What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-10 · 115 added, 92 removed, 112 unchanged (65% of the section changed)

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GRI-0621 is also an oral formulation of tazarotene, a synthetic retinoid acid receptor (RAR)-beta and gamma selective agonist, that is approved in the United States for topical treatment of psoriasis and acne.

As of March 31, 2024, it has been evaluated in over 1,700 patients as an oral product for up to 52-weeks.

As of June 30, 2024, it has been evaluated in over 1,700 patients as an oral product for up to 52-weeks.

We are developing GRI-0621 for the treatment of severe fibrotic lung diseases such as idiopathic pulmonary fibrosis (IPF), a life-threatening progressive fibrotic disease of the lung that affects approximately 140,000 people in the United States, with up to 40,000 new cases per year in the United States.

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In preliminary data from our trials to date with GRI-0621, and earlier trials with oral tazarotene, we have observed GRI-0621 to be well-tolerated and to inhibit iNKT cell activity in subjects.

We and others have shown that activated iNKT are upregulated in IPF, primary sclerosing cholangitis (PSC), non-alcoholic steatohepatitis (NASH), alcoholic liver disease (ALD), Systemic Lupus Erythematosus Disease (SLE), multiple sclerosis (MS), ulcerative colitis (UC) patients as well as other indications.

We and others have shown that activated iNKT are upregulated in IPF, primary sclerosing cholangitis (PSC), metabolic dysfunction-associated steatohepatitis (MASH), alcoholic liver disease (ALD), systemic lupus erythematosus (SLE), multiple sclerosis (MS), ulcerative colitis (UC) patients as well as other indications.

In these patients activated iNKT cells are correlated with more severe disease.

Food and Drug Administration (FDA) has cleared our Investigative New Drug (IND) application for GRI-0621 for the treatment of IPF and we plan to evaluate GRI-0621 in a randomized, double-blind, multi-center Phase 2a biomarker study, for which we commenced enrollment in December 2023.

We expect interim data from this trial to be available in the third quarter of 2024 and topline results to be available in the fourth quarter of 2024.

Food and Drug Administration has cleared our Investigative New Drug (IND) application for GRI-0621 for the treatment of IPF and we plan to evaluate GRI-0621 in a randomized, double-blind, multi-center Phase 2a biomarker study, for which we commenced enrollment in December 2023.

Based on our current enrollment projections, we now expect interim data from this trial to be available in the fourth quarter of 2024 and topline results to be available in the first quarter of 2025.

Additionally, on March 1, 2024, we received authorization of our clinical trial application from the United Kingdom Medicines and Healthcare Products Regulatory Agency to initiate the Phase 2a biomarker study evaluating GRI-0621 for the treatment of IPF in the United Kingdom.

Our 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 cells.

We are developing GRI-0803 for the treatment of autoimmune disorders, with much of our preclinical work in SLE or lupus and MS.

GRI-0803, the lead molecule selected from the library, is a novel oral agonist of type 2 Natural Killer T cells and would be developed for the treatment of autoimmune disorders, with much of our preclinical work in SLE or lupus and MS.

In lupus, the immune system mistakenly attacks its own healthy tissues, especially joints and skin, but can affect almost every organ and tissue of the body.

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Only two drugs have been approved for lupus in the past 50 years, and new treatment options are sorely needed.

Subject to IND clearance, we intend to evaluate GRI-0803 in a Phase 1a and 1b trial initially targeting SLE.

We expect to file an IND with respect to this Phase 1a and 1b trial in the second half of 2024.

We will continue to evaluate indications to select the best fit for further development of the program, but our initial focus is on lupus.

In order to focus our resources on our GRI-0621 program, we have limited our development of GRI-0803

pending additional funding.

Subject to obtaining the requisite additional funding and IND clearance, we intend to evaluate GRI-0803 in a Phase 1a and 1b trial initially targeting SLE.

We expect to file an IND with respect to this Phase 1a and 1b trial in 2025.

We expect to continue to evaluate indications to select the best fit for further development of the program, but our initial focus would be on lupus.

Recent Developments

Securities Purchase Agreement

On February 1, 2024, we entered into a securities purchase agreement (the Purchase Agreement), pursuant to which we agreed to issue and sell, in a public offering, (i) 330,450 shares (the Shares) of the Company’s common stock, par value $0.0001 per share (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, 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 $4.4 million, after deducting offering costs of $1.1 million.

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 are 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.

January 2024 and June 2024 Reverse Stock Split

On January 19, 2024, our stockholders approved a reverse stock split of our Common Stock and our Board subsequently approved a reverse stock split of our Common Stock at a ratio of one-for-seven (the January 2024 Reverse Stock Split).

On June 7, 2024, our stockholders approved a reverse stock split of our Common Stock and our Board subsequently approved a reverse stock split of our Common Stock at a ratio of one-for-thirteen (the June 2024 Reverse Stock Split).

June 2024 Securities Purchase Agreement

On June 26, 2024, we entered into a securities purchase agreement (the June 2024 Purchase Agreement), pursuant to which we agreed to issue and sell, in a public offering (the June 2024 Offering), (i) 60,000 shares (the June 2024 Shares) of Common Stock, (ii) 2,125,793 pre-funded warrants (the June 2024 Pre-Funded Warrants) exercisable for an aggregate of 2,125,793 shares of Common Stock, (iii) 2,185,793 Series C-1 common warrants (the Series C-1 Common Warrants) exercisable for an aggregate of 2,185,793 shares of Common Stock, and (iv) 2,185,793 Series C-2 common warrants (the Series C-2 Common Warrants, and together with the Series C-1 Common Warrants, the Series C Common Warrants) exercisable for an aggregate of 2,185,793 shares of Common Stock for net proceeds of $3,172, after deducting offering expenses of $1,057.

The securities were offered in combinations of (a) one June 2024 Share or one June 2024 Pre-Funded Warrant, together with (b) one Series C-1 Common Warrant and one Series C-2 Common Warrant, for a combined purchase price of $1.83 (less $0.0001 for each June 2024 Pre-Funded Warrant).

The June 2024 Pre-Funded Warrants were exercisable for one share of Common Stock at a price per share of $0.0001, were exercisable immediately and expired when exercised in full.

Each Series C Common Warrant is exercisable into one share of Common Stock at a price per share of $1.83 and are exercisable beginning on the effective date of stockholder approval of the issuance of the shares upon exercise of the Series C Common Warrants (Warrant Stockholder Approval).

The Series C-1 Common Warrants will expire on the five-year anniversary of the Warrant Stockholder Approval.

The Series C-2 Common Warrants will expire on the 18-month anniversary of the Warrant Stockholder Approval.

As of July 31, 2024, all of the June 2024 Pre-Funded Warrants have been exercised.

May 2024 At The Market Offering

On May 20, 2024, we entered into an At The Market Offering Agreement (the Sales Agreement) with H.C.

Wainwright & Co., LLC (Wainwright), pursuant to which we may sell and issue, subject to the limitations in the Sales Agreement, shares up to $10.0 million of our Common Stock from time to time through Wainwright as our sales agent (the ATM Offering).

Under the Sales Agreement, Wainwright is entitled to compensation of 3.0% of the gross offering proceeds of all shares of Common Stock sold through it pursuant to the Sales Agreement.

As of June 30, 2024, we have sold 293,892 shares of our Common Stock in the ATM Offering at a weighted-average price of $3.27 per share, raising $1.0 million of gross proceeds and net proceeds of $0.9 million, after deducting commissions to the sales agent and other ATM Offering related expenses.

On July 26, 2024, we filed a prospectus supplement to the Company’s registration statement on Form S-1 (File No.

333-279348) to increase the amount of shares of Common Stock that we may offer and sell under the Sales Agreement and applicable registration statement to an aggregate offering price of up to $2.6 million, which amount does not include the shares of Common Stock having an aggregate gross sales price of approximately $1.0 million that have been sold under the ATM Offering.

February 2024 Securities Purchase Agreement

On February 1, 2024, we entered into a securities purchase agreement (the February 2024 Purchase Agreement), pursuant to which we agreed to issue and sell, in a public offering, (i) 25,419 shares (the February 2024 Shares) of Common Stock, (ii) 359,196 pre-funded warrants (the February 2024 Pre-Funded Warrants) exercisable for an aggregate of 359,196 shares of Common Stock, (iii) 384,615 Series B-1 common warrants (the Series B-1 Common Warrants) exercisable for an aggregate of 384,615 shares of Common Stock, and (iv) 384,615 Series B-2 common warrants (the Series B-2 Common Warrants, and together with the Series B-1 Common Warrants, the Series B Common Warrants) exercisable for an aggregate of 384,615 shares of Common Stock for net proceeds of $4,389, after deducting offering expenses of $1,110.

The Series B Common Warrants together with the February 2024 Pre-Funded Warrants are referred to in this Quarterly Report on Form 10-Q as the “February 2024 Warrants.” The securities were offered in combinations of (a) one February 2024 Share or one February 2024 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 $14.30 (less $0.0013 for each February 2024 Pre-Funded Warrant).

Subject to certain ownership limitations, the February 2024 Warrants became exercisable upon issuance.

Each February 2024 Pre-Funded Warrant was exercisable for one share of Common Stock at a price per share of $0.0013 and expired when exercised in full.

Each Series B-1 Common Warrant is exercisable into one share of Common Stock at a price per share of $14.30 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 $14.30 for an 18-month period after February 6, 2024 the date of issuance.

In connection with the issuance of the securities 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.

January 2024 Reverse Stock Split

On January 19, 2024, our stockholders approved a reverse stock split of our Common Stock.

Our Board approved the reverse stock split at a ratio of one-for-seven (the January 2024 Reverse Stock Split).

Following the Board’s approval, we filed an amendment to our amended and restated certificate of incorporation (Charter) with the Secretary of State of the State of Delaware to effect the January 2024 Reverse Stock Split as of 4:01 p.m.

Eastern Time on January 29, 2024.

Shares of our Common Stock began trading on a post-split basis on January 30, 2024.

As a result of the January 2024 Reverse Stock Split, every seven shares of our Common Stock, either issued or outstanding, immediately prior to the filing and effectiveness of our amendment to our Charter filed with the Secretary of State of the State of Delaware, was automatically combined and converted (without any further act) into one share of fully paid and nonassessable share of Common Stock.

No fractional shares were issued in connection with the January 2024 Reverse Stock Split.

Stockholders who otherwise would have received fractional shares of Common Stock received cash in lieu thereof at a price equal to the fraction to which the stockholder would have otherwise been entitled.

The January 2024 Reverse Stock Split had the effect of reducing the aggregate number of outstanding shares of Common Stock from 4,520,233 shares on a pre-reverse split basis to a total of 645,738 shares outstanding on a post-reverse split basis.

Unless otherwise noted, all financial information, share numbers, option numbers, warrant numbers, other derivative security numbers and exercise prices appearing in this Quarterly Report on Form 10-Q have been adjusted to give effect to the January 2024 Reverse Stock Split.

Nasdaq Compliance - Equity Deficiency

In connection with the issuance of the February 2024 Shares and February 2024 Warrants pursuant to the February 2024 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.

As of June 30, 2024, all of the February 2024 Pre-Funded warrants and the Series A-1 Warrants have been exercised in full.

Nasdaq Compliance - Stockholders’ Equity Deficiency

On November 22, 2023, we received a letter (the Notice) from the Listing Qualifications Department (the Staff) of The Nasdaq Stock Market LLC (Nasdaq) notifying us that we were not in compliance with the minimum stockholders’ equity requirement for continued listing on The Nasdaq Capital Market based on the information provided in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.

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Per the Staff’s January 22, 2024 letter, we must complete an equity offering to raise gross proceeds of at least $6.0 million and furnish to the Staff and Nasdaq evidence of compliance with the Stockholders’ Equity Requirement by filing a publicly available report prior to May 24, 2024.

While we completed an equity offering with gross proceeds of $5.5 million and have met the minimum Stockholders’ Equity

Requirement as of the quarter ended March 31, 2024, the proceeds will likely be insufficient for us to maintain compliance with the Stockholders’ Equity Requirement such that we will need to raise substantial additional funds in the near term.

If we fail to evidence compliance with the Stockholders’ Equity Requirement in our Quarterly Report on Form 10-Q for the quarter ending June 30, 2024 or as otherwise required by Nasdaq, we may be delisted.

We completed multiple equity offerings with gross proceeds of $10.5 million and have met the minimum Stockholders’ Equity Requirement for each of the quarters ended March 31, 2024 and June 30, 2024.

As such, on July 2, 2024, we received a letter from the Staff of Nasdaq notifying us that the stockholders’ equity deficiency under Listing Rule 5550(b) had been cured and that we were then in compliance with all applicable continued listing standards.

Nasdaq Compliance - Bid Price Deficiency

The rules of The Nasdaq Capital Market also require that we maintain a closing price for shares of our Common Stock of at least $1.00 per share (the Minimum Bid Price Rule).

On January 5, 2024, we received a letter (the Letter) from the Staff of Nasdaq indicating that we no longer meet the Minimum Bid Price Rule set forth in Nasdaq Listing Rule 5550(a)(2) because the closing bid price for our Common Stock was less than $1.00 for the previous 30 consecutive business days.

The Letter is in addition to the Notice described above.

The Letter has no immediate effect on our continued listing on The Nasdaq Capital Market.

Under Nasdaq Listing Rule 5810(c)(3)(A), we have a 180-calendar day period, or until July 3, 2024 (the Compliance Date), to regain compliance with the Minimum Bid Price Rule.

The Minimum Bid Price Rule will be met if our Common Stock has a minimum closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days during the 180-calendar day period, unless Nasdaq exercises its discretion to extend such 10‑day period.

If we do not regain compliance by the Compliance Date, we may be eligible for an additional 180-calendar day period, subject to satisfying the conditions in the applicable Nasdaq Listing Rules.

If, before the Compliance Date, our Common Stock has a closing bid price of $0.10 per share or less for ten consecutive trading days, the Staff will issue a Staff Delisting Determination under Nasdaq Listing Rule 5810 with respect to our Common Stock.

On January 5, 2024, we received a letter (the Letter) from the Staff of Nasdaq indicating that we no longer met the Minimum Bid Price Rule set forth in Nasdaq Listing Rule 5550(a)(2) because the closing bid price for our Common Stock was less than $1.00 for the previous 30 consecutive business days.

The Letter was in addition to the Notice described above.

The Letter had no immediate effect on our continued listing on The Nasdaq Capital Market.

Under Nasdaq Listing Rule 5810(c)(3)(A), we had a 180-calendar day period, or until July 3, 2024 (the Compliance Date), to regain compliance with the Minimum Bid Price Rule.

The Minimum Bid Price Rule requires that a listed company maintain a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days during the 180-calendar day period, unless Nasdaq exercises its discretion to extend such 10‑day period.

On January 29, 2024, we filed an amendment to our Charter to implement the January 2024 Reverse Stock Split to attempt to regain compliance with the Minimum Bid Price Rule, but were not able to regain compliance following the January 2024 Reverse Stock Split.

There can be no assurance that the stock price of our Common Stock will remain above the minimum $1.00 bid price required for any post-split Nasdaq monitoring period or otherwise.

On June 7, 2024, we filed an amendment to our Amended and Restated Certificate of Incorporation to effect the June 2024 Reverse Stock Split to attempt to regain compliance with the Minimum Bid Price Rule.

On July 2, 2024 and July 19, 2024, we received letters from the Staff of Nasdaq notifying us that we were again in compliance with the Minimum Bid Price Rule.

If our closing price again remains below $1.00 for 30 trading days, we may again fail to comply with the Minimum Bid Price Rule, and we would receive an additional notification of our failure to comply with the Minimum Bid Price Rule and may be subject to delisting from Nasdaq.

Merger with Vallon Pharmaceuticals, Inc.

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

In April 2023, the Company (formerly Vallon Pharmaceuticals, Inc.

(Vallon)) consummated a merger with GRI Bio Operations, Inc.

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

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The Merger Agreement provided for the merger of Merger Sub with and into GRI Operations, with GRI Operations continuing as a wholly-owned subsidiary of the Company and the surviving corporation of the merger (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 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 Growth Fund, LP (Altium), pursuant to which GRI Operations issued senior secured promissory notes (the Bridge Notes) in the aggregate principal amount of $3.3 million, in exchange for an aggregate purchase price of $2.5 million.

The Bridge Notes were issued in two closings:

(i) the first closing for $1.67 million in aggregate principal amount (in exchange for an aggregate purchase price of $1.25 million) closed on December 14, 2022;

and (ii) the second closing for $1.67 million in aggregate principal amount (in exchange for an aggregate purchase price of $1.25 million) closed on March 9, 2023.

In addition, upon the funding of each tranche, Altium received warrants to purchase an aggregate of 178,927 shares of GRI Operations’ common stock (the Bridge Warrants).

In addition to the Bridge SPA, and also in connection with signing the Merger Agreement, the Company, GRI Operations and Altium entered into a Securities Purchase Agreement on December 13, 2022 (the Equity SPA) pursuant to which the Investor agreed to invest $12.25 million 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 (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.

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 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.

Pursuant to the Equity SPA, on May 8, 2023, the Company issued to Altium (i) Series A-1 Warrants to purchase 181,316 shares of the Company’s Common Stock with an initial exercise price of $94.57 per share, (ii) Series A-2 Warrants to purchase 163,185 shares of the Company’s Common Stock with an initial exercise price of $103.18 per share, and (iii) Series T Warrants to purchase at an exercise price of $12.28 per share (x) 814,467 shares of the Company’s 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 116,353 shares of the Company’s Common Stock (collectively, the Equity Warrants).

Upon the completion of the Merger, the outstanding principal and accrued interest on the Bridge Notes was cancelled and the Bridge Warrants were exchanged for warrants (the Exchange Warrants) to purchase an aggregate of 60,227 shares of the Company’s Common Stock.

As of March 31, 2024, all of the A-2 Warrants and the Exchange Warrants had been exercised and all of the A-1 Warrants and the T Warrants were outstanding.

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

Financial Operations Overview

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General and administrative expenses consist primarily of compensation and consulting related expenses for executives and other administrative personnel, professional fees and other corporate expenses, including legal and accounting fees, travel expenses, facilities-related expenses, and consulting services relating to corporate matters.

We expect our general and administrative expenses will increase substantially as we incur costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors’ and officers’ insurance, legal and accounting costs and investor relations costs, as well as an increase in personnel expenses as we hire additional personnel.

We expect our general and administrative expenses will continue to increase as we incur costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors’ and officers’ insurance, legal and accounting costs and investor relations costs, as well as an increase in personnel expenses as we hire additional personnel.

Warrant Liability

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Vallon evaluated the May 2022 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 May 2022 Warrants related to the reduction of the exercise price in certain circumstances precludes the May 2022 Warrants from being accounted for as components of equity.

As a result, the May 2022 Warrants were measured the fair value upon issuance using a Black-Scholes valuation model and are recorded as a liability on the balance sheet.

As a result, the May 2022 Warrants were measured at fair value upon issuance using a Black-Scholes valuation model and are recorded as a liability on the consolidated balance sheet.

The fair value of the May 2022 Warrants is measured at each reporting date and changes in fair value are recognized in the consolidated statements of operations in the period of change.

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Results of Operations

Comparison of the Three Months Ended March 31, 2024 and 2023

Comparison of the Three Months Ended June 30, 2024 and 2023

The following table summarizes the results of our operations for the periods indicated (in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Operating expenses:

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Change in fair value of warrant liability 1 122

Interest income (expense) 6 (1,162)

Interest income (expense), net 6 (934)

Net loss $ (2,250) $ (6,746)

Research and Development Expenses

Research and development expenses were $0.9 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.

The $0.8 million increase in research and development expenses was primarily due to increases of $0.5 million in expenses related to the development program of GRI-0621, $0.1 million in consulting fees and $0.2 million in personnel expenses.

Research and development expenses were $0.9 million in each of the three-month periods ended June 30, 2024 and 2023.

Research and development expenses in each of the three month periods ended June 30, 2024 and 2023, were primarily comprised of expenses related to the development program of GRI-0621, consulting fees and personnel expenses.

General and Administrative Expenses

General and administrative expenses were $1.0 million and $0.9 million for the three months ended March 31, 2024 and 2023, respectively.

The $0.1 million increase was primarily related to increased personnel expenses of $0.3 million as a result of increased

headcount, increases in administrative and insurance expenses of $0.2 million, offset by a $0.4 million decrease in consulting and professional fees, including legal, accounting and investor relations fees.

General and administrative expenses were $1.4 million and $5.1 million for the three months ended June 30, 2024 and 2023, respectively.

The $3.7 million decrease was primarily related to decreased costs for professional fees, including legal, accounting and

investment banking fees as a result of the completion of the Merger of $3.1 million and a decrease in personnel expenses of $0.5 million as a result of a decrease in bonus expense.

Change in Fair Value of Warrant Liability

The change in fair value of $2,000 represents a decrease in the fair value of the May 2022 Warrants outstanding during the three months ended March 31, 2024.

Interest Income (Expense)

Interest income was $6,000 for the three months ended March 31, 2024.

Interest expense was $1.2 million for the three months ended March 31, 2023 and related to the outstanding Bridge Notes.

The change in fair value of $0.1 million represents a decrease in the fair value of the May 2022 Warrants during the three months ended June 30, 2024.

Interest Income (Expense), net

Interest income, net, was $6,000 for the three months ended June 30, 2024.

Interest expense, net, was $0.9 million for the three months ended June 30, 2023 and related to senior secured promissory notes issued by GRI Operations prior to the Merger (the Bridge Notes).

Comparison of the Six Months Ended June 30, 2024 and 2023

The following table summarizes the results of our operations for the periods indicated (in thousands):

Six Months Ended June 30,

Operating expenses:

Research and development 1,811 997

General and administrative 2,342 5,926

Total operating expenses 4,153 6,923

Loss from operations (4,153) (6,923)

Change in fair value of warrant liability 3 122

Interest income (expense), net 13 (2,095)

Net loss $ (4,137) $ (8,896)

Research and Development Expenses

Research and development expenses were $1.8 million and $1.0 million for the six months ended June 30, 2024 and 2023, respectively.

The $0.8 million increase was primarily due to increases in expenses related to the development program of GRI-0621.

General and Administrative Expenses

General and administrative expenses were $2.3 million and $5.9 million for the six months ended June 30, 2024 and 2023, respectively.

The $3.6 million decrease was primarily related to decreases in costs for professional fees, including legal, accounting and investment banking fees as a result of the completion of the Merger of $3.4 million, personnel expenses of $0.2 million and a $0.1 million decrease in consulting.This decrease were offset by an increase in administrative and insurance expenses of $0.1 million as a result of operating as a public company.

Change in Fair Value of Warrant Liability

The change in fair value of $0.1 million represents a decrease in the fair value of the May 2022 Warrants during the six months ended June 30, 2024.

Interest Income (Expense), net

Interest income (net) was $13,000 for the six months ended June 30, 2024.

Interest expense, net, was $2.1 million for the six months ended June 30, 2023 and related to the Bridge Notes.

Liquidity and Capital Resources

Since inception, we have incurred losses and expect to continue to incur losses for the foreseeable future.

We incurred net losses of $1.9 million and $2.2 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had an accumulated deficit of $33.4 million.

We incurred net losses of $4.1 million and $8.9 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had an accumulated deficit of $35.7 million.

We have financed our working capital requirements to date through the issuance of Common Stock, warrants, convertible notes and promissory notes.

As of March 31, 2024, we had $4.1 million in cash.

As of June 30, 2024, we had $6.4 million in cash.

The following table summarizes our cash flows for the periods indicated (in thousands):

Three Months Ended March 31,

Six Months Ended June 30,

Net cash provided by (used in):

Operating activities $ (4,344) $ (2,119)

Investing activities — (8)

Financing activities 8,889 6,917

Net increase in cash and cash equivalents $ 2,283 $ 451

Net increase (decrease) in cash and cash equivalents $ 4,545 $ 4,790

Cash Flows from Operating Activities

For the three months ended March 31, 2024 and 2023, $2.2 million and $0.6 million were used in operating activities, respectively.

The $1.6 million increase was primarily due to a $1.3 million increase in cash used for accounts payable and accrued expenses and a $1.1 million decrease in non-cash adjustments primarily related to the amortization of debt discounts and debt issuance costs, offset by a $0.3 million decrease in net loss and a $0.5 million increase in prepaid and other assets.

For the six months ended June 30, 2024 and 2023, $4.3 million and $2.1 million was used in operating activities, respectively.

The $2.2 million increase was primarily due to a decrease in non-cash adjustments of $2.3 million related to the amortization of debt discounts and debt issuance costs, the revaluation of the warrant liability and the carrying amount of right-of-use assets, as well as a $6.0 million increase in cash used for accounts payable and accrued expenses, offset by a $4.8 million decrease in net loss and a $1.3 million decrease in cash used for prepaid and other assets and operating lease liabilities.

Cash Flows from Investing Activities

Net cash used in investing activities was $8,000 for the six months ended June 30, 2023, which was related to the purchase of computer equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities was $4.5 million for the three months ended March 31, 2024 as a result of $5.5 million of proceeds from the Purchase Agreement, offset by $1.0 million of stock issuance costs.

Net cash provided by financing activities was $1.0 million for the three months ended March 31, 2023 and was primarily related to $1.3 million proceeds from the funding of the second tranche of the Bridge Notes, offset by the payment of $0.2 million of debt and stock issuance costs.

Securities Purchase Agreement

On February 1, 2024, we entered into the Purchase Agreement, pursuant to which we agreed to issue and sell, in a public offering (i) 330,450 Shares of 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 $4.4 million after deducting offering costs of $1.1 million.

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 are 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 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.

Merger with Vallon Pharmaceuticals, Inc .

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 placed the Additional Shares into escrow with an escrow agent for net proceeds of $11,704, after deducting offering expenses of $546.

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

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

Net cash provided by financing activities was $8.9 million for the six months ended June 30, 2024 and was primarily related to $10.5 million of proceeds from the February 2024 Purchase Agreement, the ATM Offering and the June 2024 Purchase Agreement.

The increase was offset by $1.6 million of stock issuance costs.

Net cash provided by financing activities was $6.9 million for the six months ended June 30, 2023 and was primarily due to $12.3 million of proceeds from the Equity SPA and $1.3 million of proceeds from the funding of the second tranche of the Bridge Notes.

The increase was offset by $2.9 million of net liabilities assumed in the connection with the Merger, $3.0 million in costs associated with the Merger, the payment of $0.5 million of debt issuance costs related to the Bridge Notes and $0.1 million of stock issuance costs related the Equity SPA.

June 2024 Securities Purchase Agreement

On June 26, 2024, we entered into the June 2024 Purchase Agreement, pursuant to which we agreed to issue and sell, in the June 2024 Offering), (i) 60,000 June 2024 Shares, (ii) 2,125,793 June 2024 Pre-Funded Warrants exercisable for an aggregate of 2,125,793 shares of Common Stock, (iii) 2,185,793 Series C-1 Common Warrants exercisable for an aggregate of 2,185,793 shares of Common Stock, and (iv) 2,185,793 Series C-2 Common Warrants exercisable for an aggregate of 2,185,793 shares of Common Stock for net proceeds of $3.2 million, after deducting offering expenses of $1.1 million.

May 2024 At The Market Offering

n July 26, 2024, we filed a prospectus supplement to the Company’s registration statement on Form S-1 (File No.

February 2024 Securities Purchase Agreement

On February 1, 2024, we entered into the February 2024 Purchase Agreement, pursuant to which we agreed to issue and sell, in a public offering, (i) 25,419 February 2024 Shares, (ii) 359,196 February 2024 Pre-Funded Warrants exercisable for an aggregate of 359,196 shares of Common Stock, (iii) 384,615 Series B-1 Common Warrants exercisable for an aggregate of 384,615 shares of Common Stock, and (iv) 384,615 Series B-2 Common Warrants exercisable for an aggregate of 384,615 shares of Common Stock for net proceeds of $4.4 million, after deducting offering expenses of $1.1 million.

Equity Securities Purchase Agreement

In connection with signing the Merger Agreement, the Company, GRI Operations and Altium entered the Equity SPA pursuant to which Altium agreed to invest $12.3 million 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.

Future Funding Requirements

Our net losses were $1.9 million and $2.2 million for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, we had $4.1 million in cash and an accumulated deficit of $33.4 million.

Our net losses were $4.1 million and $8.9 million for the six months ended June 30, 2024 and 2023, respectively.

As of June 30, 2024, we had $6.4 million in cash and an accumulated deficit of $35.7 million.

We expect to devote substantial financial resources to our planned activities, particularly as we prepare for, initiate, and conduct our planned clinical trials of GRI-0621 and GRI-0803, advance our discovery programs and continue our product development efforts.

In addition, we expect to incur additional costs associated with operating as a public company.

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the third quarter of 2024.

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations.

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We expect to continue to incur significant and increasing operating losses at least for the foreseeable future.

expect to generate product revenue unless and until we successfully complete development, obtain regulatory approval for and successfully commercialize our current, or any future, product candidates.

We do not expect to generate product revenue unless and until we successfully complete development, obtain regulatory approval for and successfully commercialize our current, or any future, product candidates.

Off-Balance Sheet Arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis