Cardiff Oncology, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS CARDIFF ONCOLOGY, INC. CONDENSED BALANCE SHEETS (in thousands, except par value) (Unaudited) June 30, 2024 December 31, 2023 Assets Current assets: Cash and cash equivalents $ 25,501 $ 21,655 Short-term investments 34,818 53,168 Accounts receivable and unbilled receivable 451 288 Prepaid expenses and other current assets 1,476 2,301 Total current assets 62,246 77,412 Property and equipment, net 1,095 1,238 Operating lease right-of-use assets 1,439 1,708 Other assets 1,271 1,279 Total Assets $ 66,051 $ 81,637 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 5,108 $ 1,966 Accrued liabilities 6,712 7,783 Operating lease liabilities 702 691 Total current liabilities 12,522 10,440 Operating lease liabilities, net of current portion 1,141 1,458 Total Liabilities 13,663 11,898 Commitments and contingencies (Note 6) Stockholders’ equity Preferred stock, 20,000 shares authorized; 277 designated as Series A Convertible Preferred Stock; 61 shares outstanding at June 30, 2024 and December 31, 2023 with liquidation preference of $ 1,080 and $ 1,068 at June 30, 2024 and December 31, 2023, respectively — — Common stock, $ 0.0001 par value, 150,000 shares authorized; 45,602 and 44,677 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively 5 4 Additional paid-in capital 413,017 409,343 Accumulated other comprehensive loss ( 97 ) ( 67 ) Accumulated deficit ( 360,537 ) ( 339,541 ) Total stockholders’ equity 52,388 69,739 Total liabilities and stockholders’ equity $ 66,051 $ 81,637 See accompanying notes to the unaudited condensed financial statements. 3 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Royalty revenues $ 163 $ 108 $ 368 $ 191 Costs and expenses: Research and development 9,493 8,020 17,501 17,072 Selling, general and administrative 3,215 4,296 6,345 7,379 Total operating expenses 12,708 12,316 23,846 24,451 Loss from operations ( 12,545 ) ( 12,208 ) ( 23,478 ) ( 24,260 ) Other income (expense), net: Interest income, net 805 1,053 1,731 1,993 Other income (expense), net ( 38 ) 5 ( 42 ) ( 106 ) Total other income (expense), net 767 1,058 1,689 1,887 Net loss ( 11,778 ) ( 11,150 ) ( 21,789 ) ( 22,373 ) Preferred stock dividend payable on Series A Convertible Preferred Stock ( 6 ) ( 6 ) ( 12 ) ( 12 ) Net loss attributable to common stockholders $ ( 11,784 ) $ ( 11,156 ) $ ( 21,801 ) $ ( 22,385 ) Net loss per common share — basic and diluted $ ( 0.26 ) $ ( 0.25 ) $ ( 0.49 ) $ ( 0.50 ) Weighted-average shares outstanding — basic and diluted 44,825 44,677 44,752 44,677 See accompanying notes to the unaudited condensed financial statements. 4 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF COMPREHENSIVE LOSS (in thousands) (Unaudited) Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Net loss $ ( 11,778 ) $ ( 11,150 ) $ ( 21,789 ) $ ( 22,373 ) Other comprehensive loss: Unrealized gain (loss) on securities available-for-sale 35 ( 355 ) ( 30 ) ( 36 ) Total comprehensive loss ( 11,743 ) ( 11,505 ) ( 21,819 ) ( 22,409 ) Preferred stock dividend payable on Series A Convertible Preferred Stock ( 6 ) ( 6 ) ( 12 ) ( 12 ) Comprehensive loss attributable to common stockholders $ ( 11,749 ) $ ( 11,511 ) $ ( 21,831 ) $ ( 22,421 ) See accompanying notes to the unaudited condensed financial statements. 5 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (in thousands) (Unaudited) Preferred Stock Shares Preferred Stock Amount Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balance, December 31, 2023 61 $ — 44,677 $ 4 $ 409,343 $ ( 67 ) $ ( 339,541 ) $ 69,739 Modified-retrospective adoption of ASU 2020-06 (1) — — — — ( 793 ) — 793 — Stock-based compensation — — — — 1,124 — — 1,124 Issuance of common stock upon exercise of stock options — — 33 — 107 — — 107 Other comprehensive loss — — — — — ( 65 ) — ( 65 ) Net loss — — — — — — ( 10,011 ) ( 10,011 ) Balance, March 31, 2024 61 — 44,710 4 409,781 ( 132 ) ( 348,759 ) 60,894 Issuance of common stock, net of expenses (2) — — 792 1 1,804 — — 1,805 Stock-based compensation — — — — 1,179 — — 1,179 Issuance of common stock upon exercise of stock options — — 100 — 253 — — 253 Other comprehensive gain — — — — — 35 — 35 Net loss — — — — — — ( 11,778 ) ( 11,778 ) Balance, June 30, 2024 61 $ — 45,602 $ 5 $ 413,017 $ ( 97 ) $ ( 360,537 ) $ 52,388 (1) See Note 2. (2) Net of expenses of $ 197,000 . 6 Table of Contents Preferred Stock Shares Preferred Stock Amount Common Stock Shares Common Stock Amount Additional Paid-In Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity Balance, December 31, 2022 61 $ — 44,677 $ 4 $ 404,834 $ ( 395 ) $ ( 298,100 ) $ 106,343 Stock-based compensation — — — — 1,064 — — 1,064 Other comprehensive gain — — — — — 319 — 319 Net loss — — — — — — ( 11,223 ) ( 11,223 ) Balance, March 31, 2023 61 — 44,677 4 405,898 ( 76 ) ( 309,323 ) 96,503 Stock-based compensation — — — — 1,581 — — 1,581 Other comprehensive loss — — — — — ( 355 ) — ( 355 ) Net loss — — — — — — ( 11,150 ) ( 11,150 ) Balance, June 30, 2023 61 $ — 44,677 $ 4 $ 407,479 $ ( 431 ) $ ( 320,473 ) $ 86,579 See accompanying notes to the unaudited condensed financial statements. 7 Table of Contents CARDIFF ONCOLOGY, INC. CONDENSED STATEMENTS OF CASH FLOWS (in thousands) (Unaudited) Six Months Ended June 30, 2024 2023 Operating activities Net loss $ ( 21,789 ) $ ( 22,373 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 207 188 Stock-based compensation expense 2,303 2,645 Accretion of discounts on short-term investments, net ( 283 ) ( 405 ) Changes in operating assets and liabilities: Accounts receivable and unbilled receivable ( 163 ) 610 Prepaid expenses and other current assets 696 2,260 Operating lease right-of-use assets 269 273 Other assets 8 ( 3 ) Accounts payable and accrued liabilities 2,088 1,293 Operating lease liabilities ( 306 ) ( 279 ) Net cash used in operating activities ( 16,970 ) ( 15,791 ) Investing activities: Capital expenditures ( 80 ) ( 259 ) Maturities of short-term investments 12,505 68,265 Purchases of short-term investments ( 919 ) ( 50,868 ) Sales of short-term investments 7,145 1,675 Net cash provided by investing activities 18,651 18,813 Financing activities: Proceeds from sales of common stock, net of expenses of $ 197 and $ 0 , respectively 1,805 — Proceeds from exercise of options 360 — Net cash provided by financing activities 2,165 — Net change in cash and cash equivalents 3,846 3,022 Cash and cash equivalents—Beginning of period 21,655 16,347 Cash and cash equivalents—End of period $ 25,501 $ 19,369 Supplementary disclosure of cash flow activity: Supplemental disclosure of non-cash investing and financing activities: Acquisition of property and equipment included in accounts payable and accrued expenses $ — $ 16 See accompanying notes to the unaudited condensed financial statements. 8 Table of Contents CARDIFF ONCOLOGY, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) 1. Organization and Basis of Presentation Business Organization and Overview Cardiff Oncology, Inc. (“Cardiff Oncology” or the “Company”) headquartered in San Diego, California, is a clinical-stage biotechnology company leveraging Polo-like Kinase 1 (“PLK1”) inhibition, to develop novel therapies across a range of cancers. The Company’s lead asset is onvansertib, a PLK1 inhibitor that is being evaluated in combination with standard-of- care ("SoC") therapeutics in clinical programs targeting indications such as RAS-mutated metastatic colorectal cancer (“mCRC”), as well as ongoing or planned investigator-initiated trials in metastatic pancreatic ductal adenocarcinoma (“mPDAC”), small cell lung cancer (“SCLC”), and triple negative breast cancer (“TNBC”). These programs and the Company’s broader development strategy are designed to target tumor vulnerabilities in order to overcome treatment resistance and deliver superior clinical benefit compared to SoC alone. The Company's common stock is listed on the Nasdaq Capital Market under the ticker symbol "CRDF". Basis of Presentation The accompanying unaudited interim condensed financial statements of Cardiff Oncology have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) related to a quarterly report on Form 10-Q. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and the results of its operations and cash flows for the periods presented. The unaudited condensed balance sheet at December 31, 2023, has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by GAAP for annual financial statements. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2023, included in the Company’s annual report on Form 10-K filed with the SEC on February 29, 2024. Liquidity The Company has incurred net losses since its inception and has negative operating cash flows. As of June 30, 2024, the Company had $ 60.3 million in cash, cash equivalents and short-term investments and believes it has sufficient cash to meet its funding requirements for at least the next 12 months following the issuance date of these financial statements. For the foreseeable future, the Company expects to continue to incur losses and require additional capital to further advance its clinical trial programs and support its other operations. The Company cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that the Company can raise additional funds by issuing equity securities, the Company’s stockholders may experience additional dilution. 2. Summary of Significant Accounting Policies During the six months ended June 30, 2024, there have been no changes to the Company’s significant accounting policies as described in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Net Loss Per Share Basic and diluted net loss per common share is determined by dividing net loss applicable to common stockholders by the weighted-average common shares outstanding during the period. Preferred dividends are included in net loss attributable to common stockholders in the computation of basic and diluted earnings per share. 9 Table of Contents The following table sets forth the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their effect was anti-dilutive: June 30, 2024 2023 Options to purchase Common Stock 8,351,122 6,603,661 Warrants to purchase Common Stock 2,807,353 2,807,948 Series A Convertible Preferred Stock 877 877 11,159,352 9,412,486 Recently Adopted Accounting Pronouncement In August 2020, the FASB issued ASU No. 2020-06 ("ASU 2020-06"), Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020-06”). ASU 2020-06 eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, ASU 2020-06 modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. This update was effective for the Company on January 1, 2024. The amendment is to be adopted through either a fully retrospective or modified retrospective method of transition. Early adoption is permitted. The Company adopted this standard as of January 1, 2024 using the modified-retrospective method. As a result of the adoption the Company reversed the accretion of preferred stock dividends originally recorded in 2005 related to the Series A Convertible Preferred Stock of $ 793,000 . 3. Fair Value Measurements The following table presents the Company’s assets and liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2024, and December 31, 2023: Fair Value Measurements at June 30, 2024 (in thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets: Money market fund $ 24,349 $ — $ — $ 24,349 Total included in cash and cash equivalents 24,349 — — 24,349 Available for sale investments: Certificate of deposit — 5,946 — 5,946 Corporate debt securities — 13,849 — 13,849 Commercial paper — 2,399 — 2,399 U.S. treasury securities 12,624 — — 12,624 Total available for sale investments 12,624 22,194 — 34,818 Total assets measured at fair value on a recurring basis $ 36,973 $ 22,194 $ — $ 59,167 10 Table of Contents Fair Value Measurements at December 31, 2023 (in thousands) Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Assets: Money market fund $ 21,606 $ — $ — $ 21,606 Total included in cash and cash equivalents 21,606 — — 21,606 Available for sale investments: Certificate of deposit — 8,333 — 8,333 Corporate debt securities — 19,373 — 19,373 Commercial paper — 6,202 — 6,202 U.S. government agencies — 834 — 834 U.S. treasury securities 18,426 — — 18,426 Total available for sale investments 18,426 34,742 — 53,168 Total assets measured at fair value on a recurring basis $ 40,032 $ 34,742 $ — $ 74,774 The Company’s policy is to recognize transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. There were no transfers into or out of Level 3 during the six months ended June 30, 2024 . 11 Table of Contents 4. Supplementary Balance Sheet Information Investments available for sale Investments available for sale consisted of the following: As of June 30, 2024 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value Maturity less than 1 year: Certificate of deposit $ 5,943 $ 3 $ — $ 5,946 Corporate debt securities 12,175 7 ( 28 ) 12,154 Commercial paper 2,399 — — 2,399 U.S. treasury securities 12,707 — ( 83 ) 12,624 Total maturity less than 1 year 33,224 10 ( 111 ) 33,123 Maturity 1 to 2 years: Corporate debt securities 1,690 5 — 1,695 U.S. treasury securities — — — — Total maturity 1 to 2 years 1,690 5 — 1,695 Total short-term investments $ 34,914 $ 15 $ ( 111 ) $ 34,818 As of December 31, 2023 (in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Market Value Maturity less than 1 year: Certificate of deposit $ 8,317 $ 16 $ — $ 8,333 Corporate debt securities 10,948 8 ( 16 ) 10,940 Commercial paper 6,193 9 — 6,202 U.S. government agencies 835 — ( 1 ) 834 U.S. treasury securities — — — — Total maturity less than 1 year 26,293 33 ( 17 ) 26,309 Maturity 1 to 2 years: Corporate debt securities 8,437 6 ( 10 ) 8,433 U.S. treasury securities 18,505 — ( 79 ) 18,426 Total maturity 1 to 2 years 26,942 6 ( 89 ) 26,859 Total short-term investments $ 53,235 $ 39 $ ( 106 ) $ 53,168 We periodically review our portfolio of debt securities to determine if any investment is impaired due to credit loss or other potential valuation concerns. For debt securities where the fair value of the investment is less than the amortized cost basis, we have assessed at the individual security level for various quantitative factors including, but not limited to, the nature of the investments, changes in credit ratings, interest rate fluctuations, industry analyst reports, and the severity of impairment. Unrealized losses in investments available for sale debt securities at June 30, 2024, were substantially due to increases in interest rates, not due to increased credit risks associated with specific securities. Accordingly, we have not recorded an allowance for credit losses. It is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases, which may be at maturity. 12 Table of Contents Investments available for sale that have been in a continuous unrealized loss position for greater than one-year consisted of the following: As of June 30, 2024 (in thousands) Fair Market Value Gross Unrealized Loss Corporate debt securities $ 4,333 $ ( 19 ) U.S. treasury securities 9,794 ( 72 ) Total $ 14,127 $ ( 91 ) As of December 31, 2023 (in thousands) Fair Market Value Gross Unrealized Loss Corporate debt securities $ 397 $ ( 3 ) Property and equipment Property and equipment consisted of the following: (in thousands) As of June 30, 2024 As of December 31, 2023 Furniture and office equipment $ 1,067 $ 1,067 Leasehold improvements 2,568 2,568 Laboratory equipment 1,414 1,355 Property and equipment, gross 5,049 4,990 Less—accumulated depreciation and amortization ( 3,954 ) ( 3,752 ) Property and equipment, net $ 1,095 $ 1,238 Accrued Liabilities Accrued liabilities consisted of the following: (in thousands) As of June 30, 2024 As of December 31, 2023 Clinical trials $ 3,832 $ 4,309 Accrued compensation 1,790 2,737 Research agreements and services 867 530 Other accrued liabilities 223 207 Total accrued liabilities $ 6,712 $ 7,783 5. Stockholders’ Equity Stock Options Stock-based compensation expense related to Cardiff Oncology equity awards have been recognized in operating results as follows: Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2024 2023 2024 2023 Included in research and development expense $ 397 $ 297 $ 786 $ 691 Included in selling, general and administrative expense 782 1,284 1,517 1,954 Total stock-based compensation expense $ 1,179 $ 1,581 $ 2,303 $ 2,645 13 Table of Contents The unrecognized compensation cost related to non-vested stock options outstanding at June 30, 2024, net of estimated forfeitures, was $ 9.4 million, which is expected to be recognized over a weighted-average remaining vesting period of 2.5 years. The weighted-average remaining contractual term of outstanding options as of June 30, 2024, was approximately 8.0 years. The total fair value of stock options vested during the six months ended June 30, 2024 and 2023, were $ 2.7 million and $ 3.2 million, respectively. The estimated fair value of stock option awards was determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions during the following periods indicated: Six Months Ended June 30, 2024 2023 Risk-free interest rate 4.06 % 3.61 % Dividend yield 0 % 0 % Expected volatility of Cardiff Oncology common stock 106 % 109 % Expected term 5.8 years 5.3 years A summary of stock option activity and changes in stock options outstanding is presented below: Total Options Weighted-Average Exercise Price Per Share Intrinsic Value Balance outstanding, December 31, 2023 6,650,954 $ 4.27 $ 23,926 Granted 1,899,096 $ 3.40 Exercised ( 133,614 ) $ 2.69 Forfeited and expired ( 65,314 ) $ 13.96 Balance outstanding, June 30, 2024 8,351,122 $ 4.02 $ 1,169,885 Exercisable at June 30, 2024 4,124,114 $ 4.85 $ 468,750 Vested and expected to vest at June 30, 2024 8,121,830 $ 4.05 $ 1,118,569 2021 Equity Incentive Plan In June 2021 the Company's stockholders approved the 2021 Omnibus Equity Incentive Plan ("2021 Plan"). As of June 30, 2024 the number of authorized shares in the 2021 Plan is equal to the sum of (i) 8,150,000 shares, plus (ii) the number of shares of Common Stock reserved, but unissued under the 2014 Plan; and (iii) the number of shares of Common Stock underlying forfeited awards under the 2014 Plan. As of June 30, 2024, there were 3,153,005 shares available for issuance under the 2021 Plan. 2014 Equity Incentive Plan Subsequent to the adoption of the 2021 Plan, no additional equity awards can be made under the terms of the 2014 Plan. Inducement Grants The Company issues equity awards to certain new employees as inducement grants outside of its 2021 Plan. As of June 30, 2024, an aggregate of 1,380,248 shares were issuable upon the exercise of inducement grant stock options approved by the Company. Rescinding and reissuance of March 2024 stock options On May 30, 2024, the Board of Directors of the Company approved the rescinding of an aggregate of 1,697,712 shares of common stock issuable upon exercise of stock options granted on March 7, 2024 at an exercise price of $ 3.51 per share to employees and officers of the Company. On May 30, 2024, the Board of Directors of the Company approved the grant of an aggregate of 1,697,712 shares of common stock issuable upon exercise of stock options at an exercise price of $ 3.51 per share to employees and officers of the Company, subject to stockholder approval of an increase in the shares of common stock 14 Table of Contents available for issuance pursuant to the Company’s 2021 Equity Incentive Plan at the Company’s annual meeting on June 20, 2024. The increase of shares available was approved by shareholders at the June 20, 2024 meeting, thus completing the requirements for the reissuance of the grant. The terms of the reissued grant were identical to the rescinded grant, therefore the transaction does not represent a stock option modification. Warrants A summary of warrant activity and changes in warrants outstanding, classified as equity is presented below: Total Warrants Weighted-Average Exercise Price Per Share Weighted-Average Remaining Contractual Term Balance outstanding, December 31, 2023 2,807,948 $ 2.45 1.9 years Expired ( 595 ) $ 252.72 Balance outstanding, June 30, 2024 2,807,353 $ 2.40 1.4 years Sale of Common Stock During June 2024, the Company received net proceeds of $ 1.8 million from the sale of 0.8 million shares of its common stock under the Sales Agreement with Jefferies LLC. 6. Commitments and Contingencies Executive Agreements Certain executive agreements provide for severance payments in case of terminations without cause or certain change of control scenarios. Research and Development Agreements In March 2017, the Company entered into a license agreement with Nerviano which granted the Company development and commercialization rights to NMS-1286937, which Cardiff Oncology refers to as onvansertib. Terms of the agreement also provide for the Company to pay development and commercial milestones, and royalties based on sales volume. These potential development milestones include: (a) dosing of the first subject in the first Phase III Clinical Trial for the first Product, a registration enabling Phase II Clinical Trial, or after completion of a Phase II Clinical Trial that is used as the basis for an NDA submission; and (b) upon filing of the first NDA or equivalent for the first product candidate. During the six months ended June 30, 2024 and 2023 no milestone or royalty payments were made. The Company is a party to various agreements under which it licenses technology on an exclusive basis in the field of oncology therapeutics. These agreements include License fees, Royalties and Milestone payments. The Company also has a legacy license agreement in the field of oncology diagnostics under which royalty payments are due to the Company. These royalty payments are calculated as a percent of revenue. For the six months ended June 30, 2024 and 2023, payments have not been material. 15 Table of Contents Litigation As previously disclosed in the Supplement to the Company’s Proxy Statement for its Annual Meeting held on June 20, 2024 (the “2024 Annual Meeting”) as filed with the SEC on June 3, 2024, a purported stockholder of the Company filed a class action and derivative complaint in the Court of Chancery of the State of Delaware against the Company, and against James Armitage, Mark Erlander, Rodney Markin, Mani Mohindru, Gary Pace, Renee Tannenbaum, Lale White, Tod Smeal, Fairooz Kabbinavar and James Levine. The complaint alleges, among other things, that the By-Laws of the Company (the “By-Laws”), in effect as of May 13, 2024, require directors to be elected, and other business to be transacted, using a voting standard that treats broker non-votes as votes “against” these actions. This purported stockholder also claims that directors Renee Tannenbaum and Mani Mohindru were not validly elected in 2022 and 2023, respectively, and that the Company did not validly amend its 2021 Equity Incentive Plan at the annual meeting of stockholders held in 2022, in each case because the voting standard urged by the purported stockholder was not satisfied. The Board of Directors adopted amendments to the By-Laws to confirm and clarify the applicable voting standards that applied to the business transacted at the 2024 Annual Meeting. The Board of Directors also adopted resolutions to rescind equity grants that were made in reliance on the 2022 amendment to the 2021 Equity Incentive Plan and approved replacement grants with terms identical to the equity grants rescinded. The replacement grants were approved by the stockholders at the 2024 Annual Meeting. On June 26, 2024, the plaintiff dismissed the complaint with prejudice as to the plaintiff, with the court retaining jurisdiction to determine plaintiff’s counsel’s application for an award of attorneys’ fees. Currently, the fees cannot be estimated, and no fees have been accrued. The Company does not believe these fees will be material. From time to time, the Company may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in matters may arise from time to time that may harm the Company’s business. As of the date of this report, management believes that there are no claims against the Company, which could result in a material adverse effect on the Company’s business or financial condition. 7. Subsequent Events Sale of Common Stock From July 1, 2024 through August 6, 2024, the Company sold 0.9 million shares of its common stock under the Sales Agreement with Jefferies LLC. Gross proceeds from these sales was $ 2.3 million. 16 Table of Contents