What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-14 · 128 added, 263 removed, 270 unchanged (59% of the section changed)

4 unchanged sentences

(in thousands, except share and per share amounts)

September 30, 2022

March 31, 2023

December 31, 2022

3 unchanged sentences

Prepaid expenses and other current assets

Other receivables

Total current assets

15 unchanged sentences

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

no shares issued and outstanding at September 30, 2022 and December 31, 2021

no shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock, $ 0.001 par value, 250,000,000 shares authorized;

23,969,497 and 22,230,032 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

29,277,227 and 28,991,548 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

8 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating Expenses:

4 unchanged sentences

Other income (expense):

Change in the fair value of the derivative liability

Change in the fair value of the Simple Agreements for Future Equity

Other (expense) income, net

Gain on debt extinguishment

Interest expense, net

Other expense, net

Interest expense

Total other income, net

Cumulative preferred stock dividends

Loss before income tax

Income tax expense

Net loss attributable to common stockholders

Unrealized loss on foreign currency translation

Unrealized gain on foreign currency translation

Total comprehensive loss

Net loss per share attributable to common stockholders, basic and diluted

Weighted-average common shares outstanding, basic and diluted

Net loss per share:

Weighted-average common shares outstanding:

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

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AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT )

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

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Balances as of December 31, 2022

Exercise of stock options

Issuance of common stock under the at-the-market sales agreement, net of commissions and allocated fees

Issuance of common stock as commitment shares for equity line financing (see Note 7)

Equity-based compensation

Other comprehensive loss

Other comprehensive gain

Balances as of March 31, 2023

Exercise of stock options

Equity-based compensation

Other comprehensive loss

Balances as of June 30, 2022

Exercise of stock options

Equity-based compensation

Other comprehensive loss

Balances as of September 30, 2022

Preferred Stock

Comprehensive

3 unchanged sentences

Equity-based compensation

Other comprehensive loss

Other comprehensive gain

Balances as of March 31, 2022

Exercise of common stock warrants

Equity-based compensation

Issuance of Series B-1 Convertible Preferred Stock upon conversion of debt

Other comprehensive loss

Balances as of June 30, 2021

Exercise of stock options

Exercise of common stock warrants

Equity-based compensation

Other comprehensive loss

Balances as of September 30, 2021

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

3 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Amortization of right-of-use assets

Amortization of debt issuance costs

Amortization of debt discount

Change in the fair value of the derivative liability

Change in the fair value of the Simple Agreements for Future Equity

Gain on debt extinguishment

Issuance of common stock as commitment shares for equity line financing

Changes in operating assets and liabilities:

1 unchanged sentence

Prepaid expenses and other assets

Other receivables

Accounts payable

Accrued expenses

Deferred grant income, current and other liabilities

Accounts payable and accrued expenses

Deferred grant income and other liabilities

Operating lease liabilities

4 unchanged sentences

Cash flows from financing activities:

Proceeds from the ATM

Proceeds from the exercise of common stock options

Payments on loan payable

Proceeds from issuance of Simple Agreements for Future Equity

Proceeds from exercise of stock warrants

Deferred offering costs

Net cash provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net (decrease) in cash and cash equivalents

Cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents – end of period

Supplemental disclosures of non-cash financing activities:

Remeasurement of right-of-use asset and operating lease liability

Issuance of Series B-1 Convertible Preferred Stock upon conversion of debt

Deferred offering costs included in accounts payable

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

12 unchanged sentences

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’ equity (deficit).

Translation adjustments are recorded to accumulated other comprehensive income (loss) (“AOCI”) within stockholders’ equity.

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 over-allotment 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 (“SAFEs”) 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.

The Company held cash and cash equivalents of $ 46,610 at September 30, 2022.

The Company expects that its cash and cash equivalents, including the net proceeds from its IPO, will enable it to fund its operating expenses and capital expenditure requirements through at least the one year period subsequent to the filing date of this Quarterly Report on Form 10-Q.

On November 15, 2022, the Company closed a 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.

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”).

Please refer to Note 7 for further details.

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 in the Company’s sole discretion, over a 36-month period commencing on March 10, 2023.

The Company filed a prospectus supplement to its Registration Statement on Form S-3 (File No.

333-268992) covering the resale of shares of common stock that may be issued under the Purchase Agreement.

As of March 31, 2023, the Company had not sold any shares of its common stock to Lincoln Park.

Please refer to Note 7 for further details.

The Company held cash and cash equivalents of $ 38,810 at March 31, 2023.

The Company expects that its cash and cash equivalents will enable it to fund its operating expenses and capital expenditure requirements through at least the one year period subsequent to the filing date of this Quarterly Report on Form 10-Q.

However, additional funding will be necessary beyond this point to fund the Company’s future preclinical and clinical activities.

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Basis of Presentation

The accompanying consolidated financial statements as of September 30, 2022, and for the three and nine months ended September 30, 2022 and 2021, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“U.S.

The accompanying consolidated financial statements as of March 31, 2023, and for the three months ended March 31, 2023 and 2022, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“U.S.

GAAP”) for interim financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X.

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GAAP for complete financial statements.

opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of September 30, 2022, the statements of operations and comprehensive loss and convertible preferred stock and stockholders’ equity (deficit) for the three and nine months ended September 30, 2022 and 2021, and cash flows for the nine months ended September 30, 2022 and 2021.

In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all adjustments that are necessary to present fairly the Company’s financial position as of March 31, 2023, the statements of operations and comprehensive loss and stockholders’ equity for the three months ended March 31, 2023 and 2022.

Such adjustments are of a normal and recurring nature.

The results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results for the year ending December 31, 2022, or for any future period.

The results for the three months ended March 31, 2023 are not necessarily indicative of the results for the year ending December 31, 2023, or for any future period.

These interim financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2022, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 23, 2023.

1 unchanged sentence

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 other income 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.

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.

Grant Receivables

Grant receivables relate to outstanding amounts due for reimbursable expenditures of awarded grants issued by the National Institute of Aging, a division of the National Institute of Health (“NIH”) and are carried at their estimated collectible amounts.

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.

Property and Equipment

Property and equipment is recorded at cost, less 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.

Property and equipment is evaluated for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition.

If expected cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the assets.

There were no indicators of impairment of long-lived assets during the three or nine months ended September 30, 2022 or 2021.

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 freestanding 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.

For the three and nine months ended September 30, 2022, the Company generated grant income of $ 5,947 and $ 18,236 , respectively, primarily from reimbursements from the National Institute of Aging (“NIA”), a division of the NIH, for aging research.

For the three and nine months ended September 30, 2021, the Company generated grant income of $ 3,037 and $ 12,375 , respectively, from reimbursements from the NIA.

The Company records grant income in other income (expense) in the period in which the reimbursable research and development services are incurred and the right to payment is realized.

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.

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 three months ended March 31, 2023 and 2022, the Company generated grant income of $ 3,426 and $ 5,904 , 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 March 31, 2023 was $ 1,646 and $ 1,764 , respectively, as compared to the current and noncurrent portion of deferred grant income as of December 31, 2022 of $ 1,702 and $ 1,686 , 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.

Deferred grant income represents grant proceeds received by the Company prior to the period in which the reimbursable research and development services are incurred.

As of September 30, 2022, the Company has been awarded grants with project periods that extend through May 31, 2025, subject to extension.

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 March 31, 2023, 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, dementia with Lewy Bodies and dry AMD studies.

Research and development costs are expensed as incurred.

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Costs for certain research and development activities are recognized based on the pattern of performance of the individual arrangements, which may 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.

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 operating lease liabilities of $ 616 .

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 6.

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

leasing standards

Right-of-use assets (1)

Deferred rent (2)

Operating lease liabilities (3)

Operating lease liabilities, net of current portion (3)

(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.

Equity-based Compensation

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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.

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.

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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 determines the fair value of the shares of common stock underlying the stock-based awards based upon the closing price as reported on the Nasdaq Global Market on the grant 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.

Concentration of Credit Risk

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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 current assets, accounts payable, accrued expenses, deferred grant income, and other current liabilities approximate fair value because of the short-term maturity of these financial instruments.

In addition, the Company records its derivative liability and SAFEs at fair value.

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.

The valuation hierarchy is composed of three levels.

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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 attributable to common stockholders, the weighted-average number of shares of common stock is the same for basic net loss attributable to common stockholders, due to the fact that when a net loss exists, dilutive securities are not included in the calculation as 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.

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 the impact is anti-dilutive.

The Company has determined that it operates and manages one operating segment, which is the business of developing and commercializing therapeutics.

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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 consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

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).

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 2016-02 on January 1, 2022.

For additional information on the adoption of the new leasing standards, please refer to section titled “Leases” above, and Note 6.

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 as of the reporting period beginning January 1, 2022.

The adoption of this update did not have a material effect on the Company’s 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 disclosure requirements can be applied either retrospectively or prospectively to

all transactions in the scope of the amendments that are reflected in the financial statements at the date of initial application and new transactions entered into after the date of initial application.

The Company adopted ASU 2021-10 prospectively as of the reporting period beginning January 1, 2022.

The adoption of this update and the additional annual disclosure requirements are not expected to have a material effect on the Company’s financial statements.

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 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 shares of common stock and per share data have been retrospectively revised to reflect the reverse stock split.

There have been no new pronouncements issued during the three months ended March 31, 2023, which could be expected to materially impact the Company’s consolidated financial statements.

In accordance with ASC 270, Interim Reporting , and ASC 740, Income Taxes , the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate, apply that rate in providing for income taxes on a current year-to-date (interim period) basis, and include the tax impact for discrete items within the interim period.

The Company maintains a full valuation allowance against all deferred tax assets as of September 30, 2022 and December 31, 2021, as management has determined that it is not more likely than not that the Company will realize these future tax benefits.

As of September 30, 2022 and December 31, 2021, the Company had no uncertain tax positions.

The Company maintains a full valuation allowance against all deferred tax assets as of March 31, 2023 and December 31, 2022, as management has determined that it is not more likely than not that the Company will realize these future tax benefits.

As of March 31, 2023 and December 31, 2022, the Company had no uncertain tax positions.

Financial Instruments and Fair Value Measurements

Financial assets and liabilities measured at fair value are summarized below:

As of September 30, 2022

As of March 31, 2023

Quoted Priced in

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Money market funds

The following table sets forth a summary of the changes in fair value of the Level 3 liabilities for the nine months ended September 30, 2021:

Nine Months Ended September 30, 2021

Balance at December 31, 2020

Fair value recognized upon the issuance of SAFE

Change in the fair value of the derivative liability

Change in the fair value of SAFE

Balance at September 30, 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 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 shares of the Series B-1 convertible preferred stock in May of 2021.

Simple Agreements for Future Equity — On March 25, 2021, the Company entered into SAFEs 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 fair value of the SAFEs 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 SAFEs as of each valuation date.

Management determined the fair value of the SAFEs using the following significant unobservable inputs:

September 30,

Expected term (in years)

Discount upon conversion

Discount upon implied return

Probability of IPO occurrence

Probability of dissolution event occurrence

Probability of equity financing occurrence

Probability of change of control occurrence

The change in fair value of the SAFEs for the three and nine months ended September 30, 2021 was $ 932 and $ 1,976 , respectively.

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.

Accrued Expenses

Accrued expense consists of the following as of:

September 30,

March 31, 2023

December 31, 2022

Employee compensation, benefits, and related accruals

Research and development costs

Legal reserves and professional fees

Other accrued

Professional fees and other accruals

Other Current Liabilities

1 unchanged sentence

Under the agreement, the Company financed $ 838 of certain premiums at a 6.85 % annual interest rate.

Payments of approximately $ 134 are due monthly from October 2021 through September 2022.

As of September 30, 2022 and December 31, 2021, the outstanding principal of the loan was $ 0 and $ 1,191 , respectively, and is included in other current liabilities on the consolidated balance sheet.

Payments of approximately $ 72 are due monthly from November 2022 through October 2023.

As of March 31, 2023 and December 31, 2022, the outstanding principal of the loan was $ 427 and $ 634 , respectively, and is included in other current liabilities on the consolidated balance sheet.

Commitments and Contingencies

Operating Leases

The Company’s corporate headquarters is located in Purchase, New York where it currently occupies 2,864 square feet of office space under a lease that expires in May, 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, 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.

Amounts reported in the consolidated balance sheets for leases where the Company is the lessee as of September 30, 2022 were as follows, in thousands:

As of September 30,

Amounts reported in the consolidated balance sheets for leases where the Company is the lessee as of March 31, 2023 were as follows, in thousands:

March 31, 2023

Operating lease assets

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Total operating lease liabilities

The following table summarizes operating lease costs for the three and nine months ended September 30, 2022:

Three Months Ended

Nine Months Ended

September 30, 2022

Operating lease costs

Variable lease costs

Total lease costs

Rent expense for the three and nine months ended September 30, 2021 was $ 34 and $ 116 , respectively.

The maturities of the operating lease liabilities and minimum lease payments as of September 30, 2022 were as follows:

Operating lease costs for the three months ended March 31, 2023 and 2022 was $ 54 and $ 50 , respectively.

The maturities of the operating lease liabilities and minimum lease payments as of March 31, 2023 were as follows:

For the Years Ended December 31,

4 unchanged sentences

Present value of operating lease liabilities

The following table summarizes the lease term and discount rate as of September 30, 2022:

As of September 30,

The following table summarizes the lease term and discount rate as of March 31, 2023:

March 31, 2023

Weighted-average remaining lease term (years)

2 unchanged sentences

Operating leases

The following table summarizes cash paid for amounts included in the measurement of the Company’s operating lease liabilities for the three and nine months ended September 30, 2022:

Nine Months Ended September 30, 2022

The following table summarizes the supplemental cash flow information related to the Company’s operating leases:

Three Months Ended March 31,

(In Thousands)

4 unchanged sentences

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.

As of September 30, 2022 and December 31, 2021, there was no litigation or contingency with at least a reasonable possibility of a material loss.

As of March 31, 2023 and December 31, 2022, there was no litigation or contingency with at least a reasonable possibility of a material loss.

Stockholders’ Equity

Common and Preferred 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.

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 March 31, 2023, no dividends on common stock had been declared by the Company.

On December 23, 2022, the Company filed a shelf registration statement on Form S-3 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”).

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.

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 ATM offerings under the Shelf.

The Company sold 95,823 shares of common stock pursuant to the ATM during the three months ended March 31, 2023 for gross proceeds of approximately $ 197 .

As of March 31, 2023, there was $ 39,803 remaining of common stock available for sale under the ATM, subject to the limitations of General Instruction I.B.6 of Form S-3.

Lincoln Park Purchase Agreement

On March 10, 2023, the Company entered into a purchase agreement with Lincoln Park for an equity line financing.

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 (the “Commitment Shares”).

The Company recorded $ 318 to other expense, net in connection with the issuance of the Commitment Shares.

As of March 31, 2023, the Company had not sold any shares of its common stock to Lincoln Park under the Purchase Agreement.

Equity-based Compensation

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All other types of awards may be issued to employees, directors, consultants, and other service providers.

As of September 30, 2022, the aggregate number of shares of common stock of the Company that may be issued under the Plan is 2,529,995 .

As of March 31, 2023, the aggregate number of shares of common stock of the Company that may be issued under the Plan is 3,224,254 .

The number of shares reserved for issuance under the 2021 Plan increased automatically on January 1, 2023 pursuant to an evergreen provision therein by 1,449,577 shares, representing 5.0 % of total common shares outstanding at December 31, 2022.

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.

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.

10 unchanged sentences

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 September 30, 2022, subject to adjustment as provided in the ESPP, a total of 209,532 shares of common stock are 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 the Company’s 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 Company’s board of directors.

As of March 31, 2023, subject to adjustment as provided in the ESPP, a total of 209,532 shares of common stock are 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 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

Stock Options

The fair value of options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

Nine Months Ended September 30,

Three Months Ended March 31,

Fair value of common stock

$ 1.65 – $ 2.12

$ 1.75 – $ 6.15

Expected volatility

92.29 % – 92.68 %

100.82 % – 101.83 %

Risk-free interest rate

3.46 % – 4.21 %

0.67 % – 1.06 %

Dividend yield

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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 determined 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:

4 unchanged sentences

Options exercised

( 1,739,465 )

Options forfeited

Options expired

Balance, September 30, 2022

Exercisable as of September 30, 2022

The weighted-average grant date fair value of stock options granted was $ 1.47 and $ 1.90 during the three and nine months ended September 30, 2022, respectively.

The weighted-average grant date fair value of stock options granted was $ 1.79 during the nine months ended September 30, 2021.

There were 14,000 and 449,270 stock options granted at an aggregate fair value of $ 21 and $ 838 for the three and nine months ended September 30, 2022, respectively.

There were no stock options granted during the three months ended September 30, 2021, and 67,232 stock options granted at an aggregate fair value of $ 121 for the nine months ended September 30, 2021.

During the three and nine months ended September 30, 2022 there were 1,371,589 and 1,739,465 stock options exercised, respectively, with an aggregate grant date fair value of $ 1,018 and $ 1,308 , respectively.

During the three and nine months ended September 30, 2021 there were 4,996 and 25,783 stock options exercised, respectively, with an aggregate grant date fair value of $ 3 and $ 14 , respectively.

The intrinsic value of stock options exercised during the three and nine months ended September 30, 2022 was $ 1,596 and $ 2,717 , respectively, and was $ 26 and $ 140 for the three and nine months ended September 30, 2021, respectively.

The Company recorded total equity-based compensation expense in the statement of operations and comprehensive loss related to stock options as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Balance, March 31, 2023

Exercisable as of March 31, 2023

The weighted-average grant date fair value of stock options granted was $ 1.62 and $ 2.31 during the three months ended March 31, 2023 and 2022, respectively.

There were 412,720 stock options granted at an aggregate fair value of $ 668 for the three months ended March 31, 2023 and 212,450 stock options granted at an aggregate fair value of $ 491 for the three months ended March 31, 2022.

During the three months ended March 31, 2023 and 2022, there were 0 and 348,552 stock options exercised, respectively, with an aggregate grant date fair value of $ 0 and $ 209 , respectively.

The intrinsic value of stock options exercised during the three months ended March 31, 2023 was $ 0 , and was $ 1,084 for the three months ended March 31, 2022.

Restricted Stock Units

The fair values of restricted stock units (“RSUs”) are based on the fair market value of the Company’s common stock on the date of grant.

Each RSU represents a contingent right to receive one share of the Company’s common stock upon vesting.

The RSUs will vest annually over three years on each anniversary of the Grant Date.

The following table summarizes the Company’s RSU activity for the three months ended March 31, 2023:

Weighted-Average

Outstanding at December 31, 2022

Outstanding at March 31, 2023

Equity-based Compensation Expense

The Company recorded total equity-based compensation expense in the statement of operations and comprehensive loss related to stock options and restricted stock units as follows:

Three Months Ended March 31,

Research and development

1 unchanged sentence

Total equity-based compensation

As of September 30, 2022, total future compensation expense related to unvested awards yet to be recognized by the Company was $ 7,338 , which is expected to be recognized over a weighted-average remaining vesting period of approximately 2.2 years.

As of March 31, 2023, total future compensation expense related to unvested awards yet to be recognized by the Company was $ 6,944 , which is expected to be recognized over a weighted-average remaining vesting period of approximately 2.0 years.

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:

September 30,

Options issued and outstanding

Convertible preferred stock (as converted)

Warrants for common stock

Subsequent Events

On November 10, 2022, the Company entered into an underwriting agreement with respect to a follow-on public offering, pursunt to which the Company agreed to issue and sell 5,000,000 shares of its common stock at a public offering price of $ 1.20 per share.

In connection with the follow-on public offering, the Company is expected to receive net proceeds of approximately $ 5.4 million, after deducting underwriting discounts and commissions and other offering related expenses.

The follow-on public offering is expected to close on November 15, 2022, subject to customary closing conditions.

Additionally, the Company granted the underwriters in the follow-on public 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.

Restricted stock units issued and oustanding

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

What changed 10-Q

Item 1. Financial Statements