CERO THERAPEUTICS HOLDINGS INC
For the period ended Jun 30, 2024. Filed Aug 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 14, 2024
CERO$0.010.0%Stored close · as of Jul 8, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-17.
0001213900-24-044805
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001213900-24-069055
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 71 previous paragraphs and 91 current paragraphs.
50 unchanged; 13 reworded; 27 added; 8 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 29 previous and 34 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (27)
Current report
Recent Developments
Current report
Investigational New Drug Application Submission
Current report
On June 28, 2024, the Company submitted an Investigational New Drug Application (“IND”) for its product candidate, CER-1236, to the Food and Drug Administration (the “FDA”). On July 26, 2024, the Company was informed by the FDA that it has placed a clinical hold on the IND. The FDA indicated that the clinical hold has been placed as a result of insufficient data provided with regard to two issues within pharmacology and toxicology of CER-1236. The FDA indicated that, within 30 calendar days, it would provide a detailed official hold letter and requested that the Company hold its response until after receipt of such letter (the “Hold Letter”). The Company plans to work expeditiously to resolve this clinical hold so that CER-1236 may proceed to the clinic, including by beginning scientific experimental activities to address the two issues based upon the FDA communication, as well as earlier discussions with the FDA. Notwithstanding the FDA Communication and pending receipt of the Hold Letter, the Company continues to believe that it will be able to initiate the planned clinical trial by the end of 2024.
Current report
Nasdaq Notices of Non-compliance
Current report
On July 19, 2024, the Company received a letter (the “Bid Price Requirement Letter”) from the staff at The Nasdaq Global Market (“Nasdaq”) notifying the Company that, for the 30 consecutive trading days prior to the date of the Bid Price Requirement Letter, the closing bid price for the Common Stock has been below the minimum $1.00 per share required for continued listing on Nasdaq set forth in Nasdaq Listing Rule 450(a)(1), which is required for continued listing of the Common Stock on Nasdaq (the “Bid Price Requirement”).
Current report
On July 19, 2024, the Company also received a letter (the “MVPHS Letter”) from Nasdaq notifying the Company that the “Market Value of Publicly Held Shares” (the “MVPHS”) of the Common Stock had been below the minimum of $15,000,000 for the last 30 consecutive business days prior to the date of the MVPHS Letter, which is required for continued listing of the Common Stock on Nasdaq (the “MVPHS Requirement”).
Current report
Such letters are in addition to the letter from Nasdaq received by the Company on May 2, 2024 (the “MVLS Letter” and, together with the Bid Price Letter and the MVPHS Letter, the “Letters”) notifying the Company that, for the 30 consecutive trading days prior to the date of such MVLS Letter, the Common Stock had traded at a value below the minimum $50,000,000 “Market Value of Listed Securities” (“MVLS”) requirement set forth in Nasdaq Listing Rule 5450(b)(2)(A), which is required for continued listing of the Common Stock on Nasdaq (the “MVLS Requirement” and, together with the Bid Price Requirement and the MVPHS Requirement, the “Requirements”).
Current report
The Letters are only notifications of deficiency, not of imminent delisting, and have no current effect on the listing or trading of the Company’s securities on Nasdaq.
Current report
In accordance with Nasdaq listing rules 5810(c)(3)(C) and 5810(c)(3)(D), respectively, the Company has 180 calendar days, or until January 15, 2025, to regain compliance with the Requirements, except for the MVLS Requirement, with respect to which such deadline is October 29, 2024. To regain compliance with the Bid Price Requirement, the bid price of the Company’s common stock must close at $1.00 per share or more for a minimum of ten consecutive business days. To regain compliance with the MVPHS Requirement, the Company’s common stock must trade at or above a level such that the Company’s MVPHS closes at or above $15,000,000 for a minimum of ten consecutive business days. If the Company does not regain compliance with the Bid Price Requirement by January 15, 2025, the Company may be afforded a second 180 calendar day period to regain compliance. To qualify, the Company would be required to meet the MVPHS Requirement and all other initial listing standards for The Nasdaq Global Market, except for the Bid Price Requirement. In addition, the Company would be required to notify Nasdaq of its intent to cure the deficiency during the second compliance period. In order to regain compliance with the MVPHS Requirement, the Common Stock must trade at or above a level such that the Company’s MVLS closes at or above $50,000,000 for a minimum of ten consecutive business days during the compliance period. If the Company is unable to satisfy the MVLS requirement prior to such date, the Company may be eligible to transfer the listing of its securities to The Nasdaq Capital Market (provided that it then satisfies the requirements for continued listing on that market).
