What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-03 · 181 added, 239 removed, 154 unchanged (73% of the section changed)

Financial Statements.

Vallon Pharmaceuticals, Inc.

GRI Bio, Inc.

(formerly Vallon Pharmaceuticals, Inc.)

Balance Sheets

(in thousands, except share and per share amounts)

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Assets (unaudited)

1 unchanged sentence

Cash and cash equivalents $ 1,665 $ 3,781

Marketable securities, available-for-sale 419 3,808

Prepaid expenses and other current assets 432 371

Total current assets 5,569 8,129

Other assets — 206

Total assets $ 2,097 $ 4,152

4 unchanged sentences

Warrant liability 185 122

Other current liabilities — 97

Total current liabilities 2,110 2,445

Other liabilities — 72

Total liabilities 2,066 1,810

2 unchanged sentences

Common stock, $ 0.0001 par value;

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

250,000,000 shares authorized as of March 31, 2023 and December 31, 2022;

449,408 shares issued and outstanding as of March 31, 2023 and December 31, 2022

Additional paid-in-capital 31,353 31,268

Accumulated other comprehensive loss ( 1 ) ( 2 )

Accumulated deficit ( 31,322 ) ( 28,926 )

2 unchanged sentences

See accompanying notes to unaudited interim financial statements.

Vallon Pharmaceuticals, Inc.

Table of Content s

GRI Bio, Inc.

(formerly Vallon Pharmaceuticals, Inc.)

Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Three Months Ended

September 30, Nine Months Ended

September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Operating expenses:

3 unchanged sentences

Loss from operations ( 2,349 ) ( 2,634 )

Other income — — — 61

Revaluation of derivative liability — — — ( 89 )

Change in fair value of warrant liability ( 63 ) —

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

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

Interest expense, net 16 ( 1 )

Net loss ( 2,396 ) ( 2,635 )

Other comprehensive income (loss):

Unrealized gain (loss) on investments 2 ( 1 ) 1 ( 1 )

Other comprehensive loss:

Unrealized loss on investments — ( 4 )

Total comprehensive loss $ ( 2,396 ) $ ( 2,639 )

3 unchanged sentences

See accompanying notes to unaudited interim financial statements.

Vallon Pharmaceuticals, Inc.

Statements of Changes in Stockholders’ Equity (Deficit)

Table of Content s

GRI Bio, Inc.

(formerly Vallon Pharmaceuticals, Inc.)

Statements of Changes in Stockholders’ Equity

(in thousands, except shares)

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

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

Balance, December 31, 2021 227,093 $ — $ 27,722 $ ( 2 ) $ ( 21,902 ) $ 5,818

Issuance of common stock for convertible notes 54,906 — 439 — — 439

Issuance of common stock for IPO, net of issuance expenses 2,250,000 — 15,104 — — 15,104

Issuance of common stock for services 1,714 — 9 — — 9

Issuance of Underwriters Warrants — — 399 — — 399

Stock-based compensation — — 181 — — 181

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

Net loss — — — — ( 2,635 ) ( 2,635 )

Balance, March 31, 2022 227,093 $ — $ 27,903 $ ( 6 ) $ ( 24,537 ) $ 3,360

Stock-based compensation — — 138 — — 138

Net loss — — — — ( 2,312 ) ( 2,312 )

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

1 unchanged sentence

Stock-based compensation — — 85 — — 85

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

Net loss — — — — ( 2,396 ) ( 2,396 )

Balance, March 31, 2023 449,408 $ — $ 31,353 $ — $ ( 31,322 ) $ 31

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

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.

Vallon Pharmaceuticals, Inc.

Table of Content s

GRI Bio, Inc.

(formerly Vallon Pharmaceuticals, Inc.)

Statements of Cash Flows

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Operating activities:

4 unchanged sentences

Stock-based compensation expense 85 181

Revaluation of derivative liability — 89

Change in fair value of warrant liability 63 —

Loss on warrant conversion 388 —

Forgiveness of PPP note — ( 61 )

Non-cash interest, depreciation and other expense — 2

Change in operating assets and liabilities:

4 unchanged sentences

Investing activities:

Purchase of marketable securities ( 640 ) ( 3,266 )

Sale of marketable securities — 1,154

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

Cash provided by investing activities — 1,154

Financing activities:

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 — ( 23 )

Cash provided by financing activities 3,432 15,770

Net increase in cash and cash equivalents 1,030 5,775

Cash used in financing activities — ( 23 )

Net decrease in cash and cash equivalents ( 2,116 ) ( 1,159 )

Cash and cash equivalents, at beginning of period 3,781 3,702

Cash and cash equivalents, at end of period $ 1,665 $ 2,543

Supplemental disclosure of cash flows information:

Noncash financing activities:

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.

