Opus Genetics Inc

Nature of Business

On October 22, 2024, Opus Genetics, Inc., a Delaware corporation formerly known as Ocuphire Pharma, Inc. (the “Company” or “Opus”), acquired a private corporation then operating under the name of “Opus Genetics, Inc.” (“Former Opus”) pursuant to the terms of an Agreement and Plan of Merger, dated as of October 22, 2024 (such agreement, the “Merger Agreement” and the transaction consummated via the Merger Agreement, the “Opus Acquisition”), by and among the Company, Former Opus, and certain merger subsidiaries party thereto.

The accompanying unaudited condensed financial statements do not give effect to the Opus Acquisition. The historical financial statements have been labeled under the name “Ocuphire Pharma, Inc.” solely for purposes of this filing, as this was the name of the Company for the entirety of the historical periods presented.

Following the Opus Acquisition, the Company is a clinical-stage ophthalmic biotechnology company developing gene therapies for the treatment of inherited retinal diseases (IRDs) and other ophthalmologic disorders. The pipeline includes adeno-associated virus (AAV)-based gene therapies that address mutations in genes that cause different forms of bestrophinopathy, Leber congenital amaurosis (LCA) and retinitis pigmentosa. The Company’s most advanced gene therapy program is designed to address mutations in the LCA5 gene, which encodes the lebercilin protein and is currently being evaluated in a Phase 1/2 open-label, dose-escalation trial. The pipeline also includes Phentolamine Ophthalmic Solution 0.75%, a non-selective alpha-1 and alpha-2 adrenergic antagonist to reduce pupil size, and APX3330, a novel small-molecule inhibitor of Ref-1 to slow the progression of non-proliferative diabetic retinopathy. Phentolamine Ophthalmic Solution 0.75% is currently being evaluated in Phase 3 trials for presbyopia and dim (mesopic) light vision disturbances.

In November 2022, the Company entered into a license and collaboration agreement (the “Viatris License Agreement”) with FamyGen Life Sciences, Inc. (acquired by and now known as Viatris, Inc. (“Viatris”)), pursuant to which it granted Viatris an exclusive license to develop, manufacture, import, export and commercialize its refractive product candidate Phentolamine Ophthalmic Solution 0.75% (initially known as Nyxol) (“PS”). PS is a once-daily eye drop formulation of phentolamine mesylate designed to reduce pupil diameter and improve visual acuity. PS was approved by the FDA for the treatment for pharmacologically induced mydriasis produced by adrenergic agonists (e.g., phenylephrine) or parasympatholytic (e.g., tropicamide) agents, or a combination thereof under the brand name RYZUMVITM in September 2023 and was launched commercially in April 2024. The Company reported positive top-line data from multiple late-stage clinical trials for PS in reversal of pharmacologically induced mydriasis, presbyopia and dim light disturbances. The VEGA-2 Phase 3 study in presbyopia achieved its primary endpoint. The VEGA-3 Phase 3 clinical trial evaluating PS for presbyopia (age-related blurry near vision) is underway. For decreased vision under mesopic (low) light conditions following keratorefractive surgery, we received FDA agreement under Special Protocol Assessment (“SPA”) for LYNX-2, a Phase 3 Trial of PS. LYNX-2 continues enrollment. LYNX-3, an additional Phase 3 study for decreased vision under mesopic (low) light conditions following keratorefractive surgery, has commenced.

Basis of Presentation

The accompanying condensed financial statements have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations.

The December 31, 2023 condensed balance sheet was derived from audited financial statements, and may not include all disclosures required by GAAP; however, the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and the notes thereto for the fiscal year ended December 31, 2023.

In the opinion of management, all adjustments, consisting of only normal recurring adjustments that are necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, have been made. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.

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Liquidity

The accompanying condensed financial statements have been prepared on the basis that the Company will continue as a going concern. From its inception, the Company has devoted substantially all its efforts to drug development and conducting clinical trials.

As of September 30, 2024, the Company had $36.6 million in cash and cash equivalents. The Company believes its current available cash and cash equivalents will be sufficient to fund the Company’s planned expenditures and meet its obligations for at least twelve months from the date of issuance of these financial statements.

In the future, the Company may need to raise additional funds until it is able to generate sufficient revenues to fund its development activities. The Company’s future operating activities, coupled with its plans to raise capital or pursue additional financing, may provide additional liquidity in the future; however, these actions are not solely within the control of the Company and the Company is unable to predict the outcome of these actions taken to generate the liquidity ultimately required.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer or such person functioning in such role. The Company’s Chief Executive Officer views the Company’s operations and manages its business inone operating segment, which is the business of development of products related to vision performance and health. Accordingly, the financial statements and accompanying notes contained herein include the measure of profit or loss, categories of expenses and other financial information that is evaluated by the Company’s Chief Executive Officer.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of 90 days or less at the time of deposit to be cash equivalents.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. Management follows approved policies established by the Company’s Board of Directors (the “Board”) to reduce credit risk associated with the Company’s cash deposit and investment accounts. Pursuant to these policies, the Company limits its exposure through the kind, quality and concentration of its investments. The Company’s cash and cash equivalents are held or managed by two financial institutions in the United States. As of September 30, 2024, the Company had cash equivalents of $36.1 million that were not eligible for coverage by Federal Deposit Insurance Corporation. These balances are invested in funds whose assets consist almost entirely of securities issued by the U.S. Treasury or guaranteed by the U.S. government.

Short-term Investments

The Company determines the appropriate classification of its investments in debt and equity securities at the time of purchase and records them on a settlement date basis. The Company’s short-term investments are comprised of equity securities, which in accordance with the fair value hierarchy described below are recorded at fair value using Level l inputs on the balance sheets. Subsequent changes in fair values are recorded in other income, net on the statements of comprehensive (loss) income. The Company classifies investments available to fund current operations as current assets on its balance sheets. The Company didnot recognize any impairments on its investments to date through September 30, 2024.

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Revenue Recognition

The Company follows the provisions of Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers. The guidance provides a five-step model to determine how revenue is recognized. The Company has entered into license agreements which have revenue recognition implications (See Note 9 – License and Collaboration Agreements).

In determining the appropriate amount of revenue to be recognized, the Company performs the following steps: (i) identification of the contracts with a customer; (ii) determination of the performance obligations in the contract; (iii) measurement of the transaction price, including potential constraints on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated stand-alone selling prices; and (v) recognition of revenue when (or as) the Company satisfies a performance obligation.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in ASC 606. Performance obligations may include license rights, development and other services. Significant management judgment is required to determine the level of effort required under an arrangement and the period over which the Company expects to complete its performance obligations under the arrangement. If the Company cannot reasonably estimate when its performance obligations are either completed or become inconsequential, then revenue recognition is deferred until the Company can reasonably make such estimates. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method.

As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price of each performance obligation identified in the contract. The Company uses key assumptions to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. The Company allocates the total transaction price to each performance obligation based on the relative standalone selling prices of the promised goods or service underlying each performance obligation.

Licenses of intellectual property and research and development services: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the customer, and the customer can use and benefit from the license. For licenses that are bundled with other obligations, such as research and development services, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. For research and development services that are distinct from a license transfer obligation, the Company determines whether the services are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from such services. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone payments: At the inception of each arrangement that includes milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal will not occur, the value of the associated milestone (such as a regulatory submission) is included in the transaction price. Milestone payments that are not within the control of the Company, such as approvals from regulators, are not considered probable of being achieved until such contingency occurs (such as receipt of those approvals).

Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (a) when the related sales occur, or (b) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

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Contract Assets and Unbilled Receivables

The Company recognizes contract assets and unbilled receivables when goods or services are transferred to the customer before the customer pays or before reimbursement for payment is billed or due, excluding any amounts presented as an account receivable. The Company recorded contract assets and unbilled receivables in connection with a license and collaboration agreement (See Note 9 – License and Collaboration Agreements).

Accounts Receivable and Allowances for Credit Losses

The Company records a provision for credit losses, when appropriate, based on historical experience, current conditions and reasonable supportable forecasts. The Company estimates credit losses over the remaining expected life of an asset by, among other things, primarily using historical experience and current economic conditions that could affect the collectability of the balances in the future. Account balances are charged off against the allowance when the Company believes that it is probable that the receivable will not be recovered. Actual write-offs may be in excess of the Company’s estimated allowance. The Company hasnot incurred any bad debt expense to date andno allowance for credit losses has been recorded during the periods presented.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation costs, for personnel in functions not directly associated with research and development activities. Other significant costs include insurance coverage for directors and officers and other property and liability exposures, legal fees relating to intellectual property and corporate matters, business development costs, professional fees for accounting and tax services, other services provided by business consultants, and legal settlements.

Research and development expenses consist of costs incurred in performing research and development activities, including compensation, benefits and stock-based compensation costs for research and development employees and costs for consultants, costs associated with nonclinical studies and clinical trials, regulatory activities, manufacturing activities to support clinical activities, license fees, nonlegal patent costs, fees paid to external service providers that conduct certain research and development, and an allocation of overhead expenses. Research and development expenses include costs that are reimbursed under the Viatris License Agreement (See Note 9 – License and Collaboration Agreements).

Other income, net includes interest earned from cash and cash equivalent investments, realized and unrealized gains (losses) from equity investments and reimbursements in connection with grants and other sources when they occur. In addition, this line item includes payments made by the Company in connection with the Contingent Value Rights Agreement(the “CVR Agreement”)discussed further below with former shareholders of Rexahn Pharmaceuticals, Inc. (“Rexahn”).

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) ASC 718, Compensation — Stock Compensation. Accordingly, compensation costs related to equity instruments granted are recognized at the grant date fair value. The Company records forfeitures when they occur. Stock-based compensation arrangements to non-employees are accounted for in accordance with the applicable provisions of ASC 718.

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Derivative Liability

The Company evaluates all features contained in financing agreements to determine if there are any embedded derivatives that require separation from the underlying agreement under ASC 815 –Derivatives and Hedging. An embedded derivative that requires separation is accounted for as a separate liability from the host agreement. The separated embedded derivative is accounted for separately on a fair market value basis. The Company records the fair value change of a separated embedded derivative at each reporting period in the statements of comprehensive (loss) income under the fair value change in derivative liability line item. The Company determined that certain features under an equity line financing (See Note 6 — Stockholders’ Equity) collectively qualified as an embedded derivative. The derivative was accounted for separately from the underlying equity line financing agreement.

Fair Value Measurements

The Company follows accounting guidance that emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value measurements are defined on a three-level hierarchy:

As of September 30, 2024 and December 31, 2023, the fair values of cash and cash equivalents, accounts receivable, contract assets and unbilled receivables, prepaid and other assets, accounts payable, and accrued expenses approximated their carrying values because of the short-term nature of these assets or liabilities. The fair value of the short-term investments, while outstanding, were based on observable Level 1 inputs in the form of quoted market prices from a major stock exchange. The fair value of the derivative liability associated with the equity line financing facility (See Note 6 – Stockholders’ Equity) was based on cash flow models discounted at current implied market rates representing expected returns by market participants for similar instruments and are based on Level 3 inputs as well the Company’s underlying stock price and associated volatility, expected term of the financing and market interest rates. There wereno transfers between fair value hierarchy levels during the three and nine months ended September 30, 2024 and 2023.

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The following table provides a roll-forward of short-term investments and derivative liabilities measured at fair value on a recurring basis using observable Level 1 and Level 3 inputs, as applicable, for the nine months ended September 30, 2024 and 2023 (in thousands):

Rexahn Warrants

The fair value of the warrant liabilities associated with the Rexahn warrants wasde minimis during the periods presented. The last of the Rexahn warrants classified as liabilities expired in April 2023 unexercised. See Note 2 – Merger for additional background.

There wereno financial instruments measured on a non-recurring basis for any of the periods presented.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07 -Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements, primarily through disclosures of significant segment expenses. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The guidance must be applied retrospectively to all prior periods presented. The Company adopted the guidance on January 1, 2024. The adoption of this ASU did not have a material impact on the Company’s financial statements.

In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance also includes certain other amendments to improve the effectiveness of income tax disclosures. This ASU is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years and should be applied on a prospective basis, with retrospective application permitted. The Company is currently evaluating the impact of adoption of this guidance on its financial statements.

On November 5, 2020, the Company completed a merger transaction with Rexahn (the “Rexahn Merger”). In connection with the Rexahn Merger, the Company, Shareholder Representatives Services LLC, as representative of the Rexahn stockholders prior to the Rexahn Merger, and Olde Monmouth Stock Transfer Co., Inc., as the rights agent, entered into the CVR Agreement.

Pursuant to the terms of the Rexahn Merger and the CVR Agreement, Rexahn stockholders of record as of immediately prior to the effective time of the Rexahn Merger receivedone contingent value right (“CVR”) for each share of Rexahn common stock held.

Each CVR entitles such holders to receive, for each calendar quarter (each, a “CVR Payment Period”) during the 15-year period after the closing (the “CVR Term”), an amount equal to the following:

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The CVRs are not transferable, except in certain limited circumstances, will not be certificated or evidenced by any instrument, will not accrue interest and will not be registered with the SEC or listed for trading on any exchange. The CVR Agreement will continue in effect until the later of the end of the CVR Term and the payment of all amounts payable thereunder. As of September 30, 2024, no payments subject to the CVR Agreement hadbeen received beyond those previously reported in the second and third quarters of calendar year 2021. In addition, no milestones had been accrued as there wereno potential milestones yet considered probable beyond those previously reported.

Former Rexahn Warrants

As of September 30, 2024, none of the Rexahn warrants classified as equity remained outstanding. The remaining warrants in the amount of 58,597 with an exercise price of $38.40 per share expired unexercised in January 2024.

Apexian Sublicense Agreement

On January 21, 2020, the Company entered into a sublicense agreement with Apexian Pharmaceuticals, Inc., pursuant to which it obtained exclusive worldwide patent and other intellectual property rights. In exchange for the patent and other intellectual rights, the Company agreed to certain milestone payments and royalty payments on future sales (See Note 8 — Apexian Sublicense Agreement). As of September 30, 2024, there was sufficient uncertainty with regard to any future cash milestone payments under the sublicense agreement that no liabilities were recorded related to the sublicense agreement.

Facility Leases

The Company has a short-term, non-cancellable facility lease (the “HQ Lease”) for its headquarters. The HQ Lease qualified for the short-term lease exception under ASC 842, Leases. The monthly base rent for the HQ Lease is approximately $3,000. The rent expense associated with the HQ Lease amounted to $9,000 during each of the three-month periods ended September 30, 2024 and 2023, and $27,000 during each of the nine-month periods ended September 30, 2024 and 2023. The total remaining expected rental payments under the HQ Lease amount to $9,000 through its current expiration date of December 31, 2024.

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Other

In the ordinary course of business, from time to time, the Company may be subject to a broad range of claims and legal proceedings that relate to contractual allegations and patent infringement, employment and other claims. In addition, the Company from time to time may be potentially committed to reimburse third parties for costs incurred associated with business development related transactions upon the achievement of certain milestones. The Company establishes accruals when applicable for matters and commitments which it believes losses are probable and can be reasonably estimated. To date, no loss contingency for such matters and potential commitments have been recorded. Although it is not possible to predict with certainty the outcome of these matters or potential commitments, the Company is of the opinion that the ultimate resolution of these matters and potential commitments will not have a material effect on its results of operations or financial position.

Prepaid and Other Assets

Prepaid and other assets consist of the following as of the dates provided (in thousands):

Property and Equipment, net

Property and equipment held for use by category are presented in the following table as of (in thousands):

Depreciation expense was $1,000 during the three months ended September 30, 2023 and $3,000 during the nine months ended September 30, 2023. There wasno depreciation expense during the three and nine months ended September 30, 2024.

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Accrued Expenses

Accrued expenses consist of the following as of the dates provided (in thousands):

Rodgers Letter Agreement

On April 19, 2023, the Company appointed Richard Rodgers, a director of the Company, as interim President and Chief Executive Officer. In connection with his appointment, the Company and Mr. Rodgers entered into a letter agreement, dated as of April 20, 2023, concerning Mr. Rodgers’s services (the “Letter Agreement”). The Letter Agreement provided that Mr. Rodgers (i) was to receive a $40,000 monthly salary, and (ii) was eligible for a potential prorated bonus at the discretion of the Board, at the end of his term as interim President and Chief Executive Officer. Pursuant to the bonus clause, a $100,000 bonus was expensed in December 2023 and paid on March 4, 2024. Mr. Rodgers also received 50,000 restricted stock units under the Company’s 2020 Equity Incentive Plan which vested 12 months following the grant date. Mr. Rogers’s services as interim President and Chief Executive Officer concluded on October 31, 2023 with the appointment of George Magrath to the role, the Letter Agreement has expired, and the Company does not expect to incur further expenses related thereto. The Company incurred related consulting expenses of $120,000 and $215,000 during the three and nine months ended September 30, 2023, respectively. As of December 31, 2023, $100,000 of the related expenses were unpaid related to a prorated bonus and were paid in full on March 4, 2024.

Dr. Pepose Consulting Agreement

On April 8, 2022, the Company entered into a consulting agreement (as amended, the “2022 Consulting Agreement”) with Jay Pepose, M.D., a director of the Company. The consulting agreement originally provided for $10,000 a month in cash payments and a stock option grant for 50,000 options, of which 25% vested on March 31, 2023, with the remainder vesting in equal monthly installments over 36 months. The consulting agreement was amended on September 19, 2022 to provide for vesting acceleration for stock-based awards in the event of a change in control. The consulting agreement was also amended effective December 1, 2022 to increase the cash payment to $25,000 per month and amended effective January 1, 2024 to extend the expiration to March 31, 2024 and to increase the retainer for March 2024 to $49,000.

On April 11, 2024, the Company entered into another consulting agreement (the “2024 Consulting Agreement”) with Dr. Pepose following the expiration of the 2022 Consulting Agreement. Pursuant to the 2024 Consulting Agreement, Dr. Pepose is paid a monthly consulting fee of $39,583. Additionally, Dr. Pepose received an award of 32,000 RSUs, as well as stock options to purchase 48,000 shares of the Company’s common stock. The RSUs will vest on April 11, 2025, subject to Dr. Pepose’s continued service over that period. The options vest in 12 equal monthly installments that began on May 11, 2024, subject to Dr. Pepose’s continued service over such period. The 2024 Consulting Agreement is scheduled to terminate on April 11, 2025.

For the agreements with Dr. Pepose above, the Company incurred related consulting expenses of $119,000 and $337,000 during the three and nine months ended September 30, 2024, respectively; the Company incurred related consulting expenses of $75,000 and $225,000 during the three and nine months ended September 30, 2023, respectively. As of September 30, 2024 and December 31, 2023, $40,000 and $25,000 of the related consulting expenses were unpaid, respectively.

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Amendment to Articles of Incorporation

At the Company’s 2024 annual meeting of stockholders held on June 11, 2024, the Company’s stockholders voted to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation that resulted in an increase in the number of authorized shares of the Company’s common stock from 75 million to 125 million shares. The increase in authorized shares became effective on June 12, 2024.

Lincoln Park Purchase Agreement

On August 10, 2023, the Company entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”) for an equity line financing (the “Purchase Agreement”). The Purchase Agreement provides that, subject to the terms and conditions set forth therein, the Company has the sole right, but not the obligation, to direct Lincoln Park to purchase up to $50 million of shares of the Company’s common stock from time to time over the 30-month term of the Purchase Agreement. Concurrently with entering into the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park (the “Registration Rights Agreement”), pursuant to which the Company agreed to register the resale of the shares of the Company’s common stock that have been and may be issued to Lincoln Park under the Purchase Agreement pursuant to a registration statement. Lincoln Park has agreed not to cause or engage in any manner whatsoever in any direct or indirect short selling or hedging of the Company’s common stock.

A total of 400,000 shares were issued under the Purchase Agreement during the nine months ended September 30, 2024 for net proceeds of $0.7 million. The Company incurred de minimis issuance costs during the nine months ended September 30, 2024. There wasno activity under the Purchase agreement during the three months ended September 30, 2024.

A total of 800,000 shares of the Company’s common stock were sold under the Purchase Agreement for net proceeds in the amount of $3.1 million during the three and nine months ended September 30, 2023. The Company incurred issuance costs of $0.2 million, consisting of investor expense reimbursement and legal costs, during the three- and nine-months periods ended September 30, 2023 which were recorded as a component of financing costs in the accompanying statements of comprehensive (loss) income during the three and nine month periods ended September 30, 2023.

In addition to the initial commitment shares issued upon the execution of the Purchase Agreement of 246,792, a total of 1,700,000 shares of common stock were sold under the Purchase Agreement for gross proceeds through September 30, 2024 in the amount of $5.2 million and with issuance costs in the aggregate of $1.4 million.

Under the Purchase Agreement, on any business day selected by the Company, the Company may direct Lincoln Park to purchase up to 50,000 shares of its common stock on such business day (or the purchase date) (a “Regular Purchase”), provided that the closing sale price of the Company’s common stock on Nasdaq on the applicable purchase date is not below $0.25 and subject to other adjustments. A Regular Purchase may be increased to up to 70,000 shares based on the share price on the applicable purchase date. The Company may direct Lincoln Park to purchase shares in Regular Purchases as often as every business day.

In addition, the Company may also direct Lincoln Park, on any business day on which the Company has submitted a Regular Purchase notice for the maximum amount allowed for such Regular Purchase, to purchase an additional amount of the Company’s common stock (an “Accelerated Purchase”) based on certain market and trading conditions.

The pricing and settlement provisions in the Purchase Agreement result in the recognition of a derivative liability accounted for on a fair value basis under the provisions of ASC 815 -Derivatives and Hedging. A Monte Carlo simulation model was used to estimate future stock pricing and purchase activity to determine the fair value of the derivative liability. As of September 30, 2024, the change in the derivative liability from December 31, 2023 wasde minimis. The fair value change in the derivative liability is recorded in the fair value change in derivative liabilities line item in the accompanying condensed statements of comprehensive (loss) income during periods with valuation changes.

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At-The-Market Program

On February 4, 2021, the Company filed a Form S-3 shelf registration under the Securities Act of 1933 which was declared effective by the SEC on February 12, 2021 (the “2021 Shelf”) under which the Company may offer and sell, from time to time in its sole discretion, securities having an aggregate offering price of up to $125 million. In connection with the 2021 Shelf, on March 11, 2021, the Company entered into a sales agreement with JonesTrading Institutional Services LLC (“JonesTrading”) under which the Company may offer and sell, from time to time at its sole discretion, to or through JonesTrading, acting as agent and/or principal, shares of its common stock having an aggregate offering price of up to $40 million (the “2021 ATM”).

During the three and nine months ended September 30, 2024,219,406 and 1,608,522 shares of common stock were sold under the ATM, respectively, for aggregate gross proceeds in the amount of $0.5 million and $3.8 million, respectively, before deducting issuance expenses, including the placement agent’s fees, legal and accounting expenses, in the amount of $42,000 and $232,000, respectively.

During the three and nine months ended September 30, 2023,577,555 shares of common stock were sold under the 2021 ATM for aggregate gross proceeds in the amount of $2.4 million before deducting issuance expenses, including the placement agent’s fees, legal and accounting expenses, in the amount of $69,000.

As of September 30, 2024.7,653,838 shares of common stock were sold under the ATM since its inception for gross proceeds in the amount of $26.4 million and with issuance costs in the aggregate of $0.9 million.

Registered Direct Offering

On June 4, 2021, the Company entered into a placement agency agreement for a registered direct offering (“RDO”) with A.G.P./Alliance Global Partners (“AGP”). Pursuant to the terms of the placement agency agreement, AGP on June 8, 2021 sold an aggregate of 3,076,923 shares of the Company’s common stock and warrants to purchase 1,538,461 shares of the Company’s common stock (the “RDO Warrants”) at an offering price of $4.875 per one share and perone-half of each RDO Warrant. The RDO was made pursuant to the Company’s 2021 shelf registration.

The RDO Warrants have an exercise price of $6.09 per share, are exercisable from the initial issuance date of June 8, 2021, and will expire five years following the initial issuance date. As of September 30, 2024,1,538,461 RDO Warrants were outstanding andnone have been exercised since issuance.

Subject to limited exceptions, a holder of a RDO Warrant will not have the right to exercise any portion of its RDO Warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or, at the election of a holder prior to the date of issuance,9.99%) of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise; provided that upon prior notice to the Company, the holder may increase or decrease the beneficial ownership limitation, provided further that in no event shall the beneficial ownership limitation exceed 9.99%.

Pre-Merger Financing

On June 17, 2020, the Company, Rexahn and certain investors entered into a Securities Purchase Agreement, which was amended and restated in its entirety on June 29, 2020 (as amended and restated, the “Securities Purchase Agreement”). Pursuant to the Securities Purchase Agreement, the investors invested a total of $21.15 million in cash, including $300,000 invested byfive directors of the Company prior to the Rexahn Merger andone director of Rexahn upon closing of the Rexahn Merger (the “Pre-Merger Financing”). The Pre-Merger Financing also included the issuance of Series A Warrants and Series B Warrants discussed further below.

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Series A Warrants

The Series A Warrants were issued on November 19, 2020 at an initial exercise price of $4.4795 per share, were immediately exercisable upon issuance and have a term offive years from the date of issuance. The Series A Warrants are exercisable for 5,665,838 shares of common stock in the aggregate (without giving effect to any limitation on exercise contained therein) and were outstanding as of September 30, 2024. The Series A Warrants were accounted for and classified as equity on the accompanying balance sheets.

Series B Warrants

The Series B Warrants had an exercise price of $0.0001, were exercisable upon issuance and would have expired on the day following the later to occur of (i) the Reservation Date (as defined therein) or (ii) the date on which the investor’s Series B Warrants would have been exercised in full (without giving effect to any limitation on exercise contained therein). None of the Series B Warrants were outstanding as of September 30, 2024 or December 31, 2023.

Stock-based compensation expense was included in general and administrative and research and development costs as follows in the accompanying condensed statements of comprehensive (loss) income for the three and nine-month periods indicated below (in thousands):

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Stock Options

Inducement Plan

On February 22, 2021, the Company adopted the Company’s 2021 Inducement Plan (as amended, the “Inducement Plan”), pursuant to which the Company originally reserved 325,258 shares of its common stock to be used exclusively for grants of awards to individuals who were not previously employees or directors of the Company, as an inducement material to the individual’s entry into employment with the Company within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

2020 Equity Incentive Plan

The stockholders of the Company approved the 2020 Equity Incentive Plan (the “2020 Plan”) for stock-based awards. The 2020 Plan became effective on November 5, 2020. Under the 2020 Plan, (i)1,000,000 new shares of common stock were reserved for issuance and (ii) up to 70,325 additional shares of common stock may be issued, consisting of (A) shares that remain available for the issuance of awards under prior equity plans and (B) shares of common stock subject to outstanding stock options or other awards covered by prior equity plans that have been cancelled or expire on or after the date that the 2020 Plan became effective. The 2020 Plan permits the grant of incentive and non-statutory stock options, appreciation rights, restricted stock, restricted stock units, performance stock, and other stock-based awards.

2020 Plan Evergreen Provision

Under the 2020 Plan, the shares reserved automatically increase on January 1 of each year, for a period of not more thanten years from the date the 2020 Plan is approved by the stockholders of the Company, commencing on January 1, 2021 and ending on (and including) January 1, 2030, by an amount equal to 5% of the shares of common stock outstanding as of December 31st of the preceding calendar year. Notwithstanding the foregoing, the Board may act prior to January 1st of a given year to provide that there will be no January 1 increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence. On January 1, 2024,1,198,875 shares were added to the 2020 Plan as a result of its evergreen provision.

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2018 Equity Incentive Plan

Prior to the 2020 Plan, the Company had adopted a 2018 Equity Incentive Plan (the “2018 Plan”) in April 2018 under which 1,175,000 shares of the Company’s common stock were reserved for issuance to employees, directors and consultants. Upon the effective date of the 2020 Plan, no additional shares were available for issuance under the 2018 Plan.

Stock Options

During the three and nine months ended September 30, 2024, zero and 1,021,166 stock options were granted to directors, officers, employees and consultants, respectively, generally vesting over aone- tofour-year period with monthly, quarterly and annual vesting tranches. During the three and nine months ended September 30, 2023,30,000 and 793,578 stock options were granted to directors, officers, employees and consultants, respectively, generally vesting over a five (5) to forty-eight (48) month period.

The Company recognized $474,000 and $400,000 in stock-based compensation expense related to stock options during the three months ended September 30, 2024 and 2023, respectively, and $1,431,000 and $2,087,000 during the nine months ended September 30, 2024 and 2023, respectively. Stock-based compensation expense during the nine-month period ended September 30, 2023 included a one-time charge of $0.4 million attributed to the modification of the Company’s former Chief Executive Officer’s stock options with respect to their exercisability provisions.

During the three and nine months ended September 30, 2024 and 2023, there wereno exercises of stock options during these periods.

As of September 30, 2024 and December 31, 2023,4,848,064 and 4,410,258 stock options were outstanding, respectively.

The weighted average fair value per share of options granted during the nine months ended September 30, 2024 was $1.95. The weighted average fair value per share of options granted during the three and nine months ended September 30, 2023 was $3.30 and $2.85, respectively. The Company measures the fair value of stock options with service-based vesting criteria to employees, directors, consultants and directors on the date of grant using the Black-Scholes option pricing model. The Company does not have sufficient share trading history to support an internal calculation of volatility and expected term. As such, the Company has used a weighted average volatility considering the volatilities of several guideline companies.

For purposes of identifying similar entities, the Company considered characteristics such as industry, length of trading history, and stage of life cycle. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The average expected life of the options was based on the contractual term for agreements that allow for exercise of vested options through the end of the contractual term upon termination of continuous service, and for all other agreements, was based on the midpoint between the vesting date and the end of the contractual term according to the “simplified method” as described in Staff Accounting Bulletin 110. The risk-free interest rate is determined by reference to implied yields available from U.S. Treasury securities with a remaining term equal to the expected life assumed at the date of grant. The Company records forfeitures when they occur.

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The weighted average assumptions used in the Black-Scholes option pricing model are as follows during the three and nine months ended September 30, 2024 and 2023:

Duringthe three and nine months ended September 30, 2024,79,725 and 386,097 stock options vested, respectively. During the three and nine months ended September 30, 2023,94,347 and 715,171 stock options vested, respectively, inclusive of the vesting acceleration of stock options attributed to the departure of the Company’s former Chief Executive Officer in the amount of 145,418 during the second quarter of 2023.

During the three and nine months ended September 30, 2024,114,425 and 583,360 options were forfeited, respectively. During the three and nine months ended September 30, 2023,5,267 and 260,233 options were forfeited, respectively, inclusive of the stock option forfeited in connection with the departure of the Company’s former Chief Executive Officer in the amount of 249,633 during the second quarter of 2023.

Restricted Stock Units

During the three and nine months ended September 30, 2024, the Company granted zero and 592,222 restricted stock units (“RSUs”), respectively, to certain officers and employees under the 2020 Plan. The weighted average grant date per unit fair value of the RSUs granted during the nine months ended September 30, 2024 was $2.24. The vesting period of the RSUs ranges from aone-year period to afour-year period during which 25 percent of the RSUs vest annually on each anniversary of the grant date, subject to the recipient’s continued service on such dates.

During the three and nine months ended September 30, 2023, the Company granted an aggregate ofzero and 416,464 RSUs, respectively, to the Board, officers, employees and consultants under the 2020 Plan. The weighted average grant date per unit fair value of the RSUs granted during the nine months ended September 30, 2023 was $3.98. The vesting period of the RSUs ranges from aone year period to afour year period where 25% of the RSUs vest annually on each anniversary of the grant date, subject to the recipient’s continued service on such dates.

During the three and nine months ended September 30, 2024, zero and 144,162 RSUs vested, respectively, and 36,660 and 119,330 RSUs were forfeited during the three and nine months ended September 30, 2024, respectively. The total expense for the three and nine months ended September 30, 2024 related to these RSUs was $302,000 and $891,000, respectively.

During the three and nine months ended September 30, 2023, zero and 33,614 RSUs vested, respectively, andzero and 100,842 RSUs were forfeited during the three and nine months ended September 30, 2023, respectively, attributed solely to the departure of the Company’s former Chief Executive Officer. The total expense for the three and nine months ended September 30, 2023 related to these RSUs was $173,000 and $437,000, respectively.

Common Stock Issued for Services

The Company granted stock for services in the amount ofzero and 81,234 common shares during the three and nine months ended September 30, 2024, respectively, to board members who elected to receive their board retainers in the form of stock for services with a weighted grant date fair value of $3.01 per share. The Company granted stock for services in the amount ofzero and 72,986 common shares during the three and nine months ended September 30, 2023, respectively, to board members who elected to receive their board retainers in the form of stock for services with a weighted grant date fair value of $3.77 per share.

The stock-based compensation related to these services amounted tozero and during the three months ended September 30, 2024 and 2023, and $245,000 and $275,000 during the nine months ended September 30, 2024 and 2023, respectively.

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General

As of September 30, 2024,1,747,911 shares were available for future issuance under the 2020 Plan and Inducement Plan, in the aggregate. No shares were available for future issuance under the 2018 Plan. Unrecognized stock-based compensation cost was $6.1 million as of September 30, 2024. The unrecognized stock-based expense is expected to be recognized over a weighted average period of 1.6 years.

On January 21, 2020, the Company entered into a sublicense agreement (as amended on June 4, 2020, the “Apexian Sublicense Agreement”) with Apexian, pursuant to which it obtained exclusive worldwide patent and other intellectual property rights that constitute a Ref-1 Inhibitor program relating to therapeutic applications to treat disorders related to ophthalmic and diabetes mellitus conditions. In connection with the Apexian Sublicense Agreement, the Company issued a total of 891,422 shares of its common stock to Apexian and to certain affiliates of Apexian in calendar year 2020. As a result of the shares of common stock issued pursuant to the Apexian Sublicense Agreement, Apexian is considered by the Company to be a related party.

The Company also agreed to make one-time milestone payments under the Apexian Sublicense Agreement for each of the first ophthalmic indication and the first diabetes mellitus indication for the development and regulatory milestones, and once for each of several sales milestones. These milestone payments include (i) payments for specified developmental and regulatory milestones totaling up to $11 million in the aggregate and (ii) payments for specified sales milestones of up to $20 million in the aggregate, which net sales milestone payments are payable once, upon the first achievement of such milestone. Lastly, the Company also agreed to make a royalty payment equal to a single-digit percentage of its net sales of products associated with the covered patents under the Apexian Sublicense Agreement.

None of themilestone or royalty payments were triggered or deemed probable as of September 30, 2024.

Viatris License Agreement

On November 6, 2022, the Company entered into the Viatris License Agreement, pursuant to which it granted Viatris (as successor to Famy) an exclusive, perpetual, sub-licensable license to develop, manufacture, import, export and commercialize (i) PS, for treating (a) reversal of mydriasis, (b) night vision disturbances or dim light vision, and (c) presbyopia, and (ii) PS and low dose pilocarpine for treating presbyopia (together, the “PS Products”) worldwide except for certain countries and jurisdictions in Asia (the “Viatris Territory”). The Company retains the exclusive right to develop, manufacture, have manufactured, import, export and commercialize the PS Products outside of the Viatris Territory.

Under the terms of the Viatris License Agreement, the Company in partnership with Viatris, will develop the PS Products in the United States. Viatris will reimburse the Company for agreed-to budgeted costs related to the development of the PS Products through FDA approval, and then share costs above the agreed upon threshold amount. Viatris will be responsible for developing the PS Products in countries and jurisdictions in the Viatris Territory outside of the United States.

Pursuant to the Viatris License Agreement, the Company received a one-time non-refundable cash payment of $35 million in November 2022 for the exclusive, perpetual, sub-licensable license to develop, manufacture, import, export and commercialize the PS Products in the Viatris Territory. In addition, with respect to the PS Products, the Company will be eligible to receive potential additional payments of up to $130 million upon achieving certain specified regulatory or net sales milestones, with the first milestone payment of $10 million already made following approval by the FDA of PS for reversal of mydriasis, which occurred during the third quarter of 2023. The Company will also receive tiered royalties, starting at low double-digit royalties up to low 20% royalties, based on the aggregate annual net sales of all PS Products in the United States, and will receive low double-digit royalties based on all annual net sales in the Viatris Territory outside of the United States. The royalty payments will continue on a country-by-country basis from the date of the first commercial sale of the first PS Product in a country of the Viatris Territory until December 31, 2040.

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The Viatris License Agreement was accounted for under the provisions of ASC 606. In accordance with the provisions under ASC 606, the Company identifiedtwo distinct performance obligations at the effective date: (1) the license to its intellectual property (“license transfer”) and (2) research and development services.

The Company determined that the licenses transferred represented functional intellectual property. As such, the revenue related to the licenses was recognized at the point in time in which the license/know-how was delivered to Viatris which occurred during the fourth quarter of 2022. The Company determined that revenue related to the research and development services constrained to the 120-day non-cancellation period was to be recognized over time as the services are rendered based on an estimated percentage of completion input model.

Recognition of Revenue

Revenue recognized under the Viatris License Agreement during the three and nine months ended September 30, 2024 was $3.9 million and $6.7 million, respectively, related to the output of research and development services and to a much lesser extent royalty payments.

Revenue recognized under the Viatris License Agreement during the three and nine months ended September 30, 2023 was $11.9 million and $17.4 million, respectively, related to the output of research and development services and to milestone payments. On September 25, 2023, the Company met the $10 million milestone payment requirements attributed to the FDA’s approval of PS for reversal of mydriasis under the name “RYZUMVI”, and the $10 million milestone payment was included in the revenue recognized during the three and nine months ended September 30, 2023.

Regulatory Milestones under the Viatris License Agreement

The Company has evaluated the regulatory milestones that may be received in connection with the Viatris License Agreement. There is uncertainty that the events to obtain the remaining regulatory milestones (aside from the approval by the FDA of RYZUMVI) will be achieved given the nature of clinical development and the stage of the development of the PS Products. These remaining regulatory milestones will be constrained until it is probable that a significant revenue reversal will not occur.

Sales Milestone and Royalty Payments

Sales milestones and royalties relate predominantly to a license of intellectual property granted to Viatris and are determined by sales or usage-based thresholds. The sales milestones and royalties are accounted for under the royalty recognition constraint and are accounted for as constrained variable consideration. The Company applies the royalty recognition constraint for each commercial milestone and only recognize revenues for each once a sale of a licensed product (achievement of each) occurs. Royalty payments in the amount of $14,000 and $36,000 were recognized related to the sale of RYZUMVI by Viatris during the three and nine months ended September 30, 2024, respectively.

Each of the remaining regulatory and sales milestone performance obligations (aside from the $10 million milestone payment related to the FDA’s approval of PS in the third quarter of 2023) were constrained as of September 30, 2024 andno revenue was recognized related to these milestones.

A reconciliation of the closing balance of the contract assets and unbilled receivables associated with the Viatris License Agreement is as follows as of September 30, 2024 and 2023 (in thousands):

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The remaining amounts in contract assets and unbilled receivables as of September 30, 2024 attributed to the research and development services are expected to be settled during the fourth quarter of 2024.

BioSense License and Assignment:

On March 10, 2020, prior to the Rexahn Merger, Rexahn entered into an amendment to its collaboration and license agreement, (as amended, the “BioSense License and Assignment Agreement”) with BioSense to advance the development and commercialization of the Rexahn RX-3117 drug compound (“RX-3117”) for all human uses in the Republic of Singapore, China, Hong Kong, Macau, and Taiwan (the “BioSense Territory”).

Under the BioSense License and Assignment Agreement, the Company is eligible to receive additional milestone payments in an aggregate of up to $84,500,000 upon the achievement of development, regulatory and commercial goals and will also be eligible to receive tiered royalties at low double-digit rates on annual net sales in the BioSense Territory. The Company determined that none of the milestone payments under the BioSense License and Assignment Agreement were probable of payment as of September 30, 2024, and as a result, no revenue related to the milestones was recognized, as the achievement of events entitling the Company to any milestone payments were highly susceptible to factors outside of the Company’s control. Future sales-based royalties related to the exclusive license to develop RX-3117 will be recognized in the period the underlying sales transaction occurs.

Payments received under the BioSense License and Assignment Agreement are subject to the CVR Agreement described in Note 2 – Merger.

Processa License Agreement

On June 16, 2021, the Company entered into a license agreement (the “Processa License Agreement”) with Processa Pharmaceuticals, Inc. (“Processa”), pursuant to which the Company agreed to grant Processa an exclusive license to develop, manufacture and commercialize RX-3117 globally, excluding the BioSense Territory.

Processa will make future payments to the Company upon the achievement of certain development, regulatory and commercial milestones. In addition, Processa will pay the Company mid-single-digit percentage royalties based on annual sales. The Company determined that none of the milestone payments under the Processa License Agreement were probable of payment as of September 30, 2024, and as a result, no revenue related to the milestones was recognized, as the achievement of events entitling the Company to any milestone payments were highly susceptible to factors outside of the Company’s control.

Future payments received under the Processa License Agreement will be subject to the CVR Agreement described in Note 2 – Merger.

Basic net (loss) income per share of common stock is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings or loss per share of common stock is computed similarly to basic earnings or loss per share except the weighted average shares outstanding are increased to include additional shares from the assumed exercise of any common stock equivalents, if dilutive. The Company’s warrants, stock options, RSUs and any unissued common stock for services, while outstanding, are considered common stock equivalents for this purpose. Diluted earnings is computed utilizing the treasury method for the warrants, stock options, RSUs and any unissued common stock for services. With the exception of the third quarter of 2023, no incremental common stock equivalents were included in calculating diluted loss per share because such inclusion would be anti-dilutive given the net loss reported for the other periods presented.

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The following table presents the computation of weighted average common shares considered in the computation of diluted net (loss) income per share during the periods presented:

The following potential common shares were not considered in the computation of diluted net (loss) income per share as their effect would have been anti-dilutive for the three and nine-month periods presented below:

The effective tax rate for the nine months ended September 30, 2024 and 2023 was 0% andnominal, respectively. As of September 30, 2024, a full valuation allowance has been established to reduce the Company’s net deferred income tax assets. As such, no tax benefit related to the Company’s pre-tax loss was recognized for any of the periods presented.

The Company’s corporate returns are subject to examination for tax years beginning in 2020 for federal income tax purposes and subject to examination in various state jurisdictions. The Company does not have any reserves for income taxes that represent the Company’s potential liability for uncertain tax positions.

Effective October 1st,2021, the Company began offering a 401(k) plan (“401 K Plan”) to its employees. All employees are eligible to participate in the 401 K Plan. The Company makes matching contributions equal to 100% on thefirst 3% of compensation that is deferred as an elective deferral and an additional 50% on the next 2% of compensation. The Company’s matching contributions are made on a payroll-by-payroll basis. During thethree months ended September 30, 2024 and 2023, the Company contributed$40,000 and $21,000 to the 401 K Plan, respectively. During the nine months ended September 30, 2024 and 2023, the Company contributed $141,000 and $77,000 to the 401K Plan, respectively.

Acquisition of Opus Genetics

Summary of Transaction

As described in Note 1, “Nature of Business,” on October 22, 2024, the Company completed the stock purchase of Former Opus. Under the terms of the Merger Agreement, at the closing of the Opus Acquisition, the Company issued to the security holders of Former Opus 5,237,063 shares of the Company’s common stock, par value $0.0001 per share and 14,145.374 shares of the Company’s preferred stock, par value $0.0001 per share, designated as Series A Non-Voting Convertible Preferred Stock (“Series A Preferred Stock”), each share of which is convertible into 1,000 shares of common stock, subject to stockholder approval. Following the closing of the Opus Acquisition, the Company had 31,435,507 shares of common stock and 14,145.374 shares of preferred stock outstanding.

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Ancillary Documents

In connection with the execution of the Merger Agreement, the Company and Former Opus entered into stockholder support agreements (the “Support Agreements”) with certain of the Company’s directors and officers. The Support Agreements provide that, among other things, each of the stockholders has agreed to vote or cause to be voted all of the shares ofcommon stock owned by such stockholderat the next annual meeting of stockholders (the “Stockholders’ Meeting”)in favor of(i) the approval of the conversion of the Series A Preferred Stock into shares of common stock (the “Conversion Proposal”) and (ii) the approval of one or more adjournments of the Stockholders’ Meeting tosolicit additional proxies if there are not sufficient votes cast infavor of the Conversion Proposal.

Concurrently and in connection with the execution of the Merger Agreement, certain of Former Opus security holders and all of the directors and officers of the Company entered into lock-up agreements, pursuant to which each such stockholder will be subject to a 180-day lock-up on the sale or transfer of shares of common stock held by such stockholder at Closing, including those shares received by Opus’s security holders in the Opus Acquisition.

In connection with the Merger Agreement, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with certain Former Opus security holders (the “Selling Security Holders”). Pursuant to the Registration Rights Agreement, the Company will prepare and file a resale registration statement covering the shares of common stock and shares of common stock underlying the Series A Preferred Stock issued to Former Opus security holders upon the closing of the Opus Acquisition (the “Registrable Securities”) with the SEC within 120 calendar days following the date of the Merger Agreement or such later date agreed to by the holders of no less than a majority of the then outstanding Registrable Securities (the “Filing Deadline”). The Company will use its reasonable best efforts to cause such registration statement to be declared effective by the SEC within 30 calendar days of the Filing Deadline (or within 60 calendar days if the SEC reviews and has written comments to the registration statement).

The Company has also agreed to, among other things, indemnify the Selling Security Holders as well as their officers, directors, agents, partners, members, managers, stockholders, any person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a person, as such terms are used in and construed under Rule 405 of the Securities Act of 1933 (as amended, the “Securities Act” and each such person, an “Affiliate”), investment advisers and employees of each of them, each person who controls any such Selling Security Holders (within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) and the officers, directors, partners, members, managers, stockholders, agents, Affiliates, investment advisers and employees of each such controlling person under the registration statement from certain liabilities and pay all fees and expenses incident to the Company’s obligations under the Registration Rights Agreement.

Certificate of Designation

On October 22, 2024, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Non-Voting Convertible Preferred Stock with the Secretary of State of the State of Delaware (the “Certificate of Designation”) in connection with the Opus Acquisition. The Certificate of Designation provides for the issuance of shares of Series A Preferred Stock.

Holders of Series A Preferred Stock are entitled to receive dividends on shares of Series A Preferred Stock (on an as-if-converted-to-Common-Stock basis) equal to and in the same form, and in the same manner, as dividends (other than dividends on shares of our common stock payable in the form of common stock) actually paid on shares of our common stock when, as and if such dividends (other than dividends payable in the form of common stock) are paid on shares of our common stock. In addition to any dividends payable as described above, commencing on October 15, 2025, holders of Series A Preferred Stock will be entitled to receive when, as and if declared by the Board or a duly authorized committee of the Board, and the Company will pay, out of funds legally available therefor, cumulative quarterly cash dividends of $26.00 per share of Series A Preferred Stock; provided that for the Series A Dividend Payment Date occurring on October 15, 2025, the amount of such quarterly cash dividend shall be $15.26. Any such dividends will be payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year, commencing with the first payment on October 15, 2025 (each such date, a “Series A Dividend Payment Date”).

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Except as otherwise required by law, the Series A Preferred Stock will haveno voting rights. However, as long as any shares of Series A Preferred Stock are outstanding, the Company will not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series A Preferred Stock: (i) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Certificate of Incorporation or the Bylaws, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series A Preferred Stock, regardless of whether any of the foregoing actions will be by means of amendment to the Certificate of Incorporation or by merger, consolidation or otherwise, (ii) issue further shares of Series A Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series A Preferred Stock, (iii) amend, in any manner that would be reasonably likely to prevent, impede or materially delay the stockholder approval of the Conversion Proposal or the Automatic Conversion (as defined in the Certificate of Designation), or terminate any Support Agreements, or agree to any transfer, sale or disposition of such shares subject to the Support Agreements (except for such transfers, sales or dispositions with respect to which the approval of the Company is not required pursuant to the applicable Support Agreement), (iv) amend Sections 4.02, 4.03 or 4.07 of the Merger Agreement in any manner that would be reasonably likely to prevent, impede or materially delay the stockholder approval of the Conversion Proposal or (v) enter into any agreement with respect to any of the foregoing.

Following stockholder approval of the Conversion Proposal, each share of Series A Preferred Stock will be convertible into shares of common stock at any time at the option of the holder thereof, into 1,000 shares of common stock, subject to certain limitations.

Consulting Agreement with Dr. Bennett

In connection with Dr. Jean Bennett’s appointment as a member of the Board, effective October 22, 2024, she and the Company entered into a consulting agreement (the “Bennett Consulting Agreement”), pursuant to which Dr. Bennett will provide consulting services to the Company for aone-year period. Pursuant to the Bennett Consulting Agreement, Dr. Bennett was granted a restricted stock unit award with respect to 100,000 shares of common stock, which award is scheduled to vest on October 22, 2025, subject to her continued service with the Company through and including such date; provided, that the award will vest in full if the Bennett Consulting Agreement is terminated by (i) Dr. Bennett due to a breach of the Bennett Consulting Agreement by the Company, or (ii) the Company other than due to Dr. Bennett’s embezzlement, non-performance, fraud or deceit, or her violation of law or breach of the Bennett Consulting Agreement.

Appointment of President and Employment Agreement

Dr. Yerxa, age 58, has also been appointed to serve as the Company’s President, effective October 22, 2024. Dr. Yerxa has been the Chief Executive Officer and President of Former Opus since July 2022. In connection with his appointment, on and effective October 22, 2024, Dr. Yerxa and the Company entered into an employment agreement (the “Yerxa Employment Agreement”). The Yerxa Employment Agreement provides for aone-year employment term expiring on October 21, 2025, following which Dr. Yerxa will continue to provide consulting services to the Company for a period ofthree years (the “Yerxa Consulting Term”). Pursuant to the Yerxa Employment Agreement, Dr. Yerxa will receive an annual base salary of $425,000 and will be eligible for a target annual bonus equal to 35% of his base salary, prorated based on the number of days that Dr. Yerxa is employed by the Company during the applicable fiscal year and based on the achievement of performance metrics approved by the Compensation Committee of the Board (the “Compensation Committee”).

As provided in the Yerxa Employment Agreement, as an inducement for Dr. Yerxa to enter into the Yerxa Employment Agreement and subject to the terms of the Inducement Plan, Dr. Yerxa will be granted a time-based restricted stock unit award with respect to 332,800 shares of common stock, which award is scheduled to vest infour equal annual installments on each of the first four anniversaries of the grant date, subject to Dr. Yerxa’s continued service with the Company through each vesting date. During the Yerxa Consulting Term, Dr. Yerxa will receive an annual payment in the amount of $400,000, which amount may be paid in cash or, in the Company’s sole discretion with respect to up to 50% of the amount, in shares of common stock (or such greater amount as may be mutually agreed upon by the parties). The amounts to be paid to Dr. Yerxa during the Yerxa Consulting Term will be accelerated in the event that the Consulting Term is terminated by (i) Dr. Yerxa due to a breach of the consulting agreement by the Company, or (ii) the Company other than a for cause termination.

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In the event of a termination of his employment by the Company without “Cause” or by Dr. Yerxa for “Good Reason” (each as defined in the Yerxa Employment Agreement and each, a “Qualifying Termination”), in each case, within twelve months following the closing date of the Opus Acquisition, then subject to Dr. Yerxa’s execution of a release of claims in favor of the Company (a “Release”) and continued compliance with certain restrictive covenants, Dr. Yerxa will be entitled to receive (i) a lump sum payment equal to the sum of 0.5 times (a) his base salary and (b) an amount equal to a prorated portion of his target annual bonus, (ii) continued health coverage for Dr. Yerxa and his covered dependents at the Company’s expense for up to twelve months, and (iii) all outstanding and unvested equity awards held by Dr. Yerxa will become fully vested and exercisable. In addition, in the event of a Qualifying Termination that occurs within three months prior to a “Change in Control” (as defined in the Yerxa Employment Agreement), then, in lieu of the amounts described in clause (i) above, and subject to Dr. Yerxa’s execution of a Release and continued compliance with certain restrictive covenants, Dr. Yerxa will be entitled to receive a lump sum payment equal to the sum of 0.5 times (x) his base salary and (y) his target annual bonus.

Dr. Yerxa will be subject to certain non-competition and non-solicitation covenants for twelve months following the termination of his employment with the Company.

Accounting Treatment

Given the timing of the closing of the Opus Acquisition, the purchase accounting is incomplete at this time. As such, it is not practicable for the Company to disclose the allocation of purchase price to assets acquired and liabilities assumed and pro forma revenues and earnings of the combined entity.

Inducement Plan Amendment

Effective as of October 20, 2024, the Company amended the 2021 Inducement Plan reserve to 2,625,258 shares of its common stock.

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