What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-16 compared with 2022-11-14 · 279 added, 351 removed, 177 unchanged (78% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Quarterly Report on Form 10-Q for the three

and nine-month periods ended September 30, 2022 contains “forward-looking statements” within the meaning of the Securities

Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These forward-looking statements contain information about our expectations, beliefs or intentions regarding our product development and

commercialization efforts, business, financial condition, results of operations, strategies or prospects, and other similar matters.

forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently

subject to uncertainties, risks and changes in circumstances that are difficult to predict.

These statements may be identified by words

such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,”

This Quarterly Report on Form 10-Q for the three-month

period ended March 31, 2023 contains “forward-looking statements” within the meaning of the Securities Act of 1933, as amended

(the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

These forward-looking

statements contain information about our expectations, beliefs or intentions regarding our product development and commercialization

efforts, business, financial condition, results of operations, strategies or prospects, and other similar matters.

These forward-looking

statements are based on management’s current expectations and assumptions about future events, which are inherently subject to

uncertainties, risks and changes in circumstances that are difficult to predict.

These statements may be identified by words such as

“expects,” “plans,” “projects,” “will,” “may,” “anticipates,”

“believes,” “should,” “intends,” “estimates,” and other words of similar meaning.

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also adversely affect our business, financial condition and results of operations may arise from time to time.

Given these risks and uncertainties,

the forward-looking statements discussed in this report may not prove to be accurate.

Accordingly, you should not place undue reliance

on these forward-looking statements, which only reflect the views of the Company’s management as of the date of this report.

undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated

events or changes to future operating results or expectations, except as required by law.

Given these risks and

uncertainties, the forward-looking statements discussed in this report may not prove to be accurate.

Accordingly, you should not place

undue reliance on these forward-looking statements, which only reflect the views of the Company’s management as of the date of

We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence

of unanticipated events or changes to future operating results or expectations, except as required by law.

The following discussion and analysis of our

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dollars, unless otherwise noted.

We are a clinical-stage biotechnology company

dedicated to developing treatments for serious and life-threatening diseases.

Currently, two of our programs are focused on kidney diseases

that we believe have the potential to offer medical benefit.

As we grow the Company and build our team, we intend to focus on identifying

medical conditions within and outside of kidney disease.

Our current development programs are focused on the development of two novel

Renazorb, for treatment of hyperphosphatemia in patients with endstage renal disease (ESRD), a latestage chronic kidney disease,

and UNI-494, for treatment of acute kidney injury (AKI).

Based on the unique mechanism of action of UNI-494 to restore mitochondrial function,

UNI-494 has potential applications in several indications in which mitochondrial dysfunction is implicated, such as chronic kidney disease

(CKD), liver diseases and ophthalmic diseases.

We are a biotechnology company dedicated to developing

treatments for kidney disease that have the potential to offer medical benefit.

Our development programs are focused on the development

of two novel therapies:

Renazorb, for treatment of hyperphosphatemia in patients with chronic kidney disease, and UNI 494, for treatment

of acute kidney injury (AKI).

Chronic kidney disease (CKD) is the gradual loss

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Our initial focus is developing drugs and getting them approved

in the US, and then to partner with global biopharmaceutical companies in the rest of the world.

According to estimates by The Centers

for Disease Control and Prevention (CDC) in 2019, 37 million (approximately 15%) adults in the United States have CKD and, of these, approximately

2 million patients with CKD stage 3-5, and around 400 thousand patients with end-stage renal disease (ESRD) have hyperphosphatemia.

the European Union (EU), around 20 million (approximately 8%) adults have CKD, more than 1 million CKD stage 3-5 patients, and approximately

180 thousand patients with ESRD have hyperphosphatemia.

The number of patients with ESRD in the US is increasing steadily and is projected

to reach between 971,000 and 1,259,000 in 2030.

AKI is a sudden episode of kidney failure or kidney

damage (within the first 90 days of injury).

in the US, and then look to partner with the other global biopharmaceutical companies in the rest of the world.

According to estimates

by The Centers for Disease Control and Prevention (CDC) in 2019, 37 million (approximately 15%) adults in the United States have CKD

and, of these, approximately 2 million patients with CKD stage 3-5, and around 400 thousand patients with end-stage renal disease (ESRD)

have hyperphosphatemia.