Vallon Pharmaceuticals, Inc.

Table of Content s

GRI Bio, Inc.

(formerly Vallon Pharmaceuticals, Inc.)

Notes to Unaudited Interim Financial Statements

1 unchanged sentence

ORGANIZATION AND DESCRIPTION OF BUSINESS

Vallon Pharmaceuticals, Inc.

(Vallon or the Company), based in Philadelphia, PA was incorporated in Delaware on January 11, 2018, which is the date of inception.

The Company is a biopharmaceutical company focused on the development and commercialization of novel abuse-deterrent medications for CNS disorders.

The Company’s lead investigational product candidate, ADAIR, is a proprietary, abuse-deterrent oral formulation of immediate-release dextroamphetamine (the main active ingredient in Adderall®) for the treatment of attention-deficit/hyperactivity disorder (ADHD) and narcolepsy.

In March 2022, the Company announced that its SEAL study for ADAIR did not reach its primary endpoint, and there is no assurance that ADAIR will receive approval by the U.S.

Food and Drug Administration (the FDA).

In addition to ADAIR, the Company completed formulation development work and selected the final formulation of its second product candidate, ADMIR, an abuse deterrent formulation of methylphenidate (Ritalin®), for the treatment of ADHD.

Recent Developments

The SEAL study ( S tudy to E valuate the A buse L iability, Pharmacokinetics, Safety and Tolerability of an Abuse-Deterrent d-Amphetamine Sulfate Immediate Release Formulation), was the Company’s pivotal intranasal human abuse liability study assessing the pharmacodynamics (PD), pharmacokinetics (PK), safety and tolerability of snorting professional laboratory-manipulated ADAIR 30 mg when compared to crushed d-amphetamine sulfate and placebo in recreational drug users.

ADAIR was prepared for snorting by a pharmacist using a multi-step technique that had been developed by a professional laboratory and agreed upon by the FDA.

The SEAL study enrolled 55 subjects, of whom 53 completed the study and 52 were included in the final analysis.

The study involved a four-way crossover design to evaluate professionally manipulated, intranasal ADAIR 30 mg, crushed intranasal dextroamphetamine, ADAIR 30 mg taken orally, and placebo.

All subjects were non-dependent recreational stimulant users with an additional history of recreational intranasal drug use.

The SEAL study did not meet its primary endpoint, which was E max Drug Liking.

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.

In addition, the Company has engaged Ladenburg Thalmann & Co.

(Ladenburg) to evaluate its strategic alternatives with the goal of maximizing stockholder value.

Ladenburg has been engaged to advise the Company on the strategic review process, which could include, without limitation, exploring the potential for a possible merger, business combination, investment into the Company, or a purchase, license or other acquisition of assets.

In the meantime, and in conjunction with the exploration of strategic alternatives, the Company is streamlining its operations in order to preserve its capital and cash resources.

These financial statements have been prepared on the basis that the Company is a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.

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 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.

Merger with GRI Bio, Inc.

On April 21, 2023, GRI Bio, Inc.

(GRI or the Company), formerly known as Vallon Pharmaceuticals, Inc.

(Vallon) completed its previously announced merger transaction with GRI Operations, Inc., formerly known as GRI Bio, Inc.

(Private GRI) in accordance with the terms of the Agreement and Plan of Merger, dated as of December 13, 2022, and amended on February 17, 2023 (the Merger Agreement),by and among Vallon, Vallon Merger Sub, Inc.

(Merger Sub), and Private GRI, pursuant to which Merger Sub merged with and into Private GRI, with Private GRI surviving as a wholly owned subsidiary of Vallon (the Merger)(Note 10).

Immediately prior to the effective time of the Merger (the Effective Time), on April 21, 2023, the Company effected a 1-for-30 reverse stock split of its common stock (the Reverse Stock Split).

Stockholders’ equity and all references to share and per share amounts in the accompanying financial statements have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

Substantially concurrent with the closing of the Merger, Vallon was renamed “GRI Bio, Inc.”

