What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-10 compared with 2023-11-14 · 140 added, 248 removed, 217 unchanged (64% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Assets (unaudited)

6 unchanged sentences

Total assets $ 4,587 $ 2,956

Liabilities and stockholders' equity (deficit)

Liabilities and stockholders' equity

Current liabilities:

1 unchanged sentence

Accrued expenses 999 1,270

Advances from employees — 5

Warrant liability 1 3

Bridge promissory note, net — 602

Operating lease liabilities, current 43 14

3 unchanged sentences

Commitments and contingencies (Note 11)

Stockholders' equity (deficit):

Stockholders' equity:

Common stock, $ 0.0001 par value;

250,000,000 shares authorized as of September 30, 2023 and December 31, 2022;

2,956,354 and 999,748 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

250,000,000 shares authorized as of March 31, 2024 and December 31, 2023;

3,196,488 and 645,738 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Additional paid-in-capital 36,218 31,792

Accumulated deficit ( 33,420 ) ( 31,533 )

Total stockholders’ equity (deficit) 2,227 ( 1,625 )

Total liabilities and stockholders' equity (deficit) $ 4,404 $ 383

Total stockholders’ equity 2,798 259

Total liabilities and stockholders' equity $ 4,587 $ 2,956

See accompanying notes to unaudited interim consolidated financial statements.

2 unchanged sentences

(in thousands, except share and per share amounts)

Three Months Ended September 30, Nine Months Ended September 30,

2023 2022 2023 2022

Three Months Ended March 31,

Operating expenses:

4 unchanged sentences

Change in fair value of warrant liability 2 —

Other income 250 — 250 —

Interest income (expense), net 6 ( 1,162 )

7 unchanged sentences

(in thousands, except shares)

Redeemable Convertible Stock Common Stock Additional Paid-in Capital Accumulated Deficit Stockholders’ Deficit

Shares Amount Shares

Balance, December 31, 2021 7,816 $ 124 851,419 $ — $ 10,430 $ ( 15,278 ) $ ( 4,848 )

Net loss — — — — — ( 302 ) ( 302 )

Balance, March 31, 2022 7,816 $ 124 851,419 $ — $ 10,430 $ ( 15,580 ) $ ( 5,150 )

Net loss — — — — — ( 295 ) ( 295 )

Balance, June 30, 2022 7,816 $ 124 851,419 $ — $ 10,430 $ ( 15,875 ) $ ( 5,445 )

Issuance of warrants and non-contingent beneficial ownership feature in connection with convertible promissory note — — — — 60 — 60

Issuance of warrants in connection with non-convertible promissory note — — — — 30 — 30

Net loss — — — — — ( 351 ) ( 351 )

Balance, September 30, 2022 $ 7,816 $ 124 851,419 $ — $ 10,520 $ ( 16,226 ) $ ( 5,706 )

Redeemable Convertible Stock Common Stock Additional Paid-in Capital Accumulated Deficit Stockholders’ Equity (Deficit)

Shares Amount Shares

Common Stock Additional Paid-in Capital Accumulated Deficit Stockholders’ Deficit

Balance, December 31, 2022 142,820 $ — $ 16,871 $ ( 18,496 ) $ ( 1,625 )

4 unchanged sentences

Balance, March 31, 2023 142,887 $ — $ 17,416 $ ( 20,646 ) $ ( 3,230 )

Stock-based compensation — — — — 13 — 13

Restricted stock vesting — — 164,038 — — — —

Warrant exercise — — 43,682 — 12 — 12

Issuance of common stock in pre-closing financing — — 1,214,912 — 11,721 11,721

Issuance of common stock for settlement of bridge note — — 54,298 — 3,333 3,333

Issuance of common stock for reverse recapitalization expenses — — 30,542 — 1,875 1,875

Issuance of common stock to Vallon stockholders in reverse recapitalization — — 448,667 — ( 2,940 ) ( 2,940 )

Net loss — — ( 6,746 ) ( 6,746 )

Balance, June 30, 2023 — $ — 2,956,354 $ — $ 31,430 $ ( 27,392 ) $ 4,038

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

Balance, December 31, 2023 645,738 $ — $ 31,792 $ ( 31,533 ) $ 259

Stock-based compensation — — 37 — 37

Fractional share adjustment ( 250 ) — — — —

Issuance of common stock and prefunded warrants in financing 330,450 — 4,389 — 4,389

Prefunded warrant exercise 2,220,550 — — — —

Net loss — — — ( 1,887 ) ( 1,887 )

Balance, September 30, 2023 — $ — 2,956,354 $ — $ 31,756 $ ( 29,529 ) $ 2,227

Balance, March 31, 2024 3,196,488 $ — $ 36,218 $ ( 33,420 ) $ 2,798

See accompanying notes to unaudited interim consolidated financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Operating activities:

12 unchanged sentences

Cash used in operating activities ( 2,203 ) ( 579 )

Investing activities:

Purchase of property and equipment ( 8 ) —

Cash used in investing activities ( 8 ) —

Financing activities:

1 unchanged sentence

Repayment of advances from employees — ( 195 )

Proceeds from issuance of non-convertible promissory note — 125

Proceeds from issuance of convertible promissory note — 125

Proceeds from issuance of common stock in pre-closing financing 1,250 —

Proceeds from issuance of bridge promissory note — 1,250

Proceeds from warrant exercise 12 —

Net liabilities assumed in connection with reverse recapitalization ( 2,939 ) —

Payment of reverse recapitalization costs ( 2,984 ) —

Payment of deferred stock issuance costs ( 517 ) —

Proceeds from issuance of common stock and prefunded warrants 5,500 —

Payment of stock issuance costs ( 1,014 ) ( 110 )

Payment of debt issuance costs — ( 105 )

4 unchanged sentences

Supplemental disclosure of non-cash financing activities:

Issuance of stock for repayment of bridge promissory note $ 3,333 $ —

Recognition of debt discount and additional paid-in-capital for issuance of warrants in connection with the

issuance of promissory notes $ — $ 532

Issuance of stock for payment of reverse recapitalization costs $ 1,875 $ —

Issuance of warrants for payment of stock issuance costs $ 18 $ —

Merger costs included in accounts payable $ 72 $ —

Recognition of right of use assets and lease liabilities $ 152 $ —

Debt and stock issuance costs included in accounts payable $ 97 $ 45

Property and equipment purchases included in accounts payable $ — $ 8

See accompanying notes to unaudited interim consolidated financial statements.

4 unchanged sentences

GRI Bio, Inc.

(GRI or the Company), based in La Jolla, CA, was incorporated in Delaware in May 2009, which is the date of inception.

(GRI or the Company), based in La Jolla, CA, was incorporated in Delaware in May 2009.

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 lead product candidate, GRI-0621, is an oral inhibitor of type 1 Natural Killer T (iNKT) 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).

GRI-0803, the lead molecule selected from the library, is a novel oral agonist of type 2 Natural Killer T 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).

Reverse Merger with Vallon Pharmaceuticals, Inc .

On April 21, 2023, the Company (formerly Vallon Pharmaceuticals, Inc.(Vallon)) consummated a merger with GRI Bio Operations, Inc.

(formerly GRI Bio, Inc.) (Private GRI) pursuant to an Agreement and Plan of Merger, as amended (the Merger Agreement), by and among the Company, Private GRI and Vallon Merger Sub, Inc.

(Merger Sub), a Delaware corporation and wholly-owned subsidiary of the Company (Note 4).

The Merger Agreement provided for the merger of Merger Sub with and into Private GRI, with Private GRI surviving the merger as a wholly-owned subsidiary of the Company (the Merger).

In connection with the closing of the Merger (the Closing), the Company amended its certificate of incorporation and bylaws to change its name from “Vallon Pharmaceuticals, Inc.” to “GRI Bio, Inc.” In addition, prior to the effective time of the Merger (the Effective Time), the Company effected a reverse stock split of the Company’s common stock at a ratio of 1 for 30 (the Reverse Stock Split).

At the Effective Time, each share of Private GRI’s common stock outstanding immediately prior to the Effective Time 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).

Except as otherwise indicated or as the context requires, references herein to “GRI Bio,” the “Company,” or the “combined company,” refer to GRI Bio, Inc.

on a post-Merger basis, and references to “Private GRI” refer to the business of GRI Bio, Inc.

prior to the completion of the Merger.

References to “Vallon” refer to Vallon Pharmaceuticals, Inc.

prior to the completion of the Merger.

On April 21, 2023, pursuant to the Agreement and Plan of Merger, dated as of December 13, 2022, as amended on February 17, 2023 (the Merger Agreement), by and among the Company, GRI Bio Operations, Inc., formerly known as GRI Bio, Inc.

(GRI Operations), and Vallon Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (Merger Sub), Merger Sub was merged with and into GRI Operations (the Merger), with GRI Operations surviving the Merger as a wholly owned subsidiary of the Company (Note 4).

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

Recapitalization

In connection with the Merger, and immediately prior to the effective time of the Merger (the Effective Time), the Company effected a reverse stock split of its common stock, par value $ 0.0001 (Common Stock), at a ratio of 1-for-30 (the April 2023 Reverse Stock Split).

On January 29, 2024, the Company effected a reverse stock split of its Common Stock at a ratio of one-for-seven (the January 2024 Reverse Stock Split and together with the April 2023 Reverse Stock Split, the Reverse Stock Splits).

Unless otherwise noted, all references to share and per share amounts in these consolidated financial statements reflect the Reverse Stock Splits.

Basis of Presentation

As discussed in Note 4, the Merger was accounted for as reverse recapitalization under which the historical financial statements of the Company prior to the Merger are the historical financial statements of the accounting acquirer, Private GRI.

All common stock, per share and related information presented in the consolidated financial statements and notes prior to the Merger has been retroactively adjusted to reflect the Exchange Ratio and Reverse Stock Split for all periods presented, to the extent applicable.

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 the satisfaction of liabilities in the normal course of business.

All Common Stock, per share and related information presented in the consolidated financial statements and notes prior to the Merger has been retroactively adjusted to reflect the Exchange Ratio (as defined below) and the Reverse Stock Splits for all periods presented, to the extent applicable.

These unaudited interim consolidated 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 the 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 in 2009 and as a result has incurred $ 29,529 in accumulated deficit through September 30, 2023.

The Company has incurred operating losses since its inception in 2009 and, as a result, has incurred $ 33,420 in accumulated deficit through March 31, 2024.

The Company has financed its working capital requirements to date through the issuance of equity and debt securities.

As of September 30, 2023, the Company had cash of approximately $ 3,488 .

In connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered the Equity SPA pursuant to which the Investor agreed to invest $ 12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI common stock immediately prior to the consummation of the Merger.

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 Private GRI common stock (the Additional Shares) into escrow with an escrow agent for net proceeds of $ 11,704 , after deducting offering expenses of $ 546 .

As of March 31, 2024, the Company had cash of approximately $ 4,091 .

In connection with signing the Merger Agreement, the Company, GRI Operations and Altium Growth Fund, LP (Altium) entered into a Securities Purchase Agreement, dated December 13, 2022 (the Equity SPA), pursuant to which Altium agreed to invest $ 12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes (as defined below) in return for the issuance of shares of GRI Operations common stock (GRI Operations Common Stock) immediately prior to the consummation of the Merger.

Pursuant to the Equity SPA, immediately prior to the Closing, GRI Operations issued 969,602 shares of GRI Operations Common Stock (the Initial Shares) to Altium and 3,878,411 shares of GRI Operations Common Stock (the Additional Shares) into escrow with an escrow agent for net proceeds of $ 11,704 , after deducting offering expenses of $ 546 .

At the Closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 36,263 shares of the Company’s Common Stock and the Additional Shares converted into an aggregate of 145,052 shares of the Company’s 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 the Company’s common stock issued in exchange for the Additional Shares.

Based on the Company’s current operating plan, the Company believes that its existing cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements into the first quarter of 2024.

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

On February 1, 2024, the Company entered into a securities purchase agreement (the Purchase Agreement), pursuant to which the Company agreed to issue and sell, in a public offering, (i) 330,450 shares (the Shares) of Common Stock, (ii) 4,669,550 pre-funded warrants (the Pre-Funded Warrants) exercisable for an aggregate of 4,669,550 shares of Common Stock, (iii) 5,000,000 Series B-1 common warrants (the Series B-1 Common Warrants) exercisable for an aggregate of 5,000,000 shares of Common Stock, and (iv) 5,000,000 Series B-2 common warrants (the Series B-2 Common Warrants, and together with the Series B-1 Common Warrants, the Common Warrants) exercisable for an aggregate of 5,000,000 shares of Common Stock for net proceeds of $ 4,389 , after deducting offering expenses of $ 1,110 .

The Common Warrants together with the Pre-Funded Warrants are referred to in this Quarterly Report on Form 10-Q as the “Warrants.” The securities were offered in combinations of (a) one Share or one Pre-Funded Warrant, together with (b) one Series B-1 Common Warrant and one Series B-2 Common Warrant, for a combined purchase price of $ 1.10 (less $ 0.0001 for each Pre-Funded Warrant).

Subject to certain ownership limitations, the Warrants became exercisable upon issuance.

Each Pre-Funded Warrant is exercisable for one share of Common Stock at a price per share of $ 0.0001 and does not expire.

Each Series B-1 Common Warrant is exercisable into one share of Common Stock at a price per share of $ 1.10 for a five-year period after February 6, 2024, the date of issuance.

Each Series B-2 Common Warrant is exercisable into one share of Common Stock at a price per share of $ 1.10 for an 18 -month period after February 6, 2024 the date of issuance.

In connection with the issuance of the Shares and Warrants pursuant to the Purchase Agreement, the exercise price of the Series A-1 Warrants was reduced to par, or $ 0.0001 , per share pursuant to the terms of the Series A-1 Warrants.

The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its business activities, including its research and development program.

The Series T Warrants issued in connection with the Merger are not presently subject to forced exercise by the Company as the equity conditions for their forced exercise, which include (among other things) a requirement that shares of the Company’s common stock have a value weighted average price of at least $ 9.21 per share for the periods specified in the Series T Warrants, are not met.

The Series T Warrants issued in connection with the Merger are not presently subject to forced exercise by the Company as the equity conditions for their forced exercise, which include (among other things) a requirement that shares of Common Stock have a value weighted average price of at least $ 64.47 per share for the periods specified in the Series T Warrants, are not met.

The Company intends to raise capital through additional issuances of equity securities and/or short-term or long-term debt arrangements, but there can be no assurances any such financing will be available when needed, even if the Company’s research and development efforts are successful.

3 unchanged sentences

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 (the SEC).

Any reference in the accompanying unaudited interim financial statements 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, 2022 balance sheet was derived from the Company’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 Company’s financial position as of September 30, 2023, and the results of operations and stockholders’ equity (deficit) for the three and nine months ended September 30, 2023 and 2022 and cash flows for the three and nine months ended September 30, 2023 and 2022.

Results of operations for the three and nine months ended September 30, 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, 2022, which are included as Exhibit 99.2 of Amendment No.

2 to the Current Report on Form 8-K filed with the SEC on July 6, 2023.

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

Any reference in the accompanying unaudited interim financial statements 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, 2023 balance sheet was derived from the Company’s audited consolidated financial statements.

In the opinion of management, the unaudited interim consolidated financial statements furnished herein include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of March 31, 2024, and the consolidated results of operations and consolidated stockholders’ equity for the three months ended March 31, 2024 and 2023 and consolidated cash flows for the three months ended March 31, 2024 and 2023.

Consolidated results of operations for the three months ended March 31, 2024, are not necessarily indicative of the consolidated operating results that may be expected for the year ending December 31, 2024.

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

The accompanying unaudited interim consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2024.

Principles of Consolidation

The unaudited interim consolidated financial statements include the accounts of GRI Bio, Inc.

and its wholly-owned subsidiary, GRI Bio Operations, Inc.

All intercompany balances and transactions have been eliminated.

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 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.

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 September 30, 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 an uninsured cash balances of $ 2,988 at September 30, 2023.

The Company’s cash balance as of December 31, 2022 was fully insured.

Estimates and assumptions are primarily made in relation to the valuation of share options, warrant issuance and subsequent revaluations, valuation allowances relating to deferred tax assets, accrued expenses and estimation of the incremental borrowing rate for the operating lease.

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

Fair Value Measurements

2 unchanged sentences

The three levels of fair value hierarchy defined by ASC 820 are described below:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

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, 2023, the Company’s financial instruments included cash, cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and certain liability classified warrants.

The carrying amounts reported in the balance sheets for cash, 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.

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

Pricing inputs that are generally unobservable inputs and not corroborated by market data.

As of March 31, 2024, the Company’s financial instruments included cash, cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and certain liability classified warrants.

The carrying amounts reported in the balance sheets for cash, 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.

At September 30, 2023, there were no financial assets or liabilities measured at fair value on a recurring basis other than the liability classified warrants.

In May 2022, Vallon issued warrants in connection with a securities purchase agreement.

Vallon evaluated the warrants 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 a result, the warrants are recorded as a liability on the balance sheet.

At March 31, 2024, there were no financial assets or liabilities measured at fair value on a recurring basis other than the liability classified warrants.

In May 2022, Vallon Pharmaceuticals, Inc.

(Vallon) issued warrants in connection with a securities purchase agreement.

Vallon evaluated the warrants 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 precluded the warrants from being accounted for as components of equity.

As a result, the warrants were recorded as a liability on the balance sheet.

Vallon recorded the fair value of the warrants upon issuance using a Black-Scholes valuation model.

1 unchanged sentence

The valuation of the warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable.

The change in the fair value of the Level 3 warrants liabilities is reflected in the statement of operations for the nine months ended September 30, 2023.

Deferred Stock Issuance Costs

Deferred stock issuance costs represent incremental legal costs incurred that are directly attributable to proposed offerings of securities.

The costs are charged against the gross proceeds of the respective offering upon closing.

Debt Discounts

The relative fair values of warrants and common shares issued and call option rights assigned in connection with principal advances under promissory notes, the increases in fair values of embedded conversion options in connection with convertible promissory note modifications, and the intrinsic values of non-contingent beneficial conversion features were recorded as debt discounts that are amortized as additional interest expense over the estimated terms of the notes using the effective interest method.

Debt Issuance Costs

Debt issuance costs represent incremental legal costs and other costs incurred that are directly attributable to issuing debt.

The costs are included as a direct reduction of the carrying amount of the respective liability and are amortized as additional interest expense over the estimated term of the debt using the effective interest method.

Stock-Based Compensation

The Company recognizes expense for employee and non-employee stock-based compensation in accordance with ASC Topic 718, Stock-Based Compensation (ASC 718).

ASC 718 requires that such transactions be accounted for using a fair value-based method.

The estimated fair value of the options is amortized over the vesting period, based on the fair value of the options on the date granted, and is calculated using the Black-Scholes option-pricing model.

The Company accounts for forfeitures as incurred.

In considering the fair value of the underlying stock when the Company granted options, the Company considered several factors including the fair values established by market transactions.

Stock option-based compensation includes estimates and judgments of when stock options might be exercised and stock price volatility.

The timing of option exercises is out of the Company's control and depends upon a number of factors including the Company's market value and the financial objectives of the option holders.

These estimates can have a material impact on the stock compensation expense but will have no impact on the cash flows.

The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period the estimates are revised.

The Company uses the expected term, rather than the contractual term, for both employee and consultant options issued.

The change in the fair value of the Level 3 warrants liabilities is reflected in the statement of operations for the three months ended March 31, 2024.

Net Loss Per Common Share

Basic and diluted net loss per common share are calculated by dividing the net loss by the applicable weighted-average number of common shares outstanding during the period.

As the Company had a net loss in each of the three and nine months ended September 30, 2023 and 2022, diluted net loss per common share is the same as basic net loss per common share for the period because the effects of potentially dilutive securities are antidilutive.

Basic and diluted net loss per common share is computed based on the weighted average number of shares of common stock outstanding during each year.

Diluted net loss per common share is computed based on the weighted average number of shares of common stock outstanding during each year, plus the dilutive effect of options considered to be outstanding during each year, in accordance with ASC 260, Earnings Per Share .

As the Company had a net loss in each of the three months ended March 31, 2024 and 2023, diluted net loss per common share is the same as basic net loss per common share for the period because the effects of potentially dilutive securities are antidilutive.

Common stock equivalents excluded from the diluted net loss per common share calculations are as follows:

September 30,

Stock options 32,642 12,781

1 unchanged sentence

Restricted stock with repurchase rights — 23,433

Stock subject to put right — 7,816

Convertible promissory note

10,331,195 51,036

Recent Accounting Pronouncements

The Company considered the applicability and impact of all ASUs issued during the quarter ended September 30, 2023 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 March 31, 2024 and each was determined to be either not applicable or expected to have minimal impact on these consolidated financial statements.

MERGER WITH VALLON

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.

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

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 outstanding immediately prior to the Effective Time, including any shares of Private GRI’s common stock issued pursuant to the Equity SPA automatically converted solely into the right to receive a number of shares of the Company’s common stock equal to the Exchange Ratio.

(b) Each option to purchase shares of Private GRI’s 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 the Company’s common stock subject to each Assumed Option was determined by multiplying (i) the number of shares of Private GRI’s 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 the Company’s common stock.

The per share exercise price for the Company’s 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.

(a) Each share of GRI Operations Common Stock outstanding immediately prior to the Effective Time, including any shares of GRI Operations Common Stock issued pursuant to the Equity SPA 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 GRI Operations Common Stock (each, a GRI Operations Option) outstanding and unexercised immediately prior to the Effective Time under the GRI Bio, Inc.

2015 Equity Incentive Plan, as amended (the GRI Operations 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 Operations Plan and each such GRI Operations Option in accordance with the terms of the GRI Operations Plan (the Assumed Options).

The number of shares of Common Stock subject to each Assumed Option was determined by multiplying (i) the number of shares of GRI Operations Common Stock that were subject to such GRI Operations 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 Common Stock.

The per share exercise price for the 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’s 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’s 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 the Company’s 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 Private GRI’s 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.

(c) Each warrant to purchase shares of GRI Operations Common Stock (the GRI Operations Warrants) outstanding immediately prior to the Effective Time was assumed by the Company and converted into a warrant to purchase shares of Common Stock (the Assumed Warrants) and thereafter (i) each Assumed Warrant became exercisable solely for shares of the Common Stock;

(ii) the number of shares of Common Stock subject to each Assumed Warrant was determined by multiplying (A) the number of shares of GRI Operations Common Stock that were subject to such GRI Operations 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 Common Stock;

(iii) the per share exercise price for shares of Common Stock issuable upon exercise of each Assumed Warrant was determined by dividing (A) the exercise price per share of GRI Operations Common Stock subject to such GRI Operations 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 (Note 8) were exchanged for warrants (the Exchange Warrants) to purchase an aggregate of 60,227 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 $ 103.11 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.

The Merger is accounted for as a reverse recapitalization under U.S.

GAAP because the primary assets of Vallon were cash and cash equivalents.

For accounting purposes, GRI has been determined to be the accounting acquirer based upon the terms of the Merger and other factors including:

(i) the equity holders of Private GRI immediately prior to the Merger owned, or held rights to acquire, in the aggregate approximately 85 % of the outstanding shares of the Company’s common stock and the Company’s stockholders immediately prior to the Merger owned approximately 15 % of the outstanding shares of the Company’s common stock (ii) Private GRI holds the majority (4 out of 5) of board seats of the combined company, and (iii) Private GRI’s management holds the majority of

key positions in the management of the combined company.

(e) All rights with respect to GRI Operations 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 GRI Operations restricted stock awards otherwise remained unchanged.

The Merger was accounted for as a reverse recapitalization under GAAP because the primary assets of Vallon were cash and cash equivalents.

For accounting purposes, GRI Operations was determined to be the accounting acquirer based upon the terms of the Merger and other factors including:

(i) the equity holders of GRI Operations immediately prior to the Merger owned, or held rights to acquire, in the aggregate approximately 85 % of the outstanding shares of the Company’s Common Stock and the Company’s stockholders immediately prior to the Merger owned approximately 15 % of the outstanding shares of the Company’s Common Stock (ii) GRI Operations holds the majority (4 out of 5) of board seats of the combined company, and (iii) GRI Operations’ management holds the majority of key positions in the management of the combined company.

Immediately after the Merger, there were 422,333 shares of the Company’s Common Stock outstanding.

7 unchanged sentences

Total net liabilities assumed plus transaction costs $ ( 5,923 )

In addition to the transaction costs noted above, at the Effective Time, 30,542 shares of the Company’s common stock were issued to Private GRI’s financial advisor for services related to the Merger.

In addition to the transaction costs noted above, at the Effective Time, 4,363 shares of Common Stock were issued to GRI Operations’ financial advisor for services related to the Merger.

FAIR VALUE MEASUREMENTS

The Company applies the guidance in ASC 820 to account for financial assets and liabilities measured on a recurring basis.

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

Fair value is measured as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market

participants at the measurement date.

As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

6 unchanged sentences

The Company evaluates its hierarchy disclosures each reporting period.

There were no transfers between Level 1, 2 and 3 during the nine months ended September 30, 2023.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s liabilities that are measured at fair value on a recurring basis at September 30, 2023:

There were no transfers between Level 1, 2 and 3 during the three months ended March 31, 2024.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s liabilities that are measured at fair value on a recurring basis at March 31, 2024:

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

5 unchanged sentences

Change in valuation ( 2 )

Fair value as of September 30, 2023

Fair value as of March 31, 2024 $ 1

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Volatility 211.9 % 171.0 %

3 unchanged sentences

PROPERTY AND EQUIPMENT

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Computer equipment $ 21 $ 21

1 unchanged sentence

Accumulated depreciation ( 27 ) ( 26 )

Depreciation expense related to property and equipment was $ 3 and $ 2 for the nine months ended September 30, 2023 and 2022, respectively.

Depreciation expense related to property and equipment was $ 1 for each of the three months ended March 31, 2024 and 2023 .

ACCRUED EXPENSES

Accrued expenses consist of the following:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Research and development $ 191 $ 93

4 unchanged sentences

Bridge Financing

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

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

The Bridge Notes were issued in two closings:

2 unchanged sentences

The Bridge Notes were secured by a lien on all of the Company’s assets.

In addition, upon the funding of each tranche, the Investor received warrants to purchase an aggregate of 1,252,490 shares of the Company’s common stock (the Bridge Warrants).

In addition, upon the funding of each tranche, Altium received warrants to purchase an aggregate of 178,927 shares of Common Stock (the Bridge Warrants).

The Bridge Warrants had an exercise price of $ 9.31 per share, were exercisable at any time on or after the applicable issuance date and had a term of 60 months from the date all shares underlying the Bridge Warrants were freely tradable.

1 unchanged sentence

The $ 1,250 of proceeds from the second closing were allocated to the Bridge Notes and Bridge Warrants based on their relative fair values as of the commitment date, resulting in an allocation of $ 718 and $ 532 , respectively.

In addition to the Bridge SPA, and also in connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered into the Equity SPA (Note 9) pursuant to which the Investor agreed to invest $ 12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI’s common stock immediately prior to the consummation of the Merger.

In addition to the Bridge SPA, and also in connection with signing the Merger Agreement, the Company, GRI Operations and Altium entered into the Equity SPA (Note 9) pursuant to which Altium agreed to invest $ 12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of GRI Operations’ Common Stock immediately prior to the consummation of the Merger.

On April 21, 2023, the Company completed the Merger and the outstanding principal and accrued interest on the Bridge Notes was cancelled and the Bridge Warrants were exchanged for the Exchange Warrants.

1 unchanged sentence

The Bridge Notes were accounted for as share-settled debt under the accounting guidance in ASC 835-30 and, as such, the initial net carrying amounts were accreted to the redemption amounts using the effective interest method.

The Company incurred debt issuance costs of $ 205 during the year ended December 31, 2022 and $ 90 during the nine months ended September 30, 2023 related to its issuance of debt under the Bridge SPA.

Unamortized debt discounts and debt issuance costs totaled $ 1,065 as of December 31, 2022.

Interest expense stemming from amortization of debt discounts and issuance costs was $ 2,104 for the nine months ended September 30, 2023.

In November 2018, Private GRI and TEP Biotech, LLC (TEP) entered into a convertible note and warrant purchase agreement pursuant to which TEP agreed to fund up to $ 5,000 to Private GRI in exchange for a convertible promissory note (the TEP Note) and a warrant to purchase up to 25,245 shares of Private GRI’s common stock at an exercise price of $ 0.27 per share.

The TEP Note was secured by Private GRI’s assets and accrued simple interest on the outstanding principal balance at a rate of 12 % per annum.

The total outstanding principal and accrued interest balance was initially due on the earlier of Private GRI’s next financing, as defined, and May 2, 2020.

The initial $ 2,500 tranche under the TEP Note was funded upon execution of the agreement in November 2018.

In December 2019, Private GRI and TEP amended the TEP Note.

In lieu of TEP funding the second $ 2,500 tranche, TEP made a first additional advance of $ 500 to Private GRI in exchange for a convertible promissory note, a warrant to purchase up to 17,269 shares of Private GRI’s common stock at an exercise price of $ 0.27 per share, and the assignment of Private GRI’s rights under a certain call option agreement.

The call option agreement, which was entered into in 2015, provided Private GRI with the right to repurchase up to 39,720 shares of Private GRI’s common stock held by the counterparty for $ 26.74 per share at any time before April 1, 2025.

In July 2020, the TEP Note maturity date was extended to August 31, 2020, and in March 2021, TEP agreed to forbear on its available right to exercise remedies on account of Private GRI’s failure to pay the past due principal and accrued interest balance until October 31, 2021.

In May 2021, Private GRI and TEP amended the TEP Note, and TEP agreed to make a second additional advance of $ 500 to Private GRI in exchange for a convertible promissory note with separate, modified conversion options.

In July 2022, Private GRI and TEP further amended the TEP Note, and TEP agreed to make a third additional advance of $ 125 to Private GRI in exchange for a convertible promissory note and a warrant to purchase up to 1,169 shares of Private GRI’s common stock at an exercise price of $ 0.27 per share.

In October 2022, Private GRI and TEP entered into a conversion agreement pursuant to which, effective upon the full execution of the Merger Agreement (Note 4), $ 3,500 of outstanding principal under the TEP Note together with $ 650 of related accrued interest was to

automatically convert into 155,210 shares of Private GRI’s common stock at a conversion price of $ 26.74 per share.

Further, upon the closing of the first tranche of the Bridge Notes, Private GRI was to repay, in cash, the $ 125 third additional advance under the TEP Note along with the $ 15 of related accrued interest.

Upon issuance of the 155,210 conversion shares and payment of the $ 140 principal and accrued interest balance, Private GRI would fully satisfy all of its obligations under the TEP Note.

In December 2022, upon the full execution of the Merger Agreement and the closing of the first tranche of the Bridge Notes Private GRI issued the 155,210 conversion shares and paid the $ 140 principal and accrued interest balance as per the terms of the conversion agreement.

The share numbers and exercise or conversion prices in this section of Note 8 entitled “TEP Note” reflect the Exchange Ratio retroactively.

As part of the conversion, the $ 4,150 of converted principal and accrued interest, along with $ 863 of related forfeited accrued interest through the conversion date, were credited to stockholders’ deficit.

Interest expense recognized on the TEP Note was $ 142 and $ 352 for the three and nine months ended September 30, 2022.

The Company incurred $ 295 of debt issuance costs related to its issuance of debt under the Bridge SPA, of which $ 90 was incurred during the three months ended March 31, 2023.

Interest expense stemming from amortization of debt discounts and issuance costs was $ 1,161 for the three months ended March 31, 2023.

STOCKHOLDERS’ EQUITY

In connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered the Equity SPA pursuant to which the Investor agreed to invest $ 12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI’s common stock immediately prior to the consummation of the Merger.

Pursuant to the Equity SPA, immediately prior to the Closing, Private GRI issued 6,787,219 shares of Private GRI’s common stock (the Initial Shares) to the Investor and 27,148,877 shares of Private GRI’s common stock (the Additional Shares) into escrow with an escrow agent for net proceeds of $ 11,704 , after deducting offering expenses of $ 546 .

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

Redeemable Common Stock

In November 2018, Private GRI entered into an agreement with a stockholder pursuant to which the stockholder had the right to require Private GRI to purchase all or a portion of 7,816 shares of Private GRI’s common stock held by the stockholder for $ 15.88 per share (the Put Right).

The Put Right was exercisable (i) for a period commencing thirty days prior to the day Private GRI completed an equity or debt financing and ending fifteen business days thereafter, or (ii) at any time following a breach of the agreement by Private GRI.

Management assessed the Put Right and determined that (i) it was not freestanding and, therefore, was not required to be classified as a liability and (ii) it could be exercised by the stockholder at any time, which was not within Private GRI’s control.

Therefore, the common shares subject to the Put Right were classified in mezzanine equity.

In December 2022, the stockholder exercised the Put Right and Private GRI redeemed the 7,816 shares of Private GRI’s common stock for $ 124 ($ 15.88 per share).

The redeemed shares were retired by Private GRI.

The share numbers and exercise or conversion prices in this section of Note 9 entitled “Redeemable Common Stock” reflect the Exchange Ratio retroactively.

Common Stock Warrants

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 the Company’s common stock at an exercise price of $ 13.51 , (ii) Series A-2 Warrants to purchase 1,142,289 shares of the Company’s common stock at an exercise price of $ 14.74 , and (iii) Series T Warrants to purchase (x) 814,467 shares of the Company’s common stock at an exercise price of $ 12.28 and (y) upon exercise of the Series T Warrants, 814,467 additional Series

A-1 Warrants and Series A-2 Warrants, each to purchase 814,467 shares of the Company’s common stock at an exercise price of $ 13.51 and $ 14.74 , respectively (collectively, the Equity Warrants).

The Series A-1 Warrants have a term of 60 months from the date all shares underlying the Series A-1 Warrants are freely tradable.

The A-2 warrants have a 2-year term and expire in June 2025.

Series T Warrants have a term of 24 months from the date all shares underlying Series T Warrants are freely tradable.

As noted in Note 2.

Liquidity , the Company may force the exercise of the Series T Warrants subject to the satisfaction of certain equity conditions.

The Equity Warrants include certain contingent cashless exercise features and contain certain other rights with regard to asset distributions and fundamental transactions.

The exercise price of the Series A-1 Warrants is subject to adjustment for certain dilutive issuances, and all of the Equity Warrants are subject to standard antidilution adjustments.

All of the Equity Warrants were outstanding as of September 30, 2023.

The Equity Warrants were classified as equity and the allocated fair value of $ 5,675 is included in additional paid in capital.

Pursuant to the Bridge SPA, upon the funding of each tranche of the Bridge Note, the Investor received the Bridge Warrants.

The Bridge Warrants had an exercise price of $ 1.33 per share, were exercisable at any time on or after the applicable issuance date and had a term of 60 months from the date all shares underlying the Bridge Warrants are freely tradable.

Upon the completion of the Merger the Bridge Warrants were exchanged for 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 subject to adjustments for splits and recapitalization events.

All of the Bridge Warrants were outstanding as of September 30, 2023.

The Bridge Warrants were classified as equity and the allocated fair value of $ 2,860 is included in additional paid in capital.

In connection with the Closing, Private GRI granted its financial advisor warrants (the Advisor Warrants) to purchase shares of Private GRI’s common stock, which, at the Effective Time, became exercisable for an aggregate of 2,402 shares of the Company’s common stock at an exercise price of $ 61.39 per share.

The Advisor Warrants have a five-year term.

All of the Advisor Warrants were outstanding as of September 30, 2023.

The Advisor Warrants were classified as equity and the fair value of $ 18 is included in additional paid in capital.

The Black-Scholes option-pricing model was used to estimate the fair value of the Equity Warrants, the Exchange Warrants and the Advisor Warrants with the following weighted-average assumptions:

In connection with signing the Merger Agreement, the Company, GRI Operations and Altium entered the Equity SPA pursuant to which Altium agreed to invest $ 12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of GRI Operations’ Common Stock immediately prior to the consummation of the Merger.

Pursuant to the Equity SPA, immediately prior to the Closing, GRI Operations issued the Initial Shares to Altium and the Additional Shares into escrow with an escrow agent for net proceeds of $ 11,704 , after deducting offering expenses of $ 546 .

At the Closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 36,263 shares of Common Stock and the Additional Shares converted into an aggregate of 145,052 shares of Common Stock.

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

On February 1, 2024, the Company entered into the Purchase Agreement, pursuant to which the Company agreed to issue and sell, in the Offering, (i) 330,450 Shares of the Common Stock, (ii) 4,669,550 Pre-Funded Warrants exercisable for an aggregate of 4,669,550 shares of Common Stock, (iii) 5,000,000 Series B-1 Common Warrants exercisable for an aggregate of 5,000,000 shares of Common Stock, and (iv) 5,000,000 Series B-2 Common Warrants exercisable for an aggregate of 5,000,000 shares of Common Stock for net proceeds of $ 4,389 , after deducting offering expenses of $ 1,110 .

The securities were offered in combinations of (a) one Share or one Pre-Funded Warrant, together with (b) one Series B-1 Common Warrant and one Series B-2 Common Warrant, for a combined purchase price of $ 1.10 (less $ 0.0001 for each Pre-Funded Warrant).

Subject to certain ownership limitations, the Warrants were exercisable upon issuance.

Each Pre-Funded Warrant is exercisable for one Share of Common Stock at a price per share of $ 0.0001 and does not expire.

Each Series B-1 Common Warrant is exercisable into one Share of Common Stock at a price per share of $ 1.10 for a five-year period after February 6, 2024, the date of issuance.

Each Series B-2 Common Warrant is exercisable into one share of Common Stock at a price per share of $ 1.10 for an 18 -month period after February 6, 2024, the date of issuance.

The Warrants were classified as equity and the allocated fair value of $ 4,279 is included in additional paid in capital.

The Company determined that the amount paid for the Pre-Funded Warrants approximates their fair value.

The Black-Scholes option-pricing model was used to estimate the fair value of the Series B-1 Common and Series B-2 Common Warrants with the following weighted-average assumptions:

Volatility 156.3 %

2 unchanged sentences

Risk-free interest rate 4.65 %

As of September 30, 2023, the Company had the following warrants outstanding to purchase common stock.

In connection with the issuance of the securities pursuant to the Purchase Agreement, the exercise price of the Series A-1 Warrants issued in connection with the Merger was reduced to par, or $ 0.0001 , per share pursuant to the terms of the Series A-1 Warrants.

As of March 31, 2024, the Company had the following warrants outstanding to purchase Common Stock.

Number of Shares Exercise Price per Share Expiration Date

8,629 $ 34.76 November 2023

2,449,000 $ 0.0001 Do not expire

5,000,000 $ 1.10 August 2025

116,353 $ 85.96 December 2025

1,142,289 $ 14.74 June 2025

542 $ 2,100.00 February 2026

2 unchanged sentences

343 $ 429.73 April 2028

421,590 $ 14.73 60 months after registration date

1,269,210 $ 13.51 60 months after registration date

814,467 $ 12.28 24 months after registration date

ASSET PURCHASE AGREEMENT

On August 22, 2023, the Company entered into Asset Purchase Agreement (the Aardvark Agreement) with Aardvark Therapeutics, Inc.

(Aardvark), pursuant to which Aardvark agreed to purchase (i) the Company’s license agreement with Medice Arzneimittel Pűtter GmbH & Co.

KG, dated January 6, 2020, (ii) certain patents related to the Company’s ADAIR product candidate, and (iii) files (of contract manufacturing and FDA correspondence) for a formulation described in IND No.

133072, ADAIR for the Treatment of ADHD and Narcolepsy, filed with the United States FDA.

Under the terms of the Aardvark Agreement, the Company received an upfront cash payment of $ 250 , which was recognized as other income.

The Company is also eligible to receive potential additional milestone payments contingent upon Aardvark achieving certain future ADAIR regulatory and sales milestones.

Other than the upfront payment, the Company does not anticipate the receipt of any milestone payments from Aardvark in the near term, which potential milestone payments may or may not be achieved, paid or received in the future.

The foregoing description of the Aardvark Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the text of the Aardvark Agreement that is filed as Exhibit 10.2 to this Quarterly Report on Form 10-Q.

181,316 $ 0.0001 December 2028

5,000,000 $ 1.10 February 2029

STOCK-BASED COMPENSATION

2015 Equity Incentive Plan

Private GRI adopted the GRI Bio, Inc.

2015 Equity Incentive Plan, as amended (the Private GRI Plan), that provided Private GRI with the ability to grant stock options, restricted stock awards and other equity-based awards to employees, directors, and consultants.

Stock options granted under the Private GRI Plan generally had a contractual life of up to 10 years.

Upon completion of the Merger, the Company assumed the Private GRI Plan and 89,472 outstanding and unexercised options issued thereunder, and ceased granting awards under the Private GRI Plan.

GRI Operations adopted the GRI Operations Plan, that provided GRI Operations with the ability to grant stock options, restricted stock awards and other equity-based awards to employees, directors, and consultants.

Upon completion of the Merger, the Company assumed the GRI Operations Plan and 12,781 outstanding and unexercised options issued thereunder, and ceased granting awards under the GRI Operations Plan.

As of March 31, 2024, no options remain outstanding under the GRI Operations Plan.

Amended and Restated 2018 Equity Incentive Plan

6 unchanged sentences

Stock options granted by the Company under the A&R 2018 Plan generally have a contractual life of up to 10 years.

As of September 30, 2023, awards granted under the A&R 2018 Plan representing the right to purchase or contingent right to receive up to an aggregate of 228,542 shares of the Company's common stock were outstanding and 216,666 shares of the Company’s common stock were reserved for issuance under the A&R 2018 Plan.

As of March 31, 2024, awards granted under the A&R 2018 Plan representing the right to purchase or contingent right to receive up to an aggregate of 32,642 shares of the Company's Common Stock were outstanding and 56,781 shares of the Company’s Common Stock were reserved for issuance under the A&R 2018 Plan.

The number of shares reserved for issuance under the A&R 2018 Plan may be increased pursuant to the A&R 2018 Plan’s “evergreen” provision on the first day of each calendar year beginning January 1, 2024 and ending on and including January 1, 2033, by a number of shares not to exceed 4 % of the aggregate number of shares of the Company’s Common Stock outstanding on the final day of the immediately preceding calendar year.

The Company recorded stock-based compensation related to stock options issued under the Private GRI Plan and the A&R 2018 Plan in the following expense categories of its accompanying statements of operations for the three and nine months ended September 30, 2023 and 2022:

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

2023 2022 2023 2022

The Company recorded stock-based compensation related to equity-based awards issued under the GRI Operations Plan and the A&R 2018 Plan in the following expense categories of its accompanying consolidated statements of operations for the three months ended March 31, 2024 and 2023:

For the Three Months Ended March 31,

Research and development $ — $ —

2 unchanged sentences

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 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 nine months ended September 30, 2023:

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.The Company records expense for performance-based awards if the Company 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, 2024:

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

Outstanding at December 31, 2023 32,642 $ 37.41 9.55

Granted 221,265 $ 2.38

Exercised — —

Forfeited/cancelled —

Outstanding at September 30, 2023 318,014 $ 9.35 7.92

Exercisable at September 30, 2023 318,014 $ 9.35 7.92

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,

Volatility 129.54 % 90.39 %

Expected term in years 5.84 5.98

Dividend rate 0.00 % 0.00 %

Risk-free interest rate 4.34 % 2.00 %

Fair value of option on grant date $ 2.13 $ 3.86

As of September 30, 2023, the unrecognized compensation cost related to unvested stock options expected to vest was $ 424 .

Outstanding at March 31, 2024 32,642 $ 37.41 9.30

Exercisable at March 31, 2024 5,958 $ 133.34 8.78

Vested and expected to vest at March 31, 2024 32,642 $ 37.41 9.30

As of March 31, 2024, all of the outstanding and exercisable stock options were out of the money and therefore had no intrinsic value.

At March 31, 2024, the unrecognized compensation cost related to unvested stock options expected to vest was $ 350 .

This unrecognized compensation is expected to be recognized over a weighted-average amortization period of 2.72 years.

No equity-based awards were granted during the three months ended March 31, 2024 and 2023.

COMMITMENTS AND CONTINGENCIES

9 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