What changed in this filing

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Item 1. Financial Statements

2022-11-09 compared with 2022-08-22 · 249 added, 196 removed, 551 unchanged (45% of the section changed)

3 unchanged sentences

Condensed Consolidated Balance Sheets

September 30,

Current assets:

10 unchanged sentences

Stockholders' equity (deficit)

Preferred stock, $ 0.0001 par value, 70,000,000 shares authorized, 0 shares

issued and outstanding

Common stock, $ 0.0001 par value, 30,000,000 shares authorized, 8,416,032 and

7,584,980 shares issued and outstanding at June 30, 2022 and December 31,

2021, respectively

Preferred stock, $ 0.0001 par value, 30,000,000 and 70,000,000 shares

authorized at September 30, 2022 and December 31, 2021 respectively,

0 shares issued and outstanding

Common stock, $ 0.0001 par value, 70,000,000 and 30,000,000 shares

authorized at September 30, 2022 and December 31, 2021 respectively,

10,945,904 and 7,584,980 shares issued and outstanding at September 30, 2022

and December 31, 2021, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

6 unchanged sentences

Interest income

Australian research and development incentives

Change in fair value of embedded features

Australian research and development

Change in fair value of embedded

Change in fair value of warrant liability

Loss on extinguishment of convertible

notes and convertible notes, related

Other income (expense), net

Net loss attributable to noncontrolling interests

Deemed dividend on warrant modification

Net loss attributable to noncontrolling

Deemed dividend on warrant

Deemed dividend for ratchet shares

issued at IPO

Net loss attributable to MAIA Biotechnology, Inc.

7 unchanged sentences

Three Months Ended

Six Months Ended

Net loss attributable MAIA Biotechnology, Inc.

September 30,

Nine Months Ended

September 30,

Net loss attributable to MAIA Biotechnology, Inc.

Foreign currency translation adjustment

4 unchanged sentences

Condensed Consolidated Statements of Chan ges in Stockholders' Equity (Unaudited)

For the three and six months ended June 30, 2022

For the three and nine months ended September 30, 2022

For the Three and Nine Months Ended

September 30, 2022

Preferred Stock

Additional Paid-In Capital

Accumulated Deficit

Accumulated other comprehensive income

Accumulated other comprehensive income (loss)

Total MAIA Equity

15 unchanged sentences

Balance at June 30, 2022

Issuance of common shares upon exercise of stock options

Issuance of common shares in connection with initial public offering, net of $ 2,749,905 issuance cost

Issuance of warrants to underwriter in connection with initial public offering

Stock-based compensation expense

Issuance of ratchet shares

Deemed dividend for ratchet shares

Foreign currency translation adjustment

Balance at September 30, 2022

See the accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)

For the three and six months ended June 30, 2021

For the three months ended September 30, 2021

For the Three and Nine Months Ended

September 30, 2021

Preferred Stock

Additional Paid-In Capital

19 unchanged sentences

Balance at June 30, 2021

Issuance of common shares upon conversion of convertible notes

Issuance of common shares upon conversion of SAFE

Issuance of common shares in connection with Equity Financing

Transaction costs incurred in connection with Equity Financing

Reclassification of warrant liability to equity

Issuance of restricted common shares to Jerry Shay pursuant to THIO Merger Agreement

Stock-based compensation expense - MAIA

Stock-based compensation expense - DGD

Stock-based compensation expense - THIO

Dissolution of DGD

Dissolution of THIO pursuant to Merger Agreement

Balance at September 30, 2021

See the accompanying notes to the unaudited condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated S tatements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation

Loss on extinguishment of convertible notes

Loss on settlement of bonus

Change in fair value of embedded features

7 unchanged sentences

Due to related parties

Accrued interest

Net cash used in operating activities

1 unchanged sentence

Proceeds from issuance of convertible notes, warrants, and embedded conversion

Deferred offering costs

Proceeds from Paycheck Protection Program loan

Collections of subscriptions receivable

Proceeds from issuance of common stock, net of transaction costs

Proceeds from issuance of common stock, net of transaction

Proceeds from exercise of stock options

Proceeds from exercise of warrants

Proceeds from sale of common stock in initial public offering

Payment of initial public offering transaction costs

Payment on loan payable to officer

Net cash provided by financing activities

Cash flows from financing activities foreign currency exchange rates:

Effect of foreign currency exchange on cash

Net effect of foreign currency exchange on cash

Net increase (decrease) in cash

Net increase in cash

Cash at beginning of period

1 unchanged sentence

Supplemental disclosure of cash flow information:

Conversion of convertible notes and accrued interest into MAIA common stock

Conversion of SAFE into MAIA common stock

Subscription receivable for issuance of MAIA common stock

Options issued for accrued bonus

Options issued for deferred compensation

Options issued for services

Reclassification of warrant liability to equity

Issuance of convertible note for payment on loan to officer

Previously paid issuance costs in connection with the initial public offering

Warrants issued to underwriters in connection with the initial public offering

See the accompanying notes to the unaudited condensed consolidated financial statements.

21 unchanged sentences

In April 2022, the Company established a wholly owned Romanian subsidiary, MAIA Biotechnology Romania S.R.L., to conduct various pre-clinical and clinical activities for the development of the Company's product candidates.

At June 30, 2022, the Company had working capital of $ 5,512,072 , accumulated deficit of $ 35,157,721 , cash of $ 8,150,012 and current liabilities of $ 3,097,566 .

At September 30, 2022 , the Company had working capital of $ 12,323,572 , accumulated deficit of $ 39,090,204 , cash of $ 14,063,642 and current liabilities of $ 2,456,293 .

Since inception the Company has experienced net losses and negative cash flows from operations each fiscal year.

3 unchanged sentences

During May 2022, the company sold 11,111 shares of common stock at $ 9 per share for gross proceeds of $ 99,999 .

On August 1, 2022, the Company sold 2,000,000 shares of common stock at $ 5 per share for gross proceeds of $ 10,000,000 in an initial public offering.

The Company completed an initial public offering on August 1, 2022 and has commenced trading on the NYSE American under the ticker symbol "MAIA.”

T he Company sold 2,000,000 shares of common stock at $ 5 per share for gross proceeds of $ 10,000,000 in the initial public offering.

On August 3, 2022, the Company sold an additional 300,000 shares of common stock at $ 5 per share for gross proceeds of $ 1,500,000 per the overallotment option for the underwriter.

After deducting $ 2,406,170 for cash issuance costs, net proceeds from the offering and overallotment were $ 9,093,830 .

The Company will require significant funding to perform the necessary clinical trials, and to meet the Company’s long-term development and commercialization goals.

The Company believes that its cash as of June 30, 2022, and subsequent cash proceeds from the exercise of warrants and funds received from the Company’s initial public offering will be sufficient to support operations through at least the next twelve months from the date the consolidated financial statements are issued, including funding of the THIO-101 lead-in and preliminary efficacy of the phase 2 THIO-101.

The Company plans to meet its long term capital requirements primarily through issuances of equity securities.

The Company plans to meet its capital requirements primarily through issuances of equity securities, or debt financings, as well as other sources.

