What changed in this filing

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Item 1. Financial Statements

2024-08-07 compared with 2024-05-15 · 123 added, 72 removed, 298 unchanged (40% of the section changed)

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Stockholders’ Equity:

Common Stock, par value $ 0.0001 , 250,000,000 shares authorized;

6,660,840 shares issued and outstanding as of March 31, 2024;

3,930,840 shares issued and outstanding as of December 31, 2023, respectively.

Common Stock, par value $ 0.0001 per share, 250,000,000 shares authorized;

693,175 shares issued and outstanding as of June 30, 2024;

261,998 shares issued and outstanding as of December 31, 2023.

Additional paid-in capital

8 unchanged sentences

For the three months ended

For the six months ended

Operating expenses:

3 unchanged sentences

Loss from operations

( 2,883,742 )

( 1,732,414 )

( 6,087,302 )

( 4,010,096 )

Other income and expenses:

Interest income, net

$ ( 2,829,106 )

$ ( 1,701,364 )

$ ( 5,963,368 )

$ ( 3,941,506 )

Net loss per share of Common Stock, basic and diluted

Weighted-average basic and diluted shares

Weighted-average basic and diluted Common Stock

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

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$ ( 56,522,140 )

Issuance of Common Stock upon exercise of warrants, net of issuance costs

Stock-based compensation

Settlement of fractional shares paid in cash

( 2,829,106 )

Balance at June 30, 2024

$ ( 59,351,246 )

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

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$ ( 47,833,330 )

Stock-based compensation

Issuance of Common Stock and warrants, net of issuance costs

Issuance of Common Stock upon exercise of pre-funded warrants

( 1,701,364 )

Balance at June 30, 2023

$ ( 49,534,694 )

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

1 unchanged sentence

Statements of Cash Flows

For the three months ended

For the six months ended

Cash flows from operating activities:

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Proceeds from issuance of Common Stock and warrants, net of issuance costs

Issuance costs paid setting up ATM

Proceeds from exercise of pre-funded warrants

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Issuance of abeyance shares

Incremental fair value of May 2024 warrant inducement

Equity issuance costs in accounts payable or accrued expenses

Deferred offering costs included in accounts payable and accrued expenses

Incremental fair value of March 2023 warrant modification

Supplemental disclosure:

Cash paid for taxes

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

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The Company is a clinical-stage biotechnology company focused on the treatment of medical and aesthetic skin conditions and diseases.

Initial Public Offering

On August 17, 2021, the Company completed its initial public offering (“IPO”), in which it sold 160,714 shares of its common stock, par value $ 0.0001 per share (“Common Stock”), together with 160,714 warrants to purchase one share of Common Stock with an exercise price of $ 112.00 per share, at a combined offering price of $ 112.00 .

Additionally, the underwriters exercised their option to purchase an additional 24,106 warrants to purchase Common Stock with an exercise price of $ 112.00 per share, resulting in total IPO warrants issued of 184,820 at an exercise price of $ 112.00 .

The Company received net cash proceeds of approximately $ 15.4 million from the IPO after deducting underwriters’ discounts and offering expenses of approximately $ 2.6 million.

The Company’s shares of Common Stock and warrants are listed on the Nasdaq Stock Market LLC (“Nasdaq”) under the symbols “DRMA,” and “DRMAW,” respectively, and both began trading in August 2021.

Reverse Stock Split

Reverse Stock Splits

On May 7, 2024, the Company held its annual meeting of stockholders at which time the stockholders approved the adoption of an amendment to its Amended and Restated Certificate of Incorporation, as amended (the “Charter”), to effect a reverse stock split of its issued and outstanding shares of Common Stock, at a specific ratio, ranging from one-for-five to one-for-thirty, with the exact ratio determined by the Company’s board of directors without further approval or authorization of its stockholders (the “Reverse Split”).

On May 16, 2024, the Company effected the Reverse Split of its shares of Common Stock at a ratio of 1-for-15, as approved by the Company’s board of directors (the “May 2024 Reverse Stock Split”).

