What changed in this filing

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Item 1. Financial Statements

2024-05-13 compared with 2023-11-14 · 641 added, 588 removed, 690 unchanged (64% of the section changed)

STATEMENTS (Condensed)

FINANCIAL STATEMENTS

Unicycive Therapeutics, Inc.

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(In thousands, except for share and per share

September 30,

Current assets:

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Property, plant and equipment, net

Liabilities and stockholders’ (deficit) equity

Liabilities, mezzanine equity, and stockholders’ deficit

Current liabilities:

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Accrued liabilities

Dividends payable

Warrant liability

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Commitments and contingencies (Note 8)

Stockholders’ (deficit) equity:

Series A-2 preferred stock, $ 0.001 par value per share – zero and 43,649 shares authorized at December 31, 2022 and September 30, 2023, respectively;

zero and 43,649 shares outstanding at December 31, 2022 and September 30, 2023, respectively

Preferred stock, $ 0.001 par value per share – 10,000,000 and 9,926,161 shares authorized at December 31, 2022 and September 30, 2023, respectively;

zero shares outstanding at December 31, 2022 and September 30, 2023

Common stock, $ 0.001 par value per share – 200,000,000 shares authorized at December 31, 2022 and September 30, 2023;

15,231,655 shares issued and outstanding at December 31, 2022, and 34,754,401 shares issued and outstanding at September 30, 2023

Mezzanine equity:

Series B-1 preferred stock, $ 0.001 par value per share – zero shares authorized at December 31, 2023, and 50,000 shares authorized at March 31, 2024;

zero shares outstanding at December 31, 2023, and 50,000 shares outstanding at March 31, 2024

Stockholders’ deficit:

Series A-2 preferred stock, $ 0.001 par value per share – 43,649 Series A-2 shares authorized at December 31, 2023 and 21,388.01 Series A-2 Prime shares authorized at March 31, 2024;

43,649 Series A-2 shares outstanding at December 31, 2023 and 19,991.51 Series A-2 Prime shares outstanding at March 31, 2024

Preferred stock:

$ 0.001 par value per share— 9,926,161 and 9,904,773 shares authorized at December 31, 2023 and March 31, 2024, respectively;

zero shares issued and outstanding at December 31, 2023 and March 31, 2024

Common stock, $ 0.001 par value per share – 200,000,000 shares authorized at December 31, 2023 and March 31, 2024;

34,756,049 and 37,606,630 shares issued and outstanding at December 31, 2023 and March 31, 2024, respectively

Additional paid-in capital

Accumulated deficit

Total stockholders’ (deficit) equity

Total liabilities and stockholders’ (deficit) equity

Total stockholders’ deficit

Total liabilities and stockholders’ deficit

See accompanying notes to the financial statements

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Licensing revenues:

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Total other income (expenses)

Deemed dividend to Series A-1 preferred shareholders

Deemed dividend to Series A-1 preferred stockholders

Dividend to Series B preferred stockholders

Net loss attributable to common stockholders

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Unicycive Therapeutics, Inc.

Statements of Stockholders’ (Deficit)

Statements of Mezzanine Equity and Stockholders’

(In thousands, except share amounts)

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Stockholders’

Balance, December 31, 2021

Issuance of common stock for exercise of options

Stock-based compensation expense

Balance, March 31, 2022

Issuance of common stock for exercise of options

Stock-based compensation expense

Balance, June 30, 2022

Issuance of common stock for vested restricted stock units

Issuance of common stock for exercise of options

Stock-based compensation expense

Balance, September 30, 2022

Series A-1 and Series A-2

Preferred Stock

Stockholders’

Balance, December 31, 2022

Balance at December 31, 2022

Issuance of Series A-1 preferred stock, net of issuance costs and allocated fair value of warrant liability

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Stock-based compensation expense

Balance, March 31, 2023

Deemed dividends on Series A-1 preferred stock

Issuance of common stock from exercise of options

Stock-based compensation expense

Balance, June 30, 2023

Deemed dividends on Series A-1 preferred stock

Issuance of Series A-2 preferred stock and common stock upon conversion of Series A-1 preferred stock

Issuance of common stock from exercise of options

Stock-based compensation expense

Balance, September 30, 2023

Balance at March 31, 2023

Series A-2 Prime

Stockholders’

Balance at December

Issuance of Series B-1 preferred

stock, net of issuance costs

Dividends on Series B-1 preferred

Exchange of Series A-2 preferred

stock for Series A-2 Prime preferred stock

Conversion of Series A-2 Prime

preferred stock into common stock

Issuance of common stock for exercise

compensation expense

March 31, 2024

See accompanying notes to the financial statements

Unicycive Therapeutics, Inc.

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(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities

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Payments on financed insurance policies

Issuance costs related to issuance of Series B-1 preferred stock

Proceeds from issuance of Series B-1 preferred stock

Issuance costs related to issuance of Series A-1 preferred stock and warrants

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Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the period

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Fair value of warrants issued in connection with the issuance of preferred stock

Deferred insurance charges included in prepaid expenses and other current assets

Deferred preclinical and other charges included in prepaid expenses and other current assets

Cash paid for interest

Cash paid for income taxes

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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 was dormant until July 2017 when it began evaluating a number

of drug candidates for in-licensing.

The Company in-licensed the drug candidate UNI

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Ltd, a Singapore-based corporation, (“Sphaera”) (Note 3).

UNI 494 is a pro-drug of Nicorandil

UNI 494 is a pro-drug of Nicorandill

that is being developed as a treatment for acute kidney injury.

In September 2018, the Company purchased a second

drug candidate, Renazorb RZB 012 (“Renazorb”) and its trademark, RENALAN, and various patents from Spectrum Pharmaceuticals,

(“Spectrum”) (Note 3).

Renazorb (“Oxylanthanum Carbonate”) is being developed for the treatment of hyperphosphatemia

in patients with Chronic Kidney Disease (“CKD”).

drug candidate, Renazorb RZB 012 and its trademark, RENALAN, and various patents from Spectrum Pharmaceuticals, Inc.

