What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-07-28 compared with 2022-05-09 · 112 added, 52 removed, 251 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Assets (unaudited)

10 unchanged sentences

Accrued expenses 854 1,430

Warrant liability 1,554 —

Other current liabilities 104 97

5 unchanged sentences

Common stock, $ 0.0001 par value;

250,000,000 shares authorized as of March 31, 2022 and December 31, 2021;

6,812,836 shares issued and outstanding as of March 31, 2022 and December 31, 2021

250,000,000 shares authorized as of June 30, 2022 and December 31, 2021;

10,512,836 and 6,812,836 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in-capital 29,978 27,722

7 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended March 31,

License revenue-related party $ — $ —

Three Months Ended

June 30, Six Months Ended

2022 2021 2022 2021

Operating expenses:

5 unchanged sentences

Revaluation of derivative liability — — — ( 89 )

Change in fair value of warrant liability ( 266 ) — ( 266 ) —

Interest expense, net ( 1 ) ( 2 ) ( 2 ) ( 10 )

Net loss $ ( 1,773 ) $ ( 2,312 ) $ ( 4,408 ) $ ( 4,950 )

Other comprehensive loss:

Unrealized loss on investments ( 4 ) —

Other comprehensive income (loss):

Unrealized gain (loss) on investments $ 3 $ — $ ( 1 ) $ —

Total comprehensive loss $ ( 1,770 ) $ ( 2,312 ) $ ( 4,409 ) $ ( 4,950 )

15 unchanged sentences

Balance, March 31, 2021 6,812,836 — 27,264 — ( 15,237 ) 12,027

Stock-based compensation — — 138 — — 138

Net loss — — — — ( 2,312 ) ( 2,312 )

Balance, June 30, 2021 6,812,836 $ — $ 27,402 $ — $ ( 17,549 ) $ 9,853

Common Stock Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Stockholders’ Equity

1 unchanged sentence

Stock-based compensation — — 181 — — 181

Unrealizes loss on marketable securities, available-for-sale — — — ( 4 ) — ( 4 )

Unrealized loss on marketable securities, available-for-sale — — — ( 4 ) ( 4 )

Net loss — — — — ( 2,635 ) ( 2,635 )

Balance, March 31, 2022 6,812,836 — 27,903 ( 6 ) ( 24,537 ) 3,360

Issuance of common stock, net of offering expenses 3,700,000 1 2,160 — — 2,161

Stock-based compensation — — ( 85 ) — — ( 85 )

Unrealized gain on marketable securities, available-for-sale — — — 3 — 3

Net loss — — — — ( 1,773 ) ( 1,773 )

Balance, June 30, 2022 10,512,836 $ 1 $ 29,978 $ ( 3 ) $ ( 26,310 ) $ 3,666

See accompanying notes to unaudited interim financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended

Six Months Ended

Operating activities:

5 unchanged sentences

Revaluation of derivative liability — 89

Change in fair value of warrant liability 266 —

Forgiveness of PPP note — ( 61 )

6 unchanged sentences

Investing activities:

Purchase of marketable securities ( 492 ) —

Sale of marketable securities 2,522 —

1 unchanged sentence

Financing activities:

Proceeds from common stock, net of offering expenses — 15,503

Proceeds from issuance of common stock and warrants, net of offering expenses 3,447 15,503

Proceeds from convertible notes — 350

Payment of finance lease liability ( 46 ) ( 62 )

Cash (used in) provided by financing activities ( 23 ) 15,819

Net (decrease) increase in cash and cash equivalents ( 1,159 ) 12,871

Cash provided by financing activities 3,401 15,791

Net increase in cash and cash equivalents 1,519 10,351

Cash and cash equivalents, at beginning of period 3,702 109

23 unchanged sentences

ADAIR scored similarly to what was observed in an earlier proof-of-concept study, however, reference dextroamphetamine did not score as high as expected and as seen in the previous study, thus driving the lack of statistical significance.

The SEAL study did meet all pharmacodynamic secondary endpoints including Overall Drug Liking and willingness to Take Drug Again at 12 and 24 hours post-dosing, demonstrating statistical significance.

The Company is continuing to assess the best path forward for the ADAIR and ADMIR development programs.

5 unchanged sentences

The Company has not generated any significant revenues from operations since inception and does not expect to do so in the foreseeable future.

The Company has incurred operating losses since its inception and has incurred $ 24,537 in accumulated deficit through March 31, 2022.

The Company has financed its working capital requirements to date through the issuance of common stock, convertible notes, short-term promissory notes, and a Paycheck Protection Program (PPP) promissory note.

In January 2021, the Company completed a $ 350 convertible note financing and in February 2021, the Company completed the inital public offering (IPO) of the Company’s common stock, raising net proceeds of $ 15,500 .

As of March 31, 2022, the Company had cash, cash equivalents and marketable securities of approximately $ 5,177 .

The Company expects to incur ongoing expenses as it evaluates its plans for the ADAIR and ADMIR programs and strategic alternatives after it announced in March 2022 that the SEAL study of ADAIR for the treatment of ADHD failed to meet statistical

significance for its primary endpoint.

The Company has incurred operating losses since its inception and has incurred an accumulated deficit of $ 26,310 through June 30, 2022.

The Company has financed its working capital requirements to date through the issuance of common stock, warrants, convertible notes, short-term promissory notes, and a Paycheck Protection Program (PPP) promissory note.

In January 2021, the Company completed a $ 350 convertible note financing and in February 2021, the Company completed the initial public offering (IPO), raising net proceeds of $ 15,500 .

On May 17, 2022, the Company entered into a Securities Purchase Agreement with certain investors (the Securities Purchase Agreement) for the sale of up to 3,700,000 shares of the Company’s common stock, par value $ 0.0001 per share (the Shares), at a

purchase price of $ 1.0632 per Share in a registered direct offering (the Offering).

In a concurrent private placement also pursuant to the Securities Purchase Agreement (the Private Placement), for each Share of common stock purchased by an investor, such investor was entitled receive from the Company an unregistered warrant (the Warrant and, together with the Shares, the Securities) to purchase one Share of common stock.

The gross proceeds from the Offering and Private Placement were approximately $ 3,900 , before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company of approximately $ 572 , of which $ 85 related to the warrants was expensed.

As of June 30, 2022, the Company had cash, cash equivalents and marketable securities of approximately $ 6,970 .

The Company is currently assessing the best path forward for the ADAIR and ADMIR programs and has no other product candidates undergoing clinical trials.

11 unchanged sentences

The December 31, 2021 balance sheet was derived from audited financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of March 31, 2022, and the results of operations and stockholders’ equity (deficit) for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021.

Results of operations for the three months ended March 31, 2022, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2022.

In the opinion of management, the unaudited interim financial statements furnished herein include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of June 30, 2022, and the results of operations and stockholders’ equity (deficit) for the three and six months ended June 30, 2022 and 2021 and cash flows for the six months ended June 30, 2022 and 2021.

Results of operations for the three and six months ended June 30, 2022, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2022.

The unaudited interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements.

5 unchanged sentences

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the unaudited interim financial statements and the reported amounts of expenses during the reporting period.

Estimates and assumptions are primarily made in relation to the valuation of share options, the embedded derivative of convertible notes, warrant issuance, valuation allowances relating to deferred tax assets, revenue recognition, accrued expenses and estimation of the incremental borrowing rate for the finance lease.

Estimates and assumptions are primarily made

in relation to the valuation of share options, the embedded derivative of convertible notes, warrant issuance, valuation allowances relating to deferred tax assets, revenue recognition, accrued expenses and estimation of the incremental borrowing rate for the finance lease.

If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

5 unchanged sentences

The Company considers various factors in determining whether to recognize an impairment charge, including the duration and severity of any decline in fair value below the amortized cost basis, any adverse changes in the financial condition of the issuers and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Warrant Liabilities

The Company evaluated the warrants issued in connection with the May 2022 registered direct financing (Note 7) in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC 815-40), and concluded that a provision in the warrants related to the reduction of the exercise price in certain circumstances precludes the warrants from being accounted for as components of equity.

As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants are recorded as derivative liabilities on the Balance Sheets and measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair Value Measurement , with changes in fair value recognized in the Statements of Operations and Comprehensive Loss in the period of change.

Stock-based Compensation

10 unchanged sentences

Recent Accounting Pronouncements

The Company considered the applicability and impact of all ASUs issued during the quarter ended March 31, 2022 and each was determined to be either not applicable or expected to have minimal impact on these financial statements.

The Company considered the applicability and impact of all ASUs issued during the quarter ended June 30, 2022 and each was determined to be either not applicable or expected to have minimal impact on these financial statements.

MARKETABLE SECURITIES AND FAIR VALUE MEASUREMENTS

1 unchanged sentence

The following is a summary of the Company’s available for sale securities as of the dates indicated:

As of March 31, 2022

As of June 30, 2022

Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

1 unchanged sentence

Debt securities:

Corporate bonds $ 349 $ — $ — $ 349

Municipal bonds 1,752 — ( 3 ) 1,749

14 unchanged sentences

Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

As of March 31, 2022, all of the Company’s marketable securities were classified as Level 2 assets.

As of June 30, 2022, the Company’s financial instruments included cash and cash equivalents, marketable securities, prepaid expenses and other current assets, accounts payable, accrued expenses, and the warrant liability.

The carrying amounts reported in the balance sheets for cash and cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair value based on the short-term maturity of these instruments.

The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

The carrying amounts reported in the balance sheets for cash and cash equivalents, marketable securities, prepaid expenses and other current assets, accounts payable, accrued expenses, and note payable approximate their fair value based on the short-term maturity of these instruments.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022:

Quoted Prices in Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Unobservable Inputs (Level 3)

Marketable securities, available-for-sale $ — $ 1,749 $ —

Warrant Liability $ — $ — $ 1,554

On May 17, 2022, the Company issued 3,700,000 shares of common stock pursuant to a securities purchase agreement at a purchase price of $ 1.0632 per share in a registered direct offering (Note 7).

In connection with the registered direct offering, the Company issued warrants to purchase an aggregate of 3,700,000 shares of common stock at an exercise price of $ 0.9382 per share.

The warrants were classified as a liability in accordance with ASC 815-40 and the fair value of $ 1,554 is reflected in warrant liability on the Balance Sheet.

The warrant liability was measured at fair value at inception and is revalued at each financial statement date, with changes in fair value presented within change in fair value of warrant liability in the Statement of Operations and Comprehensive Loss.

The following table presents the changes is the fair value of the Level 3 liability:

Warrant Liability

Fair value as of December 31, 2021 $ —

Initial measurement on May 17, 2022 1,288

Change in valuation 266

Balance, June 30, 2022 $ 1,554

The Black-Scholes valuation model was used to estimate the fair value of the warrants with the following weighted-average assumptions:

(Initial Measurement)

May 17, 2022 June 30, 2022

Volatility 130.8 % 132.3 %

Expected term in years 2.5 2.5

Dividend rate 0.0 % 0.0 %

Risk-free interest rate 2.665 % 2.955 %

The fair value of the embedded derivative liability identified in the 2021 Convertible Notes (Note 6) was a Level 3 fair value measurement.

As of February 12, 2021, the embedded derivative was remeasured based upon the conversion price of $ 8.00 per share upon closing of the IPO.

As such, an expense of $ 89 was recorded during the three months ended March 31, 2021.

The following table summarizes the estimated fair value of our investments in marketable debt securities with state contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

As of March 31, 2022

As such, an expense of $ 89 was recorded during the six months ended June 30, 2021.

The following table summarizes the estimated fair value of our investments in marketable debt securities with stated contractual maturity dates, accounted for as available-for-sale securities and classified by the contractual maturity date of the securities:

As of June 30, 2022

Due in 1 year $ 1,749

5 unchanged sentences

Accrued expenses consist of the following:

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Research and development $ 469 $ 894

12 unchanged sentences

In accordance with the CARES Act, all borrowers are required to maintain the PPP loan documentation for six years after the PPP loan was forgiven or repaid in full and to provide that documentation to the SBA upon request.

In January 2021, the Company entered into a Convertible Promissory Note Purchase Agreement with certain existing stockholders, including Salmon Pharma, an affiliate of Medice, and David Baker, the Company’s Chief Executive Officer, pursuant to which the Company issued convertible promissory notes (the 2021 Convertible Notes), for cash proceeds of $ 350 .

In January 2021, the Company entered into a Convertible Promissory Note Purchase Agreement with certain existing stockholders, including Salmon Pharma, an affiliate of Medice, and David Baker, the Company’s Chief Executive Officer, pursuant to which the Company issued the 2021 Convertible Notes, for cash proceeds of $ 350 .

The 2021 Convertible Notes bore an interest rate of 7.0 % per annum, non-compounding, and had a maturity date of September 30, 2021.

3 unchanged sentences

Upon the conversion of the 2021 Convertible Notes to common stock at the closing of the IPO, the embedded derivative liability was remeasured and removed from the balance sheet.

STOCKHOLDERS’ EQUITY

STOCKHOLDERS’ EQUITY (DEFICIT)

In February 2021, the Company completed the IPO of 2,250,000 shares of common stock at a public offering price of $ 8.00 per share.

The gross proceeds from the IPO, before deducting underwriting discounts, commissions and other offering expenses payable by the Company, were $ 18,000 .

Underwriting discounts and expenses totaled $ 1,600 and the Company incurred approximately $ 905 of additional expenses related to completing the IPO for aggregate net proceeds of approximately $ 15,500 .

On May 17, 2022, the Company sold 3,700,000 shares of common stock pursuant to a securities purchase agreement at a purchase price of $ 1.0632 per share in a registered direct offering (the Offering).

The gross proceeds from the Offering were approximately $ 3,900 , before deducting fees payable to the placement agent and other estimated offering expenses payable by the Company of approximately $ 572 of which $ 85 related to the warrants was expensed.

Common Stock Warrants

In connection with the IPO, the Company granted the underwriters warrants (the Underwriters' Warrants) to purchase an aggregate of 112,500 shares of common stock at an exercise price of $ 10.00 per share.

The Underwriters’ Warrants have a five-year term and were not exercisable prior to August 12, 2021.

All of the Underwriters’ Warrants were outstanding as of March 31, 2022.

The Underwriters’ Warrants have a five -year term and are not exercisable prior to August 12, 2021.

All of the Underwriters’ Warrants were outstanding as of June 30, 2022.

The warrants were classified as equity and the fair value of $ 399 is reflected as additional paid-in capital.

4 unchanged sentences

Risk-free interest rate 0.155 %

In connection with the Offering, the Company issued warrants to purchase an aggregate of 3,700,000 shares of common stock at an exercise price of $ 0.9382 per share.

The warrants have a five -year term.

All of the warrants were outstanding as of June 30, 2022.

The warrants were classified as a liability and the fair value of $ 1,554 is reflected in warrant liability on the balance sheet.

The Black-Scholes option-pricing model was used to estimate the initial fair value of the warrants with the following weighted-average assumptions:

Volatility 130.8 %

Expected term in years 2.5

Dividend rate 0.0 %

Risk-free interest rate 2.665 %

STOCK-BASED COMPENSATION

The Company recorded stock-based compensation related to stock options issued under the Company’s 2018 Equity Incentive Plan (2018 Plan) in the following expense categories of its accompanying statements of operations for the three months ended March 31, 2022 and 2021:

For the Three Months Ended March 31,

The Company recorded stock-based compensation related to stock options and shares issued under the Company’s 2018 Equity Incentive Plan (2018 Plan) in the following expense categories of its accompanying statements of operations for the three and six months ended June 30, 2022 and 2021:

For the Three Months Ended June 30, For the Six Months Ended June 30,

2022 2021 2022 2021

Research and development $ ( 129 ) $ 18 $ ( 111 ) $ 39

1 unchanged sentence

Total $ ( 85 ) $ 138 $ 96 $ 306

Stock Options

The Company has granted stock options to purchase its common stock to employees and consultants under the 2018 Plan, under which the Company may issue stock options, restricted stock and other equity-based awards.

1 unchanged sentence

Stock options granted by the Company generally have a contractual life of up to 10 years.

As of March 31, 2022, all equity awards granted from the 2018 Plan were in the form of stock options.

The Company measures equity-based awards granted to employees, and non-employees based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period or performance-based period, which is generally the vesting period of the respective award.

The measurement date for equity awards is the date of grant, and equity-based compensation costs are recognized as expense over the requisite service period, which is the vesting period or for certain performance-based awards.

The Company records the expense for these awards if it concludes that it is probable that the performance condition will be achieved.

The table below represents the activity of stock options granted to employees and non-employees for the three months ended March 31, 2022:

The measurement date for service-based equity awards is the date of grant, and equity-based compensation costs are recognized as expense over the requisite service period, which is the vesting period for certain performance-based awards.

The Company records expense for performance-based awards if it concludes that it is probable that the performance condition will be achieved.

The table below represents the activity of stock options granted to employees and non-employees for the six months ended June 30, 2022:

Number of options Weighted average exercise price Weighted average remaining contractual term (years)

3 unchanged sentences

Forfeited 182,290 —

Outstanding at March 31, 2022 890,490 $ 4.05 8.70

Exercisable at March 31, 2022 253,388 $ 3.22 7.89

Outstanding at June 30, 2022 730,700 $ 3.92 8.51

Exercisable at June 30, 2022 315,888 $ 3.36 7.88

The Black-Scholes option-pricing model was used to estimate the grant date fair value of each stock option grant at the time of grant using the following weighted-average assumptions:

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Volatility 90.39 % 83.50 %

3 unchanged sentences

Fair value of option on grant date $ 3.86 $ 3.87

As of March 31, 2022, the unrecognized compensation cost related to unvested stock options expected to vest was $ 1,486 .

At June 30, 2022, the unrecognized compensation cost related to unvested stock options expected to vest was $ 1,132 .

This unrecognized compensation is expected to be recognized over a weighted-average amortization period of 2.71 years.

Restricted Stock Units

The Company has issued performance-based restricted stock units (RSUs).

Vesting of the performance-based RSUs is subject to the achievement of certain milestones.

The following table summarizes the activity related to RSUs granted to employees for the three months ended June 30, 2022:

Outstanding at December 31, 2021 —

Granted 150,000

Vested and settled —

Expired/forfeited/canceled —

Outstanding at June 30, 2022 150,000

During the six months ended June 30, 2022, the Company granted 150,000 RSUs at a grant date fair value of $ 0.5552 , all of which were performance-based RSUs.

As of June 30, 2022, the milestones associated with the performance-based RSUs were not probable of achievement, and accordingly, no stock-based compensation expense has been recognized for these awards.

The unrecognized compensation cost related to unvested performance-based RSUs was $ 83 , which will be recognized commencing in the period in which the performance condition is deemed probable of achievement.

RELATED PARTY TRANSACTIONS

In January 2020, the Company entered into a license agreement with Medice which grants Medice an exclusive license, with the right to grant sublicenses, to develop, use, manufacture, market and sell ADAIR throughout Europe.

Medice is responsible for obtaining regulatory approval of ADAIR in the licensed territory.

Under the license agreement, Medice paid Vallon a $ 100 upfront payment and is required to pay milestone payments upon first obtaining regulatory approval to market and sell ADAIR in any country, territory or region in the licensed territory and upon achieving certain annual net sales thresholds.

Medice will also pay tiered royalties on annual net sales of ADAIR at rates in the low double-digits.

The initial term of the license agreement will expire five years after the date on which Medice first obtains regulatory approval in any country, territory or region in the licensed territory.

In January 2021, the Company entered into a Convertible Promissory Note Purchase Agreement with certain existing stockholders, including Salmon Pharma, an affiliate of Medice, and David Baker, the Company’s Chief Executive Officer, pursuant to which the Company issued the 2021 Convertible Notes for cash proceeds of $ 350 .

7 unchanged sentences

The global COVID-19 pandemic continues to present uncertainty and unforeseeable new risks to the Company’s operations and business plan.

The Company has closely monitored recent COVID-19 developments, including the lifting of COVID-19 safety measures, the drop in vaccination rates, the implementation of, and reaction to, vaccine mandates, the spread of various coronavirus strains such as the Delta variant, and supply chain and labor shortages.

In light of these developments, the full impact of the COVID-19 pandemic on the Company’s business, operations and clinical development plans remains uncertain and will vary depending on the pandemic’s future impact on the Company’s clinical trial enrollment, clinical trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as any legal or regulatory consequences resulting therefrom.

The Company has closely monitored recent COVID-19 developments, including the lifting of COVID-19 safety measures, the drop in vaccination rates, the implementation of, and reaction to, vaccine mandates, the spread of new strains or variants of coronavirus (such as the Delta and Omicron variants), and supply chain and labor shortages.

In light of these developments, the full impact of the COVID-19 pandemic on the Company’s business, operations and clinical development plans remains uncertain and will vary depending on the pandemic’s future impact on the Company’s clinical trial enrollment (including the Company’s ability to recruit and retain patients), clinical trial sites, CROs, third-party manufacturers, and other third parties with whom we do business, as well as any legal or regulatory consequences resulting therefrom.

To the extent possible, the Company is conducting business as usual, with necessary or advisable modifications to employee travel and with most of its employees and consultants working remotely.

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-Q

Item 1. Financial Statements