Xenetic Biosciences, Inc. 10-Q

ITEM 1 – FINANCIAL STATEMENTS XENETIC BIOSCIENCES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, 2024 December 31, 2023 (Unaudited) ASSETS Current assets: Cash $ 7,298,597 $ 8,983,046 Prepaid expenses, receivables and other 716,381 603,828 Total current assets 8,014,978 9,586,874 Other assets 1,018,352 1,018,352 Total assets $ 9,033,330 $ 10,605,226 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 283,586 $ 240,832 Accrued expenses and other current liabilities 1,304,016 568,753 Total current liabilities 1,587,602 809,585 Total liabilities 1,587,602 809,585 Commitments and contingencies – – Stockholders' equity: Preferred stock, 10,000,000 shares authorized – – Series B, $ 0.001 par value: 1,804,394 shares issued and outstanding as of June 30, 2024 and December 31, 2023 1,804 1,804 Common stock, $ 0.001 par value; 10,000,000 shares authorized as of June 30, 2024 and December 31, 2023; 1,543,802 and 1,543,385 shares issued as of June 30, 2024 and December 31, 2023, respectively; 1,541,101 and 1,540,684 shares outstanding as of June 30, 2024 and December 31, 2023, respectively 1,544 1,544 Additional paid in capital 208,173,105 208,053,935 Accumulated deficit ( 195,703,279 ) ( 193,234,196 ) Accumulated other comprehensive income 253,734 253,734 Treasury stock ( 5,281,180 ) ( 5,281,180 ) Total stockholders' equity 7,445,728 9,795,641 Total liabilities and stockholders' equity $ 9,033,330 $ 10,605,226 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 3 XENETIC BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2024 2023 2024 2023 Revenue: Royalty revenue $ 726,404 $ 651,005 $ 1,237,221 $ 1,256,849 Total revenue 726,404 651,005 1,237,221 1,256,849 Operating costs and expenses: Research and development ( 933,771 ) ( 903,243 ) ( 1,878,092 ) ( 1,498,519 ) General and administrative ( 1,130,029 ) ( 945,950 ) ( 1,964,939 ) ( 1,871,693 ) Total operating costs and expenses ( 2,063,800 ) ( 1,849,193 ) ( 3,843,031 ) ( 3,370,212 ) Loss from operations ( 1,337,396 ) ( 1,198,188 ) ( 2,605,810 ) ( 2,113,363 ) Other income (expense): Other (expense) income ( 21 ) 21,122 31 25,642 Interest income, net 63,447 126,103 136,696 180,204 Total other income 63,426 147,225 136,727 205,846 Net loss $ ( 1,273,970 ) $ ( 1,050,963 ) $ ( 2,469,083 ) $ ( 1,907,517 ) Basic and diluted net loss per share $ ( 0.83 ) $ ( 0.69 ) $ ( 1.60 ) $ ( 1.25 ) Weighted-average shares of common stock outstanding, basic and diluted 1,540,799 1,524,717 1,540,741 1,520,710 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 4 XENETIC BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) THREE MONTHS ENDED JUNE 30, 2024 Preferred Stock Common Stock Accumulated Number of Shares Par Value ($0.001) Number of Shares Par Value ($0.001) Additional Paid in Capital Accumulated Deficit Other Comprehensive Income Treasury Stock Total Stockholders' Equity Balance as of April 1, 2024 1,804,394 $ 1,804 1,543,385 $ 1,544 $ 208,131,009 $ ( 194,429,309 ) $ 253,734 $ ( 5,281,180 ) $ 8,677,602 Issuance of common stock in connection with restricted stock – – 417 – – – – – – Share-based expense – – – – 42,096 – – – 42,096 Net loss – – – – – ( 1,273,970 ) – – ( 1,273,970 ) Balance as of June 30, 2024 1,804,394 $ 1,804 1,543,802 $ 1,544 $ 208,173,105 $ ( 195,703,279 ) $ 253,734 $ ( 5,281,180 ) $ 7,445,728 SIX MONTHS ENDED JUNE 30, 2024 Preferred Stock Common Stock Accumulated Number of Shares Par Value ($0.001) Number of Shares Par Value ($0.001) Additional Paid in Capital Accumulated Deficit Other Comprehensive Income Treasury Stock Total Stockholders' Equity Balance as of January 1, 2024 1,804,394 $ 1,804 1,543,385 $ 1,544 $ 208,053,935 $ ( 193,234,196 ) $ 253,734 $ ( 5,281,180 ) $ 9,795,641 Issuance of common stock in connection with restricted stock – – 417 – – – – – – Share-based expense – – – – 119,170 – – – 119,170 Net loss – – – – – ( 2,469,083 ) – – ( 2,469,083 ) Balance as of June 30, 2024 1,804,394 $ 1,804 1,543,802 $ 1,544 $ 208,173,105 $ ( 195,703,279 ) $ 253,734 $ ( 5,281,180 ) $ 7,445,728 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 5 XENETIC BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) THREE MONTHS ENDED JUNE 30, 2023 Preferred Stock Common Stock Accumulated Number of Shares Par Value ($0.001) Number of Shares Par Value ($0.001) Additional Paid in Capital Accumulated Deficit Other Comprehensive Income Treasury Stock Total Stockholders’ Equity Balance as of April 1, 2023 2,774,394 $ 2,774 1,519,360 $ 1,520 $ 207,838,756 $ ( 189,956,172 ) $ 253,734 $ ( 5,281,180 ) $ 12,859,432 Issuance of common stock to adjust for reverse split rounding – – 15,941 16 ( 16 ) – – – – Share-based expense – – – – 69,389 – – – 69,389 Net loss – – – – – ( 1,050,963 ) – – ( 1,050,963 ) Balance as of June 30, 2023 2,774,394 $ 2,774 1,535,301 $ 1,536 $ 207,908,129 $ ( 191,007,135 ) $ 253,734 $ ( 5,281,180 ) $ 11,877,858 SIX MONTHS ENDED JUNE 30, 2023 Preferred Stock Common Stock Accumulated Number of Shares Par Value ($0.001) Number of Shares Par Value ($0.001) Additional Paid in Capital Accumulated Deficit Other Comprehensive Income Treasury Stock Total Stockholders' Equity Balance as of January 1, 2023 2,774,394 $ 2,774 1,519,360 $ 1,520 $ 207,769,904 $ ( 189,099,618 ) $ 253,734 $ ( 5,281,180 ) $ 13,647,134 Issuance of common stock to adjust for reverse split rounding – – 15,941 16 ( 16 ) – – – – Share-based expense – – – – 138,241 – – – 138,241 Net loss – – – – – ( 1,907,517 ) – – ( 1,907,517 ) Balance as of June 30, 2023 2,774,394 $ 2,774 1,535,301 $ 1,536 $ 207,908,129 $ ( 191,007,135 ) $ 253,734 $ ( 5,281,180 ) $ 11,877,858 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 6 XENETIC BIOSCIENCES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 2,469,083 ) $ ( 1,907,517 ) Adjustments to reconcile net loss to net cash used in operating activities: Share-based expense 119,170 138,241 Changes in operating assets and liabilities: Prepaid expenses, receivables and other ( 112,553 ) ( 762,941 ) Other assets – 362,500 Accounts payable, accrued expenses and other liabilities 778,017 ( 201,841 ) Net cash used in operating activities ( 1,684,449 ) ( 2,371,558 ) Net change in cash ( 1,684,449 ) ( 2,371,558 ) Cash at beginning of period 8,983,046 13,097,265 Cash at end of period $ 7,298,597 $ 10,725,707 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ – $ – The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. 7 XENETIC BIOSCIENCES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The Company Background Xenetic Biosciences, Inc. (“Xenetic” or the “Company”), incorporated in the state of Nevada and based in Framingham, Massachusetts, is a biopharmaceutical company focused on advancing innovative immune-oncology technologies addressing hard to treat cancers. The Company’s proprietary Deoxyribonuclease (“DNase”) platform is designed to improve outcomes of existing treatments, including immunotherapies, by targeting neutrophil extracellular traps (“NETs”), which have been implicated in cancer progression and resistance to cancer treatments. Xenetic is currently focused on advancing its systemic DNase program into the clinic as an adjunctive therapy for pancreatic carcinoma and locally advanced or metastatic solid tumors. Additionally, Xenetic has partnered with biotechnology and pharmaceutical companies to develop its proprietary drug delivery platform, PolyXen ® , and receives royalty payments under an exclusive license arrangement in the field of blood coagulation disorders. As used in this Quarterly Report on Form 10-Q (“Quarterly Report”), unless otherwise indicated, all references herein to “Xenetic,” the “Company,” “we” or “us” refer to Xenetic Biosciences, Inc. and its wholly-owned subsidiaries. The Company, directly or indirectly, through its wholly-owned subsidiaries, Hesperix S.A. (“Hesperix”) and Xenetic Biosciences (U.K.) Limited (“Xenetic UK”), and the wholly-owned subsidiaries of Xenetic UK, Lipoxen Technologies Limited (“Lipoxen”), Xenetic Bioscience, Incorporated and SymbioTec, GmbH (“SymbioTec”), own various United States (“U.S.”) federal trademark registrations and applications along with unregistered trademarks and service marks, including but not limited to XCART™, OncoHist™, PolyXen, ErepoXen™, and ImuXen™, which may be used throughout this Quarterly Report. All other company and product names may be trademarks of the respective companies with which they are associated. Going Concern and Management’s Plan Management evaluates whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. The Company has incurred substantial losses since its inception and expects to continue to incur operating losses in the near-term. The Company believes that its existing resources will be adequate to fund the Company’s operations for a period of at least twelve months from the date of the issuance of these financial statements. However, the Company anticipates it will need additional capital in the long-term to pursue its business initiatives. While the Company believes it has access to capital resources through possible public or private equity offerings, debt financings, corporate collaborations, related party funding, or other means to continue as a going concern, the terms, timing and extent of any future financing will depend upon several factors, including the achievement of progress in its product development programs, its ability to identify and enter into licensing or other strategic arrangements, its continued listing on the Nasdaq Stock Market (“Nasdaq”), and factors related to financial, economic, geo-political, industry and market conditions, many of which are beyond its control. The capital markets for the biotech industry can be highly volatile, which make the terms, timing and extent of any future financing uncertain. 