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

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revenue as well as product sales.

The Company has generated approximately $ 0.7 million in licensing revenue during the nine months ended

September 30, 2023.

The Company has not generated any licensing revenue during the three months ended March 31, 2024.

The Company has incurred operating losses and

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

As of December 31, 2022, and September

As of December 31, 2023 and March

31, 2024, the Company had an accumulated deficit of $ 64.5 million and $ 85.5 million, respectively.

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a private placement and that included initial upfront funding of $ 28.0 million in net proceeds.

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.

In 2021, the Company received approximately

$ 22.3 million in net proceeds from its IPO, and in March 2023 the Company received approximately $ 28.0 million in net proceeds from the

sale of preferred stock.

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.

The financial impact associated with the clinical trial we will be required

to run based on recent FDA feedback is uncertain, and we expect to obtain clarifying feedback from the FDA regarding the scope of the

trial in the Fall of 2023.

Based on the Company’s currently anticipated level of expenditures, the Company believes that it will

need funding by the second half of 2024 to continue operations, satisfy its obligations and fund the future expenditures that will be

required to conduct the clinical and regulatory work to develop its product candidates.

The accompanying financial statements have been

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

liabilities and commitments in the normal course of business.

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

as a going concern for one year after the date that these financial statements are available to be issued.

The financial statements do

not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary from

the outcome of this uncertainty.

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 received $ 46.2 million in net proceeds (net of issuance costs).

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 financings, 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

Based on the Company’s current level of expenditures, 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.

Summary of Significant Accounting Policies

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The accompanying unaudited financial statements

of the Company as of September 30, 2023, have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation

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

of the Company as of March 31, 2024 have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X

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

The Company believes the footnotes and other disclosures made in the financial statements are adequate

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Commission (“SEC”) on March 28, 2024.

Preferred Stock

The Company classifies its Series A-1 Preferred

Stock (as defined in Note 10) outside of stockholders’ deficit on the accompanying balance sheets as it is contingently redeemable

upon the occurrence of an event that is not solely within the Company’s control.

The Company recorded the issuance of Series A-1

Preferred Stock at the residual value from proceeds after the allocation of the fair value of warrants, net of related and allocable issuance

As the Series A-1 Preferred Stock is not currently redeemable, and as the Company has determined that it is not probable of becoming

redeemable, no subsequent remeasurement is required.

Since the Company is obligated to pay cumulative dividends on the Series A-1 preferred

stock whether or not declared by the Board of Directors, the Company accrues the paid in-kind dividends as they are earned, based on the

stated contractual rate.

See Note 10 for information about the Series A-1 Preferred Stock conversion in July 2023.

Warrant Liabilities

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, 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) on the balance sheets as a result of certain redemption clauses that are not within

the control of the Company.

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

preferred stock financing arrangement (recognized as a partial offset to the carrying value of the Series A-1 Preferred Stock), and are

remeasured at fair value each reporting period.

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

The warrant liabilities are measured using Level 3 fair value inputs.

See Note 11 for a description of warrant liabilities

and the related valuations.

Use of Estimates

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Significant items subject to such estimates and assumptions

include revenues, stock-based compensation, research contract accruals and prepaid amounts, and the fair value of warrant liabilities.

Actual results may materially differ from those estimates.

include revenues, stock-based compensation, research contract progress estimates, and the fair value 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”).

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 12), 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

are recognized in earnings during each period.

The warrant liability is measured using Level 3 fair value inputs.

See Note 12 for a description

of warrant liability and the related valuations.

Segment Information

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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.

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

Risks and Uncertainties

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of an asset are capitalized.

Repair and maintenance expenditures are expensed as incurred.

Repairs and maintenance expenditures are expensed as incurred.

Depreciation is computed using the straight-line

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and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

If there is an indication

If there is indication

of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition.

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fair value at that time.

On September 30, 2023, management determined there were no impairments of the Company’s property and equipment.

At March 31, 2024, management determined there were no impairments of the Company’s property and equipment.

The Company determines whether a contract is,

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The Company’s financial instruments include

warrants, cash and cash equivalents, prepaid expenses, and accounts payable.

the warrant liability, cash and cash equivalents, accounts payable and accrued liabilities.

Fair value is defined as the price that would

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GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.

The hierarchy

gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and

the lowest priority to unobservable inputs (Level 3 measurements).

The Company’s warrants, recorded in the accompanying balance

sheets, are categorized based on the inputs to valuation techniques as follows:

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;

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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 contingently issuable warrants

associated with the Company’s March 2023 private placement transaction, further described in Note 11 – Warrant Liability,

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,

(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, 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 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 September 30, 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.

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 following table summarizes the fair value

hierarchy of financial liabilities measured at fair value as of September 30, 2023 (in thousands).

hierarchy of financial liabilities measured at fair value as of March 31, 2024 (in thousands):

Warrant liability

Total liabilities at fair value

The following table summarizes the fair value

hierarchy of financial liabilities measured at fair value as of December 31, 2023 (in thousands):

Warrant liability

Total liabilities at fair value

The following table summarizes the changes in

fair value of the derivative liability classified in Level 3.

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.

Nine Months Ended

September 30,

Fair value, January 1, 2023

are attributable to unobservable inputs (in thousands):

Three Months Ended

Fair value at January 1, 2023

Issuance of Warrants (March 3, 2023)

Change in fair value of Warrants

Fair value, September 30, 2023

The expense relating to the change in fair value

of the derivative liability of $ 8,697,000 for the nine months ended September 30, 2023, is included in other income (expense) in the statements

of operations.

Fair value at March 31, 2023

Change in fair value of warrants

Fair value at December 31, 2023

Change in fair value of warrants

Fair value at March 31, 2024

The expense relating to the change in fair

value of the warrant liability of $ 10.4 million and $ 11.8 million for the three months ended March 31, 2023 and March 31, 2024 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 September 30, 2023, the recorded values of cash and cash equivalents, prepaid expenses,

and accounts payable approximated fair value due to the short-term nature of the instruments.