Current report
The Company intends to actively monitor the closing bid price for its common stock, its MVPHS and its MVLS and may, if appropriate, evaluate available options to resolve these deficiencies and regain compliance with the Requirements. Such options may include seeking to qualify for continued listing under a different continued listing standard of the Nasdaq Global Market or Nasdaq Capital Market, in lieu of the MVPHS and MVLS requirements, including the Equity Standard, if the Company has sufficient stockholders’ equity at such time. While the Company is exercising diligent efforts to maintain the listing of its securities on Nasdaq, there can be no assurance that the Company will be able to regain or maintain compliance with Nasdaq listing standards.
Current report
Results of Operations for the three-months ended June 30, 2024 and 2023
Current report
General and administrative expenses were $2.4 million for the three-month period ended June 30, 2024 compared to $1.2 million for the three-month period ended June 30, 2023, reflecting an increase of $1.3 million. The increase in the three-month period ended June 30, 2024, over the three-month period ended June 30, 2023, was predominantly due to the expenses associated with operating as a publicly traded company. The hiring of senior management in G&A resulted in an increase of $0.9 million the three-month period ended June 30, 2024, versus the three-month period ended June 30, 2023, while reduction of business consulting expense offset $0.2 million of the increase. Expenses related to services required for SEC compliance, such as printing and transfer agency fees, totaled $0.1 million and public company insurance coverage increased insurance expenses $0.1 million in the three-month period ended June 30, 2024, versus the three-month period ended June 30, 2023. Corporate communications and website development increased $0.1 million and legal expenses increased $0.1 million in the three-month period ended June 30, 2024, versus the three-month period ended June 30, 2023, due to increased requirements of a public company. Public company director fees were $0.1 million in the three-month period ended June 30, 2024, versus no fees as a private company in the three-month period ended June 30, 2023.
Current report
Research and development expenses were $2.7 million for the three-month period ended June 30, 2024 compared to $1.2 million for the three-month period ended June 30, 2023, reflecting an increase of $1.5 million. The increase was related to increased research and development activity as the Company prepared and filed the IND for CER-1236. Compensation increased $0.6 million in the three-month period ended June 30, 2024, over the three-month period ended June 30, 2023, due to increases in compensation, bonus accruals, and increased stock-based compensation expense for employees. Multiple manufacturing runs were necessary to complete the IND application, increasing manufacturing costs by $0.3 million in the three-month period ended June 30, 2024, over the three-month period ended June 30, 2023. Additionally, clinical and regulatory consultants were required to complete and file the IND application, resulting in an increase in scientific consulting of $0.5 million in the three-month period ended June 30, 2024, over the three-month period ended June 30, 2023. The remaining $0.1 million increase in the three-month period ended June 30, 2024, over the three-month period ended June 30, 2023, was related to lab supplies and expenses, additional pre-clinical work and facilities rent escalation.
Current report
Interest and other income, net was $2.7 million for the three-month period ended June 30, 2024 compared to $0.3 million for the three-month period ended June 30, 2023, reflecting an increase of $2.4 million. The increase in the three-month period ended June 30, 2024, over the three-month period ended June 30, 2023, was predominantly due to the $2.9 million change in value of the Company’s Earnout Liability. Settlement of vendor liabilities in the three-month period ended June 30, 2024, resulted in a $0.4 million increase in income in the three-month period ended June 30, 2024 versus the three-month period ended June 30, 2023, offset by the $0.6 million other expense for the delayed S-1 penalty and a 0.3 million decrease in other income the three-month period ended June 30, 2024, related to the elimination of the gain on the revaluation of warrants in the three-month period ended June 30, 2023, and reduced interest income, net in the three-month period ended June 30, 2024.
Current report
Results of Operations for the six-months ended June 30, 2024 and 2023
Current report
Condensed Consolidated****STATEMENTS OF OPERATIONS
Current report
General and Administrative Expenses
Current report
General and administrative expenses were $5.3 million for the six-month period ended June 30, 2024, compared to $1.9 million for the six-month period ended June 30, 2023, reflecting an increase of $3.4 million. The increase in the six-month period ended June 30, 2024, over the six-month period ended June 30, 2023, was predominantly due to a $1.8 million expense consisting of the remaining underwriting fees from the PBAX initial public offering, which were earned on the consummation of the business combination. Additionally, the hiring of senior management in G&A resulted in an increase of $1.1 million, including recruiting fees, offset by $0.2 million less in business consulting as functions were brought in house in the six-month period ended June 30, 2024. Legal fees declined $0.1 million in the six-month period ended June 30, 2024, versus the six-month period ended June 30, 2023. Expenses related to services required for SEC compliance, such as printing and transfer agency fees, increased $0.3 million and public company insurance coverage increased insurance expenses $0.2 million in the six-month period ended June 30, 2024, compared to the six-month period ended June 30, 2023. Corporate communications and website development, accounting and director fees each increased $0.1 million in the six-month period ended June 30, 2024 compared to the six-month period ended June 30, 2023, for an aggregate $0.3 million due to increased requirements of a public company.
Current report
Research and Development Expenses
Current report
Research and development expenses were $4.4 million for the six-month period ended June 30, 2024, compared to $3.0 million for the six-month period ended June 30, 2023, reflecting an increase of $1.4 million. The increase was related to increased R&D activity as the Company prepared and filed the IND for CER-1236. Compensation increased $0.3 million in the six-month period ended June 30, 2024, versus the six-month period ended June 30, 2023, due to increases in compensation, bonus accruals, and increased stock-based compensation expense for employees. To complete the IND application, multiple manufacturing runs were necessary, increasing manufacturing costs by $0.1 million in the six-month period ended June 30, 2024, versus the six-month period ended June 30, 2023. Additionally, clinical and regulatory consultants were required to complete and file the IND application, resulting in an increase in scientific consulting of $0.6 million in the six-month period ended June 30, 2024, versus the six-month period ended June 30, 2023. The remaining $0.4 million increase in the six-month period ended June 30, 2024, versus the six-month period ended June 30, 2023, was related to lab supplies and expenses, additional pre-clinical work and facilities rent escalation.
Current report
Interest and Other Income, Net
Current report
Net cash used in operating activities increased $5.4 million from $3.5 million to $8.9 million in the six-month period ended June 30, 2023 and 2024 respectively. The increase in cash used was largely related to having a $4.8 million increase in the adjustment to net loss related to the gain on the revaluation of derivative liabilities. The difference in net loss reflected $0.3 million more cash being used in the six-month period ended June 30, 2024 versus 2023. The difference of $1.3 million of cash used to pay down accounts payable and accruals, $0.6 million in vendor settlements, and $0.4 more cash consumed on prepaid expenses in the six-month period ended June 30, 2024 versus 2023 was offset by $0.7 million in accrued expense addition, and $1.4 million less in cash adjustments due to stock-based compensation expense in the six-month period ended June 30, 2024 versus 2023. The remaining difference was an additional $0.1 million in adjustment to lease liability due to rent escalation.
Current report
Net cash provided by financing activities increased $9.1 million from $0.6 million in the three-month period ended June 30, 2023 to $9.7 million in the three-month period ended June 30, 2024. The increase was related to the net proceeds of $7.3 million from the issuance of Series A and B Preferred Stock, the net proceeds of $1.7 million for the sale of common stock under the ELOC, $0.8 million from the issuance of ELOC commitment shares to compensate the ELOC investor, and $0.2 million related to net insurance financing. These increases in cash were partially offset by the $0.6 million borrowing under the bridge loan in 2023, for which there was no equivalent in the six-month period ended June 30, 2024.