The Company cannot make any assurances that additional financings will be available, on acceptable terms or at all.

If the Company is unable to raise the necessary funding, management will undertake cost

cutting measures, as done in the past, to reduce compensation and reduce the scope of or delay its clinical programs.

If the Company is unable to raise the necessary funding, management will undertake cost cutting measures to reduce compensation and reduce

the scope of or delay its clinical programs.

This could negatively impact the Company’s business and could also lead to the reduction of the Company’s operations.

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Given the daily evolution of the COVID-19 Outbreak and the global responses to curb its spread, we are not able to estimate the effects of the COVID-19 Outbreak on our results of operations, financial condition, or liquidity for the future.

One of our initial clinical studies is taking place in Australia, which has imposed one of the strictest COVID-19-related measures, including lock-downs.

While we have not currently experienced any potential delays or increased costs as a result of these measures, we may do so in the future.

One of our initial clinical studies is taking place in Australia, which initially imposed one of the strictest COVID-19-related measures, including lock-downs.

While we are not currently experiencing any delays or increased costs as a result of these measures, we may do so in the future.

Basis of Presentation

15 unchanged sentences

Use of Estimates

The preparation of the Company’s unaudited interim condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The preparation of the Company’s unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

The most significant estimates in the Company’s financial statements relate to the valuation of common stock, stock options and warrants, the embedded features in convertible notes, accruals for outsourced research and development activities, and the valuation allowance of deferred tax assets.

These estimates

and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

These estimates and assumptions are based on current facts, historical experience and various other factors believed

to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources.

Actual results may differ materially and adversely from these estimates.

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Cash accounts are maintained at financial institutions that potentially subject the Company to concentrations of credit risk.

At June 30, 2022 and December 31, 2021, substantially all of the Company’s cash was deposited in accounts at one financial institution.

At September 30, 2022 and December 31, 2021 , substantially all of the Company’s cash was deposited in accounts at one financial institution.

The Company maintains its cash deposits, which at times may exceed the federally insured limits, with a reputable financial institution and, accordingly, the Company believes such funds are subject to minimal credit risk.

1 unchanged sentence

The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents.

As of June 30, 2022 and December 31, 2021, cash includes cash in a depository bank account;

the Company has no cash equivalents as of June 30, 2022 and December 31, 2021.

As of September 30, 2022 and December 31, 2021 , cash includes cash in a depository bank account;

the Company has no cash equivalents as of September 30, 2022 and December 31, 2021 .

Fair Value Measurements

7 unchanged sentences

These valuations require significant judgment.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the six months ended June 30, 2022, and as of and during the twelve months ended December 31, 2021.

The carrying amount of accounts payable approximated fair value as they are

short term in nature.

The fair value of warrants issued for services is estimated based on the Black-Scholes model during the periods ended June 30, 2021.

There were no warrants issued during the six months ending June 30, 2022.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management as of and during the nine months ended September 30, 2022, and as of and during the twelve months ended December 31, 2021.

The carrying amount of accounts payable approximated fair value as they are short term in nature.

The fair value of warrants issued for services is estimated based on the Black-Scholes

model during the nine months ended September 30, 2021 and the nine months ended September 30, 2022 .

The carrying value of notes payable and convertible notes payable approximated the estimated fair values due to their recent issuances.

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The research and development incentive is one of the key elements of the Australian Government’s support for Australia’s innovation system and is supported by legislative law primarily in the form of the Australian Income Tax Assessment Act 1997, as long as eligibility criteria are met.

Management has assessed the Company’s research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the research and development incentive regime described above.

At each period end, management estimates the refundable tax offset available to the Company based on

available information at the time and it is included in Australian research and development incentives in the condensed consolidated statements of operations.

Under the program, a percentage of eligible research and development expenses incurred by the Company through its subsidiary in Australia are reimbursed.

At each period end, management estimates the refundable tax offset available to the Company based on available information at the time and it is included in Australian research and development incentives in the condensed consolidated statements of operations.

Derivative Financial Instruments

23 unchanged sentences

and global economic and capital market conditions.

There were no issuances of common stock as it relates to DGD or THIO during the six months ended June 30, 2021.

There were no issuances of common stock as it relates to DGD or THIO during nine months ended September 30, 2021.

The fair value of restricted stock awards is based on the common stock price.

13 unchanged sentences

Deferred Offering Costs

Deferred offering costs are included in other assets and consists of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related to the initial public offering and that were charged to additional paid-in capital upon the completion of the initial public offering on August 1, 2022.

In February 2016, the FASB issued ASU No.

2016-02 , as amended, Leases (“Topic 842”), which applies to all leases.

Under Topic 842, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing leases, while the statement of operations will reflect lease expense for operating leases and amortization and interest expense for financing leases.

Topic 842 is effective for public entities for fiscal years beginning after December 15, 2018 and periods beginning after December 15, 2021 for all other entities.

Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.

The Company adopted this new standard as of January 1, 2022 .

At the inception of an arrangement the Company determines whether the arrangement is or contains a lease based on the circumstances present.

Currently none of the Company’s operating lease commitments are subject to the new standard as its leases are short-term in nature (i.e., less than twelve months).

Deferred offering costs were included in other assets and consisted of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that are directly related to the initial public offering and were charged to additional paid-in capital upon the completion of the initial public offering on August 1, 2022.

Net Loss Per Share

5 unchanged sentences

The following table summarizes the Company’s potentially dilutive securities, in common share equivalents, which have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive:

Six Months Ended

Nine Months Ended

September 30,

Shares issuable upon exercise of stock options

3 unchanged sentences

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are adopted by the Company as of the specified effective date.

Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

Unless otherwise discussed, the Company believes that

the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

ACCRUED EXPENSES

As of June 30, 2022 and December 21, 2021, accrued expenses consisted of the following:

As of September 30, 2022 and December 31, 2021, accrued expenses consisted of the following:

September 30,

Professional fees

Research and development costs

Deferred compensation to former employees and officers

Deferred compensation to former officers

Total accrued expenses

STOCKHOLDERS' EQUITY

In March 2020, the shareholders approved an amended and restated certificate of incorporation which authorizes MAIA to issue 100,000,000 shares of stock, as follows:

70,000,000 shares of preferred stock and 30,000,000 shares of common stock, all with a par value of $ 0.0001 per share.

The rights, privileges, preferences, and restrictions of the classes of preferred stock have yet to be established.

As of June 30, 2022, each of the common stockholders have equal voting rights, and except in the case of restricted common shares, equal rights of participation in dividends and other distributions with other common stockholders.

Among other provisions, MAIA's shareholders agreement gave first MAIA, followed by the non-selling shareholders, the option to purchase the outstanding shares of a shareholder prior to the sale of shares to a third party.

Should the non-selling shareholders decline to purchase any portion of the selling shareholders shares, MAIA had a final opportunity to repurchase the shares.

The agreement also contains provisions for "drag-along" and "tag-along" rights, as described in the agreement.

MAIA’s shareholders agreement, including the aforementioned provisions, terminated upon the closing of MAIA’s initial public offering on August 1, 2022.

Upon the closing of the Company’s initial public offering, the Company’s shareholders agreement terminated pursuant to its terms.

In connection with the closing of the Company’s initial public offering, the Company amended and restated its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”) and amended and restated its Bylaws (the “Amended and Restated Bylaws”).

The Amended and Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on August 1, 2022 and became effective on that date, and among other things, increased the authorized number of common stock to 70,000,000 shares and decreased the authorized number of preferred stock to 30,000,000 shares.

Sales of MAIA Common Stock

1 unchanged sentence

During May 2022, the Company sold 11,111 shares of common stock at $ 9 per share for gross proceeds of $ 99,999 with no transaction costs.

The Company issued these shareholders additional shares upon the closing of the Company's initial public offering such that the $ 9.00 price per share they paid was equal to the price per share in the Company's initial public offering of $ 5.00 .The number of Ratchet Shares were calculated using the $ 5.00 per share price in the Company's initial public offering and 219,872 shares of common stock were issued on August 1, 2022 to the investors in the Recent Private Rounds.

The Ratchet Shares were declared a deemed dividend of $ 1,099,360 based on the $ 5 price of the initial public offering.

Initial Public Offering

On July 28, 2022 the Company’s shares of common stock began trading on the NYSE American under the symbol MAIA.

On August 1, 2022, the Company sold 2,000,000 shares of common stock at $ 5.00 per share for gross proceeds of $ 10,000,000 in an initial public offering prior to deducting underwriting discounts, commissions, and other offering expenses.

On August 3, 2022, the Company sold an additional 300,000 shares of common stock at $ 5.00 per share when the underwriter exercised the overallotment for gross proceeds of $ 1,500,000 prior to deducting underwriting discounts, commissions, and other offering expenses.

After deducting the underwriting discount and other offering expenses payable by the Company, the total net proceeds for the initial public offering and the overallotment were approximately $ 9.1 million.

MAIA Biotechnology, Inc.

Restricted Stock Awards

During the six months ended June 30, 2021, MAIA recognized $ 135,000 of stock compensation expense related to 75,000 of MAIA’s restricted shares granted to the founders.

During the nine months ended September 30, 2021 , MAIA recognized $ 202,500 of stock compensation expense related to 112,500 of MAIA’s restricted shares granted to the founders.

On August 13, 2021, upon the dissolution of THIO and merger into MAIA (see Note 1), a founder's 612,500 fully vested THIO restricted shares were cancelled and the founder was issued 612,500 MAIA restricted shares.

Additionally, in accordance with the founder's original award, the founder was also issued 87,500 MAIA restricted shares which vested ratably each quarter through April 1, 2022 to replace the equivalent number of unvested THIO restricted shares.

There are no unvested shares as of June 30, 2022 related to the founder's restricted shares.

During the six months ended June 30, 2021, MAIA recognized $ 105,000 of stock compensation expense related to the MAIA restricted shares granted to the founder.

The issuance of restricted shares in MAIA as a replacement for the shares the founder held in THIO was accounted for as a modification.

There was no additional incremental stock compensation recorded as related to the cancellation of the founder's THIO restricted shares and concurrent grant of MAIA restricted shares as the fair value of the original THIO award immediately before the grant of the MAIA restricted shares and the fair value of the replacement award were equal.

There were no unvested restricted shares as of June 30, 2022.

Additionally, in accordance with the founder's original award, the founder was also issued 87,500 MAIA restricted shares which vested ratably each quarter through April

1, 2022 to replace the equivalent number of unvested THIO restricted shares.

There are no unvested shares as of September 30, 2022 related to the founder's restricted shares.

Unvested balance at January 1, 2022

Unvested balance at June 30, 2022

Unvested balance at September 30, 2022

MAIA Stock Warrants

In January 2022, the Company and certain warrant holders executed waivers related to the acceptance and approval of an amendment to the holders' warrant agreements originally issued between May 6, 2020 and February 26, 2021 in connection with the Company's issuance of convertible notes.

The amendment removed the IPO expiration provision from the warrant agreements, and the warrants are now only be exercisable, in whole or in part, during the exercise period ending on earliest to occur of:

The amendment removed the IPO expiration provision from the warrant agreements, and the warrants are now only to be exercisable, in whole or in part, during the exercise period ending on the earliest to occur of:

(a) various dates in 2028 as stated within the warrant agreements;

1 unchanged sentence

The value of the warrant modification to the 144,497 warrants was calculated using the Black-Scholes-Merton option pricing model.

The incremental fair value attributable the modified awards compared to the original awards immediately prior to the modification was calculated at $ 450,578 was treated as a deemed dividend for the three months ended March 31, 2022 and is reflected as “Deemed dividend on warrant modification”

The incremental fair value attributable to the modified awards compared to the original awards immediately prior to the modification was calculated at $ 450,578 and was treated as a deemed dividend for the three months ended March 31, 2022 and is reflected as “Deemed dividend on warrant modification”

in the accompanying statement of operations.

During January 2022, warrants were exercised, resulting in the issuance of 61,111 shares of MAIA common stock for proceeds of approximately $ 110,000 .

During May 2022, warrants were exercised, resulting in the issuance of 153,000 shares of common stock for proceeds of approximately $ 275,400 , another 394,501 warrants were exercised with a cashless exercise assuming the fair market value of $ 9 per share resulting in the issuance of 315,601 shares of common stock.

During January 2022, warrants were exercised, resulting in the issuance of 61,111 shares of MAIA common stock for proceeds of $ 110,000 .

During May 2022, warrants were exercised, resulting in the issuance of 153,000 shares of common stock for proceeds of approximately $ 275,400 .

Another 394,501 warrants were exercised with a cashless exercise assuming the fair market value of $ 9 per share resulting in the issuance of 315,601 shares of common stock.

On August 1, 2022 at the closing of the initial public offering, 20,520 warrants with an exercise price of $ 5.00 per share expired.

Concurrently with the closing of the Company’s initial public offering, the Company issued warrants to purchase an aggregate of up to 100,000 shares of its common stock to the Representative or its designees, at an exercise price of $ 6.25 per share (the “Representative’s Warrants”).

The Representative’s Warrants are exercisable beginning on January 23, 2023 , and expire on July 27, 2027 , pursuant to the terms and conditions of the Representative’s Warrants.

On August 3, concurrently with the full exercise of the Underwriter’s over-allotment option, the Company issued additional warrants to purchase an aggregate of up to 15,000 shares of its common stock to the Representative or its designees on the same terms.

The warrants are equity classified instruments and the value of the warrants determined using the black-sholes method was $ 343,735 using a term of five years , risk free interest rate of 2.82 % and volatility of 77.5 %.

Balance at January 1, 2022

Balance at June 30, 2022

Balance at September 30, 2022

MAIA Biotechnology, Inc.

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2018 Stock Option Plan (the "MAIA 2018 Plan").

MAIA's board of directors administers the MAIA Plan, under which 3,900,000 shares of common stock are reserved for stock option issuance, for the purposes of attracting, retaining, and motivating key employees, directors, and consultants of MAIA.

The 2018 plan was replaced by the Amended and Restated 2020 Equity Plan.

As of June 30, 2022 there are 1,934,500 options outstanding in the 2018 Stock Option Plan.

MAIA's board of directors administers the MAIA Plan for the purposes of attracting, retaining, and motivating key employees, directors, and consultants of MAIA.

The terms of the MAIA 2018 Plan continue to govern the 1,924,500 options outstanding in the plan of September 30, 2022.

In 2020, the Company adopted the MAIA Biotechnology, Inc.

Amended and Restated 2020 Equity Incentive Plan (the "MAIA 2020 Plan"), also administered by the board of directors.

The MAIA 2020 Plan reserved 1,671,000 common shares for issuance, also for the purposes of attracting, retaining, and motivating key employees, directors, and consultants of MAIA.

In November 2020, the MAIA 2020 Plan was amended to reserve a total of 3,171,000 shares of common stock.

The MAIA 2020 Plan permits awards to take the form of stock options, restricted stock and restricted stock units.

In April and July of 2021 there were amendments to the 2020 Plan to bring the plan to a total of 4,171,000 shares reserved for issuance.

As of June 30, 2022 there are 3,993,023 options outstanding in the 2020 plan and 174,977 shares available for future issuance under the 2020 Plan.

Stock options are to be granted with an exercise price which is at least equal to the stock's estimated fair value at the date of grant, and with a contractual term of no more than 10 years from the date of grant.

In the case of an option granted to a 10 % stockholder, the exercise price shall be generally no less than 110 % of the fair market value per share on the date of grant, and the contractual term shall be 7 years.

The MAIA 2020 Plan permitted awards to take the form of stock options, restricted stock and restricted stock units.

The terms of the MAIA 2020 Plan continue to govern the 3,993,023 options outstanding in the plan as of September 30, 2022 .

There are no shares reserved for future issuance in the MAIA 2018 Plan or the MAIA 2020 Plan .

On August 1, 2022 the Company approved the MAIA Biotechnology, Inc.

2021 Equity Incentive Plan (the "MAIA 2021 Plan") with 1,909,518 shares of common stock reserved for issuance.

As of September 30, 2022 there are 1,315,131 available for future issuance under the MAIA 2021 Plan and 594,387 options are outstanding in the MAIA 2021 Plan.

Stock options are to be granted with an exercise price which is at least equal to the stock's estimated fair value at the date of grant, and with a contractual term of no more than ten years from the date of grant.

Outstanding options awarded under the MAIA 2021 Plan may, but need not, vest and therefore become exercisable in periodic instalments that may, but need not, be equal.

The option may be subject to such other terms and conditions as to the time or times when it may be exercised (which may be based on performance or other criteria) as the board of directors may deem appropriate.

The option may be subject to other terms and conditions as to the time or times when it may be exercised (which may be based on performance or other criteria) as the board of directors may deem appropriate.

Unexercised options are cancelled ninety days after termination of an employee, director, founder, or consultant.

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Certain clauses in the Plans also govern the Company's exercise repurchase rights and various other features of awards granted under the plans.

As of June 30, 2022, only stock options have been awarded pursuant to the MAIA stock award plans.

The following table summarizes the activity and information regarding MAIA's outstanding and exercisable options for the six months ended June 30, 2022:

As of September 30, 2022, only stock options have been awarded pursuant to the MAIA stock award plans.

The following table summarizes the activity and information regarding MAIA's outstanding and exercisable options for the nine months ended September 30, 2022:

Balance at January 1, 2022

Cancelled/forfeited

Balance at June 30, 2022

Options exercisable at June 30, 2022

During the six months ended June 30, 2022, the fair value of the Company's common stock was estimated for financial reporting purposes from January 1 to January 26, 2022 based on valuations of $ 8.87 per share as of December 31, 2021.

Balance at September 30, 2022

Options exercisable at September 30, 2022

During the nine months ended September 30, 2022 , the fair value of the Company's common stock was estimated for financial reporting purposes from January 1 to January 26, 2022 based on valuations of $ 8.87 per share as of December 31, 2021.

For our valuations of common stock performed, we used a hybrid method of the Option Pricing Method ("OPM”) and the Probability-Weighted Expected Return Method ("PWERM”).

1 unchanged sentence

Our approach included the use of an initial public offering scenario, a scenario assuming continued operation as a private entity, and a dissolution scenario.

Under the hybrid OPM and PWERM, the per share value calculated under the OPM and PWERM are weighted based on expected exit outcomes and the

quality of the information specific to each allocation methodology to arrive at a final estimated fair value per share of the common stock before a discount for lack of marketability is applied.

From January 27 to June 30, 2022 the fair value of the Company’s common stock was estimated for financial reporting purposes at $ 9 per share based on the sale of common stock from January 27, 2022 to May 19, 2022.

During the six months ended June 30, 2021, the fair value of the Company’s common stock was estimated for financial reporting purposes based on valuations.

Under the hybrid OPM and PWERM, the per share values calculated under the OPM and PWERM are weighted based on expected exit outcomes and the quality of the information specific to each allocation methodology to arrive at a final estimated fair value per share of the common stock before a discount for lack of marketability is applied.

From January 27 to May 31, 2022 the fair value of the Company’s common stock was estimated for financial reporting purposes at $ 9 per share based on the sale of common stock from January 27, 2022 to May 19, 2022.

From June 1, 2022 to August 1, 2022 the fair value of the Company's common stock was estimated for financial reporting purpose at $ 5 per share based on the price paid in the initial public offering.

During the nine months ended September 30, 2021 , the fair value of the Company’s common stock was estimated for financial reporting purposes based on valuations.

From January 1, 2021 to February 28, 2021 a valuation of $ 1.80 was used.

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We then subtracted the net debt to determine equity value.

The value of option grants is calculated using the Black-Scholes option pricing model with the following assumptions for options granted during the six months ended June 30:

The value of option grants is calculated using the Black-Scholes option pricing model with the following assumptions for options granted during the nine months ended September 30, 2022 and 2021:

Risk-free interest rate

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Expected dividend yield

The weighted-average grant date fair value of stock options issued during the six months ended June 30, 2022 and 2021 was $ 5.97 and $ 1.49 , respectively.

As of June 30, 2022, the total unrecognized compensation related to unvested employee and non-employee stock option awards granted was $ 2,991,036 , which the Company expects to recognize over a weighted average period of approximately 3.1 years.

The weighted-average grant date fair value of stock options issued during the nine months ended September 30, 2022 and 2021 was $ 3.11 and $ 2.57 , respectively.

As of September 30, 2022 , the total unrecognized compensation related to unvested employee and non-employee stock option awards granted was $ 3,829,045 , which the Company expects to recognize over a weighted average period of approximately 3.4 years.

Stock based compensation related to the Company’s stock plans are as follows:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

General and administrative

6 unchanged sentences

THIO - In November 2018 and as amended in December 2020, the Company entered into a Global Patent Licensing Agreement ("PLA") titled "Patent and Technology License Agreement AGT.

L2264 - MAIA Biotechnology"

with the University of Texas Southwestern ("UTSW") to license patent families for a specific compound ("THIO") from UTSW to MAIA.