8 2. Risks and Uncertainties Impact of Global Conflicts on Operations The short and long-term implications of Russia’s invasion of Ukraine and conflict in the Middle East are difficult to predict at this time. The imposition of current and future sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our business, financial condition, and results of operations. 3. Summary of Significant Accounting Policies Preparation of Interim Financial Statements The accompanying condensed consolidated interim financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The results for the interim periods are not necessarily indicative of results for the full year. The condensed consolidated financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 21, 2024, and amended on April 26, 2024. On May 15, 2023, the Company effected a reduction, on a 1-for-10 basis , in its authorized common stock, par value $0.001, along with a corresponding and proportional decrease in the number of shares issued and outstanding (the “Reverse Stock Split”). On the effective date of the Reverse Stock Split, (i) every 10 shares of common stock were reduced to one share of common stock, with any fractional amounts rounded up to one share; (ii) the number of shares of common stock into which each outstanding warrant, restricted stock unit (“RSU”), or option to purchase common stock was convertible into was proportionately reduced on the same basis as the common stock; (iii) the exercise price of each outstanding warrant or option to purchase common stock was proportionately increased on a 1-to-10 basis; and (iv) the number of shares of common stock into which each share of preferred stock was convertible into was proportionately reduced on the same basis as the common stock. Unless otherwise indicated, all of the share numbers, share prices, and exercise prices have been adjusted in this Quarterly Report, on a retroactive basis, to reflect this 1-for-10 Reverse Stock Split. Principles of Consolidation The condensed consolidated financial statements of the Company include the accounts of Hesperix, Xenetic UK and Xenetic UK’s wholly owned subsidiaries: Lipoxen, Xenetic Bioscience, Incorporated, and SymbioTec. Certain of the Company’s subsidiaries require guarantees of support from Xenetic. While all intercompany balances and transactions have been eliminated in consolidation, the Company has $0.2 million of cash collateralizing these guarantees. Basic and Diluted Net Loss per Share The Company computes basic net loss per share by dividing net loss applicable to common stockholders by the weighted-average number of shares of the Company’s common stock outstanding during the period. The Company computes diluted net loss per share after giving consideration to the dilutive effect of stock options that are outstanding during the period, except where such non-participating securities would be anti-dilutive. For the three and six months ended June 30, 2024 and 2023, basic and diluted net loss per share are the same in each respective period due to the Company’s net loss position. Potentially dilutive, non-participating securities have not been included in the calculations of diluted net loss per share, as their inclusion would be anti-dilutive. 9 4. Significant Strategic Collaborations Takeda Pharmaceutical Co. Ltd. (together with its wholly-owned subsidiaries, “Takeda”) In October 2017, the Company granted to Takeda the right to grant a non-exclusive sublicense to certain patents related to the Company’s PolyXen technology that were previously exclusively licensed to Takeda in connection with products related to the treatment of blood and bleeding disorders. Royalty payments of approximately $ 0.7 million and $ 1.2 million were recorded as revenue by the Company during the three and six months ended June 30, 2024, respectively, and approximately $ 0.7 million and $ 1.3 million were recorded as revenue by the Company during the three and six months ended June 30, 2023, respectively. These payments are based on single digit royalties on net sales of certain covered products. The Company’s policy is to recognize royalty payments as revenue when they are reliably measurable, which is upon receipt of reports from Takeda. The Company receives these reports in the quarter subsequent to the actual sublicensee sales. At the time the revenue was received, there were no remaining performance obligations and all other revenue recognition criteria were met. Belgian Volition SARL Limited (“Volition”) Collaboration On August 2, 2022, the Company announced a research and development collaboration with Volition to develop NETs-targeted adoptive cell therapies for the treatment of cancer. The collaboration is an early exploratory program to evaluate the potential combination of Volition’s Nu.Q ® technology Test and the Company’s DNase-Armored CAR T platform to develop proprietary adoptive cell therapies potentially targeting multiple types of solid cancers. Under the terms of the collaboration agreement, Volition will fund a research program and the two parties will share proceeds from commercialization or licensing of any products arising from the collaboration. To date, Volition has funded $26,000 under this agreement. Catalent Pharma Solutions LLC (“Catalent”) On June 30, 2022, the Company entered into a Statement of Work (the “SOW”) with Catalent to outline the general scope of work, timeline, and pricing pursuant to which Catalent will provide certain services to the Company to perform cGMP manufacturing of the Company’s recombinant protein, Human DNase I. The parties agreed to enter into a Master Services Agreement that will contain terms and conditions to govern the project contemplated by the SOW and that will supersede the addendum to the SOW containing Catalent's standard terms and conditions. The Company has paid Catalent approximately $ 2.5 million through June 30, 2024, of which approximately $ 28,000 and $ 0.1 million has been recognized as an advance payment and is included in prepaid expenses, receivables and other current assets as of June 30, 2024 and December 31, 2023, respectively, and approximately $ 49,000 has been recognized as a liability and is included in accrued expenses and other current liabilities as of June 30, 2024. There was no accrual as of December 31, 2023. In addition, approximately $ 0.3 million has been recognized within other assets as of both June 30, 2024 and December 31, 2023. Scripps Research Institute (“Scripps Research”) On March 17, 2023, the Company and Scripps Research entered into a Research Funding and Option Agreement (the “Agreement”), pursuant to which the Company has agreed to provide Scripps Research an aggregate of up to $0.9 million to fund research relating to advancing the pre-clinical development of the Company’s DNase oncology platform technology. Under the Agreement, the Company has the option to acquire a worldwide exclusive license to Scripps Research’s rights in the Technology or Patent Rights (as defined in the Agreement), as well as a non-exclusive, royalty-free, non-transferrable license to make and use TSRI Technology (as defined in the Agreement) solely for the Company’s internal research purposes during the performance of the research program contemplated by the Agreement. During the second quarter of 2024, the Company amended the Agreement to extend the term to October 31, 2024 with no additional funding required. The Company has paid Scripps Research approximately $ 0.9 million under the Agreement through June 30, 2024, of which approximately $ 0.1 million and $ 0.4 million has been recognized as an advance payment and is included in prepaid expenses, receivables and other current assets as of June 30, 2024 and December 31, 2023, respectively. 10 University of Virginia (“UVA”) On December 21, 2023, the Company entered into a Research Funding and Material Transfer Agreement with UVA (the “UVA Agreement”) to advance the development of our systemic DNase program. Under the terms of the UVA Agreement, i n addition to advancing our existing intellectual property, we have an option to acquire an exclusive license to any new intellectual property arising from the DNase research program. Allan Tsung, MD, a member of the Company’s Scientific Advisory Board and Chair of the Department of Surgery at the UVA School of Medicine, will oversee the research conducted under the UVA Agreement. The Company has paid UVA approximately $ 0.2 million under the UVA Agreement through June 30, 2024, which was expensed during the six months ended June 30, 2024. There were no amounts incurred as of December 31, 2023. Other Agreements The Company has also entered into various research, development, license and supply agreements with Serum Institute of India (“Serum Institute”), PJSC Pharmsynthez (“Pharmsynthez”) and SynBio LLC (“SynBio”), a wholly owned subsidiary of Pharmsynthez. The Company and its collaborative partners continue to engage in research and development activities with no resultant commercial products through June 30, 2024. No amounts were recognized as revenue related to the Serum Institute, Pharmsynthez or SynBio agreements during the three and six months ended June 30, 2024 and 2023, respectively. 