GENELUX Corp

GENELUX CORPORATION

NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022

(In thousands, except for share amounts and per share data)

NOTE 1 –BASIS OF PRESENTATION

Organization and Operations

Genelux Corporation (“Genelux” or the “Company”), a Delaware Corporation, incorporated on September 4, 2001, is a biomedical company located in Westlake Village, California. The Company is engaged in the research and development of diagnostic and therapeutic solutions for cancer for which there is no effective treatment today. The Company is focused on the development of therapeutic approaches for cancer that are designed to generate a personalized multi-prong attack to overwhelm a tumor’s sophisticated defense mechanisms.

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, the Company has experienced recurring losses from operations since inception and incurred a net loss of $28,297 and used cash in operations of $20,275 during the year ended December 31, 2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its strategies. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

At December 31, 2023, the Company had cash and cash equivalents, and short-term investments, in the amount of $23,191. The ability to continue as a going concern is dependent on the Company attaining and maintaining profitable operations in the future and raising additional capital to meet its obligations and repay its liabilities arising from normal business operations when they come due. Since inception, the Company has funded its operations primarily through equity and debt financings, and licensing income, and it expects to continue to rely on these sources of capital in the future.

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in case of equity financing, or grant unfavorable terms in future licensing agreements.

Reverse Stock Split

In August 2022, the Company effected a 1-for-3 reverse stock split of its common stock. The par value and the authorized shares of the common stock were not adjusted as a result of the reverse stock split. The reverse stock split resulted in an adjustment to the conversion prices of the convertible preferred stock to reflect a proportional decrease in the number of shares of common stock to be issued upon conversion. The accompanying financial statements and notes to the financial statements give retroactive effect to the reverse stock split for all periods presented.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. Significant estimates are used in the valuation of accruals for potential liabilities, valuations of stock-based compensation, and realization of deferred tax assets, among others. Actual results could differ from these estimates.

Income (Loss) Per Share

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Diluted loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued.

For the years ended December 31, 2023 and 2022, the basic and diluted shares outstanding were the same, as potentially dilutive shares were considered anti-dilutive. The potentially dilutive securities consisted of the following:

Revenue Recognition

The Company records revenue under the guidance of Accounting Standards Codification (“ASC”) 606,Revenue from Contracts with Customers (Topic 606) which requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

The Company determines revenue recognition through the following steps:

Under certain of the Company’s licensing, supply and collaboration agreements, it is entitled to receive payment upon the achievement of contingent milestone events or the performance of obligations. The Company recognizes revenue based on guidance in ASC 606. In evaluating revenue recognition under a license agreement, the Company uses a two-step process for determining whether a promised good or service (including a license of intellectual property) is distinct and, therefore, is a performance obligation: (1) consideration of the individual good or service (i.e., whether the good or service is capable of being distinct); and (2) consideration of whether the good or service is separately identifiable from other promises in the contract (i.e., whether the promise to transfer the good or service is distinct in the context of the contract). Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue on the Company’s balance sheet. Amounts expected to be recognized as revenue in the next 12 months following the balance sheet date are classified as current liabilities.

During the year ended December 31, 2022, the Company, under the Newsoara License Agreement (see Note 12), invoiced and collected $170 relating to supplying product for Newsoara to use in their clinical trials. As the product did not ship during the year ended December 31, 2022, the Company recorded the cash received as deferred revenue until the product was shipped. During the year ended December 31, 2023, the Company shipped the product to Newsoara and thus recognized the revenue.

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash deposits. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company has not experienced any losses on deposits since inception.

Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at date of purchase to be cash equivalents. Cash equivalents consisted of money market funds as of December 31, 2023. There wereno cash equivalents as of December 31, 2022. As of December 31, 2023, the amount of cash equivalents included in cash and cash equivalents totaled $7,924.

Short-Term Investments

The Company’s short-term debt security investments are classified as available-for-sale and are carried at fair value, with the unrealized gains and non-credit related losses reported as a component of accumulated other comprehensive loss and included in stockholders’ equity. Realized gains and losses and declines in value determined to be other than temporary are based on the specific identification method and are included as a component of total other income (expense), net in the Statements of Operations. There were no realized gains or losses during the year ended December 31, 2023.

For available-for-sale securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through a charge to interest income. For available-for-sale securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers such factors as, among other things, the severity of the impairment, any changes in interest rates, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the short-term debt security investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. The credit-related portion of unrealized losses, and any subsequent improvements, are recorded in interest income through an allowance account. Any impairment that has not been recorded through an allowance for credit losses is included in other comprehensive loss on the statements of operations and comprehensive loss.

No credit-related losses or impairments have been recognized on the Company’s investments in available-for-sale securities during the year ended December 31, 2023.

All of the Company’s short-term investments as of December 31, 2023 had maturities of less than one year.

Deferred Offering Costs

The Company capitalizes certain legal, professional, accounting and other third-party fees that are directly associated with in-process equity issuances as deferred offering costs until such equity issuances are consummated. After consummation of the equity issuance, these costs are recorded as a reduction in the capitalized amount associated with the equity issuance. Should the equity issuance be delayed or abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the Statement of Operations. As of December 31, 2022, the Company incurred $1,568 of deferred offering costs related to the Company’s IPO, and during the year ended December 31, 2023, the Company incurred an additional $303 of costs. During the year ended December 31, 2023, a total of $1,871 of deferred offering costs were recorded against the net proceeds received from the IPO.

Property and Equipment

Property and equipment are recorded at cost, less accumulated depreciation and amortization. Property and equipment is depreciated over the estimated useful life of the asset or the term of the lease using the straight-line method, whichever is shorter. Maintenance and repairs are charged to expense as incurred. At the time depreciable property is retired or otherwise disposed of, the related cost and accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is reflected in operations. The Company has determined the estimated useful lives of its property and equipment, as follows:

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

Fair Value of Financial Instruments

The Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs, of which the first two are considered observable and the last unobservable, to measure fair value:

The Company’s short-term investments and cash equivalents are carried at fair value, determined according to the fair value hierarchy described in Note 3 below. The carrying amount of the Company’s warrant liabilities of $169 at December 31, 2022 was based on Level 3 measurements. The carrying amounts of financial instruments such as cash, short-term investments, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The carrying amounts of the Company’s convertible notes payable approximated their fair values as the interest rates of the notes payable are based on prevailing market rates.

Income Taxes

Income tax expense is based on pretax financial accounting income. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized. The Company recorded a valuation allowance against its deferred tax assets as of December 31, 2023 and 2022.

The Company accounts for uncertainty in income taxes using a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement. The Company classifies the liability for unrecognized tax benefits as current to the extent that the Company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes.

Patents and Patent Application Costs

Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are therefore expensed as incurred and are included in General and Administrative expenses on the accompanying Statements of Operations. Patent expenses were $107 and $88 during the years ended December 31, 2023 and 2022, respectively.

Segment Information

The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Company’s current focus is on developing oncolytic immunotherapies for the treatment of cancer.

Research and Development Costs

Research and development expenses are expensed as incurred. Research and development expenses consist of costs incurred to discover, research and develop drug candidates, including compensation-related expenses for research and development personnel, including stock-based compensation expense, preclinical and clinical activities, costs of manufacturing, overhead expenses including facilities and laboratory expenses, materials and supplies, amounts paid to consultants and outside service providers, and depreciation and amortization.

Payments made pursuant to research and development contracts are initially recorded as advances on research and development contract services in the Company’s balance sheet and are then charged to research and development costs in the Company’s statement of operations as those contract services are performed. Expenses incurred under research and development contracts in excess of amounts advanced are recorded as research and development contract liabilities in the Company’s balance sheet, with a corresponding charge to research and development costs in the Company’s statement of operations. The Company reviews the status of its research and development contracts on a quarterly basis.

Research Contract Costs and Accruals

The Company has entered into various research and development-related contracts with companies both inside and outside of the United States. These agreements are generally cancellable, and related costs are recorded as research and development expenses as incurred. The Company records prepaid expenses and accruals for estimated ongoing research costs. When evaluating the adequacy of the prepaid expenses and accrued liabilities, the Company analyzes progress of the studies or clinical trials, including the phase or completion of events, invoices received and contracted costs. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the Company’s estimates. The Company’s historical accrual estimates have not been materially different from the actual costs.

Stock-Based Compensation

The Company measures all stock options and other stock-based awards granted based on the fair value of the award on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company has elected to recognize forfeitures as they occur. The reversal of compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service or performance condition is recognized in the period of the forfeiture. Generally, the Company issues stock options with only service-based vesting conditions and records the expense for these awards using the straight-line method over the requisite service period.

The Company classifies stock-based compensation expense in its statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified.

The Company was a private company until the completion of its IPO on January 30, 2023. In 2022 and prior, the Company estimated the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold its common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options at each valuation date, as applicable.

The fair value of each stock option grant is estimated using the Black-Scholes option-pricing model. The Company was a private company and lacked company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the biotechnology industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with shareholders. For the year ended December 31, 2023, comprehensive loss included $12 of unrealized gains on short-term investments, net of tax.

Leases

The Company accounts for its leases in accordance with the guidance of ASC 842,Leases. The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments.

Recent Accounting Pronouncements

The Company’s management has evaluated all the recently issued, but not yet effective, accounting standards and guidance that have been issued or proposed by the FASB or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position and results of operations.

NOTE 3 -FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis:

The underlying securities in the money market funds held by the Company are all government backed securities. During the year ended December 31, 2023, there were no transfers between levels. There were no cash equivalents or short-term investments as of December 31, 2022.

Valuation of cash equivalents and short-term investments

Money market funds, U.S. Government Agency bonds and U.S. Treasury bonds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy. Cash equivalents consisted of money market funds at December 31, 2023.

NOTE 4 -SHORT-TERM INVESTMENTS

As of December 31, 2023, the Company’s available-for-sale investments by type, consisted of the following:

As of December 31, 2023, all available-for-sale securities consisted of investments that mature within one year.

NOTE 5 -PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2023 and 2022:

Depreciation expense for each of the years ended December 31, 2023 and 2022 was $499 and $553, respectively.

NOTE 6 –ACCRUED PAYROLL AND PAYROLL TAXES

As of December 31, 2022, the Company had accrued compensation owed to the Company’s Chief Executive Officer, another employee and two former employees that had accrued over a several year period in the amount of $2,852. During the year ended December 31, 2023, the Company repaid $1,187 of the amounts that were accrued. In addition, during the period, the Company incurred payroll tax liabilities of $2,037 relating to stock option exercises and restricted stock unit vesting, and repaid $1,716 of that liability, leaving a balance of $321 due as of December 31, 2023. As of December 31, 2023, a total of $2,117 was owed to employees for these past due balances, and for current accrued payroll and payroll taxes, and other compensation related benefits.

NOTE 7 –LEASE LIABILITIES

Operating Leases

The Company accounts for leases in accordance with ASC 842, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. In July 2018, the Company entered into a long-term non-cancellable lease agreement for its manufacturing facility that requires aggregate average monthly payments of $10 beginning October 2018. The lease terminated in September 2023, with a Company option to extend for an additional five years. The Company classified the lease as an operating lease and determined that the value of the right of use asset and lease liability at the adoption date was $518 and $519, respectively, using a discount rate of 4.00%. Effective April 2022, the Company extended the lease for the additional five-year period, through September 2028, with no changes to any of the other terms of the lease and hasthe option to extend the lease for an additional five years. Prior to the extension, the remaining lease liability amounted to $174. On the date of the extension, the Company determined that the value of the new right of use asset and lease liability was $860, respectively, using a discount rate of 4.00%. As such, the Company recorded an increase in lease liability of $686 as a result of the lease extension. Effective July 2023, the Company extended the lease for an additional two-year period, through October 2030, with no changes to any of the other terms of the lease and has the option to extend the lease for an additional five years. Prior to the extension, the remaining lease liability amounted to $701. On the date of the extension, the Company determined that the value of the new right of use asset and lease liability was $909, respectively, using a discount rate of 7.00%. As such, the Company recorded an increase in the lease liability of $208 as a result of the lease extension.

In December 2020, the Company entered into a long-term non-cancellable lease agreement for a laboratory facility that requires aggregate average monthly payments of $18 beginning January 2021. The Company classified the lease as an operating lease and determined that the value of the right of use asset and lease liability at the adoption date was $439, respectively, using a discount rate of 4.00%. Effective February 2023, the Company extended the lease term through December 2024, with no changes to any of the other terms of the lease.

The average monthly rent payment on the extended lease is approximately $30 per month. Prior to the extension, the remaining lease liability amounted to $12. On the date of the extension, the Company determined that the value of the new right of use asset and lease liability was $649, respectively, using a discount rate of 5.5%. As such, the Company recorded an increase in the lease liability of $637 as a result of the lease extension.

In July 2021, the Company entered into a long-term non-cancellable lease agreement for its new corporate headquarters that requires aggregate average monthly payments of $10 beginning August 2021. The lease terminates in July 2027. The Company classified the lease as an operating lease and determined that the value of the right of use asset and lease liability at the adoption date was $656, respectively, using a discount rate of 4.00%.

In November 2023, the Company entered into a long-term non-cancellable lease agreement for a second manufacturing facility that requires aggregate average monthly payments of $12 beginning November 2023. The lease terminates in October 2030, with a Company option toextend for an additional five years. The Company classified the lease as an operating lease and determined that the value of the right of use asset and lease liability at the adoption date was $803, respectively, using a discount rate of 7.00%.

During the years ended December 31, 2023 and 2022, the Company made combined aggregate payments of $523 and $389, respectively, towards the lease liabilities. As of December 31, 2023 and 2022, the combined lease liability amounted to $2,519 and $1,430, respectively.

ASC 842 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. During the years ended December 31, 2023 and 2022, the Company reflected combined amortization of the right of use assets of $519 and $415, respectively, related to the leases, resulting in a combined net asset balance of $2,428 and $1,335 as of December 31, 2023 and 2022, respectively.

The maturities of the Company’s lease liabilities are as follows as of December 31, 2023:

Other Leases

In November 2019, the Company entered into a short-term lease agreement for one of its office facilities, which was subsequently extended until December 2022 and is currently on a month-to-month basis. Rent expense was $36 during the years ended December 31, 2023 and 2022, respectively.

NOTE 8 –NOTES PAYABLE – SHAREHOLDERS

During the year ended December 31, 2022, the Company, in anticipation of closing its IPO, entered into note payable agreements with several shareholders totaling $1,100. The notes accrue interest at 12% per annum, are unsecured and are due at the earlier of June 15, 2023 or the month after the closing of the IPO. As of December 31, 2022, the outstanding principal and accrued and unpaid interest balances on the notes were $1,100 and $5, respectively.

During the year ended December 31, 2023, the Company extended the due date on the notes until April 30, 2023. During the year ended December 31, 2023, the Company borrowed an additional $900 from its shareholders, repaid $600 of principal and $11 of accrued interest, and $1,400 of principal and $63 of accrued interest was converted into 73,134 shares of the Company’s common stock with a fair value of $1,865. The notes accrued interest of $69 during the year. As of December 31, 2023, there was no outstanding principal and accrued and unpaid interest owed on the notes. Upon conversion of the notes payable, the Company incurred a debt extinguishment cost of $402, as the conversion price was lower than the fair value of the shares on the conversion date. This amount was recorded as debt extinguishment costs in the Statements of Operations during the year ended December 31, 2023.

In consideration for the notes issued in 2022, the Company issued the note holders stock warrants to purchase up to an aggregate total of 44,441 shares of its common stock with an exercise price per share equal to 90% of the IPO price, or $5.40 per share, based on the IPO closing price (see Note 9). The issuance of the warrants was contingent upon the closing of the IPO, and as such, were not formally granted until the closing of the IPO in January 2023. The warrants expire in December 2025. The Company determined the warrants should be accounted for as a liability on the date of issuance. The Company calculated the fair value of the warrants issued to the noteholders to be $169 using a Black Scholes option pricing model with the following assumptions:

The Company recognized a liability and recorded a debt discount at the date of issuance in 2022 in the amount of $169. The Company recorded the fair value of the warrants as warrant liabilities as of December 31, 2022. The notes’ discounts are being amortized over the term of the notes and the unamortized portion is recognized as a reduction to the carrying amount of the notes (a valuation debt discount). During the year ended December 31, 2022, the Company amortized $61 of debt discount, leaving an unamortized balance of $108 at December 31, 2022. During the year ended December 31, 2023, the Company amortized $108 of debt discount, leaving no unamortized balance at December 31, 2023.

The following table sets forth a summary of the changes in the estimated fair value of the warrant liabilities during the years ended December 31, 2023 and 2022:

NOTE 9 –CONVERTIBLE NOTES PAYABLE – SHAREHOLDERS

Convertible notes payable to shareholders consisted of the following as of December 31, 2023 and 2022:

Upon the closing of the IPO, all of the principal plus accrued and unpaid interest automatically converted into 1,134,063 shares of the Company’s common stock based on the conversion price of $5.40, which was 90% of the IPO closing price. As of December 31, 2023, no principal or interest was due on the notes. During the year ended December 31, 2023, the Company issued the shareholders stock warrants to purchase up to 217,771 shares of the Company’s common stock at exercise prices of $9.00 and $10.50. All of the warrant shares were exercised during the year ended December 31, 2023.

NOTE 10 –CONVERTIBLE NOTES PAYABLE

Convertible notes payable consisted of the following as of December 31, 2023 and 2022:

During the years ended December 31, 2020 and 2021, the Company entered into convertible note payable agreements with an investing group under which the Company borrowed an aggregate amount of $9,065. The notes accrue interest at 6.0% per annum, are unsecured, and are convertible into the Company’s common stock at the price of $10.50 per share. In consideration for the notes, the Company issued the noteholder stock warrants to purchase up to 146,641 shares of its common stock with an exercise price of $10.50 per share. The warrants expire in September 2025. During the year ended December 31, 2023, all of the warrant shares were exercised with a cashless exercise and the Company issued 70,265 shares of its common stock to the note holder relating to the exercise (see Note 13).

As of December 31, 2022, the Company owed $9,065 of principal on the notes and $1,178 of accrued and unpaid interest. During the year ended December 31, 2023, the notes accrued interest of $45, and on January 30, 2023, the date of the closing of the IPO, total principal of $9,065 and total accrued and unpaid interest of $1,223 was owed on the notes.

The Company calculated the relative fair value of the warrants issued to the noteholder and recognized a debt discount at the date of issuance. The note discount is being amortized over the term of the note and the unamortized portion is recognized as a reduction to the carrying amount of the note (a valuation debt discount). As of December 31, 2022, the notes had an unamortized debt discount balance of $541. During the year ended December 31, 2023, the Company amortized $541 of debt discount, leaving no unamortized balance at December 31, 2023.

Upon the closing of the IPO, all of the principal plus accrued and unpaid interest automatically converted into 979,619 shares of the Company’s common stock based on the conversion price of $10.50 per share. As of December 31, 2023, no principal or interest was due on the notes.

NOTE 11 –U.S. SMALL BUSINESS ADMINISTRATION LOAN UNDER THE CARES ACT

During the year ended December 31, 2020, the Company entered into a loan agreement with the United States Small Business Administration (“SBA”) under which the Company borrowed $314. The loan was unsecured, accrued interest at 1.0% and was due on April 23, 2022. The loan term may be extended to April 2025 if mutually agreed to by the Company and lender. The Company applied ASC 470, Debt, to account for the PPP loan. During the year ended December 31, 2021, the Company applied for forgiveness of the loan and the loan was forgiven by the SBA during the year ended December 31, 2022. The forgiveness of the loan was recorded as a gain on forgiveness of debt during the same period. No amounts were due under the loan as of December 31, 2022.

NOTE 12 –LICENSE AGREEMENTS

Agreement with Newsoara BioPharma Co. Ltd

In September 2021, the Company entered into a collaboration and exclusive license with Newsoara BioPharma Co. Ltd (“Newsoara”) for the development and commercialization of the Company’s primary product (Olvi-Vec). According to the terms of the agreement, Newsoara shall have exclusive rights in Greater China to Olvi-Vec. The Company and Newsoara are co-sponsors of a Phase 1/2 clinical trial in China of Olvi-Vec in patients with recurrent SCLC, of which Newsoara currently is conducting the Phase 1 portion of the trial. Newsoara also shall have exclusive rights in Greater China to the Company’s proprietary oncolytic virus platform (with the exception of V-VET1, described below), and the parties will collaborate on the development of novel oncolytic immune therapeutics. Newsoara, at its cost and expense, will be responsible for development and commercialization and will have the future right to manufacture licensed products in Greater China.

Under terms of the agreement, the Company has received up-front and near-term payments totaling $9,900, net of a 10% Chinese income tax, and will be eligible to receive additional per product payments of up to $160.5 million, contingent on certain development, regulatory, and commercial milestones, plus tiered royalties on net sales ranging from mid-single digit to mid-teens percentages. The Company shall have an exclusive license outside of Greater China to oncolytic virus products derived by Newsoara and will pay Newsoara milestones and royalties on sales of any such products which the Company elects to develop. As of December 31, 2021, the Company had received a $4,500 up front payment (net of a 10% foreign income tax). During the year ended December 31, 2022, the Company received the remaining $5,400 of the upfront payments (net of the 10% foreign income tax).

The allocation of the transaction price to the Company’s primary performance obligations in the agreement includes payments related to each of the following obligations (or events):

At December 31,2021, the Company performed an analysis of revenue recognition in accordance with guidance of ASC 606 and determined that since the Company did not complete obligation 3) above prior to December 31, 2021, that revenue would be recognized at such time as the Company met that performance obligation. As such, as of December 31, 2021, the Company delayed recognition of any revenue under this contract and the cash received of $4,500 was recorded as deferred revenue. During the year ended December 31, 2022, the Company completed the transfer of its manufacturing technology, at which point the Company completed its performance obligation 3) above, and thus recognized the related revenue of $11,000, with the 10% foreign income tax of $1,100 being recorded as a provision for foreign income taxes. Under no circumstances would the Company be required to repay the $9,900 received under the license agreement.

Agreement with ELIAS Animal Health, LLC

In November 2021, the Company entered into an exclusive worldwide licensing agreement for V-VET1, its clinical stage animal health product candidate, with ELIAS Animal Health, LLC (ELIAS), a biotechnology company advancing its novel cell-based immunotherapies for the treatment of cancer in veterinary medicine. V-VET1 is a vaccinia viral strain which selectively replicates in cancer cells causing cell death (apoptosis). ELIAS plans future clinical trials to evaluate and develop V-VET1 as a potential new immunotherapy option for veterinary oncologists. Under the terms of the agreement, Genelux will receive an upfront payment of $60 and will receive further payments under development and sales milestones, and royalties on product sales. No payments were received as of December 31, 2021.

The allocation of the transaction price to the Company’s primary performance obligations in the agreement includes payments related to each of the following obligations (or events):

The Company performed an analysis of revenue recognition in accordance with guidance of ASC 606 and determined that since the Company did not complete obligation 2) above prior to December 31, 2021, that revenue recognition would be recognized at such time as the Company met that performance obligation. During the year ended December 31, 2022, the Company received payments of $60 and $8 and completed the transfer of its manufacturing technology, at which point the Company completed its performance obligation 2) above, and thus recognized the related revenue of $68. Under no circumstances would the Company be required to repay the $60 received under the license agreement.

NOTE 13 -SHAREHOLDERS’ EQUITY

Preferred Stock

As of December 31, 2022, authorized shares and shares issued and outstanding of the Company’s preferred stock by series were as follows:

Upon the closing of the Company’s IPO on January 30, 2023, all of the Company’s 22,094,889 outstanding shares of Series A through Series K preferred stock automatically converted into 8,359,143 shares of common stock, of which 994,705 shares were attributable to conversion price adjustments based on a weighted-average anti-dilution formula.

As of January 30, 2023, earned but undeclared and unpaid Series H dividends were $3,443. Upon the closing of the IPO, the unpaid dividends were automatically converted into 272,101 shares of the Company’s common stock.

In January 2023, the Company’s Certificate of Incorporation with the state of Delaware was amended to change the number of authorized preferred shares from 29,927,994 to 10,000,000.

Common Stock

Authorized shares

The Company’s Certificate of Incorporation authorizes the Company to issue up to 200,000,000 of its common shares. Holders of shares of common stock have full voting rights, one vote for each share held of record. Shareholders are entitled to receive dividends as may be declared by the Board out of funds legally available therefore and share pro rata in any distributions to shareholders upon liquidation. Shareholders have no conversion, pre-emptive or subscription rights. All outstanding shares of common stock are fully paid and non-assessable. As of December 31, 2023 and 2022, there were 26,788,986 and 9,126,726 shares of common stock issued and outstanding, respectively.

In January 2023, the Company’s Certificate of Incorporation with the state of Delaware was amended to change the number of authorized common shares from 75,000,000 to 200,000,000.

Common Stock Issued for Cash Upon Closing of the Company’s IPO

On January 30, 2023, the Company completed its underwritten IPO of its common stock, in which the Company issued and sold 2,500,000 shares of its common stock at a public offering price of $6.00 per share. In February 2023, the Company sold an additional 153,000 shares of common stock at $6.00 per share pursuant to the underwriters’ partial exercise of their option to purchase additional shares of common stock. The total gross proceeds of the IPO were $15,918 and the Company raised $12,632 in net proceeds after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Common Stock Issued for Cash Upon Closing of the Company’s Private Placements

On May 12, 2023, the Company entered into a securities purchase agreement (the “PIPE 1 SPA”) with certain investors (the “PIPE 1 Purchasers”), pursuant to which the Company agreed to sell and issue 1,665,213 shares of its common stock in a private placement transaction (the “First Private Placement”). The purchase price per share of common stock was $20.00 per share. The initial closing of the First Private Placement occurred in May 2023 (the “PIPE 1 Initial Closing”) subject to customary closing conditions. The total gross proceeds to the Company at the PIPE 1 Initial Closing from the First Private Placement are expected to be approximately $33,300, including $1,463 from the cancellation of certain of the Company’s bridge loans and accrued interest (see Note 8). Two of the PIPE 1 Purchasers were contractually obligated to fund up to $17,500 of such PIPE 1 Purchasers’ investment amounts following the PIPE 1 Initial Closing but no later than November 15, 2023. During the year ended December 31, 2023, the Company received $6,000 of the committed amount of $17,500. As of December 31, 2023, the Company sold 1,017,079 shares of its common stock under the PIPE 1 SPA resulting in gross and net proceeds to the Company of $20,342 and $19,842, respectively.

On June 9, 2023, the Company entered into another securities purchase agreement (the “PIPE 2 SPA”, and, together with the PIPE 1 SPA, the “Purchase Agreements”) with certain investors (the “PIPE 2 Purchasers”), pursuant to which the Company agreed to sell and issue 900,000 shares of the Company’s common stock in a private placement transaction (the “Second Private Placement”, and, together with the First Private Placement, the “Private Placements”). The purchase price per share of Common Stock was $20.00 per share. The initial closing of this Second Private Placement occurred in June 2023 (the “PIPE 2 Initial Closing”), subject to customary closing conditions. The total gross proceeds to the Company from the Second Private Placement are expected to be approximately $18,000. One of the PIPE 2 Purchasers was contractually obligated to fund up to $12,500 of such PIPE 2 Purchaser’s investment amounts following the PIPE 2 Initial Closing, but no later than November 15, 2023. As of December 31, 2023, the Company sold 275,000 shares of its common stock under the PIPE 2 SPA resulting in gross and net proceeds to the Company of $5,500 and $5,300, respectively.

As of December 31, 2023, the Company sold 1,292,079 shares of its common stock under the Purchase Agreements resulting in the total gross and net proceeds to the Company from the First Private Placement and the Second Private Placement of $25,842 and $25,142, respectively. As of that same date, the Company had received $6,000 of the $30,000 in aggregate committed investment amounts to be funded following the PIPE 1 Initial Closing and PIPE 2 Initial Closing.

In November 2023, the Company agreed to extend the funding deadline for $2,000 of the remaining committed investment amounts to March 31, 2024. The investor who was obligated to fund $22,000 of the remaining committed investment amounts has not made such payments and has indicated that he does not intend to comply with his investment commitments under the Purchase Agreements. The Company is currently evaluating the potential remedies with respect to this investor’s non-compliance with his contractual obligations to the Company.

Grant of Restricted Stock Units

The following table summarizes restricted common stock activity during the year ended December 31, 2023:

In February 2023, the Company’s Board of Directors approved the issuance of a combined total of 113,500 restricted units (“RSU”) of the Company’s common stock to certain of its officers, directors and consultants. The fair value of the shares on the date of grant was $746. All of the shares vested and were issued to the RSU holders during the year ended December 31, 2023. The RSU shares were granted under the Company’s 2022 Equity Incentive Plan.

In September 2023, the Company’s Board of Directors approved the issuance of a combined total of 57,900 restricted shares of the Company’s common stock (“restricted common stock”) to certain of its employees and directors. The fair value of the shares on the date of grant was $1,297. All of the shares vest in one to four years. The restricted common stock was granted under the Company’s 2022 Equity Incentive Plan. As none of the shares vested during the year ended December 31, 2023, no shares were issued relating to the grant.

During the year ended December 31, 2023, the Company recorded $940 of stock compensation for the fair value vesting of restricted common stock, and as of December 31, 2023, $1,103 of unamortized compensation remained.

Stock Options

In August 2009, the Company’s Board of Directors approved the adoption of the 2009 Equity Incentive Plan (“the 2009 Plan”). The 2009 Plan was initiated to encourage and enable employees, directors and consultants of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. A total of 6,166,666 of the authorized shares of the Company’s common stock may be subject to, or issued pursuant to, the terms of the plan. As of December 31, 2023 and December 31, 2022, no shares were available for grant under the 2009 plan.

In September 2018, the Company’s Board of Directors approved the adoption of the 2019 Equity Incentive Plan (“the 2019 Plan”). The 2019 Plan was initiated to encourage and enable employees, directors and consultants of the Company to acquire and retain a proprietary interest in the Company by ownership of its common stock. The 2019 Plan allows for the following types of awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) Stock Appreciation Rights; (iv) Restricted Stock Awards; (v) Restricted Stock Unit Awards; (vi) Other Stock Awards. The maximum number of shares of our common stock that may be issued under our 2019 Plan is 2,059,073 shares. Outstanding stock awards granted under the 2009 Plan that (i) expire or terminate for any reason prior to exercise or settlement; (ii) are forfeited because of failure to meet a contingency or condition required to vest such shares or otherwise return to us; or (iii) are required or withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award can be added to the authorized shares as Returning Shares, not to exceed 3,774,260 shares. The maximum number of shares of our common stock under our 2019 Plan that may be issued is 5,833,333 shares. As of December 31, 2023, a total of 1,632,314 shares were available for grant under the 2019 plan.

In June 2022, the Company’s Board of Directors approved the adoption of the 2022 Equity Incentive Plan (“the 2022 Plan”). The 2022 Plan provides for the grant of incentive stock options (“ISOs”), to employees, including employees of any parent or subsidiary, and for the grant of nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, RSU awards, performance awards and other forms of stock awards to employees, directors, and consultants, including employees and consultants of our affiliates. The 2022 Plan is a successor to the 2019 Plan. No further grants will be made under the 2019 Plan. The maximum number of shares of the Company’s common stock under the 2022 Plan that may be issued is 2,800,000 shares. In addition, the number of shares of the Company’s common stock reserved for issuance under the 2022 Plan will automatically increase on January 1 of each calendar year, starting on January 1, 2024 and continuing through and including January 1, 2032, in an amount equal to 5% of the total number of shares of our common stock outstanding on the last day of the calendar month before the date of each automatic increase, or a lesser number of shares determined by the Company’s Board of Directors. During the year ended December 31, 2023, a total of 706,388 option shares of the Company’s common stock, with a fair value of $12,645, were granted under the 2022 Plan, along with 171,400 RSU shares. As of December 31, 2023, a total of 1,922,212 shares were available for grant under the 2022 plan. In January 2024, the number of shares available to be issued under the 2022 Plan automatically increased by 1,339,449 shares, as determined by the Plan, and 3,261,661 shares were available for grant under the 2022 Plan as of that date.

In September 2023, the Company’s Board of Directors approved the adoption of the Company’s 2023 Inducement Plan (the “Inducement Plan”) to reserve 1,000,000 shares of the Company’s common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company as an inducement material to the individual’s entry into employment with the Company. The Inducement Plan provides for the grant of NSOs, stock appreciation rights, restricted stock awards, RSU awards, performance-based cash and stock awards, and other stock-based awards. In addition, forms of (i) Stock Option Grant Notice, Stock Option Agreement and Notice of Exercise and (ii) Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement, for both (a) executive officers and (b) employees at or below the vice president level, were adopted and approved for use with the Inducement Plan. The terms and conditions of the Inducement Plan are substantially similar to the Company’s stockholder-approved 2022 Equity Incentive Plan. During the year ended December 31, 2023, a total of 444,300 option shares, with a fair value of $8,031, were granted under the Inducement Plan. As of December 31, 2023, a total of 555,700 shares were available for grant under the Inducement plan.

Option exercise prices are set forth in the Grant Notice, without commission or other charge, provided however, that the price per share of the shares subject to the option shall not be less than the greater of(i) 100% of the fair market value of a share of stock on the grant date, or (ii) 110% of the fair market value of a share of stock on the grant date in the case of a Participant then owning more than 10% of the total combined voting power of all classes of stock of the Company or any “subsidiary corporation” of the Company or any “parent corporation” of the Company. Options to employees, directors and consultants generally vest and become exercisable over a period not exceeding four years. Options typically expire ten years after date of grant.

The Company’s policy is to recognize compensation cost for awards with only service conditions on a straight- line basis over the requisite service period for the entire award. Additionally, the Company’s policy is to issue new shares of common stock to satisfy stock option exercises. The Company applied fair value accounting for all share-based payments awards. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model.

Stock Option Grants during the Year Ended December 31, 2023

During the year ended December 31, 2023, under its 2022 Plan and Inducement Plan, the Company’s Board of Directors approved the granting of options to certain employees and directors to purchase 1,150,688 shares of its common stock with exercise prices of $13.97 and $22.40 per share. The options vest over various periods, but none longer than four years, expire ten years from the date of grant and had an aggregate fair value of $20,676 at the date of grant. The Company valued the options using a Black-Scholes option pricing model. During the year ended December 31, 2023, the Company recorded $2,515 of stock compensation for the value of these options and previously granted options vesting during the period.

The assumptions used for the options granted during the year ended December 31, 2023 are as follows:

Stock Option Grants during the Year Ended December 31, 2022

During the year ended December 31, 2022, under its 2019 Incentive Plan, the Company granted options to certain employees and directors, and a consultant, to purchase 247,785 shares of its common stock with exercise prices of $9.00 and $10.50 per share. The options vest over various periods, but none longer than four years, expire ten years from the date of grant and had an aggregate fair value of $1,969 at the date of grant. The Company valued the options using a Black-Scholes option pricing model. During the year ended December 31, 2022, the Company recorded $2,415 of stock compensation for the value of these options and previously granted options vesting during the period.

The assumptions used for all of the options granted during the year ended December 31, 2022 are as follows:

The table below summarizes the Company’s stock option activities for the years ended December 31, 2023 and 2022:

The following table summarizes information concerning outstanding and exercisable options as of December 31, 2023:

Stock Option Repricing

In September 2022, the Company’s Board of Directors approved a stock option repricing whereby the exercise prices of previously granted and unexercised options held by certain employees, directors and key advisers with exercise prices between $9.00 and $10.50 per share, would be adjusted (the “Stock Option Repricing”) to equal the initial offering price, contingent and effective upon the completion of the Company’s IPO. In connection with the closing of the IPO, the Stock Option Repricing was completed and the options to purchase 4,092,887 shares of the Company’s common stock, with exercise prices previously between $9.00 and $10.50, were repriced to the initial offering price of $6.00 per share, of which a total of 2,796,400 shares of common stock are held by executive officers and directors. The total cost of the repricing was $2,733, of which $2,689 was recorded during the year ended December 31, 2023, with the remainder of the cost being recorded over the future vesting periods of the options.

Stock Option Exercises

During the year ended December 31, 2023, a total of 232,787 option shares were exercised for total proceeds of $1,474.

As of December 31, 2023, unvested compensation of $19,825 remained that will be amortized over the remaining vesting periods, through December 2027. The weighted average grant-date fair value per share of options granted during the years ended December 31, 2023 and 2022 was $22.26 and $7.68, respectively. The aggregate intrinsic value for option shares outstanding at December 31, 2023 was $31,056.

At the time of the issuances of stock options, the Company believed the Company’s estimates of the fair value for financial reporting purposes of the Company’s common stock were reasonable and consistent with the Company’s understanding of how similarly situated companies in the industry were valued.

The following table summarizes the stock-based compensation expense, for stock options only, by line item in the statements of operations for the years ended December 31, 2023 and 2022, respectively.

Stock Warrants

The table below summarizes the Company’s warrants activities for the years ended December 31, 2023 and 2022:

The following table summarizes information concerning outstanding and exercisable warrants as of December 31, 2023:

Upon the closing of the IPO and the overallotment exercises, the Company agreed to issue the underwriters warrants entitling them to purchase up to 185,694 shares of the Company’s common stock. The warrants have an exercise price of $6.00 per share and expire on the fifth anniversary of the closing date of the IPO, or January 2028. During the year ended December 31, 2023, the underwriters completed cashless exercises of their warrants to purchase 185,694 shares of common stock at an exercise price of $6.00 per share. Pursuant to this exercise, the warrant holder received 140,303 shares of the Company’s common stock. As of December 31, 2023, no shares were still outstanding.

During the year ended December 31, 2023, the Company granted warrants to certain of its lenders to purchase up to 44,441 shares of the Company’s common stock (see Note 8). The warrants have an exercise price of $5.40 per share and expire three years from the date of the grant. None of these warrants have been exercised as of December 31, 2023.

During the year ended December 31, 2023, the Company granted warrants to certain of its lenders to purchase up to 217,771 shares of the Company’s common stock. The warrants have exercise prices of $9.00 and $10.50 per share. The Company calculated the aggregate fair value of the warrants on the date of grant to be $3,152 using a Black-Scholes pricing model. As all of the debt converted during the year ended December 31, 2023, the value of the warrants was recorded as a financing cost during the same period. During the year ended December 31, 2023,217,771 warrant shares were exercised for proceeds of $2,175.

During the year ended December 31, 2023, a warrant holder completed a cashless exercise of their warrants to purchase 146,641 shares of common stock at an exercise price of $10.50 per share. Pursuant to this exercise, the warrant holder received 70,265 shares of the Company’s common stock.

During the year ended December 31, 2023, a warrant holder completed a cashless exercise of a warrant to purchase 16,666 shares of common stock at an exercise price of $9.00 per share. Pursuant to this exercise, the warrant holder received 11,666 shares of the Company’s common stock. Warrant holders also exercised 88,751 warrant shares for proceeds of $814.

During the year ended December 31, 2023, a total of 126,767 shares were forfeited by the warrant holders in connection with their cashless exercises.

The aggregate intrinsic value for warrant shares outstanding at December 31, 2022 was $3,141.

NOTE 14 -INCOME TAXES

Significant components of the provision for income taxes for the years ended December 31, 2023 and 2022 are as follows:

The reconciliation of income tax attributable to income before provision for income taxes at the U.S. federal statutory tax rate to income tax expense for the years ended December 31, 2023 and 2022 is as follows:

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2023 and 2022 were as follows:

Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined it is more likely than not that the assets will not be realized. Due to uncertainties surrounding the realizability of the deferred tax assets, the Company has recorded a full valuation allowance against its deferred tax assets at December 31, 2023 and 2022.

At December 31, 2023 and 2022, the Company had federal income tax net operating loss carryforwards of approximately $160,000 and $132,000, respectively. At December 31, 2023 and 2022, the Company had California income tax net operating loss carryforwards of approximately $134,000 and $106,000, respectively. Of the total federal net operating loss, $22,330 has an indefinite carryforward period as of December 31, 2023. The remaining federal and California net operating loss carryforwards will expire through December 31, 2040, unless previously utilized. At December 31, 2023, the Company also has federal and California research and development tax credits of $2,579 and $1,970, respectively. The federal credits will expire through 2040 unless previously utilized. The California credits carryforward indefinitely. The utilization of net operating loss and tax credit carryforwards may be subject to limitation under the provisions of the Internal Revenue Code Section 382 and similar state provisions.

The Company has adopted the provisions in ASC 740 relating to the accounting for uncertain tax positions. This provision requires that the Company recognize the impact of a tax position in its financial statements if the position is more likely than not to be sustained upon examination and on the technical merits of the position. The Company’s also has a policy to recognize interest and/or penalties on the income tax expense related to uncertain tax positions. The Company had no material uncertain tax positions as of December 31, 2023 and 2022, respectively, and consequently, no interest or penalties have been accrued by the Company.

The Company is subject to taxation in the United States and state jurisdictions. The Company’s tax years for 2010 and forward are subject to examination by the United States and California tax authorities due to the carry forward of unutilized net operating losses.

NOTE 15 -LEGAL MATTERS

As of December 31, 2023, we were the defendant in one pending litigation. On November 6, 2023, the Los Angeles County Superior Court granted the Company’s motion for summary judgment and issued an order and final judgment dismissing all claims against the Company with prejudice. Although the plaintiff filed a notice of appeal of the dismissal order with the California Court of Appeal, the plaintiff subsequently filed a request for dismissal of his appeal, which was dismissed by the appellate court on February 23, 2024. Accordingly, the order and final judgment dismissing all claims against the Company with prejudice is now final.

In the future, the Company may be involved in additional actual and/or threatened legal proceedings, claims, investigations and government inquiries arising in the ordinary course of our business, including legal proceedings, claims, investigations and government inquiries involving intellectual property, data privacy and security, other torts, illegal or objectionable content, consumer protection, securities, employment, contractual rights, civil rights infringement, false or misleading advertising, or other legal claims relating to our business.

NOTE 16 -SUBSEQUENT EVENTS

Subsequent to December 31, 2023, several warrant holders exercised their warrants to purchase 76,487 shares of common stock at an exercise price of $9.00 per share. Total proceeds relating to the exercises was $688.

Subsequent to December 31, 2023, the Company extended the warrant expiration date on the warrants for two warrant holders. Their warrants were set to expire on December 31, 2023, but were extended to March 31, 2024. The total number of shares subject to the extended warrants was 3,809, each with an exercise price of $10.50.