What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-03-20 compared with 2024-03-26 · 130 added, 127 removed, 459 unchanged (36% of the section changed)

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

and subsidiary (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

and subsidiary (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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COGNITION THERAPEUTICS, INC.

AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

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Total current liabilities

Operating lease liabilities, noncurrent

Deferred grant income and other liabilities, noncurrent

Operating lease liabilities, non-current

Total liabilities

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COGNITION THERAPEUTICS, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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Other income (expense):

Other income (expense), net

Other income, net

Interest expense

Loss on currency translation from liquidation of subsidiary

Total other income, net

Unrealized gain (loss) on foreign currency translation

Foreign currency translation adjustment, including reclassifications

Total comprehensive loss

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COGNITION THERAPEUTICS, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

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Balances as of December 31, 2022

Exercise of common stock options

Issuance of common stock in follow-on public offering, net of discounts and issuance costs of $ 816

Equity-based compensation

Other comprehensive loss

Balances as of December 31, 2022

Issuance of common stock under the at-the-market (ATM) sales agreement, net of commissions and allocated fees of $ 159

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

Issuance of common stock as commitment shares for equity line financing (Note 8)

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Balances as of December 31, 2023

Issuance of common stock in follow on public offering, net of discounts and issuance costs of $ 1,329

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

Issuance of common stock upon vesting of RSUs, net of shares withheld for employee taxes

Exercise of common stock options

Equity-based compensation

Reclassification adjustment of foreign currency translation included in net loss for liquidation of subsidiary

Balances as of December 31, 2024

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

COGNITION THERAPEUTICS, INC.

AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

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Amortization of right-of-use assets

Loss on currency translation from liquidation of subsidiary

Issuance of common stock as commitment shares for equity line financing

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Prepaid expenses and other assets

Other receivables

Accounts payable and accrued expenses

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Cash flows from financing activities:

Proceeds from issuance of common stock under the ATM sales agreement, net of commissions and allocated fees

Proceeds from sale of common stock related to the equity line financing

Proceeds from issuance of common stock in follow-on public offering

Proceeds from issuance of common stock in follow-on public offering, net

Proceeds from issuance of common stock under the ATM sales agreement, net

Proceeds from the exercise of common stock options

Proceeds from sale of common stock related to the equity line financing

Payment of employee withholding taxes on vested restricted stock units

Payments on loan payable

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Prepayment of insurance through third-party financing

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

Deferred offering costs included in Accounts payable

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

COGNITION THERAPEUTICS, INC.

AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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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 its follow-on public offering of 5,000,000 shares of the Company’s common stock at a public offering price of $ 1.20 per share (“November 2022 Offering”).

The gross proceeds from the November 2022 Offering were $ 6,000 and the net proceeds were approximately $ 5,184 , after deducting underwriting discounts and commissions and other offering related expenses payable by the Company.

In January 2024, the Company ceased operations at Cognition Therapeutics PTY LTD, a wholly owned subsidiary (the “Subsidiary”) and completed its liquidation of the Subsidiary (the “Liquidation”).

In accordance with the Liquidation, the Company removed the Accumulated Other Comprehensive Income (AOCI) balance associated with the currency translation adjustments and recorded a loss on liquidation of the Subsidiary in accumulated deficit.

On December 23, 2022, the Company filed a Registration Statement on Form S-3 (File No.

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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.

During the year ended December 31, 2023, the Company sold 125,000 shares of common stock to Lincoln Park for proceeds of $ 205 , as part of the equity line financing arrangement.

During the year ended December 31, 2024, the Company did not sell any shares of common stock to Lincoln Park.

As of December 31, 2024, $ 34,795 was available to draw pursuant to the Purchase Agreement.

Please refer to Note 8 for further details.

The Company held cash and cash equivalents of $ 29,922 at December 31, 2023, and received net proceeds from a follow on public offering of common stock of $ 10,363 in March of 2024 (Note 13).

The Company expects that its cash and cash equivalents, including the net proceeds from its IPO, its follow-on public offerings, and its ATM 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 Annual Report on Form 10-K.