In the European Union (EU), around 20 million (approximately 8%) adults have CKD, more than 1 million CKD stage

3-5 patients, and approximately 180 thousand patients with ESRD have hyperphosphatemia.

The number of patients with ESRD is increasing

steadily and is projected to reach between 971,000 and 1,259,000 in 2030.

AKI is a sudden episode of kidney failure or

kidney damage (within the first 90 days of injury).

After 90 days, the patient is considered to have progressed into CKD.

AKI affects over 2

million US patients and costs the healthcare system over $9 billion per year.

AKI kills more than 300,000 patients per year in the US

and is caused by multiple etiologies.

Our business model is to license drugs and technologies,

and pursue development, regulatory approval, and commercialization of those products in global markets.

Many biotechnology companies utilize

similar strategies of in-licensing and then developing and commercializing drugs.

We believe, however, that our management team’s

broad network and extensive drug development expertise in the biopharmaceutical industry, and successful track record, gives us an advantage

in identifying and bringing these assets into the Company at an attractive price with limited upfront cost.

Since our formation we have devoted substantial

resources to developing our product candidates.

over 2 million US patients and costs the healthcare system over $9 billion per year.

AKI kills more than 300,000 patients per year in

the US and is caused by multiple etiologies.

Our business model is to license technologies

and drugs and pursue development, regulatory approval, and commercialization of those products in global markets.

Many biotechnology

companies utilize similar strategies of in-licensing and then developing and commercializing drugs.

We believe, however, that our management

team’s broad network, expertise in the biopharmaceutical industry, and successful track record gives us an advantage in identifying

and bringing these assets into the Company at an attractive price with limited upfront cost.

Since our formation we have devoted substantially

all of our resources to developing our product candidates.

We have incurred significant operating losses to date.

Our net losses were $7.3 million

and $12.7 million for the nine months ended September 30, 2021, and for the nine months ended September 30, 2022, respectively.

September 30, 2022, we had an accumulated deficit of $28.7 million.

We expect that our operating expenses will increase significantly

as we continue to advance our product candidates through pre-clinical and clinical development, seek regulatory approval, and prepare

for and, if approved, proceed to commercialization;

acquire, discover, validate, and develop additional product candidates;

obtain, maintain,

protect, and enforce our intellectual property portfolio;

and hire additional personnel to execute our plans.

In addition, we expect to

incur additional costs associated with operating as a public company.

We have funded our operations primarily from the

sale and issuance of common stock, convertible promissory notes and from a loan, including cash and deferred salary from our Chief Executive

Officer and principal stockholder.

Our ability to generate product revenue will depend

on the successful development, regulatory approval and eventual commercialization of our current product candidates and future product

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through

private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing.

Our net losses were

$3.5 million and $14.6 million for the three months ended March 31, 2022 and 2023.

As of March 31, 2023, we had an accumulated deficit

of $48.6 million.

We expect that our operating expenses will increase significantly as we advance our product candidates through

pre-clinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization;

discover, validate and develop additional product candidates;

obtain, maintain, protect and enforce our intellectual property portfolio;

and hire additional personnel.

We have funded our operations primarily from

the sale and issuance of common stock, convertible promissory notes and from a loan, including cash and deferred salary from our Chief

Executive Officer and principal stockholder.

Our ability to generate

product revenue will depend on the successful development, regulatory approval and eventual commercialization of our current product

candidates and future product candidates.

Until such time as we can generate significant revenue from product sales, if ever, we expect

to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources,

or through other sources of financing.

Adequate funding may not be available to us on acceptable terms, or at all.

If we fail to raise capital or enter into agreements to raise

capital as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our

current product candidates and future product candidates.

We plan to continue to use third-party service

providers, including contract manufacturing organizations, to carry out our pre-clinical and clinical development and to manufacture and

supply the materials to be used during the development and commercialization of our product candidates.

The Impact of the COVID-19 Pandemic and Climate

Change on Our Business

In March 2020, the World Health Organization declared

the outbreak of COVID-19 a global pandemic.

This pandemic could result in difficulty securing clinical trial site locations, CROs, and/or

trial monitors and other critical vendors and consultants supporting our trial.

These situations, or others associated with COVID-19,

could cause delays in our clinical trial plans and could increase expected costs, all of which could have a material adverse effect on

our business and financial condition.

At the current time, we are unable to quantify the potential effects of this pandemic on our future

financial statements.