Prior to the Merger, Private GRI was incorporated under the laws of the State of Delaware in May 2009 under the name Glycoregimmune, Inc.

and changed its name to GRI Bio, Inc, in July 2015.

GRI is based in La Jolla, California.

The unaudited interim financial statements included in this Quarterly Report on Form 10-Q are representative of Vallon’s operations prior to the closing of the Merger, the adoption of Private GRI’s business plan and the commencement of conducting Private GRI’s business.

Unless the context otherwise requires, references to the “Company” or “GRI” refer to GRI Bio, Inc.

and its subsidiary after completion of the Merger.

In addition, references to “Vallon” refer to the Company prior to the completion of the Merger.

Nature of Business

GRI is a clinical-stage biopharmaceutical company focused on discovering, developing, and commercializing innovative therapies that target serious diseases associated with dysregulated immune responses leading to inflammatory, fibrotic, and autoimmune disorders.

The Company’s goal is to be an industry leader in developing therapies to treat these diseases and to improve the lives of patients suffering from such diseases.

The Company’s lead product candidate, GRI-0621, is an oral inhibitor of type 1 Natural Killer T (iNKT I) cells and is being developed for the treatment of severe fibrotic lung diseases such as idiopathic pulmonary fibrosis (IPF).

The Company’s product candidate portfolio also includes GRI-0803 and a proprietary library of 500+ compounds.

GRI-0803, the lead molecule selected from the library, is a novel oral agonist of type 2 Natural Killer T (NKT II) cells and is being developed for the treatment of autoimmune disorders, with much of its preclinical work in Systemic Lupus Erythematosus Disease (SLE) or lupus and multiple sclerosis (MS).

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

Vallon has incurred operating losses since its inception and has incurred $ 31,322 in accumulated deficit through March 31, 2023.

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

In May 2022, Vallon entered into a Securities Purchase Agreement with certain investors (the Securities Purchase Agreement) for the sale of up to 123,333 shares of the Company’s common stock, par value $ 0.0001 per share (the Shares), at a purchase price of $ 31.896 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) 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 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.

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

The Company’s future capital requirements are difficult to forecast and will depend on many factors, including but not limited to the terms and timing of any strategic alternatives including a merger or business combination, asset acquisitions or sales, collaborations or licensing arrangements.

If the Company raises additional funds by issuing equity securities, its stockholders may experience dilution.

Any future debt financing may impose upon it covenants that restrict our operations, including limitations on its ability to incur liens or additional debt, pay dividends, repurchase its common stock, make certain investments and engage in certain merger, consolidation or asset sale transactions.

Any equity or debt financing may contain terms that are not favorable to the Company or its stockholders.

If the Company is unable to raise additional funds when needed, it may be required to delay, reduce or terminate some or all of its development programs and clinical trials.

The Company may also be required to sell or license to other parties’ rights to develop or commercialize its drug candidates that it would prefer to retain.

Therefore, there is substantial doubt about the Company’s ability to continue as a going concern.

The Company expects to continue to incur expenses and operating losses at least for the foreseeable future as it evaluates future plans for the ADAIR and ADMIR programs as well as its strategic alternatives.

Table of Content s

As of March 31, 2023, the Company had cash, cash equivalents and marketable securities of approximately $ 1,665 .

Following the completion of the Merger (Note 10), management believes the combined organization’s existing resources will be sufficient to support the combined organization’s planned operations for at least the next twelve months.

For the foreseeable future, the Company’s ability to continue its operations is dependent upon its ability to obtain additional capital.

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial periods and pursuant to the rules of the Securities and Exchange Commission.

References in this Quarterly Report on Form 10-Q to “authoritative guidance” is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB).

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 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 December 31, 2022 balance sheet was derived from Vallon’s 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 Vallon’s financial position as of March 31, 2023, and the results of operations and stockholders’ equity (deficit) for the three months ended March 31, 2023 and 2022 and cash flows for the three months ended March 31, 2023 and 2022.

Results of operations for the three months ended March 31, 2023, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2023.

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

The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on February 14, 2022.

The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2022, included in the Vallon’s Annual Report on Form 10-K filed with the SEC on February 24, 2023.

Recapitalization

Immediately prior to the closing of the IPO (Note 7), the Company effected a one-for-40 reverse stock split of its common stock.