5. Accrued Expenses and Other Current Liabilities On June 19, 2024, the Company entered into a confidential separation agreement and general release with each of Jeffrey F. Eisenberg, the Company’s former Chief Executive Officer (the “Eisenberg Separation Agreement”), and Curtis Lockshin, the Company’s former Chief Scientific Officer (the “Lockshin Separation Agreement” and together, the “Separation Agreements”) pursuant to which Messrs. Eisenberg and Lockshin were each eligible for certain severance payments and benefits consistent with the terms of their existing employment agreements as described under “Employment Agreements with our Named Executive Officers” in the Amendment No. 1 to Annual Report on Form 10-K/A filed by the Company with the Securities and Exchange Commission on April 26, 2024. In addition, the Eisenberg Separation Agreement provides for accelerated vesting of all of the unvested stock options held by Mr. Eisenberg as of May 16, 2024. As of June 30, 2024, the Company expensed approximately $ 0.8 million of accrued payroll and benefits related to the Separation Agreements. In addition, the Company recorded approximately $ 13,000 of share-based expense for the accelerated vesting of unvested stock options. As of June 30, 2024, approximately $ 0.8 million was accrued within accrued expenses and other current liabilities related to these obligations. 6. Fair Value Measurements Accounting Standards Codification Topic 820, Fair Value Measurement, defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company applies the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 utilizes quoted market prices in markets that are not active, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. Level 3 inputs are unobservable inputs for the asset or liability in which there is little, if any, market activity for the asset or liability at the measurement date. As of June 30, 2024 and December 31, 2023, the carrying amounts of the Company’s financial instruments approximates fair value due to their short maturities. There were no financial instruments classified as Level 3 in the fair value hierarchy during the three and six months ended June 30, 2024 and 2023. 11 7. Stockholders’ Equity Common Stock Each share of the Company’s common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to dividends when and if declared by the Board of Directors. In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company, the holders of common stock are entitled to share ratably in the assets of the Company available for distribution. On May 11, 2023, the Company filed a Certificate of Change to the Company’s Articles of Incorporation with the Secretary of State of Nevada to effect the Reverse Stock Split. The Reverse Stock Split was effective at 12:01 a.m., Eastern Time, on May 15, 2023. No fractional shares were issued as a result of the Reverse Stock Split and any remaining share fractions were rounded up to the nearest whole share, resulting in 15,941 new shares of common stock being issued to existing holders of the Company’s common stock. Warrants The Company has warrants to purchase approximately 462,963 shares of the Company’s common stock (the “Series A Warrants”) outstanding as of both June 30, 2024 and December 31, 2023. The Series A Warrants are immediately exercisable at a price of $ 33.00 per share of common stock and expire on February 23, 2025 . No Series A Warrants were exercised or forfeited during the three and six months ended June 30, 2024 and 2023. In addition, the Company had publicly traded warrants to purchase approximately 2,100 shares of common stock outstanding as of both June 30, 2024 and December 31, 2023. These warrants had an exercise price of $ 130.00 per share of common stock and expired on July 19, 2024 . The warrants ceased trading on Nasdaq under the symbol “XBIOW” upon expiration. The warrants also provided that if the weighted-average price of common stock on any trading day on or after 30 days after issuance is lower than the then-applicable exercise price per share, each warrant may be exercised, at the option of the holder, on a cashless basis for one share of common stock. None of these warrants were exercised or forfeited during the three and six months ended June 30, 2024 and 2023. The Company also has warrants to purchase approximately 800 shares of the Company’s common stock outstanding as of both June 30, 2024 and December 31, 2023. These warrants have an exercise price of $ 29.09 per share of common stock and expire on July 3, 2026 . None of these warrants were exercised or forfeited during the three and six months ended June 30, 2024 and 2023. 8. Share-Based Expense Total share-based expense related to stock options and RSU’s was approximately $42,000 and $0.1 million for the three months ended June 30, 2024 and 2023, respectively, and approximately $0.1 million and $0.1 million for each of the six months ended June 30, 2024 and 2023. Share-based expense is classified in the condensed consolidated statements of operations as follows: Schedule of share-based compensation expense Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Research and development expenses $ ( 3,804 ) $ 13,778 $ 11,433 $ 27,466 General and administrative expenses 45,900 55,611 107,737 110,775 $ 42,096 $ 69,389 $ 119,170 $ 138,241 12 Employee Stock Options and RSU’s During the three and six months ended June 30, 2024, 20,000 stock options to purchase shares of common stock were granted by the Company. No stock option awards to purchase shares of common stock were granted during the three and six months ended June 30, 2023. No RSUs were granted during each of the three and six months ended June 30, 2024 and 2023. The Company recognized a total of approximately $ 42,000 and $ 0.1 million of share-based expense related to employee stock options during the three months ended June 30, 2024 and 2023, respectively, and $ 0.1 million during each of the six months ended June 30, 2024 and 2023, respectively. The Company issued 417 shares of common stock during the three and six months ended June 30, 2024 related to RSU’s. No employee stock options were exercised during the three and six months ended June 30, 2024 and 2023. During the three and six months ended June 30, 2024 stock options to purchase 11,667 shares of common stock were forfeited. No employee stock options expired during the three and six months ended June 30, 2023. Non-Employee Stock Options There were no non-employee stock options granted or exercised during the three and six months ended June 30, 2024 and 2023, respectively. No non-employee stock option grants expired during the three and six months ended June 30, 2024. During the six months ended June 30, 2023, non-employee stock option grants to purchase approximately 100 shares of common stock expired. The Company did not recognize any expense related to non-employee stock options during the three and six months ended June 30, 2024 and 2023, respectively. 9. Income Taxes During the three and six months ended June 30, 2024 and 2023, there was no provision for income taxes as the Company incurred losses during both periods. Deferred tax assets and liabilities reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company records a valuation allowance against its deferred tax assets as the Company believes it is more likely than not the deferred tax assets will not be realized. The valuation allowance against deferred tax assets was approximately $ 40.4 million and $ 39.7 million as of June 30, 2024 and December 31, 2023, respectively. As of June 30, 2024 and December 31, 2023, the Company did no t record any unrecognized tax positions. 10. Related Party Transactions The Company has entered into various research, development, license and supply agreements with Serum Institute and Pharmsynthez, each a related party whose relationship has not materially changed from that disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 21, 2024, as amended on April 26, 2024. During the fourth quarter of 2019, the Company entered into a loan agreement with Pharmsynthez (the “Pharmsynthez Loan”), pursuant to which the Company advanced Pharmsynthez an aggregate principal amount of up to $ 500,000 to be used for the development of a specific product under the Company’s Co-Development Agreement with Pharmsynthez. The Pharmsynthez Loan had an initial term of 15-months and accrued interest at a rate of 10% per annum. The Pharmsynthez Loan was guaranteed by all of the operating subsidiaries of Pharmsynthez, including SynBio and AS Kevelt, and was secured by all of the common and preferred stock of the Company owned by Pharmsynthez and SynBio. Pharmsynthez paid all obligations due under the Pharmsynthez Loan in May 2023, and no further amounts are due under the Pharmsynthez Loan. As a result, no amounts were outstanding as of June 30, 2024 and December 31, 2023. The Company did not recognize any interest income related to the Pharmsynthez Loan during the three and six months ended June 30, 2024. The Company recognized approximately $ 65,000 of income related to interest and fees associated with the Pharmsynthez Loan including approximately $ 40,000 related to interest income during the three and six months ended June 30, 2023. 13