Our suppliers and service providers may also experience

a disruption in their business as a result of natural or man-made disasters.

A significant natural or man-made disaster, such as an earthquake,

prolonged or repeated power outage, fire, drought or other extreme weather events and changing weather patterns, which are increasing

in frequency due to the impacts of climate change, could severely damage our facilities or the facilities of our suppliers or service

providers, which could have a material adverse effect on our business and financial condition.

At the current time, we are unable to quantify

the potential effects of climate change on our future financial statements.

If we fail to raise

capital or enter into agreements to raise capital as and when needed, we may have to significantly delay, scale back or discontinue the

development and commercialization of our current product candidates and future product candidates.

Recent Developments

On March 3, 2023, we entered into a securities

purchase agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to

which we agreed to issue and sell, in a private placement (the “Offering”), 30,190 shares of Series A-1 Convertible Preferred

Stock, par value $0.001 per share (the “Series A-1 Preferred Stock”), which offering will result in up to $130 million in

gross proceeds and initial upfront funding of $30 million.

Pursuant to the Certificate of Designation of

Preferences, Rights and Limitations of the Series A Convertible Voting Preferred Stock (the “Certificate of Designation”),

each share of Series A-1 Preferred Stock is, subject to the Stockholder Approval (as defined below), convertible into a unit (“Unit”)

consisting of (i) shares of common stock, par value $0.001 per share (the “Common Stock”) and, if applicable, shares of Series

A-2 Convertible Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred Stock”), in lieu of Common Stock,

(ii) a tranche A warrant to acquire shares of Series A-3 Convertible Preferred Stock (the “Tranche A Warrant”), (iii) a tranche

B warrant to acquire shares of Series A-4 Convertible Preferred Stock (the “Tranche B Warrant”), and (iv) a tranche C warrant

to acquire shares of Series A-5 Convertible Preferred Stock (the “Tranche C Warrant”, together with the Tranche A Warrant

and the Tranche B Warrant, the “Warrants”).

The shares of Series A-3 Convertible Preferred Stock, Series A-4 Convertible

Preferred Stock and Series A-5 Convertible Preferred Stock issuable upon exercise of the Warrants collectively are referred to herein

as the “Preferred Warrant Shares”.

The Tranche A warrants for an aggregate exercise price of approximately $25 million are

exercisable until 21 days following our announcement of receipt of FDA approval for Renazorb, the Tranche B warrants for an aggregate

exercise price of approximately $25 million are exercisable until 21 days following our announcement of receipt of Transitional Drug

Add-On Payment Adjustment (“TDAPA”) approval for Renazorb, and the Tranche C Warrant for an aggregate exercise price of approximately

$50 million are exercisable until 21 days following four quarters of commercial sales of Renazorb following receipt of TDAPA approval.

Subject to the terms and limitations contained

in the Certificate of Designation, the Series A-1 Preferred Stock issued in the Offering will not become convertible until our stockholders

approve the issuance of the Units upon conversion of the Series A-1 Preferred Stock and the issuance of all Common Stock upon conversion

of the Series A Preferred Stock (as defined below), among other items (the “Stockholder Approval”).

On the tenth (10th) Trading

Day (as defined in the Certificate of Designation) following the announcement of the Stockholder Approval, each share of Series A-1 Preferred

Stock shall automatically convert into a Unit.

Subject to the limitations set forth in the Certificate of Designation, at the option

of the holder, each share of Series A-2 Preferred Stock, Series A-3 Convertible Preferred Stock, Series A-4 Convertible Preferred Stock

or Series A-5 Convertible Preferred Stock shall be convertible into one share of Common Stock.

In addition, in connection with the Offering,

we agreed to modify our dividend policy to state that we intend to pay dividends to all stockholders, including holders of Series A Preferred

Stock on an as-if-converted-to-Common-Stock basis, on a quarterly basis in an amount of which the aggregate of all quarterly dividends

shall equal at least seventy-five percent (75%) of our annual net cash flow from operations following approval of Renazorb by the FDA,

if obtained, and the commencement of commercial sales.

The COVID-19 Pandemic and its Impacts on Our

In March 2020, the World Health Organization

declared the outbreak of COVID-19 a global pandemic.

This pandemic could result in difficulty securing clinical trial site locations,

CROs, and/or trial monitors and other critical vendors and consultants supporting our trial.

These situations, or others associated with

COVID-19, could cause delays in our clinical trial plans and could increase expected costs, all of which could have a material adverse

effect on our business and financial condition.

At the current time, we are unable to quantify the potential effects of this pandemic

on our future financial statements.

Components of Results of Operations

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expenses consist of expenses incurred in connection with the development of our product candidates.

These expenses include fees paid to

third parties to conduct certain research and development activities on our behalf, 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 our research and product development employees and allocated overheads, including information

These expenses include fees paid

to third parties to conduct certain research and development activities on our behalf, 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 our research and product development employees and allocated overheads, including information

technology costs and utilities and expenses for the issuance of shares pursuant to the anti-dilution clause in the purchase of in process

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General and administrative expenses consist principally

of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for

legal, consulting, accounting and tax services, including information technology costs and utilities, and other general operating expenses

not otherwise classified as research and development expenses.

of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees

for legal, consulting, accounting and tax services, including information technology costs and utilities, and other general operating

expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative

expenses will increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting services

costs associated with complying with the applicable stock exchange and the SEC requirements, investor relations costs and director and

officer insurance premiums associated with being a public company.

Other Income (Expenses)

Other expenses consist primarily of interest expense

related to convertible notes and a loss on conversion of convertible notes.

expenses will increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting

services costs associated with complying with the applicable stock exchange and the SEC requirements, investor relations costs and director

and officer insurance premiums associated with being a public company.

Other Expenses

Other expenses consist of the change in fair value of our warrant liability,

interest income and interest expense.

Results of Operations

Comparison of the Three Months Ended September 30,

Comparison of the Three Months Ended March 31,

2022 and 2023

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Three Months Ended

September 30,

Licensing revenues:

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Other income (expenses):

Interest income

Interest expense

Loss on debt conversion

Change in fair value of warrant liability

Total other income (expenses)

Licensing Revenues

Licensing revenues of $1.0 million were recorded

for the three months ended September 30, 2022 due to a licensing agreement entered into with Lee’s Pharmaceutical (HK) Limited in July

We received an upfront payment of $1.0 million.

Licensing revenues increased approximately $0.7 million, or 100%, from

the three months ended March 31, 2022 due to an upfront payment of approximately $0.7 million associated with a licensing agreement entered

into with Lotus International Pte Ltd.

in February 2023.

There was no comparable revenue earned in the prior period.

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Research and development expenses increased by

approximately $1.0 million, or 27%, from approximately $3.8 million for the three months ended September 30, 2021 to approximately $4.8

million for the three months ended September 30, 2022.

The increase in research and development expenses was primarily due to a $826,000

increase in drug development costs.

approximately $1.1 million, or 57%, from approximately $1.9 million for the three months ended March 31, 2022 to approximately $3.0 million

for the three months ended March 31, 2023.

The increase in research and development expenses was primarily due to a $962,000 increase

in drug development costs.

Labor costs increased $148,000 from the prior period.

Other costs increased $53,000.

Non-cash stock

compensation decreased $65,000.

General and Administrative Expenses

General and administrative expenses increased

by $763,000, or 81%, from approximately $939,000 for the three months ended September 30, 2021 to approximately $1.7 million for the three

months ended September 30, 2022 primarily due to an increase of $415,000 in consulting and professional services.

Labor costs increased

Stock compensation increased $92,000, and travel, rent, and other costs increased $105,000.

Other Income (Expenses)

Other income (expenses) decreased by $483,000,

or 99% from approximately $486,000 for the three months ended September 30, 2021 to $3,000 for the three months ended September 30, 2022.

The decrease was due primarily to the conversion to equity in July 2021 of our outstanding convertible notes, including accrued interest,

as a result of our initial public offering.

Comparison of the Nine Months Ended September 30,

2021 and 2022

The following table summarizes our results of

operations for the periods indicated (in thousands):

Nine Months Ended

September 30,

Licensing revenues:

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expenses):

Interest expense

Loss on debt conversion

Gain on extinguishment of debt

Total other income (expenses)

Licensing Revenues

Licensing revenues of $1.0 million were recorded

for the nine months ended September 30, 2022 due to a licensing agreement entered into with Lee’s Pharmaceutical (HK) Limited in July

We received an upfront payment of $1.0 million.

There was no comparable revenue earned in the prior period.

We may earn additional

licensing revenue in the future if we negotiate business development arrangements with third parties.