The par value was not adjusted as a result of the May 2024 Reverse Stock Split.

All issued and outstanding shares of Common Stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented.

On March 13, 2023, the Company effected a reverse stock split of shares of the Company’s Common Stock at a ratio of 1-for-16 pursuant to an amendment to the Company’s certificate of incorporation approved by the Company’s board of directors and stockholders.

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Since its inception, the Company has devoted substantially all of its resources to research and development activities and has not generated any revenue or commercialized any product candidates.

As of March 31, 2024, cash and cash equivalents totaled $ 4.7 million and the Company had an accumulated deficit of $ 56.5 million.

For the three months ended March 31, 2024, and the year ended December 31, 2023, the Company used cash of $ 2.7 million and $ 6.4 million, respectively, in operations.

The Company’s cash and cash equivalents are expected to fund operations into the third quarter of 2024.

As of June 30, 2024, cash and cash equivalents totaled $ 4.9 million and the Company had an accumulated deficit of $ 59.4 million.

For the six months ended June 30, 2024, and the year ended December 31, 2023, the Company used cash of $ 4.8 million and $ 6.4 million, respectively, in operations.

The Company’s cash and cash equivalents are expected to fund operations into the fourth quarter of 2024.

The Company anticipates that it will continue to incur net losses for the foreseeable future.

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Management can provide no assurance that any sources of a sufficient amount of financing or collaboration agreements will be available to the Company on favorable terms, if at all.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening of global economic conditions, potential future global pandemics or health crises, and the recent disruptions to, and volatility in, the credit and financial markets in the United States.

The Company’s ability to raise additional capital may be adversely impacted by potential worsening of global economic conditions, potential future global pandemics or health crises, and the disruptions to, and volatility in, the credit and financial markets in the United States.

Because of historical and expected operating losses and net operating cash flow deficits, there is substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the financial statements, which is not alleviated by management’s plans.

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To date, the Company has not experienced any losses on its deposits of cash and cash equivalents.

Deferred Financing Costs

The Company capitalizes certain legal, accounting, and other fees and costs that are directly attributable to in-process equity financing as deferred offering costs until such financings are completed.

Upon the completion of an equity financing, these costs are recorded as a reduction of additional paid-in capital of the related financing.

As of June 30, 2024, the Company had deferred offering costs of $ 0.1 million.

Fair Value Measurement

The Company uses a three-tier fair value hierarchy to prioritize the inputs used in the Company’s fair value measurements.

These tiers include Level 1, defined as observable inputs such as quoted prices in active markets for identical assets;

These tiers include:

Level 1, defined as observable inputs such as quoted prices in active markets for identical assets;

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable;

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Refer to Note 5 - Equity Incentive Plan for further discussion.

The Company performs an assessment of warrants upon issuance to determine their proper classification in the financial statements based upon the warrant’s specific terms, in accordance with the authoritative guidance provided in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 480 Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging .

The Company performs an assessment of warrants upon issuance to determine their proper classification in the financial statements based upon the warrant’s specific terms, in accordance with the authoritative guidance provided in Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) , and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (“ASC 815-40”) .

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480-40 and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed in the Company’s own Common Stock and whether the warrant holders could potentially require cash settlement of the warrants.

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Basic net loss per share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of shares outstanding during the period.

The weighted-average number of shares of common stock outstanding includes (i) contingently issuable restricted stock units for which no future service is required as a condition to the delivery of the underlying Common Stock, (ii) pre-funded warrants because their exercise requires only nominal consideration for the delivery of shares, and (iii) shares held in abeyance because there is no consideration required for delivery of the shares, (collectively, “basic shares”), without consideration of common share equivalents.

Diluted net loss per share is calculated by adjusting basic shares outstanding for the dilutive effect of common share equivalents outstanding for the period.

For purposes of the diluted net loss per share calculation, stock options and warrants are considered to be common share equivalents but are excluded from the calculation of diluted net loss per common share if their effect would be anti-dilutive.

