and the Purchasers agreed to, in the aggregate between the two OFA Facilities, provide up to $ 260,000 in gross funding to support the Company’s commercial activities of IGALMI sublingual film.

In addition, the OFA Facilities are intended to support the expansion of clinical development efforts of BXCL501, which includes a Phase 3 program for the acute treatment of agitation in patients with Alzheimer’s disease, and for general corporate purposes.

The Lenders and Purchasers are comprised of affiliates of Oaktree Capital Management, L.P.

and Qatar Investment Authority.

A summary of the OFA Facilities is provided below.

Credit Agreement

The Credit Agreement provides up to $ 135,000 in senior secured term loans, of which the initial Tranche A of $ 70,000 was funded on April 28, 2022, and the remaining tranches may be borrowed at the Company’s option prior to December 31, 2024, subject to satisfaction of certain conditions, including regulatory and financial milestones.

Tranche B of the Credit Agreement is $ 35,000 and is available upon satisfaction of certain conditions, including receipt of certain regulatory and financial milestones.

Tranche C of the Credit Agreement is $ 30,000 and is available upon satisfaction of

certain conditions, including specified minimum net sales of the Company attributable to sales of BXCL501 for a trailing twelve consecutive month period.

As of December 31, 2022, $ 65,000 remained available under the Credit Agreement, subject to achievement of the specified conditions and milestones.

The loans under the Credit Agreement do not amortize and mature on the fifth anniversary of the Effective Date;

provided that the Company may, at its option, extend the maturity date to the sixth anniversary if, prior to December 31, 2024, the Company receives and satisfies certain conditions including receipt of certain regulatory and financial milestones.

Borrowings under the Credit Agreement are issued at a 200 -basis point original issue discount and bear interest at a fixed annual rate of 10.25 %, payable quarterly.

Of such interest, 225 -basis points per annum is, at the Company’s option, payable in kind by capitalizing and adding such interest to the outstanding principal amount of loans from the first payment date on which such interest is owed through, and including, the third anniversary of such payment date, unless, with respect to any payment date, the Company elects to pay all or a portion of such interest in cash.

The Company is required to pay a ticking fee equal to 0.75 % per annum on the undrawn amount of the commitments, payable quarterly commencing 120 days after the funding of the Tranche A term loan through the termination of the commitments, which is expensed as incurred and recognized as interest expense in the Consolidated Statements of Operations.

The Company may voluntarily prepay the Credit Agreement at any time subject to a prepayment fee.

The Company’s obligations under the Credit Agreement are guaranteed by BTI’s existing and subsequently acquired or organized subsidiaries, subject to certain exceptions.

BTI’s obligations under the Credit Agreement and the related guarantees thereunder are secured, subject to customary permitted liens and other agreed upon exceptions, by (i) a pledge of all of the equity interests of all of the Company’s existing and any future direct subsidiaries, and (ii) a perfected security interest in all of its and the guarantors’ tangible and intangible assets (except that the guarantees provided by the BXCL701 Subsidiaries (as defined below) are unsecured).

The Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions, including specific exceptions with respect to product commercialization and development activities.

The Company must also comply with certain financial covenants, including (i) maintenance of cash or permitted cash equivalent investments in accounts controlled by OFA for the Lenders, of at least (a) $ 15,000 from the Effective Date until the date on which the second tranche of loans are funded (the “Step-Up Date”) and (b) $ 20,000 from and after the Step-Up Date, provided, in the case of (a) and (b), that following any Permitted BXCL701 Release Event (as defined below), such amount will increase by $ 12,500 , and following such time as unaffiliated third parties hold ownership of at least 30 % of the equity interests in the BXCL701 Subsidiaries (as defined below), such amount will increase by an additional $ 5,000 (provided, that such amount will in no event exceed 50 % of the aggregate amount of loans outstanding at any time);

and (ii) a minimum revenue test, measured quarterly beginning with the Company’s fiscal quarter ending on December 31, 2023 (such six-month period the “Revenue Covenant Measurement Period”), that requires it and its subsidiaries’ consolidated net revenue for the six consecutive month period ending on the last day of each such fiscal quarter to not be less than a minimum revenue amount specified in the Credit Agreement (such testing date, the “Revenue Covenant Measurement Testing Date” and the covenant described in this clause (ii) the “Revenue Covenant”).

The Company’s failure to comply with the financial covenants will result in an event of default, subject to certain cure rights with respect to the Revenue Covenant.

With respect to the Revenue Covenant, the Company would be required to pay the Lenders an amount in respect of the Revenue Covenant, and any such payment will be applied to the prepayment of the loans under the Credit Agreement.

Notwithstanding the foregoing, the Credit Agreement permits OnkosXcel (together with OnkosXcel Employee Holdings, LLC (“Employee Holdings”), a subsidiary of BTI, and their respective subsidiaries, the “BXCL701 Subsidiaries”) to receive third-party investment or transfer all or substantially all of their assets to an unaffiliated third-party, in each case subject to terms and conditions set forth in the Credit Agreement, including the escrow of certain proceeds received by BTI and its subsidiaries (other than the BXCL701 Subsidiaries) in respect of these disposition events and, under circumstances set forth in the Credit Agreement, the mandatory prepayment of such escrowed amounts.

The Company’s equity interests in the BXCL701 Subsidiaries have been pledged in support of its obligations under the Credit Agreement, and the BXCL701 Subsidiaries have provided direct guarantees of BTI’s obligations under the Credit Agreement on an unsecured basis.

However, the pledge, guarantee and other obligations of the BXCL701 Subsidiaries under the Credit Agreement will be released upon certain agreed upon events (“Permitted BXCL701

Release Events”), including an initial public offering by the BXCL701 Subsidiaries or the ownership by unaffiliated third parties of at least 20 % of the equity interests in the BXCL701 Subsidiaries.

The Credit Agreement contains events of default that are customary for financings of this type relating to, among other things, payment defaults, breach of covenants, breach of representations and warranties, cross default to material indebtedness, bankruptcy-related defaults, judgment defaults, breach of the financial covenants described above, and the occurrence of certain change of control events.

In certain circumstances, events of default are subject to customary cure periods.

Following an event of default and any applicable cure period, the Lenders will have the right upon notice to terminate any undrawn commitments and may accelerate all amounts outstanding under the Credit Agreement, in addition to other remedies available to them as the Company’s secured creditors.

Revenue Interest Financing Agreement

The RIFA provides up to $ 120,000 in financing in exchange for a capped revenue interest on net sales of IGALMI, and other future BXCL501 products, if any, that receive regulatory approval for sale.

The initial Tranche A of $ 30,000 was funded on July 8, 2022, and the remaining tranches may be borrowed at the Company’s option prior to December 31, 2024, subject to satisfaction of certain conditions, including certain regulatory, patent, and financial milestones.

The effective interest rate on the RIFA as of December 31, 2022, was approximately 14 %.

Under the terms of the RIFA, the Purchasers will receive tiered revenue interest payments on U.S.

net sales of IGALMI, and other future BXCL501 products, if any, that receive regulatory approval for sale, equal to a royalty ranging from 0.375 % to 7.750 % of net sales of IGALMI, and other future BXCL501 products, if any, approved for sale in the U.S., subject to a hard cap equal to 1.75 x the total amount funded.

In addition, if the conditions to the second tranche of the financing provided under the RIFA have been met, once payments equal to the hard cap have been received by the Purchasers, the Company will be required to make revenue interest payments equal to a flat 0.375 % royalty on U.S.

net sales of IGALMI, and other future BXCL501 products, if any, that receive regulatory approval for sale, through and including March 31, 2036 (the “Tail Royalty”).

The Company is also required to make certain additional payments to the Purchasers from time to time to ensure that the aggregate amount of payments received by the Purchasers under the RIFA are at least equal to certain agreed upon minimum levels as of certain specified dates, subject to terms and conditions set forth in the RIFA.

Revenue interest payments due under the RIFA are payable quarterly based on net sales.

Any time after the initial funding of the RIFA, BTI has the right (the “BTI Call Option”), but not the obligation, to buy out the Purchasers’ interests in the revenue interest payments at an agreed upon repurchase price.

The BTI Call Option can be exercised in year one, two, three and thereafter at a multiple of the Purchasers invested capital of 1.225 x, 1.375 x, 1.525 x and 2.25 x, respectively.

The Purchasers will not be entitled to any Tail Royalty if the BTI Call Option is exercised before the third anniversary of the Effective Date.

The Company’s obligations under the RIFA are secured, subject to customary permitted liens and other agreed upon exceptions and subject to an intercreditor agreement between OFA for the Credit Agreement and RIFA, by a perfected security interest in (i) accounts receivable arising from net sales of BXCL501 products in the U.S.

and one or more segregated bank accounts maintained for the purpose of receiving payments in respect of such accounts receivable, (ii) intellectual property that is claiming or covering BXCL501 itself or any method of using, making or manufacturing BXCL501 and (iii) regulatory approvals, clinical data, and all other assets that underlie BXCL501.

The RIFA contains customary representations and warranties and certain restrictions on the Company’s ability to incur indebtedness and grant liens on intellectual property related to BXCL501.

In addition, the RIFA provides that if certain events occur, including certain bankruptcy events, failure to make payments, a change of control, an out-license or sale of all of the rights in and to BXCL501 in the U.S., in each case except a permitted licensing transaction (as defined in the RIFA) and, subject to applicable cure periods, material breach of the covenants in the RIFA, OFA, at the direction of the Purchasers, may require the Company to repurchase the Purchasers’ interests in the revenue interest payments at an agreed upon repurchase price.

Tranche B and C of the RIFA are each $ 45,000 and are available upon satisfaction of certain conditions, including receipt of certain regulatory and patent related milestones and specified minimum net sales of BXCL501 during any

consecutive twelve-month period.

As of December 31, 2022, $ 90,000 remained available under the RIFA, subject to achievement of the specified conditions and milestones.

Warrants and Equity Investment Right

In connection with the Credit Agreement, on the Effective Date, the Company granted warrants to the Lenders to purchase up to 278 shares of its common stock (the “BTI Warrants”) at an exercise price of $ 20.04 per share.

The BTI Warrants will expire on April 19, 2029, are freely transferable and may be net exercised at the holder’s election.

In addition, pursuant to the Credit Agreement, the Lenders have the right to purchase shares of the Company’s common stock after the Effective Date, so long as borrowings under the Credit Agreement are outstanding, for a purchase price of $ 5,000 at a price per share equal to a 10 % premium to the volume-weighted average price of the common stock over the 30 trading days prior to the Lenders’ election to proceed with such equity investment (the “Equity Investment Right”).

BTI entered into a registration rights agreement with the Lenders and filed a registration statement on Form S-3 to register the shares issuable upon exercise of the BTI Warrants and, if issued, the shares related to the Equity Investment Right, for resale.

The maximum shares of BTI common stock issuable under the BTI Warrants and Lenders’ Equity Investment Right is 5,593 .

As part of the Credit Agreement, OnkosXcel, a wholly owned subsidiary of BTI, granted warrants to the Lenders to purchase 175 individual limited liability company units (which number of units is not in thousands;

referred to herein as the “OnkosXcel Warrants”).

The strike price of the OnkosXcel Warrants is formulaic based on the value of OnkosXcel at the time of exercise and can only be exercised upon occurrence of an equity related liquidity event for OnkosXcel of at least $ 20,000 .

The exercise price per unit of the OnkosXcel Warrants will be set upon the earlier of the closing of the next sale (or series of related sales) by OnkosXcel of equity securities of OnkosXcel with aggregate proceeds of not less than $ 20,000 to unrelated third parties (the “Next Equity Financing”) at an exercise price per unit equal to a 10 % premium over the price per unit of the equity securities sold by OnkosXcel in such Next Equity Financing or, in the event of a sale of OnkosXcel prior to the Next Equity Financing or an initial public offering constituting the Next Equity Financing, the lesser of (x) 75 % of the fair value of the consideration to be paid for a unit upon the consummation of such transaction and (y) 150 % of the valuation applicable to the initial profits units issued by OnkosXcel after the closing of the Credit Agreement.

The OnkosXcel Warrants are transferable with approval from BTI, which cannot be unreasonably withheld, expire on April 19, 2029, and may be net exercised at the holder’s election.

Maturities of long-term debt are expected to be as follows:

December 31, 2022

Interest expense was as follows:

Interest expense

Accretion of debt discount and amortization of financing costs

Total interest expense

Derivative Financial Instruments

BTI identified certain freestanding financial instruments and/or embedded features that require separate accounting from the borrowings under the OFA Facilities.

This includes the OnkosXcel Warrants and Equity Investment Right held by the Lenders, along with certain put/call options.

The OnkosXcel Warrants and Equity Investment Right do not meet certain scope exceptions under U.S.

GAAP, primarily because the exercise prices and number of shares of the Company’s common stock issuable under the instruments are variable, and the instruments meet the definition of a derivative instrument.

Therefore, these instruments are recorded as derivative liabilities in the Consolidated Balance Sheets.

The respective derivative liabilities are recorded at fair value on the date of issuance and are revalued on each balance sheet date until such instruments are settled or expire, with changes in the fair value between reporting periods recorded within other expense, net in the Company’s Consolidated Statements of Operations.

Common Stock Financing Activities

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 .

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, having an aggregate offering price of up to $ 100,000 , from time to time, through an “at the market 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 received proceeds of $ 4,056 , net of issuance costs of $ 500 .

The Company did not sell any shares, and thus did no t receive any proceeds under this program, for the year ended December 31, 2022 .

Stock-Based Compensation

2017 Equity Incentive Plan

The Company’s 2017 Equity Incentive Plan (the “2017 Plan”) became effective in August 2017.

Following the effective date of the Company's 2020 Plan (as defined below), 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.

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

Following the effective date of the Company's 2020 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.

2020 Incentive Award Plan

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.

The Company’s 2020 Plan was approved and became effective at the Company’s 2020 annual meeting of stockholders 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 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 immediately prior to the approval of the 2020 Plan by the Company’s stockholders.

Any shares of common stock which, 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 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 .

The shares available for issuance under the 2020 Plan increased by 1,119 shares and 977 shares on January 1, 2022 and 2021, respectively.

Stock-based awards granted under the 2020 Plan have a term of ten years .

The vesting schedule of all awards granted under the 2020 Plan is determined by the Board of Directors, which is generally four years .

As of December 31, 2022, there were 599 shares available to be granted under the 2020 Plan.

A summary of the status of the Company’s stock option activity for the year ended December 31, 2021 is presented below (in thousands, except per share amounts):

Restricted stock units

The table below summarizes activity relating to RSUs.

Outstanding as of January 1, 2022

Outstanding as of December 31, 2022

In 2022, the Company granted 122 time-based RSUs to certain employees and consultants.

The majority of RSUs granted to employees vest over four years , with 25 % vesting at the one-year anniversary of the grant date and the balance vesting ratably over the remaining 12 quarters of the vesting period.

25 RSUs granted to employees in May 2022 cliff-vest 100 % at the one-year anniversary of the grant date.

RSUs granted to a third-party consultant vest 50 % on each of the first and second anniversaries of the grant date.

None of the RSUs had vested as of December 31, 2022.

The weighted average grant date fair value per share for the RSUs granted in March and May 2022 was $ 15.31 and $ 10.76 , respectively.

Unrecognized stock-based compensation expense related to these awards was $ 1,229 as of December 31, 2022.

No RSUs were issued and outstanding as of December 31, 2021.

Profit sharing units

The table below summarizes activity relating to profits interests (the “profit sharing units” or “PSUs”).

Weighted average

price per unit

(in whole dollars)

Outstanding as of January 1, 2022

Outstanding as of December 31, 2022

Vested units as of December 31, 2022

During 2022, Employee Holdings, a management holding company used to facilitate the grant of equity interests to service providers of OnkosXcel, granted 1,310 individual (not in thousands) time-based PSUs in Employee Holdings to certain employees and consultants of the Company in consideration for services provided to OnkosXcel.

The PSUs represent indirect equity interests in OnkosXcel.

All PSUs, other than those granted to certain executive employees of the Company, vest ratably over 48 months .

PSUs granted to certain executive employees of the Company, vest ratably over 24 months .

The fair value of $ 4 per unit for the PSUs was estimated at the date of grant using a Black-Scholes option pricing model.

Profit share unit valuation inputs

Expected volatility

Risk-free rate of interest

Expected dividend yield

Expected term

Unrecognized stock-based compensation expense related to the PSUs was $ 4,588 as of December 31, 2022.

No PSUs were issued and outstanding as of December 31, 2021.

Stock options

A summary of the Company’s stock option activity for the year ended December 31, 2022, is presented below.

Weighted average

price per share

5 unchanged sentences

The total intrinsic value of stock options exercised for the years ended December 31, 2022 and 2021 was $ 2,437 and $ 11,942 , 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.

The weighted average grant date fair value of options vested at December 31, 2021 was $ 7.05 .

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.

The total intrinsic value of stock options exercisable as of December 31, 2022 and 2021 was $ 40,255 and $ 39,794 , respectively.

The weighted average grant date fair value of options granted during the years ended December 31, 2022 and 2021 was $ 11.62 and $ 28.81 , respectively.

The weighted average grant date fair value of options vested as of December 31, 2022 was $ 10.16 .

The weighted average remaining contractual life is 5.7 years for options exercisable as of December 31, 2022.

The weighted average remaining contractual life was 7.0 years for options outstanding as of December 31, 2022.

Stock-Based Compensation

The fair value of options granted during the years ended December 31, 2021 and 2020 was estimated using the Black-Scholes option-pricing model with the following assumptions.

The fair value of options granted during the years ended December 31, 2022 and 2021 was estimated using the Black-Scholes pricing model with the following assumptions:

December 31, 2022

3 unchanged sentences

Risk-free rate of interest

Expected dividend

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.

Expected dividend yield

In 2021, the Company began using a combination of the historical volatility of publicly traded peer companies and the limited historical information related to the Company’s common stock to estimate volatility.

The expected term of the 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.

The Company uses the simplified method because it does not have sufficient option exercise data to provide a reasonable basis upon which to estimate the expected term.

The expected dividend yield is 0 % as the Company has no history of paying dividends nor does management expect to pay dividends over the contractual terms of these options.

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 expected dividend yield is zero percent as the Company has no history of paying dividends nor does management expect to pay dividends over the contractual terms of these options.

The risk-free interest rates are determined by reference to the U.S.

Treasury yield curve in effect at the time of grant, with maturities approximating the expected term of the stock options.

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 Company recognized stock-based compensation expense related to awards issued under the 2017 Plan and the 2020 Plan, as well as the PSUs, of $ 17,337 and $ 19,455 for the years ended December 31, 2022 and 2021, respectively, which were comprised as follows:

Year ended December 31,

Research and development

Selling, general and administrative

Unrecognized compensation expense related to unvested stock option awards as of December 31, 2022, was $ 15,483 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 1.6 years.

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

The Company charged $ 6,657 and $ 12,798 to research and development and general and administrative expense for the year ended December 31, 2021, respectively.

The Company charged $ 6,020 and $ 8,591 to research and development and general and administrative expense for the year ended December 31, 2020, respectively.

2020 Employee Stock Purchase Plan

The Company’s 2020 Employee Stock Purchase Plan (the “ESPP”) was also approved and became effective at the Company’s 2020 annual meeting of Shareholders on May 20, 2020.

The Company’s 2020 Employee Stock Purchase Plan (the “ESPP”) was also approved and became effective at the Company’s 2020 annual meeting of stockholders on May 20, 2020.

The ESPP is designed to assist eligible employees of the Company with the opportunity to purchase the Company’s common stock at a discount through accumulated payroll deductions during successive offering periods.

The aggregate number of shares that may be issued pursuant to rights granted under the ESPP is 100 shares of common stock.

In addition, the number of shares available for issuance under the ESPP will increase on the first day of each calendar year beginning on January 1, 2021 and ending on and including January 1, 2030 by a number of shares of common stock equal to the lesser of (a) 1 % of the shares outstanding on the final day of the immediately preceding calendar year and (b) such smaller number of shares as determined by the Board.

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

The number of shares that may be issued or transferred pursuant to rights granted under the component of the ESPP that is intended to qualify for favorable U.S.

federal tax treatment under Section 423 of the Internal Revenue Code (the “Section 423 Component”) shall not exceed 500 shares.

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 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.

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 value

of a share on the first trading day or on the last trading day of the applicable offering period, whichever is lower.

The shares available for issuance under the ESPP increased by 280 shares and 244 shares on January 1, 2022 and 2021, respectively.

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

In August 2018, the Company entered into an agreement to lease approximately 11,040 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) which was effective February 22, 2019.

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:

BTI leases office space for its corporate headquarters at 555 Long Wharf Drive, New Haven, Connecticut (the “HQ Lease”) under an operating lease that expires in February 2026.

The Company has an option to renew the HQ Lease for one additional five-year term.

Payments under the HQ Lease are fixed.

The Company also leases equipment such as copiers and information technology equipment.

The future minimum annual lease payments under operating leases, as of December 31, 2022, were as follows:

Year ending December 31,

3 unchanged sentences

Less current portion of lease liability

Long-term portion operating lease liability

The current portion of the Company’s operating lease liability of $ 293 as of December 31, 2021 is included in other current liabilities on the balance sheet.

The Company recorded lease expense related to its operating lease right-of-use asset of $ 365 and $ 345 for the years ended December 31, 2021 and 2020, respectively.

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

From time to time, in the ordinary course of business, the Company may be subject to litigation and regulatory examinations as well as information gathering requests, inquiries and/or investigations.

The Company is not currently subject to any matters where it believes there is a reasonable possibility that a material loss may be incurred.

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.

Long-term portion of operating lease liability

The current portion of the Company’s operating lease liability of $ 319 , as of December 31, 2022, is included in other current liabilities on the Consolidated Balance Sheets.

Lease expense was $ 410 and $ 365 for the years ended December 31, 2022 and 2021, respectively.

Lease renewal options are not included in the ROU asset or lease liability.

Employee Benefit Plan

The Company maintains a defined contribution retirement plan for its employees that complies with Section 401(k) of the Internal Revenue Code (the “401(K) Plan”).

Employees are eligible to participate in the 401(K) Plan and can contribute a portion of their pay into the 401(K) Plan, subject to annual limits established by the U.S.

Internal Revenue Service.

Participating employees receive an employer matching contribution equal to 50 % of eligible employee contributions on the first 5 % of eligible compensation contributed.

During the year ended December 31, 2022, employer contributions to the 401(K) Plan were $ 568 .

BTI did not offer a matching contribution to the 401(K) Plan prior to 2022.

Fair Value Measurements

The Company groups its assets and liabilities measured at fair value in three levels based on the nature of the inputs and assumptions used to determine fair value.

Refer to Note 3, Summary of Significant Accounting Policies , for additional information on the accounting policies related to fair value.

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

As of December 31, 2022 and 2021, the Company had $ 191,022 and $ 228,584 , respectively, primarily in money market funds that hold U.S.

government cash equivalent instruments (included in cash and cash equivalents) which were valued based on Level 1 inputs.

There were no transfers between levels within the hierarchy during the years ended December 31, 2022 and 2021.

Derivative liabilities measured at fair value on a recurring basis are summarized below.

December 31, 2022

Derivative liability - Equity Investment Right

Derivative liability - OnkosXcel Warrants

Total derivative liabilities

Derivative liabilities are comprised of the OnkosXcel Warrants and Equity Investment Right held by the Lenders.

The fair value of the derivative liabilities was determined using Monte Carlo simulation models for the Equity Investment Right, and Binomial Option Pricing and Distribution models for the OnkosXcel Warrants.

The following table presents changes in Level 3 liabilities measured at fair value for the year ended December 31, 2022.

Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category.

Derivative liabilities

Balance - December 31, 2021

Addition of derivative liabilities

Change in fair value

Balance - December 31, 2022

The change from the day one fair value of the derivative liabilities was reported in the Consolidated Balance Sheets as derivative liabilities and Consolidated Statements of Operations as other expense, net, as of and for the year ended December 31, 2022.

Inputs used to calculate the estimated fair value of the Equity Investment Right were as follows:

Equity Investment Right

Strike price relative to volume weighted 30-day average

Volatility (annual)

Probability of exercise

Estimated premium to 30-day average

Discount rate

In estimating the fair value of the derivative liability related to the OnkosXcel Warrants, inputs included third-party fair value estimates of OnkosXcel limited liability company units along with the volatility of those units (which was set at 100 % based on the historical volatility of the Company’s stock, along with a peer group of comparable publicly traded companies), and the timing and probability of the relevant capital transactions occurring.

The estimated fair value of the Credit Agreement and RIFA as of December 31, 2022, were $ 52,670 and $ 30,673 , respectively.

Both observable and unobservable inputs were used to determine the fair value of long-term debt, which was classified within the Level 3 category.

The fair value of the BTI warrants, which is a non-recurring fair value, was determined as of the date of issuance using a Black-Scholes pricing model and the fair value of $ 3,245 was recorded as a component of stockholders’ equity in additional-paid-in-capital in the Consolidated Balance Sheets, with the offset recorded as a discount on the amounts funded under the OFA Facilities.

This non-recurring measurement is classified as a Level 3.

The inputs used were a strike price of $ 20.04 , the Company’s stock price of $ 14.93 , volatility of 95 %, term of 7 years and risk-free rate of 2.95 %.

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.

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

For tax years beginning on or after January 1, 2022, the 2017 Tax Cuts and Jobs Act amended Section 174 of the U.S.

Tax Code to eliminate current-year deductibility of research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the U.S.

and fifteen years for research activities performed outside of the U.S.

For the 2022 tax year, the Company capitalized $ 86,704 of research and development expenses.

This resulted in an increase in the deferred tax asset associated with capitalized research and development of $ 22,764 .

In determining the realizability of the Company’s net deferred tax asset, the Company considered numerous factors, including historical profitability, estimated future taxable income, and the industry in which it operates.

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.

The significant components of the Company’s net deferred tax assets are as follows:

Deferred tax assets:

2 unchanged sentences

Stock options

Capitalized R&D

Capitalized research & development

Accrued expense

Lease Accounting - liability

Unrealized gain

Lease liability

Unrealized loss

Valuation allowance

5 unchanged sentences

The income tax benefit for the year ended December 31, 2022 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:

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

A reconciliation between the Company’s effective tax rate and the federal statutory rate are as follows:

Year ended December 31,

Federal statutory rate

Stock based compensation

Federal and state credits

Federal tax credits

Valuation allowance

At December 31, 2021, the Company had approximately $ 138,843 of gross federal and $ 138,614 of gross state net operating loss carry-forwards.

If not utilized, the federal and state net operating loss carry-forwards will begin to expire in 2037.

The federal net operating loss of $ 136,197 incurred after December 31, 2017 will be carried forward indefinitely.

The utilization of such net operating loss carry-forwards and realization of tax benefits in future years depends predominantly upon having taxable income.

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

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.

These ownership changes may limit the amount of NOL and research tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

As of December 31, 2022, the Company had approximately $ 222,355 of gross federal and $ 214,489 of gross state net operating loss (“NOL”) carryforwards.

If not utilized, the federal and state NOL carryforwards will begin to expire in 2037.

The federal NOL of $ 219,709 incurred after December 31, 2017, will be carried forward indefinitely.

The utilization of such NOL carryforwards and realization of tax benefits in future years depends predominantly upon having taxable income.

The Company also has approximately $ 10,013 of federal orphan drug and research development credits which will begin to expire in 2037 if not utilized.

Utilization of the NOL and research tax credit carryforwards may be subject to a substantial annual limitation due to ownership limitations that have occurred or that could occur in the future, as required by section 382 of the U.S.

Tax Code, as well as similar state and foreign provisions.

These ownership changes may limit the amount of the NOL and research credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively.

In general, an "ownership change,"

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.

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.

as defined by Section 382 of the U.S.

Tax 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 by certain stockholders or public groups.

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

The Company has analyzed its tax positions and has concluded that as of December 31, 2022, there were no uncertain positions.

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.

federal and state NOLs 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 NOLs from prior years opens the relevant year to audit by the U.S.

Internal Revenue Service and/or state taxing authorities.

BTI did no t have any unrecognized tax benefits and has no t accrued any interest or penalties for the years ended December 31, 2022 and 2021.

Net Loss Per Share

Basic and diluted net loss per share are as follows :

Net loss (numerator)

Weighted average shares (denominator)

Basic and diluted net loss per share

Potentially dilutive securities outstanding consists of stock options and RSUs.

The Company had common stock equivalents outstanding as of December 31, 2022 and 2021 of 5,001 and 4,000 shares, respectively.

Commitments and Contingencies

From time to time, in the ordinary course of business, the Company may be subject to litigation and regulatory examinations as well as information gathering requests, inquiries and/or investigations.

The Company is not currently subject to any matters where it believes there is a reasonable possibility that a material loss may be incurred.

As of December 31, 2022, there were no matters which would have a material impact on the Company’s financial results.

In April 2022, the Company signed a commercial supply agreement that requires minimum annual payments for the first three years of the agreement that in aggregate total $ 10,000 for the three-year period .

Subsequent Events

As of March 15, 2023, the Company sold 756 shares under the Sale Agreement with Jefferies in the first quarter of 2023 for net proceeds of $ 23,917 , net of issuance costs of $ 740 .

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