FEMASYS INC

Organization and Nature of Business

Femasys Inc. (the Company or Femasys) was incorporated in Delaware on February 19, 2004 and is headquartered in Suwanee, Georgia. The Company is a leading biomedical company focused on addressing significant unmet needs of women worldwide with a broad portfolio of in-office, accessible, and innovative therapeutic and diagnostic products solutions, including a lead revolutionary product candidate and FDA-cleared products. The Company’s mission is to provide women with superior minimally-invasive, non-surgical product technologies, accessible in the office, improving patient care and overall health economics focused on servicing the reproductive health needs for those seeking solutions for infertility issues (FemaSeed®) or permanent birth control (FemBloc®). The Company currently operates asone segment with an initial focus on servicing the reproductive health needs for those seeking solutions for infertility issues or permanent birth control.

Femasys has an expansive intellectual property portfolio which covers both design and utility patents in the U.S. and significant ex-U.S. markets for each product initiative. Femasys has taken concepts internally conceived and protected through development, including domestic and foreign regulatory approvals, and production, through in-house manufacturing. FemaSeed, a solution which enables directed intratubal insemination to improve on traditional intrauterine insemination (IUI) and provides a lower cost option to in vitro fertilization methods, received approval to sell FemaSeed in Canada in April 2023. In September 2023 the Company received 510(k) clearance from the FDA for FemaSeed for intratubal insemination. The clinical trial was still ongoing at the time of receiving regulatory clearance, however, enrollment was completed in November 2023. FemVue®, a solution that enables fallopian tube assessment with ultrasound as an alternative to the radiologic approach (hysterosalpingogram) for the diagnosis of infertility, is approved for sale in the U.S., Japan, and Canada. FemChec®, allows for fallopian tube evaluation after a FemBloc procedure to confirm occlusion (or procedure success). FemCerv® is a solution for complete tissue sampling with minimal contamination of the endocervical canal as an alternative to the single biopsy method, and is approved for sale in the U.S. and Canada. FemCath®™, allows for selective evaluation of an individual fallopian tube as an alternative to the traditional intrauterine catheter that is undirected, is approved for sale in the U.S. and Canada. FemBloc, the Company’s solution for permanent birth control, is based on the Company’s non-surgical platform technology and in June 2023 Femasys received FDA approval of our IDE to evaluate the safety and efficacy of FemBloc, our non-surgical, non-implant, in-office solution for permanent birth control in a pivotal clinical trial. In August 2023 Femasys announced the initiation of enrollment in the FINALE [Prospective Multi-Center Trial for FemBloc Intratubal Occlusion for TranscervicAL Permanent Birth Control] pivotal trial designed to evaluate the safety and efficacy of FemBloc. This prospective, multi-center, open-label, single-arm study design includes pregnancy rate as the primary endpoint, which will be analyzed once 401 women have used FemBloc forone year for permanent birth control. In addition, the study is designed as a roll-in beginning with enrollment of 50 women for a clinical readout primarily of preliminary safety data prior to enrolling the remaining subjects. An interim analysis of clinical data endpoints is planned once 300 women have used FemBloc for permanent birth control forone year. Follow-up will continue annually forfive years post-market.

Basis of Presentation

The Company has prepared the accompanying financial statements pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC).

Liquidity

The Company had previously disclosed in the financial statements as of and for the year ended December 31, 2022, that substantial doubt regarding the Company’s ability to continue as a going concern existed. The Company has incurred net operating losses in every year since inception and has an accumulated deficit as of December 31, 2023 of $108,381,629. For the year ended December 31, 2023, the Company generated a net loss of $14,247,124. The Company expects such losses to increase over the next few years as the Company advances FemBloc through clinical development until FDA approval is received and the product is available to be marketed.

Although the Company has a history of negative cash flows from operations and losses, the Company raised $20,800,182, net during 2023 (see Notes 7 and 9). As of December 31, 2023, the Company has cash and cash equivalents of $21,716,077. Based on the improvement in its cash position during 2023, the Company believes it has sufficient financial resources to fund operations and meet its capital requirements and anticipated obligations as they come due in the next twelve months. Therefore, the Company has concluded that the conditions and events raising substantial doubt no longer exist. The Company plans to finance its operations and development needs with its existing cash and cash equivalents, in the future with additional equity and/or debt financing arrangements, and revenue primarily from the sale of FemVue and FemaSeed to support the Company’s research and development activities, largely in connection with FemBloc. While we believe that our cash will provide sufficient cash to fund operations to meet our capital requirements and anticipated obligations as they become due, uncertainty around the Company’s product acceptance in the market could have a negative impact on our liquidity.

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 not able to obtain sufficient funds on acceptable terms when needed, the Company’s business, results of operations, and financial condition could be materially adversely impacted. The Company’s ability to meet its obligations in the ordinary course of business is dependent upon its ability to manage financing and generate sufficient cash flow to meet its obligations and ultimately to attain profitable operations. Although management plans to ensure the Company will continue as a going concern, there is no assurance that viability can be obtained since the availability and amount of such funding is not certain. As such, there can be no assurance that the Company will be able to obtain additional liquidity if needed or under acceptable terms, if at all.

Thepreparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting periods. The most significant estimates used in these financial statements include stock options, warrants, the valuation of useful lives of property and equipment, and clinical trial cost accruals. Actual results could differ from those estimates.

Most of the products being developed by the Company, such as FemBloc, will require approval from the FDA or corresponding foreign regulatory agencies prior to commercial sales. FemaSeed Intratubal Insemination Product, FemCath (formally FemVue) Cornual Balloon Catheter, FemVue Saline‑Air Device, FemChec Pressure Management Device, and FemCerv Endocervical Sampler have achieved FDA clearance. FemaSeed, FemCath and FemCerv have also received approval in Canada and FemVue has also received approval to sell in Canada, Hong Kong and Japan. There can be no assurance the Company’s other products in development will receive the necessary clearances. If the Company is denied clearance or clearance is delayed, it might have a material adverse impact on the Company.