The common share equivalents that are not included in the calculation of diluted net loss per common share but could potentially dilute basic earnings per share in the future are as follows:

As of March 31,

The weighted-average number of shares of Common Stock outstanding includes (i) pre-funded warrants because their exercise requires only nominal consideration for the delivery of shares, and (ii) shares held in abeyance because there is no consideration required for delivery of the shares, (collectively, “basic shares”), without consideration of common stock equivalents.

Diluted net loss per share is calculated by adjusting basic shares outstanding for the dilutive effect of common stock equivalents outstanding for the period.

For purposes of the diluted net loss per share calculation, stock options and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per common stock if their effect would be anti-dilutive.

The common share equivalents that are not included in the calculation of diluted net loss per share of Common Stock but could potentially dilute basic earnings per share in the future are as follows:

As of June 30,

Common Stock options

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Recent Accounting Pronouncements

For the quarter ended March 31, 2024, the Company has reviewed recent accounting standards and identified the following as relevant to the Company.

For the six months ended June 30, 2024, the Company has reviewed recent accounting standards and identified the following as relevant to the Company.

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures .

Improvements to Income Tax Disclosures (“ASU 2023-09”) .

ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

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Prepaid other and other current assets

Deferred offering costs

Total prepaid expenses and other current assets

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Equity Securities

A summary of the Company’s equity securities as of March 31, 2024, is as follows:

A summary of the Company’s equity securities as of June 30, 2024, is as follows:

Common Stock, par value $0.0001

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Total equity securities

On November 20, 2023, the Company closed on an inducement agreement (the “Inducement”) with a holder (the “Holder”) of certain of its existing warrants to purchase up to 3,472,095 shares of the Company’s common stock, issued to the Holder on (i) April 25, 2022 (as amended on March 20, 2023, the “April 2022 Warrants”) and (ii) March 20, 2023 (the “March 2023 Warrants” together with the April 2022 Warrants, the “Existing Warrants”).

The Existing Warrants had an exercise price of $ 2.82 .

Pursuant to the Inducement, the Holder agreed to exercise for cash its Existing Warrants at a reduced exercise price of $ 0.6511 per share in consideration for the Company’s agreement to issue in a private placement (i) new series A Common Stock purchase warrants (the “November 2023 Series A Common Warrants”) to purchase 3,707,944 shares of Common Stock and (ii) new series B Common Stock purchase warrants (the “November 2023 Series B Common Warrants” and together with the November 2023 Series A Common Warrants, the “New Warrants”) to purchase 3,236,246 shares of Common Stock .

The New Warrants are exercisable subject to stockholder approval, which the Company received at a stockholder meeting on January 12, 2024.

The Company received net cash proceeds of approximately $ 2.0 million from the Inducement after deducting underwriters’ discounts and offering expenses of approximately $ 0.3 million.

On June 7, 2024, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C.

Wainwright & Co., LLC (the “Sales Agent”) providing for the sale of up to $ 1,157,761 of its shares of Common Stock, par value $ 0.0001 per share, as set forth in the ATM Agreement.

The Sales Agent will be entitled to compensation at a fixed commission rate of 3.0 % of the gross sales price of the shares of Common Stock sold pursuant to the ATM Agreement, as well as other transactional fees.

As of June 30, 2024, no shares have been sold under the ATM Agreement.

On May 21, 2024, the Company closed on inducement agreements (the “May 2024 Inducement”) with certain holders (the “Holders”) of certain of the Company’s existing warrants to purchase up to an aggregate of 516,336 shares of the Company’s Common Stock, issued to the Holders on (i) May 26, 2023 (the “May 2023 Warrants”), having an exercise price of $ 32.40 per share, and (ii) November 2023 New Warrants (as defined below), which were issued in two separate series, each having an exercise price of $ 9.7665 per share (together with the May 2023 Warrants, the “May 2024 Existing Warrants”).