Current report
Fair value measurements – Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:
Current report
The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Current report
The carrying amounts of cash, restricted cash, and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate fair value due to their relatively short-term maturities.
Current report
There were no material changes in critical accounting estimates during the period covered by this quarterly report on Form 10-Q.
Removed paragraphs (8)
Previous report
Results of Operations
Previous report
(Unaudited)
Previous report
General and administrative expenses were $2.88 million for the three-month period ended March 31, 2024 compared to $0.63 million for the three-month period ended March 31, 2023, reflecting an increase of $2.25 million. The increase in 2024 over 2023 was predominantly due to the expenses associated with expenses necessary to comply with NASDAQ and SEC requirements. Business consulting increased $0.17 million for expenses related to business services and consulting related to the financing and for general management. Investment banking success fees were $1.75 million in support of the PIPE that closed concurrently with the Merger. Services related to printing, filing, and transfer agency increased $0.13 million in support of the regulatory requirements associated with the Merger and public reporting. Recruiting increased $0.24 million related to executive hiring after the Merger. Director and officer liability insurance expenses increased $0.11 million and other various expenses represented an additional increase of $0.06 million. These increases were offset by reduced legal fees as fees associated with the Merger and financing were capitalized and there were $0.10 million less general corporate and IP-related legal fees.
Previous report
Research and development expenses were $1.67 million for the three-month period ended March 31, 2024 compared to $1.80 million for the three-month period ended March 31,2023, reflecting a decrease of $0.13 million. The decrease in 2024 relative to 2023 was predominantly due to product manufacturing costs declining from 0.25 million in 2023 to 0.03 million in 2024 as the engineering runs were completed. This decrease was partially offset by an increase associated with reducing headcount and outsourcing essential work.
Previous report
Net cash used in operating activities increased $3.64 million from $1.44 million to $5.08 million in the three-month period ended March 31, 2023 and 2024 respectively. The increase in cash used was largely related to having a $0.14 million decrease in net loss and a ($2.1) million cash adjustment due to the non-cash adjustment for the gain resulting from derivative liability revaluation. Changes in cash used for net working capital represented an increase in cash used of $1.57 million.
Previous report
Net cash provided by financing activities increased $7.16 million from an immaterial amount in the three-month period ended March 31, 2023 to $7.16 million in the three-month period ended March 31, 2024. The increase was related to the $6.76 million provided by the sale of Series A Preferred Stock and $0.41 million related to insurance financing.
Previous report
**Leases –**The Company determines if an arrangement is, or contains, a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term using the Company’s incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable. The Company determines the lease term as the noncancellable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the balance sheets.
Previous report
Certain leases include variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer a distinct service to the Lessee, such as common area maintenance services. The Company has elected to separate the accounting for fixed lease components and variable and non-lease components for real estate and equipment leases. The variable lease costs are recorded on the consolidated statement of operations as rent expense, within general and administrative expenses. The Company has no financing leases.
Reworded paragraphs (13)
Previous wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information which Cero Therapeutics Holdings, Inc. (“the Company”) management believes is relevant to an assessment and understanding of its results of operations and financial condition. The discussion should be read together withthe Company*’s financial statements and related notes that are presented above. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements resulting from various factors. Please see “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in the proxy statement/prospectus, dated January 22, 2024 (the “Proxy Statement/Prospectus”), and filed with the Securities and Exchange Commission (the “SEC”). Unless the context otherwise requires, references in this section to “Predecessor” is intended to mean the business and operations of CERo Therapeutics, Inc. prior to the Merger.*
Current wording
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information which CERo Therapeutics Holdings, Inc. (“the Company”) management believes is relevant to an assessment and understanding of its results of operations and financial condition. The discussion should be read together withthe Company*’s financial statements and related notes that are presented above. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements resulting from various factors. Please see “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023), filed with the Securities and Exchange Commission (the “SEC”). Unless the context otherwise requires, references in this section to “Predecessor” is intended to mean the business and operations of CERo Therapeutics, Inc. prior to the Merger.*
Previous wording
Predecessor was incorporated in Delaware on September 23, 2016, and is based in South San Francisco, California. Predecessor was focused on developing its therapeutic platform to genetically engineer human immune cells to fight cancer and did not begin clinical development or product commercialization. The Company’s efforts will focus on continued product development, including clinical development, to support regulatory approval to commercialize and subsequent product commercialization.