Concurrent with the closing of the Merger (Note 10), on April 21, 2023, the Company effected a 1-for-30 reverse stock split of its common stock.

All share and per share amounts, excluding the number of authorized shares and par value, contained in these financial statements and accompanying notes, and this Quarterly Report on Form 10-Q give retroactive effect to the reverse split.

Use of Estimates

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 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.

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 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 and subsequent 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.

Marketable Securities

Marketable securities consist of debt securities that are designated as available-for-sale.

Marketable debt securities are recorded at fair value and unrealized holding gains or losses are reported as a component of accumulated other comprehensive income (loss).

Realized gains or losses resulting from the sale of these securities are determined based on the specific identification of the securities sold.

An impairment charge is recognized when the decline in the fair value of a debt security below the amortized cost basis is determined to be other-than-temporary.

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.

Cash and Cash Equivalents

Cash equivalents are highly-liquid investments that are readily convertible into cash with original maturities of three months or less when purchased and as of March 31, 2023 and December 31, 2022 included investments in money market funds.

The Company maintains its cash and cash equivalent balances at domestic financial institutions.

Bank deposits with US banks are insured up to $ 250 by the Federal Deposits Insurance Corporation.

The Company had uninsured cash balances of $ 1,218 and $ 3,281 at March 31, 2023 and December 31, 2022, respectively.

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 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 Company evaluated the warrants issued in connection with the Offering (Note 6) 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 accompanying Balance Sheets and measured at fair value at inception and at each reporting date in accordance with ASC 820, Fair

Table of Content s

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.

The difference between the intrinsic value of the stock issued and the fair value of the Warrants 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 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

Marketable Securities

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

As of September 30, 2022

Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Marketable Securities:

Debt securities:

Corporate bonds $ 150 $ — $ — $ 150

Municipal bonds 270 — ( 1 ) 269

Total $ 420 $ — $ ( 1 ) $ 419

As of December 31, 2021

Adjusted Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value

Marketable Securities:

Debt securities:

Corporate bonds $ 1,153 $ — $ ( 1 ) $ 1,152

Municipal bonds 2,657 — ( 1 ) 2,656

Total $ 3,810 $ — $ ( 2 ) $ 3,808

The Company considered the applicability and impact of all ASUs issued during the quarter ended March 31, 2023 and each was determined to be either not applicable or expected to have minimal impact on these financial statements.

FAIR VALUE MEASUREMENTS

Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

4 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 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 September 30, 2022:

As of March 31, 2023, the Vallon’s financial instruments included cash and cash equivalents, 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.

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

Table of Content s

The following table presents, for each of the fair value hierarchy levels required under ASC 820, Vallon’s liabilities that are measured at fair value on a recurring basis at March 31, 2023:

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

Marketable securities, available-for-sale $ — $ 419 $ —

Warrant liability $ — $ — $ 185

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.

On May 17, 2022, Vallon issued 123,333 shares of common stock pursuant to the Securities Purchase Agreement at a purchase price of $ 31.896 per share in the Offering (Note 6).

In connection with the Offering, the Company issued Warrants to purchase an aggregate of 123,333 shares of common stock at an exercise price of $ 28.146 per share.

The Warrants were classified as a liability in accordance with ASC 815-40 and the fair value of $ 185 is reflected in warrant liability on the accompanying Balance Sheets.

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 accompanying Statements of Operations and Comprehensive Loss.

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:

1 unchanged sentence

Fair value as of December 31, 2022 $ 122

Initial measurement on May 17, 2022 1,288

Warrant conversion ( 573 )

Change in valuation 63

Balance as of September 30, 2022 $ 225

Balance as of March 31, 2023 $ 185

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 September 30, 2022

December 31, 2022 March 31, 2023

Volatility 139.9 % 159.4 %

2 unchanged sentences

Risk-free interest rate 4.32 % 3.94 %

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 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 September 30, 2022

Due in 1 year $ 419

Due in 1-5 years —

Due in 5-10 years —

Due after 10 years —

ACCRUED EXPENSES

Accrued expenses consist of the following:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Research and development $ 2 $ 42

1 unchanged sentence

Payroll and related 1,215 401

Licensing related — 62

Total accrued expenses $ 1,353 $ 711

PPP NOTE AND CONVERTIBLE NOTES

In May 2020, the Company issued a promissory note under the PPP (the PPP Note) totaling $ 61 .