However, additional funding will be necessary to fund future preclinical

and clinical activities.

The Company expects to finance its future cash needs through a combination of grant awards, equity or debt financings, collaboration agreements, strategic alliances, and licensing arrangements.

Please refer to Note 13 for further details.

On March 14, 2024, the Company closed a follow-on public offering of 6,571,428 shares of the Company’s common stock at a public offering price of $ 1.75 per share (“March 2024 Offering”).

As part of the March 2024 Offering, the underwriters exercised their option to purchase 985,714 shares of the Company’s common stock on March 28, 2024, at a public offering price of $ 1.75 per share.

The gross proceeds from the March 2024 Offering were $ 13,225 and the net proceeds were approximately $ 11,896 , after deducting underwriting discounts and commissions and other offering related expenses payable by the Company.

Liquidity and Going Concern

The Company’s Consolidated Financial Statements have been prepared on a going concern basis, which contemplates the continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.

The Company has incurred recurring losses since inception, including net losses of $ 33,971 for the year ended December 31, 2024 and $ 25,788 for the year ended December 31, 2023.

As of December 31, 2024 and 2023, the Company had cash and cash equivalents of $ 25,009 and $ 29,922 , respectively.

The Company has incurred losses and negative cash flows from operations and had an accumulated deficit of $ 175,160 as of December 31, 2024.

The Company expects to continue to incur losses for the foreseeable future.

As of March 20, 2025, the date of issuance of these Consolidated Financial Statements, the Company believes that its cash and cash equivalents as of December 31, 2024, is not sufficient to fund operations for the period through one year after the date of this filing and therefore substantial doubt exists about the Company’s ability to continue as a going concern.

To execute its business plans, the Company will need substantial funding to support its continuing operations and pursue its growth strategy.

Until such time that the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operations through the sale of common stock in public offerings and/or private placements, debt financings or other capital sources, including collaborations with other companies or other strategic transactions.

The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.

If the Company is unable to obtain funding, the Company could be forced to delay, reduce or abandon its product development programs, which could have a material adverse effect on its business prospects.

Summary of Significant Accounting Policies

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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.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.

(“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of the expenses during the reporting periods.

Significant estimates and assumptions reflected in these consolidated financial statements include but are not limited to the valuation of stock-based awards and the valuation allowance of deferred tax assets.

In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.

Changes in estimates are recorded in the period in which they become known.

Actual results could differ from those estimates.

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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.

Grant receivables relate to outstanding amounts due for reimbursable expenditures of awarded grants issued by the National Institute of Aging (“NIA”) a division of 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.

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

For the year ended December 31, 2023 and 2022, the Company generated grant income of $ 24,805 and $ 22,217 , respectively, primarily from reimbursements from the National Institute of Aging, a division of the NIH for aging research.

The current and noncurrent portion of deferred grant income as of December 31, 2023 was $ 1,701 and $ 0 , 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.

For the year ended December 31, 2024 and 2023, the Company generated grant income of $ 19,549 and $ 24,805 , respectively, primarily from reimbursements from the NIA for aging research.

For the year ended December 31, 2024 and 2023, deferred grant income was $ 1,066 and $ 1,701 , 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 grants, as well as facilities and administrative costs.

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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.

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.

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Deferred Offering Costs

The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings, including the IPO, as deferred costs until such financings are consummated.

After consummation of the equity financing, these costs are recorded in stockholders’ deficit as a reduction of proceeds generated as a result of the offering.

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated.

After consummation of an equity financing, these costs are recorded in stockholders’ equity as a reduction of additional paid-in capital generated as a result of the financings.

Property and Equipment

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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 corresponding current and noncurrent operating lease liabilities of $ 130 and $ 486 , respectively.

The adoption did not have a material impact on the condensed consolidated statement of operations or cash flows.

For additional information on the adoption of the new leasing standard, refer to Note 7.

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.

Under ASC 842, Leases (“ASC 842”), the Company determines if an arrangement is a lease at its inception.

Leases are classified as either operating or finance, based on the Company’s evaluation of certain criteria.

If a lease has a term greater than one year, the lease is recognized in the balance sheet as a right-of-use asset and a lease liability at lease commencement.

The Company elected the short-term lease practical expedient, therefore, if a lease has a term less than one year, the Company will not recognize the lease on its balance sheet.

The right-of-use asset represents the Company’s right of use to an underlying asset for the term of the lease and the lease liability represents the Company’s obligation to make lease payments arising from the lease.

If the Company’s leases do not provide an implicit rate within the lease, the Company uses its incremental borrowing rate, based on information available at the commencement date of the lease to determine the present value of the lease payments.

Operating lease right-of-use assets and operating lease liabilities are determined and recognized on the commencement date of the lease based on the present value of lease payments over the term of the lease.

For operating leases, rent expense is recognized on a straight-line basis over the term of the lease, and right-of-use assets are subsequently re-measured to reflect the effect of uneven lease payments.

For finance leases, right-of-use assets are amortized on a straight-line basis over the shorter of the lease term or the useful life of the underlying asset.

Expenses for finance leases include the amortization of right-of-use assets, which is recorded as depreciation and amortization expense, and interest expense, which reflects interest accrued on the lease liability.

The Company accounts for income taxes under the asset and liability method pursuant to authoritative guidance.

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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.

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.

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The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

Prior to the IPO, due to the absence of an active market for the Company’s common stock, the Company utilized methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation , to estimate the fair value of its common stock.

In determining the exercise prices for stock options granted, the Company has considered the estimated fair value of the common stock as of the measurement date.

The estimated fair value of the common stock has been determined at each grant date based upon a variety of factors, including the illiquid nature of the common stock, arm’s-length sales of the Company’s capital stock (including convertible preferred stock), the effect of the rights and preferences of the preferred stockholders and the prospects of a liquidity event.

Among other factors are the Company’s financial position and historical financial performance, the status of technological developments within the Company’s research, the composition and ability of the current research and management team, an evaluation or benchmark of the Company’s competition and the current business climate in the marketplace.

Significant changes to the key assumptions underlying the factors used could result in different fair values of common stock at each valuation date.

Subsequent to the IPO, the board of directors will determine the fair value of the shares of common stock underlying the stock-based awards based off of the closing price as reported on the Nasdaq Stock Market LLC on the grant date.

Refer to note 9 for additional information.

Concentration of Credit Risk

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● Level 3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

Comprehensive Loss

The Company recorded $ 4 in other comprehensive gain and $ 1 in other comprehensive loss related to foreign currency translation for the years ended December 31, 2023 and 2022, respectively.

Other Comprehensive Gain

The Company recorded $ 0 and $ 4 in other comprehensive gain related to foreign currency translation for the years ended December 31, 2024 and 2023, respectively.

The Company presents comprehensive gain and loss in a single statement within its consolidated financial statements.

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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.

The Company has determined that it operates and manages one operating segment, which is the business of development of clinical and preclinical product candidates for neurodegenerative disorders, such as AD and DLB.

The Company’s chief operating decision maker, its chief executive officer, reviews financial information on an aggregate basis for the purpose of allocating resources.

Refer to Note 13 – Segment Reporting for more information.

Emerging Growth Company Status

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Recent Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments

(“ASU 2016-13”), with amendments in 2018, 2019, 2020, and 2022.

The ASU sets forth a “current expected credit loss” model that requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts.

ASU 2016-13 applies to financial instruments that are not measured at fair value, including receivables that result from revenue transactions.

The Company adopted ASU 2020-06 on January 1, 2023, using a modified retrospective approach, and it did not have a material impact on the Company’s consolidated financial statements.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which enhances segment disclosures and requires additional disclosures of segment expenses.

This ASU is effective for annual periods in fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024.

We adopted this ASU for the annual period ended December 31, 2024 and the amendments have been applied retrospectively to all prior periods presented in the financial statements by expanding the disclosure of expenses included in our segment measures of profitability.

Refer to Note 13 - Segment Reporting for more information.

Not Yet Adopted

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements (“ASU 2023-06”), to clarify or improve disclosure and presentation requirements of a variety of topics and align the requirements in the FASB ASC with the SEC's regulations.

The amendments apply to all reporting entities within the scope of the affected topics unless otherwise indicated.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

The Company is currently evaluating ASU 2023-06 to determine its impact on the Company's consolidated financial statements and disclosures.

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Property and equipment, net

Depreciation expense for the years ended December 31, 2023 and 2022 was $ 96 and $ 83 , respectively, which includes amortization expense of $ 2 and $ 2 for the years ended December 31, 2023 and 2022, respectively.

Depreciation expense for the years ended December 31, 2024 and 2023 was $ 107 and $ 96 , respectively.

Accrued Expenses

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Under the agreement, the Company financed $ 356 of certain premiums at a 8.65 % annual interest rate.

Total payments of approximately $ 62 , including interest and principal, are due monthly from November 2023 through October 2024.

Total payments of approximately $ 41 , including interest and principal, are due monthly from November 2024 through July 2025.

As of December 31, 2024, the outstanding principal of the loan was $ 279 .

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The Company sold 19,913,189 shares of common stock pursuant to the ATM during the year ended December 31, 2024 for gross proceeds of approximately $ 12,840 .

As of December 31, 2023, there was $ 34,714 remaining of common stock available for sale under the ATM.

As of December 31, 2024, there was $ 21,874 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

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

The Company recorded $ 318 to other expense, net during the year ended December 31, 2023 in connection with the issuance of the Commitment Shares.

During the year ended December 31, 2023, the Company sold 125,000 shares of common stock to Lincoln Park for proceeds of $ 205 , as part of the equity line financing arrangement.

During the year ended December 31, 2024, the Company did not sell any shares of common stock to Lincoln Park.

As of December 31, 2024, $ 34,795 was available to draw pursuant to the Purchase Agreement.

March 2024 Offering

In March 2024, the Company entered into an underwriting agreement with Titan Partners Group LLC, a division of American Capital Partners, LLC, relating to the issuance and sale by the Company of 7,557,142 shares of its common stock, which included the exercise of the underwriters’ option to purchase 985,714 additional shares of common stock, at a public offering price of $ 1.75 per share.

The Company closed this offering on March 14, 2024 and the full exercise of the underwriters’ option to purchase 985,714 additional shares of common stock was closed on March 28, 2024.

The Company received net proceeds of approximately $ 11,896 , after deducting $ 1,329 of underwriting discounts and commissions and other offering related expenses payable by the Company.

Equity-based Compensation

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As of December 31, 2024, the aggregate number of shares of common stock of the Company that may be issued under the Plan is 2,587,917 .

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 % of total common shares

outstanding at December 31, 2022.

The number of shares reserved for issuance under the 2021 Plan increased automatically on January 1, 2024 pursuant to an evergreen provision therein by 643,309 shares, representing 2 % of total common shares outstanding at December 31, 2023.

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.

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Year Ended December 31,

Fair value of common stock

$ 1.20 – $ 2.99

$ 1.72 – $ 3.05

Expected volatility

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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.

Activity for options was as follows:

Options Outstanding

Weighted-Average

Intrinsic Value

Contractual Life

Exercise Price

Balance, December 31, 2023

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There were 247,500 stock options granted at an aggregate fair value of $ 385 for the year ended December 31, 2024 and 628,769 stock options granted at an aggregate fair value of $ 983 for the year ended December 31, 2023.

During the year ended December 31, 2023 and 2022, there were 0 and 1,761,516 stock options exercised, respectively, with an aggregate grant date fair value of $ 0 and $ 1,325 , respectively.

During the year ended December 31, 2024 and 2023, there were 93,350 and 0 stock options

exercised, respectively, with an aggregate grant date fair value of $ 58 and $ 0 , respectively.

