NRX Pharmaceuticals Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
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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.
Sep 30, 2024 · Filed Nov 14, 2024
NRXP$2.38+4.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001437749-24-026847
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001437749-24-035289
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 114 previous paragraphs and 128 current paragraphs.
87 unchanged; 24 reworded; 17 added; 2 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 15 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 (17)
Current report
Resignation of CEO, Stephen Willard
Current report
On October 7, 2024, Stephen Willard, the Chief Executive Officer of the Company provided notice to the Board that he was resigning from the Company, effective immediately, in order to assume the leadership of an early stage biotechnology company. Mr. Willard’s resignation was not a result of any disagreement with the Company on any matter relating to its operations, policies, or practices, or to any issues regarding its accounting policies or practices. Jonathan Javitt, Chairman of the Board of Directors of the Company, was appointed as Interim Chief Executive Officer concurrent with Mr. Willard’s resignation. All terms and conditions of Dr. Javitt’s existing consulting agreement will remain in full force and effect.
Current report
August 2024 SPA
Current report
On August 12, 2024, the Company executed a Securities Purchase Agreement (the “SPA”) and related agreements, under which the Company agreed to sell and issue, and certain purchasers agreed to purchase, an aggregate of $16.3 million of securities. The consideration payable by the purchasers under the SPA will be comprised of three equal closings, each subject to certain closing conditions. The securities to be issued and sold by the Company include up to $16.3 million of senior secured convertible notes (the “Notes”) and warrants to purchase shares of the Company’s common stock (the “Warrants”). The proceeds arising from the sale of the Notes and the Warrants were used to settle the Company’s outstanding amounts owed to Streeterville (as defined below) and other working capital needs. The Company has received the first and second tranche.
Current report
The Notes bear interest at the rate of 6% per annum and mature in 15 months following their date of issuance. The Notes may be settled in cash or in shares of the Company’s common stock, at the sole discretion of the holder, at the applicable conversion price. The Notes may not be prepaid by the Company however, the holders of the Notes may elect to convert the Notes, in whole or in part, into shares of the Company’s common stock at any time after the original issuance date. The conversion price will equal the lower of (i) $2.4168 or (ii) a price equal to 92% of the lowest volume-weighted average price during the seven-trading day period immediately preceding the applicable conversion date. The Notes include certain redemption, protection features and default interest and penalties. The Notes are secured by all assets of the Company, including its intellectual property.
Current report
The Warrants have a term of 5 years, and exercise price of $2.42 and are exercisable immediately upon issuance.
Current report
Streeterville Settlement
Current report
On August 12, 2024, the Company and Streeterville entered into a Settlement and Release of Claims (the “Settlement Agreement”), whereby the Company and Streeterville agreed to settle all disputes between the parties and release the Company from all obligations arising from the Notes at certain Securities Purchase Agreement, dated November 4, 2022 (“Streeterville Notes”), between the Company and Streeterville, and that certain Convertible Promissory Note, dated November 4, 2022, issued to Streeterville by the Company, in exchange for a payment of $2.5 million upon the initial closing of the sale of the Notes, and within 60 days thereafter, a second payment of $3.05 million. The Company made the $2.5 million payment upon the closing on August 15, 2024. The Company made the $3.05 million payment in October 2024
Current report
For the three months ended September 30, 2024, the Company recorded $0 of interest income compared to less than $0.1 million of interest expense for the three months ended September 30, 2023. The decrease of less than $0.1 million is due to no premiums being paid on the convertible notes.
Current report
Interest expense
Current report
Loss on convertible note redemptions
Current report
For nine months ended September 30, 2024, the Company recorded a loss of $0.1 million related to convertible note redemptions calculated as the difference between the redemption price as calculated as per the terms of the Anson Note (See Note 7) relative to the fair value of the Common Stock on the date of redemption.
Current report
August 2024 SPA
Current report
On August 12, 2024, the Company executed the SPA and related agreements, under which the Company agreed to sell and issue, and certain purchasers agreed to purchase, an aggregate of $16.3 million of securities. The consideration payable by the purchasers under the SPA will be comprised of three equal closings, each subject to certain closing conditions. The securities to be issued and sold by the Company include up to $16.3 million of the Notes and warrants to purchase 1.4 million shares of the Company’s common stock. The proceeds are expected to be used to settle the Company’s outstanding amounts owed to Streeterville and other working capital needs. The Notes bear interest at the rate of 6% per annum and mature in 15 months following their date of issuance. The Notes may be settled in cash or in shares of the Company’s common stock, at the sole discretion of the holder, at the applicable conversion price. The Note may not be prepaid by the Company however, the holders of the Note may elect to convert the Notes, in whole or in part, into shares of the Company’s common stock at any time after the original issuance date. The conversion price will equal the lower of (i) $2.4168 or (ii) a price equal to 92% of the lowest volume-weighted average price during the seven-trading day period immediately preceding the applicable conversion date. The Notes include certain redemption, protection features and default interest and penalties. The Notes are secured by all assets of the Company, including its intellectual property. The Warrants have a term of 5 years, and exercise price of $2.42 and are exercisable immediately upon issuance. The Company is the process of assessing the accounting treatment of the transaction. The aggregate net cash proceeds to the Company from the August 2024 SPA were approximately $4.5 million. On August 14, 2024, the first tranche closed. Subsequent to September 30, 2024, the second tranche has closed.
Current report
At-The Market Offering Agreement
Current report
From July 11, 2024 to July 30, 2024, the Company announced that it entered into multiple purchase agreements (the “ATM Purchase Agreements”) subject to standard closing conditions where accredited investors purchased 103,063 shares of unregistered Common Stock at a range of $2.421 – $2.528 per share. During the quarter ended September 30, 2024, the Company sold additional shares of Common Stock at an aggregate sales price of $0.3 million.
Current report
Convertible notes payable
Removed paragraphs (2)
Previous report
Convertible note default penalty
Previous report
Convertible note payable
Reworded paragraphs (24)
Previous wording
During the second quarter of 2024 and in the subsequent period, the Company has achieved the following:
Current wording
During the third quarter of 2024 and in the subsequent period, the Company has achieved the following:
Previous wording
In Q1 2024, the Company incorporated HOPE Therapeutics as a wholly-owned subsidiary and engaged its auditors who in August 2024 completed an audit of its financial statements which will be necessary for the intended spin-off of HOPE to the Company’s shareholders. Intravenous ketamine has now become a standard of care for acute treatment of suicidal depression, in the absence of an FDA-labeled product. Intranasal Esketamine is approved by the FDA (SPRAVATO®), but has not demonstrated a benefit on suicidality and is not approved for use in patients with bipolar depression. Attempts to use intranasal racemic ketamine for suicidal depression have failed.
Current wording
In the first quarter of fiscal 2024, the Company incorporated HOPE Therapeutics as a wholly-owned subsidiary and engaged its auditors who in August 2024 completed an audit of its financial statements which will be necessary for the intended spin-off of HOPE to the Company’s shareholders. Intravenous ketamine has now become a standard of care for acute treatment of suicidal depression, in the absence of an FDA-labeled product. Intranasal Esketamine is approved by the FDA (SPRAVATO®), but has not demonstrated a benefit on suicidality and is not approved for use in patients with bipolar depression. Attempts to use intranasal racemic ketamine for suicidal depression have failed.
Previous wording
In November 2023, the Company initiated manufacture of ketamine together with Nephron Pharmaceuticals, Inc. to develop a single patient presentation of ketamine. Nine months of real-time stability is expected in June 2024, the minimum stability time required for a New Drug Application.
Current wording
In November 2023, the Company initiated manufacture of ketamine together with Nephron Pharmaceuticals, Inc. to develop a single patient presentation of ketamine. Twelve-month real-time stability on the first manufactured lot of NRX-100 (ketamine) at Nephron Pharmaceuticals, utilizing commercial scale processes, was reached on September 24, 2024. Demonstrating the ability to manufacture drug product, and prove its stability, are critical components of the drug approval process with the US FDA.
Previous wording
Pursuant to the April Underwriting Agreement and the engagement letter dated April 18, 2024, by and between the Company and Representative, the Company agreed to issue to the Representative in connection with the April Offering, a warrant to purchase up to a number of shares of Common Stock representing 5.0% of the Shares and any April Option Shares (as defined below) sold, at an initial exercise price of $3.63 per share, subject to certain adjustments (the “April Underwriter's Warrant”). On April 19, 2024, the Company issued to the Representative the April Underwriter's Warrant to purchase up to 30,350 shares of Common Stock. The April Underwriter's Warrants and Over-Allotment Warrants is exercisable six months following the date of the Underwriting Agreement and terminates on the five-year anniversary of the date of the April Underwriting Agreement.
Current wording
Pursuant to the April Underwriting Agreement and the engagement letter dated April 18, 2024, by and between the Company and Representative, the Company agreed to issue to the Representative in connection with the April Offering, a warrant to purchase up to a number of shares of Common Stock representing 5.0% of the Shares and any April Option Shares (as defined below) sold, at an initial exercise price of $3.63 per share, subject to certain adjustments (the “April Underwriter's Warrant”). On April 19, 2024, the Company issued to the Representative the April Underwriter's Warrant to purchase up to 30,350 shares of Common Stock. The April Underwriter's Warrants and Over-Allotment Warrants is exercisable nine months following the date of the Underwriting Agreement and terminates on the five-year anniversary of the date of the April Underwriting Agreement.
Previous wording
On April 15, 2024, the Company increased the maximum aggregate offering amount of the shares of Common Stock issuable under that certain At the Market Offering Agreement, dated August 14, 2023 (the “Offering Agreement”), with H.C. Wainwright & Co., and filed a prospectus supplement (the “Current Prospectus Supplement”) under the Offering Agreement for an aggregate of $4.9 million. Though June 30, 2024, the Company received aggregate net cash proceeds to the Company from the ATM Purchases Agreements were approximately $1.4 million. Subsequent to June 30, 2024, the Company sold additional shares of Common Stock at an aggregate sales price of $0.3 million.
Current wording
On April 15, 2024, the Company increased the maximum aggregate offering amount of the shares of Common Stock issuable under that certain At the Market Offering Agreement, dated August 14, 2023 (the “Offering Agreement”), with H.C. Wainwright & Co., and filed a prospectus supplement (the “Current Prospectus Supplement”) under the Offering Agreement for an aggregate of $4.9 million. Though September 30, 2024, the Company received aggregate net cash proceeds to the Company from the ATM Purchases Agreements were approximately $1.7 million.
Previous wording
Since inception, the Company has incurred significant operating losses. For the three months ended June 30, 2024 and 2023, the Company’s net loss was $7.9 million and $8.7 million, respectively. For the six months ended June 30, 2024 and 2023, the Company’s net loss was $14.4 million and $19.8 million, respectively. As of June 30, 2024, the Company had an accumulated deficit of $267.6 million, a stockholders’ deficit of $18.4 million and a working capital deficit of $18.8 million.
Current wording
Since inception, the Company has incurred significant operating losses. For the three months ended September 30, 2024 and 2023, the Company’s net loss was $1.6 million and $6.1 million, respectively. For the nine months ended September 30, 2024 and 2023, the Company’s net loss was $16.0 million and $25.8 million, respectively. As of September 30, 2024, the Company had an accumulated deficit of $269.2 million, a stockholders’ deficit of $18.8 million and a working capital deficit of $16.2 million.
Previous wording
The Company has now secured operating capital that it anticipates as sufficient to fund its drug development operations through year end and to finance submission of FDA New Drug Applications for NRX-100 and NRX-101 in 2024. The Company may pursue additional equity or debt financing or refinancing opportunities in 2024 to fund ongoing clinical activities, to meet obligations under its current debt arrangements and for the general corporate purposes. Such arrangements may take the form of loans, equity offerings, strategic agreements, licensing agreements, joint ventures or other agreements. The sale of equity could result in additional dilution to the Company’s existing shareholders. The Company cannot make any assurances that additional financing will be available to it and, if available, on acceptable terms, or that it will be able to refinance its existing debt obligations which could negatively impact the Company’s business and operations and could also lead to a reduction in the Company’s operations. The Company will continue to carefully monitor the impact of its continuing operations on the Company’s working capital needs and debt repayment obligations. As such, the Company has concluded that substantial doubt exists regarding the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these condensed consolidated financial statements.
Current wording
The Company has secured operating capital that it anticipates as sufficient to fund its drug development operations through year end and to finance submission of FDA New Drug Applications for NRX-100 and NRX-101. The Company may pursue additional equity or debt financing or refinancing opportunities in 2024 to fund ongoing clinical activities, to meet obligations under its current debt arrangements and for general corporate purposes. Such arrangements may take the form of loans, equity offerings, strategic agreements, licensing agreements, joint ventures or other agreements. The sale of equity could result in additional dilution to the Company’s existing shareholders. The Company cannot make any assurances that additional financing will be available to it and, if available, on acceptable terms, or that it will be able to refinance its existing debt obligations which could negatively impact the Company’s business and operations and could also lead to a reduction in the Company’s operations. The Company will continue to carefully monitor the impact of its continuing operations on the Company’s working capital needs and debt repayment obligations. As such, the Company has concluded that substantial doubt exists regarding the Company’s ability to continue as a going concern for a period of at least twelve months from the date of issuance of these condensed consolidated financial statements.
Previous wording
For the three months ended June 30, 2024, the Company recorded $2.8 million of research and development expense compared to approximately $3.9 million for the three months ended June 30, 2023. The decrease of $1.1 million is related primarily to a decrease of $2.4 million in clinical trials and development expense, $0.1 million in shipping, freight, and delivery, $0.2 million in other regulatory and process development costs, and less than $0.1 million related to stock-based compensation, partially offset by a increase of $1.3 million related to the Alvogen warrants and $0.4 million related to fees paid to regulatory and process development consultants. The research and development expense for the three months ended June 30, 2024 and 2023, respectively, includes less than $0.1 million and $0.1 million, respectively of non-cash stock-based compensation.
Current wording
For the three months ended September 30, 2024, the Company recorded $0.6 million of research and development expense compared to approximately $3.3 million for the three months ended September 30, 2023. The decrease of $2.7 million is related primarily to a decrease of $2.1 million in clinical trials and development expense due to the conclusion of the phase 2 study related to NRX-101 and the Company's cash conservation efforts, less than $0.1 million in shipping, freight, and delivery, less than $0.1 million in other regulatory and process development costs, less than $0.1 million related to stock-based compensation, less than $0.1 million related to the Alvogen warrants, and $0.2 million related to fees paid to regulatory and process development consultants. The research and development expense for the three months ended September 30, 2024 and 2023, respectively, includes less than $0.1 million and $0.1 million, respectively of non-cash stock-based compensation.
Previous wording
For the three months ended June 30, 2024, the Company recorded $4.2 million of general and administrative expense compared to approximately $4.1 million for the three months ended June 30, 2023. The increase of $0.1 million is related primarily to an increase of $0.9 million in consultant fees, $0.7 million in legal expense, partially offset by a decrease of $0.8 million in insurance expense, $0.4 million in stock-based compensation expense, and $0.3 million in employee expenses. The general and administrative expense for the three months ended June 30, 2024 and 2023, respectively, includes $0.1 million and $0.4 million, respectively, of non-cash stock-based compensation.
Current wording
For the three months ended September 30, 2024, the Company recorded $2.4 million of general and administrative expense compared to approximately $2.5 million for the three months ended September 30, 2023. The decrease of less than $0.1 million is related primarily to a decrease of less than $0.1 million in insurance expense, $0.2 million in stock-based compensation expense, and $0.5 million in employee expenses offset by an increase of $0.4 million in consultant fees, $0.5 million in legal expense. The general and administrative expense for the three months ended September 30, 2024 and 2023, respectively, includes $0.1 million and $0.3 million, respectively, of non-cash stock-based compensation.
Previous wording
For three months ended June 30, 2024, the Company recorded a loss of less than $0.1 million related to the change in fair value of the convertible note payable which is accounted for under the fair value option. For the three months ended June 30, 2023, the Company recorded a loss of approximately $0.7 million related to the change in fair value of the convertible note payable which is accounted for under the fair value option.
Current wording
For three months ended September 30, 2024, the Company recorded a gain of $1.4 million related to the change in fair value of the convertible notes payable which are accounted for under the fair value option. For the three months ended September 30, 2023, the Company recorded a loss of approximately $0.4 million related to the change in fair value of the convertible notes payable which are accounted for under the fair value option.
Previous wording
Results of operations for the six months ended June 30, 2024 and 2023
Current wording
Results of operations for the nine months ended September 30, 2024 and 2023
Previous wording
For the six months ended June 30, 2024, the Company recorded $4.6 million of research and development expense compared to approximately $7.5 million for the six months ended June 30, 2023. The decrease of $2.9 million is related primarily to a decrease of $4.1 million in clinical trials and development expense, $0.3 million in other regulatory and process development costs, $0.1 million in shipping, freight, and delivery, less than $0.1 million related to stock-based compensation, partially offset by an increase in $1.3 related to Alvogen warrants and $0.4 million related to fees paid to regulatory and process development consultants. The research and development expense for the six months ended June 30, 2024 and 2023 includes less than $0.1 million and $0.2 million, respectively, of non-cash stock-based compensation.
Current wording
For the nine months ended September 30, 2024, the Company recorded $5.2 million of research and development expense compared to approximately $10.8 million for the nine months ended September 30, 2023. The decrease of $5.7 million is related primarily to a decrease of $6.1 million in clinical trials and development expense due to the conclusion of the phase 2 study related to NRX-101 and the Company's cash conservation efforts, $0.6 million in other regulatory and process development costs, $0.2 million in shipping, freight, and delivery, $0.2 million related to stock-based compensation, partially offset by an increase in $1.3 million related to Alvogen warrants and $0.2 million related to fees paid to regulatory and process development consultants. The research and development expense for the nine months ended September 30, 2024 and 2023 includes less than $0.1 million and $0.3 million, respectively, of non-cash stock-based compensation.
Previous wording
For the six months ended June 30, 2024, the Company recorded $8.5 million of general and administrative expense compared to approximately $9.9 million for the six months ended June 30, 2023. The decrease of $1.4 million is related primarily to a decrease of $2.0 million in insurance expense, $0.8 million in employee expense, $0.8 million in stock-based compensation expense, and less than $0.1 million in patent expense, partially offset by an increase of $1.3 million in consultant fees, $0.7 million in legal expense, and $0.2 million in other general and administrative expense. The general and administrative expense for the six months ended June 30, 2024 and 2023, respectively, includes $0.3 million and $1.0 million, respectively, of non-cash stock-based compensation.
Current wording
For the nine months ended September 30, 2024, the Company recorded $10.9 million of general and administrative expense compared to approximately $12.3 million for the nine months ended September 30, 2023. The decrease of $1.4 million is related primarily to a decrease of $2.1 million in insurance expense, $1.3 million in employee expense, $0.9 million in stock-based compensation expense, and $0.1 million in patent expense, partially offset by an increase of $1.7 million in consultant fees, and $1.3 million in legal expense. The general and administrative expense for the nine months ended September 30, 2024 and 2023, respectively, includes $0.4 million and $1.3 million, respectively, of non-cash stock-based compensation.
Previous wording
For the six months ended June 30, 2024, the Company recorded less than $0.1 million of interest income compared to $0.3 million of interest income for the six months ended June 30, 2023. The decrease of $0.2 million is due to interest earned in the Company’s money market account.
Current wording
For the nine months ended September 30, 2024, the Company recorded less than $0.1 million of interest income compared to $0.4 million of interest income for the nine months ended September 30, 2023. The decrease of $0.3 million is due to interest earned in the Company’s money market account.
Previous wording
For the six months ended June 30, 2024, the Company recorded $0.2 million of interest expense, compared to no interest expense for the six months ended June 30, 2023. The increase of $0.2 million is due to premiums for cash payments on the convertible note.
Current wording
For the nine months ended September 30, 2024, the Company recorded $0.2 million of interest expense, compared to less than $0.1 interest expense for the nine months ended September 30, 2023. The increase of $0.2 million is due to premiums for cash payments on the convertible note.
Previous wording
For the three months ended June 30, 2024, the Company recorded $0.8 million of a default penalty compared to no default penalty for the three months ended June 30, 2023. The increase is due to alleged default in connection with the convertible note.
Current wording
For the nine months ended September 30, 2024, the Company recorded $0.8 million of a default penalty for the nine months ended September 30, 2023. The increase is due to alleged default in connection with the convertible note.
Previous wording
For six months ended June 30, 2024, the Company recorded a loss of $0.3 million related to the change in fair value of the convertible note payable which is accounted for under the fair value option. For the six months ended June 30, 2023, the Company recorded a loss of approximately $2.4 million related to the change in fair value of the convertible note payable which is accounted for under the fair value option.
Current wording
For nine months ended September 30, 2024, the Company recorded a gain of $1.0 million related to the change in fair value of the convertible notes payable which are accounted for under the fair value option. For the nine months ended September 30, 2023, the Company recorded a loss of approximately $2.8 million related to the change in fair value of the convertible note payable which is accounted for under the fair value option.
Previous wording
During the six months ended June 30, 2024, operating activities used approximately $6.2 million of cash, primarily resulting from a net loss of $14.4 million partially offset by (a) net non-cash losses of $2.9 million, including $0.3 million in change in fair value of convertible promissory note, and $0.3 million of stock-based compensation, $1.3 million of contract costs related to Alvogen termination, $0.8 million of default penalties, and (b) changes in operating assets and liabilities of $5.3 million.
Current wording
During the nine months ended September 30, 2024, operating activities used approximately $8.5 million of cash, primarily resulting from a net loss of $16.0 million, partially offset by (a) net non-cash losses of $2.1 million, including a gain of $1.0 million in change in fair value of convertible promissory notes, and gain of $0.2 million in change in fair value of warrants, $0.4 million of stock-based compensation, $1.3 million of contract costs related to Alvogen termination, $0.8 million of default penalties, $0.5 million in debt issuance costs, and (b) changes in operating assets and liabilities of $5.4 million.
Previous wording
During the six months ended June 30, 2023, operating activities used $13.9 million of cash, primarily resulting from a net loss of $19.8 million, reduced by (a) net non-cash losses of $3.9 million, including $2.4 million in change in fair value of convertible promissory note and $1.2 million of stock-based compensation, and (b) changes in operating assets and liabilities of $1.9 million.
Current wording
During the nine months ended September 30, 2023, operating activities used $18.5 million of cash, primarily resulting from a net loss of $25.8 million, reduced by (a) net non-cash losses of $4.6 million, including $2.8 million in change in fair value of convertible promissory note and $1.6 million of stock-based compensation, and (b) changes in operating assets and liabilities of $2.7 million.
Previous wording
During the six months ended June 30, 2024, financing activities provided $3.5 million of cash resulting from $1.0 million in proceeds from issuance of Common Stock and warrants issued in a private placement, and $4.7 million in proceeds from issuance of Common Stock and warrants offset by $2.2 million in repayments of the convertible note.
Current wording
During the nine months ended September 30, 2024, financing activities provided $5.6 million of cash resulting from $1.0 million in proceeds from issuance of Common Stock and warrants issued in a private placement, $4.9 million in proceeds from issuance of Common Stock and warrants, $2.9 million in proceeds from the Anson Note, and $2.1 million from warrant proceeds offset by $4.8 million in repayments of the convertible notes.
Previous wording
During the six months ended June 30, 2023, financing activities provided $8.8 million of cash resulting from $8.1 million in proceeds from issuance of common stock and warrants issued in a private placement, net of issuance costs, and $0.8 million in proceeds from proceeds from issuance of insurance loan offset by $0.1 million in repayments of the convertible note.
Current wording
During the nine months ended September 30, 2023, financing activities provided $7.3 million of cash resulting from $8.1 million in proceeds from issuance of common stock and warrants issued in a private placement, net of issuance costs, and $0.8 million in proceeds from proceeds from issuance of insurance loan offset by $2.3 million in repayments of the convertible note.
Previous wording
See Note 7, Debt, and Note 8, Commitments and Contingencies, of the notes to the Company’s condensed consolidated financial statements as of and for the six months ended June 30, 2024 included elsewhere in this report for further discussion of the Company’s commitments and contingencies.
Current wording
See Note 7, Debt, and Note 8, Commitments and Contingencies, of the notes to the Company’s condensed consolidated financial statements as of and for the nine months ended September 30, 2024 included elsewhere in this report for further discussion of the Company’s commitments and contingencies.
Previous wording
The Company's management’s discussion and analysis of its financial condition and results of operations is based on its financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of these financial statements requires the Company to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses during the reporting period. In accordance with GAAP, the Company evaluates its estimates and judgments on an ongoing basis. The most significant estimates relate to the stock-based compensation, the valuation of warrants, and the fair value of a note payable. The Company bases its estimates and assumptions on current facts, historical experiences, and various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Current wording
The Company's management’s discussion and analysis of its financial condition and results of operations is based on its financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of these financial statements requires the Company to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of expenses during the reporting period. In accordance with GAAP, the Company evaluates its estimates and judgments on an ongoing basis. The most critical estimates relate to the stock-based compensation, the valuation of warrants, and the fair value of notes payable. The Company bases its estimates and assumptions on current facts, historical experiences, and various other factors that the Company believes are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Previous wording
The Company estimates the fair value of the convertible note payable using a Monte Carlo simulation model, which uses as inputs the fair value of our Common Stock and estimates for the equity volatility and volume volatility of its Common Stock, the time to expiration(i.e. expected termination date) of the convertible note, the risk-free interest rate for a period that approximates the time to expiration, and probability of default. Therefore, the Company estimates its expected future equity and volume volatility based on the historical volatility of both its Common Stock utilizing a lookback period consistent with the time to expiration. The time to expiration is based on the contractual maturity date, giving consideration to the mandatory and potential accelerated redemptions beginning six months from the issuance date. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration. For the year ended December 31, 2023, the probability of default was estimated using Bloomberg’s Default Risk function which uses its financial information to calculate a default risk specific to the Company. For the six months ended June 30, 2024, the probability of default was estimated based on discussions with management, the Company's current cash balance, and the Company's current efforts to receive financing to repay the Note or amend the agreement.
Current wording
The Company estimates the fair value of its notes payable using a Monte Carlo simulation model, which uses as inputs the fair value of its Common Stock and estimates for the equity volatility of its Common Stock, the time to expiration (i.e., expected term) of the note, the risk-free interest rate for a period that approximates the time to expiration, and probability of default. Therefore, the Company estimates its expected future equity volatility based on the historical volatility of its Common Stock price utilizing a lookback period consistent with the time to expiration. The time to expiration is based on the contractual maturity date, giving consideration to the redemption features embedded in the notes. The risk-free interest rate is determined based on the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration. Unless otherwise specified, the probability of default is estimated using Bloomberg’s Default Risk function which uses its financial information to calculate a default risk specific to the Company. For the Streeterville valuations during the nine months ended September 30, 2024, the probability of default was based on management's estimates which include, the Company's current cash runway, current efforts to raise financing, and current economic environment. Interest expense is included within the fair value of the note payable. Management believes those assumptions are reasonable but if these assumptions change, it could materially affect the fair value.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
For the six months ended June 30, 2024, the Company recorded $0.8 million of a default penalty compared to no default penalty for the six months ended June 30, 2023. The increase is due to alleged default in connection with the convertible note.