Ensysce Biosciences Inc

Previous wording

Ensysce is a clinical stage pharmaceutical company seeking to develop innovative solutions for severe pain relief while reducing the fear of and the potential for opioid misuse, abuse and overdose. Our lead product candidate, PF614, is an extended release TAAP prodrug of oxycodone. TAAP modification of prescription drugs removed the ability to crush, chew or manipulate and inject to achieve the effect of the medication more quickly than by swallowing. MPAR® adds a layer of overdose protection to each TAAP product.

Current wording

Ensysce is a clinical stage pharmaceutical company developing innovative solutions for severe pain relief while reducing the fear of and the potential for opioid misuse, abuse and overdose. Our lead product candidate, PF614, is an extended release TAAP prodrug of oxycodone. TAAP modification of prescription drugs removed the ability to crush, chew or manipulate and inject to achieve the effect of the medication more quickly than by swallowing. MPAR® adds a layer of overdose protection to each TAAP product.

Previous wording

Our lead product candidate, PF614, is in Phase 2 clinical development, PF614-MPAR is in Phase 1b clinical development and nafamostat is proceeding towards Phase 2 clinical development. Our other product candidates and our research initiatives are in preclinical or earlier stages of development. Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. We have not yet successfully completed any pivotal clinical trials, nor have we obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing activities.

Current wording

Our lead product candidate, PF614, is in Phase 3 clinical development, PF614-MPAR is in Phase 1b clinical development and nafamostat is proceeding towards Phase 1 clinical development. Our other product candidates and our research initiatives are in preclinical or earlier stages of development. Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates. We have not yet successfully completed any pivotal clinical trials, nor have we obtained any regulatory approvals, manufactured a commercial-scale drug, or conducted sales and marketing activities.

Previous wording

We have generated limited revenues and have incurred significant operating losses since our inception and expect to continue to incur operating losses for the foreseeable future. These factors raise substantial doubt about our ability to continue as a going concern. Our future viability is dependent on our ability to raise additional capital to finance our operations. Without raising additional capital through a future offering, we believe that current cash on hand is sufficient to fund operations into the third quarter of 2024. We based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.” Our future viability beyond the twelve months is dependent on our ability to raise additional capital to finance our operations.

Current wording

We have generated limited revenues and have incurred significant operating losses since our inception and expect to continue to incur operating losses for the foreseeable future. These factors raise substantial doubt about our ability to continue as a going concern. Our future viability is dependent on our ability to raise additional capital to finance our operations. Without raising additional capital through a future offering, we believe that current cash on hand is sufficient to fund operations into the second quarter of 2025. We based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.” Our future viability beyond the twelve months is dependent on our ability to raise additional capital to finance our operations.

Previous wording

On October 23, 2023, the Company entered into a Securities Purchase Agreement (the “SPA”) for an aggregate financing of $1.7 million with investors, including $0.2 million with a board member. At the first closing under the SPA, which occurred on October 25, 2023, the Company issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $612,000 for an aggregate purchase price of $566,667 and (ii) warrants to purchase 1,255,697 shares of the Company’s common stock in the aggregate. At the second closing under the SPA, which occurred on November 28, 2023, the Company issued to the investors referenced above, (i) additional notes in the aggregate principal amount of $1,224,000 for an aggregate purchase price of $1,133,333 and (i) additional warrants to purchase 2,511,394 shares of the common stock in the aggregate. The notes mature on April 25, 2024 and May 28, 2024, respectively.

Current wording

On October 23, 2023, we entered into a Securities Purchase Agreement (the “SPA”) for an aggregate financing of $1.7 million with investors, including $0.2 million with a board member. At the first closing under the SPA, which occurred on October 25, 2023, we issued to the investors (i) senior secured convertible promissory notes in the aggregate principal amount of $612,000 for an aggregate purchase price of $566,667 and (ii) warrants to purchase 83,714 shares of our common stock in the aggregate. At the second closing under the SPA, which occurred on November 28, 2023, we issued to the investors referenced above, (i) additional notes in the aggregate principal amount of $1,224,000 for an aggregate purchase price of $1,133,333 and (i) additional warrants to purchase 167,427 shares of the common stock in the aggregate. The notes matured on April 25, 2024 and May 28, 2024, respectively.

Previous wording

The combined notes are subject to an original issue discount of 8%, have a term of six months from their respective date of issuance and accrue interest at the rate of 6.0% per annum. The notes are convertible into common stock, at a per share conversion price equal to $1.5675. Beginning ninety days following issuance of the notes at the first closing and second closing, respectively, the Company is obligated to redeem monthly one third of the original principal amount under the applicable note, plus accrued but unpaid interest, liquidated damages and any other amounts then owing to the holder of such note. The Company is required to pay the redemption amount in cash with a premium of 10% or, at the election of the investor at any time, some or all of the principal amount and interest may be paid by conversion of shares under the note into common stock based on a conversion price equal to $1.5675. Conversions and repayments of principal and interest on the notes in January and February 2024 totaled $1.7 million.

Current wording

The combined notes are subject to an original issue discount of 8%, have a term of six months from their respective date of issuance and accrue interest at the rate of 6.0% per annum. The notes are convertible into common stock, at a per share conversion price equal to $23.51. Beginning ninety days following issuance of the notes at the first closing and second closing, respectively, we are obligated to redeem monthly one third of the original principal amount under the applicable note, plus accrued but unpaid interest, liquidated damages and any other amounts then owing to the holder of such note. We are required to pay the redemption amount in cash with a premium of 10% or, at the election of the investor at any time, some or all of the principal amount and interest may be paid by conversion of shares under the note into common stock based on a conversion price equal to $23.51. Conversions and repayments of principal and interest on the notes in January and February 2024 totaled $1.7 million.

Previous wording

The warrants have an exercise price of $1.5675 and are exercisable for five years following issuance on each of the first and second closing dates under the SPA. Warrants for 1.3 million shares of common stock were exercised in January 2024.

Current wording

The warrants have an exercise price of $23.51 and are exercisable for five years following issuance on each of the first and second closing dates under the SPA. Warrants for 88,261 shares of common stock were exercised in January 2024.

Previous wording

On May 12, 2023, the Company completed a public offering of an aggregate of 1,800,876 shares of its common stock at par value $0.0001 per share (including pre-funded warrants in lieu thereof), Series A-1 warrants to purchase up to 1,800,876 shares of common stock and Series A-2 warrants to purchase up to 1,800,876 shares of common stock, at a combined public offering price of $3.887 per share (or pre-funded warrant in lieu thereof) and accompanying warrants. The Series A-1 warrants have an exercise price of $3.64 per share, are exercisable immediately upon issuance and expire five years from the date of issuance, and the Series A-2 warrants have an exercise price of $3.64 per share, are exercisable immediately upon issuance and expire eighteen months from the date of issuance. A holder of a warrant issued in the offering will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the number of shares of Common Stock outstanding immediately after giving effect to such exercise; provided, however, that upon 61 days’ prior notice to the Company, the holder may increase or decrease the beneficial ownership limitation, provided that in no event shall the beneficial ownership limitation exceed 9.99%. Gross proceeds from this offering are approximately $7.0 million before the deduction of placement agent fees and related costs of $0.7 million. The Series A-1 and Series A-2 warrants were repriced to $1.31 per share and exercised in February 2024.

Current wording

On May 12, 2023, we completed a public offering of an aggregate of 120,059 shares of its common stock at par value $0.0001 per share (including pre-funded warrants in lieu thereof), Series A-1 warrants to purchase up to 120,059 shares of common stock and Series A-2 warrants to purchase up to 120,059 shares of common stock, at a combined public offering price of $58.31 per share (or pre-funded warrant in lieu thereof) and accompanying warrants. The Series A-1 warrants have an exercise price of $54.60 per share, are exercisable immediately upon issuance and expire five years from the date of issuance, and the Series A-2 warrants have an exercise price of $54.60 per share, are exercisable immediately upon issuance and expire eighteen months from the date of issuance. A holder of a warrant issued in the offering will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the number of shares of Common Stock outstanding immediately after giving effect to such exercise; provided, however, that upon 61 days’ prior notice us, the holder may increase or decrease the beneficial ownership limitation, provided that in no event shall the beneficial ownership limitation exceed 9.99%. Gross proceeds from this offering are approximately $7.0 million before the deduction of placement agent fees and related costs of $0.7 million. The Series A-1 and Series A-2 warrants were repriced to $19.65 per share and exercised in February 2024.

Previous wording

H.C. Wainwright & Co. acted as the exclusive placement agent for the offering. The Company also registered warrants issued to the placement agent to purchase 126,061 shares of common stock at a per share exercise price of $4.8588, which is 125% of the price of the shares in the offering.

Current wording

H.C. Wainwright & Co. acted as the exclusive placement agent for the offering. We also registered warrants issued to the placement agent to purchase 8,404 shares of common stock at a per share exercise price of $72.882, which is 125% of the price of the shares in the offering.

Previous wording

In connection with the offering, the Company amended certain existing warrants to purchase up to an aggregate of 210,085 shares of the Company’s common stock that were previously issued in September 2021 through December 2022 to purchasers in the offering at exercise prices ranging from $16.80 to $187.20 per share, such that the amended warrants have a reduced exercise price of $3.64 per share, at an additional offering price of $0.125 per amended warrant.

Current wording

In connection with the offering, we amended certain existing warrants to purchase up to an aggregate of 14,006 shares of our common stock that were previously issued in September 2021 through December 2022 to purchasers in the offering at exercise prices ranging from $252.00 to $2,808.00 per share, such that the amended warrants have a reduced exercise price of $54.60 per share, at an additional offering price of $1.875 per amended warrant.

Previous wording

On February 2, 2023, we entered into a definitive Securities Purchase Agreement with certain institutional investors , pursuant to which the Company agreed to issue and sell in a registered direct offering, priced “at-the-market” under the rules of The Nasdaq Stock Market, an aggregate of 297,619 shares of common stock of the Company, par value $0.0001 per share, at an offering price of $10.08 per share, for gross proceeds of approximately $3.0 million before the deduction of placement agent fees and related costs of $0.3 million. The closing of the Offering occurred on February 6, 2023.

Current wording

On February 2, 2023, we entered into a definitive Securities Purchase Agreement with certain institutional investors , pursuant to which we agreed to issue and sell in a registered direct offering, priced “at-the-market” under the rules of The Nasdaq Stock Market, an aggregate of 19,842 shares of our common stock, par value $0.0001 per share, at an offering price of $151.2 per share, for gross proceeds of approximately $3.0 million before the deduction of placement agent fees and related costs of $0.3 million. The closing of the Offering occurred on February 6, 2023.

Previous wording

In a concurrent private placement, the Company issued to the institutional investors, for each share of common stock purchased in the offering, a common warrant to purchase one share of common stock. The common warrants are exercisable immediately upon issuance and terminate five and one-half years following issuance. The common warrants have an exercise price of $8.58 per share and are exercisable to purchase an aggregate of up to 297,619 shares of Common Stock and expire on August 7, 2028. A holder of a common warrant will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the number of shares of common stock outstanding immediately after giving effect to such exercise; provided, however, that upon 61 days’ prior notice to the Company, the holder may increase or decrease the beneficial ownership limitation, provided that in no event shall the beneficial ownership limitation exceed 9.99%.

Current wording

In a concurrent private placement, we issued to the institutional investors, for each share of common stock purchased in the offering, a common warrant to purchase one share of common stock. The common warrants are exercisable immediately upon issuance and terminate five and one-half years following issuance. The common warrants have an exercise price of $128.70 per share and are exercisable to purchase an aggregate of up to 19,842 shares of Common Stock and expire on August 7, 2028. A holder of a common warrant will not have the right to exercise any portion of its warrants if the holder, together with its affiliates, would beneficially own in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the number of shares of common stock outstanding immediately after giving effect to such exercise; provided, however, that upon 61 days’ prior notice to us, the holder may increase or decrease the beneficial ownership limitation, provided that in no event shall the beneficial ownership limitation exceed 9.99%.

Previous wording

H.C. Wainwright & Co. acted as the exclusive placement agent (the “Placement Agent”) for the offering. We issued placement agent warrants to purchase up to 20,832 shares of common stock to the Placement Agent (including its designees). These warrants have an exercise price equal to $12.60 per share and are exercisable for five years from the commencement of sales in the offering. The common warrants and placement agent warrants and the shares of our common stock issuable upon the exercise of the common warrants and placement agent warrants are not being registered under the Securities Act of 1933, as amended, are not being offered pursuant to the Registration Statement, and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act of 1933 and Rule 506(b).

Current wording

H.C. Wainwright & Co. acted as the exclusive placement agent (the “Placement Agent”) for the offering. We issued placement agent warrants to purchase up to 1,389 shares of common stock to the Placement Agent (including its designees). These warrants have an exercise price equal to $189.00 per share and are exercisable for five years from the commencement of sales in the offering. The common warrants and placement agent warrants and the shares of our common stock issuable upon the exercise of the common warrants and placement agent warrants are not being registered under the Securities Act of 1933, as amended, are not being offered pursuant to the Registration Statement, and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act of 1933 and Rule 506(b).

Previous wording

On December 7, 2022, we entered into an underwriting agreement with Lake Street Capital Management, LLC (the “Underwriter”), pursuant to which we agreed to issue and sell (i) 190,000 shares of the Company’s common stock, par value $0.0001 per share, (ii) pre-funded warrants to purchase 51,666 shares of common stock and (iii) warrants to purchase 483,333 shares of common stock to the Underwriter in a public offering. In addition, the Company granted the Underwriter the option, for 45 days from the closing of the offering, to purchase up to 28,500 additional shares of common stock and common warrants to purchase up to an additional 72,500 shares of common stock. The Underwriter agreed to purchase the shares from the Company pursuant to at a price of $15.62 per share.

Current wording

On December 7, 2022, we entered into an underwriting agreement with Lake Street Capital Management, LLC (the “Underwriter”), pursuant to which we agreed to issue and sell (i) 12,667 shares of our common stock, par value $0.0001 per share, (ii) pre-funded warrants to purchase 3,445 shares of common stock and (iii) warrants to purchase 32,223 shares of common stock to the Underwriter in a public offering. In addition, we granted the Underwriter the option, for 45 days from the closing of the offering, to purchase up to 1,900 additional shares of common stock and common warrants to purchase up to an additional 4,834 shares of common stock. The Underwriter agreed to purchase our shares pursuant to at a price of $234.30 per share.

Previous wording

In lieu of a purchase of common stock that would otherwise result in an investor’s beneficial ownership exceeding 4.99% (or, at the election of the investor, 9.99%) of the outstanding common stock, a pre-funded warrant was offered, each of which enables the investor to purchase one share of common stock at an exercise price of $0.0001. Each pre-funded warrant was exercisable upon issuance and will expire when exercised in full (all pre-funded warrants were exercised immediately upon issuance). Each pre-funded warrant was sold with a common warrant to purchase two shares of common stock. The public purchase price of one share of common stock and accompanying common warrant to purchase two shares of Common Stock is $16.80 and the combined purchase price of one pre-funded warrant and accompanying common warrant to purchase two shares of common stock is $16.80.

Current wording

In lieu of a purchase of common stock that would otherwise result in an investor’s beneficial ownership exceeding 4.99% (or, at the election of the investor, 9.99%) of the outstanding common stock, a pre-funded warrant was offered, each of which enables the investor to purchase one share of common stock at an exercise price of $0.0001. Each pre-funded warrant was exercisable upon issuance and will expire when exercised in full (all pre-funded warrants were exercised immediately upon issuance). Each pre-funded warrant was sold with a common warrant to purchase two shares of common stock. The public purchase price of one share of common stock and accompanying common warrant to purchase two shares of Common Stock is $252.00 and the combined purchase price of one pre-funded warrant and accompanying common warrant to purchase two shares of common stock is $252.00.

Previous wording

Each common warrant is exercisable immediately at an exercise price of $16.80 per share and will expire five years following the date of issuance. The offering closed on December 9, 2022 and we received aggregate gross proceeds of approximately $4.1 million from the Offering.

Current wording

Each common warrant is exercisable immediately at an exercise price of $252.00 per share and will expire five years following the date of issuance. The offering closed on December 9, 2022 and we received aggregate gross proceeds of approximately $4.1 million from the Offering.

Previous wording

On June 30, 2022, we entered into an $8.0 million convertible financing agreement with institutional investors. The agreement provided for two closings, each for notes payable of $4.24 million (resulting in gross cash proceeds of $4.0 million). Funds were received for the first closing on July 1, 2022 and for the second closing on August 9, 2022. The remaining amount of principal and interest on the 2022 Notes was repaid in the first quarter of 2023. We were obligated under the 2022 Notes to pay additional cash as true-up payments for interest or redemption amounts that we paid in shares of common stock that were valued below $24.07 or the lower conversion price of $9.01 in effect between January 12, 2023 and May 12, 2023. The true-up payments compensate the holder for the difference between the value of a share and the conversion price in effect at the time of redemption, multiplied by the number of shares paid. The true-up payments totaling $0.6 million were paid on May 12, 2023.

Current wording

On June 30, 2022, we entered into an $8.0 million convertible financing agreement with institutional investors. The agreement provided for two closings, each for notes payable of $4.24 million (resulting in gross cash proceeds of $4.0 million). Funds were received for the first closing on July 1, 2022 and for the second closing on August 9, 2022. The remaining amount of principal and interest on the 2022 Notes was repaid in the first quarter of 2023. We were obligated under the 2022 Notes to pay additional cash as true-up payments for interest or redemption amounts that we paid in shares of common stock that were valued below $361.05 or the lower conversion price of $135.15 in effect between January 12, 2023 and May 12, 2023. The true-up payments compensate the holder for the difference between the value of a share and the conversion price in effect at the time of redemption, multiplied by the number of shares paid. The true-up payments totaling $0.6 million were paid on May 12, 2023.

Previous wording

In connection with each of the first and second closings of the 2022 Notes we also issued warrants to purchase 38,900 shares of the Company’s common stock. The warrants have a current exercise price of $3.64 and are exercisable for five years following issuance of the 2022 Notes.

Current wording

In connection with each of the first and second closings of the 2022 Notes we also issued warrants to purchase 2,594 shares of our common stock. The warrants have a current exercise price of $54.60 and are exercisable for five years following issuance of the 2022 Notes.

Previous wording

We have received funding under federal grants from the National Institutes of Health (“NIH”) through the National Institute on Drug Abuse (“NIDA”). In September 2018, we were awarded a research and development grant related to the development of our MPAR® overdose prevention technology (the “MPAR Grant”). In September 2019, we were awarded a second research and development grant related to the development of our TAAP/MPAR® abuse deterrent technology for Opioid Use Disorder (“OUD”) (the “OUD Grant”). Grant funds are awarded annually through a Notice of Award which contains certain terms and conditions including, but not limited to, complying with the grant program legislation, regulation and policy requirements, complying with conditions on expenditures of funds with respect to other applicable statutory requirements such as the federal appropriations acts, periodic reporting requirements, and budget requirements.

Current wording

We have received funding under federal grants from the National Institutes of Health (“NIH”) through the National Institute on Drug Abuse (“NIDA”). In September 2018 and August 2024, we were awarded a research and development grant related to the development of our MPAR® overdose prevention technology (the “MPAR Grant”). In September 2019, we were awarded a second research and development grant related to the development of our TAAP/MPAR® abuse deterrent technology for Opioid Use Disorder (“OUD”) (the “OUD Grant”). Grant funds are awarded annually through a Notice of Award which contains certain terms and conditions including, but not limited to, complying with the grant program legislation, regulation and policy requirements, complying with conditions on expenditures of funds with respect to other applicable statutory requirements such as the federal appropriations acts, periodic reporting requirements, and budget requirements.

Previous wording

We do not track our research and development expenses on a program-by-program basis. Our direct external research and development expenses consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and development as well as for managing our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track our costs by program and cannot state precisely the total costs incurred for each of our clinical and preclinical programs on a project-by-project basis.

Current wording

We do not track our research and development expenses on a program-by-program basis. Our direct external research and development expenses consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not allocate employee costs, costs associated with our discovery efforts, laboratory supplies, and facilities, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and development as well as to manage our preclinical development, process development, manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track our costs by program and cannot state precisely the total costs incurred for each of our clinical and preclinical programs on a project-by-project basis.

Previous wording

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will remain elevated as we continue our existing, and commences additional, planned clinical trials for PF614, PF614-MPAR® and nafamostat, as well as conduct other preclinical and clinical development, including submitting regulatory filings for our other product candidates, subject to our ability to obtain financing. We also expect our related personnel costs to increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, to remain elevated. In addition, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to acquire the rights to future product candidates.

Current wording

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will remain elevated as we continue our existing, and commence additional, planned clinical trials for PF614, PF614-MPAR® and nafamostat, as well as conduct other preclinical and clinical development, including submitting regulatory filings for our other product candidates, subject to our ability to obtain financing. We also expect our related personnel costs to increase and, as a result, we expect our research and development expenses, including costs associated with stock-based compensation, to remain elevated. In addition, we may incur additional expenses related to milestone and royalty payments payable to third parties with whom we may enter into license, acquisition and option agreements to acquire the rights to future product candidates.

Previous wording

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the continued development of our product candidates, subject to our ability to obtain financing. We also anticipate that we will continue to incur significant accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses as a public company. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and other employee-related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of that product candidate.

Current wording

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support the continued development of our product candidates, subject to our ability to obtain financing. We also anticipate that we will continue to incur significant accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses. Additionally, if and when we believe a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and other employee-related expenses as a result of our preparation for commercial operations, especially as it relates to the sales and marketing of that product candidate.

Previous wording

Loss on conversions and change in fair value of convertible notes

Current wording

Change in fair value of convertible notes

Previous wording

We elected the fair value option to account for the 2021 Notes as we believe the fair value option provided users of the financial statements with greater ability to estimate the outcome of future events as facts and circumstances change, particularly with respect to changes in the fair value of the common stock underlying the conversion option. The 2022 Notes were accounted for under ASC 480 –*Distinguishing Liabilities from Equity,*due to share settlement features contained within the notes. We used a discounted cash flow model and a Monte Carlo simulation to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs. Changes in the fair value of the notes are recognized through earnings for each reporting period.

Current wording

The 2022 Notes were accounted for under ASC 480 –*Distinguishing Liabilities from Equity,*due to share settlement features contained within the notes. We used a discounted cash flow model and a Monte Carlo simulation to estimate the fair value of the notes, both of which rely on unobservable Level 3 inputs. Changes in the fair value of the notes are recognized through earnings for each reporting period.

Previous wording

We use a Black-Scholes option pricing model to estimate the fair value of the liability classified warrants. Changes in the fair value of the warrants are recognized through earnings for each reporting period.

Current wording

We use a Black-Scholes option pricing model to estimate the fair value of the warrants. Changes in the fair value of the warrants are recognized through earnings for each reporting period.

Previous wording

Interest expense consists of interest accrued on our financed directors’ and officers’ insurance, and accumulated interest from the 2023 Notes based on the stated interest rate. In addition, the 2023 Notes balance at December 31, 2023 reflects amortization of the debt discount from the original issuance and a discount associated with the warrant issuances and amortization of the associated debt issuance costs that are all recorded as interest expense. Interest expense related to the 2021 Notes and 2022 Notes was included in the estimate of fair value of the convertible notes.

Current wording

Interest expense consists of interest accrued on our financed directors’ and officers’ insurance, and interest from the 2023 Notes based on the stated interest rate. In addition, the 2023 Notes reflects amortization of the debt discount from the original issuance and a discount associated with the warrant issuances and amortization of the associated debt issuance costs that are all recorded as interest expense. Interest expense related to the 2022 Notes was included in the estimate of fair value of the convertible notes.

Previous wording

We file income tax returns in the United States federal tax jurisdiction and state jurisdictions and may become subject to income tax audit and adjustments by related tax authorities. Our tax return period for United States federal income taxes for the tax years since 2020 remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions are open for examination from 2019. We record reserves for potential tax payments to various tax authorities related to uncertain tax positions, if any. The nature of uncertain tax positions is subject to significant judgment by management and subject to change, which may be substantial. These reserves are based on a determination of whether and how much a tax benefit taken by us in our tax filings or whether our position is more likely than not to be realized following the resolution of any potential contingencies related to the tax benefit. We develop our assessment of uncertain tax positions, and the associated cumulative probabilities, using internal expertise and assistance from third-party experts. As additional information becomes available, estimates are revised and refined. Differences between estimates and final settlement may occur resulting in additional tax expense. Potential interest and penalties associated with such uncertain tax positions is recorded as a component of our provision for income taxes. To date, no amounts are being presented as an uncertain tax position.

Current wording

We file income tax returns in the United States federal tax jurisdiction and state jurisdictions and may become subject to income tax audit and adjustments by related tax authorities. Our tax return period for United States federal income taxes for the tax years since 2021 remain open to examination under the statute of limitations by the Internal Revenue Service and state jurisdictions. We record reserves for potential tax payments to various tax authorities related to uncertain tax positions, if any. The nature of uncertain tax positions is subject to significant judgment by management and subject to change, which may be substantial. These reserves are based on a determination of whether and how much a tax benefit taken by us in our tax filings or whether our position is more likely than not to be realized following the resolution of any potential contingencies related to the tax benefit. We develop our assessment of uncertain tax positions, and the associated cumulative probabilities, using internal expertise and assistance from third-party experts. As additional information becomes available, estimates are revised and refined. Differences between estimates and final settlement may occur resulting in additional tax expense. Potential interest and penalties associated with such uncertain tax positions is recorded as a component of our provision for income taxes. To date, no amounts are being presented as an uncertain tax position.

Previous wording

Revenue from federal grants totaled $2.2 million for the year ended December 31, 2023, compared to $2.5 million for the year ended December 31, 2022. Revenue decreased $0.3 million during the year ended December 31, 2023, due to the timing of research activities eligible for funding under the grants.

Current wording

Revenue from federal grants totaled $5.2 million for the year ended December 31, 2024, compared to $2.2 million for the year ended December 31, 2023, respectively. The $3.0 million difference is due to the timing of research activities eligible for funding, with increased activities under the OUD grant following the selection of a lead drug candidate in June 2024 and funding under the newly awarded MPAR grant which began in September 2024.

Previous wording

Research and development expenses were $7.6 million for the year ended December 31, 2023, compared to $19.8 million for the year ended December 31, 2022. The decrease was primarily the result of changes in timing of external research and development costs related to the clinical programs for PF614 and PF614-MPAR. We do not currently track expenses on a program-by-program basis. We expect future research and development expenses to approximate current levels but may need to be adjusted based on our ability to raise capital sufficient to fund these expenses.

Current wording

Research and development expenses were $7.2 million for the year ended December 31, 2024, compared to $7.6 million for the year ended December 31, 2023, respectively, representing a decrease of $0.4 million. The decrease was primarily the result of reduced external research and development costs related to clinical and pre-clinical programs for PF614 and PF614-MPAR, with decreased clinical trial activity for both programs in the 2024 period. We do not currently track expenses on a program-by-program basis.

Previous wording

General and administrative expenses were $5.4 million for the year ended December 31, 2023, compared to $6.9 million for the year ended December 31, 2022. The decrease was primarily a result of reduced stock-based compensation, reduced liability insurance, legal, and consulting fees and no employee bonus expenses in the 2023 period. We expect future general and administrative expenses to approximate current levels.

Current wording

General and administrative expenses were $4.7 million for the year ended December 31, 2024, compared to $5.4 million for the year ended December 31, 2023 respectively, representing a decrease of $0.6 million. The decrease was primarily a result of reduced stock-based compensation expenses. We expect future general and administrative expenses to approximate current levels.

Previous wording

As of December 31, 2023, we had $1.1 million of cash and cash equivalents. Since inception, we have generated limited revenues and have incurred significant operating losses and negative cash flows from our operations, and we anticipate that we will continue to incur losses for at least the foreseeable future. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all.

Current wording

As of December 31, 2024, we had $3.5 million of cash and cash equivalents. Since inception, we have generated limited revenues and have incurred significant operating losses and negative cash flows from our operations, and we anticipate that we will continue to incur losses for at least the foreseeable future. We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all.

Previous wording

Remaining funding under approved federal research grants totals $2.2 million and is expected to be utilized by August 2024. Pursuant to the terms and conditions of the two grants, we are required to submit progress reports to NIDA on an annual basis and a final research performance progress report within 120 days of the performance period end date. Additionally, the grants limit the use of funds to activities that are clearly severable and independent from activities that involve human subjects until the receipt by NIDA of (i) Institutional Review Board (“IRB”) approval, (ii) federal-wide assurance from the Office for Human Research Protections, (iii) a Data and Safety Monitoring Plan, (iv) certification that all key personnel have completed education on the protection of human subjects and (v) a Clinical Trials Dissemination Plan. We must also comply with the data sharing policies of NIDA and the NIH Public Access Policy, that require submission of final peer-reviewed journal manuscripts that arise from the use of grants to PubMed Central immediately upon acceptance for publication.

Current wording

The remaining cash funding under the MPAR federal research grant totaled $10.6 million at December 31, 2024 and is expected to be utilized by May 31, 2027. Pursuant to the terms and conditions, we are required to submit progress reports to NIDA on an annual basis and a final research performance progress report within 120 days of the performance period end date.

Previous wording

We have generated limited revenues and have incurred significant operating losses since our inception and, as of December 31, 2023, we have an accumulated deficit of $121.6 million. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Without capital raised through financing transactions, existing cash resources are sufficient to allow us to fund current planned operations into the third quarter of 2024, which raises substantial doubt about the Company’s ability to continue as a going concern.

Current wording

We have generated limited revenues and have incurred significant operating losses since our inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future. Without capital raised through financing transactions, existing cash resources are sufficient to allow us to fund current planned operations into the second quarter of 2025, which raises substantial doubt about our ability to continue as a going concern.

Previous wording

During the years ended December 31, 2023 and 2022, we used cash in operating activities of $10.8 million and $17.9 million, respectively. The decrease primarily resulted from the change in net loss between 2022 and 2023 and the timing of vendor invoicing and payments primarily associated with research and development activities.

Current wording

During the years ended December 31, 2024 and 2023, we used cash in operating activities of $7.5 million and $10.8 million, respectively. The decrease primarily resulted from additional revenue cash inflow from grant funding and a reduction in research and development activities in 2024.

Previous wording

During the years ended December 31, 2023 and 2022, net cash provided by financing activities was $8.7 million and $8.8 million, respectively. For 2023, net cash proceeds from 2023 February and 2023 May offerings of $9.1 million, net of transaction costs of $0.4 million, net cash proceeds from 2023 Notes of $1.6 million, and the repayment of financed insurance premiums of $0.5 million and cash payment of 2022 Notes of $1.0 million. In 2022, net cash consisted primarily of net proceeds from the issuance of the 2022 Notes and the net proceeds of the issuance of shares and related warrants in connection with the underwriting agreement completed in December of 2022.

Current wording

During the year ended December 31, 2024, net cash provided by financing activities was $9.9 million, primarily consisting of net proceeds from the August 2024 public offering $1.7 million, warrant exercises and warrant inducements of $9.1 million, net of transaction costs, less repayment of convertible notes of $0.5 million and financed insurance premiums of $0.4 million. During the year ended December 31, 2023, net cash provided by financing activities was $8.8 million, primarily consisting of net proceeds from 2023 February and 2023 May offerings of $8.7 million and net proceeds from 2023 Notes of $1.6 million, less the repayment of financed insurance premiums of $0.5 million and cash payment of 2022 Notes of $1.0 million.

Previous wording

Our commitments as of December 31, 2023 included an estimated $17.9 million related to open purchase orders and contractual obligations that occurred in the ordinary course of business, including commitments with contract research organizations for multi-year pre-clinical and clinical research studies. Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule, and adjust requirements based on our business needs prior to the delivery of goods or the performance of services.

Current wording

Our commitments as of December 31, 2024 included an estimated $12.0 million related to open purchase orders and contractual obligations that occurred in the ordinary course of business, including commitments with contract research organizations for multi-year pre-clinical and clinical research studies. Although open purchase orders are considered enforceable and legally binding, the terms generally allow us the option to cancel, reschedule, and adjust requirements based on our business needs prior to the delivery of goods or the performance of services.