The medical device industry is characterized by frequent and extensive litigation and administrative proceedings over patent and other intellectual property rights. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often difficult to predict, and the outcome may be uncertain until the court has entered final judgment and all appeals are exhausted. The Company’s competitors may assert that its products or the use of its products are covered by United States or foreign patents held by them. If such relevant patents are upheld as valid and enforceable and the Company is found to infringe, the Company could be prevented from selling its products unless it can obtain a license to use technology or ideas covered by such patents or are able to redesign its products to avoid infringement. A license may not be available at all or on commercially reasonable terms, and it may not be able to redesign its products to avoid infringement.

The Company relies on single source suppliers to provide certain components of all its products commercially available and those under development. The Company purchases these components on a purchase order basis. If the Company overestimates its component requirements, it could have excess inventory, which would increase its costs and result in write‑downs harming its operating results. If the Company underestimates its requirements, it may not have an adequate supply, which could interrupt the manufacturing of its products.

Certain of the Company’s financial instruments, including cash, notes payable and other liabilities approximate their fair value because of the short‑term maturity of these financial instruments. The fair value of the Company’s cash equivalents is based on Level 1 inputs, and the fair value of stock options, convertible notes and warrants are based on Level 3 inputs. See Notes 3, 7, 9 and 10 for additional details.

The Company considers all highly liquid investments with an initial maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of amounts invested in money market mutual funds and are stated at fair value. See Note 2(s) for information on concentration of credit risk.

The Company grants trade credit to customers in the normal course of business and does not require collateral or any other security to support its receivables. Management reviews its accounts receivable monthly for any collection issues. Potentially uncollectible accounts are written off to bad debt expense when it is determined that the likelihood a customer account is uncollectible is probable. For the year ending December 31, 2023, the Company hadno write-offs, compared to $977 in 2022. As of December 31, 2023 and 2022, the Company’s reserves for uncollectible accounts were $2,000 and $2,048, respectively.

Inventories are stated at the lower of cost or net realizable value. Cost, which includes amounts related to materials, labor and overhead, is determined on a first‑in, first‑out basis. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.

Management reviews inventories continually for aging or obsolescence and accounts for such items once identified. In 2023 and 2022, the Company disposed of inventory in the amount of $4,409 and $2,847, respectively. As of December 31, 2023 and 2022, the FemVue reserve for slow moving, obsolete, or unusable inventories was $3,580 and $2,103, respectively.

Inventory stated at cost, net of reserve, consisted of the following as of December 31:

The Company has research tax credits that are available to the Company to offset future payroll withholding liabilities. As of December 31, 2023 and 2022, the total amount of these credits is $928,234 and $891,062, respectively. The Company has included these amounts on the accompanying balance sheets as follows as of December 31:

Property and equipment are carried at cost less accumulated depreciation and, if applicable, impairment charges. Expenditures which materially increase value or extend useful lives of assets are capitalized, while maintenance and repairs which do not improve or extend the lives of the respective assets are charged to operations when incurred. Gains and losses on the retirement or disposal of individual assets are included in the results of operations. Depreciation and amortization are computed using the straight‑line method over estimated useful lives of assets as follows:

Depreciation expense for the years ended 2023 and 2022 was $468,391 and $521,151, respectively. In 2023, the Company disposed of property and equipment at a cost of $187,826 with a net book value of $47,538, which is recorded in operating expenses on the statements of comprehensive loss. In 2022, the Company disposed of property and equipment at a cost of $28,234 with a net book value of $2,285, which is recorded in other expense on the statements of comprehensive loss.

The Company reviews long‑lived assets, including property and equipment and definite lived intangibles, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the asset group may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset group and its eventual disposition is less than its carrying amount. Impairment, if any, is measured as the amount by which the carrying amount of a long‑lived asset group exceeds its fair value. The Company hasnot recorded any impairment losses to date.

The Company records operating leases as right-of-use assets and operating lease liabilities in its balance sheets for all operating leases with terms exceedingone year. Right-of-use assets represent the right to use an underlying asset for the lease term, including extension options considered reasonably certain to be exercised, and operating lease liabilities to make lease payments. Right-of-use assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term. To the extent that lease agreements do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the lease commencement date to determine the present value of lease payments. The expense for operating lease payments is recognized on a straight-line basis over the lease term and is included in operating expenses in the Company’s statements of comprehensive loss. Non-lease components included in lease agreements are accounted for separately. The Company records finance leases as right-to-use assets and finance lease liabilities in its balance sheets for all finance leases with terms exceedingone year, similar to operating leases, and records interest expense and depreciation expense on the right-of-use asset in the statements of comprehensive loss.

Intangible assets consist of patent and trademark application costs and related legal fees, carried at cost less accumulated amortization and, if applicable, impairment charges. Amortization is computed using the straight‑line method over a weighted average useful life ofthree years and is recorded in depreciation and amortization expense within the results of operations. Intangible assets consist of the following as of December 31:

Amortization expense for intangible assets for the years ended December 31, 2023 and 2022 was $3,294 and $21,799, respectively.

Deferred offering costs, which consisted mainly of legal, consulting, and accounting fees directly attributable to a strategic financing transaction, were capitalized in accordance with Staff Accounting Bulletin (SAB) Topic 5.AExpenses of Offering, codified in Accounting Standards Codification (ASC) 340-10-S99-1 Other Assets and Deferred Costs.

During 2022, the Company incurred $232,845 in deferred offering costs in connection with prospectuses filed in July 2022, including an offering to sell up to $150 million in stock, debt securities and warrants, and an Equity Distribution Agreement entered into with Piper Sandler which included an at-the-market (ATM) facility. These deferred offering costs will be offset against the total proceeds from the issuance of common stock available under the prospectuses, and the Company will expense any remaining balance of deferred offering costs if $150 million prospectuses is terminated or aborted. As of December 31, 2023, and 2022, the Company offset $17,952 and $95, respectively of deferred offering costs in connection with the gross proceeds issued under the prospectuses.

As of December 31, 2023 and 2022, deferred offering costs capitalized were $214,798 and $232,750, respectively, and are included in other long-term assets in the accompanying balance sheet.

Accrued compensation costs include incentive compensation and unused paid time off. Accrued clinical trial expenses include research and development costs for third-party services, largely related to the Company’s clinical trials, which are estimated based upon the services provided but not yet invoiced. These costs, at times, may be a significant component of the research and development expenses and the Company makes estimates in determining the accrued expense each period. As actual costs become known, the Company adjusts its accrual. Other accrued expenses include director fees, taxes and other miscellaneous accrued expenses.