Current wording
CERo Therapeutics, Inc. (Predecessor) was incorporated in Delaware on September 23, 2016, and is based in South San Francisco, California. Predecessor was focused on developing its therapeutic platform to genetically engineer human immune cells to fight cancer and did not begin clinical development or product commercialization. The Company’s efforts will focus on continued product development, including clinical development, to support regulatory approval to commercialize and subsequent product commercialization.
Previous wording
On February 13, 2024, Predecessor, PBAX and Merger Sub entered into Amendment No. 2 to the Business Combination Agreement to create two additional pools of earnout shares (the “Earnout Shares”) of PBAX Class A Common Stock, one pool of which will contain 875,000 shares, which will be fully vested at Closing and which are being issued as an offset to the agreement by Phoenix Biotech Sponsor, LLC to forfeit an offsetting number of shares of PBAX Class A Common Stock, and one pool of which will contain 1,000,000 shares of PBAX Class A Common Stock, which will be fully vested upon the achievement of certain regulatory milestone-based earnout targets and make certain other technical changes to the timing and process for issuance of the 1,200,000 shares of PBAX Class A Common Stock subject to the other earn-out conditions set forth in the Business Combination Agreement.
Current wording
On February 13, 2024, Predecessor, PBAX and Merger Sub entered into Amendment No. 2 to the Business Combination Agreement to create two additional pools of earnout shares (the “Earnout Shares”) of PBAX Class A Common Stock (one pool of which contains 875,000 shares, and one pool of which contains 1,000,000 shares of PBAX Class A Common Stock) and make certain other technical changes to the timing and process for issuance of the 1,200,000 shares of PBAX Class A Common Stock subject to the other earnout conditions set forth in the Business Combination Agreement.
Previous wording
In addition, the holders of Predecessor common stock and Predecessor preferred stock have the contingent right to receive the Earnout Shares. At the Closing , the Company issued three pools of shares of Common Stock subject to forfeiture if the applicable conditions to transferability thereof are not satisfied: (i) 1,200,000 shares of Common Stock, which will be fully vested upon the achievement of certain adjusted stock price-based earnout targets or upon a qualifying transaction (ii) 875,000 shares of Common Stock, pursuant to a Letter Agreement, dated as of February 14, 2024 which were fully vested at Closing of the Merger and which were issued as an offset to the Sponsor Share Forfeiture Agreement, and (iii) 1,000,000 shares of Common Stock, which will be fully vested upon to achievement of certain regulatory milestone-based earnout targets.
Current wording
In addition, the holders of Predecessor common stock and Predecessor preferred stock have the contingent right to receive the Earnout Shares. At the Closing, the Company issued three pools of shares of Common Stock subject to forfeiture if the applicable conditions to transferability thereof are not satisfied: (i) 1,200,000 shares of Common Stock, which will be fully vested upon the achievement of certain adjusted stock price-based earnout targets or upon a qualifying transaction (ii) 875,000 shares of Common Stock, pursuant to a Letter Agreement, dated as of February 14, 2024 which were fully vested at Closing of the Merger and which were issued as an offset to the Sponsor Share Forfeiture Agreement, and (iii) 1,000,000 shares of Common Stock, which were fully vested upon the June 28, 2024 achievement of certain regulatory milestone-based earnout targets.
Previous wording
Predecessor and the Company have not recognized any revenue from any sources, including from product sales, and does not expect to generate any revenue from the sale of products in the foreseeable future. If the development efforts for the Company’s product candidates, each of which is a specific product and indication combination, are successful and result in regulatory approval, or if the Company executes license agreements with third parties, the Company may generate revenue from R&D services, from the achievement of development milestones or from milestones and royalties related to product sales. However, there can be no assurance as to when any revenues will be generated, if at all.
Current wording
Predecessor and the Company have not recognized any revenue from any sources, including from product sales, and the Company does not expect to generate any revenue from the sale of products in the foreseeable future. If the development efforts for the Company’s product candidates, each of which is a specific product and indication combination, are successful and result in regulatory approval, or if the Company executes license agreements with third parties, the Company may generate revenue from R&D services, from the achievement of development milestones or from milestones and royalties related to product sales. However, there can be no assurance as to when any revenues will be generated, if at all.
Previous wording
Interest and other income, net consists predominantly of interest income from interest bearing bank accounts, interest expense on payables, and the gain or loss on the revaluation of the warrant liability, which represents the change in fair value of outstanding warrants between periods.
Current wording
Interest and other income, net consists predominantly of interest income from interest bearing bank accounts, interest expense on payables, and the gain or loss on the revaluation of derivative liabilities, which represents the change in fair value of earnout liabilities or outstanding warrants between periods.
Previous wording
The Results of Operations for the three-month period ended March 31, 2024 arepro forma as the period presented in following table and discussion includes the Predecessor for the period from January 1, 2024 through February 13, 2024 and the Company for the period from February 14, 2024 through March 31, 2024. This pro forma period from January 1, 2024 to March 31, 2024 does not include the Merger transactions that occurred On-The-Line.
Current wording
The Results of Operations for the six-month period ended June 30, 2024 arepro forma as the period presented in the following table and discussion includes the Predecessor for the period from January 1, 2024 through February 13, 2024 and the Company for the period from February 14, 2024 through June 30, 2024. This pro forma period from January 1, 2024 to June 30, 2024 does not include the Merger transactions that occurred on-the-line.
Previous wording
Interest and other income, net was $1.93 million for the three-month period ended March 31, 2024 compared to $(0.01) million for the three-month period ended March 31,2023, reflecting an increase of $1.94 million. The increase in 2024 relative to 2023 was predominantly due to the reclass of the Predecessor preferred stock warrants to equity and the change in value of the Company’s Earnout Liability between February 14, 2024 and March 31, 2024. Settlement of vendor liabilities of $0.14 million resulted in an additional gain.
Current wording
Interest and other income, net was $5.0 million for the six-month period ended June 30, 2024, compared to $0.3 million for the six-month period ended June 30, 2023, reflecting an increase of $4.7 million. The increase in 2024 relative to 2023 was predominantly due to the $4.7 million change in value of the Company’s Earnout Liability in the six-month period ended June 30, 2024. Settlement of vendor liabilities in 2024 resulted in a $0.6 million increase in income in 2024, offset by the $0.6 million other expense for the delayed S-1 penalty.
Previous wording
The Company, therefore, anticipates that substantial additional funding will be needed in connection with its continuing operations. At March 31, 2024, the Company had $4.6 million in cash and cash equivalents. The Company intends to devote most of the net proceeds from Merger and PIPE to the preclinical and clinical development of its product candidates and public company compliance costs. Based on current business plans, the Company believes that the cash available at March 31, 2024 will not fund its operating expenses and capital requirements for 12 months after the filing of the financial statements for the three-month period ended March 31, 2024. The Company has arranged two equity lines of credit, one providing for the sale of up to 2,977,070 shares of newly issued shares of Common Stock and the other providing for the purchase of up to $25 million of Common Stock on the satisfaction of certain conditions. The Company has no guarantee that the conditions will be satisfied to require the purchase of all, or any, of the Equity Line of Credit (“ELOC”) funds. Any estimate as to how long the Company expects the net proceeds from the ELOC funding may fund the Company operations is based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than its current expectations. Changing circumstances, some of which may be beyond the Company’s control, could result in less cash and cash equivalents available to fund operations or cause the Company to consume capital significantly faster than currently anticipated, and the Company may need to seek additional funds from additional sources sooner than planned.
