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Item 5. Market for Registrant’s Common Equity

2024-03-22 compared with 2023-03-22 · 5 added, 247 removed, 7 unchanged (97% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock is listed on the NASDAQ Capital Market under the symbol “MBRX”. 

As of Marc h 14, 2022, there were approximately 136 h olders of record of our common stock.

In addition, we believe that a significant number of beneficial owners of our common stock hold their shares in nominee or in “street name”

accounts through brokers.

Our common stock is listed on the NASDAQ Capital Market under the symbol “MBRX”.

As of Marc h 14, 2024, there were approximately 138 hol ders of record of our common stock.

In addition, we believe that a significant number of beneficial owners of our common stock hold their shares in nominee or in “street name” accounts through brokers.

We have never paid any dividends on our common stock.

3 unchanged sentences

All information related to equity securities sold by us during the period covered by this report that were not registered under the Securities Act have been included in our Form 10-Q filings or in a Form 8-K filing.

We did not issue any equity securities during the fourth quarter of 2022 that were not registered under the Securities Act.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

We did not repurchase any of our equity securities during the year ended December 31, 2022.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Financial Statements and Notes thereto included in this Form 10-K.

The forward-looking statements included in this discussion and elsewhere in this Form 10-K involve risks and uncertainties, including those set forth under “Cautionary Statement About Forward-Looking Statements.”

Actual results and experience could differ materially from the anticipated results and other expectations expressed in our forward-looking statements as a result of a number of factors, including but not limited to those discussed in this Item and in Item 1A - “Risk Factors.”

We are a clinical stage pharmaceutical company with a growing pipeline, including Phase 2 clinical programs for hard-to-treat cancers and viruses. We have three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial 1 , based substantially on discoveries made at and licensed from MD Anderson Cancer Center (MD Anderson) in Houston, Texas.

Three of our six drug candidates have shown human activity in clinical trials and are currently in Phase 1b/2 or Phase 2 clinical trials.

Since our inception, our drugs have been in, are currently in, or have received approval to proceed in eleven clinical trials.

Our Core Technologies

Our core technologies consist of the following:

a) Annamycin or L-Annamycin is a “next generation”

anthracycline designed to be different than currently approved anthracyclines, which are limited in utility because of cardiotoxicity risks and their susceptibility to multidrug resistance mechanisms.

Annamycin was designed to avoid multidrug resistance and has shown no cardiotoxicity 2  in subjects treated in clinical trials to date.

Furthermore, we have demonstrated safe dosing beyond the dose limitations imposed by regulatory authorities upon currently prescribed anthracyclines due to their inherent cardiotoxicity;

b) our WP1066 Portfolio, which includes WP1066 and WP1220, two of several Immune/Transcription Modulators in the portfolio designed to inhibit p-STAT3 (phosphorylated signal transducer and activator of transcription) among other transcription factors associated with tumor activity, while also stimulating a natural immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs);

c) our WP1122 Portfolio, which contains compounds (including WP1122, WP1096, and WP1097) designed to exploit the potential uses of inhibitors of glycolysis such as 2-deoxy-D-glucose (2-DG), which we believe may provide an opportunity to cut off the fuel supply of tumors by taking advantage of their high level of dependence on glucose in comparison to healthy cells, as well as viruses that depend upon glycolysis and glycosylation to infect and replicate.

Our Focus  

We are focused on internally funded (“internally”

and “externally”

funded trials are defined in the Funding Strategy section below) development of:

1) Annamycin for the treatment of Soft Tissue Sarcoma metastasized to the lungs (STS lung metastases or STS lung mets)

2) Annamycin in combination with Cytarabine (also known as Ara-C, the combination with Annamycin of which is referred to as AnnAraC) for the treatment of Relapsed or Refractory Acute Myeloid Leukemia (R/R AML or AML).

3) Developing a better delivery mechanism for WP1066 to further support current and possibly future externally funded oncology clinical trials. 

We have also recently established a Recommended Phase 2 Dose (RP2D) for WP1122 to potentially enable future externally funded oncology and virology trials.

Beyond this, we support development of our core technologies through several externally funded clinical trials with the potential for others in the near-term.

1 Subject to publishing final Clinical Study Report

Our Clinical Trials

In the US and Europe, we or external investigators have approved, are currently conducting or have completed eleven internally or externally funded clinical trials for four of our drug candidates –

Annamycin, WP1066, WP1220, and WP1122 since inception.

All clinical trials are or were in the Phase 1 or 2 stage.

During 2021, we had four active clinical trials evaluating either Annamycin or WP1066 in the US and Europe.

This increased to six active or just completed trials in 2022 involving Annamycin, WP1066, and WP1122.

In 2021 and 2022, there were five “right-to-try”

(or their foreign equivalent) uses of Annamycin and WP1066.

Three of the six clinical trials active in 2022 are internally funded trials of Annamycin and one is an internally funded Phase 1 clinical trial for WP1122 setting a RP2D.

Moving into 2023, we are actively recruiting in three clinical trials in a Phase 1b/2 or Phase 2 stage and have recently concluded one trial.

These three currently active clinical trials are open label so we expect to be able to announce what human activity is being demonstrated in these trials during 2023. In February 2023, the externally funded Phase 1 clinical trial with WP1066 or the treatment of pediatric brain tumors concluded.

We expect to have up to three externally funded Phase 1b/2 clinical trial for WP1066 in the treatment of GBM and other brain tumors in 2023.

During 2022, we or external investigators filed applications or began recruiting for five internally or externally funded clinical trials in the US and Europe.

Annamycin - The clinical trial application (CTA) in Poland for a Phase 1b/2 trial of Annamycin in combination with Cytarabine or AnnAraC for the treatment of AML was allowed in 2022.

This trial was later approved to expand into Italy in 2022 and dosing subjects began there in March 2023.

With preclinical data in mice demonstrating a 68% improvement in activity in AML with AnnAraC over Annamycin alone combined with the human activity demonstrated in the highest dosing cohort in the single agent AML clinical trial, we concluded our single agent Annamycin clinical trial treating AML and focused on this combination trial.

Annamycin - An investigator sponsored trial (externally funded) was initiated in Poland in 2022 to study an alternative dosing regimen for Annamycin in the treatment of STS lung mets.

This trial began administering drug to subjects in late 2022.

WP1066 - In 2022, an investigational new drug (IND) application we filed in the US for a Phase 1 clinical trial studying WP1066 for treating glioblastoma multiforme (GBM) in adults went into effect.

Consistent with our strategy of leveraging external funding for many of our clinical trials, we intend to seek to capitalize on external funding with opportunities for an investigator-initiated clinical trial in adult cancer patients in 2023.

We supplied drug product to an externally funded pediatric brain tumor trial with WP1066 up to its conclusion in February 2023.

WP1122 - Our Phase 1a clinical trial of WP1122 in the United Kingdom for the treatment of COVID-19 for which we later received the appropriate authorization to proceed.

This trial began recruiting in 2022, and we completed the trial in late 2022, establishing an RP2D.

We are in the process of completing this trial - locking the database and finalizing a clinical study report (CSR).

This RP2D will possibly aid in future externally funded trials for the treatment of certain viruses and cancers as we look for investigator led studies.

WP1122 - In 2022, we filed an IND with the FDA that then went into effect, allowing us to proceed with a clinical trial using WP1122 for the treatment of GBM.

This may lead to an oncology investigator-initiated trial (IIT).

Additionally, an investigator filed independently a CTA in Brazil in 2022 to study WP1122 for the treatment of moderate to severe COVID-19.

Based on current COVID-19 epidemiology, we do not expect this externally funded trial to be conducted.

Additionally, we are in discussions with research institutions in the US, Asia, and South America regarding possible externally funded trials or programs involving WP1066 and WP1122.

In terms of developing preclinical data, we have our own lab and consultants with our employees conducting research and, we sponsor research at MD Anderson to expand the science of our core technologies and possible combinations with other approved drugs.

We have an National Institutes of Health or NIH funded preclinical study with WP1096 (from the WP1122 portfolio) for the treatment of the Tacaribe Arenavirus.

Moleculin Biotech, Inc.

Results of Operations for the Year Ended December 31, 2022 as Compared to the Year Ended December 31, 2021

The following table is data derived from the Consolidated Statement of Operations (in thousands) and the discussions that follow are in approximate amounts:

Year ended December 31,

Operating expenses:

Research and development

General and administrative

Depreciation and amortization

Total operating expense

Loss from operations

Other income:

Gain from change in fair value of warrant liability

Other income, net

Interest income, net

Research and Development Expense  

Research and development (R&D) expense w as 

$19.0  million and $14.4 million for the years ended December 31, 2022 and 2021, respectively.

The increase in R&D of $4.6 million is mainly rela ted to increased clinical trial activity, as described above, and costs related to manufacturing of additional drug product. 

2 In discussions of “no cardiotoxicity”

of Annamycin, management’s beliefs are based on an expert’s opinion based their review of certain clinical trial subject data including LVEF, ECHO strain analyses, and cardiac biomarkers –

troponin’s I & T

General and Administrative Expense  

General and administrative (G&A) expense was $11.5  million a nd $8.4 million for the years ended December 31, 2022 and 2021, respectively.

The increase in G&A of $3.1 million was mainly attributable to an increase in regulatory and legal services, and consulting & advisory fees.

Gain from Change in Fair Value of Warrant Liability

We recorded a gain of $1.3  million du ring the year ended December 31, 2022 as compared to a gain of $6.7 million, during the year ended December 31, 2021, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings.

We are required to revalue certain of the warrants at the time of each warrant exercise and at the end of each reporting period and reflect in the statement of operations a gain or loss from the change in fair value of the warrant in the period in which the change occurred.

We calculated the fair value of the warrants outstanding using the Black-Scholes model.

Generally, a gain results principally from a decline in our share price during the period and a loss results principally from an increase in our share price.

The net loss for the year ended December 31, 2022 wa s $29.0  million, which included non-cash gains of $1.3  million on wa rrants in 2022 as compared to $6.7 million in the prior year and approximately $2.3 million o f stock-based compensation expense in 2022 as compared to $2.4 million in 2021.

Liquidity and Capital Resources 

As of December 31, 2022 , we had cash and cash equivalents of $43.1  million and prepaid expenses and other current assets of $2.5  million.

We also had $2.1  million of accounts payable and $2.7  million of accrued expenses and other current liabilities.

A significant portion of the accounts payable and accrued expenses are due to work performed in relation to our preclinical activities and our clinical trials.

For the years ended December 31, 2022 and 2021, we used approxima tely $27.6  million and $19.0  million of cash in operating activities, respectively, which represents cash outlays for research and development and general and administrative expenses in such periods.

The increased cash outflows in 2022  was primarily due to payments for increased clinical trial activity, costs related to manufacturing of additional drug product, and increased consulting, legal, and advisory fees.

For the year ended December 31, 2022, there were no net proceeds from financing activities.

In 2021, approximately $74.7 million was raised predominately through the sale of shares of common stock and the exercise of warrants.

Cash used in investing activities for the year ended December 31, 2022 was approximately$0.1  million.

We believe that our cash resources as of December 31, 2022, will be sufficient to meet our projected operating requirements 

into the third quarter of 2024.

Such projections are subject to changes in our internally funded preclinical and clinical activities, including unplanned preclinical and clinical activity.

We anticipate incurring operating losses for the next several years as we support the preclinical and clinical activities necessary to prepare our drug candidates for successful out licensing, including our efforts to expand our technologies.

These factors raise uncertainties about our ability to fund operations in future years.

If we need to raise additional capital in order to continue to execute our business plan, there is no assurance that additional financing will be available when needed or that we will be able to obtain financing on terms acceptable to us.

A failure to raise sufficient capital could adversely impact our ability to achieve our intended business objectives and meet our financial obligations as they become due and payable.

In March 2022, we received a subpoena from the SEC requesting information and documents, including materials related to certain individuals (none of which are our officers or directors) and entities, and materials related to the development of and statements regarding our drug candidate for the treatment of COVID-19.

We have received, and expect to continue to receive, periodic further requests from the SEC staff with respect to this matter.

We are not aware of the specific nature of the underlying investigation by the SEC, and to the extent that this investigation relates to prior public disclosures that we have made, we believe in the accuracy and adequacy of such prior disclosures.

The correspondence from the SEC transmitting the subpoena to us states that the SEC is trying to determine whether there have been any violations of federal securities laws, but that its investigation does not mean that the SEC has concluded that anyone has violated the law or that the SEC has a negative opinion of any person, entity, or security. We cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation.

During the year ended December 31, 2022, we have expensed approximately $2.4 million in related legal fees and expenses.

We estimate that potentially an additional $1 million in legal costs will be incurred in 2023 in connection with our response to this subpoena.

Stock Offerings

In February 2021, we completed an underwritten public offering of an aggregate of 14,273,684 shares of common stock at a public offering price of $4.75 per share.

We granted the underwriters a 30-day option to purchase up to an additional 2,141,052 shares of common stock offered in the public offering.

The offering closed on February 5, 2021 and gross proceeds of the offering were approximately $67.8 million, prior to deducting the underwriting discount and other offering expenses.

On February 10, 2021, the underwriters of the public offering exercised in full their option to purchase an additional 2,141,052 shares of common stock at the public offering price of $4.75 per share, bringing total gross proceeds to approximately $78.0 million before underwriting discount.

Lincoln Park Equity Lines

In June 2021, we entered into a Purchase Agreement with Lincoln Park Capital Fund (Lincoln Park Agreement).

Pursuant to the terms of the Purchase Agreement, Lincoln Park agreed to purchase from us up to $20.0 million of common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement.

Pursuant to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement, we issued 107,788 shares of common stock to Lincoln Park as an initial fee for its commitment to purchase shares of our common stock under the Purchase Agreement, and have agreed to issue Lincoln Park up to an additional 53,893 shares of common stock as commitment shares pro-rata when and if Lincoln Park purchases (at our discretion) the $20.0 million aggregate commitment.

As of the date of this report, there have been no issuances under the Lincoln Park Agreement.

ATM Agreements

In June 2021, we entered into an At Market Issuance Sales Agreement (2021 ATM Agreement) with Oppenheimer & Co.

Pursuant to the terms of the 2021 ATM Agreement, we may offer and sell, from time to time through Oppenheimer shares of our common stock with an aggregate sales price of up to $50.0 million.

As of the date of this report, there have been no issuances under the 2021 ATM Agreement.

The Company terminated the 2021 ATM Agreement on February 3, 2023.

In January 2021, we issued 468,684 shares for gross proceeds of $2.9 million using our 2020 ATM Agreement with Oppenheimer & Co., Inc.

We terminated the 2020 ATM Agreement on February 2, 2021.

Additionally, during the first quarter of 2021, 10,000 shares were issued due to the exercise of warrants related to past public offerings.

Gross proceeds received due to these exercises approximated $63,000.

The following table sets forth the primary sources and uses of cash for the years indicated (in thousands):

For the Year Ended December 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net change in cash and cash equivalents

As of December 31, 2022, there was $0.3 million of cas h on hand in a bank account in Australia and we know of no related limitations impacting our liquidity in Australia.

Cash used in operating activities

Net cash used in operating activities was$27.6  million for the year ended December 31, 2022 compared to $19.0 million for the year ended December 31, 2021.

This increase in use of cash for operations was mainly due to payments for increased clinical trial activity, costs related to manufacturing of additional drug product, and increased consulting, legal and advisory fees.

These are all a reflection of the ongoing clinical and pre-clinical activity and the associated increase in G&A support for our three core drug technologies.

Cash used in investing activities

Net cash used in investing activities w as de minimis  f or the years ended December 31, 2022 and December 31, 2021, respectively. 

Cash provided by financing activities

Net cash provided by financing activities was de minimis  f or the year ended December 31, 2022 compared to the prior period of $74.7 million.

Net cash provided by financing in 2021 consisted primarily of $74.6 million net proceeds from the issuance of common stock, and $0.1 million net proceeds from the exercise of warrants. 

Off-Balance Sheet Transactions

We do not engage in off-balance sheet transactions.

Recent Accounting Pronouncements 

We have implemented all new accounting pronouncements that are in effect and may impact our financial statements and we do not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on our financial position or results of operations.

Critical Accounting Policies and Significant Judgments and Estimates 

The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) for financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (SEC).

We believe that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain .

Research and Development Costs

We record accrued expenses for estimated costs of our research and development activities conducted by third-party service providers, which include the conduct of pre-clinical and clinical trials and preparation for clinical trials and contract manufacturing activities.

We record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced, and we include these costs in accrued liabilities in the balance sheets and within research and development expense in the statement of operations.

These costs are a significant component of our research and development expenses.

We record accrued expenses for these costs based on the estimated amount of work completed and in accordance with agreements established with these third parties.

We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services.

We make significant judgments and estimates in determining the accrued balance in each reporting period.

As actual costs become known, we adjust our accrued estimates.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period.

Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from clinical research organizations and other third-party service providers.

To date, there have been no material differences from our accrued expenses to actual expenses.

Impairment of Long-Lived Assets

We evaluate the recoverability of our property and equipment and amortizable intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable or at a minimum annually during the fourth quarter of the year.

Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate.

If such review indicates that the carrying amount of property and equipment and amortizable intangible assets is not recoverable, the carrying amount of such asset is reduced to fair value.

Acquired in-process research and development (IPR&D) assets are considered indefinite lived until the completion or abandonment of the associated research and development efforts.

We evaluate the recoverability of our IPR&D assets for possible impairment annually during the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

Recoverability of IPR&D assets is measured by a comparison of the carrying amounts its fair value.

If such review indicates that the carrying amount of IPR&D assets is not recoverable, the carrying amount of such asset is reduced to fair value.

Components of our Results of Operations, Net Loss and Financial Condition

Operating expenses

We classify our operating expenses into three categories:

research and development, general and administrative and depreciation.

Research and development .

Research and development expenses consist primarily of:

costs incurred to conduct research, such as the discovery and development of our product candidates;

costs related to production of clinical supplies, including fees paid to contract manufacturers and drug manufacturing costs;

fees paid to clinical consultants, clinical trial sites and vendors, including clinical research organizations, in preparation for clinical trials and our IND and Orphan Drug applications with the FDA;

costs related to compliance with drug development regulatory requirements.

We recognize all research and development costs as they are incurred.

Pre-clinical costs, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed.

We expect our research and development expenses to increase in the future as we advance our product candidates into and through clinical trials and pursue regulatory approval of our product candidates in the United States and Europe.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming.

The actual probability of success for our product candidates may be affected by a variety of factors including:

the quality of our product candidates, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability.

We may never succeed in achieving regulatory approval for any of our product candidates.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent, if any, we will generate revenue from the commercialization and sale of our product candidates.

General and administrative

General and administrative expense consists of personnel related costs, which include salaries, as well as the costs of professional services, such as accounting and legal, facilities, information technology and other administrative expenses.

We expect our general and administrative expense to increase due to the anticipated growth of our business and related infrastructure as well as accounting, insurance, investor relations and other costs associated with becoming a public company.

Depreciation and Amortization.

Depreciation and amortization expense consists of depreciation on our property and equipment.

We depreciate our assets over their estimated useful life.

We estimate leasehold improvements to have a estimated useful life over the term of the lease or the estimated useful life, whichever is shorter;

computer equipment to have a 2-year life;

software to have a 3-year life, machinery and equipment to have a 2 to 5 year life and furniture and office equipment to have a 2 to 7 year life.