The PPP Note had a stated interest rate of 1 % and had a two-year maturity.

Payments were required to be made over a 1.5 -year period beginning November 1, 2020 unless forgiven.

In January 2021, the Company was notified that the loan along with accumulated interest had been forgiven.

As a result, the Company recorded income from the extinguishment of its obligation in accordance with ASC 405-20-40-1, disclosed in the amount of $ 61 included in other income on the accompanying statements of operations and comprehensive loss.

The Small Business Administration (SBA) reserves the right to audit any PPP loan, regardless of size.

These audits may occur after forgiveness has been granted.

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 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.

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.

The Company evaluated the fair value of the derivative liability.

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 (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 were 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.

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STOCKHOLDERS’ EQUITY

In February 2021, Vallon completed the IPO of 75,000 shares of common stock at a public offering price of $ 240.00 per share.

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

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

On May 17, 2022, Vallon completed the Offering, pursuant to which it sold 123,333 shares of common stock pursuant to the Securities Purchase Agreement at a purchase price of $ 31.896 per share .

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 Vallon 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 are not exercisable prior to August 12, 2021.

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

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

In connection with the IPO, Vallon granted the underwriters warrants (the Underwriters' Warrants) to purchase an aggregate of 3,758 shares of common stock at an exercise price of $ 300.00 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, 2023.

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

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

Volatility 85.0 %

2 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.

In connection with the Offering, the Company issued Warrants to purchase an aggregate of 123,333 shares of common stock at an exercise price of $ 28.146 per share (May 2022 Warrant Agreement).

The Warrants have a five-year term.

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.

The May 2022 Warrant Agreement entitled the holders 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 May 2022 Warrant Agreement (Alternate Cashless Exercise).

In July 2022, Vallon amended the terms of the May 2022 Warrant Agreement to obligate each Warrant holder who signed the warrant amendment (each, an Applicable Holder) to effect an Alternate Cashless Exercise, in whole, by August 10, 2022 (the Expiration Date).

The Warrants held by the Applicable Holders that were not exercised by the Expiration Date, were automatically exercised pursuant to the Alternate Cashless Exercise.

A total of 74,000 Warrants were exercised pursuant to the May 2022 Warrant Agreement amendment.

In December 2022, an additional 24,666 Warrants were exercised pursuant to the Alternate Cashless Exercise under the original terms of the May 2022 Warrant Agreement.

The fair value of the Warrants of $ 185 as of March 31, 2023 is reflected in warrant liability on the accompanying Balance Sheets (Note 4).

As of March 31, 2023, Vallon had the following warrants outstanding to purchase common stock.

Number of Shares Exercise Price per Share Expiration Date

1 unchanged sentence

24,667 $ 28.146 May 17, 2027

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STOCK-BASED COMPENSATION

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

Vallon recorded stock-based compensation related to stock options issued under the Vallon’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, 2023 and 2022:

For the Three Months Ended March 31,

Research and development $ 6 $ 18

1 unchanged sentence

Total $ 85 $ 181

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.

The Company has also granted certain stock options outside of the 2018 Plan.

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

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.

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

Vallon has also granted certain stock options outside of the 2018 Plan.

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

As of March 31, 2023, 47,761 shares of the Company's common stock were authorized to be issued under the 2018 Plan, and 24,303 shares were reserved for future awards under the 2018 Plan.

Vallon 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 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.

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:

The table below represents the activity of stock options granted to employees and non-employees for the three months ended March 31, 2023:

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

Outstanding at December 31, 2022 23,142 $ 118.05 8.05

Granted 204,500 $ 5.22

Exercised — —

Forfeited — —

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

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

Outstanding at March 31, 2023 23,142 $ 118.05 7.80

Exercisable at March 31, 2023 13,112 $ 106.79 7.53

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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 Nine Months Ended September 30,

For the Three Months Ended March 31, 2022

Volatility 88.65 %

3 unchanged sentences

Fair value of option on grant date $ 128.70

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

No options were granted during the three months ended March 31, 2023.

As of March 31, 2023, the unrecognized compensation cost related to unvested stock options expected to vest was $ 753 .

This unrecognized compensation is expected to be recognized over a weighted-average amortization period of 2.39 years.