L2264 - MAIA Biotechnology" with the University of Texas Southwestern ("UTSW") to license patent families for a specific compound ("THIO") from UTSW to MAIA.

The agreement, as amended, has a term of 20 years.

1 unchanged sentence

The agreement requires certain payments upon assignment of the license to a third party as well as upon reaching specific milestones, ranging between $ 1,000,000 and $ 50,000,000 , not to exceed a combined milestone payment total of $ 112,000,000 .

As of June 30, 2022, no assignment has occurred and none of the defined milestones have been completed and therefore no payments are due to UTSW related to the milestones.

As of September 30, 2022 , no assignment has occurred and none of the defined milestones have been completed and therefore no payments are due to UTSW related to the milestones.

The agreement requires royalties of 2 - 4 % (depending on THIO reaching specified sales levels in the respective jurisdictions) royalty payments on net sales up to $1,000,000,000, and 2.5 - 5 % on net sales above $1,000,000,000.

4 unchanged sentences

As of June 30, 2022, no assignment has occurred and none of the defined milestones have been completed and therefore no payments are due to UTSW related to the milestones.

As of September 30, 2022 , no assignment has occurred and none of the defined milestones have been completed and therefore no payments are due to UTSW related to the milestones.

The agreement requires royalties of 2 - 4 % (depending on THIO reaching specified sales levels in the respective jurisdictions) royalty payments on net sales up to $1,000,000, and 2.5 - 5 % on net sales above $1,000,000,000.

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If either party terminates a study plan, the Company shall reimburse Regeneron for the Regeneron product it received in connection with such study plan based on the actual out-of-pocket cost to Regeneron of such Regeneron product.

As of June 30, 2022 neither party has terminated the agreement.

As of September 30, 2022 neither party has terminated the agreement.

The Company provides for income taxes using the asset and liability approach.

1 unchanged sentence

Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

As of June 30, 2022, and December 31, 2021, the Company had a full valuation allowance against its deferred tax assets.

For the six months ended June 30, 2022 and 2021, the Company recorded zero income tax expense.

No tax benefit has been recorded in relation to the pre-tax losses for the six months ended June 30, 2022 and 2021, due to a full valuation allowance to offset any deferred tax assets.

The issuance of shares in connection with the Company’s IPO, as well as prior share issuances, may result in limitations on the utilization of the Company’s net operating loss carryforwards under IRS section 382.

As of September 30, 2022, and December 31, 2021, the Company had a full valuation allowance against its deferred tax assets.

For the nine months ended September 30, 2022 and 2021 , the Company recorded zero income tax expense.

No tax benefit has been recorded in relation to the pre-tax losses for nine months ended September 30, 2022 and 2021, due to a full valuation allowance to offset any deferred tax assets.

SUBSEQUENT EVENTS

Initial Public Offering

On July 28, 2022 the Company’s shares of common stock began trading on the NYSE American under the symbol MAIA.

Approval of Ratchet Shares

In the first quarter of 2022, the Company completed a crossover round with certain investors consisting of sales of the Company’s common stock, $ 0.0001 par value per share (“Common Stock”) at a price of $ 9.00 per share, in the aggregate amount of approximately $2.4 million (the “Crossover Round”), and in May 2022, the Company issued and sold 11,111 shares of Common Stock to certain investors at a price of $ 9.00 per share for a total aggregate amount of approximately $ 99,999 (together with the Crossover Round, the “Recent Private Rounds”).

Given the proximity of the anticipated timing of the closing of the Company’s initial public offering and the closing of the Recent Private Rounds, the Board determined on July 21, 2022 that it is in the best interests of the Company, that in the event that the price per share of Common Stock sold in the Company’s planned initial public offering (the “IPO Share Price”) is less than $ 9.00 , the Company is authorized and directed to issue to the investors in the Recent Private Rounds, so long as such investors continue to hold the shares, that number of additional shares of Common Stock such that the price per share the investors paid in the Recent Private Rounds is equal to the IPO Share Price (the “Ratchet Shares”);

and that upon issuance of the Ratchet Shares, the Ratchet Shares are deemed fully paid and nonassessable.

The number of Ratchet Shares were calculated using the $ 5.00 per share price in the Company's initial public offering and 219,872 shares of common stock were issued on August 1, 2022 to the investors in the Recent Private Rounds.

The table below presents the Company’s balance sheet as of June 30, 2022 on an actual basis and on a pro forma basis to give effect to:

The sale of 2,300,000 shares of common stock in the Company's initial public offering including the exercise of the underwriters overallotment option, after deducting the underwriting discount and estimated offering expenses payable by the Company;

The issuance of 219,872 Ratchet Shares in connection with recent private crossover rounds that occurred during the first half of 2022.

As of June 30, 2022

Total Stockholders’

Shares of Common stock issued and outstanding

Expiration of Warrants

On August 1, 2022 at the closing of the initial public offering, 20,520 warrants with an exercise price of $ 5.00 per share expired.

Issuance of Warrants

The Representative’s Warrants are exercisable beginning on January 23, 2023 , and expire on July 27, 2027 , pursuant to the terms and conditions of the Representative’s Warrants.

On January 3, concurrently with the full exercise of the Underwriter’s over-allotment option, the Company issued additional warrants to purchase an aggregate of up to 15,000 shares of its common stock to the Representative or its designees on the same terms.

Approval of 2021 Equity Incentive Plan

On August 1, 2022 the Company approved the 2021 Equity Incentive Plan with 1,909,518 shares of common stock reserved for issuance.

Amended and Restated Certificate and Amended and Restated Bylaws

The Amended and Restated Bylaws became effective immediately upon the consummation of the initial public offering.

Termination of Shareholders Agreement

Upon the closing of the Company’s initial public offering, the Company’s shareholders agreement terminated pursuant to its terms.

The shareholders agreement gave first MAIA, followed by the non-selling shareholders, the option to purchase the outstanding shares of a shareholder prior to the sale of shares to a third party.

Should the non-selling shareholders decline to purchase any portion of the selling shareholders shares, MAIA could have a final opportunity to repurchase the shares.

The agreement also contained provisions for "drag-along" and "tag-along" rights, as described in the agreement.

The shareholders agreement, including the aforementioned provisions, terminated upon the closing of MAIA’s initial public offering.

Employee Retirement Plan

The Company created MAIA's 401(k) plan (the "Plan"), which became effective on October 1, 2022.

All employees who have attained the age of 21 are eligible to participate in the Plan as the first entry date, as defined, following the employment date.

Each eligible employee can contribute a percentage of compensation up to a maximum of the statutory limits per year.

The Company will make a "safe harbor" matching contribution and deferrals will be determined on an annual basis.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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In the First Quarter 2022, we completed the Crossover Round for total proceeds of approximately $2.4 million.

After this round, we believe we have raised sufficient capital to fund the THIO-101 lead-in and preliminary efficacy of the phase 2 THIO-101 trial.

In the First Quarter 2022, THIO received approval by the Bellberry Human Research Ethics Committee (HREC) in Australia to initiate the THIO-101 Phase 2 clinical study.

In March 2022, the U.S.

Food and Drug Administration (FDA) granted Orphan Drug Designation (ODD) to THIO for the treatment of hepatocellular carcinoma, and in May 2022, the FDA granted ODD to THIO for the treatment of small cell lung cancer.

Food and Drug Administration (FDA) granted Orphan Drug Designation (ODD) to THIO for the treatment of hepatocellular carcinoma, and in May 2022, the FDA granted ODD to THIO

for the treatment of small-cell lung cancer.

The FDA’s Office of Orphan Products Development may grant orphan designation status to drugs and biologics that are intended for the treatment, diagnosis or prevention of rare diseases, or conditions that affect fewer than 200,000 people in the U.S.

2 unchanged sentences

In May 2022, we completed the Additional Round for total proceeds of approximately $99,999.

In May 2022, we entered into a research and collaboration agreement with the Nationwide Children’s Hospital to evaluate the potential of THIO in combination with current standard-of-care therapies for cancer.

The organizations will conduct preclinical studies to assess the efficacy and safety of THIO in combination with radiotherapy and immune checkpoint inhibitors in vitro and in vivo.

The organizations will conduct preclinical studies to assess the efficacy and safety of THIO in combination with radiotherapy and immune checkpoint inhibitors in vitro and in vivo models.

In July 2022, we completed our selection process for the clinical sites for our Phase 2 study in Australia and Europe and our application to start the Phase 2 study in Australia has been approved.

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On August 3, 2022, the Company sold an additional 300,000 shares of common stock at $5.00 per share when the underwriter exercised the overallotment for net proceeds of $1,500,000 prior to deducting underwriting discounts, commissions, and other offering expenses.

We believe we have raised sufficient capital to fund the THIO-101 lead-in and preliminary efficacy of the phase 2 THIO-101 trial.

Impact of the COVID-19 Pandemic on Our Operations

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While we have not currently experienced any potential delays or increased costs as a result of these measures, we may do so in the future.

One of our initial clinical studies is taking place in Australia, which initially imposed one of the strictest COVID-19-related measures, including lock-downs.

While are not currently experiencing any delays or increased costs as a result of these measures, we may do so in the future.

Impact of the War in Ukraine on Our Operations

2 unchanged sentences

Because of the highly uncertain and dynamic nature of these events, the Company terminated any planned research activities in Russia.

Financial Operations Overview and Analysis for the Three Months Ended June 30, 2022 and 2021

Comparison of the Three Months Ended June 3, 2022 and 2021

Financial Operations Overview and Analysis for the Three Months Ended September 30, 2022 and 2021

Comparison of the three months ended September 30, 2022 and 2021

Three Months Ended

September 30,

Operating expenses:

6 unchanged sentences

Interest income

Australian research and development

Australian research and

development incentives

Change in fair value of embedded

Change in fair value of warrant

Loss on extinguishment of

convertible notes and convertible

notes, related parties

Other income (expense), net

Net loss attributable to noncontrolling

Deemed dividend for ratchet shares

issued at IPO

Net loss attributable to MAIA

2 unchanged sentences

Research and development expenses

Research and development expenses increased by approximately $1,475,000 or 229%, from approximately $644,000 for the three months ended June 30, 2021 to approximately $2,119,000 for the three months ended June 30, 2022.

The increase was primarily related to the increase in clinical expenses related to the clinical preparation and startup of THIO trials of approximately $1,017,000, an increase in payroll and bonus expenses of approximately $561,000 related to increased headcount of five additional research and development employees during the first six months of 2022, offset by a decrease in stock-based compensation costs of approximately $103,000.

Research and development expenses increased by approximately $1,261,000 or 117%, from approximately $1,082,000 for the three months ended September 30, 2021 to approximately $2,343,000 for the three months ended September 30, 2022.

The increase was primarily related to the increase in clinical expenses related to the clinical preparation and startup of THIO 101 trial of approximately $667,000, an increase in payroll and bonus expenses of approximately $610,000 related to increased headcount of additional research and development employees, an increase of approximately $111,000 in professional fees and other expenses, offset by a decrease in stock-based compensation costs of approximately $127,000.

General and administrative expenses

General and administrative expenses increased by approximately $463,000 or 54% from approximately $859,000 for the three months ended June 30, 2021 to approximately $1,322,000 for the three months ended June 30, 2022.

The increase was primarily related to an increase in payroll and bonus expense of approximately $222,000, an increase in professional fees of approximately $231,000, and an increase in other expenses of $99,000 offset by a decrease in stock based compensation of approximately $89,000.

General and administrative expenses increased by approximately $502,000 or 44% from approximately $1,152,000 for the three months ended September 30, 2021 to approximately $1,653,000 for the three months ended September 30, 2022.

The increase was primarily related to an increase in payroll expense of approximately $228,000, an increase in other expenses of approximately $472,000 related to the costs of operating as a public

company, offset by a decrease in stock-based compensation of approximately $119,000 and professional fees of approximately $79,000.

Other income (expense), net

Other income (expense), net increased approximately $2,093,000 or 107% from other expense of approximately $1,957,000 for the three months ended June 30, 2021 to other income of approximately $136,000 for the three months ended June 30, 2022.

The change in other income (expense), net was primarily the result of approximately $1,552,000 expense related to change in the fair value of warrant liability, expense of approximately $313,000 related to interest for convertible notes and the approximately $92,000 of expense for the change in fair value of the bifurcated embedded feature for the three months ended June 30, 2021 and by the increase of approximately

$136,000 of income related to the Australian research and development incentives for the three month June 30, 2022.

Comparison of the Six Months Ended June 30, 2022 and 2021

Six Months Ended

Other income (expense), net changed by approximately $3,034,000 or 102% from other expense of approximately $2,970,000 for the three months ended September 30, 2021 to other income of approximately $64,000 for the three months ended September 30, 2022.

The change in other income (expense), net was primarily the result of the following expenses in the three months ended September 30, 2021:

approximately $2,323,000 expense related to the loss on extinguishment of convertible notes, approximately $451,000 expense related to the interest for convertible notes, the change in the fair value of warrant liability expense of approximately $101,000 related to interest for convertible notes, approximately $96,000 of expense for the change in fair value of the bifurcated embedded feature, and by the increase of approximately $65,000 of income related to the Australian research and development incentives for the three months ended September 30, 2022.

This was offset by approximately $2,000 of interest for the three months ended September 30, 2022.

Comparison of nine months ended September 30, 2022 and 2021

Nine Months Ended

September 30,

Operating expenses:

6 unchanged sentences

Interest income

Australian research and development

Australian research and

development incentives

Change in fair value of embedded

Change in fair value of warrant

Loss on extinguishment of

convertible notes and convertible

notes, related parties

Other income (expense), net

2 unchanged sentences

modifications

Deemed dividend for ratchet shares

issued at IPO

Net loss attributable to MAIA

2 unchanged sentences

Research and development expenses

Research and development expenses increased by approximately $3,290,000 or 363%, from approximately $907,000 for the six months ended June 30, 2021 to approximately $4,197,000 for the six months ended June 30, 2022.

The increase was primarily related to an increase in clinical expenses of approximately $2,248,000 due to an increase in payments to clinical research organizations and payments to consultants primarily related to the THIO 101 trial start-up, an increase in payroll related expenses and bonus expense of approximately $938,000 related to increased headcount of five research and development employee during the six months ending June 30, 2021, and an increase in stock-based compensation of approximately $104,000.

Research and development expenses increased by approximately $4,551,000 or 229%, from approximately $1,988,000 for the nine months ended September 30, 2021 to approximately $6,540,000 for the nine months ended September 30, 2022.

The increase was primarily related to an increase in clinical expenses of approximately $2,721,000 due to an increase in payments to clinical research organizations and payments to consultants primarily related to the THIO 101 trial start-up and pre-clinical activities, an increase in payroll related expenses and bonus expense of approximately $1,470,000 related to increased headcount of eight research and development employees during the nine months ended September 30, 2022, an increase of approximately $190,000 in professional fees, and an increase in other expenses of approximately $193,000, offset by a decrease in stock-based compensation of approximately $23,000.

General and administrative expenses

General and administrative expenses increased by approximately $1,042,000 or 63% from approximately $1,647,000 for the six months ended June 30, 2021 to approximately $2,689,000 for the six months ended June 30, 2022.

The increase was related to the increases in payroll and bonus expenses of approximately $361,000 related to an increase in headcount over the same period last year, increases in professional fees for approximately $656,000, and an increase in other expenses of approximately $160,000, offset by a decrease in stock based compensation expense of approximately $136,000.

General and administrative expenses increased by approximately $1,543,000 or 55% from approximately $2,799,000 for the nine months ended September 30, 2021 to approximately $4,342,000 for the nine months ended September 30, 2022.

The increase was primarily attributable to the increased costs to create additional infrastructure to support our operations as a public company.

Increases included an increase in payroll, bonus expenses and benefits of approximately $583,000 related to an increase in headcount over the same period last year, an increase in professional fees for approximately $623,000, and an increase in other expenses of approximately $592,000, offset by a decrease in stock-based compensation expense of approximately $255,000 primarily due to the 2021 expense related to founders' stock-based compensation expense.

Other income (expense), net

Other income (expense), net increased approximately $2,094,000, or 109% from approximately ($1,928,000) for the six months ended June 30, 2021 to approximately $166,000 for the six months ended June 30, 2022.

The change in other income (expense), net was primarily the result of approximately $1,446,000 expense related to change in the fair value of bifurcated embedded feature, expense related to approximately $376,000 related to interest for convertible notes and the approximately $107,000 of expense for the change in fair value of the warrant liability for the six months ended June 30, 2021 and by the increase of approximately $165,000 of income related to the Australian research and development incentives for the six month June 30, 2022.

Other income (expense), net changed by approximately $5,128,000 or 105% from approximately $4,898,000 of other expenses for the nine months ended September 30, 2021 to approximately $230,000 of other income for the nine months ended September 30, 2022.

The change in other income (expense), net was primarily the result of approximately $2,323,000 expense related to loss of extinguishment of convertible notes, the approximately $1,546,000 of expense for the change in fair value of the warrant liability, the change in the fair value of bifurcated embedded feature of $203,000, and expense related to approximately $828,000 related to interest for convertible notes for the nine months ended September 30, 2021 .

Other income increased by approximately $230,000 of income related to the Australian research and development incentives and offset by approximately $2,000 of interest expense for nine months ended September 30, 2022 .

Liquidity and Capital Resources

As of June 30, 2022, our available cash totaled approximately $8,150,000 which represented a decrease of approximately $2,424,000 compared to December 31, 2021.

As of June 30, 2022, we had working capital of approximately $5,512,000 which represents a decrease of approximately $3,014,000 compared to December 31, 2021.

As of September 30, 2022, our cash totaled approximately $14,064,000 which represented an increase of approximately $3,489,000 compared to December 31, 2021.

As of September 30, 2022, we had working capital of approximately $12,324,000 which represents an increase of approximately $3,797,000 compared to December 31, 2021.

We have generated no revenues and we expect to continue to incur operating losses for the foreseeable future and may never become profitable.

5 unchanged sentences

We will need to raise additional capital to fund our operations, to develop and commercialize THIO, and to develop, acquire or in-license other products.

We may seek to fund our operations through additional public equity, or debt financings, as well as other sources.

We may seek to fund our operations through additional public equity, or debt

financings, as well as other sources.

We cannot make any assurances that additional financings will be available to us and, if available, on acceptable terms or at all.

This could negatively impact our business and operations and could also lead to the reduction of our operations.

We believe that we currently have sufficient funds to support operations through the next 24 months from the date of this filing.

If the Company is unable to raise the necessary funding, management will undertake cost cutting measures, as done in the past, to reduce compensation and reduce the scope of or delay its clinical programs.

Cash Flows Six Months Ended June 30, 2022 and June 30, 2021

Six Months Ended

We believe that we currently have sufficient funds to support funding of the THIO-101 lead-in and preliminary efficacy of the phase 2 THIO-101 through the next 12 months from the date of this filing.

If the Company is unable to raise the necessary funding, management will undertake cost cutting measures to reduce compensation and reduce the scope of or delay its clinical programs.

This could negatively impact the Company’s business and could also lead to the reduction of the Company’s operations.

Cash Flows nine months ended September 30, 2022 and 2021

Nine Months Ended

September 30,

Net cash flows used in operating activities

1 unchanged sentence

Effect of foreign currency exchange rate changes on cash

Net (decrease) increase in cash and cash equivalents

Net increase in cash and cash equivalents

Operating Activities

For the six months ended June 30, 2022, net cash used in operating activities was approximately $4,827,000, which consisted of a consolidated net loss of approximately $6,720,000 offset by non-cash charges of approximately $1,298,000 in stock-based compensation.

Total changes in operating assets and liabilities of approximately $594,000 were driven by an approximate $962,000 increase in accounts payable and accrued liabilities, offset by an

approximate $203,000 increase in prepaid expenses and other assets and an approximate increase of $165,000 in Australia research and development incentives receivables.

For the six months ended June 31, 2021, net cash used in operating activities was approximately $1,204,000, which consisted of a net loss of approximately $4,482,000 offset by non-cash charges of approximately $3,153,000 which primarily includes approximately $1,330,000 in stock-based compensation, $107,000 related to the change in fair value of embedded features, $270,000 amortization of debt discount on convertible notes and changes in the fair value of the warrant liability of approximately $1,446,000.

Total changes in operating assets and liabilities of approximately $125,000 were primarily driven by an approximate $97,000 increase in accrued expenses and an approximate increase of $79,000 in accounts payable and an approximate decrease in prepaid expenses and other assets of $27,000 offset by a decreases of approximately $71,000 in other assets, and a decrease of approximately $7,000 in amounts due to related parties.

For the six months ended June 30, 2022 the effect of foreign currency exchange rate changes on cash decreased the cash balance as of June 30, 2022 by approximately $8,000.

For the nine months ended September 30, 2022, net cash used in operating activities was approximately $9,146,000, which consisted of a consolidated net loss of approximately $10,652,000 offset by non-cash charges of approximately $1,831,000 in stock-based compensation.

Total changes in operating assets and liabilities of approximately $325,000 were driven by an approximate $412,000 increase in prepaid expense and other assets, and an approximate $230,000 increase in the Australia research and development incentives receivable offset by an increase of approximately $317,000 in other accounts payable and accrued expenses.

For the nine months ended September 30, 2021, net cash used in operating activities was approximately $2,516,000, which consisted of a net loss of approximately $9,685,000 offset by non-cash charges of approximately $6,785,000 which primarily includes approximately $2,109,000 in stock-based compensation, $2,323,000 loss on extinguishment of convertible notes, $203,000 related to the change in fair value of embedded features, $597,000 amortization of debt discount on convertible notes, a changes in the fair value of the warrant liability of approximately $1,546,000, and approximately $7,000 loss on settlement of bonus..

Total changes in operating assets and liabilities of approximately $385,000 were primarily driven by an approximate $345,000 increase in accrued expenses, an approximate increase of $342,000 in accounts payable and an approximate increase in accrued interest of $227,000 offset by and an approximate increase in prepaid expenses and other assets of $522,000 and an approximate decrease in amounts due to related parties of $7,000.

For the nine months ended September 30, 2022 the effect of foreign currency exchange rate changes on cash decreased the cash balance as of September 30, 2022 by approximately $34,000.

Financing Activities

Net cash provided by financing activities was approximately $2,411,000 and $7,322,000 for the six months ended June 30, 2022 and 2021, respectively.

Net cash provided by financing activities for the six months ended June 30, 2022 consisted primarily of proceeds from issuance of common stock of approximately of $2,474,000 and net proceeds from issuance of common stock upon exercise of warrants of $385,000 and stock options of approximately $48,000 offset by an approximate $496,000 increase in deferred offering costs.

Net cash provided by financing activities for the six months ended June 30, 2021 consisted of proceeds from issuance of convertible notes totaling approximately $7,252,000, collections of subscriptions receivable of approximately $2,000, proceeds from the paycheck protection program loan totaling approximately $63,000, and proceeds from exercise of stock options of approximately $5,000.

Net cash provided by financing activities was approximately $12,670,000 and $12,805,000 for the nine months ended September 30, 2022 and 2021, respectively.

Net cash provided by financing activities for the nine months ended September 30, 2022 consisted primarily of gross proceeds from the sale of common stock in the initial public offering of approximately $11,500,000, net proceeds from issuance of common stock of approximately of $2,474,000 in a crossover round, and proceeds from issuance of common stock upon exercise of warrants of approximately $385,000 and stock options of approximately $66,000 offset by approximately $1,755,000 of the offering costs paid in the nine months ended September 30, 2022.

Total Net cash provided by financing activities for nine months ended September 30, 2021 consisted of proceeds from issuance of convertible notes totaling approximately $7,369,000, proceeds for issuance of common stock net of transactions costs totaling approximately $5,366,000, collections of subscriptions receivable of approximately $2,000, proceeds from the paycheck protection program loan totaling approximately $63,000, and proceeds from exercise of stock options of approximately $5,000.

Critical Accounting Policies and Significant Judgments and Estimates

12 unchanged sentences

To determine the fair value of our common stock underlying annual option grants to officers and directors, our board of directors considered, among other things, input from management, valuations of our common stock valuation firms in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, and our board of directors’

assessment of additional objective and subjective

factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant.

assessment of additional objective and subjective factors that it believed were relevant, and factors that may have changed from the date of the most recent valuation through the date of the grant.

These factors included, but were not limited to:

12 unchanged sentences

In evaluating the fair value of our common stock during the period March 2021 through May 2021, management evaluated events and their potential impact on the estimated fair value per share of the common stock.

We considered events during this period which would have an effect on the fair value of our common stock such as milestones related to the clinical development and operations of our drug substances and advances in the production of drug substances and our drug product, however, there were no specific events that would indicate a definitive change in the value of the Company.

considered events during this period which would have an effect on the fair value of our common stock such as milestones related to the clinical development and operations of our drug substances and advances in the production of drug substances and our drug product, however, there were no specific events that would indicate a definitive change in the value of the Company.

Given that there were no specific events that caused the change in fair value of our common stock from the indicated value of $1.83 as of February 28, 2021 to the $8.00 per share realized from the sale of common stock initiated in mid July, we performed a retrospective valuation of our common stock as of April 30, 2021.

12 unchanged sentences

During November 2021 and December 2021, the fair value of the Company’s common stock was determined to be $8.69 and $8.87, respectively.

For our valuations of common stock performed November 2021 and December 2021,

we used a hybrid method of the Option Pricing Method ("OPM”) and the Probability-Weighted Expected Return Method ("PWERM”).

For our valuations of common stock performed November 2021 and December 2021, we used a hybrid method of the Option Pricing Method ("OPM”) and the Probability-Weighted Expected Return Method ("PWERM”).

PWERM considers various potential liquidity outcomes.

6 unchanged sentences

In May 2022, the Company completed additional sales of its common stock at a price of $9.00 per share resulting in aggregate proceeds of approximately $0.1 million.

Due to the lack of any single specific event that would have indicated a definitive change in the value of the Company, the fair value of the

Company’s common stock from January 27, 2022 through June 6, 2022, was determined based on sales of the Company’s shares at arm’s length to unrelated third parties at $9.00 per share.

Following the initial public offering, it will not be necessary to determine the fair value of our common stock, as our shares will be traded in the public market.

Due to the lack of any single specific event that would have indicated a definitive change in the value of the Company, the fair value of the Company’s common stock from January 27, 2022 through May 31, 2022, was determined based on sales of the Company’s shares at arm’s length to unrelated third parties at $9.00 per share.

The fair value for common stock for June 2022 was determined based on the $5.00 per share for common stock initial public offering price.

Following the initial public offering, the fair value of our common stock, is based on the closing price of the common stock in the public market.

Stock-based compensation

12 unchanged sentences

The total expense related to stock options is material to our financial statements on an annual basis, and significant fluctuations in the volatility assumption or the fair value of our common stock could result in material changes in related compensation expense to be recognized.

Prepaid and Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our prepaid and accrued research and development expenses.

This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

We make estimates of our prepaid and accrued research and development expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at the time.

We confirm the accuracy of estimates with the service providers and make adjustments if necessary.

Examples of estimated prepaid and accrued research and development expenses include expenses for:

Clinical Research Organizations (CROs) in connection with clinical studies;

Investigative sites in connection with clinical studies;

Vendors in connection with preclinical development activities;

Vendors related to product manufacturing, development and distribution of clinical materials.

We base our expenses related to clinical studies on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs that conduct and manage clinical studies on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

The scope of services under these contracts can be modified and some of the agreements may be cancelled by either party upon written notice.

There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the clinical expense.

Payments under some of these contracts depend on factors such as the successful enrollment of subjects and the completion of clinical study milestones.

In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed we may report amounts that are too high or too low in any particular period.

To date, there have been no material differences between our estimates and the amount actually incurred.

Quantitative and Qualitative Disclosures About Market Risk.

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Item 1. Financial Statements