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Item 2. Management’s Discussion and Analysis

2025-08-14 compared with 2025-05-15 · 56 added, 45 removed, 116 unchanged (47% of the section changed)

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

As of March 31, 2025, it has been evaluated in over 1,700 patients as an oral product for up to 52-weeks.

As of June 30, 2025, 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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Food and Drug Administration has cleared our Investigative New Drug (IND) application, and we have received authorization of our clinical trial application from both the United Kingdom Medicines and Healthcare Products Regulatory Agency and the Australian Therapeutic Goods Administration to initiate the Phase 2a biomarker study evaluating GRI-0621 for the treatment of IPF in the, U.S., United Kingdom and Australia, respectively.

We are evaluating 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 expect interim data from this trial to be available in the second quarter of 2025 and topline results to be available in the third quarter of 2025.

We are evaluating GRI-0621 in a randomized, double-blind, multi-center Phase 2a biomarker study, for which we commenced enrollment in December 2023.Enrollment was completed in July 2025.

No safety concerns have been observed by the Independent Data Monitoring Committee (IDMC) review of the first 12 subjects at two weeks and the first 24 subjects at six weeks of treatment.

Changes from baseline of biomarkers in GRI-0621 treated subjects are suggestive of an anti-fibrotic effect, with decreases in biomarkers of fibrosis formation and increases in biomarkers of fibrosis resolution observed.

Topline results from the Phase 2a biomarker study are expected in the third quarter of 2025.

Our product candidate portfolio also includes GRI-0803 and a proprietary library of 500+ compounds.

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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 application with respect to this Phase 1a and 1b trial in 2025.

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 and to file an IND application with respect to this Phase

1a and 1b trial in 2026.

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

Reverse Stock Splits

On February 11, 2025, our stockholders approved a reverse stock split of our common stock, par value $0.0001 per share (Common Stock), within the range of not less than one-for-2 and not more than one-for-23, and our board of directors subsequently approved the February 2025 Reverse Stock Split at the ratio of one-for-17.

Following these approvals, we filed an amendment to our amended and restated certificate of incorporation, as amended with the Secretary of State of the State of Delaware to effect the February 2025 Reverse Stock Split as of 4:01 p.m.

Eastern Time on February 21, 2025.

Shares of our Common Stock began trading on a post-split basis on February 24, 2025.

The February 2025 Reverse Stock Split had the effect of reducing the aggregate number of outstanding shares of Common Stock from 8,933,366 shares on a pre-reverse split basis to a total of 525,358 shares outstanding on a post-reverse split basis.

On February 21, 2025, our stockholders approved the February 2025 Reverse Stock Split.

April 2025 Securities Purchase Agreement

On April 1, 2025, we entered into a securities purchase agreement (the April 2025 Purchase Agreement), pursuant to which we issued and sold, in a public offering (the April 2025 Offering), (i) 202,000 shares (the April 2025 Shares) of Common Stock, (ii) 1,186,888 pre-funded warrants (the April 2025 Pre-Funded Warrants) exercisable for an aggregate of 1,186,888 shares of Common Stock, (iii) 1,388,888 Series E-1 common stock warrants (the Series E-1 Common Warrants) to purchase up to 1,388,888 shares of Common Stock, (iv) 1,388,888 Series E-2 common stock warrants (the Series E-2 Common Warrants) to purchase up to 1,388,888 shares of Common Stock, and (v) 1,388,888 Series E-3 common stock warrants (the Series E-3 Common Warrants, and collectively with the Series E-1 Warrants and the Series E-2 Warrants, the Series E Common Warrants) to purchase up to 1,388,888 shares of Common Stock, for gross proceeds of $5,000, before deducting offering expenses.

On April 1, 2025, we entered into a securities purchase agreement (the April 2025 Purchase Agreement), pursuant to which we issued and sold, in a public offering (the April 2025 Offering), (i) 202,000 shares (the April 2025 Shares) of Common Stock, (ii) 1,186,888 pre-funded warrants (the April 2025 Pre-Funded Warrants) exercisable for an aggregate of 1,186,888 shares of Common Stock, (iii) 1,388,888 Series E-1 common stock warrants (the Series E-1 Common Warrants) to purchase up to 1,388,888 shares of Common Stock, (iv) 1,388,888 Series E-2 common stock warrants (the Series E-2 Common Warrants) to purchase up to 1,388,888 shares of Common Stock, and (v) 1,388,888 Series E-3 common stock warrants (the Series E-3 Common Warrants, and collectively with the Series E-1 Warrants and the Series E-2 Warrants, the Series E Common Warrants) to purchase up to 1,388,888 shares of Common Stock, for net proceeds of $4.0 million, before deducting offering expenses of $1.0 million.

The securities were offered in combinations of (a) one April 2025 Share or one April 2025 Pre-Funded Warrant, together with (b) one Series E-1 Common Warrant, one Series E-2 Common Warrant and one Series E-3 Common Warrant, for a combined purchase price of $3.60 (less $0.0001 for each April 2025 Pre-Funded Warrant).

