What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-05-12 · 263 added, 262 removed, 527 unchanged (50% of the section changed)

2 unchanged sentences

Balance Sheets

(In thousands, except for share and per share amounts)

(in thousands, except for share and per share

Current assets:

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Preferred stock:

$ 0.001 par value per share— 10,000,000 shares authorized at December 31, 2021 and March 31, 2022;

no shares issued and outstanding at December 31, 2021 and March 31, 2022

Common stock, $ 0.001 par value per share – 200,000,000 shares authorized at December 31, 2021 and March 31, 2022;

14,996,534 shares issued and outstanding at December 31, 2021, and 15,020,517 shares issued and outstanding at March 31, 2022

$ 0.001 par value per share— 10,000,000 shares authorized at December 31, 2021 and June 30, 2022;

no shares issued and outstanding at December 31, 2021 and June 30, 2022

Common stock, $ 0.001 par value per share – 200,000,000 shares authorized at December 31, 2021 and June 30, 2022;

14,996,534 shares issued and outstanding at December 31, 2021, and 15,044,498 shares issued and outstanding at June 30, 2022

Additional paid-in capital

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Statements of Operations

(In thousands, except for share and per share amounts)

(in thousands, except for share and per share

Three Months Ended

Six Months Ended

Operating expenses:

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Balance at March 31, 2021

Issuance of common stock for exercise of options

Stock-based compensation expense

Balance at June 30, 2021

Preferred Stock

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Balance at March 31, 2022

Issuance of common stock for exercise of options

Stock-based compensation expense

Balance at June 30, 2022

See accompanying notes to the financial statements

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(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities

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Repayment of loan from stockholder

Deferred offering costs

Proceeds from exercise of options

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As the Company increases its research and development activities, the operating losses are expected to increase.

The Company has

historically relied on private equity offerings, debt financings and loans from a stockholder to fund its operations.

has historically relied on private equity offerings, debt financings and loans from a stockholder to fund its operations.

As of December

2021 and March 31, 2022, the Company had an accumulated deficit of $ 15.9 million and $ 19.5 million, respectively.

31, 2021 and June 30, 2022, the Company had an accumulated deficit of $ 15.9 million and $ 23.1 million, respectively.

As a result of its initial public offering (“IPO”),

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approximately $ 22.3 million in net proceeds after deducting the underwriting discounts, commissions and other offering expenses.

intends to use the net proceeds from the IPO to complete pre-clinical and clinical studies, submit regulatory filings to the FDA, and

for general and corporate purposes, including hiring additional management and conducting market research and other commercial planning.

Company intends to use the net proceeds from the IPO to complete pre-clinical and clinical studies, submit regulatory filings to the

FDA, and for general and corporate purposes, including hiring additional management and conducting market research and other commercial

The Company expects to continue incurring losses

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January 2021 through May 2021, the Company received an aggregate of $ 1.1 million upon the issuance of convertible notes.

These funds were

used primarily to settle outstanding accounts payable as well as to make payments on the loan outstanding from the chief executive officer

and principal stockholder.

were used primarily to settle outstanding accounts payable as well as to make payments on the loan outstanding from the chief executive

officer and principal stockholder.

In addition, the Company received approximately $ 22.3 million in net proceeds from its IPO.

There can be no

assurance that the Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis or at all.

If the Company is unable to secure additional capital, it may be required to curtail any clinical trials and development of new or existing

products and take additional measures to reduce expenses in order to conserve its cash in amounts sufficient to sustain operations and

meet its obligations.

Based on the Company’s current level of expenditures, and, given the Company’s cash balance of $ 13.6

million as of March 31, 2022, the Company believes that it will need funding before the end of the second quarter 2023 to continue operations,

satisfy its obligations and fund the future expenditures that will be required to conduct the clinical and regulatory work to develop

its product candidates.

can be no assurance that the Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis

If the Company is unable to secure additional capital, it may be required to curtail any clinical trials and development of

new or existing products and take additional measures to reduce expenses in order to conserve its cash in amounts sufficient to sustain

operations and meet its obligations.

Based on the Company’s current level of expenditures, and, given the Company’s cash

balance of $ 10.6 million as of June 30, 2022, the Company believes that it will need funding before the end of the second quarter 2023

to continue operations, satisfy its obligations and fund the future expenditures that will be required to conduct the clinical and regulatory

work to develop its product candidates.

The accompanying financial statements have been

prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of

liabilities and commitments in the normal course of business.

prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement

of liabilities and commitments in the normal course of business.

There is substantial doubt about the Company’s ability to continue

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have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying unaudited financial statements of

the Company as of March 31, 2022 have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X

The accompanying unaudited financial statements

of the Company as of June 30, 2022 have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X

and, accordingly, they do not include all information and footnote disclosures required by accounting principles generally accepted in

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for a fair presentation of the results of the interim periods presented.

The financial statements include all adjustments (solely of a

normal recurring nature) which are, in the opinion of management, necessary to make the information presented not misleading.

The financial statements include all adjustments (solely of

a normal recurring nature) which are, in the opinion of management, necessary to make the information presented not misleading.

read these financial statements and the accompanying notes in conjunction with the financial statements and notes thereto included in

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could have a material effect on future results of operations and financial position.

Significant items subject to such estimates and assumptions

include progress estimates for material third party research and development contracts, stock-based compensation and fair value of the

Company’s common stock prior to the Company’s IPO.

Significant items subject to such estimates and

assumptions include progress estimates for material third party research and development contracts, stock-based compensation and fair

value of the Company’s common stock prior to the Company’s IPO.

Actual results may materially differ from those estimates.

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as one reportable operating segment.

The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial

information on an aggregate basis for purposes of allocating resources and evaluating financial performance.

The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews

financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.

Risks and Uncertainties

The Company operates in a dynamic and highly competitive

industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial

position, results of operations, or cash flows:

The Company operates in a dynamic and highly

competitive industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s

future financial position, results of operations, or cash flows:

ability to obtain future financing;

advances and trends in new technologies and industry

advances and trends in new technologies

and industry standards;

results of clinical trials;

regulatory approval and market acceptance of the Company’s products;

development of sales

of sales channels;

certain strategic relationships;

litigation or claims against the Company related to intellectual property, product, regulatory,

or other matters;

litigation or claims against the Company related to intellectual property, product,

regulatory, or other matters;

and the Company’s ability to attract and retain employees necessary to support its growth.

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the Company’s current product candidates or any future product candidates will receive the necessary approvals.

If the Company is

denied approval, approval is delayed or the Company is unable to maintain approval, it could have a materially adverse impact on the Company.

If the Company

is denied approval, approval is delayed or the Company is unable to maintain approval, it could have a materially adverse impact on the

The Company has expended and will continue to

expend substantial funds to complete the research, development and clinical testing of its product candidates.

The Company also will be

required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution

of products that receive regulatory approval.

The Company also will

be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and

distribution of products that receive regulatory approval.

The Company will require additional funds to commercialize its products.

The Company is

unable to entirely fund these efforts with its current financial resources.

If adequate funds are unavailable on a timely basis from operations

or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development

programs, which would materially and adversely affect its business, financial condition and operations.

The Company is dependent upon the services of

its employees, consultants and other third parties.

Company is unable to entirely fund these efforts with its current financial resources.

If adequate funds are unavailable on a timely

basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more

of its research or development programs, which would materially and adversely affect its business, financial condition and operations.

The Company is dependent upon the services of its employees, consultants

and other third parties.

Property, Plant and Equipment

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cost less accumulated depreciation.

Additions, improvements, and major renewals or replacements that substantially extend the useful life

of an asset are capitalized.

Additions, improvements, and major renewals or replacements that substantially extend the useful

life of an asset are capitalized.

Repairs and maintenance expenditures are expensed as incurred.

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fair value at that time.

At March 31, 2022, management determined there were no impairments of the Company’s property and equipment.

At June 30, 2022, management determined there were no impairments of the Company’s property and equipment.

The Company determines whether a contract is,

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The Company’s financial instruments include

cash, prepaid expenses, and accounts payable.

The carrying amounts of these items approximate fair value as of December 31, 2021 and March

31, 2022 due to their short-term nature.

cash, prepaid expenses, accounts payable, convertible notes and a loan from the Chief Executive Officer and stockholder of the Company.

The carrying amounts of these items approximate fair value as of December 31, 2021 and June 30, 2022 due to their short-term nature.

Concentration of Credit Risk

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and development expenses consist of expenses incurred in connection with the development of the Company’s product candidates.

expenses include fees paid to third parties to conduct certain research and development activities on the Company’s behalf and related

progress estimates for those activities, consulting costs, costs for laboratory supplies, product acquisition and license costs, certain

payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for

the Company’s research and product development employees and allocated overheads, including information technology costs and utilities.

expenses include fees paid to third parties to conduct certain research and development activities on the Company’s behalf and

related progress estimates for those activities, consulting costs, costs for laboratory supplies, product acquisition and license costs,

certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses

for the Company’s research and product development employees and allocated overheads, including information technology costs and

The Company expenses both internal and external research and development expenses as they are incurred.

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The Company estimates the fair value of stock options using the Black-Scholes option-pricing model.

The Black-Scholes model

requires the input of subjective assumptions, including expected common stock volatility, expected dividend yield, expected term, risk-free

interest rate, and the estimated fair value of the Company’s underlying common stock on the date of grant.

The Black-Scholes

model requires the input of subjective assumptions, including expected common stock volatility, expected dividend yield, expected term,

risk-free interest rate, and the estimated fair value of the Company’s underlying common stock on the date of grant.

Common Stock Valuations

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parties, the lack of marketability of the common stock and the market performance of comparable publicly traded companies.

Subsequent to the IPO, the Company determines the fair value of common

stock from closing prices as quoted on the NASDAQ exchange.

Subsequent to the IPO, the Company determines

the fair value of common stock from closing prices as quoted on the NASDAQ exchange.

The Company accounts for corporate income taxes

in accordance with GAAP as stipulated in ASC, Topic 740, Income Taxes, (“ASC 740”).

This standard entails the use of the asset

and liability method of computing the provision for income tax expense.

Current tax expense results from corporate tax payable at the

Federal and California jurisdictions for the Company, which relate to the current accounting period.

Deferred tax expense results primarily

from temporary differences between financial statement and tax return reporting, which result in additional tax payable in future periods.

Deferred tax assets and liabilities are determined based on the differences between the financial statement basis and tax basis of assets

and liabilities using enacted tax rates and law.

Net future tax benefits are subject to a valuation allowance when management expects

that it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

This standard entails the use of the

asset and liability method of computing the provision for income tax expense.

Current tax expense results from corporate tax payable

at the Federal and California jurisdictions for the Company, which relate to the current accounting period.

Deferred tax expense results

primarily from temporary differences between financial statement and tax return reporting, which result in additional tax payable in

future periods.

Deferred tax assets and liabilities are determined based on the differences between the financial statement basis and

tax basis of assets and liabilities using enacted tax rates and law.

Net future tax benefits are subject to a valuation allowance when

management expects that it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

Current and non-current tax assets and liabilities

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interest or penalties related to income tax matters in income tax expense.

The Tax Cuts and Jobs Act of 2017 eliminated the option

to immediately deduct research and development expenditures in the year incurred under Section 174, which became effective January 1,

We are monitoring legislation for any further changes to Section 174 and the impact, if any, to the financial statements in 2022.

The Tax Cuts and Jobs Act of 2017 eliminated

the option to immediately deduct research and development expenditures in the year incurred under Section 174, which became effective

January 1, 2022.

We are monitoring legislation for any further changes to Section 174 and the impact, if any, to the financial statements

Comprehensive Loss

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dilutive securities.

Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and

potentially dilutive securities outstanding for the period.

For purposes of the diluted net loss per share calculation, common stock options

and warrants are considered to be potentially dilutive securities.

Basic and diluted net loss per share is presented in conformity with

the two-class method required for participating securities.

The Company has no participating securities and as such, the net

loss was attributed entirely to common stockholders.

As the Company has reported a net loss for all periods presented, diluted net loss

per common share is the same as basic net loss per common share for those periods.

All common share amounts and per share amounts have

been adjusted to reflect a 1-for-4.3 reverse stock split of the Company’s common stock that was effectuated on June 21, 2021.

Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares

and potentially dilutive securities outstanding for the period.

For purposes of the diluted net loss per share calculation, common stock

options and warrants are considered to be potentially dilutive securities.

Basic and diluted net loss per share is presented in conformity

with the two-class method required for participating securities.

The Company has no participating securities and as such, the

net loss was attributed entirely to common stockholders.

As the Company has reported a net loss for all periods presented, diluted net

loss per common share is the same as basic net loss per common share for those periods.

All common share amounts and per share amounts

have been adjusted to reflect a 1-for-4.3 reverse stock split of the Company’s common stock that was effectuated on June 21, 2021.

Recent Accounting Pronouncements

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not expected to have a material impact on the Company’s financial position or results of operations upon adoption.

In August 2020, the FASB issued ASU 2020-06, Accounting

for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments.

In August 2020, the FASB issued ASU 2020-06,

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible

ASU 2020-06 eliminates certain models that require separate accounting for embedded conversion features.

Additionally, among other changes,

the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity.

also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and

include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified

Additionally, among

other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity.

The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share

calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified

share-based payment awards.

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The Company has adopted this standard effective as of January 1, 2019.

The Company chose to adopt certain practical expedients available

from the FASB.

As a policy election, the Company chose to expense and amortize, on a straight line, the leases with terms less than 12

In addition, the Company chose not to separate certain lease and non-lease components when evaluating the fair value of a lease.

The Company chose to adopt the package of practical expedients

available from the FASB.

As a policy election, the Company chose to expense and amortize, on a straight line, the leases with terms less

than 12 months.

The adoption of this standard did not have a material effect on the Company’s financial statements.

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all commercial supplies are continued to be manufactured and supplied by the vendor.

Unicycive is not obligated to make any payments to

the vendor until FDA approval of the product is obtained and commercial revenue is generated.

In October 2017, the Company entered into an exclusive

license agreement with Sphaera, a stockholder, for the rights to further develop the drug candidate, UNI 494, for commercialization.

payments were made upon execution of the agreement but rather payments for $50,000 will be due commencing with the initiation by the Company

of a second clinical trial and $50,000 on completion of such trial.

At the time the FDA accepts a NDA application submitted by the Company

for the product, the Company will pay Sphaera $1.65 million.

Upon commercialization and sale of the drug product, royalty payments will

also be payable quarterly to Sphaera equal to 2% of net sales on the preceding quarter.

Unicycive is not obligated to make any payments

to the vendor until FDA approval of the product is obtained and commercial revenue is generated.

In October 2017, the Company entered into an

exclusive license agreement with Sphaera, a stockholder, for the rights to further develop the drug candidate, UNI 494, for commercialization.

No payments were made upon execution of the agreement but rather payments for $50,000 will be due commencing with the initiation by the

Company of a second clinical trial and $50,000 on completion of such trial.

At the time the FDA accepts a NDA application submitted by

the Company for the product, the Company will pay Sphaera $1.65 million.

Upon commercialization and sale of the drug product, royalty

payments will also be payable quarterly to Sphaera equal to 2% of net sales on the preceding quarter.

In September 2018, the Company entered into an

Assignment and Asset Purchase Agreement with Spectrum Pharmaceuticals, Inc.

(“Spectrum Agreement”) pursuant to which the Company

purchased certain assets from Spectrum, including Spectrum’s right, title, interest in and intellectual property related to Renazorb

RZB 012, also known as RENALAN™ (“Renalan”) and RZB 014, also known as SPI 014 (“SPI” and together with

Renalan, the “Compounds”), to further develop and commercialize Renazorb and related compounds.

In partial consideration for

the Spectrum Agreement, the Company issued 313,663 shares of common stock to Spectrum valued at approximately $ 4,000 which represented

(“Spectrum Agreement”) pursuant to which the

Company purchased certain assets from Spectrum, including Spectrum’s right, title, interest in and intellectual property related

to Renazorb RZB 012, also known as RENALAN™ (“Renalan”) and RZB 014, also known as SPI 014 (“SPI” and together

with Renalan, the “Compounds”), to further develop and commercialize Renazorb and related compounds.

In partial consideration

for the Spectrum Agreement, the Company issued 313,663 shares of common stock to Spectrum valued at approximately $ 4,000 which represented

four percent of the Company on a fully-diluted basis at the date of the execution of the Spectrum Agreement.

The Spectrum Agreement has

an anti-dilution provision, which provides that Spectrum maintain its ownership interest in the Company at 4 % of the Company’s shares

on a fully-diluted basis.

Fully-diluted shares of common stock for purposes of the Renazorb Purchase Agreement assumes conversion of any

security convertible into or exchangeable or exercisable for common stock or any combination thereof, including any common stock reserved

for issuance under a stock option plan, restricted stock plan, or other equity incentive plan approved by the Board of Directors of the

Company immediately following the issuance of additional shares of the Company’s common stock (but prior to the issuance of any

additional shares of common stock to Spectrum).

Spectrum’s ownership shall not be subject to dilution until the earlier of thirty-six

months from the first date the Company’s stock trades on a public market, or the date upon which the Company attains a public market

capitalization of at least $ 50 million.

On July 13, 2021, the Company’s initial public offering resulted in a public market capitalization

of at least $ 50 million, and as a result the Company was required to issue 438,374 anti-dilution shares of common stock.

This issuance

represented the final anti-dilution calculation required under the Spectrum Agreement, and no further anti-dilution shares will be issued.

The Company calculated the fair value of the shares and recognized $ 2.2 million to research and development expenses as cost to issue

those shares during the third quarter of 2021.

The Company is also required to pay Spectrum 40% of all of the Company’s sublicense

income for any sublicense granted to certain sublicensees during the first 12 months after the Closing Date (as that term is defined in

the Renazorb Purchase Agreement) and 20% of all other sublicense income.

The Company’s payment obligations to Spectrum will expire

on the twentieth (20 th ) anniversary of the Closing Date of the Renazorb Purchase Agreement.

On February 8, 2021, the Company entered into a Master

Services Agreement (the “Renazorb Development Agreement”) with Ascent Development Services, Inc.

(“Ascent”) pursuant

to which Ascent will provide strategic services related to the development of Renazorb or other investigational products (the “Compounds”)

for clinical use and regulatory approval in Japan and other Asian countries.

The Renazorb Development Agreement anticipates services to

be provided by Ascent will include market research, facilitation of informal and formal meetings with Japan’s Pharmaceutical and

Medical Devices Agency (“PMDA”), management of contract research organizations and clinical trials, and government applications

and regulatory filings related to the Asian development of the Compounds.

Unicycive will supply the Compounds or other materials necessary

for Ascent to perform the development services.

The initial Statement of Work (“SOW”) under the Renazorb Development Agreement

encompasses the development of clinical strategy as well as both informal and formal meetings with the PMDA.

The budget for the initial

SOW is approximately 24,000,000 Japanese Yen, and an upfront payment of approximately $87,000, was paid to Ascent upon the execution of

the Renazorb Development Agreement and deliverables for the initial SOW were completed by December 31, 2021.

On July 19, 2021, the Company entered into an agreement

with Syneos Health LLC (“Syneos”) pursuant to which Syneos will provide preclinical research and analysis services related

to the development of UNI-494.

The budget for the initial study, which will also include clinical pharmacology, translational sciences,

and bioanalytical services, is approximately $ 1.9 million.

Related payments totaling approximately $ 883,000 have been paid to Syneos as

of March 31, 2022, and approximately $ 738,000 of this amount is recorded as prepaid expense in the accompanying balance sheet as of March

On January 6, 2022, the Company entered into a Master

Services Agreement with Quotient Sciences Limited (“Quotient”), a UK based company that provides drug development and analysis

services, for the purpose of performing clinical research in support of UNI-494.

an anti-dilution provision, which provides that Spectrum maintain its ownership interest in the Company at 4 % of the Company’s

shares on a fully-diluted basis.

Fully-diluted shares of common stock for purposes of the Renazorb Purchase Agreement assumes conversion

of any security convertible into or exchangeable or exercisable for common stock or any combination thereof, including any common stock

reserved for issuance under a stock option plan, restricted stock plan, or other equity incentive plan approved by the Board of Directors

of the Company immediately following the issuance of additional shares of the Company’s common stock (but prior to the issuance

of any additional shares of common stock to Spectrum).

Spectrum’s ownership shall not be subject to dilution until the earlier

of thirty-six months from the first date the Company’s stock trades on a public market, or the date upon which the Company attains

a public market capitalization of at least $ 50 million.

On July 13, 2021, the Company’s initial public offering resulted in a public

market capitalization of at least $ 50 million, and as a result the Company was required to issue 438,374 anti-dilution shares of common

This issuance represented the final anti-dilution calculation required under the Spectrum Agreement, and no further anti-dilution

shares will be issued.

The Company calculated the fair value of the shares and recognized $ 2.2 million to research and development expenses

as cost to issue those shares during the third quarter of 2021.

The Company is also required to pay Spectrum 40% of all of the Company’s

sublicense income for any sublicense granted to certain sublicensees during the first 12 months after the Closing Date (as that term

is defined in the Renazorb Purchase Agreement) and 20% of all other sublicense income.

The Company’s payment obligations to Spectrum

will expire on the twentieth (20 th ) anniversary of the Closing Date of the Renazorb Purchase Agreement.

On July 19, 2021, the Company entered into an

agreement with Syneos Health LLC (“Syneos”) pursuant to which Syneos will provide preclinical research and analysis services

related to the development of UNI-494.

The budget for the initial study, which will also include clinical pharmacology, translational

sciences, and bioanalytical services, is approximately $ 1.9 million.

Related payments totaling approximately $ 1.2 million have been paid

to Syneos as of June 30, 2022, and approximately $ 0.7 million of this amount is recorded as prepaid expense in the accompanying balance

sheet as of June 30, 2022.

On January 6, 2022, the Company entered into

a Master Services Agreement with Quotient Sciences Limited (“Quotient”), a UK based company that provides drug development

and analysis services, for the purpose of performing clinical research in support of UNI-494.

The budget for the initial study is

approximately $ 3.2 million.

Related payments totaling approximately $ 0.4 million have been paid to Quotient as of June 30, 2022, and

approximately $ 0.1 million of this amount is recorded as prepaid expense in the accompanying balance sheet as of June 30, 2022.

On February 9, 2022, the Company entered into

a Master Services Agreement with CBCC Global Research Inc.

(“CBCC”), a California based company that provides clinical trial

and related services, for the purpose of performing clinical research in support of Renazorb.

The budget for the initial study is approximately

$ 1.4 million.

Related payments totaling approximately $ 321,000 have been paid to Quotient as of March 31, 2022, and approximately $ 306,000

of this amount is recorded as prepaid expense in the accompanying balance sheet as of March 31, 2022.

On February 9, 2022, the Company entered into a Master

Services Agreement with CBCC Global Research Inc.

(“CBCC”), a California based company that provides clinical trial and related

service, for the purpose of performing clinical research in support of Renazorb.

The budget for the initial study is approximately $ 1.4

Related payments totaling approximately $ 94,000 have been paid to CBCC as of March 31, 2022, and approximately $ 58,000 of this

amount is recorded as prepaid expense in the accompanying balance sheet as of March 31, 2022.

Related payments totaling approximately $ 0.3 million have been paid to CBCC as of June 30, 2022, and approximately $ 0.1

million of this amount is recorded as prepaid expense in the accompanying balance sheet as of June 30, 2022.

On June 29, 2022, the Company entered into an

Agreement with Inotiv, an Indiana based company that provides preclinical trial and related services, for the purpose of performing research

in support of Renazorb.

The budget for the initial study is approximately $ 0.8 million.

No related payments have been paid to Inotiv

as of June 30, 2022.

Balance Sheet Components

Prepaid expenses and other current assets as of

December 31, 2021 and March 31, 2022 consisted of the following (in thousands):

Prepaid expenses and other current assets as

of December 31, 2021 and June 30, 2022 consisted of the following (in thousands):

Prepaid directors and officers liability insurance premiums

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Property, plant and equipment as of December

2021 and March 31, 2022 consisted of the following (in thousands):

31, 2021 and June 30, 2022 consisted of the following (in thousands):

Leasehold improvements

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Less accumulated depreciation

Accounts payable as of December 31, 2021 and March

31, 2022 consisted of the following (in thousands):

Accounts payable as of December 31, 2021 and

June 30, 2022 consisted of the following (in thousands):

Trade accounts payable

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Accrued liabilities as of December 31, 2021 and

March 31, 2022 consisted of the following (in thousands):

June 30, 2022 consisted of the following (in thousands):

Accrued labor costs

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In accounting for the leases, the Company adopted

ASC 842 Leases on January 1, 2019, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception

of the lease initially measured at the present value of the lease payments.

The Company classified the lease as an operating lease and,

at December 1, 2021, determined that the present value of the lease was approximately $ 318,000 using a discount rate of 8.0 %.

In accordance

with ASC 842, the right-of-use asset will be amortized over the life of the underlying lease.

The Company determined that the option to

extend the lease for an additional year was not considered reasonably certain at December 31, 2021or March 31, 2022.

During the three

months ended March 31, 2022, the Company reflected amortization of right-of-use asset of approximately $ 37,000 , resulting in a right of

use asset balance of $ 268,000 .

During the three months ended March 31, 2022,

the Company made cash payments on the lease of $ 42,000 towards the lease liabilities.

As of March 31, 2022, the total lease liability

was $ 269,000 .

ASC 842 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease

is allocated over the lease term, generally on a straight-line basis.

Rent expense for the lease for the three months ended March 31,

2022 was approximately $ 43,000 .

As of March 31, 2022, maturities of the Company’s

ASC 842 Leases on January 1, 2019, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the

inception of the lease initially measured at the present value of the lease payments.

The Company classified the lease as an operating

lease and, at December 1, 2021, determined that the present value of the lease was approximately $ 318,000 using a discount rate of 8.0 %.

In accordance with ASC 842, the right-of-use asset will be amortized over the life of the underlying lease.

The Company determined that

the option to extend the lease for an additional year was not considered reasonably certain at December 31, 2021 or June 30, 2022.

the three and six months ended June 30, 2022, the Company reflected amortization of right-of-use asset of approximately $ 38,000 and $ 75,000 ,

respectively, resulting in a right of use asset balance at June 30, 2022 of $ 230,000 .

During the six months ended June 30, 2022, the

Company made cash payments on the lease of approximately $ 85,000 towards the lease liabilities.

As of June 30, 2022, the total lease

liability was $ 232,000 .

ASC 842 requires recognition in the statement of operations of a single lease cost, calculated so that the cost

of the lease is allocated over the lease term, generally on a straight-line basis.

Rent expense for the lease for the three and six months

ended June 30, 2022 was approximately $ 43,000 and $ 86,000 , respectively.

As of June 30, 2022, maturities of the Company’s

lease liabilities are as follows (in thousands, unaudited):

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“Conversion Price”

means (i) in the event of a Qualified Financing, 70% of the price per share (or conversion price, as applicable) of common stock (or securities

convertible into common stock, as applicable) sold in such financing or (ii) in the event of a change of control, the price per share

reflected in such transaction.

means (i) in the event of a Qualified Financing, 70% of the price per share (or conversion price, as applicable) of common stock (or

securities convertible into common stock, as applicable) sold in such financing or (ii) in the event of a change of control, the price

per share reflected in such transaction.

The Company accounted for the 2021 Notes as stock-settled

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$500,000 (a “Qualified Financing”) or upon a change of control.

The 2020 Notes shall convert into such numbers of shares of

the Company’s common stock equal to the conversion amount divided by the Conversion Price.

The 2020 Notes shall convert into such numbers of shares

of the Company’s common stock equal to the conversion amount divided by the Conversion Price.

“Conversion Price” means

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Additionally, the noteholders were granted warrants equal to 25 % of the conversion shares

The conversion resulted in a loss of $ 431,000 that was included as loss on debt conversion in the statement of operations for

the three months ended September 30, 2021.

The conversion resulted in a loss of $ 431,000 .

Paycheck Protection Program Loan

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The Company classified the loans as a current liability, has applied for and received loan forgiveness

in February 2021, and recorded a gain on extinguishment of debt in the statement of operations for the three months ended March 31, 2021.

in February 2021, and recorded a gain on extinguishment of debt in the statement of operations for the six months ended June 30, 2021.

Related Party Transactions

1 unchanged sentence

The Company received advances from the stockholder

of $ 150,000 during the three months ended March 31, 2021.

The Company repaid amounts owed to the stockholder of $ 144,000 during the three

months ended March 31, 2021.

of $ 236,000 during the six months ended June 30, 2021.

The Company repaid amounts owed to the stockholder of $ 144,000 during the six

months ended June 30, 2021.

The Company repaid all amounts owed to the stockholder during the year ended December 31, 2021.

Common Stock Purchase Agreement and Service

Agreement with Globavir

Service agreement with Globavir

On July 1, 2017, the Company entered into a Common

5 unchanged sentences

the Company in 2017, which were issued in 2018.

On July 1, 2017, as amended on April 6, 2020,

the Company entered into a Service Agreement with Globavir Biosciences, Inc.

(“Globavir”), a related party (the “Service

Globavir provides administrative and consulting services and shared office space and other costs in connection with

the Company’s drug development programs.

The initial amended term of the Service Agreement expired on December 31, 2020, and the

agreement automatically renews for successive one-month periods after the initial termination date.

Pursuant to the Service Agreement,

the Company paid Globavir $ 50,000 per month through December 31, 2019 and $ 10,000 per month commencing on January 1, 2020.

fourth quarter of 2021, after initially determining that future services under the Service Agreement were no longer required, the Company

wrote off the $ 28,000 remaining prepaid balance due from Globavir as of December 31, 2021.

During the three months ended March 31, 2022,

after determining that although a shared office space is no longer utilized, consulting services continue to be provided, the Company

plans to amend the Service Agreement to reflect the consulting services and a reduced service fee of $ 6,000 per month.

On July 1, 2017, as amended on April 6, 2020, the Company entered into

a Service Agreement with Globavir Biosciences, Inc.

(“Globavir”), a related party (the “Service Agreement”).

provides administrative and consulting services and shared office space and other costs in connection with the Company’s drug development

The initial amended term of the Service Agreement expired on December 31, 2020, and the agreement automatically renews for successive

one-month periods after the initial termination date.

Pursuant to the Service Agreement, the Company paid Globavir $ 50,000 per month through

December 31, 2019 and $ 10,000 per month commencing on January 1, 2020.

During the fourth quarter of 2021, after initially determining

that future services under the Service Agreement were no longer required, the Company wrote off the $ 28,000 remaining prepaid balance

due from Globavir as of December 31, 2021.

During the six months ended June 30, 2022, after determining that although a shared office

space is no longer utilized, consulting services continued to be provided, the Company amended the Service Agreement to reflect the consulting

services at a reduced service fee of $ 6,000 per month and a termination date of June 30, 2022.

Commitments and Contingencies

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that arise in the ordinary course of business.

Such matters are inherently uncertain, and there can be no guarantee that the outcome of

any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect

upon the Company’s financial statements.

Such matters are inherently uncertain, and there can be no guarantee that the outcome

of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse

effect upon the Company’s financial statements.

The Company currently has no pending claims or legal proceedings.

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The indemnification period covers all pertinent events and occurrences during the director’s or officer’s

Employee Benefit Plan

In December 2021, the Company implemented a 401K

Plan which covers all eligible employees of the Company (the “401K Plan”).

Employer matching contributions are immediately

100 % vested.

The Company’s 401K Plan provides that the Company match each participant's contribution at 100 % up to 4 % of the employee’s

eligible compensation.

Company contributions to the 401K Plan totaled approximately $ 0 and $ 19,000 for the three months ended March 31,

2021 and 2022, respectively.

Stockholders’ (Deficit) Equity

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The following table summarizes activity for warrants

for the three months ended March 31, 2022:

for the six months ended June 30, 2022:

(in thousands)

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Warrants exercised

Outstanding, March 31, 2022

During the three months ended March 31, 2021, employees

and consultants exercised a total of 383,721 stock options and the Company received $119,000 in proceeds.

A portion of these options were

exercised early (prior to vesting), and as of March 31, 2022, 52,414 of the options remained unvested.

Proceeds received related to the

unvested options of $53,000 at March 31, 2022 were recorded in accrued liabilities on the accompanying balance sheets and will be reclassified

to equity as vesting occurs, provided the employees and consultants continue to provide services to the Company.

Proceeds received related

to the vested portion of options of $ 31,000 and $ 7,000 were reclassified to equity at March 31, 2021 and March 31, 2022, respectively.

The vested portion of the exercises was 331,300 shares at March 31, 2022.

Outstanding, June 30, 2022

Voting Rights of Common Stock

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Preferred Stock

As of December 31, 2021 and March 31, 2022, the

As of December 31, 2021 and June 30, 2022, the

Company had 10,000,000 shares of preferred stock authorized, par value of $ 0.001 per share and no shares of preferred stock were issued

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The following table summarizes activity for stock

options under all plans for the three months ended March 31, 2022:

options under all plans for the six months ended June 30, 2022:

(in thousands)

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Options exercised

Outstanding, March 31, 2022

Options vested and exercisable as of March 31, 2022

As of March 31, 2022, the unrecognized compensation

Outstanding, June 30, 2022

Options vested and exercisable as of June 30, 2022

The grant date fair value of options granted during

the six months ended June 30, 2022 was $ 8,000 .

As of June 30, 2022, the unrecognized compensation

cost related to outstanding stock options was $ 1.5 million, which is expected to be recognized as expense over approximately 2.2 years.

During the three months ended March 31, 2021,

employees and consultants exercised a total of 383,721 stock options and the Company received $119,000 in proceeds.

A portion of these

options were exercised early (prior to vesting), and as of June 30, 2022, 28,433 of the options remained unvested.

Proceeds received related

to the unvested options of approximately $46,000 at June 30, 2022 were recorded in accrued liabilities on the accompanying balance sheets

and will be reclassified to equity as vesting occurs, provided the employees and consultants continue to provide services to the Company.

Proceeds received related to the vested portion of options of $37,000 and $15,000 were reclassified to equity during the six-month periods

ended June 30, 2021 and 2022, respectively.

The vested portion of the exercises was 355,281 shares at June 30, 2022.

The Company has recorded stock-based compensation

expense, which includes expense related to restricted stock units, allocated by functional cost as follows for the three months ended

March 31, 2021 and 2022 (in thousands):

expense, which includes expense related to restricted stock units, allocated by functional cost as follows for the three and six months

ended June 30, 2021 and 2022 (in thousands):

Three Months Ended

Six Months Ended

Research and development

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The following averaged assumptions were used to

calculate the fair value of awards granted to employees, directors and non-employees for the three months ended March 31, 2021 and 2022:

Three Months Ended

calculate the fair value of awards granted to employees, directors and non-employees for the six months ended June 30, 2021 and 2022:

Six Months Ended

Expected volatility

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Three Months Ended

Six Months Ended

Weighted-average shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted

4 unchanged sentences

Three Months Ended

Six Months Ended

Options to purchase common stock

Warrants to purchase common stock

Subsequent events

On July 14, 2022, the Company entered into a license agreement with

Lee's Pharmaceutical (HK) Limited.

Under the terms of the agreement, Lee’s Pharmaceutical will be responsible for development, registration

filing and approval for Renazorb in China, Hong Kong, and certain other Asian markets.

In addition, Lee’s Pharmaceutical will have

sole responsibility for the importation of the drug product from the Company and for the costs of commercialization of Renazorb in the

licensed territories.

The Company has received an upfront payment of $ 1.0 million, expects to receive up to $ 1.0 million in milestone

payments upon product launch in China and will be eligible for tiered royalties upon achievement of prespecified regulatory and commercial

achievements.

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

What changed 10-Q

Item 1. Financial Statements