Pursuant to the May 2024 Inducement, the Holders agreed to exercise for cash their May 2024 Existing Warrants at a reduced exercise price of $ 5.16 per share in consideration for the Company’s agreement to issue in a private placement (i) new Series A Common Stock purchase warrants (the “New May 2024 Series A Warrants”) to purchase up to 601,174 shares of Common Stock, and (ii) new Series B Common Stock purchase warrants (the “New May 2024 Series B Warrants” and together with the New May 2024 Series A Warrants, the “New May 2024 Warrants”) to purchase up to 431,498 shares of Common Stock.

The Company received net proceeds of approximately $ 2.3 million from the exercise of the May 2024 Existing Warrants by the Holders, after deducting placement agent fees and other offering expenses payable by the Company.

Related to the May 2024 Inducement, as of June 30, 2024, t he Holders left 267,000 shares in abeyance at the Company’s transfer agent to be delivered to the Holders at their request .

Accordingly, as of June 30, 2024, 267,000 shares were held in abeyance, which were not issued and not outstanding.

On November 20, 2023, the Company closed on an inducement agreement (the “November 2023 Inducement”) with a holder (the “Holder”) of certain of its existing warrants to purchase up to 231,473 shares of the Company’s Common Stock, issued to the Holder on (i) April 25, 2022 (as amended on March 20, 2023, the “April 2022 Warrants”) and (ii) March 20, 2023 (the “March 2023 Warrants” together with the April 2022 Warrants, the “November 2023 Existing Warrants”).

The November 2023 Existing Warrants had an exercise price of $ 42.30 .

Pursuant to the November 2023 Inducement, the Holder agreed to exercise for cash its November 2023 Existing Warrants at a reduced exercise price of $ 9.7665 per share in consideration for the Company’s agreement to issue in a private placement (i) new series A Common Stock purchase warrants (the “November 2023 Series A Common Warrants”) to purchase 247,196 shares of Common Stock and (ii) new series B Common Stock purchase warrants (the “November 2023 Series B Common Warrants” and together with the November 2023 Series A Common Warrants, the “November 2023 New Warrants”) to purchase 215,749 shares of Common Stock.

The November 2023 New Warrants were exercisable subject to stockholder approval, which the Company received at a stockholder meeting on January 12, 2024.

The Company received net cash proceeds of approximately $ 2.0 million from the November 2023 Inducement after deducting underwriters’ discounts and offering expenses of approximately $ 0.3 million.

Related to the November 2023 Inducement, as of December 31, 2023, the Holder left 182,000 shares in abeyance at the Company’s transfer agent to be delivered to the Holder at their request, which were then delivered to the Holder on January 8, 2024 .

Accordingly, as of December 31, 2023, 182,000 shares were held in abeyance, which were not issued and not outstanding.

As of March 31, 2024, no shares were held in abeyance.

On May 26, 2023, the Company closed a private placement (the “2023 PIPE”) priced at the market under Nasdaq rules, in which it sold 458,555 shares of its Common Stock together with 342,322 pre-funded warrants to purchase up to an aggregate of 342,322 shares of Common Stock with an exercise price of $ 0.0001 per share (the “May 2023 Pre-Funded Warrants”), and 800,877 warrants to purchase up to an aggregate of 800,877 shares of Common Stock with an exercise price of $ 2.16 per share (the “May 2023 PIPE Common Warrants”) at a combined offering price of $ 2.285 .

The May 2023 PIPE Common Warrants are set to expire on November 27, 2028.

The Company received net cash proceeds of approximately $ 1.5 million from the 2023 PIPE after deducting underwriters’ discounts and offering expenses of approximately $ 0.3 million.

Since all the abeyance shares from the November 2023 Inducement were pulled by the Holder in January 2024, there were no remaining November 2023 Inducement shares held in abeyance as of June 30, 2024.

On May 26, 2023, the Company closed a private placement (the “May 2023 PIPE”) priced at the market under Nasdaq rules, in which it sold 30,570 shares of its Common Stock together with 22,821 pre-funded warrants to purchase up to an aggregate of 53,391 shares of Common Stock with an exercise price of $ 0.0001 per share (the “May 2023 Pre-Funded Warrants”), and 53,391 warrants to purchase up to an aggregate of 53,391 shares of Common Stock with an exercise price of $ 32.40 per share (the “May 2023 PIPE Common Warrants”) at a combined offering price of $ 34.275 .

The May 2023 PIPE Common Warrants were set to expire on November 27, 2028.

The Company received net cash proceeds of approximately $ 1.5 million from the May 2023 PIPE after deducting underwriters’ discounts and offering expenses of approximately $ 0.3 million.

The May 2023 Pre-Funded Warrants were exercised fully during the second quarter of 2023.

The May 2023 PIPE Common Warrants were exercised as part of the May 2024 Inducement.

On March 20, 2023, the Company closed a public offering (the “March 2023 Offering”) priced at the market under Nasdaq rules, in which it sold an aggregate of (i) 5,666 shares of Common Stock, (ii) pre-funded warrants (the “March 2023 Pre-Funded Warrants”) to purchase up to an aggregate of 102,208 shares of Common Stock with an exercise price of $ 0.0001 per share, (iii) Series A warrants (the “March 2023 Series A Common Warrants”) to purchase up to an aggregate of 107,874 shares of Common Stock, and (iv) Series B warrants (the “March 2023 Series B Common Warrants” and collectively with the March 2023 Series A Common Warrants, the “March 2023 Offering Warrants”) to purchase up to an aggregate of 107,874 shares of Common Stock.

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The Company received net cash proceeds of approximately $ 4.2 million after deducting the underwriter’s discounts and offering expenses of approximately $ 0.8 million.

The March 2023 Pre-Funded Warrants were fully exercised during the first quarter of 2023, and the March 2023 Offering Warrants were exercised as part of the Inducement in November 2023.

On April 25, 2022, the Company closed a private placement (the “April 2022 PIPE”), in which it sold 56,161 shares of its Common Stock together with 179,687 pre-funded warrants to purchase up to an aggregate of 179,687 shares of Common Stock with an exercise price of $ 0.0001 per share (the “April 2022 PIPE Pre-Funded Warrants”), and 235,849 warrants to purchase up to an aggregate of 235,849 shares of Common Stock with an exercise price of $ 21.20 per share (the “April 2022 PIPE Common Warrants”) at a combined offering price of $ 21.20 .

The Company received net cash proceeds of approximately $ 4.3 million from the April 2022 PIPE after deducting underwriters’ discounts and offering expenses of approximately $ 0.7 million.

The April 2022 PIPE Pre-Funded Warrants were fully exercised during 2022, and the April 2022 PIPE Common Warrants were exercised as part of the Inducement in November 2023.

The March 2023 Pre-Funded Warrants were fully exercised during the first quarter of 2023, and the March 2023 Offering Warrants were exercised as part of the November 2023 Inducement.

Preferred Stock

While the Company has 10,000,000 shares of preferred stock authorized with a par value of $ 0.0001 , no shares of preferred stock are outstanding as of March 31, 2024 or December 31, 2023, respectively.

While the Company has 10,000,000 shares of preferred stock authorized with a par value of $ 0.0001 , no shares of preferred stock are outstanding as of June 30, 2024, or December 31, 2023, respectively.

Summary of Warrants Outstanding

The table below lists outstanding warrants for the dates presented.

The warrants outstanding at March 31, 2024 are exercisable into 8,358,697 shares of common stock which had a fair value of $ 0.4108 per share, based on the closing trading price on March 28, 2024.

The aggregate intrinsic value of warrants outstanding as of March 31, 2024, is calculated as the difference between the exercise price of the warrants and the closing market price of the Company’s Common Stock on that date.

The intrinsic value of warrants outstanding as of March 31, 2024, was zero due to the warrants’ exercise prices being above market value.

The warrants outstanding as of June 30, 2024, are exercisable into 1,109,705 shares of Common Stock which had a fair value of $ 2.39 per share, based on the closing trading price on June 28, 2024, the last trading day prior to June 30, 2024.

The aggregate intrinsic value of warrants outstanding as of June 30, 2024, is calculated as the difference between the exercise price of the warrants and the closing market price of the Company’s Common Stock on that date.

The intrinsic value of warrants outstanding as of June 30, 2024, was zero due to the warrants’ exercise prices being above market value.

Quantity of Warrants Outstanding as of

March 31, 2024

June 30, 2024

December 31, 2023

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IPO Underwriter Warrants

March 2023 Offering Series A Common Warrants

March 2023 Offering Series B Common Warrants

March 2023 Offering Placement Agent Warrants

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November 2023 Series B Common Warrants

November 2023 Offering Placement Agent Warrants

November 2023 Placement Agent Warrants

May 2024 Series A Common Warrants

May 2024 Series B Common Warrants

May 2024 Placement Agent Warrants

Total warrants outstanding

Warrant Inducement

In November 2023, the Company completed the Inducement, in which a Holder agreed to exercise 3,472,095 common warrants to purchase Common Stock at a reduced exercise price of $ 0.6511 per share in exchange for the 3,707,944 November 2023 Series A Common Warrants and 3,236,246 November 2023 Series B Common Warrants with an exercise price of $ 0.6511 per share.

The New Warrants are exercisable subject to stockholder approval, which the Company received at a stockholder meeting on January 12, 2024.

The Inducement, which resulted in the lowering of the exercise price of the Existing Warrants and the issuance of the New Warrants, is considered a modification of the Existing Warrants under the guidance of Accounting Standards Update 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the Emerging Issues Task Force) (“ASU 2021-04”).

The modification is consistent with the equity issuance classification under that guidance as the reason for the modification was to induce the holders of the Existing Warrants to cash exercise their warrants, which raised equity capital and generated net proceeds for the Company of approximately $ 2.0 million.

As the Existing Warrants and the New Warrants were classified as equity instruments before and after the exchange, and as the exchange is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $ 3.0 million as an equity issuance cost.

Warrant Inducements

In May 2024, the Company completed the May 2024 Inducement with the Holders who agreed to exercise 516,336 warrants to purchase Common Stock at a reduced exercise price of $ 5.16 per share in exchange for 601,174 New May 2024 Series A Warrants and 431,498 New May 2024 Series B Warrants with an exercise price of $ 4.91 per share.

The May 2024 Inducement, which resulted in the lowering of the exercise price of the May 2024 Existing Warrants and the issuance of the May 2024 New Warrants, is considered a modification of the May 2024 Existing Warrants under the guidance ASC 815-40.

The modification is consistent with the equity issuance classification under that guidance as the reason for the modification was to induce the holders of the May 2024 Existing Warrants to cash exercise their warrants, which raised equity capital and generated net proceeds of approximately $ 2.3 million.

As the May 2024 Existing Warrants and the May 2024 New Warrants were classified as equity instruments before and after the exchange, and as the exchange is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $ 1.5 million as an equity issuance cost.

In November 2023, the Company completed the November 2023 Inducement, in which a Holder agreed to exercise 231,472 common warrants to purchase Common Stock at a reduced exercise price of $ 5.16 per share in exchange for 247,196 November 2023 Series A Warrants and 215,749 November 2023 Series B Warrants with an exercise price of $ 9.7655 per share.

The November 2023 New Warrants were exercisable subject to stockholder approval, which the Company received at a stockholder meeting on January 12, 2024.

The November 2023 Inducement, which resulted in the lowering of the exercise price of the November 2023 Existing Warrants and the issuance of the November 2023 New Warrants, is considered a modification of the November 2023 Existing Warrants under the guidance of ASC 815-40.

The modification is consistent with the equity issuance classification under that guidance as the reason for the modification was to induce the holder of the November 2023 Existing Warrants to cash exercise their warrants, which raised equity capital and generated net proceeds for the Company of approximately $ 2.0 million.

As the November 2023 Existing Warrants and the November 2023 New Warrants were classified as equity instruments before and after the exchange, and as the exchange is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $ 3.0 million as an equity issuance cost.

Warrant Modification

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In accordance with ASU 2021-04, as the warrants were classified as equity instruments before and after the modification, and as the modification was directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $ 0.1 million as an equity issuance cost.

The April 2022 PIPE Warrants were exercised as part of the November 2023 Inducement.

Equity Incentive Plan

Under the Company’s 2021 Plan as amended, the Company may grant options to purchase shares of Common Stock, restricted stock awards, performance stock awards, incentive bonus awards, other cash-based awards or directly issue shares of Common Stock to employees, directors, and consultants of the Company.

At the Company’s 2023 Annual Meeting of Stockholders held on August 3, 2023, the Company’s stockholders approved an amendment to the Company’s 2021 Plan to increase the number of shares of common stock authorized for issuance thereunder by 513,150 shares to 629,069 shares.

Further, effective January 1 each year, an evergreen provision contained in the Company’s 2021 Plan increases the total number of shares of common shares issuable under the 2021 Plan in an amount equal to one percent of the Company’s common shares outstanding as of December 31 the prior calendar year.

This evergreen provision resulted in an additional 39,308 and 7,701 shares of Common Stock issuable pursuant to the 2021 Plan as of January 1, 2024, and 2023, respectively.

At the Company’s 2024 Annual Meeting of Stockholders held on May 7, 2024, the Company’s stockholders approved an amendment to the Company’s 2021 Plan to increase the number of shares of Common Stock authorized for issuance thereunder from 41,937 shares to 79,930 shares.

Further at the Company’s 2024 Annual Meeting of Stockholders, the Company’s stockholders approved an amendment to the Company’s 2021 Plan, to increase the evergreen provision from one percent to five percent of the total number of the Company’s Common Stock outstanding starting on January 1, 2025.

The one percent evergreen provision resulted in an additional 2,620 and 513 shares of Common Stock issuable pursuant to the 2021 Plan as of January 1, 2024, and 2023, respectively.

Stock awards may be granted at an exercise price per share of not less than 100% of the fair market value at the date of grant.

Stock awards granted are exercisable over a maximum term of 10 years from the date of grant and generally vest over a period of four years for employees and one year for directors of the Company’s Board and consultants .

As of March 31, 2024, there remain 205,108 shares reserved for issuance under the 2021 Plan, as amended.

As of June 30, 2024, there remain 51,675 shares reserved for issuance under the 2021 Plan, as amended.

Fair Value Measurement

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The following table presents the weighted-average assumptions used for stock options granted during the following periods:

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Grant date fair value

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The following table summarizes the total stock-based compensation expense related to stock options included in the Company’s statements of operations:

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

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Options cancelled

Balance at March 31, 2024

Options exercisable at March 31, 2024

Balance at June 30, 2024

Options exercisable at June 30, 2024

In January 2024, the Board unanimously approved to provide employees and directors of the Company the opportunity to cancel outstanding, out-of-the-money, stock options without consideration, in accordance with an option cancellation agreement.

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Accordingly, the Company recognized stock-based compensation expense of $ 568,372 resulting from the stock option cancellation during the first quarter of 2024.

The aggregate intrinsic value of options outstanding and exercisable as of March 31, 2024, is calculated as the difference between the exercise price of the underlying options and the closing market price of the Company’s Common Stock on March 28, 2024, which was $ 0.4108 per share.

The intrinsic value of options outstanding and exercisable as of March 31, 2024, was zero.

As of March 31, 2024, total unrecognized compensation cost related to stock options was approximately $ 0.2 million and the weighted average period over which this cost is expected to be recognized is 1.8 years.

The aggregate intrinsic value of options outstanding and exercisable as of June 30, 2024, is calculated as the difference between the exercise price of the underlying options and the closing market price of the Company’s Common Stock on June 28, 2024, the last trading day prior to June 30, 2024, which was $ 2.39 per share.

The intrinsic value of options outstanding and exercisable as of June 30, 2024, was zero.

As of June 30, 2024, total unrecognized compensation cost related to stock options was approximately $ 0.2 million and the weighted average period over which this cost is expected to be recognized is 1.7 years.

Commitments and Contingencies

Clinical Trials

During the fourth quarter of 2023, the Company initiated a Phase 3 clinical trial, STAR-1, which is expected to report data in 2025.

During the fourth quarter of 2023, the Company initiated a Phase 3 clinical trial, STAR-1, which is expected to report top-line data in 2025.

The total contract amount with the clinical research organization is approximately $ 6.9 million, which will extend from the fourth quarter of 2023 to the first half of 2025, and which has a 30-day termination notice period.

As of March 31, 2024, the Company has recognized $ 1.4 million in expense for the STAR-1 trial.

As of June 30, 2024, the Company has recognized $ 2.9 million in expense for the STAR-1 trial.

Supplier Agreement

13 unchanged sentences

The Second Amendment includes customary terms relating to, among others, indemnification, intellectual property protection, confidentiality, remedies, and warranties.

As of March 31, 2024, the Company evaluated the likelihood of the Company achieving the specified milestones and determined that the likelihood is not yet probable and as such no accrual of these payments is required as of March 31, 2024.

As of June 30, 2024, the Company evaluated the likelihood of the Company achieving the specified milestones and determined that the likelihood is not yet probable and as such no accrual of these payments is required as of June 30, 2024.

Legal Proceedings

2 unchanged sentences

Subsequent Events

On May 7, 2024, the Company held its 2024 annual meeting of stockholders (the “2024 Annual Stockholder Meeting”) at which time the Company’s stockholders approved amendments to the 2021 Omnibus Equity Incentive Plan to (i) increase the number of shares reserved for issuance under the plan to from 629,069 to 1,198,951 shares and (ii) increase the annual evergreen percentage from 1% to 5%.

Also at the 2024 Annual Stockholder Meeting, the Company’s stockholders approved an amendment to its Amended and Restated Certificate of Incorporation to affect a reverse stock split of the issued and outstanding shares of the Company’s common stock at a specific ratio, ranging from one-for-five (1:5) to one-for-thirty (1:30) , with the exact ratio to be determined by the Company’s board of directors without further approval or authorization of the Company’s stockholders.

On May 8, 2024, the Company’s Board set and approved a reverse split ratio of one-for-fifteen (1:15) and authorized the Company’s management to effect the reverse stock split on May 16, 2024 (the “2024 Reverse Stock Split”).

The financial statements contained herein do not reflect the 2024 Reverse Stock Split as the 2024 Reverse Stock Split will not have become effective as of the date of the issuance of these financial statements.

As previously reported, on November 15, 2023, the Company received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s Common Stock for the prior 30 consecutive business days, the Company was not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on Nasdaq, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a grace period of 180 days, or until May 13, 2024, to regain compliance with the Minimum Bid Price Requirement.

On May 14, 2024, the Company received a letter from Nasdaq advising that the Company had been granted a 180-day extension to November 11, 2024, to regain compliance with the Minimum Bid Price Requirement.

During July 2024, the balance of 267,000 of abeyance shares related to the May 2024 Warrant Inducement were pulled by the investor.

Accordingly, shares outstanding increased by 267,000 during the third quarter of 2024 related to the issuance of the 267,000 abeyance shares from the May 2024 Warrant Inducement, leaving no further abeyance shares outstanding .

In June 2024, the Company entered into an ATM Agreement with the maximum offering price of $ 1,157,761 .

During July 2024, the Company issued 355,806 shares of Common Stock under the ATM Agreement resulting in gross proceeds of $ 1,157,248 before deducting issuance costs.

After issuance of the 355,806 shares during July 2024, $ 513 remained registered under the ATM Agreement.

On August 2, 2024, the Company increased the maximum aggregate offering price of the shares of the Company’s common stock issuable under the ATM Agreement by $ 505,000 , from $ 1,157,761 to $ 1,662,761 .

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

What changed 10-Q

Item 1. Financial Statements