Entero Therapeutics Inc

In our opinion, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our financial position, results of operations, and cash flows for the interim periods presented. We have consolidated such financial statements in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Therefore, such financial statements do not include all disclosures required by accounting principles generally accepted in the United States of America. In preparing these unaudited condensed consolidated financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date the unaudited condensed consolidated financial statements were issued by filing with the SEC.

These financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2023, included in our Annual Report filed on Form 10-K, filed with the SEC on March 29, 2024.

The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2024.

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Condensed Consolidated Balance Sheets

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Condensed Consolidated Statements of Operations (unaudited)

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Condensed Consolidated Statements of Mezzanine Equity and Changes in Stockholders’ Equity (unaudited)

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Condensed Consolidated Statements of Mezzanine Equity and Changes in Stockholders’Equity (unaudited)

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Condensed Consolidated Statements of Cash Flows (unaudited)

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Notes to Unaudited Condensed Consolidated Financial Statements

September 30, 2024

Note 1 - The Company and Basis of Presentation

The Company

Entero Therapeutics, Inc. (“Entero”) and its wholly-owned subsidiaries, First Wave Bio, Inc. (“FWB”) and ImmunogenX, LLC (“IMGX”), are collectively referred to as the “Company”. The Company is engaged in the research and development of targeted, non-systemic therapies for the treatment of patients with gastrointestinal (“GI”) diseases. Non-systemic therapies are non-absorbable drugs that act locally, i.e., in the intestinal lumen, skin or mucosa, without reaching an individual’s systemic circulation.

In May 2024, the Company changed its name from First Wave Biopharma, Inc. to Entero Therapeutics, Inc.

In March 2024, the Company acquired ImmunogenX, Inc. (“ImmunogenX”) (the Company’s acquisition of ImmunogenX, the “Merger”), a private, clinical-stage biopharmaceutical company founded in 2013, which was developing the biologic, Latiglutenase, for celiac disease. ImmunogenX was also developing CypCel, a metabolic marker compound that can measure the state of small-intestinal recovery of celiac patients undergoing gluten-free diets (“GFDs”).

The Company is seeking avenues to dispose of certain assets and liabilities of IMGX within 12 months of the date of the Merger, including Latiglutenase and CypCel. As of September 30, 2024, these were classified as assets and liabilities held for sale and due to the short period of time since the close of the Merger and are reported at their fair value less cost to sell. The Company determined that the discontinued operations of IMGX represents a strategic shift that will have a major effect on the Company’s operations and financial statements. See Note 3 for additional details regarding the Merger and see Note 4 for additional details surrounding the Company’s assets and liabilities held for sale and discontinued operations.

The Company’s development pipeline consists of gut-restricted GI clinical drug candidates, including the biologic Adrulipase (formerly MS1819), a recombinant lipase enzyme designed to enable the digestion of fats and other nutrients, and Capeserod, a selective 5-HT4 receptor partial agonist which the Company plans to pursue for GI indications. The Company is exploring strategic alternatives for its Niclosamide program, an oral small molecule with anti-viral and anti-inflammatory properties. All of the Company’s programs are currently on hold due to capital constraints.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development and regulatory success, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and ability to secure additional capital to fund clinical trials and operations.

Worldwide supply chain constraints and economic and capital markets uncertainty arising out of conflicts between Russia and Ukraine and conflicts in the Middle East triggered by attacks on Israel in October of 2023 have disrupted commercial and capital markets and emerged as new barriers to long-term economic recovery. Capital markets uncertainty, with public stock price decreases and volatility, could make it more difficult for us to raise capital when needed.

In addition, the Company is subject to other challenges and risks specific to its business, its ability to maintain compliance with the continued listing requirements of The Nasdaq Capital Market and its ability to execute on its strategy, as well as risks and uncertainties common to companies in the biotechnology and pharmaceutical industries with development and commercial operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its drug candidates; delays or problems in the manufacture and supply of its drug candidates, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or drug candidates; pharmaceutical product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing our intellectual property rights; complying with applicable regulatory requirements.

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Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and include the accounts of Entero and its wholly owned subsidiaries, FWB and IMGX. Intercompany transactions and balances have been eliminated upon consolidation.

In our opinion, the accompanying unaudited interim condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, which are necessary to present fairly our financial position, results of operations, and cash flows. The consolidated balance sheet at December 31, 2023, has been derived from audited financial statements of that date. The unaudited interim condensed consolidated results of operations are not necessarily indicative of the results that may occur for the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to instructions, rules, and regulations prescribed by the SEC. The Company believes that the disclosures provided herein are adequate to make the information presented not misleading when these unaudited interim condensed consolidated financial statements are read in conjunction with the audited financial statements and notes previously distributed in our Annual Report Form 10-K for the year ended December 31, 2023, filed with the SEC on March 29, 2024.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying unaudited interim condensed consolidated financial statements have been prepared as if the Company will continue as a going concern. The Company has incurred significant operating losses and negative cash flows from operations since inception. On September 30, 2024, the Company had cash and cash equivalents of approximately $0.4 million and an accumulated deficit of approximately $190.1 million. The Company has incurred recurring losses, has experienced recurring negative operating cash flows, and requires significant cash resources to execute its business plans. Based on its cash on hand at September 30, 2024, the Company anticipates having sufficient cash to fund planned operations into December 2024. Historically, the Company’s major sources of cash have been comprised of proceeds from various public and private offerings of its capital stock. The Company is dependent on obtaining additional working capital funding from the sale of equity and/or debt securities in order to continue to execute its development plans and continue operations.

The Company has been, and is expected to continue, exploring various potential strategies available including but not limited to raising capital, restructuring its indebtedness and identifying and evaluating potential strategic alternatives but there can be no assurance that these efforts will be successful, that the Company will be able to raise necessary capital on acceptable terms, reach agreement with lenders, or that the strategic review process will result in the Company pursuing any transaction or that any transaction, if pursued, will be completed on attractive terms or at all. The Company is evaluating all potential strategic options, including a merger, reverse merger, sale, wind-down, liquidation and dissolution or other strategic transaction. Additionally, there can be no assurances that any particular course of action, business arrangement or transaction, or series of transactions, will be pursued, successfully consummated or lead to increased stakeholder value or that it will make any cash distributions to stockholders. Any failure in these efforts could force the Company to delay, limit or terminate operations, make reductions in its workforce, discontinue research and development programs, liquidate all or a portion of assets or pursue other strategic alternatives, and/or seek protection under the provisions of the U.S. Bankruptcy Code.

Without adequate working capital, the Company may not be able to meet its obligations and continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the date these financial statements are issued. If the Company is not able to obtain necessary capital, it may be required to terminate operations, liquidate all or a portion of assets and/or seek bankruptcy protection. As a result, the Company concluded that its plans at this stage do not alleviate substantial doubt about the ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 2 - Significant Accounting Policies and Recent Accounting Pronouncements

Use of Estimates

The accompanying unaudited condensed consolidated financial statements are prepared in conformity with GAAP and include certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements (including goodwill), and the reported amounts of revenue and expense during the reporting period, including contingencies. Accordingly, actual results may differ from those estimates.

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Reverse Stock Split

On December 18, 2023, the Company effected a reverse stock split, whereby every twenty shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

On January 18, 2023, the Company effected a reverse stock split, whereby every seven shares of the Company’s issued and outstanding common stock was converted automatically into one issued and outstanding share of common stock, but without any change in the number of authorized shares of common stock and the par value per share.

All share and per share amounts have been retroactively restated to reflect the reverse stock splits referenced above.

Cash and Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. All cash and cash equivalent balances were highly liquid at September 30, 2024 and December 31, 2023. As of September 30, 2024 and December 31, 2023, the Company has classified approximately $0.02 million as restricted cash.

Concentrations of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist of cash. The Company primarily maintains its cash balances with financial institutions in federally insured accounts in the U.S. The Company may from time to time have cash in banks in excess of FDIC insurance limits. At September 30, 2024 the Company had approximately $0.4 million in one account in the U.S. which was in excess of these limits. The Company has not experienced any losses to date resulting from this practice. The Company mitigates its risk by maintaining the majority of its cash and equivalents with high quality financial institutions.

Fair Value Measurements

The Company follows Accounting Standards Codification*(“ASC”) Topic 820-10, Fair Value Measurements and Disclosures(*“ASC 820”), which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions, which reflect those that a market participant would use.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument’s level within the fair value hierarchy is based on the lowest level of input that is significant to the overall fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

The Company recognizes transfers between levels as if the transfers occurred on the last day of the reporting period.

Goodwill

Goodwill represents the excess of the purchase price of the acquired business over the fair value of amounts assigned to assets acquired and liabilities assumed. Goodwill and other intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if events or circumstances indicate impairment may be present. Any excess in carrying value over the estimated fair value is charged to results of operations. The Company has not recognized any impairment charges through September 30, 2024 related to goodwill.

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Impairment of Long-Lived Assets

The Company periodically evaluates its long-lived assets for potential impairment in accordance with ASC Topic 360, Property, Plant and Equipment*(*“ASC 360”). Potential impairment is assessed when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. The recoverability of these assets is assessed based on undiscounted expected future cash flows from the assets, considering a number of factors, including past operating results, budgets and economic projections, market trends and product development cycles. If impairments are identified, assets are written down to their estimated fair value. The Company has not recognized any impairment charges through September 30, 2024.

Income Taxes

Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. At September 30, 2024 and 2023, the Company does not have any significant uncertain tax positions.

Leases

Leases are recorded on the balance sheet as right of use assets and lease obligations. Lease liabilities are recognized based on the present value of the future minimum lease payments over the least term at the commencement date. Leases with a term of 12 months or less at inception are expensed monthly over the lease term. The lease term is determined by assuming the exercise of renewal options that are reasonably certain. The implicit interest rate or the incremental borrowing rate is used in determining the present value of future payments.

Research and Development

Research and development costs are charged to operations when incurred and are included in operating expenses, except for goodwill related to patents. Research and development costs consist principally of compensation of employees and consultants that perform the Company’s research activities, payments to third parties for preclinical and non-clinical activities, expenses with clinical research organizations (“CROs”), investigative sites, consultants and contractors that conduct or provide other services relating to clinical trials, costs to acquire drug product, drug supply and clinical trial materials from contract development and manufacturing organization (“CDMOs”) and third-party contractors relating to chemistry, manufacturing and controls (“CMC”) efforts, the fees paid for and to maintain the Company’s licenses and research and development costs related to Adrulipase, Capeserod and Niclosamide. Depending upon the timing of payments to the service providers, the Company recognizes prepaid expenses or accrued expenses related to these costs. These accrued or prepaid expenses are based on management’s estimates of the work performed under service agreements, milestones achieved and experience with similar contracts. The Company monitors each of these factors and adjusts estimates accordingly.

Research and Development– Intellectual Property Acquired

The Company records intellectual property acquired in business acquisitions that has not reached technological feasibility and which has no alternative future use, as In-Process R&D (“IPR&D”) at the acquisition date. On March 13, 2024, the Company entered into an acquisition agreement with IMGX which included the intellectual property and patents for Latiglutenase and CypCel, which was accounted for as a business acquisition (see Note 3 and Note 4).

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Intangible assets related to IPR&D are considered indefinite-lived intangible assets and are assessed for impairment annually or more frequently if impairment indicators exist. If the associated research and development effort is abandoned, the related assets will be written-off, and the Company will record a noncash impairment loss on its Consolidated Statements of Operations. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful lives. The impairment test for indefinite-lived intangible assets is a one-step test that compares the fair value of the intangible asset to its carrying value. If the carrying value exceeds its fair value, an impairment loss is recognized in an amount equal to the excess. The Company has not recognized any impairment charges through September 30, 2024 related to IPR&D.

For tax purposes, intangible assets related to IPR&D are considered indefinite-lived intangible assets.

Stock-Based Compensation

The Company’s board of directors (the “Board”) and stockholders have adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”) which took effect on May 12, 2014, and the 2020 Omnibus Equity Incentive Plan, which took effect on September 11, 2020 (the “2020 Plan”). From the effective date of the 2020 Plan, no new awards have been or will be made under the 2014 Plan. On March 13, 2024, in connection with the IMGX acquisition, the Company assumed IMGX’s 2021 Stock Option Plan (the “IMGX Plan”), including all IMGX stock options immediately outstanding prior to the IMGX acquisition, with each becoming an option to purchase Common Stock, subject to adjustment. The IMGX Plan was adopted and approved by the board of directors and stockholders of IMGX in 2021. Following the assumption of the IMGX Plan by the Company, no new awards have been or will be made under the IMGX Plan. The Company accounts for its stock-based compensation awards to employees, consultants, and Board members in accordance with ASC Topic 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires all stock-based payments to employees, consultants, and Board members, including grants of employee stock options, to be recognized in the statements of operations by measuring the fair value of the award on the date of grant and recognizing this fair value as stock-based compensation using a straight-line method over the requisite service period, generally the vesting period.

For awards with performance conditions that affect their vesting, such as the occurrence of certain transactions or the achievement of certain operating or financial milestones, recognition of fair value of the award occurs when vesting becomes probable.

The Company estimates the grant date fair value of stock option awards using the Black-Scholes option-pricing model. The use of the Black-Scholes option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the Common Stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the Common Stock.

Assets Held for Sale and Discontinued Operations

Assets and liabilities are classified as held for sale when all of the following criteria for a plan of sale have been met: (1) management, having the authority to approve the action, commits to a plan to sell the assets; (2) the assets are available for immediate sale, in their present condition, subject only to terms that are usual and customary for sales of such assets; (3) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; (4) the sale of the assets is probable and is expected to be completed within one year; (5) the assets are being actively marketed for a price that is reasonable in relation to their current fair value; and (6) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. When all of these criteria have been met, the assets and liabilities are classified as held for sale in the condensed consolidated balance sheet. A newly acquired business in a business combination that has met the held for sale criteria should be measured at fair value less costs to sell. This is because the business has been recently acquired and its carrying value has been adjusted to its fair value. Depreciation and amortization of assets cease upon designation as held for sale.

Discontinued operations comprise activities that were disposed of, discontinued or held for sale at the end of the period, represent a separate major line of business that can be clearly distinguished for operational and financial reporting purposes, and represent a strategic business shift having a major effect on the Company’s operations and financial results according to ASC Topic 205, Presentation of Financial Statements.

Additional details surrounding the Company’s assets and liabilities held for sale and discontinued operations are included in Note 4.

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Recent Accounting Pronouncements

The Company has evaluated recently issued accounting pronouncements and has concluded that the impact of recently issued standards that are not yet effective, will not have a material impact on the Company’s financial position or results of operations upon adoption.

Note 3 – Business Acquisition

On March 13, 2024, the Company acquired ImmunogenX, Inc., a Delaware corporation, in accordance with the terms of an Agreement and Plan of Merger, dated March 13, 2024 (the “Merger Agreement”), by and among the Company, IMMUNO Merger Sub I, Inc., a Delaware corporation (“First Merger Sub”), IMMUNO Merger Sub II, LLC, a Delaware limited liability company (“Second Merger Sub”), and ImmunogenX. Pursuant to the Merger Agreement, First Merger Sub merged with and into ImmunogenX, pursuant to which ImmunogenX was the surviving corporation (the “First Merger”). Immediately following the First Merger, IMGX merged with and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity and a wholly owned subsidiary of the Company (the “Second Merger” and, together with the First Merger, the “IMGX Merger”). Second Merger Sub subsequently changed its name to ImmunogenX, LLC. The Merger is intended to qualify as a tax-free reorganization for U.S. federal income tax purposes.

Under the terms of the Merger Agreement, following the consummation of the Merger (the “Closing”), in exchange for the outstanding shares of capital stock of ImmunogenX immediately prior to the effective time of the First Merger, the Company issued to the stockholders of ImmunogenX an aggregate of (A)36,830 shares of Common Stock, and (B)11,777.418 shares of Series G Preferred Stock, each share of which is convertible into 1,000 shares of Common Stock, upon shareholder approval. Following the closing of the acquisition, the Company had 2,303,135 shares of common stock issued and outstanding.

The Company incurred transaction costs of $5,456,038 which are included in the Company’s condensed consolidated statement of operations.

In addition, the Company assumed (i) all ImmunogenX stock options immediately outstanding prior to the First Merger, each becoming an option to purchase Common Stock subject to adjustment pursuant to the terms of the Merger Agreement (the “Assumed Options”) and (ii) all ImmunogenX warrants immediately outstanding prior to the First Merger, each becoming a warrant to purchase Common Stock subject to adjustment pursuant to the terms of the Merger Agreement (the “Assumed Warrants”). The Assumed Options are exercisable for an aggregate of 200,652 shares of Common Stock, have an exercise price of $0.81 and expire between February 1, 2031 and June 6, 2033. The Assumed Warrants are exercisable for an aggregate of 127,680 shares of Common Stock, have exercise prices ranging from $3.03 to $3.92 and expire between September 30, 2032 and September 6, 2033.

Tungsten Partners LLC (“Tungsten”) acted as financial advisor to the Company in connection with the Merger. As partial compensation for services rendered by Tungsten, the Company issued to Tungsten or its affiliates or designees an aggregate of 18,475 shares of Common Stock and 595.808 shares of Series G Preferred Stock. The fair value of the advisory fees was approximately $4.0 million which are included in the approximately $5.5 million of transaction costs noted above.

The Merger was accounted for as a business combination under the acquisition method of accounting with First Wave as the accounting acquirer. Under the acquisition method, the total purchase price of the acquisition is allocated to the net identifiable tangible and intangible assets acquired and liabilities assumed based on the fair values as of the date of such acquisition. The preliminary fair value of the consideration totaled approximately $60.1 million, summarized as follows:

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The Company has made a provisional allocation of the purchase price of the Merger to the assets acquired and the liabilities assumed as of the purchase date. The following table summarizes the provisional purchase price allocations relating to the Merger:

The fair value of IPR&D was capitalized as of the IMGX Merger date and accounted for as indefinite-lived intangible assets until completion or disposition of the assets or abandonment of the associated research and development efforts. Upon successful completion of the development efforts, the useful lives of the IPR&D assets will be determined based on the anticipated period of regulatory exclusivity and will be amortized within operating expenses. Until that time, the IPR&D assets will be subject to impairment testing and will not be amortized. The goodwill recorded related to the IMGX Merger is the excess of the fair value of the consideration transferred by the acquirer over the fair value of the net identifiable assets acquired and liabilities assumed at the date of such acquisition. The goodwill recorded is not deductible for tax purposes.

All intangible assets acquired are subject to amortization and their associated estimated acquisition date fair values are as follows:

Net loss in the Condensed Consolidated Statement of Operations for the nine months ended September 30, 2024 includes net losses of IMGX from the date of acquisition to September 30, 2024 of approximately $2.0 million, which is classified as discontinued operations.

The Merger is classified as held for sale as of September 30, 2024. Refer to Note 4 for further information.

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Pro forma disclosure for the IMGX acquisition

The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if the Acquisition had taken place on January 1, 2024. The pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on the assumed date:

Notes 4 – Discontinued Operations and Assets and Liabilities Held for Sale

The Company has initiated a plan to dispose of certain assets and liabilities of IMGX within 12 months of the date of the Merger with IMGX. These are classified as assets and liabilities held for sale and, due to the short period of time since the close of the Merger, are reported at their fair value less cost to sell. The Company determined that the discontinued operations of IMGX represents a strategic shift that will have a major effect on the Company’s operations and financial statements.

The following table summarizes the Company’s loss from discontinued operations for the three and nine months ended September 30, 2024 and 2023.

The assets and liabilities associated with discontinued operations consist of the following as of September 30, 2024:

Total assets and liabilities classified as held for sale are presented as current assets and liabilities, respectively, as they are anticipated to be sold within 12 months.

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Note 5 - Fair Value Disclosures

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.

The fair value of the Company’s financial instruments are as follows:

At September 30, 2024 and December 31, 2023, the Company had no other assets or liabilities that are subject to fair value methodology and estimation in accordance with U.S. GAAP.

Note 6 – Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements consisted of the following:

Depreciation expense for the three months ended September 30, 2024 and 2023 was approximately $1,000 and $7,000. Depreciation expense for the nine months ended September 30, 2024 and 2023 was approximately $15,000 and $22,000, respectively. Fixed assets held for sale at September 30, 2024 and 2023 in the amount of $16,000 and $0, respectively, are included in assets held for sale. Depreciation of assets ceases upon designation as held for sale.

Note 7 –Goodwill

Goodwill is as follows:

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Note 8 – Intangible Assets and In-Process R&D

Intangible assets consist of IPR&D, patents, tradenames and trademarks acquired from ImmunogenX. As of September 30, 2024, Intangible assets have been reclassified as held for sale. Intangible assets and IPR&D activity is as follows:

Note 9 - Accrued Expenses

Accrued expenses consisted of the following:

Accrued expenses in the amount of $2.2 million and $0 were reclassified as assets held for sale as of September 30, 2024 and 2023, respectively.

Note 10– Capital Stock

Common Stock and Preferred Stock

The Company’s amended and restated certificate of incorporation, as amended to date, (the “Charter”) authorizes the issuance of up to 100,000,000 shares of Common Stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share.

The Company had 4,741,964 and 1,560,998 shares of its Common Stock issued andoutstanding on September 30, 2024 and December 31, 2023, respectively.

The Company had approximately 484.52 and 514.96 shares of Series B preferred stock issued andoutstanding on September 30, 2024 and December 31, 2023, respectively.

The Company had 0 shares of Series C, Series D, Series E and Series F preferred stock issued and outstanding on September 30, 2024 and December 31, 2023.

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Most Favored Nations Exchange Right and Waiver Agreements

In the event the Company effects any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, or a combination of units thereof (a “Subsequent Financing”), each holder of the Series B Preferred Stock had the right, subject to certain exceptions set forth in the Series B Certificate of Designations, at its option, to exchange (in lieu of cash subscription payments) all or some of the Series B Preferred Stock then held (with a value per share of Series B Preferred Stock equal to the stated value of each share of Series B Preferred Stock, or $7,700.00, plus accrued and unpaid dividends thereon, of the Series B Preferred Stock (the “Exchange Amount”)) for any securities or units issued in a Subsequent Financing on dollar-for-dollar basis (the “Series B Exchange Right”). Effective May 12, 2022, the holders of 81.3% of the outstanding shares of the Series B Preferred Stock permanently waived for themselves and all other holders of the Series B Preferred Stock the Series B Exchange Right with respect to any Subsequent Financing occurring on or after January 1, 2022 (the “Permanent Waiver”). Holders of Series B Preferred Stock as of the April 27, 2022 record date were entitled to notice of and to consent to the Permanent Waiver (the “Record Holders”).

As of September 30, 2024, (i) holders of approximately 1,839.76 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $14.4 million had previously elected to exercise their Series B Exchange Rights into Series C Preferred Stock, convertible into an aggregate of 395 shares of Common Stock (which conversion the Company has elected to make in full), and additional Investor Warrants exercisable for up to an aggregate of 395 shares of Common Stock, (ii) holders of approximately 160.62 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $1.5 million had previously elected to exercise their Series B Exchange Rights into 128 shares of Common Stock with no warrants, and (iii) holders of approximately 30.91 shares of Series B Preferred Stock with an aggregate Exchange Amount of approximately $265,000 had previously elected to exercise their Series B Exchange Rights into 44 shares of Common Stock, and additional Series C Warrants exercisable for up to an aggregate of 44 shares of Common Stock.

Mezzanine Equity

Series G Preferred Stock

The Company had 12,373.226 and 0 shares of Series G stock issued andoutstanding on September 30, 2024 and December 31, 2023, respectively.

On March 13, 2024, the Company issued 12,373.226 shares of Series G Preferred stock in connection with the IMGX Merger. The following is a summary of the principal terms of the Series G Preferred Stock as set forth in the Certificate of Designation of the Series G Preferred Stock:

General; Transferability. Share of Series G Preferred Stock will be uncertificated and issued in book-entry form. Shares of Series G Preferred Stock may be transferred by the holders thereof without the consent of the Company, provided that such transfer is in compliance with applicable securities laws.

Conversion. Following stockholder approval of the conversion of the Series G Preferred Stock into Common Stock in accordance with the listing rules of the Nasdaq Stock Market (the “Conversion”), each share of Series G Preferred Stock will automatically convert into 1,000 shares of Common Stock, subject to certain limitations, including that a holder of Series G Preferred Stock is prohibited from converting shares of Series G Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be established by the holder between 4.9% and 19.9%) of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion.

The Series G Preferred Stock is redeemable for cash at the option of the holder thereof at any time following the date that is six months after the initial issuance of the Series G Preferred Stock (without regard to the lack of obtaining the requisite stockholder approval to convert the Series G Preferred Stock into Common Stock), at a price per share equal to the then-current fair value of the Series G Preferred Stock, which shall be the last reported closing sale price of the Company’s Common Stock as reported on the Nasdaq Stock Market as of the trading day immediately prior to the conversion event. As such, Series G Preferred Stock is classified as Mezzanine Equity on the balance sheet.

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Voting Rights. Except as otherwise required by law, the Series G Preferred Stock does not have voting rights. However, as long as any shares of Series G 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 G Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series G Preferred Stock or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Charter or bylaws of the Company, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of preferred stock, in each case if any such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series G Preferred Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series G Preferred Stock, (iii) prior to the earlier of stockholder approval of the Conversion or the six-month anniversary of issuance, consummate either: (A) any Fundamental Transaction (as in the Certificate of Designation) or (B) any stock sale to, or any merger, consolidation or other business combination of the Company with or into, another entity in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing.

Liquidation Preference. The Series G Preferred Stock does not have a preference upon any liquidation, dissolution or winding-up of the Company.

Dividend Rights. Holders of Series G Preferred Stock are entitled to receive dividends on shares of Series G Preferred Stock equal to, on an as-if-converted-to-Common-Stock basis, and in the same form as dividends actually paid on shares of the Common Stock.

Redemption. The shares of Series G Preferred Stock shall not be redeemable at the option of the Company or the holder thereof.

Trading Market. There is no established trading market for any of the Series G Preferred Stock, and we do not expect a market to develop. We do not intend to apply for a listing for any of the Series G Preferred Stock on any securities exchange or other nationally recognized trading system. Without an active trading market, the liquidity of the Series G Preferred Stock will be limited.

At The Market Agreement with H.C. Wainwright

On May 26, 2021, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, pursuant to which the Company may issue and sell, from time to time, through Wainwright, shares of its Common Stock, and pursuant to which Wainwright may sell its Common Stock by any method permitted by law deemed to be an “at the market offering” as defined by Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended. The Company will pay Wainwright a commission of 3.0% of the aggregate gross proceeds from each sale of Common Stock. As of May 24, 2022, the Company was authorized to offer and sell up to $8.0 million of its Common Stock pursuant to the ATM Agreement. The Company did not utilize the ATM Agreement during the nine months ended September 30, 2024 or the year ended December 31, 2023.

July 2024 Inducement Offering

On July 10, 2024, the Company entered into a warrant exercise inducement offer letter (the “Inducement Letter”) with a holder (the “Holder”) of warrants to purchase shares of the Company’s common stock (the “Existing Warrants”) pursuant to which the Holder agreed to exercise for cash their Existing Warrants to purchase 1,762,674 shares of the Company’s common stock (the “Existing Warrant Shares”), in the aggregate, at a reduced exercised price of $1.09 per share, in exchange for the Company’s agreement to issue new warrants (the “Inducement Warrants”) on substantially the same terms as the Existing Warrants as described below, to purchase up to 3,525,348 shares of the Company’s common stock (the “Inducement Warrant Shares”). The Inducement Warrants will be exercisable upon the receipt of stockholder approval and may be exercised until the fifth anniversary of the date on which such stockholder approval is obtained. The Company received aggregate gross proceeds of approximately $1.9 million from the exercise of the Existing Warrants by the Holder and the sale of the Inducement Warrants. The Company engaged Roth Capital Partners, LLC (“Roth”) to act as its financial advisor in connection with the transactions summarized above and paid Roth approximately $0.1 million for its services, in addition to reimbursement for certain expenses.

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May 2024 Registered Direct Offering

On May 14, 2024, the Company completed a Registered Direct Offering (the “May 2024 Offering”) priced at market under Nasdaq rules, for an aggregate of (i)275,000 shares of Common Stock, (ii) pre-funded warrants (the “May 2024 Pre-Funded Warrants”) to purchase up to an aggregate of 91,000 shares of Common Stock and (iii) common warrants (the “May 2024 Warrants”) to purchase up to an aggregate of 732,000 shares of Common Stock. The public offering price for each share of Common Stock and accompanying May 2024 Warrant to purchaseone share of Common Stock was $2.95 per share. The May 2024 Pre-Funded Warrants have an exercise price of $0.0001 per share, are exercisable immediately and will expire when exercised in full. The May 2024 Warrants have an exercise price of $2.70 per share, are exercisable immediately and will expiresix years from the initial exercise date.

The Company received gross proceeds of approximately $1.1 million less placement agent’s fees and other offering expenses of approximately $0.2 million.

March 2024 Registered Direct Offering

On March 6, 2024, the Company completed a Registered Direct Offering (the “March 2024 Offering”) priced at market under Nasdaq rules, for an aggregate of (i)173,100 shares of Common Stock, (ii) pre-funded warrants (the “March 2024 Pre-Funded Warrants”) to purchase up to an aggregate of 352,525 shares of Common Stock and (iii) common warrants (the “March 2024 Warrants”) to purchase up to an aggregate of 525,625 shares of Common Stock. The public offering price for each share of Common Stock and accompanying March 2024 Warrant to purchaseone share of Common Stock was $7.61 per share. The March 2024 Pre-Funded Warrants have an exercise price of $0.0001 per share, are exercisable immediately and will expire when exercised in full. The March 2024 Warrants have an exercise price of $7.48 per share, are exercisable immediately and will expire five years from the initial exercise date. The Company received gross proceeds of approximately $4.0 million less placement agent’s fees and other offering expenses of approximately $0.4 million.

September 2023 Inducement Offering

On September 14, 2023, the Company entered into warrant exercise inducement offer letters with certain holders (the “September 2023 Holders”) of warrants to purchase shares of the Company’s Common Stock (the “September 2023 Existing Warrants”) pursuant to which the September 2023 Holders agreed to exercise for cash their September 2023 Existing Warrants to purchase 294,101 shares of the Company’s Common Stock, in the aggregate, at a reduced exercised price of $8.60 per share, in exchange for the Company’s agreement to issue new warrants (the “September 2023 Inducement Warrants”) on substantially the same terms as the September 2023 Existing Warrants as described below, to purchase up to 588,204 shares of the Company’s Common Stock (the “September 2023 Inducement Warrant Shares”) and a cash payment of $2.50 per September 2023 Inducement Warrant Share which was paid in full upon the exercise of the September 2023 Existing Warrants (the “September 2023 Inducement Offering”). The Company received aggregate gross proceeds of approximately $4.0 million from the exercise of the September 2023 Existing Warrants by the Holders and the sale of the September 2023 Inducement Warrants. The Company engaged Roth Capital Partners, LLC (“Roth”) to act as its financial advisor in connection with the transactions summarized above and paid Roth approximately $0.2 million for its services.

July 2023 Offering

On July 21, 2023, the Company completed an offering (the “July 2023 Offering”) for an aggregate of (i)30,500 shares of Common Stock, (ii) pre-funded warrants (the “July 2023 Pre-Funded Warrants”) to purchase up to an aggregate of 133,750 shares of Common Stock, and (iii) common warrants (the “July 2023 Warrants”) to purchase up to an aggregate of 328,500 shares of Common Stock. The public offering price for each share of Common Stock and accompanying July 2023 Warrant to purchaseone share of Common Stock was $12.80 per share. The July 2023 Pre-Funded Warrants have an exercise price of $0.002 per share, are exercisable immediately and will expire when exercised in full. To date, pre-funded warrants have been exercised to purchase 133,750 shares of Common Stock. The July 2023 Warrants have an exercise price of $12.80 per share, are exercisable immediately and will expire five years from the initial exercise date. The Company received gross proceeds of approximately $2.1 million less placement agent’s fees and other offering expenses of approximately $0.3 million.

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June 2023 Inducement Offering

On June 13, 2023, the Company entered into warrant exercise inducement offer letters with certain holders (the “Holders”) of warrants to purchase shares of the Company’s Common Stock (the “Existing Warrants”) pursuant to which the Holders agreed to exercise for cash their Existing Warrants to purchase 86,216 shares of the Company’s Common Stock, in the aggregate, at a reduced exercised price of $23.00 per share, in exchange for the Company’s agreement to issue new warrants (the “Inducement Warrants”) on substantially the same terms as the Existing Warrants as described below, to purchase up to 172,433 shares of the Company’s Common Stock (the “Inducement Warrant Shares”) and a cash payment of $2.50 per Inducement Warrant Share which was paid in full upon the exercise of the Existing Warrants (the “June 2023 Inducement Offering”). The Company received aggregate gross proceeds of approximately $2.4 million from the exercise of the Existing Warrants by the Holders and the sale of the Inducement Warrants. The Company engaged Roth Capital Partners, LLC (“Roth”) to act as its financial advisor in connection with the transactions summarized above and paid Roth approximately $0.2 million for its services.

March 2023 Private Placement

On March 15, 2023, the Company completed a private placement offering (the “March 2023 Offering”) priced at market under Nasdaq rules, for an aggregate of (i)6,400 shares of Common Stock, (ii) pre-funded warrants (the “March 2023 Pre-Funded Warrants”) to purchase up to an aggregate of 44,751 shares of Common Stock and (iii) common warrants (the “March 2023 Warrants”) to purchase up to an aggregate of 102,302 shares of Common Stock. The public offering price for each share of Common Stock and accompanying March 2023 Warrant to purchaseone share of Common Stock was $78.20 per share. The March 2023 Pre-Funded Warrants have an exercise price of $0.002 per share, are exercisable immediately and will expire when exercised in full. The March 2023 Warrants have an exercise price of $73.20 per share, are exercisable immediately and will expire five years from the initial exercise date. The Company received gross proceeds of approximately $4.0 million less placement agent’s fees and other offering expenses of approximately $0.3 million.

Common Stock Issuances

Issuances for the Three Months Ended September 30, 2024

During the three months ended September 30, 2024, the Company issued 1,762,674 shares of Common Stock under the July 2024 Inducement Offering for which the Company received net proceeds of approximately $1.7 million.

During the three months ended September 30, 2024, the Company issued an aggregate of 38,182 shares of Common Stock upon the vesting of RSUs (See Note 12).

Issuances for the Nine Months Ended September 30, 2024

During the nine months ended September 30, 2024, the Company issued 173,100 and 275,000 shares of Common Stock under the March 2024 Offering and May 2024 Offering, respectively, for which the Company received net proceeds of approximately $4.5 million.

During the nine months ended September 30, 2024, the Company issued 1,762,674 shares of Common Stock under the July 2024 Inducement Offering for which the Company received net proceeds of approximately $1.7 million.

During the nine months ended September 30, 2024, the Company issued an aggregate of 36,830 shares of Common Stock with a value of $2.3 million in connection with the IMGX acquisition.

During the nine months ended September 30, 2024, the Company issued an aggregate of 18,475 shares of Common Stock with a value of $0.1 million to its financial advisors in connection with the IMGX acquisition.

During the nine months ended September 30, 2024, the Company issued an aggregate of 443,525 shares of Common Stock upon the exercise of pre-funded warrants issued at a par value of $0.0001 (See Note 11).

During the nine months ended September 30, 2024, the Company issued an aggregate of 27 shares of Common Stock upon the exchange of an aggregate of 30 shares of Series B Preferred Stock with a stated value of approximately $234,376 plus accrued dividends of approximately $70,429.

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During the nine months ended September 30, 2024, the Company issued an aggregate of 350,000 shares of its Common Stock to consultants with a grant date fair value of approximately $1,541,995 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.

During the nine months ended September 30, 2024, the Company issued an aggregate of 121,335 shares of Common Stock upon the vesting of RSUs (See Note 12).

Issuances for the Three Months Ended September 30, 2023

During the three months ended September 30, 2023, the Company issued 30,500 shares of Common Stock under the July 2023 Offering for which the Company received net proceeds of approximately $1.8 million.

During the three months ended September 30, 2023, the Company issued 294,101 shares of Common Stock upon the exercise of an aggregate of 294,101 investor warrants for which the Company received net proceeds of approximately $3.7 million (See Note 11).

During the three months ended September 30, 2023, the Company issued an aggregate of 133,750 shares of Common Stock upon the conversion of pre-funded warrants issued at a par value of$0.0001.

During the three months ended September 30, 2023, the Company issued an aggregate of 22 shares of Common Stock upon the exchange of an aggregate of 24.22 shares of Series B Preferred Stock with a stated value of approximately$186,500 plus accrued dividends of approximately$43,300.

During the three months ended September 30, 2023, the Company issued an aggregate of 2,500 shares of its Common Stock to consultants with a grant date fair value of approximately$76,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.

During the three months ended September 30, 2023, the Company issued an aggregate of 1,851 shares of Common Stock upon the vesting RSUs (See Note 12).

Issuances for the Nine Months Ended September 30, 2023

During the nine months ended September 30, 2023, the Company issued 6,400 shares of Common Stock under the March 2023 Offering for which the Company received net proceeds of approximately$3.7 million.

During the nine months ended September 30, 2023, the Company issued 86,216 shares of Common Stock upon the exercise of an aggregate of 86,216 investor warrants for which the Company received net proceeds of approximately$2.2 million.

During the nine months ended September 30, 2023, the Company issued 30,500 shares of Common Stock under the July 2023 Offering for which the Company received net proceeds of approximately $1.8 million.

During the nine months ended September 30, 2023, the Company issued 294,101 shares of Common Stock upon the exercise of an aggregate of 294,101 investor warrants for which the Company received net proceeds of approximately $3.7 million.

During the nine months ended September 30, 2023, the Company issued an aggregate of 199,974 shares of Common Stock upon the exercise of pre-funded warrants issued at a par value of$0.0001.

During the nine months ended September 30, 2023, the Company issued an aggregate of 26 shares of Common Stock upon the exchange of an aggregate of 28.45 shares of Series B Preferred Stock with a stated value of approximately$219,000 plus accrued dividends of approximately$49,500.

During the nine months ended September 30, 2023, the Company issued an aggregate of 2,500 shares of its Common Stock to consultants with a grant date fair value of approximately $76,000 for investor relations services provided, which was recorded as stock-based compensation and included as part of general and administrative expense.

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During the nine months ended September 30, 2023, the Company issued an aggregate of 3,854 shares of Common Stock upon the vesting of RSUs.

During the nine months ended September 30, 2023, the Company cancelled an aggregate of 148 shares of Common Stock in connection with the 1-for-7 reverse stock split on January 18, 2023.

Note 11– Warrants

Warrant activity for the nine months ended September 30, 2024 and 2023 was as follows:

As of September 30, 2024, the outstanding warrants expire from 2024 through 2033.

During the nine months ended September 30, 2024, the Company issued warrants to purchase 525,625 shares of the Company’s Common Stock and pre-funded warrants to purchase 352,525 shares of the Company’s Common Stock in connection with the March 2024 Offering, warrants to purchase 732,000 shares of the Company’s Common Stock and pre-funded warrants to purchase 91,000 shares of the Company’s Common Stock in connection with the May 2024 Offering , and warrants to purchase 3,525,348 shares of the Company’s Common Stock in connection with the July Inducement Offering (See Note 10). Additionally, the Company assumed warrants to purchase 127,680 shares of the Company’s Common Stock in connection with the IMGX acquisition.

During the nine months ended September 30, 2024, an investor exercised pre-funded warrants to purchase 443,525 shares of the Company's Common Stock and common stock warrants to purchase 1,762,674 shares of the Company's Common Stock in connection with previous offerings.

During the nine months ended September 30, 2023, the Company issued warrants to purchase 102,302 shares of the Company’s Common Stock and pre-funded warrants to purchase 44,751 shares of the Company’s Common Stock in connection with the March 2023 Offering, warrants to purchase 172,433 shares of the Company’s Common Stock in connection with the June 2023 Inducement Offering, warrants and pre-funded warrants to purchase 462,250 shares of the Company’s Common Stock in connection with the July 2023 Offering, and warrants to purchase 588,204 shares of the Company’s Common Stock in connection with the September 2023 Inducement Offering (See Note 10).

During the nine months ended September 30, 2023, an investor exercised pre-funded warrants to purchase 199,974 shares of the Company's Common Stock and common stock warrants to purchase 380,319 shares of the Company's Common Stock in connection with previous offerings.

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Note 12 – Equity Incentive Plan

The Company’s Board and stockholders adopted and approved the Amended and Restated 2014 Omnibus Equity Incentive Plan (the “2014 Plan”), which took effect on May 12, 2014. The Company’s Board and stockholders adopted and approved the 2020 Omnibus Equity Incentive Plan (the “2020 Plan”), which took effect on September 11, 2020. From the adoption and approval of the 2020 Plan, no new awards have been or will be made under the 2014 Plan.

The 2020 Plan allows for the issuance of securities, including stock options to employees, Board members and consultants. The initial number of shares of Common Stock available for issuance under the 2020 Plan was 238 shares, which will, on January 1 of each calendar year, unless the Board decides otherwise, automatically increase to equal ten percent (10)% of the total number of shares of Common Stock outstanding on December 31 of the immediately preceding calendar year, calculated on an As Converted Basis. As Converted Shares include all outstanding shares of Common Stock and all shares of Common Stock issuable upon the conversion of outstanding preferred stock, warrants and other convertible securities, but will not include any shares of Common Stock issuable upon the exercise of options and other convertible securities issued pursuant to either the 2014 Plan, the 2020 Plan, or the IMGX Plan. The number of shares permitted to be issued as “incentive stock options” (“ISOs”) is 357 under the 2020 Plan.

On March 13, 2024, in connection with the IMGX acquisition, the Company assumed the IMGX Plan, including all 200,652 IMGX stock options immediately outstanding prior to the IMGX acquisition, with each becoming an option to purchase Common Stock, subject to adjustment. Such stock options were the only awards that had been made under the IMGX Plan as of the closing of the IMGX acquisition. The IMGX Plan was adopted and approved by the board of directors and stockholders of IMGX in 2021. Following the assumption of the IMGX Plan by the Company, no new awards have been or will be made under the IMGX Plan.

As of January 1, 2024, the number of shares of Common Stock available for issuance under the 2020 Plan automatically increased to 334,078 under the 2020 Plan’s evergreen provision.

As of September 30, 2024, there were an aggregate of 73 total shares available (but un-issuable) under the 2014 Plan, of which 27 are issued and outstanding, and 9 shares are reserved subject to issuance of restricted stock and RSUs.

As of September 30, 2024, there were an aggregate of 350,000 total shares available (but un-issuable) under the IMGX 2021 Plan, of which 200,652 are issued and outstanding.

As of September 30, 2024,334,078 total shares were authorized under the 2020 Plan, of which 208,763 were issued and outstanding and 125,315 shares were available for potential issuances.

During the nine months ended September 30, 2024 and 2023, stock option activity under the 2014 Plan, 2020 Plan, and IMGX 2021 Plan was as follows:

During the nine months ended September 30, 2024, the Company assumed fully vested options to purchase 200,652 shares of the Company’s Common Stock issued under the IMGX 2021 Plan. During the nine months ended September 30, 2023, the Board approved the grant of options to purchase 250 shares of the Company’s Common Stock pursuant to the 2020 Plan. In general, options granted under the 2020 Plan vest monthly over a 36-month period.

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For the nine months ended September 30, 2024 and 2023, the fair value of each option grant has been estimated on the date of grant using the Black-Scholes Option Pricing Model with the following weighted-average assumptions:

Using the Black-Scholes Option Pricing Model, the estimated weighted average fair value of an option to purchase one share of common stock assumed during the nine months ended September 30, 2024 and 2023 was $6.32 and $61.00, respectively.

Restricted Stock and Restricted Stock Units

Restricted stock refers to shares of Common Stock subject to vesting based on certain service, performance, and market conditions. Restricted stock units (“RSUs”) refer to an award which constitutes a promise to grant shares of Common Stock at the end of a specified restriction period.

As of each September 30, 2024 and September 30, 2023, under the 2014 Plan, the Company had 1 share of restricted stock outstanding and an aggregate unrecognized restricted Common Stock expense of approximately $157,500, which will be recognized when vesting of certain milestones become probable.

During the nine months ended September 30, 2024 and 2023, RSU activity under the 2020 Plan was as follows:

During the nine months ended September 30, 2024 and 2023, the Board approved the grant of 150,421 and 8,012 RSUs, respectively. All grants of RSUs were pursuant to the 2020 Plan and typically vest quarterly over aone-year period. During the nine months ended September 30, 2024,133,401 RSUs vested, of which 12,066 were issued in October 2024. During the nine months ended September 30, 2023,5,680 RSUs vested, of which 1,826 were issued in October 2023.

The total stock-based compensation expense for employees and non-employees is included in the accompanying condensed consolidated statements of operations and as follows:

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As of September 30, 2024, the Company had unrecognized stock-based compensation expense related to stock options and RSUs of approximately $78,000. Approximately $61,000 of this unrecognized expense will be recognized over the average remaining vesting term of the stock awards of 0.85 years. Approximately $17,000 of this unrecognized expense will vest upon achieving certain clinical and/or corporate milestones. The Company will recognize the expense related to these milestones when the milestones become probable. Stock-based compensation related to IMGX for the three and nine months ended September 30, 2024 of approximately $6,000 and $19,000, respectively, is included in discontinued operations on the statement of operations.

As of September 30, 2023, the Company had unrecognized stock-based compensation expense related to stock options and RSUs of approximately $0.6 million. Approximately $0.4 million of this unrecognized expense will be recognized over the average remaining vesting term of the stock awards of 0.66 years. Approximately $0.2 million of this unrecognized expense will vest upon achieving certain clinical and/or corporate milestones. The Company will recognize the expense related to these milestones when the milestones become probable.

Note 13 – Agreements

License Agreement with Sanofi

On September 13, 2023, the Company entered into a License Agreement with Sanofi, pursuant to which the Company received a license to obtain certain exclusive worldwide rights to develop and commercialize Capeserod, a selective 5-HT4 receptor partial agonist which the Company intends to repurpose and develop for gastrointestinal indications.

The Company paid Sanofi an upfront payment of $0.5 million in October 2023 and Sanofi will be eligible to receive up to $46.0 million in potential development and regulatory milestone payments and up to $235.0 million in potential commercial milestone payments. Sanofi will also be eligible to receive mid-to-high single-digit royalties on net sales, as well as a percentage of sublicense and transfer revenues with respect to Capeserod. Sanofi will also have a right of first refusal with respect to Capeserod out-licensing transactions.

The upfront payment of $0.5 million was recorded as research and development expense in the year ended December 31, 2023. Depending on the status of development at the time a contingent payment is recognized, the Company may determine that the payment should be expensed as research and development or be capitalized as an intangible asset. This determination will be based on the facts and circumstances that exist at the time a contingent payment is recognized.

The License Agreement shall expire on a country-by-country basis upon the later of: (i) the expiration of the last to expire valid claim of an applicable patent in such country covering such licensed product, (ii) the expiration of the regulatory exclusivity for such licensed product in the applicable country and (iii) the tenth anniversary of the date of first commercial sale of a licensed product in such country. Each party may terminate the License Agreement if the other party materially breaches its obligations under the License Agreement and fails to cure such material breach within 60 days from the date of such notice of breach, except in the case of payment breach, as to which the breaching party will have only aten-day cure period. Sanofi may terminate the License Agreement upon any bankruptcy proceedings by the Company. The Company may terminate the License Agreement by providing Sanofi with at least 60 days prior written notice; provided, however, that Sanofi shall be entitled to any and all payments due and owed to Sanofi prior to the effective date of termination.

Note 14 – Leases

The Company leases its offices under operating leases which are subject to various rent provisions and escalation clauses.

The Company is a party totwo real property operating leases for the rental of office space. The Company has office space of 3,472 square feet in Boca Raton, Florida that is used for its corporate headquarters with a term through August 31, 2026. The Company also has office space in Newport Beach, California with a term through April 30, 2025. In November 2024, the Company terminated its lease in Newport Beach, California.

The Company’s leases expire at various dates through 2026. The escalation clauses are indeterminable and considered not material and have been excluded from minimum future annual rental payments.

Lease expenses amounted to approximately $55,000 and $42,000 for the three months ended September 30, 2024 and 2023, respectively and $136,000 and $114,000 for the nine months ended September 30, 2024 and 2023, respectively.

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The weighted-average remaining lease term and weighted-average discount rate under operating leases as of September 30, 2024 are:

Maturities of operating lease liabilities as of September 30, 2024, were as follows:

Note 15 – Debt

Debt consists of the following:

Revolving line of credit

In connection with the IMGX acquisition, the Company assumed a revolving line of credit. In October 2022, ImmunogenX entered into a credit agreement, which allowed for a revolving line of credit (the “Revolver”) for borrowings up to $6.0 million, initially maturing on October 1, 2024, and bearing interest per annum of theprime rate plus 4.5%. The credit agreement was amended in September 2023 (the “First Amendment”) to increase the maximum borrowings of the Revolver to $7.5 million. The credit agreement was amended and restated on March 13, 2024 (the “Second Amendment”). Terms under the Second Amendment include an extended maturity date of September 13, 2025, interest per annum of theprime rate plus 6.0%, and no further draws on the line of credit after March 13, 2024. As of September 30, 2024, the Revolver and accrued interest has been reclassified to liabilities of disposal group held for sale (see Note 4).

Promissory notes

In connection with the IMGX acquisition, the Company assumedtwo promissory notes, one of which is with a related party. The notes are each in the amount of $0.5 million, accrue interest at a rate of theprime rate plus 4.5% per annum, and have a maturity date of September 30, 2025. As of September 30, 2024, the promissory notes and all accrued interest has been reclassified to liabilities of disposal group held for sale.

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EIDL** **loan

In connection with the IMGX acquisition, the Company assumed an Economic Injury Disaster Loan (“EIDL”) loan with a principal balance of $0.5 million bearing interest of 3.75% per annum, with interest payable monthly in arrears. The Company determined the loan has a fair value as of the assumption date of March 13, 2024 of $38,000, resulting in a discount of $462,000 which is amortized over the remaining life of the loan. All unpaid principal and interest are due at maturity on June 30, 2050. As of September 30, 2024, the EIDL loan and all accrued interest has been reclassified to liabilities of disposal group held for sale.

Directors and Officer**’**s Liability Insurance

On November 30, 2023, the Company entered into 9-month financing agreements for its directors and officer’s liability insurance, as well as other corporate insurances, in the amount of approximately $0.7 million that bears interest at an annual rate of 7.90%. In June 2024, approximately $32,000 was added to the financing agreement. Monthly payments going forward, including principal and interest, are approximately $0.1 million per month. The balance due under these financing agreements was $0 at September 30, 2024 and $0.6 million at December 31, 2023.

Note 16 – Net Loss per Common Share

Basic net loss per share is computed by dividing net loss available to Common Stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect, in periods in which they have a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants and conversion of convertible debt that are not deemed to be anti-dilutive.

For the nine months ended September 30, 2024 stock options in the amount of 201,063 and warrants in the amount of 4,927,756 were excluded from the calculation of diluted net loss per share as they did not have a dilutive effect.

All shares of Common Stock that may potentially be issued in the future are as follows:

Note 17 - Employee Benefit Plans

401(k) Plan

Since 2015, the Company has sponsored a multiple employer defined contribution benefit plan, which complies with Section 401(k) of the Internal Revenue Code covering substantially all employees of the Company. All employees are eligible to participate in the plan. Employees may contribute from 1% to 100% of their compensation and the Company matches an amount equal to 100% on the first 6% of the employee contribution and may also make discretionary profit-sharing contributions.

Employer contributions under this 401(k) plan amounted to approximately $17,000 and $21,000 for the three months ended September 30, 2024 and 2023, respectively, and approximately $84,000 and $68,000 for the nine months ended September 30, 2024 and 2023.

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Note 18 - Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Where applicable, the Company records a valuation allowance to reduce any deferred tax assets that it determines will not be realizable in the future.

The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. Although the Company believes that it has adequately reserved for uncertain tax positions (including interest and penalties), it can provide no assurance that the final tax outcome of these matters will not be materially different. The Company makes adjustments to these reserves in accordance with the income tax accounting guidance when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the provision for income taxes in the period in which such determination is made and could have a material impact on the Company’s financial condition and operating results. Carryforward attributes that were generated in tax years prior to those that remain open for examination may still be adjusted by relevant tax authorities upon examination if they either have been, or will be, used in a future period.

In applying the estimated annual effective tax rate approach prescribed under ASC 740 - 270 and based on present evidence and conclusions around the realizability of deferred tax assets, the Company determined that any deferred tax benefits related to the forecasted tax rate and pretax activity during the first half of 2024 and 2023 are neither more likely than not to be realized in the current year nor realizable as a deferred tax asset at the end of the year. Therefore, the appropriate amount of income tax benefit to recognize related to deferred tax assets generated during the nine months ended September 30, 2024 and 2023 iszero.

The Company’s effective income tax rate was approximately 73% and 0% for the nine months ended September 30, 2024 and 2023, respectively. The income tax provision for interim periods is determined using an estimate of the annual effective tax rate adjusted for discrete items. The Company’s effective tax rate for the nine months ended September 30, 2024 differs from the applicable statutory tax rate primarily due to the impact of the accounting for the IMGX Merger during the period, which resulted in the release of a portion of the valuation allowance that had previously been recorded against the deferred tax assets of the Company, resulting in a $10.6 million income tax benefit for the nine months ended September 30, 2024. The change in valuation allowance was determined based on the weight of available evidence as of the present reporting period and accounted for by the Company pursuant to ASC 805 - 740 - 30 - 3 in the Statement of Operations. The Company’s effective tax rate for the nine months ended September 30, 2023 differs from the applicable statutory tax rate primarily due to the full valuation allowance recorded against its deferred tax assets during the period.

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Note 19 - Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were available to be issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements except for the items noted below.

Binding Term Sheet

In November 2024, the Company entered into a binding term sheet (the “Binding Term Sheet”) with Journey Therapeutics, Inc. (“Journey”), a life sciences company. Pursuant to the Binding Term Sheet, the Company will acquire 100% of the outstanding equity interests of Journey in return for 99% of the Company’s fully-diluted equity (the “Acquisition”). The Acquisition is subject to a number of conditions, including the completion of customary due diligence, negotiation of the definitive agreement, as well as approvals by the Company’s Board and the Company’s stockholders. Such definitive agreement will include a number of customary provisions, including without limitation, representations and warranties of Journey and the Company, restrictive covenants appliable to Journey and the Company and indemnification provisions. The Acquisition is also conditioned upon the completion of an equity financing providing net proceeds of at least $5.0 million, the effectiveness of a Form S-4 Registration Statement with regard to the Acquisition, to be filed with the SEC, and the shares of Common Stock of the combined company being approved for initial listing on Nasdaq.

Lease Termination

In November 2024, the Company terminated its lease in Newport Beach, California.

Share Issuances

In October 2024, the Company issued an aggregate of 12,066 shares of Common Stock upon the vesting of RSUs.

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