The intrinsic value of stock options exercised during the year ended December 31, 2024 and 2023 was $ 121 and $ 0 , respectively.

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

RSUs for employees vest annually over three years on each anniversary of the Grant Date and RSUs for non-employee directors vest on the one-year anniversary of the Grant Date.

RSUs with time base vesting conditions for employees vest annually over three or four years on each anniversary of the Grant Date and RSUs for non-employee directors vest on the one-year anniversary of the Grant Date.

RSUs with performance conditions for employee’s vest on the one-year anniversary of the performance achievement date, assuming continued service from the employee during that period of time.

For the year ended December 31, 2024 and 2023, the Company granted 358,200 and 542,419 RSUs awards, respectively, containing time based vesting conditions to employees and non-employee directors.

For the year ended December 31, 2024 and 2023, the Company granted 515,600 and 0 RSUs awards, respectively, containing performance based vesting conditions to employees.

During the year ended December 31, 2024, the performance conditions were achieved and RSUs will vest on the one-year anniversary of the achievement of the performance condition.

As of December 31, 2024, the Company had no outstanding performance condition.

The following table summarizes the Company’s RSU activity for the year ended December 31, 2024:

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Total equity-based compensation

As of December 31, 2023, total future compensation expense related to unvested awards yet to be recognized by the Company was $ 4,258 .

Total future compensation expense related to unvested awards yet to be recognized by the Company is expected to be recognized over a weighted-average remaining vesting period of approximately 1.6 years.

As of December 31, 2024, total future compensation expense related to unvested time-based awards yet to be recognized by the Company was $ 2,055 , which is expected to be recognized over a weighted-average remaining vesting period of approximately 1.9 years.

As of December 31, 2024, total future compensation expense related to unvested performance-based awards yet to be recognized by the Company was $ 462 , which is expected to be recognized over a weighted-average remaining vesting period of approximately 0.8 years.

Net Loss per Share

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During the years ended December 31, 2024 and 2023, the Company recorded no current or deferred income tax expenses or benefits as the Company has incurred losses since inception and has provided a full valuation allowance against its deferred tax assets.

Global Intangible Low-Taxed Income (“GILTI”) is the excess of a U.S shareholders total net foreign income over a deemed return on tangible assets.

In January 2018, in response to inquiries by companies, the FASB issued guidance that allows companies to elect as an accounting policy whether to treat the GILTI tax as a period cost or to recognize deferred tax assets and liabilities when basis differences exist that are expected to affect the amount of GILTI inclusion upon reversal.

The Company has elected to treat GILTI as a period expense.

Effective January 1, 2022, the Tax Cuts and Jobs Act of 2017 requires the Company to capitalize, and subsequently amortize R&D expense over five years for research activities conducted in the United States and over fifteen years for research activities conducted outside of the United States.

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Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2024 and 2023.

The valuation allowance increased by $ 5,772 and decreased by $ 2,610 for the years ended December 31, 2023 and 2022, respectively.

The increase in valuation allowance in 2023 was primarily a result of an increase to capitalized research expenditures, while the decrease in valuation allowance in 2022 was primarily a result of a reduction in operating losses and tax credits, offset partially by the capitalized research expenditures.

The Company incurred net operating losses (“NOL”) since inception through December 31, 2021.

The valuation allowance increased by $ 7,193 and $ 5,772 for the years ended December 31, 2024 and 2023, respectively.

The increase in valuation allowance in 2024 was primarily a result of operating losses and tax credits generated.

The Company incurred net operating losses (“NOL”) since inception through December 31, 2021 and year ended December 31, 2024.

Due to tax law changes, effective January 1, 2022, requiring the Company to capitalize and amortize R&D expenses, the Company was in a taxable position as of December 31, 2023 and 2022, and has utilized NOL generated in prior years to fully offset their income tax expense.

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As of December 31, 2024, the Company had state net operating loss carryforwards of $ 12,613 , available to reduce future state taxable income, which will begin to expire in 2028.

As of December 31, 2023, the Company had foreign net operating loss carryforwards of $ 349 and foreign research and development tax credit carryforwards of $ 268 that can be carried forward indefinitely.

As of December 31, 2023, the Company had federal research and development tax credit carryforwards of $ 2,851 , net of Section 382 limited amounts, available to reduce future federal tax liabilities, which will begin to expire in 2029.

During the year ended December 31, 2024, the Company ceased operations of its wholly owned foreign subsidiary.

As a result, all foreign net operating loss and research tax credit carryforwards were written off with an offsetting decrease to the valuation allowance.

Utilization of the Company’s net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future.

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In 2023 the Company completed an analysis covering the periods from inception through December 31, 2022 to determine whether there may have been a Section 382 ownership change.

analysis showed an ownership change occurred in January 2009 and the Section 382 limitation would result in $ 589 of federal net operating loss carryforwards expiring unutilized.

The Company updated the analysis through December 31, 2023 and determined that it is more-likely-than-not that the Company’s existing net operating loss and research and development tax credit carryforwards could be utilized to offset current and future taxable income or tax, respectively, due to the conclusion that an ownership change did not occur in 2023.

This analysis showed an ownership change occurred in January 2009 and the Section 382 limitation would result in $ 589 of federal net operating loss carryforwards expiring unutilized.

The Company updated the analysis through December 31, 2024 and determined that it is more-likely-than-not that the Company’s existing net operating loss and research and

development tax credit carryforwards could be utilized to offset current and future taxable income or tax, respectively, due to the conclusion that an ownership change did not occur in 2024.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates.

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however, carryforward attributes that were generated prior to January 1, 2021 may still be adjusted upon examination by federal, state or local tax authorities if they either have been or will be used in a future period.

Subsequent Events

In March 2024, the Company entered into an underwriting agreement with Titan Partners Group LLC, a division of American Capital Partners, LLC, as representatives of the several underwriters named therein, relating to the issuance and sale by the Company of 6,571,428 shares of its common stock, at a public offering price of $ 1.75 per share before deducting the underwriters’ discount.

The underwriters were granted an option to purchase 985,714 additional shares of common stock, at a public offering price of $ 1.75 per share before deducting the underwriters’ discount.

This offering was made pursuant to the Company’s Shelf Registration Statement, and a related prospectus supplement dated March 11, 2024.

On March 14, 2024, the Company closed the offering, excluding the underwriters’ option to purchase 985,714 additional shares of common stock.

The Company received net proceeds of approximately $ 10,361 , after deducting $ 1,139 of underwriting discounts and commissions and estimated offering expenses payable by the Company.

Segment Reporting

Operating segments are defined as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker (CODM), or decision-making group, in making decisions on how to allocate resources and assess performance.

The Company views its operations and manages its business in one operating segment related to the development of clinical and preclinical product candidates for neurodegenerative disorders, such as AD and DLB.

The Company’s Chief Executive Officer (CEO) serves as the CODM.

The CEO manages and allocates resources to the operations of the Company on a consolidated basis.

Managing and allocating resources on a consolidated basis enables the CEO to assess the overall level of resources available and how to best deploy these resources across functions and research and development projects that are in line with the Company’s strategic goals.

Consistent with this decision-making process, the CEO uses consolidated financial information for purposes of evaluating performance, cash forecasting, allocating resources and setting incentive targets.

The CEO bases this assessment on the Company’s consolidated net loss.

The measure of segment assets is reported on the consolidated balance sheets as total assets.

The table below is a summary of the segment loss, including significant segment expenses (in thousands):

Year Ended December 31,

Clinical programs

R&D Personnel costs (1)

Preclinical programs

Manufacturing

Other research and development expenses

General and administrative expenses (2)

Equity-based compensation

Other segment items (3)

Segment and consolidated net loss

(1) R&D Personnel costs exclude equity-based compensation

(2) General and administrative expenses exclude equity-based compensation

(3) Other segment items include, Other income, net, Interest expense and Loss on currency translation from liquidation of subsidiary.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data