Research and Development Expenses

Research and development expenses increased by

approximately $3.8 million, or 82%, from approximately $4.7 million for the nine months ended September 30, 2021 to approximately $8.6

million for the nine months ended September 30, 2022.

The increase in research and development expenses was primarily due to a $2.7 million

increase in drug development costs.

Labor costs increased $1.4 million from the prior period.

Other costs increased $74,000.

Consulting and other costs increased $7,000.

stock compensation decreased $17,000.

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General and administrative expenses increased

by $3.6 million, or 238%, from approximately $1.5 million for the nine months ended September 30, 2021 to approximately $5.1 million for

the nine months ended September 30, 2022 primarily due to an increase of $684,000 in insurance expense for directors and officers.

and professional services costs increased $1.0 million, and labor costs increased $748,000 from the prior period.

Stock compensation increased

$435,000, and travel, rent, and other costs increased $666,000.

by $243,000, or 15%, from approximately $1.6 million for the three months ended March 31, 2022 to approximately $1.8 million for the three

months ended March 31, 2023 primarily due to an increase of $448,000 in consulting and professional services costs.

Insurance expense

for directors and officers decreased $166,000.

Stock compensation costs decreased $129,000 from the prior period.

Travel, rent, and other

costs increased $90,000.

Other Income (Expenses)

Other income (expenses) decreased by $1.0 million,

or 99% from approximately $1.0 million for the nine months ended September 30, 2021 to $3,000 for the nine months ended September 30,

The decrease was due primarily to the conversion to equity in July 2021 of our outstanding convertible notes, including accrued

interest, as a result of our initial public offering.

The decrease was partially offset by a gain on debt extinguishment of $19,000 during

the nine months ended September 30, 2021.

Other income (expenses) increased by $10.4 million,

or 100%, from $0 in the three months ended March 31, 2022 to $10.4 million for the three months ended March 31, 2023 due primarily to

a change in fair value of our warrant liability.

Liquidity and Capital Resources

Sources of Liquidity

Since our formation through September 30, 2022, we have funded our

operations with the sale of common stock, convertible notes, a loan from our Chief Executive Officer and principal stockholder, and during

2022, with licensing revenue of $1.0 million.

During 2020, we raised additional funds through private placements by issuing common stock

for $141,000 and by issuing $1.3 million in convertible notes to investors.

During the year ended December 31, 2021, we raised $1.1 million

through the issuance of convertible notes to investors.

Since our formation through December 31,

2020, we have funded our operations with the sale of common stock, convertible notes and from a loan from our Chief Executive Officer

and principal stockholder.

During 2021 we raised $1.1 million through the issuance of convertible notes to investors.

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

on July 13, 2021 we began trading on the Nasdaq Capital Market under the symbol “UNCY”, and on July 15, 2021 we received approximately

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

We intend 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.

on July 13, 2021 we began trading on the Nasdaq Capital Market under the symbol “UNCY”, and on July 15, 2021 we received

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

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.

Future revenue streams may consist of collaboration

or licensing revenue as well as product sales.

We have generated approximately $0.7 million in licensing revenue during the three months ended March 31, 2023.

On March 3, 2023, we entered into a

securities purchase agreement with certain healthcare-focused institutional investors that will provide up to $130.0 million in

gross proceeds through a private placement and that includes initial upfront funding of $30.0 million.

Proceeds from the offering

will be used to support our NDA submission with the FDA for approval of Renazorb for the treatment of hyperphosphatemia in the U.S.

and, if approved, for the commercial launch of Renazorb in the U.S.

Future Funding Requirements

We have incurred net losses since our inception.

For the nine months ended September 30, 2022, we had a net loss of $12.7 million, and we expect to incur substantial additional losses

For the three months ended March 31, 2023, we had a net loss of $14.6 million, and we expect to incur substantial additional losses

in future periods.

As of September 30, 2022, we had an accumulated deficit of $28.7 million.

We expect to continue incurring losses for the

foreseeable future and will be required to raise additional capital in the future to complete our clinical trials, pursue product development

initiatives and penetrate markets for the sale of our products.

We believe that we will continue to have access to capital resources through

possible equity offerings, debt financings, corporate collaborations or other means.

There can be no assurance that we will be able to

obtain additional financing on terms acceptable to us, on a timely basis or at all.

