COGNITION THERAPEUTICS INC 10-K

Item 8. Financial Statements and Supplementary Data Index to Consolidated Financial Statements As of and for the years ended December 31, 2022 and 2021 ​ ​ Page ​ ​ ​ Report of Independent Registered Public Accounting Firm (PCAOB ID 42) ​ 118 ​ ​ ​ Consolidated Balance Sheets as of December 31, 2022 and 2021 ​ 119 ​ ​ ​ Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2022 and 2021 ​ 120 ​ ​ ​ Consolidated Statements of Convertible Preferred Stock and Stockholders’ (Deficit) Equity for the years ended December 31, 2022 and 2021 ​ 121 ​ ​ ​ Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 ​ 122 ​ ​ ​ Notes to Consolidated Financial Statements ​ 123 ​ ​ 117 Table of Contents Report of Independent Registered Public Accounting Firm To the Shareholders and the Board of Directors of Cognition Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Cognition Therapeutics, Inc. and Subsidiary (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ (deficit) 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. Basis of 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 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 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 audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2020. Philadelphia, Pennsylvania March 23, 2023 ​ ​ ​ ​ 118 Table of Contents COGNITION THERAPEUTICS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2022 2021 Assets ​ ​ ​ Current assets ​ ​ ​ Cash and cash equivalents ​ $ 41,562 ​ $ 54,721 Grant receivables ​ 3,672 ​ 1,799 Prepaid expenses and other current assets ​ 2,413 ​ 2,005 Other receivables ​ ​ — ​ ​ 467 Total current assets ​ 47,647 ​ 58,992 Property and equipment, net ​ 233 ​ 145 Right-of-use assets, operating leases ​ ​ 813 ​ ​ — Other assets ​ ​ 1,732 ​ ​ — Total assets ​ $ 50,425 ​ $ 59,137 Liabilities and Stockholders’ Equity ​ ​ Current liabilities ​ ​ Accounts payable ​ 3,216 ​ 4,168 Accrued expenses ​ 2,094 ​ 1,751 Deferred grant income, current ​ ​ 1,702 ​ ​ 753 Operating lease liabilities, current ​ ​ 149 ​ ​ — Other current liabilities ​ 634 ​ 1,192 Total current liabilities ​ 7,795 ​ 7,864 Operating lease liabilities, noncurrent ​ 695 ​ — Deferred grant income and other liabilities, noncurrent ​ 1,686 ​ — Total liabilities ​ 10,176 ​ 7,864 Commitments and contingencies (Note 7) ​ ​ Stockholders’ equity: ​ ​ Preferred stock, $ 0.001 par value, 10,000,000 shares authorized at December 31, 2022 and December 31, 2021; no shares issued and outstanding at December 31, 2022 and December 31, 2021 ​ ​ — ​ ​ — Common stock, $ 0.001 par value, 250,000,000 shares authorized at December 31, 2022 and December 31, 2021; 28,991,548 and 22,230,032 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively ​ 29 ​ 22 Additional paid-in capital ​ 155,820 ​ 145,453 Accumulated deficit ​ ( 115,401 ) ​ ( 94,004 ) Accumulated other comprehensive loss ​ ( 199 ) ​ ( 198 ) Total stockholders’ equity ​ 40,249 ​ 51,273 Total liabilities and stockholders’ equity ​ $ 50,425 ​ $ 59,137 ​ The accompanying notes are an integral part of these consolidated financial statements. 119 Table of Contents COGNITION THERAPEUTICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended ​ ​ December 31, ​ ​ 2022 2021 Operating Expenses: ​ ​ ​ Research and development ​ $ 30,324 ​ $ 18,572 General and administrative ​ 13,227 ​ 10,026 Total operating expenses ​ 43,551 ​ 28,598 Loss from operations ​ ( 43,551 ) ​ ( 28,598 ) Other income (expense): ​ ​ ​ Grant income ​ 22,217 ​ 17,447 Change in the fair value of the derivative liability ​ — ​ 2,209 Change in the fair value of the Simple Agreements for Future Equity ​ ​ — ​ ​ ( 2,236 ) Other income (expense), net ​ ( 35 ) ​ ( 88 ) Gain on debt extinguishment ​ — ​ 443 Interest expense ​ ( 28 ) ​ ( 893 ) Total other income, net ​ 22,154 ​ 16,882 Net Loss ​ ​ ( 21,397 ) ​ ​ ( 11,716 ) Cumulative preferred stock dividends ​ — ​ ( 4,532 ) Net loss attributable to common stockholders ​ $ ( 21,397 ) ​ $ ( 16,248 ) Unrealized loss on foreign currency translation ​ ( 1 ) ​ ( 11 ) Total comprehensive loss ​ $ ( 21,398 ) ​ $ ( 11,727 ) Net loss per share: ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.91 ) ​ $ ( 3.13 ) Diluted ​ $ ( 0.91 ) ​ $ ( 3.13 ) Weighted average common shares outstanding: ​ ​ ​ ​ ​ ​ Basic ​ ​ 23,640,199 ​ ​ 5,190,883 Diluted ​ ​ 23,640,199 ​ ​ 5,190,883 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ 120 Table of Contents COGNITION THERAPEUTICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY (in thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ Convertible ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Total ​ ​ Preferred Stock ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Shares Amount Capital Deficit Loss (Deficit) Equity Balances as of December 31, 2020 40,524,346 ​ $ 55,370 ​ 538,793 ​ $ 1 ​ $ 222 ​ $ ( 68,220 ) ​ $ ( 187 ) ​ $ ( 68,184 ) Issuance of Series B-1 convertible preferred stock upon conversion of debt ​ 10,926,089 ​ 29,391 ​ ​ — ​ ​ — ​ ​ ( 397 ) ​ ​ ( 14,068 ) ​ ​ — ​ ​ ( 14,465 ) Conversion of convertible preferred stock into common stock ​ ( 51,450,435 ) ​ ​ ( 84,761 ) ​ ​ 15,906,537 ​ ​ 16 ​ ​ 84,745 ​ ​ — ​ ​ — ​ ​ 84,761 Issuance of common stock in initial public offering, net of discounts and issuance costs of $ 7,783 ​ — ​ — ​ ​ 4,333,333 ​ ​ 4 ​ ​ 44,213 ​ ​ — ​ ​ — ​ ​ 44,217 Conversion of SAFE into common stock ​ — ​ — ​ ​ 931,485 ​ ​ 1 ​ ​ 11,177 ​ ​ — ​ ​ — ​ ​ 11,178 Exercise of common stock options ​ — ​ ​ — ​ ​ 321,686 ​ ​ — ​ ​ 276 ​ ​ — ​ ​ — ​ ​ 276 Exercise of common stock warrants ​ — ​ — ​ 198,198 ​ — ​ 34 ​ ​ ​ ​ ​ 34 Equity-based compensation ​ — ​ — ​ — ​ — ​ 5,183 ​ — ​ — ​ 5,183 Other comprehensive loss ​ — ​ — ​ — ​ — ​ — ​ — ​ ( 11 ) ​ ( 11 ) Net income ​ — ​ — ​ — ​ — ​ — ​ ( 11,716 ) ​ — ​ ( 11,716 ) Balances as of December 31, 2021 — ​ — ​ 22,230,032 ​ 22 ​ 145,453 ​ ( 94,004 ) ​ ( 198 ) ​ 51,273 Exercise of stock options — ​ — ​ 1,761,516 ​ ​ 2 ​ ​ 1,616 ​ ​ — ​ ​ — ​ 1,618 Proceeds from follow-on public offering, net of offering costs of $ 816 ​ — ​ ​ — ​ ​ 5,000,000 ​ ​ 5 ​ ​ 5,179 ​ ​ — ​ ​ — ​ ​ 5,184 Equity-based compensation ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,572 ​ ​ — ​ ​ — ​ ​ 3,572 Other comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1 ) ​ ​ ( 1 ) Net loss — ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 21,397 ) ​ ​ — ​ ( 21,397 ) Balances as of December 31, 2022 — ​ $ — ​ 28,991,548 ​ $ 29 ​ $ 155,820 ​ $ ( 115,401 ) ​ $ ( 199 ) ​ $ 40,249 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 121 Table of Contents COGNITION THERAPEUTICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2022 2021 Cash flows from operating activities: ​ ​ ​ Net loss ​ $ ( 21,397 ) ​ $ ( 11,716 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ Depreciation and amortization ​ 83 ​ 93 Equity-based compensation ​ 3,572 ​ 5,183 Amortization of right-of-use assets ​ ​ 152 ​ ​ — Amortization of debt issuance costs ​ — ​ 31 Amortization of debt discount ​ — ​ 352 Change in the fair value of the derivative liability ​ — ​ ( 2,209 ) Change in the fair value of the Simple Agreements for Future Equity ​ ​ — ​ ​ 2,236 Gain on debt extinguishment ​ — ​ ( 443 ) Changes in operating assets and liabilities: ​ ​ ​ ​ Grant receivables ​ ( 1,873 ) ​ ( 1,235 ) Prepaid expenses and other assets ​ 430 ​ 21 Other receivables ​ 467 ​ 121 Other assets ​ ​ ( 1,732 ) ​ ​ — Accounts payable ​ ( 1,092 ) ​ 2,165 Accrued expenses ​ 343 ​ 1,269 Deferred grant income, current and other liabilities ​ ​ 2,635 ​ ​ 501 Operating lease liabilities ​ ( 121 ) ​ — Net cash used in operating activities ​ ( 18,533 ) ​ ( 3,631 ) Cash flows from investing activities: ​ ​ Payments for property and equipment ​ ( 171 ) ​ ( 27 ) Net cash used in investing activities ​ ( 171 ) ​ ( 27 ) Cash flows from financing activities: ​ ​ Proceeds from Issuance of common stock in follow-on public offering ​ ​ 5,324 ​ ​ — Proceeds from the exercise of common stock options ​ ​ 1,618 ​ ​ 276 Payments on loan payable ​ ​ ( 1,396 ) ​ ​ ( 268 ) Proceeds from issuance of common stock in initial public offering ​ ​ — ​ ​ 44,217 Proceeds from issuance of Simple Agreements for Future Equity ​ ​ — ​ ​ 8,942 Proceeds from exercise of stock warrants ​ ​ — ​ ​ 34 Net cash provided by financing activities ​ 5,546 ​ 53,201 Effect of exchange rate changes on cash and cash equivalents ​ ( 1 ) ​ ( 11 ) Net (decrease) increase in cash and cash equivalents ​ ( 13,159 ) ​ 49,532 Cash and cash equivalents ​ ​ ​ ​ ​ ​ Cash and cash equivalents – beginning of period ​ 54,721 ​ 5,189 Cash and cash equivalents – end of period ​ $ 41,562 ​ $ 54,721 Supplemental disclosures of non-cash financing activities: ​ ​ Prepayment of insurance through third-party financing ​ $ 838 ​ $ 1,191 Remeasurement of right-of-use asset and operating lease liability ​ $ 349 ​ $ — Deferred offering costs included in Accounts payable ​ $ 140 ​ $ — Conversion of convertible preferred stock into common stock in initial public offering ​ $ — ​ $ 84,761 Conversion of Simple Agreements for Future Equity into common stock in initial public offering ​ $ — ​ $ 11,178 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ ​ 122 Table of Contents COGNITION THERAPEUTICS, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except share and per share amounts) 1. Description of Business and Financial Condition Cognition Therapeutics, Inc. (the “Company”) was incorporated as a Delaware corporation on August 21, 2007. The Company is a biopharmaceutical company developing disease modifying therapies for central nervous system (“CNS”) disorders. The Company’s pipeline candidates were discovered using proprietary biology and chemistry platforms designed to identify novel drug targets and disease-modifying therapies that address dysregulated pathways specifically associated with neurodegenerative diseases. The Company was founded on the unique combination of biological expertise around these targets, including proprietary assays that emphasize functional responses, and proprietary medicinal chemistry intended to produce novel, high-quality small-molecule drug candidates. On July 14, 2015, the Company formed Cognition Therapeutics PTY LTD, as its wholly owned subsidiary (the “Subsidiary”), primarily for the purpose of conducting research and development efforts at facilities located in Australia. Assets and liabilities of the Subsidiary, which uses the Australian dollar as its local functional currency, are translated to United States (U.S.) dollars at year-end exchange rates. Income statement accounts are translated using the average exchange rates prevailing during the month in which income and expenses are generated. Translation adjustments are recorded to accumulated other comprehensive income (loss) (“AOCI”) within stockholders’ deficit. Gains and losses from foreign currency transactions are included in net loss as a part of other income, net. On October 13, 2021, the Company closed its initial public offering (“IPO”) of 3,768,116 shares of the Company’s common stock at a public offering price of $ 12.00 per share. The gross proceeds from the IPO, excluding the overallotment exercise, were $ 45,217 and the net proceeds were approximately $ 37,909 , after deducting underwriting discounts and commissions and other offering related expenses payable by the Company. Upon completion of the IPO, all of the Company’s then outstanding preferred stock was automatically converted into an aggregate of 15,906,537 shares of common stock and an aggregate amount of $ 8,942 of simple agreements for future equity (“SAFE”) was automatically converted into an aggregate of 931,485 shares of common stock. On November 10, 2021, the representative of the underwriters for the IPO provided notice to the Company that it had elected to exercise its over-allotment option in full to purchase 565,217 shares of the Company’s common stock. The representative’s exercise of the over-allotment option closed on November 12, 2021, resulting in gross proceeds of $ 6,783 and net proceeds to the Company of approximately $ 6,308 , after deducting underwriting discounts and commissions and other offering related expenses. On November 15, 2022, the Company closed its follow-on public offering of 5,000,000 shares of the Company’s common stock at a public offering price of $ 1.20 per share (“November 2022 Offering”). The gross proceeds from the November 2022 Offering were $ 6,000 and the net proceeds were approximately $ 5,184 , after deducting underwriting discounts and commissions and other offering related expenses payable by the Company. Additionally, the Company granted the underwriters in the November 2022 Offering an option to purchase up to 750,000 additional shares of its common stock at the public offering price, less underwriting discounts and commissions. On December 23, 2022, the Company filed a Registration Statement on Form S-3 (File No. 333-268992) (the “Shelf”) with the Securities and Exchange Commission (“SEC”) in relation to the registration of common stock, preferred stock, debt securities, warrants, subscription rights, and/or units of any combination thereof of up to $ 200,000 in aggregate. The Shelf was declared effective on January 3, 2023 by the SEC. The Company also simultaneously entered into a sales agreement with Cantor Fitzgerald & Co. and B. Riley Securities, Inc., or the Sales Agents, providing for the offering, issuance and sale by the Company of up to $ 40,000 of its common stock from time to time in “at-the-market” offerings under the Shelf (the “ATM”). The Company held cash and cash equivalents of $ 41,562 at December 31, 2022. The Company expects that its cash and cash equivalents, including the net proceeds from its IPO and its follow-on public offering, will enable it to fund its operating expenses and capital expenditure requirements through at least the one year period subsequent to the filing 123 Table of Contents date of this Annual Report on Form 10-K. However, additional funding will be necessary to fund future preclinical and clinical activities. The Company expects to finance its future cash needs through a combination of grant awards, equity or debt financings, collaboration agreements, strategic alliances and licensing arrangements. ​ 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents consist primarily of interest-bearing deposits at various financial institutions and money markets. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Receivables Grant Receivables Grant receivables relate to outstanding amounts due for reimbursable expenditures of awarded grants issued by the National Institute of Health (“NIH”) and are carried at their estimated collectible amounts. The Company expects all receivables to be collectible, and accordingly, there is no allowance for doubtful accounts required on these grant receivables. Deferred Offering Costs The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings, including the IPO, as deferred costs until such financings are consummated. After consummation of the equity financing, these costs are recorded in stockholders’ deficit as a reduction of proceeds generated as a result of the offering. Property and Equipment Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line basis over the estimated useful life of the asset. The Company estimates the useful life to be 5 and 6 years for equipment and furniture and fixtures, respectively. The cost of repairs and maintenance is charged to expense as incurred. Equipment finance leases are included in Property and Equipment, net and other liabilities on the consolidated balance sheet. The Company reviews the recorded values of property and equipment for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset or group of assets may not be fully recoverable. There were no indicators of impairment of long-lived assets during the years ended December 31, 2022 or 2021. 124 Table of Contents Convertible Instruments ASC 815, Derivatives and Hedging Activities (“ASC 815”) requires companies to bifurcate certain conversion options and redemption features from their host instruments and account for them as free-standing derivative financial instruments should certain criteria be met. The Company also follows ASC 480-10, Distinguishing Liabilities from Equity (“ASC 480-10”) when evaluating the accounting for its hybrid instruments. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date. Grant income The Company generates grant income through grants from government and other (non-government) organizations. Grant income is recognized in other income (expense) in the period in which the reimbursable research and development services are incurred and the right to payment is realized. Deferred grant income represents grant proceeds received by the Company prior to the period in which the reimbursable research and development services are incurred. For the year ended December 31, 2022 and 2021, the Company generated grant income of $ 22,217 and $ 17,447 , respectively, primarily from reimbursements from the National Institute of Aging, a division of the NIH for aging research. The current and noncurrent portion of deferred grant income as of December 31, 2022 was $ 1,702 and $ 1,686 , respectively, as compared to the current and noncurrent portion of deferred grant income as of December 31, 2021 of $ 753 and $ 0 , respectively. The grants awarded relate to agreed-upon direct and indirect costs for specific studies or clinical trials, which may include personnel and consulting costs, costs paid to contract research organizations (“CROs”), research institutions and/or consortiums involved in the grant, as well as facilities and administrative costs. These grants are cost plus fixed fee arrangements in which the Company is reimbursed for its eligible direct and indirect costs over time, up to the maximum amount of each specific grant award. Only costs that are allowable under the grant award, certain government regulations and the NIH’s supplemental policy and procedure manual may be claimed for reimbursement, and the reimbursements are subject to routine audits from governmental agencies from time to time. While these NIH grants do not contain payback provisions, the NIH or other government agency may review the Company’s performance, cost structures and compliance with applicable laws, regulations, policies and standards and the terms and conditions of the applicable NIH grant. If any of the expenditures are found to be unallowable or allocated improperly or if the Company has otherwise violated terms of such NIH grant, the expenditures may not be reimbursed and/or the Company may be required to repay funds already disbursed. To date, the Company has not been found to have breached the terms of any NIH grant. As of December 31, 2022, the Company has been awarded grants with project periods that extend through May 31, 2026, subject to extension. Research and Development Costs The Company is involved in research and development aimed at the development of treatments for a variety of diseases related to the central nervous system, with a primary focus on Alzheimer’s Disease. Research and development costs are expensed as incurred. Research and development expenses consist principally of personnel costs, including salaries, stock-based compensation, and benefits for employees, third-party license fees and other operational costs related to our research and development activities, including allocated facility-related expenses and external costs of outside vendors, and other direct and indirect costs. Non-refundable research and development costs are deferred and expensed as the related goods are delivered or services are performed. Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks. Costs for certain research and development activities are recognized based on the pattern of performance of the individual arrangements, which may 125 Table of Contents differ from the pattern of billings incurred, and are reflected in the consolidated financial statements as prepaid expenses or as accrued research and development expenses. Leases The Company adopted Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) using the optional transition method of the modified retrospective approach, as of January 1, 2022. Accordingly, prior periods will not be restated to reflect the adoption of the standard. The Company elected the practical expedient to not apply the recognition requirements in the leasing standards to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that it is reasonably certain to exercise) and the practical expedient that permits lessees to make an accounting policy election (by class of underlying asset) to not separate lease components of a contract from non-lease components. The Company determines if an arrangement is a lease at contract inception. The Company’s contracts are determined to contain a lease when all of the following criteria based on the specific circumstances of the arrangement are met: (1) there is an identified asset for which there are no substantive substitution rights; (2) the Company has the right to obtain substantially all of the economic benefits from the identified asset; and (3) the Company has the right to direct the use of the identified asset. At the commencement date, operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. The Company’s lease agreements do not provide an implicit rate. As a result, the Company utilizes an estimated incremental borrowing rate to discount lease payments, which is based on the rate of interest the Company would have to pay to borrow a similar amount on a collateralized basis over a similar term. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or lease incentives received. Operating lease cost is recognized over the expected term on a straight-line basis. Variable lease cost is recognized as incurred. The expected lease term for those leases commencing prior to January 1, 2022 did not change with the adoption of the new leasing standards. As a result of the adoption of the new leasing standard, on January 1, 2022, the Company recorded a right-of-use asset of $ 616 and corresponding current and noncurrent operating lease liabilities of $ 130 and $ 486 , respectively. The adoption did not have a material impact on the condensed consolidated statement of operations or cash flows. For additional information on the adoption of the new leasing standard, refer to Note 7. The Company will continue to report financial information for fiscal years ended before December 31, 2021 under ASC 840. Impact of Adoption of ASC 842 on the Consolidated Financial Statements ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prior to adoption ​ Adjustment for ​ ​ ​ of new leasing ​ adoption of new ​ ​ ​ standards ​ leasing standards ​ As adjusted Right-of-use assets (1) $ — ​ $ 616 ​ $ 616 Deferred rent (2) $ 6 ​ $ ( 6 ) ​ $ — Operating lease liabilities (3) $ — ​ $ 130 ​ $ 130 Operating lease liabilities, net of current portion (3) $ — ​ $ 486 ​ $ 486 ​ ​ ​ ​ ​ ​ ​ ​ ​ (1) Represents recognition of operating lease right-of-use assets. ​ ​ ​ ​ ​ ​ ​ ​ (2) Represents reclassification of deferred rent to operating lease. ​ ​ ​ ​ ​ ​ ​ ​ (3) Represents recognition of operating lease liabilities. ​ ​ ​ ​ ​ ​ ​ ​ ​ Income Taxes The Company accounts for income taxes under the asset and liability method pursuant to authoritative guidance. 126 Table of Contents Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this authoritative guidance, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. If it is more likely than not that some portion or all of a deferred tax asset will not be recognized, a valuation allowance is recognized. The Company accounts for uncertainty in income taxes using a recognition threshold of more-likely-than-not to be sustained upon examination by the appropriate taxing authority. Measurement of the uncertainty occurs if the recognition threshold is met. The Company has determined that there were no uncertainties as of December 31, 2022 and 2021 that met the recognition threshold. Equity-based Compensation Following the provisions of ASC 718, Compensation — Stock Compensation , the Company recognizes compensation expense for equity-based grants using the straight-line attribution method, in which the expense is recognized ratably over the requisite service period within operating expenses based on the grant date fair value. The Company also has granted awards subject to performance-based vesting. The Company would recognize compensation expense for these awards commencing in the period in which the vesting condition becomes probable of achievement. Grant date fair value is estimated on the date of grant using the Black-Scholes option pricing model. Forfeitures are recognized in the period in which they occur. Black-Scholes requires inputs based on certain subjective assumptions, including (i) the expected stock price volatility, (ii) the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. Due to a lack of sufficient public market data for the Company’s common stock and lack of company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with expected term assumption. The Company uses the simplified method to calculate the expected term for stock options granted to employees whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the stock options due to its lack of sufficient historical data. The risk-free interest rate is based on U.S. Treasury securities with a maturity date commensurate with the expected term of the associated award. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. Prior to the IPO, due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation , to estimate the fair value of its common stock. In determining the exercise prices for stock options granted, the Company has considered the estimated fair value of the common stock as of the measurement date. The estimated fair value of the common stock has been determined at each grant date based upon a variety of factors, including the illiquid nature of the common stock, arm’s-length sales of the Company’s capital stock (including convertible preferred stock), the effect of the rights and preferences of the preferred stockholders and the prospects of a liquidity event. Among other factors are the Company’s financial position and historical financial performance, the status of technological developments within the Company’s research, the composition and ability of the current research and management team, an evaluation or benchmark of the Company’s competition and the current business climate in the marketplace. Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date. Subsequent to the IPO, the board of directors will determine the fair value of the shares of common stock underlying the stock-based awards based off of the closing price as reported on the Nasdaq Stock Market LLC on the grant date. 127 Table of Contents Concentration of Credit Risk The Company’s financial instruments that are exposed to credit risks consist of cash and cash equivalents. The Company maintains its cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limit. The Company has not experienced any losses in these accounts and does not believe it is exposed to any significant credit risk related to these funds. Fair Value of Financial Instruments The Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances. The carrying value of the Company’s cash and cash equivalents, grants receivable, prepaid expense, other receivables, other assets, accounts payable, accrued expenses and other liabilities approximate fair value because of the short-term maturity of these financial instruments. In addition, the Company records its warrant liability, derivative liability, and SAFE at fair value. The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below: ● Level 1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities. ● Level 2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. ● Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities. Comprehensive Loss The Company recorded $ 1 and $ 11 in other comprehensive loss related to foreign currency translation for the years ended December 31, 2022 and 2021, respectively. The Company presents comprehensive loss in a single statement within its consolidated financial statements. Net Loss Per Share Attributable to Common Stockholders Basic net loss attributable to common shares is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during each period. Diluted net loss attributable to common shares includes the effect, if any, from the potential exercise or conversion of securities, such as convertible preferred stock and stock options, which would result in the issuance of incremental shares of common stock. For diluted net loss per share, the weighted-average number of shares of common stock is the same for basic net loss per share due to the fact that when a net loss exists, dilutive securities are not included in the calculation as 128 Table of Contents the impact is anti-dilutive. The Company’s convertible preferred stock entitles the holder to participate in dividends and earnings of the Company, and, if the Company were to recognize net income, it would have to use the two-class method to calculate earnings per share. The two-class method is not applicable during periods with a net loss, as the holders of the convertible preferred stock have no obligation to fund losses. Segments The Company has determined that it operates and manages one operating segment, which is the business of developing and commercializing therapeutics. The Company’s chief operating decision maker, its chief executive officer, reviews financial information on an aggregate basis for the purpose of allocating resources. Emerging Growth Company Status The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (a) no longer an emerging growth company or (b) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). ASU No. 2016-02 requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The Company adopted ASU No. 2016-02 on January 1, 2022. For additional information on the adoption of the new leasing standards, please refer to the section titled “Leases” above, and Note 7. In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) : Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This ASU clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted for all entities. The Company adopted ASU 2021-04 on January 1, 2022. The adoption of ASU 2021-04 did not have a material impact on the Company’s consolidated financial statements. ​ In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832) : Disclosures by Business Entities about Government Assistance. This ASU increases the transparency of government assistance including the disclosure of (1) the types of assistance, (2) an entity’s accounting for the assistance, and (3) the effect of the assistance on an entity’s financial statements. The Company adopted ASU 2021-10 on January 1, 2022. The adoption of ASU 2021-10 did not have a material impact on the Company’s consolidated financial statements. For additional information on the Company’s governmental assistance transactions, please refer to the sections titled “Grant Receivables” and “Grant Income” above. ​ Reverse Stock Split ​ In July 2021, the Company's board of directors approved an amendment to the Company's second amended and restated certificate of incorporation to effect a 1 -for-3.2345 reverse stock split of the Company's common stock, which was effected on October 1, 2021 with a filing made with the Secretary of State of the State of Delaware. Stockholders entitled to fractional shares as a result of the reverse stock split received a cash payment in lieu of receiving fractional 129 Table of Contents shares. The par value of the common stock was not adjusted as a result of the reverse stock split. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately reduced and the respective exercise prices, if applicable, were proportionately increased in accordance with the terms of the appropriate securities agreements. Shares of common stock reserved for issuance upon the conversion of our convertible preferred stock were proportionately reduced and the respective conversion prices were proportionately increased. All common share and per share data have been retrospectively revised to reflect the reverse stock split. ​ 3. Financial Instruments and Fair Value Measurements Financial assets and liabilities measured at fair value are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ Quoted Priced in ​ Significant Other ​ Unobservable ​ ​ ​ ​ ​ Active Markets ​ Observable Inputs ​ Inputs ​ ​ ​ ​ (Level 1) (Level 2) (Level 3) Total Assets: ​ ​ ​ ​ Money market funds ​ $ 37,479 ​ $ — ​ $ — ​ $ 37,479 Total assets ​ $ 37,479 ​ $ — ​ $ — ​ $ 37,479 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ Quoted Priced in ​ Significant Other ​ Unobservable ​ ​ ​ ​ ​ Active Markets ​ Observable Inputs ​ Inputs ​ ​ ​ ​ (Level 1) (Level 2) (Level 3) Total Assets: ​ ​ ​ ​ Money market funds ​ $ 46,687 ​ $ — ​ $ — ​ $ 46,687 Total assets ​ $ 46,687 ​ $ — ​ $ — ​ $ 46,687 ​ There were no Level 3 financial instruments during the year ended December 31, 2022. The following table sets forth a summary of the changes in fair value of the Level 3 liabilities for the year ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, 2021 ​ ​ ​ ​ Derivative ​ ​ SAFE Liability Total Balance at December 31, 2020 ​ $ — ​ $ 2,209 ​ $ 2,209 Fair value recognized upon the issuance of SAFE ​ 8,942 ​ — ​ 8,942 Change in the fair value of the derivative liability ​ ​ — ​ ​ ( 2,209 ) ​ ​ ( 2,209 ) Change in the fair value of SAFE ​ ​ 2,236 ​ ​ — ​ ​ 2,236 Fair value recognized upon conversion of SAFE into common stock ​ ​ ( 11,178 ) ​ ​ — ​ ​ ( 11,178 ) Balance at December 31, 2021 ​ $ — ​ $ — ​ $ — ​ ​ Derivative Liability — The Company recognizes derivative liabilities as a result of the issuance of the convertible notes that contain conversion and redemption features that are required to be bifurcated. The fair value measurement of the derivative liability is classified as Level 3 under the fair value hierarchy as it has been valued using certain unobservable inputs. These inputs include: (1) probability of occurrence of future events (such as a qualified financing or a sale), and (2) discount rate for implied return required by investor. Significant increases or decreases in any of those inputs in isolation could result in a significantly lower or higher fair value measurement. The fair value of the derivative liability was determined by calculating the fair value of the notes with the conversion and redemption features as compared to the fair value of the notes without such features, with the difference representing the value of the conversion and redemption features, or the derivative liability. The conversion and 130 Table of Contents redemption features are measured at fair value as of each reporting date and the change in the fair value for the period is recorded in the consolidated statements of operations as a change in the fair value of the derivative liability. The fair value of the derivative liability is based on Level 3 unobservable inputs. Changes in fair value are recognized as a gain or loss within other income (expense) on the consolidated statements of operations and comprehensive loss. The derivative liability expired unexercised upon the conversion of the convertible notes into Series B-1 convertible preferred stock in May of 2021. Simple Agreement for Future Equity — On March 25, 2021, the Company entered into SAFE with existing investors, pursuant to which the Company received gross proceeds in an aggregate amount equal to $ 8,942 . The fair value of the SAFE liability is estimated using a fair value model that includes inputs such as: (1) probability of occurrence of future events (such as a change of control or public offering), and (2) discount rate for implied return required by investor. The Company recorded a change in fair value adjustment of $ 2,236 in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2021. Upon the occurrence of the Company’s IPO on October 7, 2021, the SAFE converted into 931,485 shares of common stock. ​ The fair value of the SAFE was determined using a probability weighted expected return method (PWERM), in which the probability and timing of potential future events is considered in order to estimate the fair value of the SAFE as of each valuation date. Management determined the fair value of the SAFE using the following significant unobservable inputs: ​ ​ ​ ​ ​ ​ ​ ​ October 7, ​ March 25, ​ ​ 2021 ​ 2021 ​ (Conversion) ​ (Issuance) Expected term (in years) — ​ 0.35 Discount upon conversion 20.0 % ​ 20.0 % Discount upon implied return 18.9 % ​ 18.9 % Probability of IPO occurrence 100.0 % ​ 45.0 % Probability of dissolution event occurrence ​ 0.0 % ​ 15.0 % Probability of equity financing occurrence ​ 0.0 % ​ 37.0 % Probability of change of control occurrence ​ 0.0 % ​ 3.0 % ​ In addition, the Company recorded the Series B-1 convertible preferred stock within mezzanine equity at fair value on the date of issuance, May 1, 2021. This non-recurring fair value measure was based on level 3 unobservable inputs. ​ In April 2020, the Company received a $ 443 unsecured loan, bearing interest at 1.0 %, pursuant to the Paycheck Protection Program (the “PPP”), a program implemented by the U.S. Small Business Administration (the “SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) (the “PPP Loan”). The PPP provided for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loan and accrued interest are forgivable after eight weeks if the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities. The amount of loan forgiveness may be reduced if the borrower terminates employees or reduces salaries during the eight-week period. The unforgiven portion of the PPP loan is payable over two years at an interest rate of 1.0 %, with a deferral of payments for the first six months . The Company used the proceeds for purposes consistent with the PPP. ​ On January 21, 2021, the Company received confirmation from the SBA that the PPP Loan had been forgiven in full, including all interest incurred. Accordingly, the Company recognized $ 443 of income for the debt extinguishment pursuant to ASC 470-50-15-4 for the year ended December 31, 2021. ​ ​ 131 Table of Contents 4. Property and Equipment Property and equipment, net, consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ 2022 2021 Equipment ​ $ 1,057 ​ $ 1,014 Furniture and fixtures ​ 129 ​ 1 ​ ​ $ 1,186 ​ $ 1,015 Less: Accumulated depreciation ​ ( 953 ) ​ ( 870 ) Property and equipment, net ​ $ 233 ​ $ 145 ​ Depreciation expense for the years ended December 31, 2022 and 2021 was $ 83 and $ 93 , respectively, which includes amortization expense of $ 2 and $ 38 for the years ended December 31, 2022 and 2021, respectively. ​ 5. Accrued Expenses Accrued expense consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, ​ ​ 2022 2021 Employee compensation, benefits, and related accruals ​ $ 870 ​ $ 1,285 Research and development costs ​ 900 ​ 250 Legal reserves, professional fees, and other accruals ​ 324 ​ 216 Total ​ $ 2,094 ​ $ 1,751 ​ ​ ​ 6. Other Current Liabilities In October 2022, the Company entered into an insurance premium financing agreement with a lender. Under the agreement, the Company financed $ 838 of certain premiums at a 6.85 % annual interest rate. Payments of approximately $ 72 are due monthly from November 2022 through December 2023. As of December 31, 2022, the outstanding principal of the loan was $ 634 included in other current liabilities on the consolidated balance sheet. ​ In October 2021, the Company entered into an insurance premium financing agreement with a lender. Under the agreement, the Company financed $ 1,453 of certain premiums at a 3.25 % annual interest rate. Payments of approximately $ 134 are due monthly from October 2021 through September 2022. The loan paid in full as of September 30, 2022. ​ ​ ​ 7. Commitments and Contingencies Operating Leases The Company’s principal executive offices are located in Purchase, New York where we currently occupy 2,864 square feet of office space under a lease that expires in May of 2029. The Company also leases approximately 6,068 square feet of laboratory and office space located in Pittsburgh, Pennsylvania under leases that expire in June of 2026. On August 31, 2022, the Company entered into a lease agreement for approximately 2,980 square feet of office space located in Pittsburgh, Pennsylvania. The lease has a term of 45 months and commenced on October 1, 2022. Additionally, on August 31, 2022, the Company and Landlord modified one of its existing lease agreements for approximately 3,706 square feet of lab space at the same location to extend the lease term termination date from June 30, 2023 until June 30, 2026. 132 Table of Contents Amounts reported in the consolidated balance sheets for leases where the Company is the lessee as of December 31, 2022 were as follows, in thousands: ​ ​ ​ ​ ​ As of ​ December 31, 2022 Assets ​ ​ Operating lease assets $ 813 Total operating lease assets $ 813 Liabilities ​ ​ Current ​ ​ Operating lease liabilities $ 149 Noncurrent ​ ​ Operating lease liabilities, net of current ​ 695 Total operating lease liabilities $ 844 ​ Operating lease costs for the year ended December 31, 2022 was $ 203 . Rent expense was $ 163 for the year ended December 31, 2021. The maturities of the operating lease liabilities and minimum lease payments as of December 31, 2022 were as follows: ​ ​ ​ ​ For the Years Ended December 31, Operating Leases 2023 ​ $ 209 2024 ​ 221 2025 ​ 222 2026 ​ ​ 155 2027 ​ ​ 87 Thereafter ​ ​ 126 Total undiscounted lease payments ​ $ 1,020 Less: Imputed interest ​ ​ ( 176 ) Present value of operating lease liabilities ​ $ 844 ​ The following table summarizes the lease term and discount rate as of December 31, 2022: ​ ​ ​ As of ​ December 31, 2022 Weighted-average remaining lease term (years) ​ Operating leases 5.0 Weighted-average discount rate ​ Operating leases 8.1 % ​ Operating cash flows used for operating leases for the year ended December 31, 2022 was $ 172 . Litigation and Contingencies From time to time, the Company may be involved in disputes or regulatory inquiries that arise in the ordinary course of business. When the Company determines that a loss is both probable and reasonably estimable, a liability is recorded and disclosed if the amount is material to the financial statements taken as a whole. When a material loss contingency is only reasonably possible, the Company does not record a liability, but instead discloses the nature and the amount of the claim, and an estimate of the loss or range of loss, if such an estimate can reasonably be made. 133 Table of Contents As of December 31, 2022 and 2021, there was no litigation or contingency with at least a reasonable possibility of a material loss. ​ ​ 8. Common Stock The Company is authorized to issue up to 250,000,000 shares of common stock with a par value of $ 0.001 per share, and 10,000,000 shares of preferred stock with a par value of $ 0.001 per share. As of December 31, 2022 and 2021, there were 28,991,548 and 22,230,032 shares of common stock issued and outstanding , respectively. On October 13, 2021, in connection with the completion of the Company’s IPO, 2,819,027 shares of Series A convertible preferred stock, 3,730,366 shares of Series A-1 convertible preferred stock, 3,565,063 shares of Series A-2 convertible preferred stock, 30,409,890 shares of Series B convertible preferred stock, and 10,926,089 shares of Series B-1 convertible preferred stock automatically converted into 15,906,537 shares of common stock. Common stockholders are entitled to dividends if and when declared by the Company’s board of directors subject to the rights of the preferred stockholders. As of December 31, 2022, no dividends on common stock had been declared by the Company. As of December 31, 2022 and 2021, the Company has reserved the following shares of common stock for issuance as follows: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 2021 Options issued and outstanding ​ 3,679,468 ​ 5,640,438 Shares available for future issuance under 2021 Plan ​ 2,561,085 ​ 1,242,271 Shares available for future issuance under ESPP ​ 209,532 ​ 209,532 Total ​ 6,450,085 7,092,241 ​ ​ 9. Equity-based Compensation 2021 Equity Incentive Plan On October 7, 2021, the date upon which the Company’s Registration Statement on Form S-1 in connection with the IPO was declared effective, the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) became effective. On the same date, the Company ceased granting awards under its 2017 Equity Incentive Plan (the “2017 Plan”). The 2021 Plan authorizes the award of both equity-based and cash-based incentive awards, including: (i) stock options (both incentive stock options and nonqualified stock options), (ii) stock appreciation rights, (iii) restricted stock awards, (iv) restricted stock units, or RSUs, and (v) cash or other stock-based awards. Incentive stock options may be granted only to employees. All other types of awards may be issued to employees, directors, consultants, and other service providers. As of December 31, 2022, the aggregate number of shares of common stock of the Company that may be issued under the Plan is 2,561,085 . The number of shares reserved for issuance under the 2021 Plan increased automatically on January 1, 2022 pursuant to an evergreen provision therein by 1,111,502 shares, representing 5 % of total common shares outstanding at December 31, 2021. The aggregate number of shares will increase each anniversary of such date prior to the termination of the 2021 Plan, equal to the lesser of (i) 5 % of the Company’s shares of common stock issued and outstanding on the last day of the immediately preceding fiscal year and (ii) such smaller number of shares as determined by the Company’s Board of Directors or the compensation committee. No more than 7,543,185 shares of common stock may be issued under the 2021 Plan through incentive stock options. Shares subject to the 2017 Plan or the 2007 Equity Incentive Plan (the “2007 Plan” and collectively with the 2017 Plan, the “Prior Plans”) that expire, terminate or are cancelled or forfeited for any reason after the effectiveness of the 2021 Plan will be added (or added back) to the shares available for issuance under the 2021 Plan. The total number of shares underlying the Prior Plan awards that may be recycled into the 2021 Plan will not exceed 4,334,131 shares. 134 Table of Contents 2017 Equity Incentive Plan On September 15, 2017, the Company’s board of directors approved the 2017 Plan, which provides for the granting of incentive stock options, non-qualified stock options and stock awards to employees, certain consultants and directors. The Board, or its designated committee, has the sole authority to select the individuals to whom awards are granted and determine the terms of each award, including the number of shares and the schedule upon which the award becomes exercisable. Upon the effectiveness of the 2021 Plan, no further awards will be granted under the 2017 Plan. The aggregate number of shares of common stock of the Company that may be issued under the 2017 Plan is 4,334,131 (taking into account shares of common stock that may become issuable pursuant to Section 3(b) of the 2017 Plan in respect of shares of common stock reserved under the Company’s Amended and Restated 2007 Equity Incentive Plan). The 2021 Plan allows for a provision for shares granted under the Prior Plans which are cancelled, forfeited, exchanged or surrendered without having been exercised to subsequently be available for reissuance under the 2021 Plan. Employee Stock Purchase Plan The Company’s board of directors approved the Employee Stock Purchase Plan, or ESPP, prior to the closing of the IPO. Under the ESPP, the Company may provide employees and employees of the Subsidiary with an opportunity to purchase shares of the Company’s common stock at a discounted purchase price. As of December 31, 2022, a total of 209,532 shares of common stock was authorized and reserved for issuance under the ESPP. Subject to prior approval by the board of directors in each instance, on or about January 1, 2022 and each anniversary of such date thereafter prior to the termination of the ESPP, the number of shares of common stock authorized and reserved for issuance under the ESPP will be increased by a number of shares of common stock equal to the least of (i) 1,000,000 shares of our common stock, (ii) 1 % of the shares of common stock outstanding on the final day of the immediately preceding calendar year, and (iii) such smaller number of shares of common stock as determined by the board of directors. Such shares of common stock may be newly issued shares, treasury shares or shares acquired on the open market. In the event that any dividend or other distribution (whether in the form of cash, our common stock, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, or exchange of common stock or other securities, or other change in the structure affecting common stock occurs, then in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the ESPP, the compensation committee will, in such manner as it deems equitable, adjust the number of shares and class of common stock that may be delivered under the ESPP, the purchase price per share and the number of shares covered by each outstanding option under the ESPP, and the numerical limits described above. Equity-based Compensation The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Fair value of common stock ​ $ 1.72 – $ 3.05 ​ $ 1.75 – $ 6.15 Expected volatility ​ 91.09 % –  92.73 % ​ 100.82 % –  101.83 % Risk-free interest rate ​ 1.87 % –  4.22 % ​ 0.67 % –  1.06 % Dividend yield ​ 0.00 % ​ 0.00 % Expected term (years) ​ 5.50  –  6.40 ​ 5.00  –  6.22 ​ Expected Term  — The expected term represents the period that the stock-based awards are expected to be outstanding. As the Company does not have sufficient historical experience for determining the expected term of the stock option awards granted, expected term has been calculated using the simplified method. 135 Table of Contents Risk-Free Interest Rate  — The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant for zero-coupon U.S. Treasury constant maturity notes with terms approximately equal to the stock-based awards’ expected term. Expected Volatility  — Up until October 13, 2021, the Company was privately held and did not have a trading history of common stock. As such, the expected volatility was derived from the average historical stock volatilities of the common stock of several public companies within the industry that the Company considers to be comparable to our business over a period equivalent to the expected term of the stock-based awards. The Company will continue to derive expected volatility from average historical stock volatilities of industry peers until the Company has compiled a trading history of its own for a sufficient period of time. Dividend Yield  — The expected dividend yield is zero as the Company has not paid and does not anticipate paying any dividends in the foreseeable future. Fair Value of Common Stock  — Prior to the IPO, the fair value of the shares of common stock underlying the stock-based awards had historically been determined by the board of directors with input from management. Because there was no public market for the common stock, the board of directors had determined the fair value of the common stock at the time of grant of the stock-based award by considering a number of objective and subjective factors, including having contemporaneous valuations of the common stock performed by a third-party valuation specialist. Subsequent to the IPO, the board of directors will determine the fair value of the shares of common stock underlying the stock-based awards based off of the closing price as reported on the Nasdaq Stock Market LLC on the grant date. Activity for options was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Weighted- ​ Aggregate ​ Average ​ ​ ​ ​ Average ​ Intrinsic ​ Remaining ​ ​ Number of ​ Exercise ​ Value ​ Contractual Life ​ Options Price (in 000’s) (In Years) Balance, December 31, 2021 5,640,438 ​ $ 4.19 $ 12,002 8.0 Options granted 524,370 ​ ​ 2.40 ​ ​ ​ Options exercised ( 1,761,516 ) ​ ​ 0.92 ​ ​ ​ Options forfeited ( 646,072 ) ​ ​ 5.62 ​ ​ ​ Options expired ( 77,752 ) ​ ​ 12.70 ​ ​ ​ Balance, December 31, 2022 3,679,468 ​ $ 5.13 ​ $ 2,085 6.7 Exercisable as of December 31, 2022 2,253,389 ​ $ 4.62 ​ $ 1,632 ​ 5.5 ​ The weighted-average grant date fair value of stock options granted was $ 1.83 and $ 9.09 during the years ended December 31, 2022 and 2021, respectively. There were 524,370 stock options granted at an aggregate fair value of $ 943 for the year ended December 31, 2022 and 1,697,076 stock options granted at an aggregate fair value of $ 15,424 for the year ended December 31, 2021. During the year ended December 31, 2022 and 2021, there were 1,761,516 and 321,686 stock options exercised, respectively, with an aggregate grant date fair value of $ 1,325 and $ 188 , respectively. The intrinsic value of stock options exercised during the year ended December 31, 2022 and 2021 was $ 2,738 and $ 1,610 , respectively. 136 Table of Contents The Company recorded total equity-based compensation expense in the statement of operations and comprehensive loss related to incentive stock options and nonstatutory stock options as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Research and development ​ $ 528 ​ $ 877 General and administrative ​ 3,044 ​ 4,306 Total equity-based compensation ​ $ 3,572 ​ $ 5,183 ​ As of December 31, 2022, total future compensation expense related to unvested awards yet to be recognized by the Company was $ 6,501 . Total future compensation expense related to unvested awards yet to be recognized by the Company is expected to be recognized over a weighted-average remaining vesting period of approximately 2.0 years. ​ 10. Net Loss per Share The following outstanding potentially dilutive common stock equivalents have been excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented due to their antidilutive effect: ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 2021 Options issued and outstanding 3,679,468 5,640,438 Shares available for future issuance under 2021 Plan 2,561,085 ​ 1,242,271 Shares available for future issuance under ESPP 209,532 ​ 209,532 Total 6,450,085 7,092,241 ​ The basic and diluted net loss per share attributable to common stockholders has been prepared as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2022 2021 Net loss ​ $ ( 21,397 ) ​ $ ( 11,716 ) Cumulative preferred stock dividends ​ — ​ ( 4,532 ) Net loss attributable to common stockholders ​ $ ( 21,397 ) ​ $ ( 16,248 ) ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding: ​ ​ ​ ​ ​ ​ Basic ​ 23,640,199 ​ 5,190,883 Diluted ​ 23,640,199 ​ 5,190,883 Net loss per share: ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.91 ) ​ $ ( 3.13 ) Diluted ​ $ ( 0.91 ) ​ $ ( 3.13 ) ​ ​ 11. Retirement Plan The Company maintains a 401(k) retirement plan to provide retirement and incidental benefits for its employees. Employees may contribute a percentage of their annual compensation to the 401(k) retirement plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service. The Company matches employee contributions dollar for dollar up to a maximum of 6 % of the employees’ compensation per person per year. All matching contributions vest immediately. Company matching contributions to the 401(k) retirement plan totaled $ 156 and $ 113 for the year ended December 31, 2022 and 2021, respectively. ​ ​ 137 Table of Contents 12. Income Taxes The net loss consists of the following components: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Domestic ​ $ ( 21,384 ) ​ $ ( 10,910 ) Foreign ​ ( 13 ) ​ ( 806 ) Total ​ $ ( 21,397 ) ​ $ ( 11,716 ) ​ ​ During the years ended December 31, 2022 and 2021, the Company recorded no current or deferred income tax expenses or benefits as the Company has incurred losses since inception and has provided a full valuation allowance against its deferred tax assets. Global Intangible Low-Taxed Income (“GILTI”) is the excess of a U.S. shareholders total net foreign income over a deemed return on tangible assets. In January 2018, in response to inquiries by companies, the FASB issued guidance that allows companies to elect as an accounting policy whether to treat the GILTI tax as a period cost or to recognize deferred tax assets and liabilities when basis differences exist that are expected to affect the amount of GILTI inclusion upon reversal. The Company has elected to treat GILTI as a period expense. Effective January 1, 2022, the Tax Cuts and Jobs Act of 2017 requires the Company to capitalize, and subsequently amortize R&D expense over five years for research activities conducted in the U.S. and over fifteen years for research activities conducted outside of the U.S. This results in a material increase to the Company’s net deferred tax assets. Furthermore, since the Company provides for a full valuation allowance against U.S deferred tax assets, this has an adverse effect on the effective tax rate. A reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate to the Company’s effective income tax rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Income tax computed at federal statutory rate 21.0 % 21.0 % State taxes, net of federal benefit ( 15.3 ) % 4.1 % Change in valuation allowance 12.0 % ( 32.9 ) % R&D Credit ( 15.1 ) % 11.2 % Interest expense — % 4.6 % Non-deductible stock compensation ( 1.7 ) % ( 5.8 ) % Fair value adjustments ​ — % ( 3.5 ) % Other ( 0.9 ) % 1.3 % Effective income tax rate — % — % ​ 138 Table of Contents The Company’s deferred tax assets and liabilities consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2022 ​ 2021 Deferred tax assets: ​ ​ ​ ​ ​ ​ Net operating loss carryforwards ​ $ 8,194 ​ $ 13,238 Tax credit carryforwards ​ 1,728 ​ 4,959 Equity-based compensation ​ ​ 307 ​ ​ 545 Operating lease liabilities ​ 178 ​ — Capitalized research expenditures ​ ​ 5,687 ​ ​ — Deferred revenue ​ ​ 354 ​ ​ — Other ​ 165 ​ 316 Deferred tax assets ​ 16,613 ​ 19,058 Less: valuation allowance ​ ( 16,435 ) ​ ( 19,045 ) Deferred tax assets after valuation allowance ​ 178 ​ 13 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ Property and equipment, net ​ ( 7 ) ​ ( 13 ) Right-of-use assets, operating leases ​ ( 171 ) ​ — Deferred tax liabilities ​ ( 178 ) ​ ( 13 ) ​ ​ ​ ​ ​ ​ ​ Net deferred tax assets ​ $ — ​ $ — ​ The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets as of December 31, 2022 and 2021. Management has considered the Company’s history of cumulative net losses and has concluded as of December 31, 2022 and 2021, that it was more likely than not that the Company will not realize all of the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2022 and 2021. The valuation allowance decreased by $ 2,610 and increased by $ 3,866 for the years ended December 31, 2022 and 2021, respectively. The decrease in valuation allowance in 2022 was primarily a result of a reduction in operating losses and tax credits, offset partially by the capitalized research expenditures, while the increase in 2021 was primarily a result of operating losses generated with no corresponding financial statement benefit. The Company incurred net operating losses (“NOL”) since inception through December 31, 2021. Due to tax law changes, effective January 1, 2022, requiring the Company to capitalize and amortize R&D expenses, the Company is in a taxable position as of December 31, 2022 and has utilized NOL generated in prior years to fully offset their current income tax expense. As of December 31, 2022, the Company had federal net operating loss carryforwards of $ 36,272 . Included in federal net operating loss carryforwards of $ 36,272 is $ 17,930 that begin to expire in 2033 and $ 18,342 that can be carried forward indefinitely. As of December 31, 2022, the Company had state net operating loss carryforwards of $ 12,248 , available to reduce future state taxable income, which will begin to expire in 2027. As of December 31, 2022, the Company had foreign net operating loss carryforwards of $ 314 that can be carried forward indefinitely. As of December 31, 2022, the Company had federal research and development tax credit carryforwards of $ 1,728 available to reduce future federal tax liabilities, which will begin to expire in 2027. Utilization of the Company’s net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under 139 Table of Contents Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed, and any limitation is known, no amounts are being presented as an uncertain tax position. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company is open to further tax examination under statue from 2018 to present; however, carryforward attributes that were generated prior to December 31, 2018 may still be adjusted upon examination by federal, state or local tax authorities if they either have been or will be used in a future period. ​ ​ 13. Subsequent Events ​ On December 23, 2022, the Company filed the Shelf (File No. 333-268992) with the SEC in relation to the registration of common stock, preferred stock, debt securities, warrants, subscription rights, and/or units of any combination thereof of up to $ 200,000 in aggregate. The Shelf was declared effective on January 3, 2023 by the SEC. The Company also simultaneously entered into a sales agreement with Cantor Fitzgerald & Co. and B. Riley Securities, Inc., or the Sales Agents, providing for the offering, issuance and sale by the Company of up to $ 40,000 of its common stock from time to time in “at-the-market” offerings under the Shelf. On March 10, 2023, the Company entered into a purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”) for an equity line financing (the “Purchase Agreement”). The Purchase Agreement provides that, subject to the terms and conditions set forth therein, the Company has the right, but not the obligation, to direct Lincoln Park to purchase up to $ 35,000 of shares of common stock at our sole discretion, over a 36-month period commencing on March 10, 2023. The Company filed a supplemental registration statement on Form S-3 (File No. 333-268992) covering the resale of shares of common stock that are issued under the Purchase Agreement. As part of the Purchase Agreement, the Company issued 189,856 shares of its common stock as consideration for Lincoln Park’s commitment to purchase shares of common stock under the Purchase Agreement. ​ 140 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. ​