Celcuity Inc. 10-Q

ITEM 1. Financial Statements Celcuity Inc. Condensed Balance Sheets September 30, 2024 December 31, 2023 (unaudited) Assets Current Assets: Cash and cash equivalents $ 12,603,289 $ 30,662,774 Investments 251,455,468 149,919,974 Other current assets 8,379,682 10,007,849 Total current assets 272,438,439 190,590,597 Property and equipment, net 338,787 228,782 Operating lease right-of-use assets 259,744 400,019 Total Assets $ 273,036,970 $ 191,219,398 Liabilities and Stockholders’ Equity: Current Liabilities: Accounts payable $ 9,158,778 $ 5,076,699 Operating lease liabilities 175,226 184,950 Accrued expenses 16,974,725 8,927,094 Total current liabilities 26,308,729 14,188,743 Operating lease liabilities 95,699 225,922 Note payable, non-current 96,923,914 37,035,411 Total Liabilities 123,328,342 51,450,076 Commitments and Contingencies (Note 5) - - Stockholders’ Equity: Preferred stock, $ 0.001 par value: 2,500,000 shares authorized; 317,577 and 854,134 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 318 854 Common stock, $ 0.001 par value: 65,000,000 shares authorized; 37,116,267 and 25,506,012 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively 37,116 25,506 Additional paid-in capital 384,873,261 299,818,965 Accumulated deficit ( 235,202,067 ) ( 160,076,003 ) Total Stockholders’ Equity 149,708,628 139,769,322 Total Liabilities and Stockholders’ Equity $ 273,036,970 $ 191,219,398 See accompanying notes to the condensed financial statements 3 Celcuity Inc. Condensed Statements of Operations (unaudited) 2024 2023 2024 2023 Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Operating expenses: Research and development $ 27,587,483 $ 17,488,236 $ 70,732,017 $ 42,512,811 General and administrative 2,472,416 1,409,801 6,104,803 3,988,248 Total operating expenses 30,059,899 18,898,037 76,836,820 46,501,059 Loss from operations ( 30,059,899 ) ( 18,898,037 ) ( 76,836,820 ) ( 46,501,059 ) Other (expense) income Interest expense ( 3,343,989 ) ( 1,372,132 ) ( 7,005,284 ) ( 3,929,140 ) Interest income 3,612,099 1,865,629 8,716,040 5,499,555 Other income, net 268,110 493,497 1,710,756 1,570,415 Net loss before income taxes ( 29,791,789 ) ( 18,404,540 ) ( 75,126,064 ) ( 44,930,644 ) Income tax benefits - - - - Net loss $ ( 29,791,789 ) $ ( 18,404,540 ) $ ( 75,126,064 ) $ ( 44,930,644 ) Net loss per share, basic and diluted $ ( 0.70 ) $ ( 0.83 ) $ ( 1.96 ) $ ( 2.05 ) Weighted average common shares outstanding, basic and diluted 42,793,047 22,117,626 38,299,548 21,920,147 See accompanying notes to the condensed financial statements 4 Celcuity Inc. Condensed Statements of Changes in Stockholders’ Equity Three and Nine Months Ended September 30, 2024 Shares Amount Shares Amount Capital Deficit Total Common Stock Preferred Stock Additional Paid-In Accumulated Shares Amount Shares Amount Capital Deficit Total Balance at December 31, 2023 25,506,012 $ 25,506 854,134 $ 854 $ 299,818,965 $ ( 160,076,003 ) $ 139,769,322 Stock-based compensation - - - - 1,331,346 - 1,331,346 Exercise of common stock warrants, net of shares withheld for exercise price 1,742,763 1,742 - - 14,007,409 - 14,009,151 Exercise of common stock options, net of shares withheld for exercise price 36,550 37 - - 239,263 - 239,300 Conversion of preferred to common stock 3,488,570 3,489 ( 348,857 ) ( 349 ) ( 3,140 ) - Net loss - - - - - ( 21,612,455 ) ( 21,612,455 ) Balance at March 31, 2024 (unaudited) 30,773,895 $ 30,774 505,277 $ 505 $ 315,393,843 $ ( 181,688,458 ) $ 133,736,664 Stock-based compensation 1,429 1 - - 1,410,512 - 1,410,513 Employee stock purchases 20,426 20 131,226 131,246 Conversion of preferred to common stock 1,877,000 1,878 ( 187,700 ) ( 187 ) ( 1,691 ) - - Exercise of common stock warrants, net of shares withheld for exercise price 19,390 19 - - 172,967 - 172,986 Exercise of common stock options, net of shares withheld for exercise price 16,197 17 - - 95,694 - 95,711 Issuance of common stock in an ATM offering 435,414 435 - - 7,641,765 - 7,642,200 Issuance costs associated with an ATM offering - - - - ( 263,727 ) - ( 263,727 ) Issuance of common stock upon closing of follow-on offering, net of underwriting discounts and offering costs 3,871,000 3,871 - - 56,248,237 - 56,252,108 Issuance of common stock warrants, note payable - - - - 1,228,911 - 1,228,911 Net loss - - - - - ( 23,721,820 ) ( 23,721,820 ) Balance at June 30, 2024 (unaudited) 37,014,751 $ 37,015 317,577 $ 318 $ 382,057,737 $ ( 205,410,278 ) $ 176,684,792 Stock-based compensation - - - - 1,931,201 - 1,931,201 Exercise of common stock warrants, net of shares withheld for exercise price 65,204 65 - - 553,615 - 553,680 Exercise of common stock options, net of shares withheld for exercise price 36,312 36 - - 330,708 - 330,744 Net loss - - - - - ( 29,791,789 ) ( 29,791,789 ) Balance at September 30, 2024 (unaudited) 37,116,267 $ 37,116 317,577 $ 318 $ 384,873,261 $ ( 235,202,067 ) $ 149,708,628 See accompanying notes to the condensed financial statements 5 Celcuity Inc. Condensed Statements of Changes in Stockholders’ Equity Three and Nine Months Ended September 30, 2023 Common Stock Preferred Stock Additional Paid-In Accumulated Shares Amount Shares Amount Capital Deficit Total Balance at December 31, 2022 21,667,250 $ 21,667 1,120,873 $ 1,121 $ 230,045,566 $ ( 96,296,887 ) $ 133,771,467 Stock-based compensation - - - - 1,273,282 - 1,273,282 Exercise of common stock options, net of shares withheld for exercise price 24,122 24 - - 127,898 - 127,922 Conversion of preferred to common stock 250,000 250 ( 25,000 ) ( 25 ) ( 225 ) - Issuance costs associated with private placement offering - - - - ( 7,486 ) - ( 7,486 ) Net loss - - - - - ( 11,938,417 ) ( 11,938,417 ) Balance at March 31, 2023 (unaudited) 21,941,372 $ 21,941 1,095,873 $ 1,096 $ 231,439,035 $ ( 108,235,304 ) $ 123,226,768 Stock-based compensation 1,958 2 - - 1,276,980 - 1,276,982 Employee stock purchases 17,477 17 - - 102,621 - 102,638 Conversion of preferred to common stock 100,000 100 ( 10,000 ) ( 10 ) ( 90 ) - - Exercise of common stock options, net of shares withheld for exercise price 21,086 22 - - 113,618 - 113,640 Net loss - - - - - ( 14,587,687 ) ( 14,587,687 ) Balance at June 30, 2023 (unaudited) 22,081,893 $ 22,082 1,085,873 $ 1,086 $ 232,932,164 $ ( 122,822,991 ) $ 110,132,341 Balance 22,081,893 $ 22,082 1,085,873 $ 1,086 $ 232,932,164 $ ( 122,822,991 ) $ 110,132,341 Stock-based compensation - - - - 1,108,637 - 1,108,637 Conversion of preferred to common stock 250,000 250 ( 25,000 ) ( 25 ) ( 225 ) - - Exercise of common stock options, net of shares withheld for exercise price 37,500 37 - - 59,965 - 60,002 Net loss - - - - - ( 18,404,540 ) ( 18,404,540 ) Balance at September 30, 2023 (unaudited) 22,369,393 $ 22,369 1,060,873 $ 1,061 $ 234,100,541 $ ( 141,227,531 ) $ 92,896,440 Balance 22,369,393 $ 22,369 1,060,873 $ 1,061 $ 234,100,541 $ ( 141,227,531 ) $ 92,896,440 See accompanying notes to the condensed financial statements 6 Celcuity Inc. Condensed Statements of Cash Flows (unaudited) 2024 2023 Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net loss $ ( 75,126,064 ) $ ( 44,930,644 ) Adjustments to reconcile net loss to net cash and cash equivalents used for operations: Depreciation 94,693 114,824 Stock-based compensation 4,673,059 3,658,902 Amortization of debt issuance costs and discount 780,555 177,939 Payment-in-kind interest 1,110,584 1,345,760 Non-cash operating lease, net 326 3,171 Change in accrued interest income ( 1,112,420 ) ( 439,331 ) Changes in operating assets and liabilities: Other current assets 1,740,973 ( 1,065,732 ) Accounts payable 4,093,903 3,031,923 Accrued expenses 8,047,631 2,826,856 Net cash used for operating activities ( 55,696,760 ) ( 35,276,332 ) Cash flows from investing activities: Proceeds from maturities of investments 415,134,729 221,054,402 Purchases of investments ( 515,557,800 ) ( 184,779,534 ) Purchases of property and equipment ( 204,729 ) ( 64,945 ) Net cash (used for) provided by investing activities ( 100,627,800 ) 36,209,923 Cash flows from financing activities: Proceeds from exercise of common stock warrants 14,735,816 - Proceeds from exercise of employee stock options 665,758 285,564 Proceeds from employee stock purchases 131,246 102,638 Proceeds from follow-on offering, net of underwriting discounts and offering costs 56,252,109 - Proceeds from note payable, net of debt issuance costs and discount of $ 2,437,644 59,226,276 - Proceeds from an ATM offering, net of issuance costs 7,356,107 - Payments for secondary registration statement costs ( 102,237 ) ( 128,298 ) Payments for debt issuance costs - ( 2,716 ) Payments for finance leases - ( 2,449 ) Net cash provided by financing activities 138,265,075 254,739 Net change in cash and cash equivalents ( 18,059,485 ) 1,188,330 Cash and cash equivalents: Beginning of period 30,662,774 24,571,557 End of period $ 12,603,289 $ 25,759,887 Supplemental disclosure of cash flow information: Interest paid $ 5,114,145 $ 2,405,441 Supplemental disclosures of non-cash investing and financing activities: Offering and registration statement costs included in accounts payable $ 44,621 $ 13,865 Property and equipment included in accounts payable $ 13,584 $ 12,961 Common stock warrants issued with note payable transaction $ 1,228,911 $ - See accompanying notes to the condensed financial statements 7 CELCUITY INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (unaudited) (For the Three and Nine Months Ended September 30, 2024 and 2023) 1. Organization Nature of Business Celcuity Inc., a Delaware corporation (the “Company”), is a clinical-stage biotechnology company focused on development of targeted therapies for treatment of multiple solid tumor indications. The Company’s lead therapeutic candidate is gedatolisib, a potent pan-PI3K and mTOR inhibitor. Its mechanism of action and pharmacokinetic properties are highly differentiated from other currently approved and investigational therapies that target PI3K or mTOR alone or together. A Phase 3 clinical trial, VIKTORIA-1, evaluating gedatolisib in combination with fulvestrant with or without palbociclib in patients with HR+/HER2- advanced breast cancer is currently enrolling patients. A Phase 1b/2 clinical trial, CELC-G-201, evaluating gedatolisib in combination with darolutamide in patients with metastatic castration resistant prostate cancer, was initiated in the first quarter of 2024 and is currently enrolling patients. A Phase 3 clinical trial, VIKTORIA-2, evaluating gedatolisib plus a CDK4/6 inhibitor and fulvestrant as first-line treatment for patients with HR+/HER2- advanced breast cancer is expected to begin enrolling patients in the second quarter of 2025. The Company was co-founded in 2012 by Brian F. Sullivan and Dr. Lance G. Laing and is based in Minnesota. The Company has not generated any revenues to date. 2. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements Basis of Presentation The accompanying unaudited condensed financial statements include the accounts of the Company and have been prepared in accordance with Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, as permitted by Article 10, the unaudited condensed financial statements do not include all of the information required by accounting principles generally accepted in the United States (“U.S. GAAP”). The balance sheet at December 31, 2023 was derived from the audited financial statements at that date and does not include all the disclosures required by U.S. GAAP. In the opinion of management, all adjustments which are of a normal recurring nature and necessary for a fair presentation have been reflected in the financial statements. These unaudited condensed financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2023 and the related footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Operating results for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected during the remainder of the current year or for any other future period. Accounting Estimates Management uses estimates and assumptions in preparing these unaudited condensed financial statements in accordance with U.S. GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates and the difference could be material. Significant items subject to such estimates and assumptions include the valuation of stock-based compensation and prepaid or accrued clinical trial costs. Risks and Uncertainties The Company is subject to risks common to companies in the development stage including, but not limited to, the clinical and commercial success of its initial drug product, gedatolisib, the regulatory approval of gedatolisib, the need for substantial additional financing to achieve its goals, uncertainty of broad adoption of its approved products, if any, by physicians and consumers, and significant competition. Clinical Trial Costs The Company records prepaid assets or accrued expenses for prepaid or estimated clinical trial costs conducted by third-party service providers, which includes the conduct of preclinical studies and clinical trials. These costs can be a significant component of the Company’s research and development expenses. The Company primarily relies on a compilation of progress reports from third-party service providers, including the respective invoicing, to record actual expenses, along with determining changes to prepaid assets and accrued liabilities. To date, the Company believes utilization of third-party reports most accurately reflects expenses incurred. As the current VIKTORIA-1 Phase 3, the CELC-G-201 Phase 1b/2 and the VIKTORIA-2 Phase 3 clinical trials ramp up site activation and patient enrollment, the Company’s estimated expenses in future periods and actual services performed may vary from these estimates, and these estimates may become more significant. Changes in these estimates that result in material changes to the Company’s prepaid assets or accrued expenses could materially affect the Company’s results of operations and financial position. 8 3. Net Loss Per Common Share Basic and diluted net loss per common share is determined by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. For all periods presented, the common shares underlying the preferred stock, options, warrants, and restricted stock have been excluded from the calculation because their effect would be anti-dilutive. Therefore, the weighted-average shares outstanding used to calculate both basic and diluted loss per common share are the same. The following table summarizes the potentially-dilutive shares excluded from the diluted weighted-average shares outstanding: Schedule of Potentially-Dilutive Shares Excluded from Diluted Weighted-Average Shares Outstanding 2024 2023 September 30, 2024 2023 Preferred stock on an as-if-converted to common stock basis 3,175,770 10,608,730 Options to purchase common stock 4,212,102 2,702,629 Warrants to purchase common stock 5,521,152 7,266,102 Restricted common stock 1,079 1,958 Total 12,910,103 20,579,419 Antidilutive securities excluded from computation of earnings per share, amount 12,910,103 20,579,419 Pre-funded warrant shares of 5,747,787 are included in the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2024, as the pre-funded warrants are exercisable for nominal consideration. 4. Investments Debt securities for which the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and reported at historical cost adjusted for amortization of premiums and accretion of discounts. Expected credit losses, if any, are recorded through the establishment of an allowance for credit losses. All of the Company’s held-to-maturity investment securities are U.S. Treasury and agencies securities that are guaranteed or otherwise supported by the United States government and have no history of credit losses. Accordingly, the Company does not expect to incur any credit losses on held-to-maturity investment securities and has no allowance for credit losses recorded for these securities. The following tables summarize the Company’s held-to-maturity investment securities at amortized cost as of September 30, 2024 and December 31, 2023: Schedule of Investment Amortized Cost, as Adjusted Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value September 30, 2024 Amortized Cost, as Adjusted Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value U.S. Treasury Bills $ 251,455,468 $ 196,920 $ - $ 251,652,388 Total $ 251,455,468 $ 196,920 $ - $ 251,652,388 Amortized Cost, as Adjusted Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value December 31, 2023 Amortized Cost, as Adjusted Gross Unrealized Holding Gains Gross Unrealized Holding Losses Estimated Fair Value U.S. Treasury Bills $ 149,919,974 $ 30,995 $ - $ 149,950,969 Total $ 149,919,974 $ 30,995 $ - $ 149,950,969 The fair value of the Company’s held-to-maturity debt securities is determined based upon inputs, other than the quoted prices in active markets, that are observable either directly or indirectly and are classified as level 2 fair value instruments. 9 5. Commitments Operating and Finance Leases The Company leases its corporate space in Minneapolis, Minnesota, with an operating lease in place through April 30, 2026. The lease provides for monthly rent, real estate taxes, and operating expenses. Rent expense is recorded on a straight-line basis over the lease term. Clinical Research Studies The Company enters into contracts in the normal course of business to conduct research and development programs internally and through third parties that include, among others, arrangements with vendors, consultants, contract manufacturing organizations (“CMOs”) and contract research organizations (“CROs”). The Company currently has two Phase 2 clinical trial agreements in place to evaluate targeted therapies selected with one of our CELsignia tests. Timing of milestone payments related to the Phase 2 clinical trials are uncertain and the contracts generally provide for termination following a certain period after notice, therefore the Company believes that non-cancelable obligations under the agreements are not material. The Company also has a license agreement in place with Pfizer to research, develop, manufacture and commercialize gedatolisib. In conjunction with the license agreement, the Company continued a Phase 1b study – B2151009 related to gedatolisib. These patients subsequently transitioned to an Expanded Access study – CELC-G-001. Contracts related to the Phase 1B and the Expanded Access studies are generally based on time and material. In addition, contracts related to the Company’s Phase 3 clinical study (VIKTORIA-1) and Phase 1b/2 clinical study (CELC-G-201) are generally cancelable with reasonable notice within 120 days and the Company’s obligations under these contracts are primarily based on services performed through termination dates plus certain cancelation charges, if any, as defined in each of the respective agreements. In addition, these agreements may, from time to time, be subjected to amendments as a result of any change orders executed by the parties. As of September 30, 2024, the Company had two material non-cancelable contractual commitments with respect to these arrangements, which totaled approximately $ 1.6 million. Software In August 2024, the Company entered into two software license agreements. These agreements will expire in August 2026. As of September 30, 2024, the Company had non-cancelable contractual commitments with respect to these arrangements, which totaled approximately $ 0.2 million. 6. Stockholders’ Equity Capital Stock At December 31, 2023, the Company’s authorized capital stock consisted of 65,000,000 shares of $ .001 par value common stock, of which 25,506,012 shares were outstanding, and 2,500,000 shares of $ .001 par value preferred stock, of which 854,134 shares were outstanding. On January 15, 2024, one of the Company’s preferred shareholders elected to convert 224,244 shares of Series A Convertible Preferred Stock into 2,242,440 shares of common stock, in accordance with the Securities Purchase Agreement dated May 15, 2022. The cost basis of the shares transferred is $ 5.75 per share. 10 On March 14, 2024, one of the Company’s preferred shareholders elected to convert 50,000 shares of Series A Convertible Preferred Stock into 500,000 shares of Common Stock, in accordance with the Securities Purchase Agreement dated May 15, 2022. The cost basis of the shares transferred is $ 5.75 per share. On March 15, 2024, one of the Company’s investors exercised 1,739,080 common stock warrants at an exercise price of $ 8.05 per share, which generated approximately $ 14.0 million in cash. The warrants were issued pursuant to the Securities Purchase Agreement dated May 15, 2022, that closed and was funded on December 9, 2022. Additional common stock warrants of 3,683 from several investors were exercised, which generated approximately $ 9,000 in cash in the first quarter of 2024. The 3,683 common stock warrants were net of shares withheld for exercise price. On March 19, 2024, one of the Company’s preferred shareholders elected to convert 43,913 shares of Series A Convertible Preferred Stock into 439,130 shares of common stock, in accordance with the Securities Purchase Agreement dated May 15, 