If we are unable to secure additional capital, we

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 our cash in amounts sufficient to sustain operations and meet our obligations.

As of March 31, 2023, we had an accumulated deficit of $48.6 million.

We expect to continue incurring losses in the

future and will be required to raise additional capital in the future to complete our clinical trials, pursue product development initiatives

and penetrate markets for the sale of our products.

We believe that we will continue to have access to capital resources through possible

equity offerings, debt financings, corporate collaborations or other means.

There can be no assurance that we will be able to obtain

additional financing on terms acceptable to us, on a timely basis or at all.

If we are unable to secure additional capital, we 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 our cash in amounts sufficient to sustain operations and meet our obligations.

Based on our current level of expenditures,

after receiving the net proceeds of $22.3 million on July 15, 2021 as a result of our IPO and given our cash balance of approximately

$7.0 million as of September 30, 2022, we believe that we will need funding before the end of the first quarter 2023 to continue operations,

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

our product candidates.

The accompanying financial statements have been

prepared assuming that we 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 our ability to continue as a going concern for one

year after the date that these financial statements are available to be issued.

The financial statements do not reflect any adjustments

relating to the recoverability and reclassification of assets and liabilities that might be necessary from the outcome of this uncertainty.

and after receiving the net proceeds of $28.0 million from a private placement financing, we believe that we have sufficient resources

such that there is not substantial doubt about our ability to continue operations for at least one year after the date that these financial

statements are available to be issued.

We anticipate that we will need to raise substantial

additional capital, the requirements for which will depend on many factors, including:

the scope, timing, rate of progress and costs of our drug discovery efforts, pre-clinical development activities, laboratory testing and clinical trials for our current product candidates and future product candidates;

the number and scope of clinical programs we decide to pursue;

the cost, timing and outcome of preparing for and undergoing regulatory review of our current product candidates and future product candidates;

the scope and costs of development and commercial manufacturing activities;

the cost and timing associated with commercializing our current product candidates and future product candidates, if they receive marketing approval;

the extent to which we acquire or in-license other product candidates and technologies;

the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

our ability to establish and maintain collaborations on favorable terms, if at all;

our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of our current product candidates and future product candidates and, ultimately, the sale of our products, following FDA approval;

the impact, if any, of the coronavirus pandemic on our business operations;

our ability to access capital;

our implementation of operational, financial and management systems;

the costs associated with being a public company.

scope, timing, rate of progress and costs of our drug discovery efforts, pre-clinical development activities, laboratory testing and

clinical trials for our current product candidates and future product candidates;

number and scope of clinical programs we decide to pursue;

cost, timing and outcome of preparing for and undergoing regulatory review of our current product candidates and future product candidates;

scope and costs of development and commercial manufacturing activities;

cost and timing associated with commercializing our current product candidates and future product candidates, if they receive marketing

extent to which we acquire or in-license other product candidates and technologies;

costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending

intellectual property-related claims;

ability to establish and maintain collaborations on favorable terms, if at all;

efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support

the development of our current product candidates and future product candidates and, ultimately, the sale of our products, following

FDA approval;

impact, if any, of the coronavirus pandemic on our business operations;

ability to access capital;

implementation of operational, financial and management systems;

costs associated with being a public company.

A change in the outcome of any of these or other

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Furthermore, our operating plans may change in the future,

and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating plans.

and we will continue to require additional capital to meet operational needs and capital requirements associated with such operating

If we raise additional funds by issuing equity securities, our stockholders may experience dilution.

Any future debt financing into which

we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur liens or

additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation or asset

sale transactions.

Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our stockholders.

Any future debt financing

into which we enter may impose upon us additional covenants that restrict our operations, including limitations on our ability to incur

liens or additional debt, pay dividends, repurchase our common stock, make certain investments or engage in certain merger, consolidation

or asset sale transactions.

Any debt financing or additional equity that we raise may contain terms that are not favorable to us or our

stockholders.

Adequate funding may not be available to us on

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Related Party Payable

We entered into a Service Agreement on July 1,

2017, as amended on April 6, 2020 (“Service Agreement”), with Globavir Biosciences, Inc.

(“Globavir”).

Executive Officer is also the Chief Executive Officer of Globavir.

Pursuant to the Service Agreement, we receive administrative, consulting

services, shared office space and other services in connection with our 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

Pursuant to the Service Agreement, we 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, we determined that future services under the Service Agreement were no longer required,

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

During the nine months ended September

30, 2022, after determining that although a shared office space is no longer utilized, consulting services continued to be provided, we

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.

Convertible Notes

In January through May 2021, we issued convertible

notes (the “2021 Notes”) in the aggregate principal amount of approximately $1,098,000.

The 2021 Notes bear interest at a

rate of 12% per annum, payable at maturity, and mature between January and May 2022.

The 2021 Notes shall automatically convert into shares

of our common stock upon the closing of a financing pursuant to which we receive gross proceeds of at least $500,000 (a “Qualified

Financing”) or upon a change of control.

The 2021 Notes shall convert into such numbers of shares of our common stock equal to the

conversion amount divided by the Conversion Price.

“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.

We accounted for the 2021 Notes as stock-settled

debt and were accreting the carrying amount of the 2021 Notes to the settlement amount through maturity.

In July through November 2020, we issued convertible

notes (the “2020 Notes”) in the aggregate principal amount of $1,290,000.

The 2020 Notes bear interest at a rate of 12% per

annum, payable at maturity, and mature between July and November 2021.

The 2020 Notes shall automatically convert into shares of our common

stock upon the closing of a financing pursuant to which we receive gross proceeds of at least $500,000 (a “Qualified Financing”)

or upon a change of control.

The 2020 Notes shall convert into such numbers of shares of our common stock equal to the conversion amount

divided by the Conversion Price.

“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.

We accounted for the 2020 Notes as stock-settled

debt and were accreting the carrying amount of the 2020 Notes to the settlement amount through maturity.

As of December 31, 2020, unpaid

and accrued interest of $53,000 as well as debt discount accretion expense of approximately $186,000 was included with the convertible

notes on the balance sheet.

As a result of our initial public offering on

July 13, 2021, approximately $2,387,000 of principal and $191,000 of unpaid accrued interest related to the 2021 and 2020 Notes was converted

into shares of common stock.

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

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.

We entered into a Service Agreement with Globavir

Biosciences, Inc.

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

Globavir provides administrative and

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

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 year ended December 31, 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.

Summary of Cash Flows

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and uses of cash for each of the periods presented below (in thousands):

Nine Months Ended

September 30,

Three Months Ended

Net cash (used in) provided by:

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Financing activities

Net increase (decrease) in cash

Net increase (decrease) in cash and cash equivalents

Cash Flows from Operating Activities

Net cash used in operating activities was $3.9

million for the nine months ended September 30, 2022.

million for the three months ended March 31, 2023.

Cash used in operating activities was primarily due to the use of funds for development

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compliance, and legal services.

We incurred a net loss of $12.7 million after including the effect of non-cash adjustments for stock

compensation and amortization of lease asset.

The net loss was partially offset by $1.0 million of revenues received from a licensing

agreement entered into with Lee’s Pharmaceutical (HK) Limited in July 2022.

Net cash used in operating activities was $3.0

million for the nine months ended September 30, 2021.

Cash used in operating activities was primarily due to the use of funds for director

and officer insurance premiums, development costs associated with our drug candidates, labor costs, consulting and accounting services,

and other corporate expenditures for investor relations, compliance, and legal services.

We incurred a net loss of $7.3 million after

including the effect of non-cash adjustments for stock issuance, stock compensation, and a loss on the conversion of our convertible debt.

million for the three months ended March 31, 2022.

Cash used in operating activities was primarily due to the use of funds for development

costs associated with our drug candidates, labor costs, consulting services, and other corporate expenditures for investor relations,

compliance, and legal services.

Cash Flows from Investing Activities

Net cash used in investing activities was $2,000

for the nine months ended September 30, 2022 and was due to the purchase of furniture and fixtures for our corporate office.

no comparable fixed asset purchases during the prior year.

for the three months ended March 31, 2022 and was due to the purchase of furniture and fixtures for our corporate office.

no comparable fixed asset purchases during the current three month period.

Cash Flows from Financing Activities

Net cash provided by financing activities

was $27.8 million during the three months ended March 31, 2023 due primarily to the private placement financing agreement we signed

on March 3, 2023.

There were no cash flows provided by financing

activities during the nine months ended September 30, 2022.

Net cash provided by financing activities was

$22.4 million for the nine months ended September 30, 2021 and was primarily related to proceeds received from our initial public offering,

net of issuance and deferred offering costs.