The April 2025 Pre-Funded Warrants are exercisable for one share of Common Stock at a price of $0.0001 per share, are exercisable immediately and will expire when exercised in full.

The April 2025 Pre-Funded Warrants were exercisable for one share of Common Stock at a price of $0.0001 per share, were exercisable immediately and expired when exercised in full.

Each Series E Common Warrant is exercisable into one share of Common Stock at a price per share of $3.20 and is immediately exercisable.

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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 March 31, 2025, we have sold 325,618 shares of our Common Stock in the ATM Offering at a weighted-average price of $11.07 per share, raising $3.6 million of gross proceeds and net proceeds of $3.5 million, after deducting commissions to the sales agent and other ATM Offering related expenses.

On May 23, 2025, we filed a prospectus supplement to our 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 $1.7 million, which amount does not include the shares of Common Stock having an aggregate gross sales price of approximately $3.6 million that were sold under the ATM Offering through March 31, 2025, in accordance with the limitations set forth in Instruction I.B.6 of Form S-3.

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 September 10, 2024, we received a letter from the Listings Qualification Department (the Staff) of The Nasdaq Stock Market LLC, indicating that we no longer met the Minimum Bid Price Rule because the closing bid price for our Common Stock was less than $1.00 for the previous 30 consecutive business days prior thereto.

We subsequently effected the February 2025 Reverse Stock Split.

On March 10, 2025, we received a letter from the Staff indicating that we were once again in compliance with the Minimum Bid Price Rule.

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 $1.8 million, which amount does not include the shares of Common Stock having an aggregate gross sales price of approximately $4.5 million that were sold under the ATM Offering through May 22, 2025, in accordance with the limitations set forth in Instruction I.B.6 of Form S-3.

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, 2025, we have sold 908,172 shares of our Common Stock in the ATM Offering at a weighted-average price of $5.01 per share, raising $4.5 million of gross proceeds and net proceeds of $4.3 million, after deducting commissions to the sales agent and other ATM Offering related expenses, of which 582,554 shares of Common Stock were sold during the quarter ended June 30, 2025, for gross proceeds of $941 and net proceeds of $825.

Financial Operations Overview

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Results of Operations

Comparison of the Three Months Ended March 31, 2025 and 2024

Comparison of the Three Months Ended June 30, 2025 and 2024

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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Research and Development Expenses

Research and development expenses were $1.6 million and $0.9 million for the three months ended March 31, 2025 and 2024, respectively.

The $0.7 million increase in research and development expenses was primarily due to an increase of $0.7 million in expenses related to the registration development program of GRI-0621.

Research and development expenses were $1.9 million and $0.9 million for the three months ended June 30, 2025 and 2024, respectively.

The $1.0 million increase in research and development expenses was primarily due to an increase of $0.9 million in expenses related to the registration development program of GRI-0621 and a $0.1 million increase in personnel expenses.

General and Administrative Expenses

General and administrative expenses were $1.4 million and $1.0 million for the three months ended March 31, 2025 and 2024, respectively.

The $0.4 million increase was primarily related to a $0.3 million increase in personnel expense including stock based compensation expense and a $0.2 million increase in professional fees.

General and administrative expenses were $1.0 million and $1.4 million for the three months ended June 30, 2025 and 2024, respectively.

The $0.4 million decrease was primarily related to a $0.4 million decrease in professional fees and public company expenses.

Interest Income

Interest income was $5,000 and $6,000 for the three months ended March 31, 2025 and 2024, respectively.

Interest income was $5,000 and $6,000 for the three months ended June 30, 2025 and 2024, respectively.

Comparison of the Six Months Ended June 30, 2025 and 2024

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 $ 3,520 $ 1,811

General and administrative 2,429 2,342

Total operating expenses 5,949 4,153

Loss from operations (5,949) (4,153)

Change in fair value of warrant liability — 3

Interest expense, net 11 13

Net loss $ (5,938) $ (4,137)

Research and Development Expenses

Research and development expenses were $3.5 million and $1.8 million for the six months ended June 30, 2025 and 2024, respectively.

The $1.7 million increase in research and development expenses was primarily due to i ncreases of $1.6 million in expenses related to the development program of GRI-0621 and a $0.1 million increase in personnel expenses.

General and Administrative Expenses

General and administrative expenses were $2.4 million and $2.3 million for the six months ended June 30, 2025 and 2024, respectively.

The $0.1 million increase was primarily related to an increase of $0.3 million in personnel expenses included stock-based compensation expense, offset by a $0.2 million decrease in public company expenses.

Change in Fair Value of Warrant Liability

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

Interest Income

Interest income was $11,000 and $13,000 for the six months ended June 30, 2025 and 2024, respectively.

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 $3.0 million and $1.9 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had an accumulated deficit of $42.8 million.

We incurred net losses of $5.9 million and $4.1 million for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, we had an accumulated deficit of $45.7 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, 2025, we had $3.3 million in cash.

As of June 30, 2025, we had $5.1 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):

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Financing activities 4,996 8,889

Net increase (decrease) in cash and cash equivalents $ (1,747) $ 2,283

Net increase in cash and cash equivalents $ 94 $ 4,545

Cash Flows from Operating Activities

For the three months ended March 31, 2025 and 2024, $1.7 million and $2.2 million were used in operating activities, respectively.

The $0.5 million decrease was primarily due to an increase in non-cash adjustments of $0.2 million related to stock-based compensation expenses, as well as a $1.1 million increase in accounts payable and a $0.7 million increase in accrued expenses, offset by a $1.2 million increase in net loss and a $0.4 million decrease in prepaid and other assets.

For the six months ended June 30, 2025 and 2024, $4.9 million and $4.3 million were used in operating activities, respectively.

The $0.6 million increase was primarily due to a $1.8 million increase in net loss and a $0.4 million decrease in cash used for prepaid and other assets and operating lease liabilities, offset by a $0.3 million increase in non-cash adjustments related to stock-based compensation expenses, as well as a $0.8 million increase in cash used for accounts payable and a $0.5 million increase in cash used for accrued expenses.

Cash Flows from Financing Activities

Net cash used in financing activities was $11,000 for the three months ended March 31, 2025 and was primarily related to stock issuance costs related to the April 2025 Purchase Agreement.

Net cash provided by financing activities was $4.5 million for the three months ended March 31, 2024 and was primarily related to $5.5 million of proceeds from the February 2024 Offering (defined below).

Net cash provided by financing activities was $5.0 million for the six months ended June 30, 2025 and was primarily related to $5.0 million in proceeds from the April 2025 Offering and $0.9 million in proceeds from the ATM Offering, offset by $0.9 million of stock issuance costs.

Net cash provided by financing activities was $8.9 million for the six months ended June 30, 2024 and was primarily related to $9.5 million of proceeds from the February 2024 Offering (defined below) and $1.0 million in proceeds from the ATM Offering.

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

April 2025 Securities Purchase Agreement

On April 1, 2025, we entered the April 2025 Purchase Agreement, pursuant to which we issued and sold, in the April 2025 Offering, (i) 202,000 April 2025 Shares, (ii) 1,186,888 April 2025 Pre-Funded Warrants exercisable for an aggregate of 1,186,888 shares of Common Stock, (iii) 1,388,888 Series E-1 Common Warrants to purchase up to 1,388,888 shares of Common Stock, (iv) 1,388,888 Series E-2 Common Warrants to purchase up to 1,388,888 shares of Common Stock, and (v) 1,388,888 Series E-3 Common Warrants, to purchase up to 1,388,888 shares of Common Stock, for gross proceeds of $5,000, before deducting offering expenses.

On April 1, 2025, we entered the April 2025 Purchase Agreement, pursuant to which we issued and sold, in the April 2025 Offering, (i) 202,000 April 2025 Shares, (ii) 1,186,888 April 2025 Pre-Funded Warrants exercisable for an aggregate of 1,186,888 shares of Common Stock, (iii) 1,388,888 Series E-1 Common Warrants to purchase up to 1,388,888 shares of Common Stock, (iv) 1,388,888 Series E-2 Common Warrants to purchase up to 1,388,888 shares of Common Stock, and (v) 1,388,888 Series E-3 Common Warrants, to purchase up to 1,388,888 shares of Common Stock, for net proceeds of $4.0 million, after deducting offering expenses of $1.0 million.

May 2024 At The Market Offering

On May 23, 2025, we filed a prospectus supplement to our registration statement on Form S-3 (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 $1.8 million, which amount does not include the shares of Common Stock having an aggregate gross sales price of approximately $4.5 million that were sold under the ATM Offering through May 22, 2025, in accordance with the limitations set forth in Instruction I.B.6 of Form S-3.

February 2024 Securities Purchase Agreement

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Future Funding Requirements

Our net losses were $3.0 million and $1.9 million for the three months ended March 31, 2025 and 2024, respectively.

As of March 31, 2025, we had $3.3 million in cash and an accumulated deficit of $42.8 million.

Our net losses were $5.9 million and $4.1 million for the six months ended June 30, 2025 and 2024, respectively.

As of June 30, 2025, we had $5.1 million in cash and an accumulated deficit of $45.7 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 through the third quarter of 2025.

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

We intend 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 our research and development efforts are successful.

unable to secure adequate additional funding, we will need to reevaluate our operating plans and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our technology on less favorable terms than we would otherwise choose or cease operations entirely.

If we are unable to secure adequate additional funding, we will need to reevaluate our operating plans and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our technology on less favorable terms than we would otherwise choose or cease operations entirely.

These actions could materially impact our business, results of operations and future prospects and the value of shares of our Common Stock.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis