COGNITION THERAPEUTICS INC 10-Q

Item 1. Financial Statements COGNITION THERAPEUTICS, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ ​ March 31, 2023 ​ December 31, 2022 ​ ​ (unaudited) ​ ​ ​ Assets ​ ​ ​ ​ Current assets: ​ ​ ​ ​ Cash and cash equivalents ​ $ 38,810 ​ $ 41,562 ​ Grant receivables ​ 1,609 ​ 3,672 ​ Prepaid expenses and other current assets ​ 2,382 ​ 2,413 ​ Total current assets ​ 42,801 ​ 47,647 ​ Property and equipment, net ​ 253 ​ 233 ​ Right-of-use assets, operating leases ​ ​ 774 ​ ​ 813 ​ Other assets ​ ​ 1,835 ​ ​ 1,732 ​ Total assets ​ $ 45,663 ​ $ 50,425 ​ Liabilities and Stockholders’ Equity ​ ​ ​ Current liabilities: ​ ​ ​ Accounts payable ​ 3,120 ​ 3,216 ​ Accrued expenses ​ 2,115 ​ 2,094 ​ Deferred grant income, current ​ ​ 1,646 ​ ​ 1,702 ​ Operating lease liabilities, current ​ ​ 157 ​ ​ 149 ​ Other current liabilities ​ 427 ​ 634 ​ Total current liabilities ​ 7,465 ​ 7,795 ​ Operating lease liabilities, noncurrent ​ 651 ​ 695 ​ Deferred grant income and other liabilities, noncurrent ​ 1,764 ​ 1,686 ​ Total liabilities ​ 9,880 ​ 10,176 ​ Commitments and contingencies (Note 7) ​ ​ ​ Stockholders’ equity: ​ ​ ​ Preferred stock, $ 0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2023 and December 31, 2022 ​ ​ — ​ ​ — ​ Common stock, $ 0.001 par value, 250,000,000 shares authorized; 29,277,227 and 28,991,548 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively ​ 29 ​ 29 ​ Additional paid-in capital ​ 157,522 ​ 155,820 ​ Accumulated deficit ​ ( 121,573 ) ​ ( 115,401 ) ​ Accumulated other comprehensive loss ​ ( 195 ) ​ ( 199 ) ​ Total stockholders’ equity ​ 35,783 ​ 40,249 ​ Total liabilities and stockholders’ equity ​ $ 45,663 ​ $ 50,425 ​ The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents COGNITION THERAPEUTICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (unaudited) (in thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ ​ 2023 2022 ​ Operating Expenses: ​ ​ ​ ​ Research and development ​ $ 5,430 ​ $ 6,518 ​ ​ General and administrative ​ 3,543 ​ 2,895 ​ ​ Total operating expenses ​ 8,973 ​ 9,413 ​ ​ Loss from operations ​ ( 8,973 ) ​ ( 9,413 ) ​ ​ Other income (expense): ​ ​ ​ ​ Grant income ​ 3,426 ​ 5,904 ​ ​ Other expense, net ​ ( 615 ) ​ ( 195 ) ​ ​ Interest expense ​ ( 10 ) ​ ( 9 ) ​ ​ Total other income, net ​ 2,801 ​ 5,700 ​ ​ Loss before income tax ​ ​ ( 6,172 ) ​ ​ ( 3,713 ) ​ ​ Income tax expense ​ ​ — ​ ​ ( 125 ) ​ ​ Net loss ​ ​ ( 6,172 ) ​ ​ ( 3,838 ) ​ ​ Net loss attributable to common stockholders ​ $ ( 6,172 ) ​ $ ( 3,838 ) ​ ​ Unrealized gain on foreign currency translation ​ 4 ​ 1 ​ ​ Total comprehensive loss ​ $ ( 6,168 ) ​ $ ( 3,837 ) ​ ​ Net loss per share: ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.21 ) ​ $ ( 0.17 ) ​ ​ Diluted ​ $ ( 0.21 ) ​ $ ( 0.17 ) ​ ​ Weighted-average common shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 29,094,592 ​ ​ 22,426,982 ​ ​ Diluted ​ ​ 29,094,592 ​ ​ 22,426,982 ​ ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 6 Table of Contents COGNITION THERAPEUTICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited) (in thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Deficit (Loss) Gain Equity Balances as of December 31, 2022 28,991,548 ​ $ 29 ​ $ 155,820 ​ $ ( 115,401 ) ​ $ ( 199 ) ​ $ 40,249 Issuance of common stock under the at-the-market sales agreement, net of commissions and allocated fees ​ 95,823 ​ ​ — ​ ​ 197 ​ ​ — ​ ​ — ​ ​ 197 Issuance of common stock as commitment shares for equity line financing (see Note 7) ​ 189,856 ​ ​ — ​ ​ 318 ​ ​ — ​ ​ — ​ ​ 318 Equity-based compensation ​ — ​ ​ — ​ ​ 1,187 ​ ​ — ​ ​ — ​ ​ 1,187 Other comprehensive gain ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 4 ​ ​ 4 Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 6,172 ) ​ ​ — ​ ​ ( 6,172 ) Balances as of March 31, 2023 ​ 29,277,227 ​ $ 29 ​ $ 157,522 ​ $ ( 121,573 ) ​ $ ( 195 ) ​ $ 35,783 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Total ​ ​ Common Stock ​ Paid-in ​ Accumulated ​ Comprehensive ​ Stockholders’ ​ Shares Amount Capital Deficit (Loss) Gain Equity Balances as of December 31, 2021 22,230,032 ​ $ 22 ​ $ 145,453 ​ $ ( 94,004 ) ​ $ ( 198 ) ​ $ 51,273 Exercise of stock options 348,552 ​ ​ — ​ ​ 303 ​ ​ — ​ ​ — ​ ​ 303 Equity-based compensation ​ — ​ ​ — ​ ​ 1,001 ​ ​ — ​ ​ — ​ ​ 1,001 Other comprehensive gain — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1 ​ ​ 1 Net loss ​ — ​ ​ — ​ ​ — ​ ​ ( 3,838 ) ​ ​ — ​ ​ ( 3,838 ) Balances as of March 31, 2022 ​ 22,578,584 ​ $ 22 ​ $ 146,757 ​ $ ( 97,842 ) ​ $ ( 197 ) ​ $ 48,740 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 7 Table of Contents COGNITION THERAPEUTICS, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2023 2022 ​ Cash flows from operating activities: ​ ​ ​ Net loss ​ $ ( 6,172 ) ​ $ ( 3,838 ) ​ Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ Depreciation and amortization ​ 21 ​ 18 ​ Equity-based compensation ​ 1,187 ​ 1,001 ​ Amortization of right-of-use assets ​ ​ 39 ​ ​ 38 ​ Issuance of common stock as commitment shares for equity line financing ​ ​ 318 ​ ​ — ​ Changes in operating assets and liabilities: ​ ​ ​ ​ ​ Grant receivables ​ 2,063 ​ ( 995 ) ​ Prepaid expenses and other assets ​ ( 72 ) ​ ( 1,082 ) ​ Accounts payable and accrued expenses ​ ( 75 ) ​ ( 539 ) ​ Deferred grant income and other liabilities ​ ​ 22 ​ ​ 2,429 ​ Operating lease liabilities ​ ( 36 ) ​ ( 20 ) ​ Net cash used in operating activities ​ ( 2,705 ) ​ ( 2,988 ) ​ Cash flows from investing activities: ​ ​ ​ ​ ​ Payments for property and equipment ​ ( 41 ) ​ ​ ( 134 ) ​ Net cash used in investing activities ​ ( 41 ) ​ ( 134 ) ​ Cash flows from financing activities: ​ ​ ​ Proceeds from the ATM ​ 197 ​ ​ — ​ Proceeds from the exercise of common stock options ​ ​ — ​ ​ 303 ​ Payments on loan payable ​ ​ ( 207 ) ​ ​ ( 394 ) ​ Net cash used in financing activities ​ ( 10 ) ​ ( 91 ) ​ Effect of exchange rate changes on cash and cash equivalents ​ 4 ​ ​ 1 ​ Net (decrease) in cash and cash equivalents ​ ( 2,752 ) ​ ( 3,212 ) ​ Cash and cash equivalents ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents – beginning of period ​ 41,562 ​ 54,721 ​ Cash and cash equivalents – end of period ​ $ 38,810 ​ $ 51,509 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 8 Table of Contents Cognition Therapeutics, Inc. and Subsidiary Notes to Consolidated Financial Statements (unaudited) (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’ equity. Gains and losses from foreign currency transactions are included in net loss as a part of other income, net. 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. 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”). 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. 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. 9 Table of Contents 2. Summary of Significant Accounting Policies Basis of Presentation 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. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. 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 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. 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. 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 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 10 Table of Contents 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 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. 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 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. 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 11 Table of Contents 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. 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. 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. 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 12 Table of Contents 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. 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 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. Income taxes 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 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. ​ 3. Financial Instruments and Fair Value Measurements Financial assets and liabilities measured at fair value are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of March 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ Significant ​ ​ ​ ​ ​ Quoted Priced in ​ Significant Other ​ Unobservable ​ ​ ​ ​ ​ Active Markets ​ Observable Inputs ​ Inputs ​ ​ ​ ​ (Level 1) (Level 2) (Level 3) Total Assets: ​ ​ ​ ​ Money market funds ​ $ 37,752 ​ $ — ​ $ — ​ $ 37,752 Total assets ​ $ 37,752 ​ $ — ​ $ — ​ $ 37,752 13 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ ​ ​ 4. Accrued Expenses Accrued expense consists of the following as of: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ March 31, 2023 December 31, 2022 ​ Employee compensation, benefits, and related accruals ​ $ 480 ​ $ 870 ​ Research and development costs ​ 1,401 ​ 900 ​ Professional fees and other accruals ​ 234 ​ 324 ​ Total ​ $ 2,115 ​ $ 2,094 ​ ​ ​ ​ 5. 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 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. 6. Commitments and Contingencies Operating Leases 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: 14 Table of Contents ​ ​ ​ ​ As of ​ March 31, 2023 Assets ​ ​ Operating lease assets $ 774 Total operating lease assets $ 774 Liabilities ​ ​ Current ​ ​ Operating lease liabilities $ 157 Noncurrent ​ ​ Operating lease liabilities, net of current ​ 651 Total operating lease liabilities $ 808 ​ 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, Operating Leases 2023 (remaining) ​ $ 159 2024 ​ 221 2025 ​ 222 2026 ​ ​ 154 2027 ​ ​ 87 Thereafter ​ ​ 126 Total undiscounted lease payments ​ $ 969 Less: Imputed interest ​ ​ ( 161 ) Present value of operating lease liabilities ​ $ 808 ​ The following table summarizes the lease term and discount rate as of March 31, 2023: ​ ​ ​ As of ​ March 31, 2023 Weighted-average remaining lease term (years) ​ Operating leases 4.8 Weighted-average discount rate ​ Operating leases 8.2 % ​ The following table summarizes the supplemental cash flow information related to the Company’s operating leases: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, (In Thousands) ​ 2023 ​ 2022 Operating cash flows used for operating leases ​ $ 50 ​ $ 32 ​ 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. 15 Table of Contents 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. 7. 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. ATM 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. 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 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. 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. 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. ​ 8. 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 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 16 Table of Contents 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. 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 of directors, 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 (the “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 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. 17 Table of Contents 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended March 31, ​ ​ 2023 2022 Fair value of common stock ​ $ 1.65 – $ 2.12 $ 3.05 ​ Expected volatility 92.29 % –  92.68 % 91.29 % ​ Risk-free interest rate 3.46 % –  4.21 % 2.36 % ​ Dividend yield 0.00 % 0.00 % ​ Expected term (years) 6.18  –  6.21 6.08 ​ ​ 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. 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 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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, 2022 3,679,468 ​ $ 5.13 $ 2,085 6.7 Options granted 412,720 ​ $ 2.08 ​ ​ ​ Options exercised — ​ $ — ​ ​ ​ Options forfeited — ​ $ — ​ ​ ​ Options expired ( 2,182 ) ​ $ 3.01 ​ ​ ​ Balance, March 31, 2023 4,090,006 ​ $ 5.13 ​ $ 2,085 6.7 Exercisable as of March 31, 2023 2,430,915 ​ $ 4.75 ​ $ 1,506 ​ 6.0 ​ 18 Table of Contents 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: ​ 19 Table of Contents ​ ​ ​ ​ ​ ​ ​ Number of ​ Weighted-Average ​ ​ Restricted ​ ​ Grant Date ​ ​ Stock Units ​ ​ Fair Value Outstanding at December 31, 2022 ​ — ​ $ — Granted ​ 375,870 ​ $ 2.09 Vested ​ — ​ $ — Forfeited ​ — ​ $ — Outstanding at March 31, 2023 ​ 375,870 ​ $ 2.09 ​ ​ 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, ​ ​ 2023 2022 Research and development ​ $ 157 ​ $ 234 ​ General and administrative ​ 1,030 ​ 767 ​ Total equity-based compensation ​ $ 1,187 ​ $ 1,001 ​ ​ 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. 9. 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: ​ ​ ​ ​ ​ ​ ​ ​ March 31, ​ 2023 2022 Options issued and outstanding 4,090,006 5,107,974 Restricted stock units issued and oustanding ​ 375,870 ​ — Total 4,465,876 5,107,974 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 20 Table of Contents