In addition, we issued convertible notes to investors for $1.1 million as well as the receipt

of $0.1 million in proceeds from the exercise of options.

Net repayments on loans from our chief executive officer offset the cash inflows

by $1.1 million.

Critical Accounting Policies, Significant Judgments

and Use of Estimates

Our financial statements have been prepared in

accordance with U.S.

activities during the three months ended March 31, 2022.

Critical Accounting Policies, Significant Judgments and Use of

Our financial statements have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The preparation of these financial statements requires

us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and

liabilities at the date of the financial statements and the reported expenses incurred during the reporting periods.

Our estimates are

based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of

which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other

Actual results may differ from these estimates under different assumptions or conditions.

We consider our critical accounting

policies and estimates to be related to research and development accruals, stock-based compensation and common stock valuations.

have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2022 from those

used for the year ended December 31, 2021.

The below policies are listed to provide a list of our policies for the most significant critical

The preparation of these financial statements requires us to make estimates

and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the

date of the financial statements and the reported expenses incurred during the reporting periods.

Our estimates are based on our historical

experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for

making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may

differ from these estimates under different assumptions or conditions.

We consider our critical accounting policies and estimates to be

related to revenue, research and development, stock-based compensation, and warrant liabilities.

The fair value of warrants contingently

issued as part of our March 2023 private placement financing represent a material addition to our critical accounting policies and estimates.

There have been no other material changes to our critical accounting policies and estimates during the three months ended March 31, 2023

from those used for the year ended December 31, 2022.

The below policies represent our critical accounting policies.

Revenue Recognition

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price to performance obligations in the contract and recognize revenues when or as we satisfy a performance obligation.

Warrant Liabilities

In conjunction with the issuance of Series A-1 Preferred Stock (see

Note 10), we established a warrant liability as of March 3, 2023, representing the fair value of warrants that may be issued, subject

to shareholder approval, upon conversion of the Series A-1 Preferred Stock.

We account for these warrants as liabilities (in accordance

with ASC 480) on the balance sheets as a result of certain redemption clauses that are not within the control of the Company.

The warrant liabilities are initially measured at fair value, resulting in an implied discount on the related preferred stock financing

arrangement (recognized as a partial offset to the carrying value of the Series A-1 Preferred Stock), and are remeasured at fair value

each reporting period.

Changes in the fair value of the warrant liabilities are recognized in earnings during each period.

liabilities are measured using Level 3 fair value inputs.

See Note 11 for a description of warrant liabilities and the related valuations.

Research and Development

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candidates or compounds.

We estimate progress achieved on material third party research and development contracts through a combination

of direct and indirect interaction with the service providers as well as internal management assessment.

Research and development expenses

include fees paid to third parties to conduct certain research and development activities on our behalf, 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 our research and product development employees and allocated overheads, including

information technology costs and utilities and expenses for issuance of shares pursuant to anti-dilution clause in the purchase of IPR&D

We expense both internal and external research and development expenses as they are incurred.

Research and development expenses include fees paid to third parties to conduct certain research and development

activities on our behalf, 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 our research

and product development employees and allocated overheads, including information technology costs and utilities and expenses for issuance

of shares pursuant to anti-dilution clause in the purchase of IPR&D technology.

We expense both internal and external research and

development expenses as they are incurred.

Stock-Based Compensation

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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 underlying common stock on the date of grant.

Common Stock Valuations

Prior to our IPO, we were required to periodically

estimate the fair value of common stock, with the assistance of an independent third-party valuation expert, when issuing stock options

and computing their estimated stock-based compensation expense.

The assumptions underlying these valuations represented management’s

best estimates, which involved inherent uncertainties and the application of significant levels of management judgment.

In order to determine the fair value, we considered,

among other things, contemporaneous transactions involving the sale of our common stock to unrelated third parties, the lack of marketability

of our common stock and the market performance of comparable publicly traded companies.

Subsequent to our IPO, we determine the fair value

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

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

interest rate.

JOBS Act Accounting Election

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billion or more;

(ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our IPO;

the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years;

or (iv) the date on which

we are deemed to be a large accelerated filer under the rules of the SEC.

(ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of our initial public

(iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years;

the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

Recent Accounting Pronouncements

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ABOUT MARKET RISK

Not applicable.

As a smaller reporting company, we are not required

to provide the information required by this item.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis