What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-15 compared with 2023-03-30 · 407 added, 428 removed, 306 unchanged (73% of the section changed)

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is a clinical stage pharmaceutical company seeking to develop innovative solutions for severe pain relief while reducing the fear of

and the potential for addiction, opioid misuse, abuse and overdose.

We have also incorporated a 79.2%-owned subsidiary, EBIR, Inc.

known as Covistat, Inc.), a clinical stage pharmaceutical company that is developing a compound utilized in our overdose protection program

for the treatment of COVID-19.

and the potential for opioid misuse, abuse and overdose.

Our lead product candidate, PF614, is an extended release TAAP prodrug of oxycodone.

TAAP modification

of prescription drugs removed the ability to crush, chew or manipulate and inject to achieve the medication more quickly than by swallowing.

TAAP modification of prescription drugs removed the ability to crush, chew or manipulate and inject to achieve the effect of the medication

more quickly than by swallowing.

MPAR ® adds a layer of overdose protection to each TAAP product.

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We may never be able to develop or commercialize a marketable product.

lead product candidate, PF614, is in Phase 1b clinical development, PF614-MPAR™ is in Phase 1 clinical development and nafamostat

is proceeding towards Phase 2 clinical development.

Our other product candidates and our research initiatives are in preclinical or earlier

stages of development.

Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on

the successful development and eventual commercialization of one or more of our product candidates.

We have not yet successfully completed

any pivotal clinical trials, nor have we obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales

and marketing activities.

expect to continue to incur net losses for the foreseeable future, and we expect our clinical development expenses, and general and administrative

expenses to continue to increase.

We have incurred significant operating losses since inception.

Our net loss was $24.2 million for the

year ended December 31, 2022 and as of December 31, 2022, we had an accumulated deficit of $110.9 million.

We expect that our expenses

and capital requirements will increase substantially in connection with our ongoing development activities, particularly if and as we:

preclinical studies and continues existing and initiates new clinical trials for PF614, PF614-MPAR™ and nafamostat, our lead

product candidates being tested for chronic pain and infectious disease;

the development of our product candidate pipeline of other product candidates, including through business development efforts to

invest in or in-license other technologies or product candidates;

expand and protect our intellectual property portfolio;

additional clinical, quality control, medical, scientific and other technical personnel to support our clinical operations;

regulatory approval for any product candidates that successfully complete clinical trials;

any pre-commercialization activities to establish sales, marketing and distribution capabilities for any product candidates for which

we may receive regulatory approval;

our infrastructure and facilities to accommodate our growing employee base;

operational, financial and management information systems and personnel, including personnel to support our research and development

programs, any future commercialization efforts and our transition to operating as a public company.

expect to incur additional costs associated with operating as a public company, including significant legal, accounting, insurance, investor

relations and other expenses that we did not incur as a private company.

lead product candidate, PF614, is in Phase 2 clinical development, PF614-MPAR is in Phase 1b clinical development and nafamostat is proceeding

towards Phase 2 clinical development.

Our other product candidates and our research initiatives are in preclinical or earlier stages

of development.

Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the successful

development and eventual commercialization of one or more of our product candidates.

We have not yet successfully completed any pivotal

clinical trials, nor have we obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing

have incurred significant operating losses since inception and we expect to continue to incur net losses for the foreseeable future.

We expect that our expenses and capital requirements will increase substantially in connection with our ongoing development activities,

particularly if and as we:

continue preclinical studies

and continues existing and initiates new clinical trials for PF614, PF614-MPAR and nafamostat, our lead product candidates being

tested for chronic pain and infectious disease;

advance the development

of our product candidate pipeline of other product candidates, including through business development efforts to invest in or in-license

other technologies or product candidates;

maintain, expand and protect

our intellectual property portfolio;

hire additional clinical,

quality control, medical, scientific and other technical personnel to support our clinical operations;

seek regulatory approval

for any product candidates that successfully complete clinical trials;

undertake any pre-commercialization

activities to establish sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory

expand our infrastructure

and facilities to accommodate our growing employee base;

add operational, financial

and management information systems and personnel, including personnel to support our research and development programs, any future

commercialization efforts and our transition to operating as a public company.

have incurred and expect to continue to incur additional costs associated with operating as a public company, including significant legal,

accounting, insurance, investor relations and other expenses.

We may never become profitable.

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of our equity holders.

financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability

to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends.

raise additional funds through collaborations or other strategic transactions with third parties, we may have to relinquish valuable

rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may not be

favorable to us.

We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable

terms, or at all.

If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale

back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential

in-licenses or acquisitions.

financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take

specific actions, such as incurring additional debt, issuing additional equity, making acquisitions or capital expenditures or declaring

If we raise additional funds through collaborations or other strategic transactions with third parties, we may have to relinquish

valuable rights to our technologies, future revenue streams, research programs or drug candidates, or grant licenses on terms that may

not be favorable to us.

We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on

favorable terms, or at all.

If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly

delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit

of potential in-licenses or acquisitions.

of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased

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continue our operations at planned levels and be forced to reduce or terminate our operations.

have generated limited revenues and have incurred significant operating losses since our inception, and as of December 31, 2022, have

an accumulated deficit of $110.9 million.

In addition, we expect to continue to incur significant and increasing expenses and operating

have generated limited revenues and have incurred significant operating losses since our inception and expect to continue to incur operating

losses for the foreseeable future.

These factors raise substantial doubt about our ability to continue as a going concern.

that our available resources and existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure

requirements into the second quarter of 2023.

We based this estimate on assumptions that may prove to be wrong, and we could exhaust

our available capital resources sooner than we expect.

See “— Liquidity and Capital Resources .” Our future viability

beyond the twelve months is dependent on our ability to raise additional capital to finance our operations.

viability is dependent on our ability to raise additional capital to finance our operations.

Without raising additional capital through

a future offering, we believe that current cash on hand is sufficient to fund operations into the third quarter of 2024.

We based this

estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Liquidity and Capital Resources .” Our future viability beyond the twelve months is dependent on our ability to raise additional

capital to finance our operations.

expect to incur substantial expenses in the foreseeable future for the development and potential commercialization of our product candidates

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our product candidates, if approved, we may require substantial additional funding in the future.

Promissory Notes

September 24, 2021, we entered into the SPA for an aggregate financing of $15.0 million with institutional investors.

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Company issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $5.3 million for

an aggregate purchase price of $5.0 million (collectively, the “ First Closing Notes ”) and (ii) warrants to purchase

18,058 shares of the Company’s common stock in the aggregate at an exercise price of $152.60 per share.

At the second closing,

the Company issued to the institutional investors referenced above, (i) senior secured convertible promissory notes in the aggregate

principal amount of $10.6 million (collectively, the “ Second Closing Notes ”, together with the First Closing Notes,

the “ 2021 Notes ”) for an aggregate purchase price of $10.0 million and (ii) warrants to purchase 36,116 shares of

the Company’s common stock in the aggregate at an exercise price of $152.60 per share.

an aggregate purchase price of $5.0 million and (ii) warrants to purchase 1,507 shares of the Company’s common stock in the aggregate

at a current exercise price of $3.64 per share.

At the second closing, the Company issued to the institutional investors referenced above,

(i) senior secured convertible promissory notes in the aggregate principal amount of $10.6 million for an aggregate purchase price of

$10.0 million and (ii) warrants to purchase 3,011 shares of the Company’s common stock in the aggregate at a current exercise price

of $3.64 per share.

The 2021 Notes were satisfied on October 10, 2022.

warrants have an exercise price of $15.60 and are exercisable for five years following issuance.

The warrants were originally priced

at a 30% premium to the conversion price and were subject to downward adjustments based on certain issuances of the Company’s common

The Company issued, to the purchasers’ signatory to the SPA, warrants to purchase up to a number of shares of common stock

equal to forty percent (40%) of the shares of common stock issuable to each purchaser under the SPA upon conversion of the Note such

purchaser holds on each of the first and second closing date under the SPA.

registered with the Securities and Exchange Commission the resale of the shares of common stock issuable upon conversion of the Notes

as well as the shares of common stock issuable upon the exercise of the warrants pursuant to a Registration Rights Agreement, dated September

24, 2021, by and among the Company and the purchasers’ signatory to the SPA.

obligations pursuant to the 2021 Notes were (i) secured by all assets of the Company and all subsidiaries of the Company pursuant to

the Security Agreement and Patent Security Agreement, each dated September 24, 2021, by and among the Company, the subsidiaries of the

Company and the holders of the 2021 Notes and (ii) guaranteed jointly and severally by the subsidiaries of the Company pursuant to the

Subsidiary Guarantee, dated September 24, 2021, by and among the Company, the subsidiaries of the Company and the purchasers signatory

June 30, 2022, we entered into an $8.0 million convertible financing agreement with institutional investors (the “2022 Notes”).

The agreement provided for two closings, each for notes payable of $4.24 million (resulting in gross cash proceeds of $4.0 million).

Funds were received for the first closing on July 1, 2022 and for the second closing on August 9, 2022.

2022 Notes are convertible into common stock, at a per share conversion price equal to $10.90 (original conversion price).

Notes, commencing on September 29, 2022 and continuing monthly on the first day of each month beginning November 1, 2022, we are obligated

to redeem one fifteenth (1/15 th ) of the original principal amount under the applicable Note, plus accrued but unpaid interest.

We may elect to pay all or part of the redemption amount in cash with a premium of eight percent or in conversion shares of common stock

based on a conversion price equal to the lesser of (i) the conversion price and (ii) 92% of the average of the three lowest VWAPs (as

defined) during the ten consecutive trading days ending on the trading day that is immediately prior to the applicable redemption date,

but in no event may we pay the redemption amount in conversion shares of common stock unless the conversion price is at least equal to

$2.006 and we have been in compliance with customary requirements under the agreement, unless waived in writing by the holder.

connection with each of the first and second closings of the 2022 Notes we also issued warrants to purchase 233,395 shares of the Company’s

common stock.

The warrants have an exercise price of $14.17 (original exercise price), a 30% premium to the conversion price, and are

exercisable for five years following issuance of the 2022 Notes.

The issuance of these warrants required us to reduce the conversion

price of the 2021 Notes and the exercise price of the outstanding warrants associated with the 2021 Notes to $15.60.

proceeds of the 2022 Notes are being used for working capital purposes subject to certain customary restrictions are secured by the Company’s

rights to its patents and licenses.

We are restricted from issuing certain additional debt or equity without the prior written consent

of the holders for certain specified periods set forth in the 2022 Notes.

If, at any time while the 2022 Notes are outstanding, we carry

out one or more capital raises in excess of $5.0 million, the holder has the right to require us to use up to 20% of the gross proceeds

of such transaction to redeem all or a portion of the convertible notes for an amount in cash equal to the cash Mandatory Redemption

Amount (i.e., 108% of outstanding principal and unpaid interest).

In connection with a financing which occurred in December 2022, we

repaid $0.75 million on the 2022 Notes and paid an additional $0.06 million of premium payments.

2022 Notes mature on December 29, 2023 and February 7, 2024, for the first and second closings, respectively.

The notes bear interest

at a rate of 6% per annum, in addition to an original issue discount of 6%.

The interest may be settled in cash or shares at the option

of the Company and is payable together with monthly redemptions of the outstanding principal amount of the debt.

At December 31, 2022,

$4.2 million of the 2022 Notes remained outstanding.

The remaining amount of principal and interest on the 2022 Notes

was repaid in the first quarter of 2023.

However, we remain obligated under the 2022 Notes to pay additional cash as true-up payments for interest

or redemption amounts that we paid in shares of common stock that were valued below $2.006 or the lower conversion price of $0.7512 in

effect between January 12, 2023 and May 12, 2023.

The true-up payments compensate for the difference between the value of a share and

the conversion price in effect at the time of redemption, multiplied by the number of shares paid.

Underwriting Agreement

December 7, 2022, we entered into an underwriting agreement (the “ Underwriting Agreement ”) with Lake Street Capital

Management, LLC (the “ Underwriter ”), pursuant to which we agreed to issue and sell (i) 2,280,000 shares (the “ Firm

Shares ”) of the Company’s common stock, par value $0.0001 per share (the “ Common Stock ”), (ii) pre-funded

warrants (the “ Pre-Funded Warrants ”) to purchase 620,000 shares of Common Stock and (iii) warrants to purchase 5,800,000

shares of Common Stock (the “ Common Warrants ” and, collectively with the Pre-Funded Warrants, the “ Warrants ”)

to the Underwriter in a public offering (the “ Offering ”).

In addition, under the terms of the Underwriting Agreement,

the Company granted the Underwriter the option, for 45 days from the closing of the Offering, to purchase up to 342,000 additional shares

of Common Stock and Common Warrants to purchase up to an additional 870,000 shares of Common Stock (the “ Option Shares ”

and, together with the Firm Shares, the “ Shares ”).

June 30, 2022, we entered into an $8.0 million convertible financing agreement with institutional investors.

The agreement provided for

two closings, each for notes payable of $4.24 million (resulting in gross cash proceeds of $4.0 million).

Funds were received for the

first closing on July 1, 2022 and for the second closing on August 9, 2022.

The remaining amount of principal and interest on the 2022

Notes was repaid in the first quarter of 2023.

We were obligated under the 2022 Notes to pay additional cash as true-up payments for

interest or redemption amounts that we paid in shares of common stock that were valued below $24.07 or the lower conversion price of

$9.01 in effect between January 12, 2023 and May 12, 2023.

The true-up payments compensate the holder for the difference between the

value of a share and the conversion price in effect at the time of redemption, multiplied by the number of shares paid.

The true-up payments

totaling $0.6 million were paid on May 12, 2023.

connection with each of the first and second closings of the 2022 Notes we also issued warrants to purchase 38,900 shares of the

Company’s common stock.

The warrants have a current exercise price of $3.64 and are exercisable for five years following

issuance of the 2022 Notes.

December Offering

December 7, 2022, we entered into an underwriting agreement with Lake Street Capital Management, LLC (the “ Underwriter ”),

pursuant to which we agreed to issue and sell (i) 190,000 shares of the Company’s common stock, par value $0.0001 per share, (ii)

pre-funded warrants to purchase 51,666 shares of common stock and (iii) warrants to purchase 483,333 shares of common stock to the Underwriter

in a public offering.

In addition, the Company granted the Underwriter the option, for 45 days from the closing of the offering, to purchase

up to 28,500 additional shares of common stock and common warrants to purchase up to an additional 72,500 shares of common stock.

Underwriter agreed to purchase the shares from the Company pursuant to at a price of $15.62 per share.

lieu of a purchase of common stock that would otherwise result in an investor’s beneficial ownership exceeding 4.99% (or, at the

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to purchase one share of common stock at an exercise price of $0.0001.

Each Pre-Funded Warrant will be exercisable upon issuance and

will expire when exercised in full (all Pre-Funded Warrants were exercised immediately upon issuance).

Each Pre-Funded Warrant is being

sold with a Common Warrant to purchase two shares of Common Stock.

The public purchase price of one share of Common Stock and accompanying

Common Warrant to purchase two shares of Common Stock is $1.40 and the combined purchase price of one Pre-Funded Warrant and accompanying

Common Warrant to purchase two shares of Common Stock is $1.40.

The Underwriter agreed to purchase the Firm Shares from the Company pursuant

to the Underwriting Agreement at a price of $1.302 per share.

Each pre-funded warrant was exercisable upon issuance and will

expire when exercised in full (all pre-funded warrants were exercised immediately upon issuance).

Each pre-funded warrant was sold with

a common warrant to purchase two shares of common stock.

The public purchase price of one share of common stock and accompanying common

warrant to purchase two shares of Common Stock is $16.80 and the combined purchase price of one pre-funded warrant and accompanying common

warrant to purchase two shares of common stock is $16.80.

common warrant is exercisable immediately at an exercise price of $16.80 per share and will expire five years following the date of issuance.

The offering closed on December 9, 2022 and we received aggregate gross proceeds of approximately $4.1 million from the Offering.

Offering was made under a registration statement on Form S-1 filed with the Securities and Exchange Commission (Registration No.

connection with the Offering, the Company’s directors and executive officers signed lock-up agreements (“Lock-Up Agreements”)

by which they agreed not to sell or transfer any Common Stock without first obtaining the written consent of the Underwriter, subject

to certain exceptions, for a period of 90 days after the date of the final prospectus relating to the Offering.

Combination Transaction

June 30, 2021, the Merger with LACQ was consummated and we became a public company.

We received net proceeds of approximately $7.8 million

at the closing and we continue to operate under our management team, led by our Chief Executive Officer Lynn Kirkpatrick.

2021, the combined company’s common stock began trading on Nasdaq under the ticker symbol “ENSC”.

February Offering

February 2, 2023, we entered into a definitive Securities Purchase Agreement with certain institutional investors , pursuant to which

the Company agreed to issue and sell in a registered direct offering, priced “at-the-market” under the rules of The Nasdaq

Stock Market, an aggregate of 297,619 shares of common stock of the Company, par value $0.0001 per share, at an offering price of $10.08

per share, for gross proceeds of approximately $3.0 million before the deduction of placement agent fees and related costs of $0.3 million.

The closing of the Offering occurred on February 6, 2023.

a concurrent private placement, the Company issued to the institutional investors, for each share of common stock purchased in the offering,

a common warrant to purchase one share of common stock.

The common warrants are exercisable immediately upon issuance and terminate five

and one-half years following issuance.

The common warrants have an exercise price of $8.58 per share and are exercisable to purchase

an aggregate of up to 297,619 shares of Common Stock and expire on August 7, 2028.

A holder of a common warrant will not have the right

to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99%

at the election of the holder prior to the date of issuance) of the number of shares of common stock outstanding immediately after giving

effect to such exercise;

provided, however, that upon 61 days’ prior notice to the Company, the holder may increase or decrease

the beneficial ownership limitation, provided that in no event shall the beneficial ownership limitation exceed 9.99%.

Wainwright & Co.

acted as the exclusive placement agent (the “ Placement Agent ”) for the offering.

We issued placement

agent warrants to purchase up to 20,832 shares of common stock to the Placement Agent (including its designees).

These warrants have

an exercise price equal to $12.60 per share and are exercisable for five years from the commencement of sales in the offering.

warrants and placement agent warrants and the shares of our common stock issuable upon the exercise of the common warrants and placement

agent warrants are not being registered under the Securities Act of 1933, as amended, are not being offered pursuant to the Registration

Statement, and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act of 1933 and Rule 506(b).

the Securities Purchase Agreement, we agreed not to issue, enter into any agreement to issue or announce the issuance or proposed issuance

of any shares of common stock or any securities convertible into or exercisable or exchangeable for Common Stock for a period of 30 days

following the closing of the offering.

Our officers and directors agreed, subject to limited exceptions, for a period of 90 days after

the closing of the offering, to not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of, directly or indirectly,

or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section

16 of the Securities Exchange Act of 1934, as amended, with respect to, any shares of common stock or securities convertible, exchangeable

or exercisable into, shares of common stock beneficially owned, held or thereafter acquired by them.

May 12, 2023, the Company completed a public offering of an aggregate of 1,800,876 shares of its common stock at par value $0.0001 per

share (including pre-funded warrants in lieu thereof), Series A-1 warrants to purchase up to 1,800,876 shares of common stock and Series

A-2 warrants to purchase up to 1,800,876 shares of common stock, at a combined public offering price of $3.887 per share (or pre-funded

warrant in lieu thereof) and accompanying warrants.

The Series A-1 warrants have an exercise price of $3.64 per share, are exercisable

immediately upon issuance and expire five years from the date of issuance, and the Series A-2 warrants have an exercise price of $3.64

per share, are exercisable immediately upon issuance and expire eighteen months from the date of issuance.

holder of a warrant issued in the offering will not have the right to exercise any portion of its warrants if the holder, together with

its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the

number of shares of Common Stock outstanding immediately after giving effect to such exercise;

provided, however, that upon 61 days’

prior notice to the Company, the holder may increase or decrease the beneficial ownership limitation, provided that in no event shall

the beneficial ownership limitation exceed 9.99%.

Gross proceeds from this offering are approximately $7.0 million before the

deduction of placement agent fees and related costs of $0.7 million.

The Series A-1 and Series A-2 warrants were repriced to $1.31 per

share and exercised in February 2024.

Wainwright & Co.

acted as the exclusive placement agent for the offering.

The Company also registered warrants issued to the placement

agent to purchase 126,061 shares of common stock at a per share exercise price of $4.8588, which is 125% of the price of the shares in

the offering.

connection with the offering, the Company amended certain existing warrants to purchase up to an aggregate of 210,085 shares of the Company’s

common stock that were previously issued in September 2021 through December 2022 to purchasers in the offering at exercise prices ranging

from $16.80 to $187.20 per share, such that the amended warrants have a reduced exercise price of $3.64 per share, at an additional offering

price of $0.125 per amended warrant.

October 23, 2023, the Company entered into a Securities Purchase Agreement (the “SPA”) for an aggregate financing of $1.7

million with investors, including $0.2 million with a board member.

At the first closing under the SPA, which occurred on October 25,

2023, the Company issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $612,000

for an aggregate purchase price of $566,667 and (ii) warrants to purchase 1,255,697 shares of the Company’s common stock in the

At the second closing under the SPA, which occurred on November 28, 2023, the Company issued to the investors referenced above,

(i) additional notes in the aggregate principal amount of $1,224,000 for an aggregate purchase price of $1,133,333 and (i) additional

warrants to purchase 2,511,394 shares of the common stock in the aggregate.

The notes mature on April 25, 2024 and May 28, 2024, respectively.

combined notes are subject to an original issue discount of 8%, have a term of six months from their respective date of issuance and

accrue interest at the rate of 6.0% per annum.

The notes are convertible into common stock, at a per share conversion price equal to

Beginning ninety days following issuance of the notes at the first closing and second closing, respectively, the Company is

obligated to redeem monthly one third of the original principal amount under the applicable note, plus accrued but unpaid interest, liquidated

damages and any other amounts then owing to the holder of such note.

The Company is required to pay the redemption amount in cash with

a premium of 10% or, at the election of the investor at any time, some or all of the principal amount and interest may be paid by conversion

of shares under the note into common stock based on a conversion price equal to $1.5675.

Conversions and repayments of principal and

interest on the notes in January and February 2024 totaled $1.7 million.

warrants have an exercise price of $1.5675 and are exercisable for five years following issuance on each of the first and second closing

dates under the SPA.

Warrants for 1.3 million shares of common stock were exercised in January 2024.

of Our Operating Results

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In September 2018, we were awarded a research and development grant related to the development of

our MPAR TM overdose prevention technology (the “MPAR Grant”).

In September 2019, we were awarded a second research

and development grant related to the development of our TAAP/MPAR TM abuse deterrent technology for Opioid Use Disorder (“OUD”)

our MPAR® overdose prevention technology (the “MPAR Grant”).

In September 2019, we were awarded a second research and

development grant related to the development of our TAAP/MPAR® abuse deterrent technology for Opioid Use Disorder (“OUD”)

(the “OUD Grant”).

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We expense research and development costs as incurred, which include:

incurred to conduct the necessary preclinical studies and clinical trials required to obtain regulatory approval;

incurred under agreements with contract research organizations (“ CROs ”) that are primarily engaged in the oversight

and conduct of our drug discovery efforts and preclinical studies, clinical trials and contract manufacturing organizations (“ CMOs ”)

expenses incurred to conduct

the necessary preclinical studies and clinical trials required to obtain regulatory approval;

expenses incurred under

agreements with contract research organizations (“ CROs ”) that are primarily engaged in the oversight and conduct

of our drug discovery efforts and preclinical studies, clinical trials and contract manufacturing organizations (“ CMOs ”)

that are primarily engaged to provide preclinical and clinical drug substance and product for our research and development programs;

costs related to acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical studies and

clinical trial materials, including manufacturing validation batches, as well as investigative sites and consultants that conduct

our clinical trials, preclinical studies and other scientific development services;

made in cash or equity securities under third-party licensing, acquisition and option agreements;

employee-related

expenses, including salaries and benefits, travel and stock-based compensation expense for employees engaged in research and development

related to compliance with regulatory requirements;

facilities-related costs, depreciation and other expenses, which include rent and utilities.

other costs related to

acquiring and manufacturing materials in connection with our drug discovery efforts and preclinical studies and clinical trial materials,

including manufacturing validation batches, as well as investigative sites and consultants that conduct our clinical trials, preclinical

studies and other scientific development services;

payments made in cash or

equity securities under third-party licensing, acquisition and option agreements;

employee-related expenses,

including salaries and benefits, travel and stock-based compensation expense for employees engaged in research and development functions;

costs related to compliance

with regulatory requirements;

allocated facilities-related

costs, depreciation and other expenses, which include rent and utilities.

recognize external development costs as incurred.

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We also expect our related personnel costs to increase and, as a result, we expect our research and development expenses, including costs

associated with stock-based compensation, to remain elevated over prior periods.

In addition, we may incur additional expenses related

to milestone and royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to

acquire the rights to future product candidates.

associated with stock-based compensation, to remain elevated.

In addition, we may incur additional expenses related to milestone and

royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to acquire the rights

to future product candidates.

this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical

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to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of the following:

scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development

an appropriate safety and efficacy profile with investigational new drug (“ IND ”) enabling studies;

patient enrollment in and the initiation and completion of clinical trials;

timing, receipt and terms of any marketing approvals from applicable regulatory authorities including the FDA and non-U.S.

extent of any required post-marketing approval commitments to applicable regulatory authorities;

clinical and commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that

we or our third-party manufacturers are able to make product successfully;

and timely delivery of clinical-grade and commercial-grade drug formulations that can be used in our clinical trials and for commercial

maintaining, defending and enforcing patent claims and other intellectual property rights;

and changing government regulation;

commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;

a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates.

the scope, progress, outcome

and costs of our preclinical development activities, clinical trials and other research and development activities;

establishing an appropriate

safety and efficacy profile with investigational new drug (“ IND ”) enabling studies;

successful patient enrollment

in and the initiation and completion of clinical trials;

the timing, receipt and

terms of any marketing approvals from applicable regulatory authorities including the FDA and non-U.S.

the extent of any required

post-marketing approval commitments to applicable regulatory authorities;

establishing clinical and

commercial manufacturing capabilities or making arrangements with third-party manufacturers in order to ensure that we or our third-party

manufacturers are able to make product successfully;

development and timely

delivery of clinical-grade and commercial-grade drug formulations that can be used in our clinical trials and for commercial launch;

obtaining, maintaining,

defending and enforcing patent claims and other intellectual property rights;

significant and changing

government regulation;

launching commercial sales

of our product candidates, if and when approved, whether alone or in collaboration with others;

maintaining a continued

acceptable safety profile of our product candidates following approval, if any, of our product candidates.

changes in the outcome of any of these variables with respect to the development of our product candidates in preclinical and clinical

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Income (Expense)

in fair value of derivative liabilities

2018 and 2021, we entered into a series of notes that were determined to have embedded derivative instruments in the form of a contingent

The notes were recognized at the value of proceeds received after allocating issuance proceeds to the bifurcated contingent

The notes were subsequently measured at amortized cost using the effective interest method to accrete interest over their

term to bring the notes’ initial carrying value to their principal balance at maturity.

The bifurcated put option was initially

measured at fair value and subsequently measured at fair value with changes in fair value recognized as a component of other expenses

in the consolidated statements of operations.

on issuance of convertible notes

elected the fair value option to account for the 2021 Notes as we believe the fair value option provides users of the

financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with

respect to changes in the fair value of the common stock underlying the conversion option.

The 2022 Notes are accounted for under ASC 480 – Distinguishing Liabilities from Equity, due to share

settlement features contained within the notes.

As a result, the 2022 Notes are recorded as liabilities at fair value upon initial recognition

and at the balance sheet date.

We use a discounted cash flow model and a

Monte Carlo simulation to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs.

The loss on issuance

of convertible notes represents the difference between the gross proceeds received and the calculated fair value on the issuance date

of the notes.

2022 Notes were accounted for under ASC 480 – Distinguishing Liabilities from Equity, due to share settlement features contained

within the notes.

As a result, the 2022 Notes were recorded as liabilities at fair value upon initial recognition and at the balance

We used a discounted cash flow model and a Monte Carlo simulation to estimate the fair value of the notes, both of which

rely on unobservable Level 3 inputs.

The loss on issuance of convertible notes represents the difference between the gross proceeds received

and the calculated fair value on the issuance date of the notes.

costs for convertible notes

issuance costs for convertible notes represent the original issue discount (expensed immediately due to the initial recognition at

fair value of both the 2021 and 2022 Notes noted above), legal and accounting fees incurred in connection with the issuance of the 2021 and 2022

in fair value of convertible notes

elected the fair value option to account for the 2021 Notes as we believe the fair value option provides users of the

financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with

respect to changes in the fair value of the common stock underlying the conversion option.

The 2022 Notes are accounted for under ASC 480 – Distinguishing Liabilities from Equity, due to share

settlement features contained within the notes.

We use a discounted cash flow model and a

issuance costs for convertible notes represent the original issue discount (expensed immediately due to the initial recognition at fair

value of the 2022 Notes noted above), and legal and accounting fees incurred in connection with the issuance of the 2022 Notes.

on conversions and change in fair value of convertible notes

conversions on the 2021 Notes occurred, we calculated the difference between the conversion price and the average of the high and low

stock price on the date of conversion.

The resulting difference was either a loss if the conversion price was below the average of the

high and low stock price on the date of conversion or a gain if the conversion price was above the average of the high and low stock

price on the date of conversion.

elected the fair value option to account for the 2021 Notes as we believe the fair value option provided users of the financial statements

with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes

in the fair value of the common stock underlying the conversion option.

The 2022 Notes were accounted for under ASC 480 – Distinguishing

Liabilities from Equity, due to share settlement features contained within the notes.

We used a discounted cash flow model and a

Monte Carlo simulation to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs.

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warrants issued with the 2021 Notes and 2022 Notes are liability classified due to certain cash settlement features.

Black-Scholes option pricing model to estimate the fair value of the warrants.

This represents the immediate expense upon initial

recognition of the liability that is included in the statement of operations.

The liability is subsequently remeasured each reporting period as described further below.

in fair value of liability classified warrants

warrants issued with the 2021 Notes and 2022 Notes are liability classified due to certain cash settlement features.

We use a Black-Scholes

option pricing model to estimate the fair value of the warrants.

Changes in the fair value of the warrants are recognized through earnings

for each reporting period.

on debt conversions

conversions on the 2021 Notes occur, we calculate the difference between the conversion price and the average of the high and low stock

price on the date of conversion.

The resulting difference is either a loss if the conversion price was below the average of the high

and low stock price on the date of conversion or a gain if the conversion price was above the average of the high and low stock price

on the date of conversion.

expense consists of interest accrued on our financed directors and officers’ insurance as well as imputed interest on the commitment

fees related to the share subscription facility.

Interest expense related to the 2021 Notes and 2022 Notes is included in the estimate

of fair value of the convertible notes.

This represents the immediate expense upon initial recognition of the

liability that is included in the statement of operations.

The liability is remeasured each reporting period as described further below.

in fair value of liability classified warrants

use a Black-Scholes option pricing model to estimate the fair value of the liability classified warrants.

Changes in the fair value of

the warrants are recognized through earnings for each reporting period.

expense consists of interest accrued on our financed directors’ and officers’ insurance, and accumulated interest from

the 2023 Notes based on the stated interest rate.

In addition, the 2023 Notes balance at December 31, 2023 reflects amortization of

the debt discount from the original issuance and a discount associated with the warrant issuances and amortization of the associated

debt issuance costs that are all recorded as interest expense.

Interest expense related to the 2021 Notes and 2022 Notes was included in

the estimate of fair value of the convertible notes.

for Income Taxes

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requires taxpayers to capitalize and amortize them over five or fifteen years pursuant to Internal Revenue Code Section 174.

has not impacted our effective tax rate or our cash tax payable in 2022;

not impacted our effective tax rate or our cash tax payable in 2023;

however, if the requirement to capitalize Section 174 expenditures

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Our tax return period for United States federal income taxes for the tax years since 2020

remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions.

We record reserves

for potential tax payments to various tax authorities related to uncertain tax positions, if any.

The nature of uncertain tax positions

is subject to significant judgment by management and subject to change, which may be substantial.

These reserves are based on a determination

of whether and how much a tax benefit taken by us in our tax filings or whether our position is more likely than not to be realized following

the resolution of any potential contingencies related to the tax benefit.

We develop our assessment of uncertain tax positions, and the

associated cumulative probabilities, using internal expertise and assistance from third-party experts.

As additional information becomes

available, estimates are revised and refined.

Differences between estimates and final settlement may occur resulting in additional tax

Potential interest and penalties associated with such uncertain tax positions is recorded as a component of our provision for

income taxes.

remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions are open for examination

We record reserves for potential tax payments to various tax authorities related to uncertain tax positions, if any.

of uncertain tax positions is subject to significant judgment by management and subject to change, which may be substantial.

These reserves

are based on a determination of whether and how much a tax benefit taken by us in our tax filings or whether our position is more likely

than not to be realized following the resolution of any potential contingencies related to the tax benefit.

We develop our assessment

of uncertain tax positions, and the associated cumulative probabilities, using internal expertise and assistance from third-party experts.

As additional information becomes available, estimates are revised and refined.

Differences between estimates and final settlement may

occur resulting in additional tax expense.

Potential interest and penalties associated with such uncertain tax positions is recorded

as a component of our provision for income taxes.

To date, no amounts are being presented as an uncertain tax position.

following table summarizes our results of operations for the years ended December 31, 2023 and 2022:

of Operations

of the Years ended December 31, 2023 and 2022

following table summarizes our results of operations for the years ended December 31, 2022 and 2021:

Year Ended December 31,

Federal grants

$ (1,007,816 )

Operating expenses:

Research and development

General and administrative

$ (12,248,402 )

General and administrative

Total operating expenses

(13,796,771 )

Loss from operations

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Other income (expense):

Change in fair value of derivative liabilities

Loss on issuance of convertible notes

Issuance costs for convertible notes

Change in fair value of convertible notes

Loss on conversions and change in fair value of convertible notes

Issuance of liability classified warrants

Change in fair value of liability classified warrants

Loss on debt conversions

Interest expense

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under the grants.

We expect funding from federal grants to generally increase in the future due to the timing of preclinical and clinical

development activities under the grants.

and Development Expenses

and development expenses were $7.6 million for the year ended December 31, 2023, compared to $19.8 million for the year ended December

The increase was primarily the result of increased external research and development costs related to the clinical programs

for PF614 and PF614-MPAR™.

The decrease was primarily the result of changes in timing of external research and development costs related to the clinical

programs for PF614 and PF614-MPAR.

We do not currently track expenses on a program-by-program basis.

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and administrative expenses were $5.4 million for the year ended December 31, 2023, compared to $6.9 million for the year ended December

The decrease was primarily driven by a one-time $11.6 million non-cash expense in 2021 related to warrants issued for the GEM

share subscription facility.

Also contributing to the decrease was non-recurring $1.3 million of non-cash expense for consultants and

$1.1 million expense for commitment fees for the share subscription facility incurred in 2021.

Excluding the one-time expenses related

to the share subscription facility, which were recorded due to the uncertainty of future issuance of shares under the facility, and consultant

expenses, we expect our general and administrative expenses to approximate current levels.

The decrease was primarily a result of reduced stock-based compensation, reduced liability insurance, legal, and consulting

fees and no employee bonus expenses in the 2023 period.

We expect future general and administrative expenses to approximate current levels.

Income and Expense

costs for convertible notes decreased due to the lower principal amount of the 2022 Notes being issued during the period as compared to the

2021 Notes issued in the prior period.

The loss on issuance of the convertible notes and related liability classified warrants was due

to the current share price at issuance (of the 2022 Notes and the related warrants) exceeding the conversion (exercise) price.

in fair value of convertible notes and liability classified warrants for the 2022 period relate to both the 2021 Notes and 2022 Notes

compared to only changes related to the 2021 Notes in the prior period.

Loss on debt conversions is driven by the difference between

the conversion price of the 2021 Notes and the average of the high and low stock price on the date of conversion.

income and expenses, net, were $91,912 for the year ended December 31, 2023, compared to $14,410 for the year ended December 31,

The decrease was primarily the result of interest expense in the current year offset by changes in the fair value of certain

financial instruments.

The activity from 2022 included the accounting considerations of the conversions of the 2021 Notes as well as

the issuance of the 2022 Notes.

There was no corresponding conversions activity in the 2023 period associated with the 2022 Notes

due to the accounting under ASC 480.

Interest expense incurred in 2023 is primarily driven by the amortization of debt discount and

debt issuance costs related to the 2023 Notes.

and Capital Resources

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from sales of any product candidates for several years, if at all.

As of December 31, 2022, we had an accumulated deficit of $110.9 million.

have funded our operations to date primarily with proceeds from the sale of common equity, funding under federal research grants and

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financing will be available to us on favorable terms, if at all.

funding under two approved federal research grants totals $4.3 million and is expected to be utilized by August 31, 2023.

the terms and conditions of the two grants, we are required to submit progress reports to NIDA on an annual basis and a final research

performance progress report within 120 days of the performance period end date.

Additionally, the grants limit the use of funds to activities

that are clearly severable and independent from activities that involve human subjects until the receipt by NIDA of (i) Institutional

Review Board (“ IRB ”) approval, (ii) federal-wide assurance from the Office for Human Research Protections, (iii) a

Data and Safety Monitoring Plan, (iv) certification that all key personnel have completed education on the protection of human subjects

and (v) a Clinical Trials Dissemination Plan.

We must also comply with the data sharing policies of NIDA and the NIH Public Access Policy,

that require submission of final peer-reviewed journal manuscripts that arise from the use of grants to PubMed Central immediately upon

acceptance for publication.

funding under approved federal research grants totals $2.2 million and is expected to be utilized by August 2024.

Pursuant to the terms

and conditions of the two grants, we are required to submit progress reports to NIDA on an annual basis and a final research performance

progress report within 120 days of the performance period end date.

Additionally, the grants limit the use of funds to activities that

are clearly severable and independent from activities that involve human subjects until the receipt by NIDA of (i) Institutional Review

Board (“ IRB ”) approval, (ii) federal-wide assurance from the Office for Human Research Protections, (iii) a Data and

Safety Monitoring Plan, (iv) certification that all key personnel have completed education on the protection of human subjects and (v)

a Clinical Trials Dissemination Plan.

We must also comply with the data sharing policies of NIDA and the NIH Public Access Policy, that

require submission of final peer-reviewed journal manuscripts that arise from the use of grants to PubMed Central immediately upon acceptance

for publication.

grant must be repaid.

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benefit of public health.

have not used the GEM Facility to date.

Pursuant to the GEM Agreement, we are entitled to draw down up to $60.0 million of gross proceeds

(“ Aggregate Limit ”) from GEM Global in exchange for shares of our common stock, subject to meeting the terms and conditions

of the GEM Agreement.

This share subscription facility is available for a period of 36 months from the closing date of the Merger (July

A draw down is subject to limitations on the amount that is drawn under the facility and must comply with certain conditions precedent

including the listing of our shares on a principal market (which includes Nasdaq), having the necessary number of shares that are issuable

pursuant to the draw down registered under an effective registration statement, and other notice and timing requirements.

Upon our valid

exercise of a draw down, pursuant to delivery of a notice and in accordance with other conditions, GEM Global is required to pay, in

cash, a per-share amount equal to 90% of the average closing bid price of the shares of our common stock recorded by Nasdaq during the

30 consecutive trading days commencing on the first trading day that is designated on the draw down notice.

In no event may our draw

down requests exceed 400% (“ Draw Down Limit ”) of the average daily trading volume for the 30 trading days immediately

preceding the date we deliver the draw down notice.

to the GEM Agreement, we are entitled to draw down up to $60.0 million of gross proceeds (“ Aggregate Limit ”) from

GEM Global in exchange for shares of our common stock, subject to meeting the terms and conditions of the GEM Agreement.

This share subscription

facility is available for a period of 36 months from the closing date of the Merger (July 2024).

A draw down is subject to limitations

on the amount that is drawn under the facility and must comply with certain conditions precedent including the listing of our shares

on a principal market (which includes Nasdaq), having the necessary number of shares that are issuable pursuant to the draw down registered

under an effective registration statement, and other notice and timing requirements.

Upon our valid exercise of a draw down, pursuant

to delivery of a notice and in accordance with other conditions, GEM Global is required to pay, in cash, a per-share amount equal to

90% of the average closing bid price of the shares of our common stock recorded by Nasdaq during the 30 consecutive trading days commencing

on the first trading day that is designated on the draw down notice.

In no event may our draw down requests exceed 400% (“ Draw

Down Limit ”) of the average daily trading volume for the 30 trading days immediately preceding the date we deliver the draw

We may not be able to utilize the facility before it expires.

Our ability to utilize

this share subscription facility is restricted while financing commitments to which we are subject remain outstanding.

Our ability to utilize this share subscription facility is

restricted while financing commitments to which we are subject remain outstanding.

the public listing of the Company’s shares following the closing of the Merger, GEM Global became entitled to a commitment fee

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be paid in two tranches.

The commitment fee for the first tranche, which is equal to 67% of the commitment fee, or $800,000, was discharged

The commitment fee for the first tranche, which was equal to 67% of the commitment fee, or $800,000, was discharged

with 3,838 shares of common stock transferred from related parties in July 2022.

The commitment fee for the second tranche, which is

The commitment fee for the second tranche, which was

equal to the remaining 33% of the commitment fee, or $400,000 was paid in January 2023 through the issuance of 44,444 shares of registered

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Additionally,

we issued a warrant with a 36-month term at the closing of the Merger granting GEM Global the right to purchase 55,306 shares of our

common stock (an amount equal to 4% of the total number of our common stock outstanding as of the closing date of the Merger (subject

to adjustments described below), calculated on a fully diluted basis), at a strike price per share equal to $200.20, which was the closing

bid price for such common stock on the first day of trading on Nasdaq.

The strike price was reduced to $1.40 per share at December 31,

2022 because of a pricing adjustment per the GEM Agreement and reduced to $0.7512 per share in January 2023.

The warrant can be exercised

on a cashless basis in part or in whole at any time during the term.

Any failure by us to timely transfer the shares under the warrant

pursuant to GEM Global’s exercise will entitle GEM Global to compensation in addition to other remedies.

The number of shares underlying

the warrant as well as the strike price is subject to adjustments for recapitalizations, reorganizations, change of control, stock split,

stock dividend, reverse stock splits, and issuances of additional common shares at a price per share less than the exercise price.

we issued a warrant with a 36-month term at the closing of the Merger granting GEM Global the right to purchase 4,608 shares of our common

stock (an amount equal to 4% of the total number of our common stock outstanding as of the closing date of the Merger (subject to adjustments

described below), calculated on a fully diluted basis), at a strike price per share equal to $2,402.40, which was the closing bid price

for such common stock on the first day of trading on Nasdaq.

The exercise price was reduced to $1.5675 per share as of December 31, 2023

because of a pricing adjustment per the GEM Agreement which is reflected on the consolidated statement of operations as a deemed dividend.

The warrant can be exercised on a cashless basis in part or in whole at any time during the term.

Any failure by us to timely transfer

the shares under the warrant pursuant to GEM Global’s exercise will entitle GEM Global to compensation in addition to other remedies.

The number of shares underlying the warrant as well as the strike price is subject to adjustments for recapitalizations, reorganizations,

change of control, stock split, stock dividend, reverse stock splits, and issuances of additional common shares at a price per share

less than the exercise price.

to the terms of the GEM Agreement, we are required to indemnify GEM Global for any losses it incurs as a result of a breach by us or

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or other costs or expenses reasonably incurred in investigating, preparing, or defending against any such loss.

September 24, 2021, we entered into a Securities Purchase Agreement for an aggregate financing of $15.0 million with institutional investors.

The Company issued to the investors (i) 2021 Notes in the aggregate principal amount of $15.9 million for an aggregate purchase price

of $15.0 million and (ii) warrants to purchase 54,174 shares of the Company’s common stock in the aggregate at an exercise price

of $152.60 per share.

The 2021 Notes were satisfied in October 2022.

June 30, 2022, we entered into a Securities Purchase Agreement for an aggregate financing of $8.0 million with institutional investors.

The Company issued to the investors (i) 2022 Notes in the aggregate principal amount of $8.48 million for an aggregate purchase price

of $8.0 million and (ii) warrants to purchase 466,788 shares of the Company’s common stock in the aggregate at an exercise price

of $14.17 per share.

The first funding of $4.0 million occurred on July 1, 2022 and the second funding of $4.0 million occurred on August

9, 2022 At December 31, 2022, $4.2 million of 2022 Notes remained outstanding.

have generated limited revenues and have incurred significant operating losses since our inception and, as of December 31, 2023, we have

an accumulated deficit of $121.6 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable

Without capital raised through financing transactions, existing cash resources are sufficient to allow us to fund current planned

operations into the third quarter of 2024, which raises substantial doubt about the Company’s ability to continue as a going concern.

additional information on risks associated with our substantial capital requirements, please read the section titled “ Risk Factors ”

included elsewhere in this Annual Report on Form 10-K.

Flows for the years ended December 31, 2023 and 2022

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Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

$ (2,024,098 )

the years ended December 31, 2022 and 2021, we used cash in operating activities of $17.9 million and $8.2 million, respectively, primarily

resulting from the clinical advancement of our product candidates, the timing of vendor invoicing and payments, legal and accounting

fees, and costs related to operating as a public company.

$ (9,117,034 )

the years ended December 31, 2023 and 2022, we used cash in operating activities of $10.8 million and $17.9 million, respectively.

decrease primarily resulted from the change in net loss between 2022 and 2023 and the timing of vendor invoicing and payments primarily

associated with research and development activities.

the years ended December 31, 2023 and 2022, net cash provided by financing activities was $8.7 million and $8.8 million, respectively.

For 2021, net cash consisted primarily of net proceeds from the Merger in June 2021 and net proceeds from the issuance of the 2021 Notes.

In 2022, net cash consisted primarily of net proceeds from the issuance of the 2022 Notes and the net proceeds of the issuance of shares

and related warrants in connection with the underwriting agreement completed in December of 2022 which were less in the aggregate than

that raised in 2021.

For 2023, net cash proceeds from 2023 February and 2023 May offerings of $9.1 million, net of transaction costs of $0.4 million, net

cash proceeds from 2023 Notes of $1.6 million, and the repayment of financed insurance premiums of $0.5 million and cash payment of 2022

Notes of $1.0 million.

In 2022, net cash consisted primarily of net proceeds from the issuance of the 2022 Notes and the net proceeds

of the issuance of shares and related warrants in connection with the underwriting agreement completed in December of 2022.

primary use of cash is to fund operating expenses, primarily related to our research and development activities.

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In addition, upon the completion of the Merger, we have incurred, and will continue to incur, additional costs associated with operating

as a public company, including significant legal, accounting, insurance, investor relations and other expenses that we did not incur

as a private company.

The timing and amount of our operating expenditures will depend largely on our ability to:

preclinical development of our early-stage programs and clinical trials of our product candidates;

or have manufactured on our behalf, our preclinical and clinical drug material and develop processes for late state and commercial

manufacturing;

regulatory approvals for any product candidates that successfully complete clinical trials;

a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain

marketing approval and intend to commercialize on our own;

additional clinical, quality control and scientific personnel;

our operational, financial and management systems and increase personnel, including personnel to support our clinical development,

manufacturing and commercialization efforts and our operations as a public company;

maintain, expand and protect our intellectual property portfolio;

the costs of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights,

including enforcing and defending intellectual property related claims;

the costs of operating as a public company.

as a public company, including significant legal, accounting, insurance, investor relations and other expenses.

The timing and amount

of our operating expenditures will depend largely on our ability to:

advance preclinical development

of our early-stage programs and clinical trials of our product candidates;

manufacture, or have manufactured

on our behalf, our preclinical and clinical drug material and develop processes for late state and commercial manufacturing;

seek regulatory approvals

for any product candidates that successfully complete clinical trials;

establish a sales, marketing,

medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval

and intend to commercialize on our own;

hire additional clinical,

quality control and scientific personnel;

expand our operational,

financial and management systems and increase personnel, including personnel to support our clinical development, manufacturing and

commercialization efforts and our operations as a public company;

obtain, maintain, expand

and protect our intellectual property portfolio;

manage the costs of preparing,

filing and prosecuting patent applications, maintaining and protecting our intellectual property rights, including enforcing and

defending intellectual property related claims;

manage the costs of operating

as a public company.

commitments as of December 31, 2023 included an estimated $17.9 million related to open purchase orders and contractual obligations that

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the option to cancel, reschedule, and adjust requirements based on our business needs prior to the delivery of goods or the performance

have generated limited revenues and have incurred significant operating losses since our inception and, as of December 31, 2022, we have

an accumulated deficit of $110.9 million.

We expect to continue to incur significant expenses and operating losses for the foreseeable

2021 Notes and 2022 Notes limit our ability to execute certain debt and equity financings, including under the GEM Agreement, while the

2021 Notes or 2022 Notes are outstanding.

Without the availability of proceeds through the share subscription facility, or capital raised

through other financing transactions, existing cash resources are not sufficient to allow us to fund current planned operations through

the next 12 months following the filing of this Annual Report on Form 10-K, which raises substantial doubt about the Company’s

ability to continue as a going concern.

additional information on risks associated with our substantial capital requirements, please read the section titled “ Risk Factors ”

included elsewhere in this Annual Report on Form 10-K.

of the numerous risks and uncertainties associated with research, development and commercialization of biologic product candidates, we

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increase significantly as a result of many factors, including:

scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical and clinical

costs, timing and outcome of regulatory review of our product candidates;

costs, timing and ability to manufacture our product candidates to supply our clinical and preclinical development efforts and our

clinical trials;

costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product

candidates for which we receive marketing approval;

costs of manufacturing commercial-grade product and necessary inventory to support commercial launch;

ability to receive additional non-dilutive funding, including grants from organizations and foundations;

revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;

costs of preparing, filing and prosecuting patent applications, obtaining, maintaining, expanding and enforcing our intellectual

property rights and defending intellectual property-related claims;

ability to establish and maintain collaborations on favorable terms, if at all;

extent to which we acquire or in-license other product candidates and technologies.

the scope, progress, results

and costs of researching and developing our product candidates, and conducting preclinical and clinical trials;

the costs, timing and outcome

of regulatory review of our product candidates;

the costs, timing and ability

to manufacture our product candidates to supply our clinical and preclinical development efforts and our clinical trials;

the costs of future activities,

including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which

we receive marketing approval;

the costs of manufacturing

commercial-grade product and necessary inventory to support commercial launch;

the ability to receive

additional non-dilutive funding, including grants from organizations and foundations;

the revenue, if any, received

from commercial sale of our products, should any of our product candidates receive marketing approval;

the costs of preparing,

filing and prosecuting patent applications, obtaining, maintaining, expanding and enforcing our intellectual property rights and

defending intellectual property-related claims;

our ability to establish

and maintain collaborations on favorable terms, if at all;

the extent to which we

acquire or in-license other product candidates and technologies.

Accounting Policies and Significant Judgments and Estimates

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our significant accounting policies are described in more detail in Note 3 to our audited consolidated financial statements, we believe

that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our consolidated

that the following accounting policy is the most critical to the judgments and estimates used in the preparation of our consolidated

financial statements.

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of estimated accrued research and development expenses include fees paid to:

including research laboratories, in connection with preclinical development activities;

and investigative sites in connection with preclinical studies and clinical trials;

in connection with drug substance and drug product formulation of preclinical studies and clinical trial materials.

vendors, including research

laboratories, in connection with preclinical development activities;

CROs and investigative

sites in connection with preclinical studies and clinical trials;

CMOs in connection with

drug substance and drug product formulation of preclinical studies and clinical trial materials.

base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant

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to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any

particular period.

measure all stock-based awards granted to employees, directors and non-employees based on their fair value on the date of the grant and

recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period

of the respective award.

Forfeitures are accounted for as they occur.

We grant stock options and restricted stock awards that are subject

to either service or performance-based vesting conditions.

Compensation expense related to awards to employees and non-employees with

performance-based vesting conditions is recognized based on the grant date fair value over the requisite service period using the accelerated

attribution method to the extent achievement of the performance condition is probable.

We estimate the probability that certain performance

criteria will be met and do not recognize compensation expense until it is probable that the performance-based vesting condition will

classify stock-based compensation expense in our statements of operations in the same way the award recipient’s payroll costs are

classified or in which the award recipient’s service payments are classified.

estimate the fair value of each stock option grant using the Black-Scholes option-pricing model, which uses as inputs the fair value

of our common stock and assumptions we make for the volatility of our common stock, the expected term of our stock options, the risk-free

interest rate for a period that approximates the expected term of our stock options and our expected dividend yield.

Value of Liabilities

elected the fair value option to account for the 2021 Notes as we believe the fair value option provides users of the financial statements

with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes

in the fair value of the common stock underlying the conversion option.

We use a Monte Carlo simulation to estimate the fair value of

the conversion feature of the notes, which relies on unobservable Level 3 inputs.

We use a discounted cash flow model to estimate the

fair value of the debt component of the 2021 Notes.

Changes in the fair value of the notes are recognized through other income (expense)

for each reporting period.

July and August 2022, the Company issued the 2022 Notes.

The 2022 Notes are accounted for under ASC 480 – Distinguishing Liabilities

from Equity, due to share settlement features contained within the notes.

As a result, the 2022 Notes are recorded as liabilities

at fair value at the balance sheet date with changes in the fair value of the notes recognized in other income (expense) for each reporting

The fair value estimate of the 2022 Notes was based on a discounted cash flow model and a Monte Carlo simulation, which represent

Level 3 measurements.

Significant assumptions include the discount rate used in the discounted cash flow model and the expected premium

for conversion used in the Monte Carlo simulation.

issued warrants in connection with the issuance of both the 2021 and 2022 Notes.

The warrants were liability classified due to certain

cash settlement features.

The Company uses a Black-Scholes model to estimate the fair value of the warrants.

Changes in the fair value

of the warrants are recognized in other income (expense) for each reporting period.

Sheet Arrangements

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is disclosed in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Growth Company and Smaller Reporting Company Status

are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various

reporting requirements that are applicable to other public companies that are not emerging growth companies.

We may take advantage of

these exemptions until we are no longer an emerging growth company under Section 107 of the JOBS Act, which provides that an emerging

growth company can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised

accounting standards.

We have elected to avail ourselves of the extended transition period and, therefore, while we are an emerging growth

company, we are not subject to new or revised accounting standards at the same time that they become applicable to other public companies

that are not emerging growth companies, unless we choose to early adopt a new or revised accounting standard.

Additionally,

we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take

advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

We will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held

Reporting Company Status

are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K.

Smaller reporting companies may take advantage

of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements.

will remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stock held

by non-affiliates exceeds $250 million as of the prior June 30, or (ii) our annual revenues exceeded $100 million during such completed

1 unchanged sentence

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 7. Management’s Discussion and Analysis