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, 2023 and March 31, 2024, 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

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the Company to concentration of credit risk consist of cash and cash equivalents.

All the Company’s cash was deposited in one account

at a financial institution during 2022, and cash balances may at times exceed federally insured limits.

Beginning in 2023, the Company’s

cash and cash equivalents are distributed across multiple financial institutions.

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.

Prepaid Expenses

Prepaid expenses represent costs incurred that

benefit future periods.

The cash and cash equivalents the Company uses to satisfy

working capital and operating expense needs are held in accounts at various 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 March 31, 2024.

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.

Revenue Recognition

The Company has implemented ASC 606, Revenue from

Contracts with Customers.

This guidance included the development of new policies based on the five-step model provided in the new revenue

standard, ongoing contract review requirements, and gathering of information provided for disclosures.

The Company recognizes revenue

from product sales or services rendered when control of the promised goods is 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.

Research and Development Expenses

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salaries and bonuses, employee benefit costs and stock-based compensation expenses for the Company’s research and product development

employees and allocated overheads, including information technology costs and utilities and expenses for issuance of shares pursuant to

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

The Company expenses both internal and external research and development

expenses as they are incurred.

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

General and Administrative Expenses

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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 the deferred tax assets will not be realized.

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

Current and non-current tax assets and liabilities

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ordinary course of business there is inherent uncertainty in quantifying income tax positions.

The Company assesses income tax positions

and records the largest amount of tax benefit with a greater than 50 % likelihood of being realized upon ultimate settlement with a taxing

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.

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

The Company is monitoring legislation for any further changes to Section 174 and the impact, if any, on the financial statements

We are monitoring legislation for any further changes to Section 174 and the impact, if any, to the financial statements in 2024.

Comprehensive Loss

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dilutive securities outstanding for the period.

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

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

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

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

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

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

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

Additionally, among other changes,

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

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

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

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

The Company adopted the standard on January 1, 2022, using a modified retrospective approach, and the adoption did not result

in any adjustments to the Company’s financial statements.

The Company adopted Accounting Standards Update

2016-13, Financial Instruments – Credit Losses (“ASC 326”), as of October 1, 2023.

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.

Company is currently evaluating the impact of this guidance on its consolidated financial statements.

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 (“Shilpa”)

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 (First Payment).

Thereafter, the Company will pay $2 million per year for four consecutive years, after the first year’s

payment, for the total payments of $10 million, provided all commercial supplies are continued to be manufactured and supplied by the

Unicycive is not obligated to make any payments to the vendor until FDA approval of the product is obtained and commercial revenue

is generated.

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.

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

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

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

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

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

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

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 on the preceding quarter.

In September 2018, the Company entered into an

Assignment and Asset Purchase Agreement with Spectrum Pharmaceuticals, Inc.

(“Spectrum Agreement”) pursuant to which the Company

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

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

Renalan, the “Compounds”), to further develop and commercialize Renazorb (“Oxylanthanum Carbonate”) and related

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

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 of the Company’s sublicense

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

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

The Company’s payment obligations to Spectrum

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

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.

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 nine months ended September 30, 2023.

(“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.

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.

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 (20th)

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 three months ended March 31, 2023.

On July 19, 2021, the Company entered into an

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The initial budget for the study, which includes clinical pharmacology, translational sciences,

and bioanalytical services, was approximately $ 2.3 million, and the research was completed as of September 30, 2023.

and bioanalytical services, was approximately $ 2.3 million.

Approximately $ 2.0 million has been paid to Syneos and the research was completed

On January 6, 2022, the Company entered into a

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

The initial budget for the study was approximately

The initial budget for the study is approximately

$ 3.7 million, and subsequent revisions reduced the overall budget to $ 2.9 million.

Related payments totaling approximately $ 2.7 million

have been paid to Quotient as of September 30, 2023, approximately $ 1.4 million of related expense has been recorded, and approximately

$ 0.9 million has been recorded as prepaid expense in the accompanying balance sheet as of September 30, 2023.

have been paid to Quotient as of March 31, 2024, approximately $ 2.4 million of related expense has been recorded, and approximately $ 0.6

million and $ 0.3 million has been recorded as prepaid expenses and other current assets in the accompanying balance sheets as of December

31, 2023 and March 31, 2024, respectively.

On February 9, 2022, the Company entered into

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revised the remaining services budget to approximately $ 0.1 million, and the research was completed as of March 31, 2023.

On September 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

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.

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.

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.

for these services is approximately $ 1.3 million.

Approximately $ 1.8 million has been paid to Inotiv under these agreements as of September

30, 2023, approximately $ 1.3 million of related expense has been recorded, and approximately $ 0.6 million has been recorded as prepaid

expense in the accompanying balance sheet as of September 30, 2023.

Approximately $ 2.8 million has been paid to Inotiv as of March 31, 2024 and

approximately $ 0.3 million and $ 0.1 million has been recorded as prepaid expenses and other current assets in the accompanying balance

sheets as of December 31, 2023 and March 31, 2024, respectively.

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

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The budget for the services is approximately $ 2.7 million, and approximately $ 2.7 million has been

paid to Celerion and the research was completed as of June 30, 2023.

paid to Celerion as of December 31, 2023, and the research was completed during 2023.

On February 1, 2023, the Company entered into

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million in future milestone payments and will be eligible for tiered royalties upon achievement of specified commercial achievements.

On June 29, 2023, the Company entered into a services

agreement with Shilpa related to NDA filing support for Oxylanthanum Carbonate.

The agreement provides for payments of up to $ 2.0 million,

and the Company has made $ 2.0 million in payments pursuant to the agreement as of September 30, 2023.

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 March 31,

Licensing Revenues

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

agreement (“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 Agreement in accordance

with FASB Topics 808 – Collaborative Arrangements and 606 -Revenue for Contracts from Customers.

agreement (the “Lee’s Agreement”) with Lee’s Pharmaceutical (HK) Limited (“Lee’s”).

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.

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

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that are an output of the entity’s “ordinary activities”.

The 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 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.

The Company does not believe that its promise

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The Company has concluded that the future milestone payments should be excluded from the transaction price due

to the uncertainty of achievement as of September 30, 2023.

The Company will reassess this conclusion at each reporting date until the

uncertainties are resolved.

to the uncertainty of achievement as of December 31, 2023 and March 31, 2024.

The Company will reassess this conclusion at each reporting

date until the uncertainties are resolved.

For the sales-based royalty payments, guidance

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The Company has concluded that the future sales-based royalties

should be excluded from the transaction price as of September 30, 2023.

The Company will reassess this conclusion at each reporting date.

should be excluded from the transaction price as of December 31, 2023 and March 31, 2024.

The Company will reassess this conclusion at

each reporting date.

The Company has concluded that at contract inception

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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

This intellectual property was transferred to Lee’s in July 2022.

On February 1, 2023, the Company entered into

a license agreement with Lotus International Pte Ltd.

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 Agreement in accordance

with FASB Topics 808 – Collaborative Arrangements and 606 -Revenue for Contracts from Customers.

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 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.

a license agreement (the “Lotus Agreement”) with Lotus International Pte Ltd.

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

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The Company has concluded that the future milestone payments should be excluded from the transaction price due

to the uncertainty of achievement as of September 30, 2023.

The Company will reassess this conclusion at each reporting date until the

uncertainties are resolved.

to the uncertainty of achievement as of March 31, 2024.

The Company will reassess this conclusion at each reporting date until the uncertainties

are resolved.

For the sales-based royalty payments, guidance

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The Company has concluded that the future sales-based royalties

should be excluded from the transaction price as of September 30, 2023.

The Company will reassess this conclusion at each reporting date.

should be excluded from the transaction price as of December 31, 2023 and March 31, 2024.

The Company will reassess this conclusion at

each reporting date.

The Company has concluded that at contract inception

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services were determined to be immaterial to the contract.

The Company has recognized a total of $ 0 and $ 675,000 in the accompanying statements

of operations as licensing revenue for the three and nine months ended September 30, 2023, respectively.

The Company has recognized a total of $ 675,000 in the accompanying statements

of operations as licensing revenue for the three months ended March 31, 2023.

Balance Sheet Components

Prepaid expenses and other current assets as of

December 31, 2022, and September 30, 2023, consisted of the following (in thousands):

September 30,

Directors’ and officers’ liability insurance premiums

Research and development services

December 31, 2023 and March 31, 2024 consisted of the following (in thousands):

Prepaid directors and officers’ liability insurance premiums

Prepaid preclinical services

Property, plant and equipment as of December 31,

2022, and September 30, 2023, consisted of the following (in thousands):

September 30,

2023 and March 31, 2024 consisted of the following (in thousands):

Leasehold improvements

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Less accumulated depreciation

Accounts payable as of December 31, 2022, and

September 30, 2023, consisted of the following (in thousands):

September 30,

Accounts payable as of December 31, 2023 and March

31, 2024 consisted of the following (in thousands):

Trade accounts payable

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Accrued liabilities as of December 31, 2023 and

September 30, 2023, consisted of the following (in thousands):

September 30,

March 31, 2024 consisted of the following (in thousands):

Accrued labor costs

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lease is for three years with an option to extend the lease for three additional years .

In accounting for the leases, the Company adopted

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

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

The lease amendment represents a modification of the original

lease, and the Company evaluated the new agreement under ASC 842.

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 a discount rate of 10.0 %.

In accordance

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

The Company determined that the option to

extend the lease for an additional three years was not considered reasonably certain on September 30, 2023.

During the three and nine

months ended September 30, 2023, the Company reflected amortization of right-of-use asset of approximately $ 77,000 and $ 196,000 , respectively,

resulting in a right of use asset balance as of September 30, 2023, of approximately $ 0.8 million.

During the nine months ended September 30, 2023,

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 three months ended March 31, 2024, the Company reflected amortization of right-of-use asset of approximately

$ 80,000 , resulting in a right of use asset balance of approximately $ 0.7 million.

During the three months ended March 31, 2024,

the Company made cash payments on the lease of $ 97,000 towards the lease liabilities.

As of September 30, 2023, the total lease liability

As of March 31, 2024, the total lease liability

was approximately $ 0.7 million.

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

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

Rent expense for the lease for the three and

nine months ended September 30, 2023, was $ 100,000 and $ 253,000 , respectively.

As of September 30, 2023, maturities of the Company’s

lease liabilities are as follows (in thousands):

Year ending December 31, 2023

As of March 31, 2024, maturities of the Company’s

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

Operating Lease

Year ending December 31, 2024

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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, the Company entered into a Common

Stock Purchase Agreement (“Stock Agreement”) with Globavir.

The Company’s principal stockholder is also the principal

stockholder in Globavir.

The Stock Agreement provided for the distribution of 62,181 shares of the Company’s common stock, valued

at $ 0.013 per share, to Globavir’s stockholders as payment for Globavir’s services and shared costs rendered on behalf of

the Company in 2017, which were issued in 2018.

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

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

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

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

the Company’s drug development programs.

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

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

Pursuant to the Service Agreement,

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

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

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

During the 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,

The Company has not entered into any additional agreements with Globavir during the nine months ended September 30, 2023.

Commitments and Contingencies

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The Company currently has no pending claims or legal proceedings.

Indemnifications

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.

paid the $ 100,000 advisory fee in March 2023.

Indemnification

In the normal course of business, the Company

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property infringement claim by any third party with respect to its technology.

The terms of these indemnification agreements are generally

The term of these indemnification agreements is generally

perpetual any time after the execution of the agreement.

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or been required to defend any action related to its indemnification obligations.

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

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 because of these indemnification obligations.

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.

request in such capacity.

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

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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 matching contributions to the 401(k) Plan totaled approximately $ 51,000 and $ 80,000

for the nine months ended September 30, 2022, and 2023, respectively.

The Company’s 401(k) Plan provides that the Company match each participant’s contribution at 100 % up to 4 % of

the employee’s eligible compensation.

Company contributions to the 401(k) Plan totaled approximately $ 107,000 and $ 35,000 for the

year ended December 31, 2023 and for the three months ended March 31, 2024, respectively.

Stockholders’ Deficit

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Initial Public Offering

During July 2021, due to 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

The underwriters exercised their option to purchase an additional 600,000 warrants, and the Company received $ 7,500 in proceeds.

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

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with a 5 -year term and with an exercise price of $ 6.00 per warrant.

The following table summarizes activity for the

Company’s common stock warrants for the nine months ended September 30, 2023:

The warrants from the initial public offering

are equity classified.

The following table summarizes activity for the Company’s IPO warrants for the three months ended March 31,

(in thousands)

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Warrants exercised

Outstanding, September 30, 2023

See Note 11 for information on preferred stock

warrants associated with our sale in March 2023 of Series A-1 Preferred Stock.

Issuance of Common Stock Upon Conversion of

Series A-1 Preferred Stock

Outstanding, March 31, 2024

See Note 12 for information on preferred stock warrants associated

with our sale in March of Series A-1 Preferred Stock.

Issuance of Common Stock Upon Conversion of Series A-1 Preferred

On June 26, 2023, the Company held its annual

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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 in partial settlement of the auto-conversion of the Series A-1 Preferred Stock.

of the Series A Convertible Voting Preferred Stock (the “Series A 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

Voting Rights of Common Stock

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shares of preferred stock authorized, par value of $ 0.001 per share, and no shares of preferred stock were issued or outstanding.

March 31, 2023, as a result of the Company’s private placement financing, there were 30,190 shares of Series A-1 Preferred Stock

issued and outstanding.

On March 3, 2023, the Company issued and sold,

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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 is, subject to approval of the Company’s stockholders, convertible into

a unit (“Unit”) consisting of:

Pursuant to the Series A 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

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

The Tranche A warrants for an aggregate exercise price of approximately

$25 million are exercisable until 21 days following the Company’s announcement of receipt of FDA approval for Oxylanthanum Carbonate,

the Tranche B warrants for an aggregate exercise price of approximately $25 million are exercisable until 21 days following the Company’s

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 are exercisable until 21 days following four quarters

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.

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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 Tranche A, B, and C 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 Series A 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 are contingently issuable upon the occurrence

of a specified event (shareholder approval).

The Company determined that the Warrants are freestanding

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.

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.

costs of $ 0.2 million were allocated to the Warrants and expensed during the nine months ended September 30, 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).

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 12 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.

11, 2023, pursuant to the Certificate of Designation, the Company issued shares of Series A-2 preferred stock in partial settlement of

the auto-conversion of the Series A-1 preferred shares.

As of September 30, 2023, there were zero shares of Series A-1 preferred stock

outstanding and there were 43,649 shares of Series A-2 Preferred Stock issued and outstanding.

The Series A-1 Preferred Stock have the following

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 September 30, 2023, the Company recorded $ 0.9 million, or $ 28.71 per share, of deemed dividends on the Series

A-1 Preferred Stock.

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.

Board of Directors Designation Rights:

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.

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

Series A 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.

The Series A-2, A-3, A-4, and A-5 Preferred Stock

have the following rights:

Dividends will accrue, on all issued

and outstanding shares of Series A-2, A-3, A-4, and A-5 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

If such dividends are not declared and paid in cash, the dividend amounts will be added to the aggregate liquidation preference

then outstanding.

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.

Holders of the Series A-2, A-3, A-4, and

3 unchanged sentences

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

1 unchanged sentence

into one share of common stock.

Exchange Agreement

On March 13, 2024, the

Company entered into an exchange agreement (the “Exchange Agreement”) with certain accredited investors (the “Investors”),

pursuant to which the Investors surrendered all shares of Series A-2 Preferred Stock held by them in exchange for an aggregate of 21,388.01

shares of new preferred stock to be known as “Series A-2 Prime Preferred” (the “Exchanged Preferred”) having rights

set forth the Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Voting

Preferred Stock (the “Amended Series A Certificate of Designation”).

Concurrent with execution

of the Exchange Agreement, but prior to filing of the Amended Series A Certificate of Designation with the Delaware Secretary of State,

the Company filed Certificates of Elimination for each of its Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series A-3 Preferred

Stock, Series A-4 Preferred Stock and Series A-5 Preferred Stock (collectively, the “Certificates of Elimination”) with the

Delaware Secretary of State.

Concurrent with the execution

of the Exchange Agreement, the Company and each Investor have amended and restated the following warrants:

(i) tranche A warrants to acquire

an aggregate of 47,852,430 shares of Series A-3 Convertible Preferred Stock of the Company that were issued on July 11 2023 (the “Original

Tranche A Warrants”) have been amended and restated to acquire an aggregate of 25,840.3122 shares of Series A-3 Convertible Preferred

Stock (as amended, the “Amended Tranche A Warrants”);

(ii) tranche B warrants to acquire an aggregate of 43,502,206 shares

of Series A-4 Convertible Preferred Stock of the Company that were issued on July 11, 2023 (the “Original Tranche B Warrants”)

have been amended and restated to acquire an aggregate of 25,666.30154 shares of Series A-4 Convertible Preferred Stock (as amended, the

“Amended Tranche B Warrants”) and (iii) tranche C warrants to acquire an aggregate of 69,603,531 shares of Series A-5 Convertible

Preferred Stock of the Company that were issued on July 11, 2023(the “Original Tranche C Warrants”, and together with the

Original Tranche A Warrants and Tranche B Warrants, the “Original Warrants”) have been amended and restated to acquire 51,506.61294

shares of Series A-5 Convertible Preferred Stock (as amended, the “Amended Tranche C Warrants,” together with the Amended

Tranche A Warrants and the Amended Tranche B Warrants, the “Amended Warrants”).

The Amended Warrants have the same terms and

conditions as the original warrants except that such Amended Warrants:

(i) reduced the amount of shares of Series A-3 Convertible Preferred

Stock, Series A-4 Convertible Preferred Stock and Series A-5 Convertible Preferred Stock into which such Amended Warrants are convertible

as described above;

(ii) allow for the issuance of fractional shares of Series A-3 Preferred Stock, Series A-4 Preferred Stock and Series

A-5 Preferred Stock, as applicable upon exercise of such Amended Warrants and (ii) revised the exercise price to be $ 1,000 per share of

Series A-3 Preferred Stock, Series A-4 Preferred Stock and Series A-5 Preferred Stock, as applicable in such Amended Warrants.

The aggregate

exercise price, the amount of shares of Common Stock upon conversion of the Series A-3 Preferred Stock, the Series A-4 Preferred Stock

and the Series A-5 Preferred Stock and exercise period in the Amended Warrants did not change from the Original Warrants.

Subject to the terms

and limitations contained in the Amended Series A Certificate of Designation, each share of Series A-2 Prime Convertible Preferred Stock,

Series A-3 Convertible Preferred Stock, Series A-4 Convertible Preferred Stock or Series A-5 Convertible Preferred Stock are convertible

into a number shares of Common Stock obtained by dividing the Original Per Share Price ($ 1,000 ) of each such share of Series A-2 Prime

Convertible Preferred Stock, Series A-3 Convertible Preferred Stock, Series A-4 Convertible Preferred Stock or Series A-5 Convertible

Preferred Stock by the applicable conversion price of $ 0.49 , $ 0.54 , $ 0.59 and $ 0.74 of each such share of Series A-2 Prime Convertible

Preferred Stock, Series A-3 Convertible Preferred Stock, Series A-4 Convertible Preferred Stock or Series A-5 Convertible Preferred Stock,

respectively.

Pursuant to the terms of the Exchange Agreement, effective March 13, 2024, the Company filed the Amended Certificate of Designation

with the Delaware Secretary of State designating, 21,400 shares as Series A-2 Prime Preferred Stock, 25,900 shares as Series A-3 Convertible

Preferred Stock, 25,700 shares as Series A-4 Convertible Preferred Stock, and 51,600 shares as Series A-5 Convertible Preferred

Stock (all such series of preferred stock referred to herein collectively as “Series A Preferred Stock”), each with a stated

value of $ 1,000 per share (the “Original Per Share Price”).

The Amended Certificate of Designation sets forth the rights,

preferences and limitations of the shares of Series A Preferred Stock.

Terms not otherwise defined in this item shall have the meanings

given in the Amended Certificate of Designation.

The Amended Certificate of Designation was filed with an effective date of 6:01 a.m.

ET on March 14, 2024.

The following is a summary

of terms of the Series A Preferred Stock under the Amended Series A Certificate of Designation:

times following the Issuance Date, while shares of Series A Preferred Stock are issued and outstanding, holders of Series A Preferred

Stock shall be entitled to receive, and the Company shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock

basis and without regard to any limitations on conversion set forth herein or otherwise) to and in the same form as dividends (other than

dividends in the form of Common Stock, which shall be made in accordance with the terms of the Amended Certificate of Designation) actually

paid on shares of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock, which shall be made

in accordance with the terms of the Amended Certificate of Designation) are paid on shares of the Common Stock.

Voting Rights.

to certain limitations described in the Amended Certificate of Designation, the Series A Preferred Stock is voting stock.

Holders of the

Series A Preferred Stock are entitled to vote together with the Common Stock on an as-if-converted-to-Common-Stock basis.

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.

Liquidation, the assets of the Company available for distribution to its stockholders shall be distributed among the holders of the shares

of Series A Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose

all shares of Series A Preferred Stock as if they had been converted to Common Stock pursuant to the terms of the Amended Certificate

of Designation immediately prior to such Liquidation, without regard to any limitations on conversion set forth in the Amended Certificate

of Designation or otherwise.

to the limitations set forth in the Amended Certificate of Designation, at the option of the holder, each share of Series A-2 Prime Preferred

Stock, Series A-3 Convertible Preferred Stock, Series A-4 Convertible Preferred Stock or Series A-5 Convertible Preferred Stock shall

be convertible into a number shares of Common Stock obtained by dividing the Original Per Share Price ($ 1,000 ) of each such share of Series

A-2 Prime Convertible Preferred Stock, Series A-3 Convertible Preferred Stock, Series A-4 Convertible Preferred Stock or Series A-5 Convertible

Preferred Stock by the applicable conversion price of $ 0.49 , $ 0.54 , $ 0.59 and $ 0.74 for the Series A-2 Prime Convertible Preferred Stock,

Series A-3 Convertible Preferred Stock, Series A-4 Convertible Preferred Stock or Series A-5 Convertible Preferred Stock, respectively.

Issuance of Series B-1 Preferred Stock

On March 13, 2024, the Company entered into a

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

pursuant to which the Company agreed to issue and sell, in a private placement (the “Offering”), 50,000 shares of Series B

Convertible Preferred Stock, par value $ 0.001 per share (the “Series B-1 Preferred Stock”), at a purchase price of $ 1,000

per share with an initial conversion price of $ 1.00 per share, subject to adjustment (the “Conversion Price”), for an aggregate

gross offering price of $ 50 million.

The Company received net proceeds of $ 46.2 million (net of issuance costs).

Pursuant to the Certificate of Designation of

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

each share of Series B-1 Preferred Stock is, subject to the Stockholder Approval (as defined below), convertible into shares of common

stock of the Company (the “Common Stock”) and, if applicable, shares of Series B-2 Convertible Preferred Stock of the Company

(“Series B-2 Preferred Stock”) in an amount of shares equal to the Liquidation Preference (as defined below) divided by the

Conversion Price.

Dividends will accrue, on all issued and outstanding

shares of Series B-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 the Stockholder Approval is not obtained at the first meeting of stockholders

following the Issuance Date (collectively, the “Accruing Dividends”).

Such Accruing Dividends are to be paid monthly (including

for any partial months) on the last day of each month beginning in the month of the Issuance Date according to the wiring instructions

provided by the Holder.

At all times following the Issuance Date, while

shares of Series B Preferred Stock are issued and outstanding, holders of Series B Preferred Stock shall be entitled to receive, and the

Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock basis and without regard

to any limitations on conversion set forth herein or otherwise) to and in the same form as dividends (other than dividends in the form

of Common Stock, which shall be made in accordance with the terms of the Series B Certificate of Designation) actually paid on shares

of the Common Stock when, as and if such dividends (other than dividends in the form of Common Stock, which shall be made in accordance

with the terms of the Series B Certificate of Designation) are paid on shares of the Common Stock.

Subject to certain limitations described in the

Series B Certificate of Designation, the Series B Preferred Stock is voting stock.

Holders of the Series B Preferred Stock are entitled

to vote together with the Common Stock on an as-if-converted-to-Common-Stock basis.

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 B Preferred Stock will

be entitled to one vote for each whole share of Common Stock into which their Series B Preferred Stock is then-convertible on all matters

submitted to a vote of stockholders.

Unless and until the Company has obtained the

Stockholder Approval, the number of shares of Common Stock that shall be deemed issued upon conversion of the Series B Preferred Stock

(for purposes of calculating the number of aggregate votes that the holders of Series B Preferred Stock are entitled to on an as-converted

basis) will be equal to that number of shares equal to 19.9 % of the Company’s outstanding Common Stock as of the Signing Date (excluding

for purposes of the calculation, any securities issued on the Signing Date) (the “Cap”), which each such holder being able

to vote the number of shares of Series B Preferred Stock held by it relative to the total number of shares of Series B Preferred Stock

then outstanding multiplied by the Cap.

Notwithstanding the foregoing, the holders of the Series B Preferred Stock are not entitled to

vote together with the Common Stock on an as-if-converted-to-Common-Stock-basis with regard to the approval of the issuance of Common

Stock upon conversion of the Series B Preferred Stock.

In the event of any voluntary or involuntary liquidation,

dissolution or winding up of the Company, including a change of control transaction, or Deemed Liquidation Event (any such event, a “Liquidation”)

the holders of shares of Series B Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available

for distribution to its stockholders, and in the event of a Deemed Liquidation Event, the holders of shares of Series B Preferred Stock

then outstanding shall be entitled to be paid out of the consideration payable to stockholders in such Deemed Liquidation Event or the

other proceeds available for distribution to stockholders, before any payment shall be made to the holders of any other shares of capital

stock of the Company by reason of their ownership thereof, an amount per share equal to the greater of (i) one times (1x) the Original

Per Share Price, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared

but unpaid thereon (the “Liquidation Preference”) or (ii) such amount per share as would have been payable had all shares

of Series B Preferred Stock been converted into Common Stock (without regard to any limitations on conversion set forth in the Series

B Certificate of Designation or otherwise) immediately prior to such Liquidation (the amount payable pursuant to this sentence is hereinafter

referred to as the “Series B Liquidation Amount”).

If upon any such Liquidation, the assets of the Company available for distribution

to its stockholders shall be insufficient to pay the holders of shares of Series B Preferred Stock the full Liquidation Preference, the

holders of shares of Series B Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion

to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts

payable on or with respect to such shares were paid in full.

After the payment in full of all Series B Liquidation Amount, the remaining

assets of the Company available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, the consideration

not payable to the holders of shares of Series B Preferred Stock pursuant to the Series B Certificate of Designation shall be distributed

among the holders of shares of Common Stock, pro rata based on the number of shares held by each such holder.

Following the Stockholder Approval, upon any Liquidation,

the assets of the Company available for distribution to its stockholders shall be distributed among the holders of the shares of Series

B Preferred Stock and Common Stock, pro rata based on the number of shares held by each such holder, treating for this purpose all shares

of Series B Preferred Stock as if they had been converted to Common Stock pursuant to the terms of the Series B Certificate of Designation

immediately prior to such Liquidation, without regard to any limitations on conversion set forth in the Series B Certificate of Designation

or otherwise.

Subject to the terms and limitations contained

in the Series B Certificate of Designation, the Series B-1 Preferred Stock issued in the Private Placement will not become convertible

until the Company’s stockholders approve the issuance of Common Stock upon conversion of the Series B Preferred Stock (as defined

below) in excess of 19.99 % of the Common Stock outstanding on the closing date (the “Stockholder Approval”).

(10th) Trading Day (as defined in the Series B Certificate of Designation) following the announcement of the Stockholder Approval, each

share of Series B-1 Preferred Stock shall automatically convert into Common Stock and if applicable, Series B-2 Preferred Stock.

to the limitations set forth in the Series B Certificate of Designation, at the option of the holder, each share of Series B-2 Preferred

Stock shall be convertible into shares of Common Stock in an amount of shares equal to the Liquidation Preference (as defined below) divided

by the Conversion Price.

The Corporation shall, as soon as practicable

following the Issuance Date, but not more than sixty (60) days thereafter, file a preliminary proxy statement for a vote of its stockholders

to approve the issuance of Common Stock upon conversion of the Series B Preferred Stock in excess of the Cap (the “Proposal”)

Warrant Liability

In connection with the Preferred Stock Offering

(see Note 10), the Company issued Warrants, which included Warrants to purchase Series A-3 Preferred Stock, Series A-4 Preferred Stock,

and Series A-5 Preferred Stock.

Once the warrants are legally issued as a result

of the automatic conversion of the Series A-1 Preferred Stock upon shareholder approval, they will become immediately exercisable at the

option of the holder.

The Company determined that the contingently issuable warrants qualify as derivative instruments pursuant to ASC

815-40 and that the warrants will be 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.

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.

In connection with the Series A 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 initially 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 Series A 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.

See Note 10 for discussion

of exchange agreement related to Series A-2 Preferred Stock and warrants.

The Warrants are recognized as liabilities in

19 unchanged sentences

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

The fair value of the 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.

5 unchanged sentences

the exercise price for the Warrants became fixed.

Therefore, as of June 30, 2023 and September 30, 2023, the fair value of the Warrants

Therefore, as of December 31, 2023 and March 31, 2024, 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

13 unchanged sentences

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 derivative liability associated with the three tranches of Warrants at September 30, 2023.

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 and March 31, 2024.

Tranche A Warrant

September 30,

Fair value of underlying stock

1 unchanged sentence

96.5 % – 139.2 %

94.7 % – 131.7 %

Risk free rate

5 unchanged sentences

Tranche B Warrant

September 30,

Fair value of underlying stock

1 unchanged sentence

114.6 % – 139.2 %

100.9 % – 131.7 %

Risk free rate

4.4 % – 4.8 %

4.8 % – 5.2 %

Dividend yield

1 unchanged sentence

Discount for lack of marketability

Probability for TDAPA approval

0.01 % – 12.0 %

Probability for FDA approval

Tranche C Warrant

September 30,

Fair value of underlying stock

1 unchanged sentence

107.8 % - 114.6 %

108.5 %- 119.6 %

Risk free rate

3 unchanged sentences

Discount for lack of marketability

Probability for commercialization

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 September 30, 2023, the Company estimated the fair value of the Warrants

to be $ 11.5 million.

1.56 %- 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 and March 31, 2024, the Company estimated the fair value of the

Warrants to be $ 13.1 million and $ 24.9 million, respectively.

The following table summarizes activity for the

Company’s preferred stock warrants for the nine months ended September 30, 2023 (includes the conversion effect in the liquidation

preference of accrued dividends):

Company’s preferred stock warrants for the three months ended March 31, 2024:

(in thousands)

Outstanding, December 31, 2023

Warrants issued

Warrants contingently issuable

Warrants exercised

Outstanding, September 30, 2023

Outstanding, March 31, 2024

Stock-based Compensation

9 unchanged sentences

meeting on June 26, 2023.

Shareholders approved an increase to the number of shares reserved on June 26, 2023, and accordingly, at September

Shareholders approved an increase to the number of shares reserved on June 26, 2023, and accordingly, at March

31, 2024, approximately 12,775,996 shares are reserved for issuance.

2 unchanged sentences

December 31, 2023, approximately 2,815,503 shares of common stock were available under the 2021 Plan.

As of September 30, 2023, there are

As of March 31, 2024, there are

approximately 2,796,503 shares of common stock available under the 2021 Plan.

The following table summarizes activity for stock

options under all plans for the nine months ended September 30, 2023:

options under all plans for the three months ended March 31, 2024:

(in thousands)

3 unchanged sentences

Options exercised

Outstanding, September 30, 2023

Options vested and exercisable as of September 30, 2023

As of September 30, 2023, the unrecognized compensation

Outstanding, March 31, 2024

Options vested and exercisable as of March 31, 2024

As of March 31, 2024, the unrecognized compensation

cost related to outstanding stock options was $ 4.5 million, which is expected to be recognized as expense over approximately 2.8 years.

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continued service, the restricted stock units shall vest upon the two-year anniversary of the date of grant.

As of September 30, 2023,

the unrecognized compensation cost related to the grant was approximately $ 5,000 , which is expected to be recognized as expense over approximately

As of March 31, 2024, the

unrecognized compensation cost related to the grant was approximately $ 3,000 , which is expected to be recognized as expense over approximately

During the year ended December 31, 2021, employees

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A portion of these options were

exercised early (prior to vesting), and as of September 30, 2023, 3,005 of the options remained unvested.

Proceeds received related to

the unvested options of approximately $ 10,000 at September 30, 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 approximately $ 21,000 were reclassified to equity during the nine months

ended September 30, 2023.

The vested portion of the exercises was 380,709 shares at September 30, 2023.

exercised early (prior to vesting), and as of March 31, 2023, 776 of the options remained unvested.

Proceeds received related to the unvested

options of approximately $ 2,500 at March 31, 2024 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 $ 1,900 were reclassified to equity during the three months ended March 31, 2024.

The vested portion

of the exercises was 382,939 shares at March 31, 2024.

During May 2022, the Company granted a consultant

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continued service, the restricted stock units shall vest upon the two-year anniversary of the date of grant.

As of September 30, 2023,

the unrecognized compensation cost related to the grant was approximately $ 2,000 , which is expected to be recognized as expense over approximately

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.

As of March 31, 2024, the

unrecognized compensation cost related to the grant was approximately $ 800 , which is expected to be recognized as expense over approximately

The Company has recorded stock-based compensation

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

ended September 30, 2022, and 2023, (in thousands):

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

March 31, 2023 and 2024 (in thousands):

Three Months Ended

Nine Months Ended

September 30,

Research and development

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each vesting-tranche for awards with graded vesting.

The midpoint between the vesting date and the maximum contractual expiration

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 underlying the Company’s common stock is determined based on the public market closing price on each date of grant.

assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application

of significant levels of management judgment.

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

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Expected Dividend – Through

September 30, 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

March 31, 2024, 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 %)

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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 nine months ended September 30, 2022:

September 30,

Expected volatility

101.00 – 105.00 %

Risk-free interest rate

2.90 - 2.92 %

Dividend yield

Expected term

The following averaged assumptions were used to

calculate the fair value of awards granted to employees, directors and non-employees for the nine months ended September 30, 2023:

September 30,

There were no equity awards granted to employees, directors and non-employees

for the three months ended March 31, 2023.

The following averaged assumptions were used to calculate the fair value of awards granted

to employees, directors and non-employees for the three months ended March 31, 2024:

Three Months Ended

Expected volatility

104.00 – 108.00 %

Risk-free interest rate

4.35 – 4.36 %

Dividend yield

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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.

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 loss per common share for periods with net losses.

The following table sets forth the computation

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Deemed dividends on Series A-1 Preferred Stock

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Three Months Ended

September 30,

Nine Months Ended

September 30,

Options to purchase common stock

Warrants to purchase common stock

Warrants to purchase convertible preferred stock

Contingently issuable warrants to purchase convertible preferred stock

Subsequent Events

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

What changed 10-Q

Item 1. Financial Statements