Accrued expenses consisted of the following as of December 31:

As part of the regulatory approval process for taking its products to market or conducting post-market clinical studies to support marketing efforts for products with regulatory clearance, the Company enters into certain Clinical Trial Agreements (CTAs) which include, among other things, the compensation and payment schedule the participating medical institutions and physicians will receive for all costs in connection with the clinical trial (or study) under the terms of the CTA. As individual patients are enrolled in the study by the participating medical institution or physician, the Company pays certain per study fees according to the CTA for the duration of the trial. As invoices are received by the Company from the medical institution or physician, the Company retains any agreed upon percentage of total invoiced costs, generally ranging between 5% -15%, that is withheld from payment until the end of the study. These retained amounts are recorded as clinical holdback, a liability, on the accompanying balance sheets, and all expenses incurred in connection with these CTA activities are expensed as services are provided, which are included as research and development expenses on the accompanying statements of comprehensive loss.

The following table shows the activity within the clinical holdback liability accounts for the year ended December 31, 2023:

The following table shows the activity within the clinical holdback liability accounts for the year ended December 31, 2022:

The Company accounts for its convertible notes (“Notes”) based on an assessment of the convertible note terms and applicable guidance ASC 470-20, Debt with Conversion and Other Options and ASC 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity. The convertible notes are recorded as a long-term liability in the balance sheets and the Company did not separate the conversion feature from the host contract as it did not meet the requirements for accounting as a derivative instrument. The convertible notes are accounted for as a single liability measured at its amortized cost.

The Company accounts for the warrants issued in conjunction with the convertible notes based on an assessment of applicable guidance under ASC 480, Distinguishing Liabilities from Equity and ASC 815. The warrants are recorded as equity and do not qualify for derivative accounting. Under ASC 470-20, for debt issued with warrants, the Company treats the warrants as a debt discount, recorded as a contra-liability against the debt, and amortize the balance over the life of the underlying debt as interest expense in the statements of comprehensive loss. The offset to the contra-liability is recorded as additional paid-in capital in the balance sheets.

The convertible notes are recorded net of debt issuance costs and a discount. The portion of the debt issuance costs allocated to the convertible notes, based on the amount of proceeds allocated between the convertible notes and warrants, is being amortized over the term of the convertible notes using the effective interest method in addition to the discount initially recognized for the fair value of warrants from the convertible notes. The amortization of debt issuance costs and discount is included in interest expense in the statements of comprehensive loss. If the debt is retired early, the associated debt discount will then recognized immediately as interest expense in the statements of comprehensive loss. See Note 7 for additional information on the November 2023 Financing.

The Company accounts for its common stock warrants as equity-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance under ASC 480 and ASC 815. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether the warrants meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. For issued warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance.

The Company’s policy is to recognize revenue when a customer obtains control of the promised goods under ASC 606, Revenue from Contracts with Customers. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods, and the Company has elected to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price. The Company does not have multiple performance obligations in its customer orders, so revenue is recognized upon shipment of the Company’s goods based upon contractually stated pricing at standard payment terms ranging from 30 to 60 days. All revenue is recognized point in time and no revenue is recognized over time. There wasno revenue recognized during the years ended December 31, 2023 and 2022 from performance obligations satisfied or partially satisfied in prior periods. Additionally, there wereno unsatisfied performance obligations as of December 31, 2023 and 2022.

The majority of products sold directly to U.S customers are shipped via common carrier, and the customer pays for shipping and handling and assumes control Free on Board (FOB) shipping point. Products shipped to the Company’s international distributors are in accordance with their respective agreements; however, the shipping terms are generally EX-Works, reflecting that control is assumed by the distributor at the shipping point. Returns are only accepted with prior authorization from the Company. Items to be returned must be in original unopened cartons and are subject to a 30% restocking fee. As of December 31, 2023, the Company has not had a history of significant returns.

The following table summarizes the Company’s sale primarily from FemVue, by geographic region for the years ending December 31:

The Company entered into a FemVue License, Manufacturing, and Supply Agreement with Bayer Yakuhin, Ltd., a wholly owned subsidiary of Bayer AG, in 2012. The Company sells products based on purchase orders provided by Bayer Yakuhin in accordance with their agreement. Control and risk of ownership transfer at the time of shipment and Femasys records revenue at that time.

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and accounts receivable. As of December 31, 2022, the Company maintained substantially all its cash and cash equivalents primarily in one bank, Silicon Valley Bank (SVB), in amounts which, at times, exceed federally insured limits, which Management believed, at that time, SVB was financially sound and minimal credit risk existed with respect to these holdings. As of March 15, 2023, the Company transferred substantially all of its cash and cash equivalents to another financial institution, Wells Fargo Bank.

The Company generates revenue from sales directly to U.S. customers and to the Company’s international distributors with all prices in U.S. dollars. For the year ended December 31, 2022, Bayer Yakuhin, Ltd. accountedfor 10%of total revenue. No other customers accounted for more than 10% of total revenue for the year ended December 31, 2023. As of December 31, 2023 and 2022, the Company hadtwo customers andone customer, respectively, with accounts receivable balances greater than 10% of total receivables. The balances for these customers were 19% and 11% as of December 31, 2023 and 10% as of December 31, 2022.

The Company’s research and development expenses consist of engineering, product development, and clinical and regulatory expenses and are expensed as incurred. These expenses include direct expenses related to employee compensation, including salary, benefits and stock-based compensation; expenses related to consulting fees, testing fees, materials, and supplies; and activities conducted by third-party service providers, which include the conducting of preclinical studies and clinical trials.

The Company’s sales and marketing expenses consist of direct expenses related to employee compensation, including salary, benefits and stock-based compensation, advertising and marketing, business development, customer service and travel.

The Company’s general and administrative expenses include accounting, human resources, and general corporate expenses. These expenses are primarily related to employee compensation, including salary, benefits, and stock‑based compensation. General corporate expenses generally relate to office rent, utilities, insurance, legal, and professional fees.

Advertising costs are expensed as incurred. Advertising costs were $18,738, and $41,022 for the years ended December 31, 2023 and 2022, respectively. They are reflected in sales and marketing expenses in the statements of comprehensive loss.

Share‑based payments, including grants of stock options, are recognized in the financial statements based on their fair value. The fair value of stock options is estimated using the Black‑Scholes model. This model requires the input of highly subjective assumptions, including the expected term of the award, expected stock volatility, and the price of the underlying shares of stock. Details of the stock‑based compensation and accounting treatment are discussed in Note 10.

The Company utilizes the asset‑and‑liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, as well as the net operating loss, capital loss, and tax credit carry forwards. Valuation allowances are established against deferred tax assets if it is more likely than not that they will not be realized.

ASC 740 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The standard requires that the Company recognize in its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company has determined it hadno unrecognized tax benefits as of December 31, 2023 and 2022.

As of December 31, 2023, the 2020 through 2023 tax years remain subject to examination by federal and most state tax authorities. The use of net operating losses generated in tax years prior to 2020 may also subject returns for those years to examination.

For the years ended December 31, 2023 and 2022, the Company recordedno other income.

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period, without consideration of common stock equivalents. The net loss attributable to common stockholders is calculated by adjusting the net loss of the Company for the cumulative dividends, if any, on the convertible preferred stock. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments, which requires a financial asset (or a group of financial assets) measured at amortized cost to be presented at the net amount expected to be collected. The ASU is intended to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets including trade and financing receivables. The ASU replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. Additionally, from 2016 through 2023, the FASB issued additional related ASUs that provide further guidance and clarification and become effective for the Company upon the adoption of ASU 2016-13. The Company adopted ASU 2016-13 and its related ASUs (collectively referred to as Topic 326) effective January 1, 2023 using a modified retrospective transition approach. As a result, the Company was not required to adjust its comparative period financial information for effects of the standard or make the new required credit loss allowance disclosures for periods before the date of adoption. Prior period amounts continue to be presented in accordance with previously applicable GAAP. The Company’s adoption of this new guidance did not have a material impact on the Company’s financial statements and footnote disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification. ASU 2020-06 is effective for the Company’s annual reporting periods beginning after December 15, 2023. Adoption is either with a modified retrospective method or a fully retrospective method of transition. Early adoption is permitted, but no earlier than annual periods beginning after December 15, 2020. The Company adopted the standard on January 1, 2023 with a fully retrospective transition approach.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 28): Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU improves financial reporting by requiring disclosure of incremental segment information on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Management is currently assessing the impact of this standard on the Company’s financial statements and will adopt the ASU on January 1, 2024.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company’s annual reporting periods beginning after December 15, 2024. Adoption is either with a prospective method or a fully retrospective method of transition. Early adoption is permitted. The Company is currently evaluating the effect that adoption of ASU 2023-09 will have on its financial statements and expects to adopt the ASU on January 1, 2025.

No other new accounting pronouncements not yet effective are expected to have a material impact on the Company’s financial statements.

The Company applies a fair value hierarchy that requires the use of observable market data, when available, and prioritizes the inputs to valuation techniques used to measure fair value in the following categories:

Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.

Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for Identical or similar instruments in markets that are not active, and model‑based valuation techniques for which all significant assumptions are observable in the market.

Level 3 – Valuation is generated from model‑based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect the Company’s own estimates of assumptions market participants would use in pricing the asset or liability.

The Company’s options on common stock and warrants are classified as equity instruments and are measured at fair value at issue date. The Company values the options based on the Black‑Scholes option pricing model. The Company uses unobservable inputs for the model’s assumptions, including management’s assumptions of the Company’s volatility and price of the underlying stock. The Company’s convertible notes are measured at fair value at each reporting period. See Notes 7, 9 and 10 for additional information.

As of December 31, 2023 and 2022, money market funds included in cash and cash equivalents on the balance sheets were $21,278,895 and $12,553,557, respectively, which represent Level 1 within the fair value hierarchy (see Note 3).

As of December 31, 2023, the Company has the right of use for its facilities located in Suwanee, GA under a long-term operating lease agreement, as amended (Lease Agreement), which expires April 2029. The Company has the option (Extension Option) to extend the term forone consecutive term offive years each at the greater of the then current prevailing rental rate or current base rent rate, as agreed by both parties, and upon certain terms and conditions. The Company must provide written notice of its intent to exercise this extension option at between nine and 12 months prior to the expiration date of April 2029. Under the terms of the lease agreement, the Company’s monthly rent is subject to increases on an annual basis. As of December 31, 2023, the Company’s monthly rent payment was $47,029.

Operating right-of-use assets and lease liabilities consist of the following as of December 31:

As of December 31, 2023 and 2022, the weighted average discount rate for all operating leases with initial terms of more than one year was approximately 10% and the weighted average remaining term for operating leases was 5.3 years and 1.1 years, respectively.

The operating lease agreement for the Company’s facility includes non-lease costs, such as common area maintenance, which are recorded as variable lease costs. Operating lease expenses are included in general and administrative expenses in the Company’s statements of comprehensive loss and are summarized as follows for the years ending December 31:

The following table summarizes the Company’s undiscounted cash payment obligations for its operating lease liabilities with initial terms of more than twelve months as of December 31, 2023:

As of December 31, 2022, the Company had the right of use for certain leasehold improvements and office equipment at its facility located in Suwanee, GA. Lease expense was recognized as payment of financing lease, depreciation expense and interest expense. The financing leases ended during 2023.

Financing right-of-use assets and lease liabilities consist of the following as of December 31, 2022:

As of December 31, 2022, the weighted average discount rate for all financing leases with initial terms of more than one year was approximately 10%, and the weighted average remaining term for financing leases was 0.7 years. During 2023, the finance leases reached the end of their lease terms. Depreciation expense associated with the Company’s financing leases was $11,796 and $18,283 for the years ended December 31, 2023 and 2022, respectively. Interest expense associated with the financing leases was $599 and $2,892 for the years ended December 31, 2023 and 2022, respectively.

As part of the regulatory approval process for taking its products to market or conducting post-market clinical studies to support marketing efforts for products with regulatory clearance, the Company enters into a CTA to compensate each participating medical institution and physician. Generally, upon executing a CTA with a participating medical institution or physician, the Company pays a fee for review board approval that usually requires annual renewals and one time site startup costs. As individual patients are enrolled in the clinical trial by the participating medical institution or physician, the Company pays certain per patient fees according to the CTA for the duration of the trial. Expenses incurred in connection with these CTA activities are expensed as services are provided and are included in research and development expenses on the accompanying statements of comprehensive loss.

Occasionally, the Company may be a party to legal claims or proceedings of which the outcomes are subject to significant uncertainty. In accordance with ASC 450, Contingencies, the Company will assess the likelihood of an adverse judgment for any outstanding claim as well as ranges of probable losses. When it has been determined that a loss is probable and the amount can be reasonably estimated, the Company will record a liability. For the years ended December 31, 2023 and 2022, there were no material legal contingencies requiring accrual or disclosure.

The Company, as permitted under Delaware law and in accordance with its bylaws, indemnifies its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director who is or was serving at the Company’s request in such capacity. The Company entered into employment agreements with its officers, which provides for indemnification protection in the executive’s capacity as an officer for actions taken within the scope of employment. The maximum amount of potential future indemnification is unlimited; however, the Company has obtained director and officer insurance that limits its exposure. The Company believes the fair value for these indemnification obligations is minimal. Accordingly, the Company has not recognized any liabilities relating to these obligations as of December 31, 2023 and 2022.

AFCO Credit Corporation (AFCO)

In June 2022, the Company executed a Promissory Note with AFCO to finance certain insurance premiums totaling $465,380, requiring the Company to pay $47,539 in a down payment and make monthly installment payments. The annual interest rate was 5.7% and themonthly installment payment was $47,539, which represents principal and interest. The final installment payment was paid in March of 2023.

In July 2023, the Company executed another Promissory Note with AFCO to finance certain insurance premiums totaling $469,042, requiring the Company to pay $48,423 in a down payment and make monthly installment payments. The annual interest rate was 8.6% and themonthly installment payment was $48,423, which represents principal and interest. The Promissory Note was paid in full without penalty during November 2023.

As of December 31, 2023 and December 31, 2022, the principal balance on the AFCO note was $0 and $141,298, respectively and is included in Note payable in the accompanying balance sheets. Interest expense in connection with the AFCO Promissory Notes was $12,304 and $10,572 for the years ended December 31, 2023 and 2022, respectively.

On November 21, 2023, the Company issued (i) senior unsecured convertible notes in an aggregate principal amount of $6,850,000, convertible into shares of common stock at a conversion price of $1.18 per share, (ii) Series A Warrants to purchase up to an aggregate of 5,805,083 shares of common stock at an exercise price of $1.18 per share, and (iii) Series B Warrants, together with the Series A Warrants, and, together with the convertible notes, to purchase up to an aggregate of 5,805,083 shares of common stock at an exercise price of $1.475 per share. The financing resulted in aggregate gross proceeds of $6,850,000, before $525,144 of transaction costs. The Company intends to use the net proceeds from the offering for general corporate purposes.

The Notes accrue interest at a rate of 6.0% per annum, payable annually, in cash or shares of common stock at the Company’s option, and mature on November 21 2025, unless earlier converted or redeemed.

The Notes are convertible into shares of common stock at the election of the holder at any time at an initial conversion price of $1.18. The Company has agreed not to issue or sell any equity securities of the Company at a price below the then-current conversion price for a period of 18 months after closing, subject to certain exceptions. Beginning six months after issuance, the Company may require holders to convert their Notes into conversion shares if the closing price of the common stock exceeds $2.36 per share for 10 consecutive trading days and the daily dollar trading volume of the common stock exceeds $1,000,000 per day during the same period and certain equity conditions described in the Notes are satisfied. The Notes provide for certain events of default, whereby each holder of Notes will be able to require the Company to redeem in cash any or all of the holder’s Notes at a premium of 115%. The conversion feature did not meet the requirements for separate accounting and is not accounted for as a derivative instrument.

The Warrants

The Series A Warrants are exercisable immediately and expire five years from the date of issuance. The Company has the right to call the exercise of the Series A Warrants if the closing price of the common stock exceeds 200% of the Series A Exercise Price for 10 consecutive trading days and the daily dollar trading volume of the common stock exceeds $1,000,000 per day during the same period and certain equity conditions are satisfied.

The Series B Warrants are exercisable immediately, together with the Series A Warrant Shares, and expireone year from the date of issuance. The Company has the right to call the exercise of the Series B Warrants if the closing price of the common stock exceeds 200% of the Series B exercise price for 10 consecutive trading days and the daily dollar trading volume of the common stock exceeds $1,000,000 per day during the same period and certain equity conditions are satisfied. There is no established public trading market for the warrants and the Company does not intend to list the Warrants on any national securities exchange or nationally recognized trading system.

The Series A Warrants and Series B Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock from which they are issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise.

The Series A and Series B Warrants were valued using the relative fair value method and the following Black-Scholes assumptions:

The November 2023 Financing proceeds of $6,850,000 net of $525,144 in transaction costs were allocated to the convertible notes and Series A and Series B Warrants using the relative fair value method. The valuation of the warrants was $2,219,165 and is recorded as a component of stockholders’ equity, and a total debt discount of $2,744,309. The convertible notes are recorded as a long-term liability, net of discount and issuance costs.

For the convertible notes for the year ended December 31, 2023, the Company recognized total interest expense of $152,488, including coupon interest expense of $44,525 amortization of debt discount and issuance costs of $107,963. The effective interest rate for the discount amortization was 32.3%. The Notes and accrued interest, net of unamortized discount costs was $4,258,179 as of December 31, 2023. The fair value of the convertible notes at December 31, 2023, calculated using a discounted cash flow analysis, was $6,126,151. There wereno convertible notes as of December 31,2022.

Future principal payments under the Notes if the conversion feature is not exercised, net of unamortized debt discounts, are as follows:

The current tax provisions and deferred tax provisions as reflected in the financial statements is as follows as of December 31:

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows as of December 31:

Deferred tax assets (liabilities) consisted of the following as of December 31:

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and the Company is required to reduce its deferred tax assets by a valuation allowance if it is more likely than not that some or all of its deferred tax assets will not be realized. Management must use judgment in assessing the potential need for a valuation allowance, which requires an evaluation of both negative and positive evidence. The weight given to the potential effect of negative and positive evidence should be commensurate with the extent to which it can be objectively verified. In determining the need for and amount of the valuation allowance, if any, the Company assesses the likelihood that it will be able to recover its deferred tax assets using historical levels of income, estimates of future income and tax planning strategies. As a result of historical cumulative losses, the Company determined that, based on all available evidence, there was substantial uncertainty as to whether it will recover recorded net deferred taxes in future periods. Accordingly, the Company recorded a valuation allowance against all of its net deferred tax assets as of December 31, 2023 and 2022. The change in valuation allowance was $3,397,568 and $2,425,019 for the years ended December 31, 2023 and 2022, respectively.

Beginning on January 1, 2022, the Tax Cuts and Jobs Act, enacted in December 2017, eliminated the option to deduct research and development expenditures in the current period and requires taxpayers to capitalize and amortize U.S.-based and non-U.S. based research and development expenditures over five and fifteen years, respectively. This legislation does not impact the Company’s current tax obligations.

As of December 31, 2023 and 2022, respectively, the Company has $90,380,015 and $82,500,567 of federal net operating loss carry forwards and $3,231,910 and $2,838,559 of federal research and experimentation tax credits, respectively, and state net operating loss carry forwards of $12,425,590 and $9,522,312, respectively. The utilization of such net operating loss carryforwards and the realization of tax benefits in future years depend predominately upon having taxable income. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s ownership may result in a limitation on the amount of net operating loss carry forwards and tax credit carry forwards that may be used in future years.

The Company’s net operating losses may be subject to Section 382 of the Internal Revenue Code which provide for a limitation on the annual use of net operating losses following certain ownership changes that could limit the Company’s ability to utilize these carryforwards. The Company has completed an analysis covering the period February 19, 2004 through December 31, 2018, to determine if such ownership changes have occurred and concluded it was more likely than not that there were changes in ownership during the period, with the most recent change of ownership occurring on December 16, 2016. Further analyses will be performed prior to recognizing the benefits of any losses or credits in the financial statements, and the Company is in the process of determining the limitations that Section 382 will have on the Company’s net operating loss carryforwards and research credits. In general, the annual use limitation equals the aggregate value of the Company’s stock at the time of the ownership change multiplied by a specified tax-exempt interest rate.

The following schedule indicates the expiration year, as of December 31, for the Company’s federal net operating loss carryforwards available to future years without taking into account any Section 382 limitations as of December 31, 2023:

The FASB issued authoritative guidance on accounting for uncertainty in income taxes, which clarifies the accounting for income taxes, by prescribing a minimum recognition threshold that a tax position is required to meet before recognition in the financial statements. The guidance also provides direction on recognition, measurement, classification, interest, and penalties, accounting in interim periods, disclosure, and transition. Management has determined there are no uncertain tax positions. Accordingly, these financial statements do not include any adjustments or disclosures related to uncertain tax positions.

The Company’s Board of Directors approved in January 2017 the Tenth Amended and Restated Certificate of Incorporation authorizing the Company to issue for all classes of stock 169,000,000 shares at $0.001 par value per share, of which 95,853,558 shares were designated common stock and 73,146,442 shares were designated Preferred Stock.

In June 2021, the Company issued 2,650,000 shares of common stock in connection with the Company’s IPO of its common stock at $13.00 per share. Net proceeds to the Company, after deducting underwriting discounts, commissions, and legal expenses, was $31,613,500. Offering costs incurred by the company were $2,016,143, which include legal expenses incurred and paid by the underwriters of $425,000. Immediately prior to the closing of the IPO, all of the convertible Series A preferred stock and redeemable convertible Series B and Series C preferred stock automatically converted into 8,116,343 shares of common stock.

The Company filed an Eleventh Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate”) with the Secretary of State of the State of Delaware in connection with the completion of the IPO on June 22, 2021. The Amended and Restated Certificate amends and restates the Company’s existing certificate of incorporation in its entirety to, among other things: (i) authorize 200,000,000 shares of common stock; (ii) eliminate all references to the previously-existing series of preferred stock (Series A, B and C); and (iii) authorize 10,000,000 shares of undesignated preferred stock that may be issued from time to time by the Board in one or more series.

On July 1, 2022, we filed a prospectus including an offering to sell up to $150 million in common and preferred stock, debt securities and warrants. Additionally, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (“Piper Sandler” or the “Sales Agent”) and filed a related prospectus establishing an “at-the-market” facility, pursuant to which we may offer and sell shares of our common stock from time to time through the Sales Agent. In October 2023, the Sales Agent was authorized to sell shares for aggregate proceeds up to $16.7 million at current market prices until all shares are sold. As of December 31, 2023,3.3 million shares of common stock have been sold for aggregate proceeds of $7.7 million under the Equity Distribution Agreement pursuant to the prospectus.

In April 2023, the Company sold an aggregate of (i)1,318,000 shares of common stock and (ii) pre-funded warrants to purchase up to 1,878,722 shares of common stock in a registered direct offering (“pre-funded warrants”) and, in a concurrent private placement, warrants to purchase up to 3,196,722 shares of common stock (“common warrants”). Additionally, common warrants were issued to the placement agent to purchase up to 191,803 shares of common stock as compensation for services (“placement agent warrants”), collectively the (“April 2023 Financing”). The purchase price per share for the common stock, prefunded warrants was $1.22 and $1.2199, respectively. The gross proceeds from the offering were $3,899,813, less placement agent fees and offering expenses of $547,764. The Company intends to use the net proceeds from the offering for general corporate purposes.

The holders of the common stock shall have the exclusive right to vote for the election of directors and on all other matters requiring stockholder action, each outstanding share entitling the holder thereof toone vote on each matter properly submitted to the stockholders of the Company for their vote; provided, however, that, except as otherwise required by law, holders of common stock, as such, shall not be entitled to vote on any amendment to the Amended and Restated Certificate (or on any amendment to a certificate of designations of any series of preferred stock) that alters or changes the powers, preferences, rights or other terms of one or more outstanding series of preferred stock if the holders of such affected series of preferred stock are entitled to vote, either separately or together with the holders of one or more other such series, on such amendment pursuant to this Amended and Restated Certificate (or pursuant to a certificate of designations of any series of preferred stock).

Dividends may be declared and paid or set apart for payment upon the common stock out of any assets or funds of the Company legally available for the payment of dividends, but only when and as declared by the Board of Directors or any authorized committee thereof.

In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately the Company’s net assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption, or conversion rights.

As of December 31, 2023, no shares of convertible preferred stock have been issued and/or outstanding, andno dividends have been declared or paid since inception.

As of December 31, 2023, no shares of redeemable convertible preferred stock have been issued and/or outstanding, andno dividends have been declared or paid since inception.

Under the terms of the Amended and Restated Certificate, the Company’s Board of Directors is authorized to direct the Company to issue shares of preferred stock in one or more series without stockholder approval. The Board of Directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.

The purpose of authorizing the Board of Directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings, and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage a third-party from seeking to acquire, a majority of the outstanding voting stock. As of December 31, 2023 and 2022, no shares of preferred stock are outstanding.

On April 20, 2023, the Company entered into a securities purchase agreement pursuant to which the Company sold (i)1,318,000 shares of common stock, (ii) pre-funded warrants to purchase 1,878,722 shares of common stock, (iii) common warrants to purchase 3,196,722 shares of common stock. Additionally, common warrants to purchase 191,803 shares of common stock were issued to the placement agent compensation for services performed.

The pre-funded warrants, common warrants and placement agent warrants were exercisable immediately following the closing date of the offering. The pre-funded warrants have an unlimited term and an exercise price of $0.0001 per share. The common warrants have a 5.5 year term and an exercise price of $1.095 per share. The placement agent warrants have a 5 year term and exercise price of $1.525 per share. The offering resulted in aggregate gross proceeds of $3,899,813, before $547,764 of transaction costs.

The pre-funded warrants and common warrants are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise.

The common stock was valued at $1,133,480, based on the Company’s stock price. The pre-funded warrants and common warrants were valued at $1,615,701 and $1,854,099, respectively, using the following Black-Scholes assumptions:

The net proceeds of $3,352,049 were allocated to the common stock, pre-funded warrants and common warrants using the relative fair value method and recorded to stockholders’ equity. In June 2023, all pre-funded warrants were exercised for shares of common stock. In September and October 2023, all common warrants and 122,994 placement agent warrants were exercised for cash proceeds of $3,687,976. As of December 31, 2023,68,809 placement agent warrants remain outstanding.

As of December 31, 2023, the Company has warrants outstanding to purchase shares of common stock, which are all exercisable in whole or in part, with expiration dates as follows:

In May 2022, a warrant to purchase 11,112 shares of common stock expired.

As of December 31, 2023, no dividends have been declared or paid since inception.

Prior to the IPO in June 2021, the Company maintainedtwo equity incentive plans, the 2004 Stock Incentive Plan, as amended, or 2004 Plan, and the 2015 Stock-Based Incentive Compensation Plan, or 2015 Plan, which provided the Company’s employees, non-employee directors, consultants and independent contractors the opportunity to participate in the equity appreciation of the business through the receipt of stock options to purchase shares of common stock. New grants ceased being made under the 2004 Plan upon the adoption of the 2015 Plan; however, outstanding stock options under the 2004 Plan may continue to be exercised in accordance with their terms. The Company adopted the 2015 Plan in April 2015, which contains substantially similar terms and conditions as the 2004 Plan. The 2015 Plan initially had 1,176,681 shares of common stock reserved for issuance under the 2015 Plan and was administered by the compensation committee of the Board of Directors. Upon the closing of the IPO, no further awards will be made under the 2015 Plan; however, outstanding stock options under the 2015 Plan may continue to be exercised in accordance with their terms.

In June 2021, in connection with the IPO, the 2021 Equity Incentive Plan (2021 Plan) became effective, which was adopted by the Board of Directors in February 2021 and the stockholders approved the 2021 Plan in March 2021. The 2021 Plan is administered by our compensation committee.

Under the 2021 Plan, the Company may grant awards in respect of shares of common stock to employees, consultants, and non-employee directors pursuant to option awards, stock appreciation right, or SAR, awards, restricted stock awards, restricted stock unit, or RSU, awards, performance stock awards, performance stock unit, or PSU, awards, and other stock-based awards.

The total number of shares of common stock available for awards under the 2021 Plan is 1,111,111, provided that such number shall be automatically increased on each January 1, beginning on January 1, 2022, by 4% of the outstanding number of shares of common stock on the immediately preceding December 31 or such lesser number of shares as determined by the Board of Directors. The aggregate number of shares of our common stock that will be available for issuance under awards granted pursuant to the 2021 Plan shall also be increased by the number of shares underlying the portion of an award granted under the 2015 Plan that is cancelled, terminated or forfeited or lapses after the effective date of the 2021 Plan. No more than 1,111,111 shares of common stock issued under the 2021 Plan may be issued pursuant to the exercise of incentive stock options (ISO), provided that such number shall be automatically increased on each January 1, beginning on January 1, 2022, by the lesser of 4% of the outstanding number of shares of common stock on the immediately preceding December 31 or 555,555 shares of common stock. Shares of common stock issued by us in connection with the assumption or substitution of outstanding grants or under certain stockholder approved plans from an acquired company shall not reduce the number of shares of common stock available for awards under the 2021 Plan. Shares of common stock underlying the portion of an award that is forfeited or otherwise terminated for any reason whatsoever, in any case, without the issuance of shares of common stock, will be added back to the number of shares of common stock available for grant under the 2021 Plan. No non-employee director may be granted awards under the 2021 Plan in any one calendar year covering a number of shares of common stock that have a fair market value on the grant date in excess of $350,000 in the first calendar year of such non-employee director’s initial service as a non-employee director and $200,000 in any other calendar year of such non-employee director’s service as a non-employee director.

