What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-13 compared with 2023-11-14 · 162 added, 263 removed, 258 unchanged (62% of the section changed)

2 unchanged sentences

Forward Looking Statements

This Quarterly Report on Form 10-Q for the three

months ended September 30, 2023, contains “forward-looking statements” within the meaning of the Securities Act of 1933, as

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

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

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

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

period ended March 31, 2024 contains “forward-looking statements” within the meaning of the Securities Act of 1933, as amended

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

These forward-looking

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

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

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

These forward-looking statements

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

risks and changes in circumstances that are difficult to predict.

28 unchanged sentences

We are a biotechnology company dedicated to developing

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

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

Our development programs are focused on the development

5 unchanged sentences

Our initial focus is developing drugs and getting them approved

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

According to estimates

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

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

hyperphosphatemia.

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

patients, and approximately 180 thousand patients with ESRD have hyperphosphatemia.

The number of patients with ESRD is increasing steadily

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

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

According to United States

Renal Data System (USRDS) 2022 Annual Data Report, 30 million (14%) of adults in the United States are estimated to have CKD and, of these,

approximately 13 million patients have advanced CKD (stage 3-5).

Approximately 550,000 patients (ESRD) are on dialysis and of those, approximately

450,000 patients (~80%) take phosphate binders to control hyperphosphatemia hyperphosphatemia (too much phosphorus in their blood).

number of patients with ESRD in the U.S.

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

AKI is a sudden episode of kidney failure or kidney

1 unchanged sentence

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

AKI affects over 2

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

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

and is caused by multiple etiologies.

AKI affects more than

2 million US patients and costs the healthcare system in excess of $9 billion per year.

More than 300,000 patients per year in the U.S.

die due to AKI that has many causes.

Our business model is to license technologies

5 unchanged sentences

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

Since our formation we have devoted substantially

all of our resources to developing our product candidates.

Since our formation we have devoted substantially all of our resources

to developing our product candidates.

We have incurred significant operating losses to date.

Our net losses were

$12.7 million and $22.7 million for the nine months ended September 30, 2022, and 2023, respectively.

As of September 30, 2023, we

had an accumulated deficit of $56.7 million.

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

product candidates through pre-clinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed

to commercialization;

acquire, discover, validate and develop additional product candidates;

obtain, maintain, protect and enforce our

intellectual property portfolio;

and hire additional personnel.

Our net losses were $14.6 million and $20.9 million

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

As of March 31, 2024, we had an accumulated deficit of $85.5

We expect that our operating expenses will increase significantly as we advance our product candidates through pre-clinical and

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

acquire, discover, validate

and develop additional product candidates;

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

and hire additional

We have funded our operations primarily from the

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

Officer and principal stockholder.

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

our Chief Executive Officer and principal stockholder.

Our ability to generate

8 unchanged sentences

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

We plan to continue to

use third-party service providers, including contract manufacturing organizations, to carry out our pre-clinical and clinical development

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

Recent Developments

On March 3, 2023, we entered into a securities

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

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

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

gross proceeds and initial upfront funding of $30 million.

Pursuant to the Certificate of Designation of

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

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

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

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

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

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

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

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

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

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

Warrant Shares”.

The Tranche A warrants for an aggregate exercise price of approximately $25 million are exercisable until 21 days

following our announcement of receipt of FDA approval for Oxylanthanum Carbonate, the Tranche B warrants for an aggregate exercise price

of approximately $25 million are exercisable until 21 days following our announcement of receipt of Transitional Drug Add-On Payment Adjustment

(“TDAPA”) approval for Oxylanthanum Carbonate, and the Tranche C Warrant for an aggregate exercise price of approximately

$50 million are exercisable until 21 days following four quarters of commercial sales of Oxylanthanum Carbonate following receipt of TDAPA

Subject to the terms and limitations contained

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

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

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

On 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.