2022. The cost basis of the shares transferred is $ 5.75 per share. On March 26, 2024, one of the Company’s preferred shareholders elected to convert 30,700 shares of Series A Convertible Preferred Stock into 307,000 shares of common stock, in accordance with the Securities Purchase Agreement dated May 15, 2022. The cost basis of the shares transferred is $ 5.75 per share. On May 31, 2024, one of the Company’s preferred shareholders elected to convert 100,000 shares of Series A Convertible Preferred Stock into 1,000,000 shares of common stock, in accordance with the Securities Purchase Agreement dated May 15, 2022. The cost basis of the shares transferred is $ 5.75 per share. On June 26, 2024, one of the Company’s preferred shareholders elected to convert 87,700 shares of Series A Convertible Preferred Stock into 877,000 shares of common stock, in accordance with the Securities Purchase Agreement dated May 15, 2022. The cost basis of the shares transferred is $ 5.75 per share. Common stock warrants of 19,390 from several investors were exercised, which generated approximately $ 173,000 in cash in the second quarter of 2024. The 19,390 common stock warrants were net of shares withheld for exercise price. Common stock warrants of 65,204 from several investors were exercised, which generated approximately $ 554,000 in cash in the third quarter of 2024. The 65,204 common stock warrants were net of shares withheld for exercise price. At September 30, 2024, the Company’s authorized capital stock consisted of 65,000,000 shares of common stock, of which 37,116,267 shares were outstanding, and 2,500,000 shares of preferred stock, including 1,850,000 shares designated as Series A Preferred Stock, of which 317,577 shares were outstanding. As of September 30, 2024, no dividends have been declared on the Company’s capital stock. Sale and Issuance of Stock On April 22, 2024, pursuant to an Open Market Sale Agreement SM with Jefferies LLC, as agent, the Company sold 285,714 shares of common stock in a single transaction at a price of $ 17.50 per share, generating gross proceeds of $ 5.0 million. On May 8, 2024, pursuant to an Open Market Sale Agreement with Jefferies LLC, as agent, the Company sold 149,700 shares of common stock in a single transaction at a price of $ 17.65 per share, generating gross proceeds of $ 2.6 million. 11 Commissions and other offering expenses related to the Open Market Sale Agreement transactions in April and May 2024 were $ 0.3 million. On May 30, 2024, the Company entered into an underwriting agreement with Leerink Partners LLC, TD Securities (USA) LLC and Stifel, Nicolaus & Company, Incorporated as representatives of the several underwriters relating to the issuance and sale of 3,871,000 shares of Common Stock, at a price to the public of $ 15.50 , generating gross proceeds of approximately $ 60.0 million. The offering closed on May 31, 2024 and resulted in net proceeds to the Company of approximately $ 56.3 million after deducting underwriting discounts and other offering expenses payable by the Company. The Company intends to use the net proceeds from the offering for working capital and general corporate purposes, which may include capital expenditures, research and development expenditures, clinical trial expenditures, expansion of business development activities and other general corporate purposes. 7. Stock-Based Compensation The following table summarizes the activity for all stock options outstanding for the nine months ended September 30: Schedule of Stock Options Activity 2024 2023 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Options outstanding at beginning of year 2,815,392 $ 7.95 1,976,586 $ 6.34 Granted 1,557,479 16.37 874,548 10.13 Exercised ( 89,059 ) 7.48 ( 82,708 ) 3.65 Forfeited ( 71,710 ) 9.95 ( 65,797 ) 7.45 Balance at September 30 4,212,102 $ 11.04 2,702,629 $ 7.63 Options exercisable at September 30: 1,891,297 $ 7.11 1,440,231 $ 6.26 Weighted Average Grant Date Fair Value for options granted during the period: $ 11.38 $ 7.09 The following table summarizes additional information about stock options outstanding and exercisable at September 30, 2024: Schedule of Stock Options Outstanding and Exercisable Options Outstanding Options Exercisable Options Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Aggregate Intrinsic Value Options Exercisable Weighted Average Exercise Price Aggregate Intrinsic Value 4,212,102 8.16 $ 11.04 $ 18,651,440 1,891,297 $ 7.11 $ 14,838,086 The Company recognized stock-based compensation expense for stock options of $ 1,843,424 and $ 1,065,567 for the three months ended September 30, 2024 and 2023, respectively and $ 4,463,423 and $ 3,516,180 for the nine months ended September 30, 2024 and 2023, respectively. In May 2022, the Company modified the exercise price on 776,324 stock option awards to $ 5.50 , the closing market price on the Nasdaq Capital Market on May 17, 2022. The effect of this modification on stock-based compensation was $ 26,652 and $ 30,188 for the three months ended September 30, 2024 and 2023, respectively, and $ 80,063 and $ 107,490 for the nine months ended September 30, 2024 and 2023, respectively. The effect of this modification on stock-based compensation over the remaining service period will be approximately $ 83,000 . In December 2021, the Company modified the exercise price on 311,000 stock option awards to $ 13.44 , the closing market price on the Nasdaq Capital Market on December 15, 2021. No director or officer awards were modified. The effect of this modification on stock-based compensation was $ 15,773 and $ 15,773 for the three months ended September 30, 2024 and 2023, respectively and $ 47,300 and $ 49,617 for the nine months ended September 30, 2024 and 2023, respectively. The effect of this modification on stock-based compensation over the remaining service period will be approximately $ 51,000 . In May 2020, the Company modified the exercise price on 203,750 stock option awards to $ 5.10 , the closing market price on the Nasdaq Capital Market on May 14, 2020. No director or officer awards were modified. The effect of this modification on stock-based compensation was $ 0 and $ 3,041 for the three months ended September 30, 2024 and 2023, respectively and $ 696 and $ 16,975 for the nine months ended September 30, 2024 and 2023, respectively. The effect of this modification on stock-based compensation over the remaining service period will be $ 0 . 12 The Black-Scholes option-pricing model was used to estimate the fair value of equity-based awards and the Monte Carlo simulation model was used to estimate the fair value of the performance-based awards, with the following weighted-average assumptions for the nine months ended September 30: Schedule of Assumptions for Fair Value of Equity-based Awards 2024 2023 Risk-free interest rate 3.48 % - 4.71 % 3.41 % - 4.61 % Expected volatility 71.2 to 76.10 % 78.0 to 79.8 % Expected life (years) 5.25 to 10.00 5.25 to 6.08 Expected dividend yield 0 % 0 % The inputs for the Black-Scholes valuation model and the Monte Carlo simulation model require management’s significant assumptions. Prior to the Company’s initial public offering, the price per share of common stock was determined by the Company’s board based on recent prices of common stock sold in private offerings. Subsequent to the initial public offering, the price per share of common stock is determined by using the closing market price on the Nasdaq Capital Market on the grant date. The risk-free interest rates are based on the rate for U.S. Treasury securities at the date of grant with maturity dates approximately equal to the expected life at the grant date. The expected life is based on the simplified method for the time-based awards and the life of the option for the performance-based awards, in accordance with the SEC Staff Accounting Bulletin Nos. 107 and 110. The expected volatility is estimated based on historical volatility information of peer companies that are publicly available in combination with the Company’s calculated volatility since being publicly traded for the time-based awards. For the performance-based awards, the Company’s full historical volatility was used to value the options. All assumptions used to calculate the grant date fair value of non-employee options are generally consistent with the assumptions used for options granted to employees. In the event the Company terminates any of its consulting agreements, the unvested options issued in connection with the agreements would also be cancelled. The Company had 1,079 and 1,958 shares of restricted stock outstanding as of September 30, 2024 and 2023, respectively, and no shares of restricted stock vested during the three months ended September 30, 2024 and 2023. The Company recognized stock-based compensation expense for restricted stock of $ 4,448 and $ 4,903 for the three months ended September 30, 2024 and 2023, respectively and $ 17,773 and $ 13,597 for the nine months ended September 30, 2024 and 2023, respectively. The Company initially reserved a maximum of 750,000 shares of common stock for issuance under the 2017 Amended and Restated Stock Incentive Plan (the “2017 Plan”). The number of shares reserved for issuance was automatically increased by 102,998 , 149,189 , 216,673 , and 255,060 shares on January 1, 2021, 2022, 2023, and 2024, respectively, and will increase automatically on January 1 of each year from 2025 through 2027 by the number of shares equal to 1.0% of the aggregate number of outstanding shares of Company common stock as of the immediately preceding December 31. However, the Company’s board may reduce the amount of the increase in any particular year. At the Annual Meetings held on May 12, 2021 and May 12, 2022, the stockholders approved one-time, 500,000 increases each year for a total increase of 1,000,000 , to the number of shares reserved for issuance under the 2017 Plan. At the Annual Meetings held on May 11, 2023 and May 9, 2024, the stockholders approved one-time, 1,500,000 increases each year for a total increase of 3,000,000 , to the number of shares reserved for issuance under the 2017 Plan. The total remaining shares available for grant under the Company’s 2017 Plan as of September 30, 2024 was 1,286,511 . 13 Total unrecognized compensation cost related to stock options and restricted stock is estimated to be recognized at September 30, 2024: Schedule of Unrecognized Compensation Cost 2024 $ 2,158,997 2025 7,470,910 2026 6,066,260 2027 4,918,768 2028 1,740,835 Total estimated compensation cost to be recognized $ 22,355,770 The Company recognized stock-based compensation expense related to its employee stock purchase plan of $ 83,329 and $ 38,167 for the three months ended September 30, 2024 and 2023, respectively and $ 191,863 and $ 129,125 for the nine months ended September 30, 2024 and 2023, respectively. The Company initially reserved a total of 100,000 shares for issuance under the employee stock purchase plan. The number of shares reserved for issuance was automatically increased by 51,499 , 74,594 , 108,337 , and 127,530 shares on January 1, 2021, 2022, 2023, and 2024, respectively, and will increase automatically on each subsequent January 1 by the number of shares equal to 0.5% of the total outstanding number of shares of Company common stock as of the immediately preceding December 31. However, the Company’s board may reduce the amount of the increase in any particular year. The total remaining shares available for issuance under the employee stock purchase plan as of September 30, 2024 was 373,739 . The Company recognized total stock-based compensation expense as follows for the three and nine months ended September 30: Schedule of Stock-based Compensation Expenses 2024 2023 2024 2023 Three Months Ended Nine Months Ended September September 2024 2023 2024 2023 Stock-based compensation expense in operating expenses: Research and development $ 1,190,424 $ 660,706 $ 3,000,641 $ 1,954,689 General and administrative 740,777 447,931 1,672,418 1,704,213 Total $ 1,931,201 $ 1,108,637 $ 4,673,059 $ 3,658,902 8. Debt On May 30, 2024, the Company entered into an Amended and Restated Loan and Security Agreement (the “A&R Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP, a Delaware limited partnership (“Innovatus”), as collateral agent, and the Lenders including Innovatus in its capacity as a Lender and Oxford Finance LLC (“Oxford”), pursuant to which Innovatus and Oxford, as Lenders, have agreed to make certain term loans (“Term Loans”) to the Company in the aggregate principal amount of up to $ 180 million. The A&R Loan Agreement amends and restates, in its entirety, that certain Loan and Security Agreement, dated April 8, 2021, as amended, between the Company and Innovatus, as collateral agent, and the Lenders named therein. Funding of the first $ 100 million under the A&R Loan Agreement occurred on May 30, 2024, including tranche payments of $ 16.8 million (the “Term A Loan”) and $ 21.5 million (the “Term B Loan”) reflecting repayment of the principal amount of loans under the Prior Loan Agreement plus accrued payment-in-kind interest, in addition to $ 61.7 million of new borrowings (the “Term C Loan”). The Company will be eligible to draw on a fourth tranche of $ 30 million (the “Term D Loan”) and fifth tranche of $ 50 million (the “Term E Loan”), in each case upon achievement of certain clinical trial milestones and satisfaction of certain financial covenants determined on a pro forma as-funded basis. The Lenders may, in their sole discretion upon the Company’s request, make additional term loans to the Company of $ 45 million (the “Term F Loan”). Funding of these additional tranches is also subject to other customary conditions and limits on when the Company can request funding for such tranches. Costs associated with the new borrowings was approximately $ 2.4 million. 14 The Company is entitled to make interest-only payments for thirty-six months, or up to forty-eight months if certain conditions are met. The Term Loans will mature on May 1, 2029 and will bear interest at a rate equal to the sum of (a) the greater of (i) the Prime Rate (as defined in the A&R Loan Agreement) or (ii) 7.75%, plus (b) 2.85%, provided that 1.0% of such interest will be payable in-kind by adding an amount equal to such 1.0% of the outstanding principal amount to the then outstanding principal balance on a monthly basis through May 31, 2027. The A&R Loan Agreement is secured by all assets of the Company. Proceeds will be used for working capital purposes and to fund the Company’s general business requirements, including the Phase 3 VIKTORIA-2 clinical trial. The A&R Loan Agreement contains customary representations and warranties and covenants, subject to customary carve-outs, and includes financial covenants related to liquidity and other financial measures. Innovatus has the right, at its election and until August 9, 2025, to convert up to 20 % of the outstanding principal of the Term A Loan into shares of the Company’s common stock at a price per share of $ 10.00 (the “Conversion Right”). Innovatus will continue to have the right to exercise a previously disclosed warrant granted to it under the Prior Loan Agreement to purchase 26,042 shares of common stock at a price per share of $ 14.40 through April 8, 2031. The A&R Loan Agreement contains a Final Fee, which is equal to 4.5 % of the initial funding of the agreement and is due on the earliest to occur of (a) the Maturity Date, (b) the acceleration of any Term Loan, and (c) the prepayment of the Term Loans. There is also a contingent non-utilization fee for both the Term D and Term E loans. If the Company achieves the Term D Milestone and (i) fails to draw the full amount of the Term D Loan during the Term D Draw Period and (ii) fails to notify Collateral Agent, at any time before the date that is four weeks after the Company’s achievement of the Term D Milestone, of the Company’s intent not to draw the full amount of the Term D Loan, a non-utilization fee of $ 900,000 , with respect to the Term D Loan shall become due and payable on the earliest of (i) the termination of the Term D Draw Period, (ii) the Maturity Date, (iii) the acceleration of any Term Loan, and (iv) the prepayment in whole of the Term Loans. If the Company achieves the Term E Milestone and (i) fails to draw the full amount of the Term E Loan during the Term E Draw Period and (ii) fails to notify Collateral Agent, at any time before the date that is four weeks after the Company’s achievement of the Term E Milestone, of the Company’s intent not to draw the full amount of the Term E Loan, a non-utilization fee of $ 1,500,000 , with respect to the Term E Loan shall become due and payable on the earliest of (i) the termination of the Term E Draw Period, (ii) the Maturity Date, (iii) the acceleration of any Term Loan, and (iv) the prepayment in whole of the Term Loans. After the 18-month anniversary of the Effective Date, the Company shall have the option to prepay all, but not less than all, of the Term Loans advanced by the Lenders under the A&R Loan Agreement, provided the Company (i) provides written notice to Collateral Agent of its election to prepay the Term Loans at least seven Business Days prior to such prepayment, and (ii) pays to Lenders on the date of such prepayment, payable to each Lender in accordance with its respective Pro Rata Share, an amount equal to the sum of (A) all outstanding principal of the Term Loans plus accrued and unpaid interest thereon through the prepayment date, (B) the Final Fee, (C) the Prepayment Fee, plus (D) all other outstanding Obligations that are due and payable, including, without limitation, Lenders’ Expenses and interest at the Default Rate with respect to any past due amounts. At May 30, 2024, the Company recognized the Final Fee of $ 4.5 million as additional debt principal and a corresponding debt discount to be amortized over the life of the loan. In connection with the funding of each of the Term C Loan, the Term D Loan, the Term E Loan and the Term F Loan, the Company agreed to issue to Innovatus and Oxford warrants to purchase that number of shares of the Company’s common stock equal to 2.5 % of the principal amount of the applicable Term Loan divided by the exercise price, which shall, with respect to the Term C Loan, be equal to the lower of (i) the volume weighted average closing price of the Company’s common stock for the five-trading day period ending on the last trading day immediately preceding the execution of the A&R Loan Agreement or (ii) the closing price on the last trading day immediately preceding the execution of the A&R Loan Agreement. Accordingly, on May 30, 2024, the Company issued 103,876 warrants with an exercise price of $ 14.84 per share. The relative fair value of the warrants was approximately $ 1.2 million. For the additional Term Loans, the exercise price will be based on the lower of (i) the exercise price for the Warrants issued pursuant to the Term C Loan or (ii) the volume weighted average closing price of the Company’s common stock for the five-trading day period ending on the last trading day immediately preceding the applicable Term Loan funding. The Warrants may be exercised on a cashless basis and are exercisable through the tenth anniversary of the applicable funding date. The number of shares of common stock for which each Warrant is exercisable and the associated exercise price are subject to certain proportional adjustments as set forth in such Warrant. The Company evaluated the change of terms under ASC 470-50, “Debt – Modification and Extinguishment”, and concluded the change in terms did not result in significant and consequential changes to the economic substance of the debt and thus resulted in a modification of the debt and not an extinguishment of the debt. 15 Long-term debt consisted of the following at September 30, 2024 and December 31, 2023: Schedule of Long-term Debt September 30, 2024 December 31, 2023 Note payable $ 100,000,000 $ 35,000,000 Add: Final fee 4,500,000 - Add: PIK interest (added to principal) 340,164 2,565,660 Less: unamortized debt issuance costs ( 1,856,880 ) ( 480,810 ) Less: unamortized debt discount ( 6,059,370 ) ( 49,439 ) Total long-term debt $ 96,923,914 $ 37,035,411 Future principal payments, including the incurred PIK interest and Final Fee, are as follows: Schedule of Long Term Debt Future Principal Payments Years Ending December 31, 2027 $ 30,538,311 2028 52,351,390 2029 21,950,463 Total $ 104,840,164 9. Subsequent Event On October 7, 2024, the Company held a Special Meeting of Stockholders at which the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation to increase the authorized number of shares of the Company’s Common Stock from 65,000,000 to 95,000,000 (the “Authorized Share Increase”). The Authorized Share Increase had previously been approved, subject to stockholder approval, by the Company’s Board of Directors. On October 7, 2024, the Company filed a certificate of amendment to the Certificate of Incorporation with the Delaware Secretary of State to effect the Authorized Share Increase, which became effective immediately upon its filing. 16