Current wording
The Company, therefore, anticipates that substantial additional funding will be needed in connection with its continuing operations. At June 30, 2024, the Company had $3.6 million in cash, restricted cash and cash equivalents. The Company intends to devote most of the available cash to the preclinical and clinical development of its product candidates and public company compliance costs. Based on current business plans, the Company believes that the cash available at June 30, 2024 will not fund its operating expenses and capital requirements for 12 months after the filing of the unaudited financial statements for the six-month period ended June 30, 2024. The Company has arranged two equity lines of credit, one providing for the sale of up to 25,000,000 newly issued shares of Common Stock and the other providing for the purchase of up to $25 million of Common Stock on the satisfaction of certain conditions. At June 30, 2024, the Company had 17.5 million shares remaining in the first ELOC and $25 million remaining in the second ELOC. The Company has no guarantee that the conditions will be satisfied to require the purchase of all, or any additional amount, of the Equity Line of Credit (“ELOC”) funds. Any estimate as to how long the Company expects the net proceeds from the ELOC funding may fund the Company’s operations is based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than its current expectations. Changing circumstances, some of which may be beyond the Company’s control, could result in less cash and cash equivalents available to fund operations or cause the Company to consume capital significantly faster than currently anticipated, and the Company may need to seek additional funds from additional sources sooner than planned.
Previous wording
Predecessor and the Company define its critical accounting policies as those accounting principles that require it to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on its financial condition and results of operations, as well as the specific manner in which it applies those principles. While significant accounting policies are more fully described in Note 2 to the Company’s audited financial statements appearing elsewhere in this Form 10-Q, the Company believes the following are the critical accounting policies used in the preparation of its financial statements that require significant estimates and judgments.
Current wording
Predecessor and the Company define its critical accounting policies as those accounting principles that require it to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on its financial condition and results of operations, as well as the specific manner in which it applies those principles. While significant accounting policies are more fully described in Note 2 to the Company’s unaudited financial statements appearing elsewhere in this Form 10-Q, the Company believes the following are the critical accounting policies used in the preparation of its financial statements that require significant estimates and judgments.
Previous wording
Stock-based compensation– The Company periodically issues Common Stock and stock options to officers, directors, and consultants for services rendered. The Company accounts for stock-based compensation as measured at grant date, based on the fair value of the award. The Company uses a Black-Scholes option pricing model (“Black-Scholes”) to estimate option award fair value, which requires the input of subjective assumptions, including the expected volatility of Common Stock, expected risk-free interest rate, and the option’s expected life. The Company also evaluates the impact of modifications made to the original terms of equity awards when they occur. The fair value of restricted stock awards is based upon the share price of the common shares on the date of grant.
Current wording
Stock-based compensation– The Company periodically issues Common Stock and stock options to officers, directors, and consultants for services rendered. The Company accounts for stock-based compensation as measured at grant date, based on the fair value of the award. The Company uses a Black-Scholes option pricing model (“Black-Scholes”) to estimate option award fair value, which requires the input of subjective assumptions, including the expected volatility of Common Stock, expected risk-free interest rate, and the option’s expected life. The Company also evaluates the impact of modifications made to the original terms of equity awards when they occur. The fair value of restricted stock awards is based upon the share price of the Common Stock on the date of grant.
Previous wording
Inflation will generally affect the Company by increasing the cost of labor and costs associated with preclinical and clinical trials and future manufacturing and commercialization activities as well as general corporate costs. Predecessor does not believe that inflation had a material effect on Predecessor’s business, financial condition or results of operations for the period from January 1, 2024 through February 14, 2024 and for the three-month period ending March 31, 2023. The Company does not believe that inflation had a material effect on the Company’s business, financial condition or results of operations for the period from February 14, 2024 through March 31, 2024, but increased inflation may materially impact the Company in later periods of 2024 and beyond.
Current wording
Inflation will generally affect the Company by increasing the cost of labor and costs associated with preclinical and clinical trials and future manufacturing and commercialization activities as well as general corporate costs. The Company does not believe that inflation had a material effect on the Company’s business, financial condition or results of operations for the period ended June 30, 2024, but increased inflation may materially impact the Company in later periods of 2024 and beyond.
Previous wording
In addition, as an emerging growth company, the Companymay take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
Current wording
In addition, as an emerging growth company, the Company may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
The Company anticipates that its R&D expenses will significantly increase in the future as the Company increases headcount, compensation expense, and contracted services for preclinical and clinical development of its product candidates, as well as for manufacturing of clinical product to be used in clinical development.