Options granted under the 2021 Plan may be either ISOs or nonqualified stock options. The price at which shares of common stock may be purchased upon exercise shall be determined by the compensation committee but shall not be less than the fair market value of one share of common stock on the date of grant, or, in the case of an ISO granted to aten-percent stockholder, less than 110% of the fair market value of a share of common stock on the date of grant. The compensation committee may grant options that have a term of up to 10 years, or, in the case of an ISO granted to aten-percent stockholder, five years. The award agreement shall specify the exercise price, term, vesting requirements, including any performance goals, and any other terms and conditions applicable to the granted option. Unless otherwise provided in an award agreement or an effective employment, consulting, severance or similar agreement with us or a subsidiary, upon a participant’s termination of service for any reason, the unvested portion of each award of options granted generally will be forfeited with no compensation due the participant.

Activity under the stock option plans was as follows:

Stock options granted under the 2021 Plan for the years ended December 31 2023 and 2022 were as follows:

The Black-Scholes weighted average assumptions for all stock option awards granted during 2023 and 2022 were as follows:

The intrinsic value of options exercised during the year ended December 31, 2022 was $3,306. The intrinsic values represent the dollar value of the exercised stock options whereby the fair market value of the underlying common stock exceeded the exercise price of the stock option as of the exercise date. There wereno options exercised during 2023.

The options outstanding and vested and currently exercisable by exercise prices as of December 31, 2023 were as follows:

As of December 31, 2023, the total number of shares of common stock reserved for future awards under the 2021 Plan is 629,555.

For the year ended December 31, 2022, the Company awarded, outside the 2021 Plan, two stock option grants for the right to purchase a total of 150,000 shares of common stock (inducement grants), which were approved by the Compensation Committee. The weighted average exercise price was $2.42. The inducement grants will vest in equal installments over four years provided the employee remains employed by the Company on the vesting date. As of December 31, 2023, awards to purchase 150,000 options are outstanding,37,500 are exercisable, and the weighted average remaining life is 8.4 years. There wereno inducement grants awarded in 2023.

The Company uses the Black‑Scholes option pricing model to determine the fair value of stock awards granted to employees and non-employees. The determination of the fair value of share‑based payment awards granted using a pricing model is affected by the Company’s stock price as well as the assumptions regarding a number of complex and subjective variables as follows:

The expected term of stock options represents the period the stock options are expected to remain outstanding. The Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, the Company estimates the expected term for all options granted by using the simplified method provided by the ASC 718, which calculates the expected term as the average of the time-to-vesting and the contractual life of the options. The contractual term for options awarded since inception is 10 years for employees and non-employees.

The risk‑free interest rate is based on U.S. Treasury zero‑coupon issues with remaining terms similar to the expected term on the options.

The Company has not declared or paid any cash dividends from inception through December 31, 2023 and does not plan to pay any cash dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model.

Expected volatility measures the amount that a stock price has fluctuated or is expected to fluctuate during a period. The Company determines volatility based on an analysis of comparable companies.

The Company accounts for forfeitures as they occur.

In June 2021, in connection with the IPO, the ESPP became effective upon adoption by the Board of Directors in February 2021 and the stockholders approved the 2021 ESPP Plan in March 2021. The ESPP is administered by the compensation committee.

The total number of shares of common stock available for purchase under the ESPP is 166,666, provided that such number is automatically increased on January 1 of each calendar year, from January 1, 2022 through January 1, 2031 by the least of (i)1.0% of the total number of shares of common stock outstanding on December 31 of the immediately preceding calendar year, (ii)222,222 shares of common stock or (iii) a number determined by the board of directors that is less than the foregoing clauses (i) and (ii).

Under the ESPP, the Company may specify offerings with durations of not more than 27 months and may specify shorter purchase periods within each offering. Each offering will haveone or more purchase dates on which shares of common stock will be purchased for employees participating in the offering. An offering may be terminated under certain circumstances. No employee may purchase more than 12,254 shares of common stock under the ESPP during any offering period. Unless otherwise determined by the board of directors, shares of common stock will be purchased for accounts of employees participating in the ESPP at a price per share equal to the lower of (i)85% of the fair market value of a share of common stock on the last date of an offering period or (ii)85% of the fair market value of a share of common stock on the first day of such offering period.

As of December 31, 2023,16,459 shares of common stock have been purchased under the ESPP to date, and the total number of shares of common stock reserved for future awards under the ESPP is 386,946.

Stock‑based compensation expense recognized is based on the value of the portion of stock option awards that is ultimately expected to vest on a straight-line basis. Stock‑based compensation expense recognized in the Company’s statements of comprehensive loss during the years ended December 31, 2023, and 2022 includes compensation expense for stock‑based awards based on the fair value estimated in accordance with the provisions of ASC 718.

The following table shows the stock-based compensation expense related to vested stock option grants to employees and non-employees awarded under the stock plans and inducement grants by financial statement line item on the accompanying statements of comprehensive loss:

As of December 31, 2023, the remaining amount of stock‑based compensation expense that is expected to be recognized in future periods for employees and non-employees is $849,834 which includes $155,222 of compensation expense to be recognized upon achieving a certain performance condition. The $694,612 of unrecognized expense is expected to be recognized over a weighted average period of 3.0 years.

The Company has a 401(k) defined contribution plan covering substantially all full‑time employees, meeting certain eligibility requirements. The Company has no required matching or other contribution requirements. For the year end December 31, 2023 and 2022, the company contributed $75,202 and $73,947 of voluntary employer matching contributions.

In November 2023, the Company issued unsecured convertible notes and accompanying Series A and Series B Warrants (see Note 7). The transaction included issuance of a $5 million convertible note and Series A and Series B Warrants to PharmaCyte Biotech, Inc. The interim CEO, President and Director of PharmaCyte Biotech, Inc., Joshua Silverman, serves on the Company’s board of directors.

During 2023, a family member of the CEO earned total cash compensation of $138,000.

During the year ended December 31, 2022, there wereno related-party transactions.

The following table sets forth the computation of the basic and diluted net loss per share for the years ended December 31:

The following potentially dilutive securities have been excluded from the computations of diluted weighted average shares outstanding because they would be anti-dilutive for the years ended December 31:

In March 2024, the Company sold 441,966 shares under the at-the-market facility, resulting in gross cash proceeds of $778,175.