Accounting for warrants 

We issued warrants to purchase shares of common stock related to equity transactions in 2017, 2018, 2019, 2020, and 2021.

We account for our warrants issued in accordance with Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging, guidance applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings for liability classified warrants.

Based on this guidance, we determined that certain of our warrants to purchase shares of common stock related to equity transactions in 2017, 2018, 2019, and 2020 meet the criteria for classification as a liability.

Accordingly, the warrants were classified as a warrant liability and are subject to fair value remeasurement at each transaction and balance sheet date.

The fair value was estimated using the Black-Scholes option pricing model, based on the market value of the underlying common stock at the measurement date, the contractual term of the warrant, risk-free interest rates, expected dividends and expected volatility of the price of the underlying common stock.

Our financial instruments consist primarily of non-trade receivables, account payables, accrued expenses, and a warrant liability.

The carrying amount of non-trade receivables, accounts payables, and accrued expenses approximates their fair value because of the short-term maturity of such.

We have categorized our assets and liabilities that are valued at fair value on a recurring basis into three-level fair value hierarchy in accordance with GAAP.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).

Assets and liabilities recorded in the balance sheets at fair value are categorized based on a hierarchy of inputs as follows:

Level 1 - Unadjusted quoted prices in active markets of identical assets or liabilities.

Level 2 - Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 - Unobservable inputs for the asset or liability.

Our financial assets and liabilities recorded at fair value on a recurring basis include the fair value of our warrant liability discussed below.

The fair value of this warrant liability associated with the February 2017, February 2018, June 2018, March 2019, April 2019, and February 2020 Offerings (Offerings) are included in long-term liabilities on the accompanying financial statements as of December 31, 2022 and 2021 respectively. 

We estimated the fair value of the warrant liability issued in our Offerings under ASC 820 as of their issuance date for financial reporting purposes.

We used the Black-Scholes option pricing model (BSM) to determine the fair value of the warrants.

The BSM model is acceptable in accordance with GAAP.

The BSM requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the weighted average term of the warrant.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon US Treasury bonds whose maturity period is appropriate for the term of the warrants and is calculated by using the average daily historical stock prices through the day preceding the grant date.

Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the warrants. Beginning in 2020, only the volatility of our stock was used in the BSM as we now have sufficient historic data in our stock price.

Changes in the fair value during the accounting period are shown as other income or expense.

Stock-based compensation

Stock based compensation transactions are recognized as compensation expense in the statement of operations based on their fair values on the date of the grant, with the compensation expense recognized over the period in which a grantee is required to provide service in exchange for the award.

We estimate the fair value of options granted using the Black-Scholes option valuation model, and the fair value of restricted stock units using the closing price of our common stock as reported on the date of grant.

The Black-Scholes estimate uses assumptions regarding a number of inputs that require us to make significant estimates and judgments.

Beginning in 2020, only the volatility of our stock was used in the BSM as we now have sufficient historic data in our stock price.

We account for income taxes using ASC 740 Income Taxes.

ASC 740 Income Taxes is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns.

In estimating future tax consequences, ASC 740 generally considers all expected future events other than enactments of and changes in the tax law or rates.

The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

Valuation allowances are provided if, considering available evidence, it is more likely than not that the deferred tax assets will not be realized.

ASC 740 clarifies the criteria that must be met prior to recognition of the financial statement benefit of a position taken in a tax return.

ASC 740 provides a benefit recognition model with a two-step approach consisting of “more-likely-than-not”

recognition criteria, and a measurement attribute that measures a given tax position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement.

ASC 740 also requires the recognition of liabilities created by differences between tax positions taken in a tax return and amounts recognized in the financial statements.

Recent accounting pronouncements

See Note 2 to the Notes to Consolidated Financial Statements in "Item 8 - Financial Statements and Supplementary Data" in this Annual Report for discussion regarding recent accounting pronouncements.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information required under this item.

We did not repurchase any of our equity securities during the year ended December 31, 2023.

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-K

Item 5. Market for Registrant’s Common Equity