Restricted Stock Units

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 nine months ended September 30, 2022:

Outstanding at December 31, 2021 —

Granted 188,023

Vested and settled —

Expired/forfeited/canceled —

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

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.

In January 2020, Vallon entered into a license agreement with MEDICE Arzneimittel Pütter GmbH & Co.

K ( Medice), a Vallon stockholder, 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.

COMMITMENTS AND CONTINGENCIES

4 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 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.

The Company will continue to actively monitor the COVID-19 pandemic and may take further actions that alter its operations, including those that may be required by federal, state or local authorities, or that the Company determines are in the best interests of its employees and other third parties with whom the Company does business.

Vallon has closely monitored recent COVID-19 developments, including states’ lifting COVID-19 safety measures, drops in vaccination rates, and the spread of various coronavirus strains such as the Delta and Omicron variants.

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

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SUBSEQUENT EVENTS

Merger with GRI Bio, Inc.

On April 21, 2023, pursuant to the Merger Agreement, Merger Sub was merged with and into Private GRI, with Private GRI surviving the Merger as a wholly owned subsidiary of the Company.

In connection with the Merger, and prior to the Effective Time, the Company effected the Reverse Split.

Also, in connection with the Closing), the Company amended its certificate of incorporation and bylaws to change its name from “Vallon Pharmaceuticals, Inc.” to “GRI Bio, Inc.”

At the Effective Time:

(a) Each share of Private GRI’s common stock (Private GRI Common Stock) outstanding immediately prior to the Effective Time, including any shares of Private GRI Common Stock issued pursuant to the Equity SPA (as defined below) automatically converted solely into the right to receive a number of shares of the Company’s common stock equal to 0.0374 (the Exchange Ratio).

(b) Each option to purchase shares of Private GRI Common Stock (each, a GRI Option) outstanding and unexercised immediately prior to the Effective Time under the GRI Bio, Inc.

2015 Equity Incentive Plan (the GRI Plan), whether or not vested, converted into and became an option to purchase shares of the Company’s common stock, and the Company assumed the GRI Plan and each such GRI Option in accordance with the terms of the GRI Plan (the Assumed Options).

The number of shares of Company Common Stock subject to each Assumed Option was determined by multiplying (i) the number of shares of GRI Common Stock that were subject to such GRI Option, as in effect immediately prior to the Effective Time, by (ii) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of Company Common Stock.

The per share exercise price for the Company Common Stock issuable upon exercise of each Assumed Option was determined by dividing (A) the per share exercise price of such Assumed Option, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio and rounding the resulting per share exercise price up to the nearest whole cent.

Any restriction on the exercise of any Assumed Option continued in full force and effect and the term, exercisability, vesting schedule, and any other provisions of such Assumed Option otherwise remained unchanged.

(c) Each warrant to purchase shares of Private GRI Common Stock outstanding immediately prior to the Effective Time other than the Bridge Warrants (as defined below) (the GRI Warrants), was assumed by the Company and converted into a warrant to purchase shares of the Company’s common stock (the Assumed Warrants) and thereafter (i) each Assumed Warrant became exercisable solely for shares of the Company’s common stock;

(ii) the number of shares of the Company’s common stock subject to each Assumed Warrant was determined by multiplying (A) the number of shares of Private GRI Common Stock that were subject to such GRI Warrant, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of Company Common Stock;

(iii) the per share exercise price for shares of the Company’s common stock issuable upon exercise of each Assumed Warrant was determined by dividing (A) the exercise price per share of the GRI Common Stock subject to such GRI Warrant, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio, and rounding the resulting exercise price up to the nearest whole cent.

(d) The Bridge Warrants were exchanged for warrants (the Exchange Warrants) to purchase an aggregate of 421,589 shares of the Company’s common stock.

The Exchange Warrants contain substantively similar terms to the Bridge Warrants, and have an initial exercise price equal to $ 14.73 per share.

(e) All rights with respect to Private GRI restricted stock awards were assumed by the Company and converted into Company restricted stock awards with the number of shares subject to each restricted stock award multiplied by the Exchange Ratio and rounding the resulting number down to the nearest whole number of shares of the Company’s common stock.

The term, exercisability, vesting schedule and other provisions of the Private GRI restricted stock awards otherwise remained unchanged.

In connection with the signing of the Merger Agreement, Private GRI entered into a securities purchase agreement dated December 13, 2022 (the Bridge SPA) with Altium Growth Fund, LP (the Investor) pursuant to which Private GRI issued senior secured promissory notes (the Bridge Notes) in the aggregate principal amount of $ 3,333 in exchange for an aggregate purchase price of $ 2,500 .

In addition, Private GRI issued the Investor warrants to purchase an aggregate of 2,504,980 shares of Private GRI Common

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Stock (the Bridge Warrants).

As a result of the Merger, at the Effective Time, the Bridge Warrants were exchanged for the Exchange Warrants to purchase an aggregate of 421,589 shares of Company Common Stock.

The Exchange Warrants contain substantively similar terms to the Bridge Warrants, and have an initial exercise price equal to $ 14.73 per share.

The exercise price of the Exchange Warrants is subject to adjustment for splits and similar recapitalization events.

In addition to the Bridge SPA and in connection with signing the Merger Agreement, on December 13, 2022, the Company, Private GRI and the Investor entered into a Securities Purchase Agreement (the Equity SPA) pursuant to which the Investor agreed to invest $ 12,250 in cash.

Pursuant to the Equity SPA, immediately prior to the Closing, Private GRI issued 6,787,219 shares of Private GRI Common Stock (the Initial Shares) to the Investor and 27,148,877 shares of GRI Common Stock (the Additional Shares) into escrow with an escrow agent.

At the closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 253,842 shares of Company Common Stock and the Additional Shares converted into an aggregate of 1,015,368 shares of Company Common Stock.

On May 8,2023, in accordance with the terms of the Equity SPA, the Company and the Investor authorized the escrow agent to, subject to beneficial ownership limitations, disburse to the Investor all of the shares of Company Common Stock issued in exchange for the Additional Shares.

Pursuant to the Equity SPA, on May 8, 2023, the Company issued to the Investor (i) Series A-1 Warrants to purchase 1,269,210 shares of Company Common Stock with an initial exercise price of $ 13.51 per share, (ii) Series A-2 Warrants to purchase 1,142,289 shares of Company Common Stock with an initial exercise price of $ 14.74 per share, and (iii) Series T Warrants to purchase at an exercise price of $ 12.28 per share (x) 814,467 shares of Company Common Stock and (y) upon exercise of the Series T Warrants, an additional amount of Series A-1 Warrants and Series A-2 Warrants, each to purchase 814,467 shares of Company Common Stock (collectively, the Equity Warrants).

Immediately following the Effective Time, there were approximately 2,918,954 shares of Company Common Stock outstanding, of which 1,201,077 shares were held by the former stockholders of GRI (excluding the Investor).

Resignation of Officers and Separation and Release Agreement

In accordance with the Merger Agreement and effective as of the Effective Time, all of the Company’s executive officers other than Leanne Kelly, the Company’s Chief Financial Officer, resigned from the Company.

The resignations were not the result of any disagreements with the Company relating to the Company’s operations, policies or practices.

In connection with the resignation of David Baker, the Company’s Chief Executive Officer, the Company and Mr.

Baker entered into a Separation and Release Agreement on April 21, 2023 (the Separation Agreement).

Pursuant to the terms of the Separation Agreement and his current employment agreement, Mr.

Baker will receive continuation of his current salary for 18 months payable in accordance with the Company’s payroll practices and a lump sum payment equal to 150 % of his target bonus within 15 days of execution of his release and certain COBRA benefits.

Baker also agreed to reduce amounts payable with respect to certain future milestone payments.

Amended and Restated 2018 Equity Incentive Plan

On April 21, 2023, the stockholders of the Company approved the Amended and Restated GRI Bio, Inc.

2018 Equity Incentive Plan, formerly the Vallon Pharmaceuticals, Inc.

2018 Equity Incentive Plan (the A&R 2018 Plan).

The A&R 2018 Plan had previously been approved by the Company’s board of directors, subject to stockholder approval.

The A&R 2018 Plan became effective on April 21, 2023, with the stockholders approving the amendment to the A&R 2018 Plan to, among other things, (i) to increase the aggregate number of shares by 168,905 shares to 216,666 shares of Company Common Stock for issuance as awards under the A&R 2018 Plan, (ii) to extend the term of the A&R 2018 Plan through January 1, 2033, (iii) to prohibit any action that would be treated as a “repricing” of an award without further approval by the stockholders of Company, and (iv) to revise the limits on awards to non-employee directors.

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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