Unicycive Therapeutics, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA UNICYCIVE THERAPEUTICS, INC. INDEX TO FINANCIAL STATEMENTS Page Audited Financial Statements for the years ended December 31, 2022 and 2023: Report of Independent Registered Public Accounting Firm (PCAOB ID # 606 ) F-2 Report of Independent Registered Public Accounting Firm (PCAOB ID #199) F-3 Balance Sheets as of December 31, 2022 and 2023 F-4 Statements of Operations for the years ended December 31, 2022 and 2023 F-5 Statements of Stockholders’ (Deficit) Equity for the years ended December 31, 2022 and 2023 F-6 Statements of Cash Flows for the years ended December 31, 2022 and 2023 F-7 Notes to the Financial Statements F-8 F- 1 Report of Independent Registered Public Accounting Firm To the Audit Committee and Stockholders of Unicycive Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheet of Unicycive Therapeutics, Inc. (the “Company”) as of December 31, 2023, and the related statements of operations, stockholders’ deficit, and cash flows for the year ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provide a reasonable basis for our opinion. /s/ Grassi & Co., CPAs, P.C . We have served as the Company’s auditors since 2023. Jericho, New York March 28, 2024 F- 2 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of Unicycive Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheet of Unicycive Therapeutics, Inc. (the “Company”) as of December 31, 2022, and the related statement of operations, stockholders’ (deficit) equity, and cash flows for the year ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion. We served as the Company's auditor from 2019 to 2023. /s/ Mayer Hoffman McCann P.C. San Diego, California March 30, 2023 F- 3 Unicycive Therapeutics, Inc. Balance Sheets (in thousands, except for share and per share amounts) As of As of December 31, December 31, 2022 2023 Assets Current assets: Cash $ 455 $ 9,701 Prepaid expenses and other current assets 2,189 3,698 Total current assets 2,644 13,399 Right of use asset, net 152 766 Property, plant and equipment, net 22 26 Total assets $ 2,818 $ 14,191 Liabilities and stockholders’ deficit Current liabilities: Accounts payable $ 892 $ 839 Accrued liabilities 2,237 3,234 Warrant liability - 13,134 Operating lease liability – current 155 327 Total current liabilities 3,284 17,534 Operating lease liability – long term - 466 Total liabilities 3,284 18,000 Commitments and contingencies (Note 8) Stockholders’ deficit: Series A-2 preferred stock, $ 0.001 par value per share – zero and 43,649 shares authorized at December 31, 2022 and December 31, 2023, respectively; zero and 43,649 shares outstanding at December 31, 2022 and December 31, 2023, respectively - - Preferred stock: $ 0.001 par value per share— 10,000,000 and 9,926,161 shares authorized at December 31, 2022 and December 31, 2023, respectively; zero shares issued and outstanding at December 31, 2022 and December 31, 2023 - - Common stock, $ 0.001 par value per share – 200,000,000 shares authorized at December 31, 2022 and December 31, 2023; 15,231,655 shares issued and outstanding at December 31, 2022 and 34,756,049 issued and outstanding at December 31, 2023 15 35 Additional paid-in capital 33,516 60,697 Accumulated deficit ( 33,997 ) ( 64,541 ) Total stockholders’ deficit ( 466 ) ( 3,809 ) Total liabilities and stockholders’ deficit $ 2,818 $ 14,191 See accompanying notes to the financial statements F- 4 Unicycive Therapeutics, Inc. Statements of Operations (in thousands, except for share and per share amounts) Year Ended December 31, Year Ended December 31, 2022 2023 Licensing revenues $ 951 $ 675 Operating expenses: Research and development 12,436 12,902 General and administrative 6,567 8,547 Total operating expenses 19,003 21,449 Loss from operations ( 18,052 ) ( 20,774 ) Other income (expenses): Interest income - 615 Interest expense ( 6 ) ( 82 ) Change in fair value of warrants - ( 10,303 ) Total other income (expenses) ( 6 ) ( 9,770 ) Net loss ( 18,058 ) ( 30,544 ) Deemed dividend to Series A-1 preferred stockholders - ( 867 ) Net loss attributable to common stockholders $ ( 18,058 ) $ ( 31,411 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 1.20 ) $ ( 1.28 ) Weighted-average shares outstanding used in computing net loss per share, basic and diluted 15,057,049 24,539,309 See accompanying notes to the financial statements F- 5 Unicycive Therapeutics, Inc. Statements of Stockholders’ (Deficit) Equity (in thousands, except share amounts) Series A-1 Preferred Stock Common Stock Series A-2 Preferred Stock Additional Paid-In Accumulated Total Stockholders’ (Deficit) Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance at December 31, 2021 - $ - 14,996,534 $ 15 - $ - $ 32,408 $ ( 15,939 ) $ 16,484 ) Net loss - - - - - - - ( 18,058 ) ( 18,058 ) Issuance of common stock for cash, net of issuance costs - - 108,032 - - - 11 - 11 Issuance of common stock - - 33,500 - - - 21 - 21 Issuance of common stock for vested restricted stock units - - 26,738 - - - - - - Issuance of common stock for exercise of options - - 66,851 - - - 29 - 29 Stock-based compensation expense - - - - - - 1,047 - 1,047 Balance at December 31, 2022 - - 15,231,655 15 - - 33,516 ( 33,997 ) ( 466 ) Net loss - - - - - - - ( 30,544 ) ( 30,544 ) Issuance of Series A-1 preferred stock, net of issuance costs and allocated fair value of warrant liability 30,190 25,407 - - - - - - - Deemed dividends on Series A-1 preferred stock - 867 - - - - ( 867 ) - ( 867 ) Issuance of Series A-2 preferred stock and common stock upon conversion of Series A-1 preferred stock ( 30,190 ) ( 26,274 ) 19,516,205 20 43,649 - 26,254 - 26,274 Issuance of common stock for exercise of options - - 8,189 - - - 27 - 27 Stock-based compensation expense - - - - - - 1,767 - 1,767 Balance at December 31, 2023 - $ - 34,756,049 $ 35 43,649 $ - $ 60,697 $ ( 64,541 ) $ ( 3,809 ) See accompanying notes to the financial statements F- 6 Unicycive Therapeutics, Inc. Statements of Cash Flows (in thousands) Year Ended Year Ended December 31, December 31, 2022 2023 Cash flows from operating activities Net loss $ ( 18,058 ) $ ( 30,544 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 7 9 G&A expense for issuance of common stock 21 - Stock-based compensation expense 1,047 1,767 Amortization of operating lease right of use asset 154 275 Change in fair value of warrant liability - 10,303 Changes in assets and liabilities: Prepaid expense and other current assets 62 ( 1,117 ) Accounts payable and accrued liabilities 1,267 1,276 Operating lease liability ( 151 ) ( 252 ) Net cash used in operating activities ( 15,651 ) ( 18,283 ) Cash flows from investing activities Purchases of property, plant and equipment ( 2 ) ( 12 ) Net cash used in investing activities ( 2 ) ( 12 ) Cash flows from financing activities Payments on financed insurance policies ( 482 ) ( 496 ) Issuance of common stock for cash, net of issuance costs 11 - Proceeds from issuance of Series A-1 preferred stock and warrants - 30,190 Issuance costs related to Series A-1 preferred stock and warrants - ( 2,153 ) Net cash (used in) provided by financing activities ( 471 ) 27,541 Net (decrease) increase in cash ( 16,124 ) 9,246 Cash at the beginning of the period 16,579 455 Cash at the end of the period $ 455 $ 9,701 Supplemental cash flow information Deferred preclinical charges included in prepaid expenses and other current assets $ 420 $ 349 Deferred insurance charges included in prepaid expenses and other current assets $ 240 $ 270 Issuance of Series A-2 preferred stock and common stock upon conversion of Series A-1 preferred stock $ - $ 26,274 Accrued dividends on preferred stock $ - $ 867 Fair value of warrants issued in connection with the issuance of preferred stock $ - $ 2,831 Cash paid for interest $ 6 $ 24 Cash paid for income taxes $ - $ - See accompanying notes to the financial statements F- 7 Notes to the Financial Statements 1. Organization and Description of Business Overview Unicycive Therapeutics, Inc. (“the Company”) was incorporated in the State of Delaware on August 18, 2016 . The Company was dormant until July 2017 when it began evaluating several drug candidates for in-licensing. The Company in-licensed the drug candidate UNI 494 from Sphaera Pharma Pte. Ltd, a Singapore-based corporation, (“Sphaera”) (Note 3). UNI 494 is a pro-drug of Nicorandil that is being developed as a treatment for acute kidney injury. In September 2018, the Company purchased a second drug candidate, Renazorb RZB 012 and its trademark, RENALAN, and various patents from Spectrum Pharmaceuticals, Inc. (“Spectrum”) (Note 3). Renazorb (“Oxylanthanum Carbonate”) is being developed for the treatment of hyperphosphatemia in patients with Chronic Kidney Disease (“CKD”). The Company continues to evaluate the licensing of additional technologies and drugs, targeting orphan diseases and other renal, liver, and other metabolic diseases affecting fibrosis and inflammation. Liquidity The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with governmental regulations and the need to obtain additional financing to fund operations. The Company’s product candidates currently under development will require significant additional research and development efforts prior to commercialization. Future revenue streams may consist of collaboration or licensing revenue as well as product sales. The Company has generated approximately $ 0.7 million in licensing revenue during the year ended December 31, 2023. The Company has incurred operating losses and negative cash flows from operations since inception and expects to continue to incur negative cash flows from operations in the future. 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 financing and loans from a stockholder to fund its operations. As of December 31, 2022, and December 31, 2023, the Company had an accumulated deficit of $ 34.0 million and $ 64.5 million, respectively. In connection with its initial public offering (“IPO”), on July 13, 2021, the Company began trading on the Nasdaq Capital Market under the symbol “UNCY”, and on July 15, 2021, received approximately $ 22.3 million in net proceeds after deducting the underwriting discounts, commissions and other offering expenses. The Company has used the net proceeds from the IPO to complete pre-clinical and clinical studies, prepare regulatory filings for the FDA, and for general and corporate purposes, including hiring additional management and conducting market research and other commercial planning. On March 3, 2023, the Company entered into a securities purchase agreement with certain healthcare-focused institutional investors that may provide up to $ 130.0 million in gross proceeds through a private placement and that included initial upfront funding of $ 28.0 million in net proceeds. On March 13, 2024, the Company entered into a securities purchase agreement with certain healthcare-focused institutional investors to provide $ 50 million in gross proceeds through a private placement. Pursuant to the securities purchase agreement, the Company issued institutional purchasers $ 50 million in shares of Series B Convertible Preferred Stock. The Company expects to continue incurring losses in the future and will be required to raise additional capital in the future to complete its planned clinical trials, pursue product development initiatives and penetrate markets for the sale of its products. Management believes that the Company will continue to have access to capital resources through possible equity offerings, debt financing, corporate collaborations, or other means. 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 currently anticipated level of expenditures, and after receiving the proceeds from the private placement in March 2024, the Company believes that it has sufficient resources such that there is not substantial doubt about the ability to continue operations for at least one year after the date that these financial statements are available to be issued. F- 8 2. Summary of Significant Accounting Policies Basis of Presentation The financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the periods presented. Management believes that these estimates and assumptions are reasonable; however, actual results may differ and could have a material effect on future results of operations and financial position. Significant items subject to such estimates and assumptions include stock-based compensation and valuation of warrant liabilities. Actual results may materially differ from those estimates. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The Company applies the five-step model in ASC 606 and recognizes revenue from product sales or services rendered when control of the promised goods or services are transferred to a counterparty in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. To achieve this core principle, the Company applies the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation. Warrant Liability In conjunction with the issuance of Series A-1 Preferred Stock (see Note 10), the Company established a warrant liability as of March 3, 2023, representing the fair value of warrants that may be issued (and have since been issued – see Note 11), subject to shareholder approval, upon conversion of the Series A-1 Preferred Stock. The Company accounts for these warrants as liabilities (in accordance with ASC 480, Distinguishing Liabilities from Equity ) on the balance sheets as a result of certain redemption clauses that are not within the control of the Company. The warrant liability was initially measured at fair value and is remeasured at fair value each reporting period. Changes in the fair value of the warrant liability is recognized in earnings during each period. The warrant liability is measured using Level 3 fair value inputs. See Note 11 for a description of warrant liability and the related valuations. Segment Information The Company operates and manages its business 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 the purposes of allocating resources and evaluating financial performance. F- 9 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: ability to obtain future financing; 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 channels; certain strategic relationships; 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. The Company’s general business strategy may be adversely affected by any such economic downturns (including the current downturn related to the COVID-19 pandemic), volatile business environments and continued unstable or unpredictable economic and market conditions. Any product candidates developed by the Company will require approvals from the FDA or other international regulatory agencies prior to commercial sales. There can be no assurance that 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. 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 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. Property, Plant and Equipment Property, plant and equipment are recorded at cost less accumulated depreciation. 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. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining lease term. Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is an indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value at that time. On December 31, 2023, management determined there were no impairments of the Company’s property and equipment. Leases The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its estimated incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments. F- 10 Fair Value of Financial Instruments The Company’s financial instruments include the warrant liability, cash and cash equivalents, accounts payable and accrued liabilities. Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The fair value hierarchy contains the following levels: ● Level 1 — defined as observable inputs based on unadjusted quoted prices for identical instruments in active markets; ● Level 2 — defined as inputs other than Level 1 that are either directly or indirectly observable in the marketplace for identical or similar instruments in markets that are not active; and ● Level 3 — defined as unobservable inputs in which little or no market data exists where valuations are derived from techniques in which one or more significant inputs are unobservable. The fair value of the warrant liability associated with the Company’s March 2023 private placement transaction, further described in Note 11, was determined as of March 3, 2023, and March 31, 2023, by using a Monte Carlo simulation technique (“MCS”) to value the embedded derivatives associated with the warrants. The MCS methodology calculates the theoretical value of a warrant liability based on certain parameters, including: (i) the threshold of exercising the warrants, (ii) the price of the underlying security, (iii) the time to expiration, or expected term, (iv) the expected volatility of the underlying security, (v) the risk-free rate, (vi) the number of paths, and (vii) estimated probability assumptions surrounding shareholder approval as well as the achievement by the Company of technical milestones associated with regulatory and commercial progress. The MCS valuation model was used for the valuations performed as of the transaction inception at March 3, 2023 and at March 31, 2023 due to uncertainty in the timing of shareholder approval and the potential variability in the warrant exercise prices. On June 26, 2023, the Company held its annual shareholder meeting, and as a result, shareholder approval for the issuance of common shares upon the conversion of the Series A-1 Preferred Stock was obtained, the warrants were issued, and the exercise price for the warrants became fixed. Therefore, as of December 31, 2023, the fair value of the warrant liability was determined using a Black Scholes model with parameters including (i) the exercise price of the warrants, (ii) the price of the underlying security, (iii) the time to expiration, or expected term, (iv) the expected volatility of the underlying security, (v) the risk-free rate, and (vi) estimated probability assumptions surrounding the achievement by the Company of technical milestones associated with regulatory and commercial progress. These valuation techniques involve management’s estimates and judgment based on unobservable inputs and are classified in Level 3. The fair value estimates may not be indicative of the amounts that would be realized in a market exchange. Additionally, there may be inherent uncertainties or changes in the underlying assumptions used, which could significantly affect the current or future fair value estimates. Generally, a significant increase (decrease) in the probabilities of shareholder approval and the achievement of technical milestones would have resulted in a significantly higher (lower) fair value measurement; however, changes in other inputs such as expected term and price of the underlying common stock will have a directionally opposite impact on fair value measurement. F- 11 The following table summarizes the fair value hierarchy of financial liabilities measured at fair value as of December 31, 2023 (in thousands). Quoted Prices in Active Markets for Identical Assets Significant Other Observable Inputs Significant Unobservable Inputs (Level 1) (Level 2) (Level 3) Total Warrant liability $ - $ - $ 13,134 $ 13,134 Total liabilities at fair value $ - $ - $ 13,134 $ 13,134 The following table summarizes the changes in fair value of the warrant liability classified in Level 3. Gains and losses reported in this table include changes in fair value that are attributable to unobservable inputs (in thousands). Year Ended December 31, 2023 Fair value, January 1, 2023 $ - Issuance of warrants (March 3, 2023) 2,831 Change in fair value of warrants 10,303 Fair value, December 31, 2023 $ 13,134 The expense relating to the change in fair value of the warrant liability of $ 10.3 million for the year ended December 31, 2023, is included in other income (expense) in the statements of operations. ASC 820, Fair Value Measurement and Disclosures requires all entities to disclose the fair value of financial instruments, both assets and liabilities, for which it is practicable to estimate fair value. As of December 31, 2022 and 2023, the recorded values of cash and cash equivalents, accounts payable, and accrued liabilities approximated fair value due to the short-term nature of the instruments. Cash and cash equivalents, accounts payable, and accrued liabilities are Level 1 financial instruments. Concentration of Credit Risk Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents. All of the Company’s cash was deposited in one account at a financial institution during 2022. Beginning in 2023, the Company’s cash and cash equivalents are distributed across multiple financial institutions. Cash balances may at times exceed federally insured limits. Cash and cash equivalents could be adversely impacted, including the loss of uninsured deposits and other uninsured financial assets, if one or more of the financial institutions in which the Company holds its cash or cash equivalents fails or is subject to other adverse conditions in the financial or credit markets. No such losses have been incurred through December 31, 2023. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets represent costs incurred that benefit future periods. These costs are amortized over specific time periods based on the agreements. Research and Development Expenses Substantially all the Company’s research and development expenses consist of expenses incurred in connection with the development of the Company’s product candidates. These expenses include fees paid to third parties to conduct certain research and development activities on the Company’s 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 the Company’s research and product development employees. The Company expenses both internal and external research and development expenses as they are incurred. General and Administrative Expenses General and administrative expenses represent personnel costs for employees involved in general corporate functions, including finance, accounting, legal and human resources, among others. Additional costs included in general and administrative expenses consist of professional fees for legal (including patent costs), audit and other consulting services, stock-based compensation, and other general corporate overhead expenses as well as costs from a service agreement with a related party (See Note 7). F- 12 Patent Costs The Company expenses all costs as incurred in connection with patent licenses and applications (including direct application fees, and the legal and consulting expenses related to making such applications) and such costs are reflected in general and administrative expenses in the statements of operations. Stock-Based Compensation The Company accounts for stock-based compensation for all share-based payments made to employees and non-employees by estimating the fair value on the date of grant and recognizing compensation expense over the requisite service period on a straight-line basis. The Company recognizes forfeitures related to stock-based compensation as they occur. 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 (prior to the Company’s initial public offering) or the public market closing price of the Company’s underlying common stock on the date of grant. Income Taxes 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 relates 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 are based upon an estimate of taxes refundable or payable for each of the jurisdictions in which the Company is subject to tax. In the ordinary course of business there is inherent uncertainty in quantifying income tax positions. The Company assess income tax positions and record the largest amount of tax benefit with a greater than 50 % likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company’s policy is to recognize 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, 2022. We are monitoring legislation for any further changes to Section 174 and the impact, if any, on the financial statements in 2024. Comprehensive Loss Comprehensive loss includes all changes in equity (net assets) during a period from non-owner sources. There were no elements of other comprehensive income (loss) in the periods presented, as a result comprehensive loss is the same as net loss for each period presented. Net Loss per Share Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities. Basic and diluted net loss for common stock and for preferred stock is computed by dividing the sum of distributed earnings and undistributed earnings for each class of stock by the weighted average number of shares outstanding for each class of stock for the period. Diluted net loss per share includes potentially dilutive securities outstanding for the period. As the Company has reported a net loss for all periods presented, a diluted net loss per common share is the same as basic net loss per common share for those periods. F- 13 Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective are not expected to have a material impact on the Company’s financial position or results of operations upon adoption. The Company adopted Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (“ASC 326”), as of October 1, 2023. This new standard adds to U.S. GAAP an impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses, which is intended to result in the timelier recognition of losses. Under the CECL model, entities estimate credit losses over the entire contractual term from the date of initial recognition of the financial instrument. As the Company does not currently have any trade receivables, there was no cumulative effect adjustment, and the adoption of this standard did not have a material impact on the Company’s financial statements. Income Taxes Disclosures – In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for public entities with annual periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. 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. 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. 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. This guidance is effective for the Company beginning in the first quarter of 2022 and must be applied using either a modified or full retrospective approach. Early adoption is permitted, but no earlier than annual periods beginning after December 15, 2020. The Company adopted the standard on January 1, 2022 using a modified retrospective approach, and the adoption did not result in any adjustments on the Company’s financial statements. 3. Significant Agreements With regards to manufacturing, testing and potential commercial supply of Oxylanthanum Carbonate, the Company has entered into an agreement with Shilpa Medicare Ltd based in India. According to the terms of the agreement Unicycive will pay the vendor $ 2 million in the first calendar year when the net revenue reaches $ 10 million from sales of Oxylanthanum Carbonate following its approval by the FDA and commercial supply of the product by the vendor. Thereafter, the Company will pay $ 2 million per year for four consecutive years , after the first year’s payment, for total payments of $ 10 million, provided 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. No payments were made upon execution of the agreement but 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. If 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 in the preceding quarter. F- 14 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 Oxylanthanum Carbonate 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 Oxylanthanum Carbonate 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. In the event an NDA filing for Oxylanthanum Carbonate is accepted by the FDA, the Company will be required to pay $ 0.2 million to Altair Nanomaterials, Inc., (“Altair”) in accordance with the Spectrum Agreement. In addition, in the event FDA approval for Oxylanthanum Carbonate is received, the Company will be required to pay $ 4.5 million to Altair. The Company is also required to pay Spectrum 40 % of all 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 Spectrum 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 Spectrum Agreement. In August 2022, the Company received an upfront payment of approximately $ 1.0 million resulting from a sublicense development agreement with Lee’s Pharmaceutical (HK) Limited. The payment represents sublicense income as described in the Spectrum Agreement, and 20 % of the amount received has been accrued as an R&D expense in the accompanying statements of operations for the year ended December 31, 2022. In February 2023, the Company received an upfront payment of approximately $ 0.7 million resulting from a sublicense development agreement with Lotus International Pte Ltd. The payment represents sublicense income as described in the Spectrum Agreement, and 20 % of the amount received has been accrued as an R&D expense in the accompanying statements of operations for the year ended December 31, 2023. 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 initial budget for the study, which includes clinical pharmacology, translational sciences, and bioanalytical services, was approximately $ 2.3 million. Approximately $ 0.2 million has been recorded as accounts payable or accrued expense in the accompanying balance sheet as of December 31, 2022, and the research was completed during 2023. 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 initial budget for the study is approximately $ 3.7 million, and subsequent revisions reduced the overall budget to $ 3.3 million. Related payments totaling approximately $ 2.5 million have been paid to Quotient as of December 31, 2023. Approximately $ 2.0 million of related expense has been recorded, and approximately $ 1.0 million and $ 0.6 million has been recorded in prepaid expenses and other current assets in the accompanying balance sheets as of December 31, 2022 and 2023, respectively. 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 Oxylanthanum Carbonate. The budget for the initial study was approximately $ 1.4 million. Payments relating to the initial agreement totaling approximately $ 0.4 million have been paid to CBCC as of March 31, 2023, and approximately $ 0.4 million of related expense has been recorded. In September 2022, a statement of work revised the remaining services budget to approximately $ 0.1 million, and the research was completed as of March 31, 2023. F- 15 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 Oxylanthanum Carbonate. The budget for the services is approximately $ 1.3 million. On April 10, 2023, the Company entered into an agreement with Inotiv that provides preclinical trial and related services, for the purpose of performing research in support of UNI-494. The budget for these services is approximately $ 1.4 million. Approximately $ 2.2 million has been paid to Inotiv as of December 31, 2023, and approximately $ 0.4 million and $ 0.3 million has been recorded in prepaid expenses and other current assets in the accompanying balance sheets as of December 31, 2022 and 2023, respectively. On July 14, 2022, the Company entered into a license agreement with Lee’s Pharmaceutical (HK) Limited (see Note 4). Under the terms of the agreement, Lee’s Pharmaceutical will be responsible for development, registration filing and approval for Oxylanthanum Carbonate 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 Oxylanthanum Carbonate 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 of between 7 % and 10 % upon achievement of prespecified regulatory and commercial achievements. On July 27, 2022, the Company entered into an agreement with Celerion, a Nebraska based company that provides clinical trial and related services, for the purpose of performing research in support of Oxylanthanum Carbonate. The budget for the services is approximately $ 2.7 million, approximately $ 2.7 million has been paid to Celerion as of December 31, 2023, and the research was completed during 2023. On February 1, 2023, the Company entered into a license agreement with Lotus International Pte Ltd. (“Lotus”) (see Note 4). Under the terms of the agreement, Lotus will be responsible for development, registration filing and approval for Oxylanthanum Carbonate in the licensed territory of South Korea. In addition, Lotus will have sole responsibility for the importation of the drug product from the Company and for the costs of commercialization of Oxylanthanum Carbonate in the licensed territory. The Company has received an upfront payment of $ 0.7 million, may receive up to $ 3.7 million in future milestone payments and will be eligible for tiered royalties upon achievement of specified commercial achievements. On June 29, 2023 and October 26, 2023, the Company entered into services agreements with Shilpa Medicare Ltd related to NDA filing support for Oxylanthanum Carbonate. The agreements provide for total payments of up to $ 3.7 million, and the Company has made $ 3.0 million in payments pursuant to the agreements as of December 31, 2023. 4. Licensing Revenues On July 14, 2022, the Company entered into a license agreement (the “Lee’s Agreement”) with Lee’s Pharmaceutical (HK) Limited (“Lee’s”). Under the terms of the agreement, Lee’s Pharmaceutical will be responsible for development, registration filing and approval for Oxylanthanum Carbonate in China, Hong Kong, and certain other Asian markets. In addition, Lee’s will have sole responsibility for the importation of the drug product from the Company and for the costs of commercialization of Oxylanthanum Carbonate in the licensed territories. Both parties agreed to enter into a separate manufacturing and supply agreement whereby Unicycive will supply Lee’s with Oxylanthanum Carbonate product. The Company has received an upfront payment of approximately $ 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 of between 7 % and 10 % upon achievement of prespecified regulatory and commercial achievements. The Company has evaluated the Lee’s Agreement in accordance with ASC 808, Collaborative Arrangements (“ASC 808”) and ASC 606. The Company first assessed whether the contractual arrangement is within the scope of ASC 808 which defines a collaborative arrangement as a contractual arrangement that involves a joint operating activity. Under ASC 606, the counterparty is considered a customer only if it is acquiring goods or services that are an output of the entity’s “ordinary activities”. The Lee’s Agreement is consistent with the Company’s current ongoing operations, which is an operating model adopted by many early-stage biotech companies. The license portion of the contract as well as the future potential transactions under a manufacturing and supply agreement both represent a vendor-customer relationship. F- 16 The Company does not believe that its promise to provide goods under a future manufacturing and supply agreement represents a material right to Lee’s, and therefore the promise does not represent a current performance obligation. The Company has concluded the agreement contains one performance obligation – the IP license. ASC 606 indicates that constrained variable consideration should be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration consisting of milestone payments and sales-based royalties may be received based on the completion of certain clinical, regulatory, and commercial activities. The Company has concluded that the future milestone payments should be excluded from the transaction price due to the uncertainty of achievement as of December 31, 2022 and December 31, 2023. The Company will reassess this conclusion at each reporting date until the uncertainties are resolved. For the sales-based royalty payments, guidance requires an entity to recognize revenue for a sales-based royalty promised in exchange for a license of intellectual property only when the later of 1) the subsequent sale or usage occurs, or 2) the performance obligation to which some or all the sales-based or usage-based royalty has been allocated has been satisfied or partially satisfied. The Company has concluded that the future sales-based royalties should be excluded from the transaction price as of December 31, 2022 and December 31, 2023. The Company will reassess this conclusion at each reporting date. The Company has concluded that at contract inception the total transaction price is the $ 1.0 million upfront fee. The Company has concluded that the license of the Oxylanthanum Carbonate IP is functional IP as it contains all the necessary information for Lee’s to develop for commercialization in the Territory. Unicycive’s ongoing activities do not significantly affect the standalone functionality of the IP. In addition, the functionality of the IP is not expected to substantially change during the license period based on Unicycive’s activities. The revenue should therefore be recognized at a point in time. This intellectual property was transferred to Lee’s in July 2022, and the Company has recognized $ 1.0 million in the accompanying statements of operations as licensing revenue for the year ended December 31, 2022. On February 1, 2023, the Company entered into a license agreement (“Lotus Agreement”) with Lotus International Pte Ltd. (“Lotus”). Under the terms of the agreement, Lotus will be responsible for development, registration filing and approval for Oxylanthanum Carbonate in the licensed territory of South Korea. In addition, Lotus will have sole responsibility for the importation of the drug product from the Company and for the costs of commercialization of Oxylanthanum Carbonate in the licensed territory. The Company has agreed to complete development of the drug product, at its own expense, as required for obtaining regulatory approval in the U.S. Both parties agreed to enter into a separate manufacturing and supply agreement whereby Unicycive will supply Lotus with Oxylanthanum Carbonate product. The Company has received an upfront payment of $ 0.7 million, may receive up to $ 3.7 million in future milestone payments and will be eligible for tiered royalties upon achievement of specified commercial achievements. The Company has evaluated the Lotus Agreement in accordance with ASC 808 and ASC 606. The Company first assessed whether the contractual arrangement is within the scope of ASC 808 which defines a collaborative arrangement as a contractual arrangement that involves a joint operating activity. Under ASC 606, the counterparty is considered a customer only if it is acquiring goods or services that are an output of the entity’s “ordinary activities”. The Lotus Agreement is consistent with the Company’s current ongoing operations, which is an operating model adopted by many early-stage biotech companies. The license portion of the contract as well as the future potential transactions under a manufacturing and supply agreement both represent a vendor-customer relationship. The Company does not believe that its promise to provide goods under a future manufacturing and supply agreement represents a material right to Lotus, and therefore the promise does not represent a current performance obligation. The Company evaluated the development services and concluded that although not material in cost, they are highly interrelated with the license grant. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct. The combination of the license grant and development services is distinct as Lotus plans to use the product of this bundled unit for developing its regulatory applications. The Company concluded that the Lotus agreement contains one performance obligation, the bundle of the license grant and development services. F- 17 ASC 606 indicates that constrained variable consideration should be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable considerations consisting of milestone payments and sales-based royalties may be received based on the completion of certain clinical, regulatory, and commercial activities. The Company has concluded that the future milestone payments should be excluded from the transaction price due to the uncertainty of achievement as of December 31, 2023. The Company will reassess this conclusion at each reporting date until the uncertainties are resolved. For the sales-based royalty payments, guidance requires an entity to recognize revenue for a sales-based royalty promised in exchange for a license of intellectual property only when the later of 1) the subsequent sale or usage occurs, or 2) the performance obligation to which some or all the sales-based or usage-based royalty has been allocated has been satisfied or partially satisfied. The Company has concluded that the future sales-based royalties should be excluded from the transaction price as of December 31, 2023. The Company will reassess this conclusion at each reporting date. The Company has concluded that at contract inception the total transaction price is $ 675,000 amount of the upfront payment. ASC 606 generally requires an entity to allocate the transaction price to the performance obligations in proportion to their standalone selling prices (i.e., on a relative standalone selling price basis). The Company identified the bundle of the license grant and development services as the single performance obligation in the agreement. The $ 675,000 initial transaction price will therefore be entirely allocated to this obligation. The Company has concluded that the license of the Oxylanthanum Carbonate IP is functional IP. However, since it is not distinct, revenue must be recognized based on the combination of the functional IP and the related development services. Lotus will not simultaneously receive and consume the benefits of the Oxylanthanum Carbonate IP or development services. Since the performance of the development services creates an asset that will also be used by the Company and can be licensed to other customers outside of the Territory, the Company is considered to control the asset as it is created, and it does create an asset with an alternative use. Therefore, the Company concluded that control is not deemed to be transferred over time and is instead transferred at a point in time. The intellectual property was transferred to Lotus in February 2023, and the development services were determined to be immaterial to the contract. The Company has recognized $ 0.7 million in the accompanying statements of operations as licensing revenue for the year ended December 31, 2023. 5. Balance Sheet Components Prepaid expenses and other current assets as of December 31, 2022 and 2023 consisted of the following (in thousands): As of As of December 31, December 31, 2022 2023 Prepaid directors’ and officers’ liability insurance premiums $ 476 $ 270 Prepaid preclinical services 1,554 3,103 Other 159 325 Total $ 2,189 $ 3,698 Property, plant and equipment as of December 31, 2022 and 2023 consisted of the following (in thousands): As of As of December 31, December 31, 2022 2023 Leasehold improvements $ 15 $ 21 Furniture and fixtures 14 21 Subtotal 29 42 Less accumulated depreciation ( 7 ) ( 16 ) Net $ 22 $ 26 F- 18 Accounts payable as of December 31, 2022 and 2023 consisted of the following (in thousands): As of As of December 31, December 31, 2022 2023 Trade accounts payable $ 846 $ 821 Credit card liability 46 18 Total $ 892 $ 839 Accrued liabilities as of December 31, 2022 and 2023 consisted of the following (in thousands): As of As of December 31, December 31, 2022 2023 Accrued labor costs $ 1,487 $ 1,917 Accrued drug development costs 228 1,034 Other 522 283 Total $ 2,237 $ 3,234 6. Operating Lease The Company leases office space under an operating lease. In December 2021, the Company entered into a lease agreement for 2,367 square feet of office space commencing December 1, 2021. The initial lease term was for two years , and there was an option to extend the lease for an additional year. On March 3, 2023, the Company expanded its leased space through a lease amendment by an additional 2,456 square feet commencing March 15, 2023. The term of the amended lease is for three years with an option to extend the lease for three additional years . The lease amendment represents a modification of the original lease, and the Company evaluated the new agreement under ASC 842, Leases . The Company classified the lease as an operating lease and, on March 15, 2023, determined that the present value of the lease was approximately $ 1.0 million using an estimated incremental borrowing rate of 10 %. During the years ended December 31, 2022 and 2023, the Company reflected amortization of right-of-use asset of approximately $ 154,000 and $ 275,000 , respectively, resulting in a right of use asset balance of approximately $ 0.8 million at December 31, 2023. During the year ended December 31, 2023, the Company made cash payments on the lease of approximately $ 331,000 towards the lease liabilities. As of December 31, 2023, the total lease liability was $ 0.8 million. Rent expense for the lease for the years ended December 31, 2022 and 2023 was approximately $ 173,000 and $ 354,000 , respectively. Maturities of the Company’s lease liabilities are as follows (in thousands): Operating Lease Year ending December 31, 2024 $ 391 Year ending December 31, 2025 424 Year ending December 31, 2026 72 Total lease payments 887 Less imputed interest rate / present value discount ( 94 ) Present value of lease liability 793 Less current portion ( 327 ) Long term portion $ 466 F- 19 7. Related Party Transactions Loan from Chief Executive Officer and Stockholder The Company received advances from a stockholder of $ 210,000 during February 2023. The Company repaid amounts owed to the stockholder of $ 210,000 plus accrued interest during March 2023. Common Stock Purchase Agreement and Service Agreement with Globavir 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”). Globavir provided 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 renewed 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 . The Company has not entered into any additional agreements with Globavir during the year ended December 31, 2023. 8. Commitments and Contingencies Contingencies The Company is subject to claims and legal proceedings 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. The Company currently has no pending claims or legal proceedings. In December 2022, the Company signed an advisory services agreement with Maxim Group LLC (“Maxim”) pursuant to which the Company will pay Maxim $ 100,000 upon the closing of a private placement of the Company’s equity or equity-linked securities. Maxim provided advisory services with respect to a private placement securities purchase agreement with certain healthcare-focused institutional investors, which closed in March of 2023. The Company paid the $ 100,000 advisory fee in March 2023. Indemnifications In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications, including for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The terms of these indemnification agreements are generally perpetual any time after the execution of the agreements. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but that have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations. F- 20 The Company believes that the likelihood of conditions arising that would trigger these indemnities is remote and, historically, the Company had not made any significant payment under such indemnification provisions. Accordingly, the Company has not recorded any liabilities relating to these agreements. However, the Company may record charges in the future as a result of these indemnification obligations. Additionally, the Company has agreed to indemnify its directors and officers for certain events or occurrences while the director or officer is, or was serving, at the Company’s request in such a capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s service. Employee Benefit Plan In December 2021, the Company implemented a 401(k) Plan which covers all eligible employees of the Company (the “401(k) Plan”). Employer matching contributions are immediately 100 % vested. The Company’s 401(k) Plan provides that the Company matches each participant’s contribution at 100 % up to 4 % of the employee’s eligible compensation. Company contributions to the 401(k) Plan totaled approximately $ 60,000 and $ 107,000 for the years ended December 31, 2022 and 2023, respectively. 9. Stockholders’ (Deficit) Equity Authorized Common Stock The Company is authorized to issue up to 200,000,000 shares of common stock at par value of $ 0.001 per share. Issuance of Common Stock and Warrants from Initial Public Offering During July 2021, as a result of its initial public offering, the Company issued 5,000,000 shares of common stock and 4,000,000 warrants to investors in exchange for cash at $ 5.00 per unit, consisting of $ 4.99 per share of common stock and $ .0125 per four fifths of a warrant. The warrants have a 5 -year term and an exercise price of $ 6.00 per warrant. The underwriters exercised their option to purchase an additional 600,000 warrants, and the Company received $ 7,500 in proceeds. As a result of the initial public offering, the Company’s outstanding convertible notes and unpaid accrued interest were converted into 736,773 shares of common stock. Additionally, convertible noteholders were granted a total of 184,193 common stock warrants with a 5 -year term and with an exercise price of $ 6.00 per warrant. The warrants from the initial public offering are equity classified. The following table summarizes activity for the Company’s IPO warrants for the year ended December 31, 2023: Weighted- Number of Average Shares Weighted- Remaining Aggregate Underlying Average Contractual Intrinsic Outstanding Exercise Term Value Warrants Price (in Years) (in thousands) Outstanding, December 31, 2022 4,784,193 6.00 4.54 - Warrants granted - - - - Warrants exercised - - - - Outstanding, December 31, 2023 4,784,193 6.00 2.54 - Issuance of Common Stock Upon Conversion of Series A-1 Preferred Stock On June 26, 2023, the Company held its annual shareholder meeting and, as a result, shareholder approval for the issuance of common shares upon the conversion of the Series A-1 Preferred Stock was obtained (see Notes 10 and 11). On July 11, 2023, pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Voting Preferred Stock (the “Certificate of Designation”), the Company issued a total of 19,516,205 shares of common stock and 43,649 Series A-2 Preferred Stock in settlement of the auto-conversion of the Series A-1 Preferred Stock. F- 21 Voting Rights of Common Stock Each holder of shares of common stock shall be entitled to one vote for each share thereof held. 10. Issuance of Series A Preferred Stock As of December 31, 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 or outstanding. On March 3, 2023, the Company issued and sold, in a private placement, 30,190 shares of Series A-1 Preferred Stock for an aggregate net proceeds of $ 28.0 million (the “Preferred Stock Offering”), net of placement agent fees and offering expenses of $ 2.2 million. The Company intends to use the net proceeds from the Preferred Stock Offering to support the Company’s New Drug Application (NDA) submission for approval of Oxylanthanum Carbonate for the treatment of hyperphosphatemia and, if approved, for the commercial launch of Oxylanthanum Carbonate in the U.S. Pursuant to the Certificate of Designation, as of March 3, 2023, each share of Series A-1 Preferred Stock was, subject to approval of the Company’s stockholders, convertible into a unit (“Unit”) consisting of: (i) shares of common stock of the Company and, if applicable, shares of Series A-2 Preferred Stock, in lieu of common stock, (ii) a tranche A warrant to acquire approximately 46,675,940 shares (excluding deemed dividends) of Series A-3 Preferred Stock (the “Tranche A Warrant”), (iii) a tranche B warrant to acquire approximately 42,432,672 shares (excluding deemed dividends) of Series A-4 Preferred Stock (the “Tranche B Warrant”), and (iv) a tranche C warrant to acquire approximately 67,892,276 shares (excluding deemed dividends) of Series A-5 Preferred Stock (the “Tranche C Warrant”, together with the Tranche A Warrant and the Tranche B Warrant, the “Warrants”). The Tranche A Warrant, for an aggregate exercise price of approximately $25 million, is exercisable until 21 days following the Company’s announcement of receipt of FDA approval for Oxylanthanum Carbonate, the Tranche B Warrant, for an aggregate exercise price of approximately $25 million, is exercisable until 21 days following the Company’s announcement of receipt of Transitional Drug Add-On Payment Adjustment (“TDAPA”) approval for Oxylanthanum Carbonate, and the Tranche C Warrant for an aggregate exercise price of approximately $50 million is exercisable until 21 days following four quarters of commercial sales of Oxylanthanum Carbonate following receipt of TDAPA approval. The Company has designated 30,190 shares of Series A-1 Preferred Stock, 1,800,000 shares of Series A-2 Preferred Stock, 1,800,000 shares of Series A-3 Preferred Stock, 1,800,000 shares of Series A-4 Preferred Stock, and 3,600,000 shares of Series A-5 Preferred Stock, together the “Series A Preferred Stock”. The Series A Preferred Stock has a par value of $ 0.001 per share. The Certificate of Designation states that, to the extent that the conversion of the Series A-1 preferred stock as well as the exercise of the Warrants into Series A-2, Series A-3, Series A-4, and Series A-5 preferred stock results in a beneficial ownership interest in excess of the maximum percentage of common stock upon conversion, the holders will receive the as converted equivalent for the remaining shares in preferred stock. The Company determined that the holders could detach the Warrants from the Series A-1 Preferred Stock, because the stock will automatically convert into shares of common stock, and the holders will be able to sell those shares while retaining the Warrants. Accordingly, the Warrants are considered freestanding from the Series A-1 Preferred Stock. The Company noted that at contract inception, the Warrants were contingently issuable upon the occurrence of a specified event (shareholder approval). In connection with the Series A-1 Preferred Stock issuance, the Company recognized liabilities for the associated Warrants, which had an aggregate fair value of $ 2.8 million at the time of issuance. Offering costs of $ 0.2 million were allocated to the Warrants and expensed during March 2023. The fair value of the Warrants was accounted for as a reduction to the net proceeds of the Preferred Stock Offering, which resulted in an initial carrying value of $ 25.4 million for the Series A-1 Preferred Stock (net of $ 2.0 million of placement agent fees and offering costs allocated to the Series A-1 Preferred Stock). Refer to Note 11 for disclosures related to the Warrants. On June 26, 2023, the Company held its annual shareholder meeting and, as a result, shareholder approval for the conversion of the Series A-1 Preferred Stock was obtained. On July 11, 2023, pursuant to the Certificate of Designation, the Company issued 19,516,205 shares of common stock (see Note 9) and 43,649 shares of Series A-2 Preferred Stock in partial settlement of the auto-conversion of the Series A-1 preferred shares. As of December 31, 2023, there were zero shares of Series A-1 preferred stock issued and outstanding and there were 43,649 shares of Series A-2 Preferred Stock issued and outstanding. F- 22 The Series A-1 Preferred Stock have the following rights: Dividends: Prior to the receiving stockholder approval, dividends will accrue, on all issued and outstanding shares of Series A-1 Preferred Stock, prior to and in preference to all other shares of capital stock of the Company, at an annual rate of eight percent ( 8 %) compounded annually on the original per share price (plus any such accreted compounded amounts); provided that such annual dividend rate shall increase to fourteen percent ( 14 %) if stockholder approval is not obtained at the first meeting of stockholders following the date of the Preferred Stock offering. If such dividends are not declared and paid in cash, the dividend amounts will be added to the aggregate liquidation preference then outstanding of the Series A-1 Preferred Stock. As of December 31, 2023, the Company recorded $ 0.9 million, or $ 28.71 per share, of deemed dividends on the Series A-1 Preferred Stock. Voting: Holders of the Series A-1 Preferred Stock are entitled to vote together with the common stock on an as-if-converted-to-common-stock basis as determined by dividing the liquidation preference with respect to such shares of Series A Preferred Stock by the conversion price. Holders of common stock are entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Accordingly, holders of Series A Preferred Stock will be entitled to one vote for each whole share of Common Stock into which their Series A Preferred Stock is then-convertible on all matters submitted to a vote of stockholders. Board of Directors Designation Rights: The holders of Series A-1 Preferred Stock have the right to appoint one member to the Board of Directors. In March 2023, Dr. Gaurav Aggarwal was appointed to the Company’s Board of Directors. On the tenth trading day following the announcement of the stockholder approval, each share of Series A-1 Preferred Stock shall automatically convert into a unit consisting of: (1) the number of shares of common stock equal to the quotient of (A) the liquidation preference with respect to such share of Series A-1 Preferred Stock, divided by (B) the conversion price, provided that, to the extent the share conversion would cause such Holder’s beneficial ownership to exceed 9.99%, such holder shall receive shares of Series A-2 Preferred Stock in lieu of common stock, on a one-for-one basis, with respect to the number of shares of common stock that exceed 9.99% ownership, (2) a Tranche A Warrant, (3) a Tranche B Warrant, and (4) a Tranche C Warrant. Liquidation Preference: The Series A-1 Preferred Stock shall have a liquidation preference of one-times the original per share price of $ 1,000 per share, plus any accrued but unpaid dividends thereon, whether or not declared, subject to certain customary anti-dilution adjustments. The Series A-2, A-3, A-4, and A-5 Preferred Stock have the following rights: Dividends: While shares of Series A Preferred Stock are issued and outstanding, holders of Series A Preferred Stock shall be entitled to receive, and the Corporation shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) and in the same form as dividends (other than dividends in the form of Common Stock) actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. Voting: Holders of the Series A-2, A-3, A-4, and A-5 Preferred Stock are entitled to vote together with the common stock on an as-if-converted-to-common-stock basis as determined by dividing the liquidation preference with respect to such shares of Preferred Stock by the conversion price. Holders of common stock are entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Accordingly, holders of Series A Preferred Stock will be entitled to one vote for each whole share of Common Stock into which their Series A Preferred Stock is then-convertible on all matters submitted to a vote of stockholders. At the option of the holder thereof, each share of Series A-2 Preferred Stock, Series A-3 Preferred Stock, Series A-4 Preferred Stock, or Series A-5 Preferred Stock shall be convertible into one share of common stock. F- 23 11. Warrant Liability In connection with the Preferred Stock Offering (see Note 10), the Company issued the Warrants. After the Warrants were legally issued as a result of the automatic conversion of the Series A-1 Preferred Stock upon shareholder approval, they became immediately exercisable at the option of the holder. The Company determined that the Warrants, while still contingently issuable, qualified as derivative instruments pursuant to ASC 815-40, Contracts in an Entity’s Own Equity and that the Warrants were considered issued for accounting purposes concurrently with the Series A-1 Preferred Stock. On June 26, 2023, the Company held its annual shareholder meeting, and as a result, shareholder approval for the conversion of the Series A-1 Preferred Stock was obtained. On July 11, 2023, pursuant to the Certificate of Designation, the Company issued, in addition to common stock and Series A-2 Preferred Stock, (i) a Tranche A Warrant to acquire 47,852,430 shares of Series A-3 Preferred Stock, (ii) a Tranche B Warrant to acquire 43,502,206 shares of Series A-4 Preferred Stock, and (iii) a Tranche C Warrant to acquire 69,603,531 shares of Series A-5 Preferred Stock. The Warrants are recognized as liabilities in the balance sheets and were initially recognized at fair value at the time of issuance. The Warrants are also subject to remeasurement at each balance sheet date after issuance. Any change in fair value is recognized as a component of other income (expense) in the statements of operations in the period of change. The valuation of the Warrants contains unobservable inputs that reflect the Company’s own assumptions for which there is little market data. Accordingly, the Warrants are measured at fair value on a recurring basis using unobservable inputs and are classified as Level 3 inputs. The significant unobservable inputs used in the fair value measurement of the Company’s Warrants include, but are not limited to, probability of obtaining certain shareholder approvals, probability of reaching certain technical milestones related to the development of Oxylanthanum Carbonate, and the estimated term of the Warrants. Significant increases (decreases) in any of those inputs in isolation would result in a significantly higher (lower) fair value measurement. Generally, a change in the assumption used for the probability of obtaining certain shareholder approvals is not correlated to a change in the probability of reaching certain technical milestones. However, a change to the assumption used for the probability of obtaining certain shareholder approvals or a change in the probability of reaching certain technical milestones would have been accompanied by a directionally opposite change and a directionally similar change, respectively, in the assumption used for the estimated term. The fair value of the contingently issuable Warrants associated with the Company’s March 2023 private placement transaction was determined as of March 3, 2023, and March 31, 2023, by using a Monte Carlo simulation technique (“MCS”) to value the embedded derivatives associated with the Warrants. The MCS methodology calculates the theoretical value of a warrant based on certain parameters, including: (i) the threshold of exercising the warrant, (ii) the price of the underlying security, (iii) the time to expiration, or expected term, (iv) the expected volatility of the underlying security, (v) the risk-free rate, (vi) the number of paths, (vii) estimated probability assumptions surrounding shareholder approval as well as the achievement by the Company of technical milestones associated with regulatory and commercial progress, and (viii) an estimated discount for lack of marketability. The MCS valuation model was used for the valuation performed as of the transaction inception on March 3, 2023, and on March 31, 2023, due to uncertainty in the timing of shareholder approval and the potential variability in the Warrant exercise price. On June 26, 2023, the Company held its annual shareholder meeting, and as a result, shareholder approval for the issuance of common shares upon the conversion of the Series A-1 Preferred Stock was obtained and the exercise price for the Warrants became fixed. Therefore, as of December 31, 2023, the fair value of the Warrants was determined using a Black Scholes model using parameters including (i) the exercise price of the warrant, (ii) the price of the underlying security, (iii) the time to expiration, or expected term, (iv) the expected volatility of the underlying security, (v) the risk-free rate, and (vi) estimated probability assumptions surrounding the achievement by the Company of technical milestones associated with regulatory and commercial progress. F- 24 These valuation techniques involve management’s estimates and judgment based on unobservable inputs and are classified in Level 3. The fair value estimates may not be indicative of the amounts that would be realized in a market exchange. Additionally, there may be inherent uncertainties or changes in the underlying assumptions used, which could significantly affect the current or future fair value estimates. Generally, a significant increase (decrease) in the probabilities of shareholder approval and the achievement of technical milestones would have resulted in a significantly higher (lower) fair value measurement; however, changes in other inputs such as expected term and price of the underlying common stock will have a directionally opposite impact on fair value measurement. The Company uses a third-party valuation expert to assist in the determination of the fair value of the Warrants. The tables below summarize the valuation inputs into the Black Scholes model for the liability associated with the three tranches of Warrants at December 31, 2023. Tranche A Warrant At December 31, 2023 Fair value of underlying stock $ 0.87 Exercise price $ 0.54 Volatility 96.5 % – 139.2 % Risk free rate 4.6 % – 5.3 % Dividend yield 0 % Term (in years) 0.5 – 1.5 Discount for lack of marketability 12.5 % Probability for FDA approval 29.3 % Tranche B Warrant At December 31, 2023 Fair value of underlying stock $ 0.87 Exercise price $ 0.59 Volatility 114.6 % – 139.2 % Risk free rate 4.4 % – 4.8 % Dividend yield 0 % Term (in years) 1.0 – 2.0 Discount for lack of marketability 12.5 % Probability for FDA approval 12.0 % Tranche C Warrant At December 31, 2023 Fair value of underlying stock $ 0.87 Exercise price $ 0.74 Volatility 107.8 % – 114.6 % Risk free rate 4.0 % – 4.4 % Dividend yield 0 % Term (in years) 2.0 – 3.0 Discount for lack of marketability 12.5 % Probability for FDA approval 4.3 % – 12.5 % As of the issuance date (March 3, 2023), the Company estimated the fair value of the Warrants to be $ 2.8 million. As of December 31, 2023, the Company estimated the fair value of the Warrants to be $ 13.1 million. F- 25 The following table summarizes activity for the Company’s Warrants for the year ended December 31, 2023 (includes the conversion effect in the liquidation preference of accrued dividends): Weighted- Number of Average Shares Weighted- Remaining Aggregate Underlying Average Contractual Intrinsic Outstanding Exercise Term Value Warrants Price (in Years) (in thousands) Outstanding, December 31, 2022 - - - - Warrants issued 160,958,167 0.64 2.10 229,069 Warrants exercised - - - - Outstanding, December 31, 2023 160,958,167 0.64 2.34 36,864 12. Stock-based Compensation On July 15, 2021, in connection with the completion of the Company’s IPO, the Company adopted a new comprehensive equity incentive plan, the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). Following the effective date of the 2021 Plan, no further awards may be issued under the 2018 Plan or the 2019 Plan (collectively, the “Prior Plans”). However, all awards under the Prior Plans that are outstanding as of the effective date of the 2021 Plan will continue to be governed by the terms, conditions and procedures set forth in the Prior Plans and any applicable award agreements. A total of 1,302,326 shares of common stock were reserved for issuance pursuant to the 2021 Plan prior to our annual meeting on June 26, 2023. Shareholders approved an increase to the number of shares reserved on June 26, 2023, and accordingly, at December 31, 2023, approximately 12,775,996 shares are reserved for issuance. The 2021 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards. As of December 31, 2022, approximately 389,676 shares of common stock were available under the 2021 Plan. As of December 31, 2023, there are approximately 2,815,503 shares of common stock available under the 2021 Plan. The following table summarizes activity for stock options under all plans for the year ended December 31, 2023: Weighted- Number of Average Shares Weighted- Remaining Aggregate Underlying Average Contractual Intrinsic Outstanding Exercise Term Value Options Price (in Years) (in thousands) Outstanding, December 31, 2022 1,342,670 $ 2.75 8.47 $ 52 Options granted 8,989,487 $ 0.75 9.61 $ 1,072 Options forfeited ( 21,882 ) $ 4.39 - $ - Options exercised ( 8,189 ) $ 3.27 - $ - Outstanding, December 31, 2023 10,302,086 $ 1.00 9.34 $ 1,196 Options vested and exercisable as of December 31, 2023 915,187 $ 3.02 7.11 $ 96 The grant date fair value of options granted during the year ended December 31, 2023 was $ 5.7 million. As of December 31, 2023, the unrecognized compensation cost related to outstanding stock options was $ 5 million, which is expected to be recognized as expense over approximately 2.9 years. During August 2023, the Company granted a consultant 10,000 restricted stock units with a grant date fair value of $ 7,500 , resulting in a fair value per share of $ 0.75 . Subject to the consultant’s continued service, the restricted stock units shall vest upon the two-year anniversary of the date of grant. As of December 31, 2023, the unrecognized compensation cost related to the grant was approximately $ 4,000 , which is expected to be recognized as expense over approximately 15 months. During the year ended December 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 December 31, 2023, 1,357 of the options remained unvested. Proceeds received related to the unvested options of approximately $ 4,000 at December 31, 2023 were included in accrued liabilities on the accompanying balance sheet 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 $ 27,000 were reclassified to equity during the year ended December 31, 2023. The vested portion of the exercises was 382,364 shares at December 31, 2023. F- 26 During May 2022, the Company granted a consultant 10,000 restricted stock units with a grant date fair value of $ 7,200 , resulting in a fair value per share of $ 0.72 . Subject to the consultant’s continued service, the restricted stock units shall vest upon the two-year anniversary of the date of grant. As of December 31, 2023, the unrecognized compensation cost related to the grant was approximately $ 1,000 , which is expected to be recognized as expense over approximately 5 months. During July 2021, the Company granted a director 26,738 restricted stock units with a grant date fair value of $ 100,000 , resulting in a fair value per share of $ 3.74 . The restricted stock units vested in July 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 years ended December 31, 2022 and 2023 (in thousands): Year Ended December 31, 2022 Year Ended December 31, 2023 Research and development $ 664 $ 847 General and administrative 383 920 Total stock-based compensation $ 1,047 $ 1,767 Fair Value of Stock Options The assumptions are based on the following for each of the periods presented: Expected Term - The expected term is calculated using the simplified method which is used when there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method. Common Stock Fair Value - The fair value of the common stock underlying the Company’s stock options prior to the initial public offering was estimated at each grant date and was determined on a periodic basis and based either on transactions with third parties in which common stock was sold for cash or with the assistance of an independent third-party valuation expert. Subsequent to our initial public offering, the fair value underlying the Company’s common stock is determined based on the public market closing price on each date of grant. The assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application of significant levels of management judgment. Volatility - The expected volatility being used is derived from the historical stock volatilities of a representative industry peer group of comparable publicly listed companies over a period approximately equal to the expected term of the options. F- 27 Risk-free Interest Rate - The risk-free interest rate is based on median U.S. Treasury zero coupon issues with remaining terms similar to the expected term on the options. Expected Dividend – Through December 31, 2023, the Company has never declared nor paid any cash dividends. The Company shall modify its dividend policy to state that the Company intends 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 its annual net cash flow from operations following the approval of Oxylanthanum Carbonate by the FDA if obtained, and the commencement of commercial sales. The following averaged assumptions were used to calculate the fair value of awards granted to employees, directors and non-employees for the years ended December 31, 2022 and 2023: Year Ended December 31, 2022 Year Ended December 31, 2023 Expected volatility 101.00 – 105.00 % 104.00 – 108.00 % Risk-free interest rate 2.90 – 3.96 % 4.35 – 4.37 % Dividend yield - % - % Expected term 6.25 years 5.50 - 6.25 years 13. Income Taxes A reconciliation of the provision for income taxes to the amount computed by applying the statutory income tax rate of 21 % to the net loss is summarized for the years ended December 31, 2022 and 2023 is as follows: Year Ended Year Ended December 31, 2022 December 31, 2023 Income taxes (benefit) at statutory rates 21.00 % 21.00 % State income tax (benefit), net of federal benefit 2.39 % 0.48 % Change in valuation allowance ( 24.04 )% ( 12.24 )% Fair value adjustment on warrants - ( 7.08 )% Other ( 0.65 )% ( 2.16 )% Effective income tax rate - % - % For the years ended December 31, 2022 and 2023, the Company did not record a deferred income tax expense or benefit. Income tax expense has been nominal for the years ended December 31, 2022 and 2023. Deferred tax assets and liabilities are recognized for the expected tax consequences attributable to the differences between financial reporting and the tax basis of existing assets and liabilities and operating loss carryforward, and they are measured using enacted tax rates expected to be in effect when differences are expected to reverse. A valuation allowance is recorded for loss carryforwards and other deferred tax assets where it is more likely than not that such loss carryforward and deferred tax asset will not be realized. Significant components of the Company’s deferred tax assets at December 31, 2022 and 2023 are shown below (in thousands): December 31, December 31, 2022 2023 Deferred tax assets: Stock-based compensation $ 373 $ 427 Net operating losses carryforwards 4,156 5,976 Depreciation and Amortization 428 389 Capitalized research 2,221 4,106 Accrued expenses 292 439 Gross deferred tax assets 7,470 11,337 Less: Valuation allowance ( 7,438 ) ( 11,176 ) Net deferred tax assets, net of valuation allowance $ 32 $ 161 Deferred tax liabilities: Other $ ( 32 ) $ ( 161 ) Total deferred tax liabilities ( 32 ) ( 161 ) Net deferred tax assets / liabilities $ - $ - F- 28 The valuation allowance increased by $ 3.7 million during the year ended December 31, 2023. The Company has concluded, based upon ASC 740, that it is more likely than not the Company will not realize any benefit from the deferred tax assets related to certain Federal and state net operating loss and credit carryforwards. Accordingly, the Company has established a full valuation allowance against its Federal and state deferred tax assets. As of December 31, 2023, the Company had available Federal and state net operating loss carryforwards of approximately $ 24.7 million and $ 11.6 million, respectively, to reduce future taxable income, if any. Federal net operating losses generated prior to 2018 and all state net operating losses generated expire in varying amounts beginning in 2037. The net operating losses generated after 2017 do not expire and will be able to offset 80 % of taxable income generated in the future. As of December 31, 2023, the Company had research and development credit carryforwards of approximately $ 629,000 and $ 398,000 available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. These credits have been provided a full reserve under ASC 740-10. The federal credit carryforwards begin to expire in 2037, and the state credit carryforwards can be carried forward indefinitely. Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership change limitations provided in the Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions. The effect of an ownership change would be the imposition of annual limitation on the use of net operating loss (“NOL”) carryforwards attributable to periods before the change in ownership. An assessment of such ownership changes under Section 382 of the Code was not completed through December 31, 2023, and as such the Company is not able to determine the impact on the NOLs and tax credit carryforwards, if any, as of the date of the financial statements. To the extent that an assessment is completed in the future, the Company’s ability to utilize tax attributes could be restricted on a year-by-year basis and certain attributes could expire before they are utilized. The Company applies the guidance under ASC 740, subtopic 10-50-15, Unrecognized Tax Benefit Related Disclosures (formerly FASB Interpretation 48, Accounting for Uncertainty in Income Taxes). For benefits to be realized, a tax position must be more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 % likely of being realized upon settlement. This interpretation also provides guidance on measurement, de-recognition, classification, interest and penalties. The following table summarizes the changes to the Company’s gross unrecognized tax benefits for the years ended December 31, 2022 and 2023 (in thousands): Year Ended December 31, Year Ended December 31, 2022 2023 Beginning balance $ 101 $ 690 Additions related to current year positions 589 152 Additions related to prior year positions - 184 Ending balance $ 690 $ 1,027 As of December 31, 2022 and 2023, the total unrecognized tax benefit was approximately $ 0.7 million and $ 1.0 million, respectively. The Company does not expect any material changes to the estimated amount of liability associated with its uncertain tax positions within the next 12 months. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2023, the Company had no accrued interest and penalties related to uncertain tax positions. The Company files U.S. and state income tax returns with varying statutes of limitations. Tax years 2018 and forward remain open to examination due to the carryover of NOL carryforwards. There are no ongoing examinations by taxing authorities at this time. F- 29 14. Net loss per share The Company computes net loss per share using the two-class method. The two-class method uses an earnings allocation formula that determines net loss per share for common stock and any participating securities according to dividends declared and participation rights in undistributed earnings. Diluted net loss per share includes the potential dilutive effect of common stock equivalents as if such securities were converted or exercised during the period, when the effect is dilutive. Common stock equivalents include: (i) outstanding stock options and restricted stock units; (ii) common stock to be issued upon the assumed exercise of the Company’s common stock warrants; and (iii) prior to issuance, the issuable warrants related to the Company’s March private placement financing. Because the impact of these items is generally anti-dilutive during periods of net loss, there is no difference between basic and diluted income (loss) per common share for periods with net losses. The following table sets forth the computation of basic and diluted net loss per share of common and preferred stock (in thousands, except share and per share data): Year Ended December 31, Year Ended December 31, 2022 2023 Numerator: Net loss $ ( 18,058 ) $ ( 30,544 ) Less: Deemed dividends on Series A-1 Preferred Stock - ( 867 ) Net loss attributable to common shares, basic and diluted ( 18,058 ) ( 31,411 ) Denominator: Weighted-average shares outstanding used in computing net loss per share attributable to common stockholders, basic and diluted 15,057,049 24,539,309 Net loss per share attributable to common stockholders, basic and diluted $ ( 1.20 ) $ ( 1.28 ) The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive: Year Ended December 31, Year Ended December 31, 2022 2023 Options to purchase common stock 1,342,670 10,302,086 Warrants to purchase common stock 4,784,193 4,784,193 Warrants to purchase convertible preferred stock - 160,958,167 Total 6,126,863 176,044,446 15. Subsequent Events On March 13, 2024, the Company signed a securities purchase agreement with certain healthcare-focused institutional investors that will provide $ 50 million in gross proceeds to Unicycive through a private placement. Pursuant to the securities purchase agreement, the Company issued to institutional purchasers $ 50 million in shares of the Company’s Series B Convertible Preferred Stock. 50,000 Shares of Series B Convertible Preferred Stock were issued at a price of $ 1,000.00 per share with an initial conversion price of $ 1.00 per common share. F- 30 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE [None.]