What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-07-28 · 81 added, 51 removed, 312 unchanged (30% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Assets (unaudited)

18 unchanged sentences

Common stock, $ 0.0001 par value;

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

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

12,732,836 and 6,812,836 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

Additional paid-in-capital 30,802 27,722

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

7 unchanged sentences

Change in fair value of warrant liability 757 — 490 —

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

Loss on warrant conversion ( 388 ) — ( 388 ) —

Interest income (expense), net 2 ( 4 ) — ( 14 )

Net loss ( 1,033 ) ( 1,257 ) ( 5,441 ) ( 6,207 )

21 unchanged sentences

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

Stock-based compensation — — 134 — — 134

Unrealized loss on investments — — — ( 1 ) — ( 1 )

Net loss — — — — ( 1,257 ) ( 1,257 )

Balance September 30, 2021 6,812,836 $ — $ 27,536 $ ( 1 ) $ ( 18,806 ) $ 8,729

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

9 unchanged sentences

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

Issuance of common stock upon warrant exercise 2,220,000 — 960 — — 960

Stock-based compensation — — ( 136 ) — — ( 136 )

Unrealized gain on marketable securities, available-for-sale — — — 2 — 2

Net loss — — — — ( 1,033 ) ( 1,033 )

Balance, September 30, 2022 12,732,836 $ 1 $ 30,802 $ ( 1 ) $ ( 27,343 ) $ 3,459

See accompanying notes to unaudited interim financial statements.

2 unchanged sentences

(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities:

6 unchanged sentences

Change in fair value of warrant liability ( 490 ) —

Loss on warrant conversion 388 —

Forgiveness of PPP note — ( 61 )

8 unchanged sentences

Sale of marketable securities 4,002 —

Cash provided by investing activities 2,030 —

Cash provided by (used in) investing activities 3,362 ( 3,266 )

Financing activities:

9 unchanged sentences

Conversion of convertible notes to common stock $ — $ 350

Finance lease liability costs included in accounts payable $ 154 $ —

Non-cash exercise of warrants $ 960 $ —

See accompanying notes to unaudited interim financial statements.

26 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 an accumulated deficit of $ 26,310 through June 30, 2022.

The Company has incurred operating losses since its inception and has incurred and accumulated deficit of $ 27,343 through September 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 .

As of September 30, 2022, the Company had cash, cash equivalents and marketable securities of approximately $ 5,151 .

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.

12 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 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.

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 September 30, 2022, and the results of operations and stockholders’ equity (deficit) for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021.

Results of operations for the three and nine months ended September 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 and subsequent warrant revaluations, 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

Warrant Liabilities, Change in Fair Value and Warrant Conversion

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.

As the warrants meet the definition of a derivative as contemplated in ASC 815, the warrants are recorded as derivative liabilities on the accompanying 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 accompanying Statements of Operations and Comprehensive Loss in the period of change.

The derivative liabilities will ultimately be converted into the Company’s common stock when the warrants are exercised, or will be extinguished upon expiry of the warrant term.

Upon exercise, the intrinsic value of the shares issued is transferred to stockholders’ equity.

The difference between the intrinsic value of the stock issued and the fair value of the warrant is recorded as gain or loss on the exchange in the accompanying Statements of Operations and Comprehensive Loss in the period of exercise.

Stock-based Compensation

10 unchanged sentences

Recent Accounting Pronouncements

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.

The Company considered the applicability and impact of all ASUs issued during the quarter ended September 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 June 30, 2022

As of September 30, 2022

Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

1 unchanged sentence

Debt securities:

Corporate bonds $ 150 $ — $ — $ 150

Municipal bonds 270 — ( 1 ) 269

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 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.

As of September 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 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)

3 unchanged sentences

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 warrants were classified as a liability in accordance with ASC 815-40 and the fair value of $ 225 is reflected in warrant liability on the accompanying Balance Sheets.

On July 25, 2022, the Company amended the terms of the warrants issued in May 2022 to obligate each warrant holder who signed the warrant amendment (Applicable Holder) to effect a cashless exercise, in whole, by August 10, 2022 (the Expiration Date).

The warrant amendment entitled the Applicable Holder to receive one share of common stock for each warrant in lieu of the aggregate number of shares of common stock that would have been received using the cashless exercise formula set forth in the warrant agreement (Alternate Cashless Exercise).

If the warrants held by the Applicable Holders were not exercised by the Expiration Date, they were automatically exercised pursuant to the Alternate Cashless Exercise.

A total of 2,220,000 warrants were exercised pursuant to the Alternate Cashless Exercise.

As a result of the warrant conversion, the Company recognized a $ 573 reversal of the warrant liability.

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

2 unchanged sentences

Initial measurement on May 17, 2022 1,288

Warrant conversion ( 573 )

Change in valuation ( 490 )

Balance, June 30, 2022 $ 1,554

Balance as of September 30, 2022 $ 225

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

May 17, 2022 September 30, 2022

Volatility 130.8 % 133.3 %

4 unchanged sentences

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 six months ended June 30, 2021.

As such, an expense of $ 89 was recorded during the nine months ended September 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

As of September 30, 2022

Due in 1 year $ 419

2 unchanged sentences

Due after 10 years —

Total $ 1,749

ACCRUED EXPENSES

Accrued expenses consist of the following:

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Research and development $ 297 $ 894

14 unchanged sentences

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

The 2021 Convertible Notes converted into 54,906 shares of the Company’s common stock upon completion of the IPO.

The 2021 Convertible Notes converted into 54,906 shares

of the Company’s common stock upon completion of the IPO.

The Company identified the mandatory conversion into shares of the Company’s common stock as a redemption feature, which requires bifurcation from the 2021 Convertible Notes and treated it as a derivative liability under ASC 815 as the redemption feature was not clearly and closely related to the debt.

10 unchanged sentences

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.

6 unchanged sentences

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 %

The warrants were classified as a liability and are revalued at each balance sheet date.

If the warrants held by the Applicable Holders were not exercised by the Expiration Date, they were automatically exercised pursuant to the Alternate Cashless Exercise.

A total of 2,220,000 warrants were exercised pursuant to the Alternate Cashless Exercise.

As a result of the warrant conversion, the Company recognized a $ 573 reversal of the warrant liability and a loss of $ 388 .

The fair value of $ 225 as of September 30, 2022 is reflected in warrant liability on the accompanying Balance Sheets (Note 4).

As of September 30, 2022, the Company had the following warrants outstanding to purchase common stock.

Number of Shares Exercise Price per Share Expiration Date

112,500 $ 10.00 February 12, 2026

1,480,000 $ 0.9382 May 17, 2027

STOCK-BASED COMPENSATION

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,

The Company recorded stock-based compensation related to stock options and restricted stock units (RSUs) 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 nine months ended September 30, 2022 and 2021:

For the Three Months Ended September 30, For the Nine Months Ended September 30,

2022 2021 2022 2021

9 unchanged sentences

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:

During the three and nine month periods ended September 30, 2022, the Company reversed stock based compensation related to performance awards with performance conditions deemed not probable of achievement.

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

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

3 unchanged sentences

Forfeited 216,406 4.06

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

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

Outstanding at September 30, 2022 696,584 $ 3.93 8.30

Exercisable at September 30, 2022 315,991 $ 3.37 7.77

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 Six Months Ended June 30,

For the Nine Months Ended September 30,

Volatility 90.39 % 83.50 %

3 unchanged sentences

Fair value of option on grant date $ 3.86 $ 3.87

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

At September 30, 2022, the unrecognized compensation cost related to unvested stock options expected to vest was $ 839 .

This unrecognized compensation is expected to be recognized over a weighted-average amortization period of 2.85 years.

Restricted Stock Units

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

The Company has issued performance-based and time-based 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:

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

Outstanding at December 31, 2021 —

2 unchanged sentences

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.

Outstanding at September 30, 2022 188,023

During the nine months ended September 30, 2022, the Company granted 188,023 RSUs at a weighted average grant date fair value of $ 0.5683 , of which 150,000 were performance-based RSUs and 38,023 were time-based RSUs.

As of September 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.

Compensation expense related to time-based RSUs was $ 6 for the nine months ended September 30, 2022.

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.

The unrecognized compensation cost related to unvested time-based RSUs was $ 18 and will be recognized over the vesting period.

RELATED PARTY TRANSACTIONS

13 unchanged sentences

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