On the tenth (10th) Trading Day (as defined in the Certificate of Designation) following

the announcement of the Stockholder Approval, each share of Series A-1 Preferred Stock automatically converted into a Unit.

the limitations set forth in the Certificate of Designation, at the option of the holder, shares of Series A-2 Preferred Stock, Series

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

into Common Stock.

In addition, in connection with the Offering,

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

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

shall equal at least seventy-five percent (75%) of our annual net cash flow from operations following approval of Oxylanthanum Carbonate

by the FDA, if obtained, and the commencement of commercial sales.

The COVID-19 Pandemic and its Impacts on Our

On March 13, 2024, the Company signed a securities purchase agreement

with certain healthcare-focused institutional investors that provided $50 million in gross proceeds to us through a private placement.

Pursuant to the securities purchase agreement, the Company issued to institutional purchasers $50.0 million in shares of the Company’s

Series B Convertible Preferred Stock.

50,000 Shares of Series B Convertible Preferred Stock were issued at a price of $1,000.00 per share

and are convertible into common stock at $1.00 per share.

The COVID-19 Pandemic and its Impact on Our

In March 2020, the World Health Organization declared

17 unchanged sentences

Research and Development Expenses

Substantially all our research and development

Substantially all of our research and development

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

4 unchanged sentences

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

research and development technology (“IPR&D”).

We expense both internal and external research and development expenses

as they are incurred.

We do not allocate our costs by product candidate,

as a significant amount of research and development expenses include internal costs, such as payroll and other personnel expenses, laboratory

supplies and allocated overhead, and external costs, such as fees paid to third parties to conduct research and development activities

on our behalf, are not tracked by product candidate.

research and development technology.

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

We do not allocate our costs by product

candidate, as a significant amount of research and development expenses include internal costs, such as payroll and other personnel expenses,

laboratory supplies and allocated overhead, and external costs, such as fees paid to third parties to conduct research and development

activities on our behalf, are not tracked by product candidate.

We expect our research and development expenses

20 unchanged sentences

Results of Operations

Comparison of the Three Months Ended September

Comparison of the Three Months Ended March 31,

2023 and 2024

2 unchanged sentences

Three Months Ended

September 30,

Licensing revenues:

10 unchanged sentences

Licensing Revenues

Licensing revenues of $1.0 million were recorded

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

in July 2022.

We received an upfront payment of $1.0 million.

Licensing revenues of approximately $0.7 million

were recorded in the three months ended March 31, 2023.

There was no comparable revenue earned in the current period.

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

Research and Development Expenses

Research and development expenses decreased by approximately $1.4 million,

or 30%, from approximately $4.8 million for the three months ended September 30, 2022, to approximately $3.4 million for the three months

ended September 30, 2023.

A decrease in drug development costs of approximately $1.9 million was due to completion of significant preclinical

development work in the prior period.

The decrease in development costs was partially offset by increases in labor costs of $156,000 and

non-cash stock compensation costs of $348,000.

General and Administrative Expenses

General and administrative expenses increased

by $864,000, or 51%, from approximately $1.7 million for the three months ended September 30, 2022, to approximately $2.6 million for

the three months ended September 30, 2023, primarily due to an increase of $392,000 in consulting and professional services costs.

expenses for directors and officers decreased $107,000.

Stock compensation costs increased $316,000 from the prior period.

Labor, travel,

rent, and other costs increased $263,000.

Other Income (Expenses)

Other income (expenses) changed by $1.6 million, or 53,600%, from $3,000

in the three months ended September 30, 2022, to $1.6 million for the three months ended September 30, 2023, due primarily to the change

in fair value of our warrant liability.

In addition, we earned interest income of $227,000 on our cash balance during the three months

ended September 30, 2023.

Comparison of the Nine Months Ended September

30, 2022, and 2023

The following table summarizes our results of

operations for the periods indicated (in thousands):

Nine Months Ended

September 30,

Licensing revenues:

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expenses):

Interest income

Interest expense

Change in fair value of warrant liability

Total other income (expenses)

Licensing Revenues

Licensing revenues decreased approximately $0.3

million, or 29%, from the nine months ended September 30, 2022, due to a smaller upfront payment of approximately $0.7 million associated

with a licensing agreement entered into with Lotus International Pte Ltd.

in February 2023.

We entered into a licensing agreement with

Lee’s Pharmaceutical (HK) Limited in July 2022 and received an upfront payment of $1.0 million.

We may earn additional

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

Research and Development Expenses

Research and development expenses increased by

approximately $73,000, or 1%, from approximately $8.6 million for the nine months ended September 30, 2022, to approximately $8.7 million

for the nine months ended September 30, 2023.

approximately $3.8 million, or 125%, from approximately $3.0 million for the three months ended March 31, 2023, to approximately $6.8

million for the three months ended March 31, 2024.

The increase in research and development expenses was primarily due to a $3.6 million

increase in labor costs.

Non-cash stock compensation increased $312,000.

The increases were partially offset by a decrease in drug development

costs of $678,000.

increase in drug development costs.

Labor costs increased $50,000 from the prior period.

Consulting and other costs increased $59,000.

Non-cash stock compensation costs increased $146,000.

General and Administrative Expenses

General and administrative expenses increased

by $1.4 million, or 27%, from approximately $5.1 million for the nine months ended September 30, 2022, to approximately $6.5 million for

the nine months ended September 30, 2023 primarily due to an increase of $1.3 million in consulting and professional services costs.

costs increased $236,000, and travel, rent, and other costs increased $261,000.

The increases were partially offset by a decrease in insurance

expenses for directors and officers of $436,000.

by $544,000, or 29%, from approximately $1.8 million for the three months ended March 31, 2023, to approximately $2.4 million for the

three months ended March 31, 2024 primarily due to an increase of $232,000 in non-cash stock compensation costs.

Insurance expense for

directors and officers decreased $97,000.

Labor costs increased $188,000 from the prior period.

Travel, rent, and other costs increased

Other Income (Expenses)

Other income (expenses) changed by $8.3 million, or 276,067%, from

$3,000 in the nine months ended September 30, 2022, to $8.3 million for the nine months ended September 30, 2023 due primarily to the

change in fair value of our warrant liability.

We earned interest income of $475,000 on our cash balance during the nine months ended

September 30, 2023 that was partially offset by a $60,000 increase in interest expense.

Other income (expenses) increased $1.4 million,

or 13%, from $10.4 in the three months ended March 31, 2023 to $11.8 million for the three months ended March 31, 2024 due primarily to

a change in fair value of our warrant liability.

Liquidity and Capital Resources

1 unchanged sentence

Since our formation through December 31,

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

and principal stockholder.

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

In connection with our initial public offering

(“IPO”), on July 13, 2021, we began trading on the Nasdaq Capital Market under the symbol “UNCY”, and on July

15, 2021 we received approximately $22.3 million in net proceeds after deducting the underwriting discounts, commissions and offering

We have used the net proceeds from the IPO to complete pre-clinical and clinical studies, submit regulatory filings to the FDA,

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

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

Officer and principal stockholder.

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

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

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

We have used the net proceeds

from the IPO to complete pre-clinical and clinical studies, submit regulatory filings to the FDA, and for general and corporate purposes,

including hiring additional management and conducting market research and other commercial planning.

Future revenue streams may consist of collaboration

or licensing revenue as well as product sales.

We have generated approximately $0.7 million in licensing revenue during the nine months

ended September 30, 2023.

On March 3, 2023, we entered into a securities

purchase agreement with certain healthcare-focused institutional investors that may provide up to $130.0 million in gross proceeds through

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

a private placement and that included initial upfront funding of $30.0 million.

Proceeds from the offering will be used to support our

2 unchanged sentences

for the commercial launch of Oxylanthanum Carbonate in the U.S.

On March 13, 2024, the Company entered into a securities purchase agreement

with certain accredited investors pursuant to which we agreed to issue and sell, in a private placement, 50,000 shares of our Series B

Convertible Preferred Stock, par value $0.001 per share at a purchase price of $1,000 per share with an initial conversion price of $1.00

per share, for an aggregate purchase price of $50.0 million.

Future Funding Requirements

We have incurred net losses since our inception.

For the nine months ended September 30, 2023, we had a net loss of $22.7 million, and we expect to incur substantial additional losses

in future periods.

As of September 30, 2023, we had an accumulated deficit of $56.7 million.

We expect to continue incurring losses in

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

development initiatives and penetrate markets for the sale of our products.

We believe that we will continue to have access to

capital resources through possible equity offerings, debt financing, corporate collaborations or other means.

There can be no

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

unable to secure additional capital, we may be required to curtail any clinical trials and development of new or existing products

and take additional measures to reduce expenses in order to conserve our cash in amounts sufficient to sustain operations and meet

our obligations.

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.

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.

For the three months ended March 31, 2024, we had a net loss of $20.9 million, and we expect to incur substantial additional losses in

future periods.

As of March 31, 2024, we had an accumulated deficit of $85.5 million.

We expect to continue incurring losses in the

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

and penetrate markets for the sale of our products.

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

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

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

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

If we are unable to secure additional capital, we may be required to

curtail any clinical trials and development of new or existing products and take additional measures to reduce expenses in order to conserve

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

Based on our current level of expenditures, we believe

that we have sufficient resources such that there is not substantial doubt about our ability to continue operations for at least one year

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

We anticipate that we will need to raise substantial

29 unchanged sentences

If we are unable to raise additional funds when needed, we may be required to delay, reduce,

or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to others’

rights to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

we are required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that

limit our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders,

or terminate some or all of our development programs and clinical trials or we may also be required to sell or license to others rights

to our product candidates in certain territories or indications that we would prefer to develop and commercialize ourselves.

required to enter into collaborations and other arrangements to supplement our funds, we may have to give up certain rights that limit

our ability to develop and commercialize our product candidates or may have other terms that are not favorable to us or our stockholders,

which could materially affect our business and financial condition.

Related Party Payable

We entered into a Service Agreement with Globavir

Biosciences, Inc.

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

Globavir provides administrative and

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

amended term of the Service Agreement expired on December 31, 2020, and the agreement automatically renews for successive one-month periods

after the initial termination date.

Pursuant to the Service Agreement, the Company paid Globavir $50,000 per month through December 31,

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

During the fourth quarter of 2021, after initially determining that future

services under the Service Agreement were no longer required, the Company wrote off the $28,000 remaining prepaid balance due from Globavir

as of December 31, 2021.

During the year ended December 31, 2022, after determining that although a shared office space is no longer utilized,

consulting services continued to be provided, the Company amended the Service Agreement to reflect the consulting services at a reduced

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

The Company has not entered into any additional agreements with

Globavir during the nine months ended September 30, 2023.

R elated Party Payable

The Company received advances from the stockholder

of $210,000 during February 2023.

The Company repaid amounts owed to the stockholder of $210,000 plus accrued interest during March 2023.

Summary of Cash Flows

1 unchanged sentence

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

Nine Months Ended

September 30,

Three Months Ended

Net cash (used in) provided by:

2 unchanged sentences

Financing activities

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Cash Flows from Operating Activities

Net cash used in operating activities was $6.5

million for the nine months ended September 30, 2023.

million for the three months ended March 31, 2024.

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

1 unchanged sentence

compliance, and legal services.

The increase in cash used compared to the same period in the prior year is due primarily to increased

professional services and labor costs in 2023.

We expect to continue to incur substantial costs related to our drug candidates.

Net cash used in operating activities was $3.9

million for the nine months ended September 30, 2022.

million for the three months ended March 31, 2023.

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

3 unchanged sentences

Net cash used in investing activities was $6,000

for the nine months ended September 30, 2023, and was due to the purchase of furniture and fixtures for our corporate office.

Net cash used in investing activities was $2,000

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

for the three months ended March 31, 2024 and was due to the purchase of furniture and fixtures for our corporate office.

There were no comparable fixed asset purchases

during the current three months ended March 31, 2023.

Cash Flows from Financing Activities

Net cash provided by financing activities was

$27.7 million during the nine months ended September 30, 2023, due primarily to the private placement financing agreement we signed on

March 3, 2023.

There were no cash flows provided by financing

activities during the nine months ended September 30, 2022.

$45.7 million during the three months ended March 31, 2024 due primarily to the private placement financing agreement we signed on March

Net cash provided by financing activities was

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

Critical Accounting Policies, Significant Judgments and Use of Estimates

Our financial statements have been prepared in

accordance with U.S.

Our financial statements have been prepared

in accordance with U.S.

generally accepted accounting principles (“GAAP”).

The preparation of these financial statements requires

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

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

Our estimates are

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

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

The preparation of these financial statements

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

contingent assets and liabilities at the date of the financial statements and the reported expenses incurred during the reporting

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the

circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are

not readily apparent from other sources.

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

We consider our critical accounting

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

value of warrants contingently issued as part of our March 2023 private placement financing represents a material addition to our critical

accounting policies and estimates.

There have been no other material changes to our critical accounting policies and estimates during

the nine months ended September 30, 2023, from those used for the year ended December 31, 2022.

The below policies represent our critical

accounting policies.

We consider our critical accounting policies and estimates to be related to revenue, research and development, stock-based

compensation, debt and equity classification and warrant liabilities.

There have been no other material changes to our critical

accounting policies and estimates during the three months ended March 31, 2024 from those used for the year ended December 31, 2023.

The below policies represent our critical accounting policies.

Revenue Recognition

We apply ASC 606, Revenue from Contracts with

Customers, for our revenue recognition guidance.

This includes the development of new policies based on the five-step model provided in

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

We recognize 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 we expect to be entitled in exchange for those goods and services.

To achieve this core principle, we apply

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 we satisfy a performance

Warrant Liabilities

We implemented ASC 606, Revenue from Contracts

with Customers.

This 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.

We recognize revenue from product sales or services

rendered when control of the promised goods are transferred to a counterparty in an amount that reflects the consideration to which we

expect to be entitled in exchange for those goods and services.

To achieve this core principle, we apply the following five steps:

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 we satisfy a performance obligation.

Debt and Equity Classification

In conjunction with the issuance of Series A-1

Preferred Stock (see Note 10), we established a warrant liability as of March 3, 2023, representing the fair value of warrants that may

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

We account for these warrants as liabilities

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

of the Company.

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

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

at fair value each reporting period.

Preferred Stock in March 2023, and in conjunction with the issuance of Series B-1 Preferred Stock in March 2024, we initially account

for the preferred stock as temporary, or mezzanine, equity.

The Series A-1 and Series B-1 Preferred Stock do not fall within the scope

of ASC 480, Distinguishing Liabilities from Equity , do not contain any embedded derivatives that require bifurcation, and are not

classified as liabilities.

However, as the Series A-1 and Series B-1 Preferred Stock, at issuance, are contingently redeemable upon the

occurrence of an event that is not solely within our control, they are required to be initially classified as mezzanine equity and measured

at the amount of net proceeds received.

As the Series A-1 and Series B-1 Preferred Stock are not currently redeemable or probable of becoming

redeemable, no subsequent remeasurement is required.

Warrant Liabilities

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

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

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

We account for these warrants as liabilities (in accordance

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

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

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

each reporting period.

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

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

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

liabilities are measured using Level 3 fair value inputs.

See Note 12 for a description of warrant liabilities and the related valuations.

Research and Development

52 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis