Annovis Bio, Inc.

Previous wording

(“APP”), tau/phospho-tau (“tau”) and α-Synuclein (“αSYN”)—that are one of the main causes of neurodegeneration. High levels of neurotoxic proteins lead to impaired axonal transport, which is responsible for the communication between and within nerve cells. When that communication is impaired, the immune system is activated and attacks the nerve cells, eventually killing them. We have observed in our clinical studies in early AD and early PD patients and pre-clinical studies in mice and rats that Buntanetap lowered neurotoxic protein levels leading to improved axonal transport, reduced inflammation, lower nerve cell death and improved affected function.

Current wording

We are a late-stage clinical drug platform company addressing neurodegeneration, such as Alzheimer’s disease (“AD”) and Parkinson’s disease (“PD”). We are developing our lead product candidate, buntanetap, which is designed to address AD, PD, and potentially other chronic neurodegenerative diseases. Buntanetap is a synthetically produced small molecule, orally administered, brain penetrant compound. In several studies, buntanetap was observed to inhibit the synthesis of neurotoxic proteins — APP/Aβ (“APP”), tau/phospho- tau (“tau”) and α-Synuclein (“αSYN”) — that are some of the main causes of neurodegeneration. High levels of neurotoxic proteins lead to reduced axonal transport, which is responsible for the communication between and within nerve cells. When that communication is compromised, the immune system is activated and attacks the nerve cells, eventually killing them. We have observed in our clinical studies in early AD and early PD patients and pre-clinical studies in mice and rats that buntanetap lowered neurotoxic protein levels leading to improved axonal transport, reduced inflammation, lower nerve cell death and improved affected function.

Previous wording

In 2021, we completed two Phase 1/2 clinical studies: one in 14 early AD patients, and one in 54 early PD patients (together, the “AD/PD Trials”). In collaboration with the Alzheimer’s Disease Cooperative Study (“ADCS”), we also conducted a trial in 16 early AD patients (the “ADCS Trial”). All three clinical trials were double-blind, placebo-controlled studies. We designed the studies by applying our understanding of the underlying neurodegenerative disease states, and measured both target and pathway validation in the spinal fluid of patients to determine whether patients improved following treatment. In addition to meeting their primary endpoints of safety and tolerability and secondary endpoint of pharmacokinetics of Buntanetap, our AD/PD Trials met exploratory endpoints of measures of biomarkers and improvements in cognition in AD patients, and in function in PD patients. Following completion of the AD/PD Trials, we submitted our data to the U.S. Food and Drug Administration (“FDA”) and requested direction to further pursue the development of Buntanetap in early PD patients. With the FDA’s guidance, we initiated a Phase 3 study in early PD patients in August 2022 (our “Phase 3 PD Study”). We also submitted a proposed protocol for the treatment of moderate AD to the FDA, and after receiving permission to proceed, we initiated a Phase 2/3 study in mild to moderate AD patients in February 2023 (our “Phase 2/3 AD Study”). At the completion of the ADCS Trial, the data showed that Buntanetap is a translational inhibitor in humans just like in animals, and we further observed that there was statistical improvement in cognition in early AD patients, just like in the AD/PD Trials. Our Phase 3 PD Study and Phase 2/3 AD Study each have built in interim analyses, which were both promising.

Current wording

We designed the studies by applying our understanding of the underlying neurodegenerative disease states, and measured both target and pathway validation in the spinal fluid of patients to determine whether patients underlying disease condition improved following treatment. In addition to meeting their primary endpoints of safety and tolerability and secondary endpoint of pharmacokinetics (“PK”) of buntanetap, our AD/PD Trials also met exploratory endpoints of measures of biomarkers and improvements in cognition in AD patients, as well as function in PD patients. We believe that the AD/PD Trials represent the first double-blind, placebo-controlled study that showed improvements in AD patients, as measured by ADAS-Cog, and in PD patients, as measured by UPDRS. Following completion of the AD/PD Trials, we submitted our data to the U.S. Food and Drug Administration (“FDA”) and requested direction to further pursue the development of buntanetap in early PD patients. With the FDA’s guidance, we initiated a Phase 3 study in early PD patients in August 2022 (our “Phase 3 PD Study”). In the Phase 3 PD Study, early PD patients were defined as those at Hoehn & Yahr stages 1, 2 or 3 and OFF times of less than two hours per day. OFF time refers to periods when PD motor and/or non-motor symptoms occur between medication doses. We also submitted a proposed protocol for the treatment of moderate AD to the FDA, and after receiving permission to proceed, we initiated a Phase 2/3 study in mild to moderate AD patients in February 2023 (our “Phase 2/3 AD Study”). In the Phase 2/3 AD Study, mild to moderate AD patients were defined as those with a MMSE score between 14 and 24. Our Phase 3 PD Study and Phase 2/3 AD Study each had built in interim analyses.

Previous wording

We believe that we are the only company developing a drug for AD and PD that is designed to inhibit more than one neurotoxic protein and has a mechanism of action designed to restore nerve cell axonal and synaptic activity. By improving brain function, our goal is to treat memory loss and dementia associated with AD as well as body and brain function associated with PD. Based on pre-clinical and clinical data collected to date, we believe that Buntanetap has the potential to be the first drug to interfere with the underlying mechanism of neurodegeneration, potentially enabling Buntanetap to be the only drug to improve cognition in AD and motor function in PD. The industry has encountered challenges in specifically targeting one neurotoxic protein, be it APP, tau or αSYN, indicating that doing so does not change the course of neurodegeneration. Our goal is to develop a disease modifying drug (“DMD”) for patients with neurodegeneration by leveraging our clinical and pre-clinical data to inhibit the three most relevant neurotoxic proteins. Studies have found that AD and PD are the most common neurodegenerative diseases in the U.S., and accordingly these diseases present two unmet needs of the aging population and two potentially large U.S. markets if a DMD is developed and approved.

Current wording

We believe that we are the only company developing a drug for AD and PD that is designed to inhibit more than one neurotoxic protein and has a mechanism of action designed to restore nerve cell axonal and synaptic activity. By improving brain function, our goal is to treat memory loss and dementia associated with AD, as well as body and brain function issues associated with PD. Based on pre-clinical and clinical data collected to date, we believe that buntanetap has the potential to be the first drug to interfere with the underlying mechanism of neurodegeneration, potentially enabling buntanetap to be the only drug to improve cognition in AD and motor function in PD. The industry has historically encountered challenges in specifically targeting one neurotoxic protein, be it APP, tau or αSYN, indicating that doing so does not change the underlying course of neurodegeneration. Our ultimate goal is to develop a disease modifying drug (“DMD”) for patients with neurodegeneration by leveraging our clinical and pre-clinical data, which shows inhibition of the most relevant neurotoxic proteins. Studies have found that AD and PD are the most common neurodegenerative diseases in the U.S., and accordingly these diseases present two unmet needs of the aging population and two potentially large U.S. markets, if a DMD is developed and approved.

Previous wording

We have never been profitable and have incurred net losses since inception. Our accumulated deficit at December 31, 2023 was $110,259,087. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when we will be able to achieve or maintain profitability, if at all.

Current wording

We have never been profitable and have incurred net losses since inception. Our accumulated deficit at December 31, 2024 was $134.8 million. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when we will be able to achieve or maintain profitability, if at all.

Previous wording

Research and development costs are either expensed as incurred or recorded separately as a prepaid asset, and the expense recognized when the service is performed. Clinical development expenses for our product candidates are a significant component of our current research and development expenses. Product candidates in later stage clinical development generally have higher research and development expenses than those in earlier stages of development, primarily due to increased size and duration of the clinical trials. We track and record information regarding external research and development expenses for each study or trial that we conduct. From time to time, we use third-party CROs, contractor laboratories and independent contractors in clinical studies. We recognize the expenses associated with third parties performing these services for us in our clinical studies based on the percentage of each study completed at the end of each reporting period.

Current wording

Research and development costs are either expensed as incurred or recorded separately as a prepaid asset, whereby expense is recognized when the service is performed. Clinical development expenses for our product candidates are a significant component of our current research and development expenses. Product candidates in later stage clinical development generally have higher research and development expenses than those in earlier stages of development, primarily due to increased size (e.g., patient population) and duration of the clinical trials. We track and record information regarding external research and development expenses for each study or trial that we conduct. We often use third-party CROs, contractor laboratories and independent contractors to help us complete clinical studies. We recognize the expenses associated with third parties performing these services for us in our clinical studies based on the percentage of each study (or study activity) completed at the end of each reporting period.

Previous wording

Our research and development expenses in 2023 were primarily related to our Phase 3 study in early PD patients and our Phase 2/3 study in AD patients. Our research and development expenses in 2022 were primarily related to our Phase 3 study in early PD patients. We expect that our research and development expenses in 2024 and for the next several years will continue to remain elevated as a result of costs associated with completing our Phase 3 trial for PD, our Phase 2/3 trial for AD and subsequent planned activities leading up to an NDA filing with the FDA. These expenditures are subject to numerous uncertainties regarding timing and cost to achieve completion. Completion of our clinical development and clinical trials may take several years or more and the length of time generally varies according to the type, complexity, novelty and intended use of our product candidates. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development.

Current wording

Our research and development expenses in 2024 were primarily related to the wind-down and analysis of our Phase 3 study in early PD patients and our Phase 2/3 study in AD patients, as well as preparatory work for our pivotal Phase 3 AD study program in early AD patients. Our research and development expenses in 2023 were primarily related to the execution of our Phase 3 study in early PD patients and our Phase 2/3 study in AD patients. We expect that our research and development expenses in 2025 and for the next several years will continue to remain elevated as a result of costs associated with completing our Phase 3 trial for AD, our planned Phase 3 trial for PD and other subsequent planned activities leading up to a potential NDA filing(s) with the FDA. These expenditures are subject to numerous uncertainties regarding timing and cost to achieve completion. Completion of our clinical development and clinical trials may take several years or more and the length of time generally varies according to the type, complexity, novelty and intended use of our product candidates. The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development.

Previous wording

Due to the stage of our research and development, we are unable to accurately determine the duration or completion costs of our development of Buntanetap. As a result of the difficulties of forecasting research and development costs of Buntanetap as well as the other uncertainties discussed above, we are unable to determine when and to what extent we will generate revenues from the commercialization and sale of approved product candidates.

Current wording

Due to the ongoing and uncertain nature of our research and development, we are unable to accurately determine the duration or completion costs of our development of buntanetap. As a result of the difficulties of forecasting research and development costs of buntanetap as well as the other uncertainties discussed above, we are unable to determine when and to what extent we will generate revenues from the commercialization and sale of approved product candidates.

Previous wording

General and administrative (“G&A”) expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our executive, finance, accounting, and administrative functions. Our general and administrative expenses also include professional fees for legal services, including patent-related expenses, consulting, tax and accounting services, insurance, rent and general corporate expenses. We expect that our general and administrative expenses will increase with the continued development and potential commercialization of our product candidates. We expect that our general and administrative expenses in 2024 and for the next several years will be significantly higher than in 2023 as we increase our employee count.

Current wording

General and administrative (“G&A”) expenses consist primarily of salaries, benefits and other related costs, including public company costs as well as stock-based compensation, for personnel serving in our executive, finance, accounting, and administrative functions. Our general and administrative expenses also include professional fees for legal services, including patent-related expenses, consulting, tax and accounting services, insurance, rent and general corporate expenses. We expect that our general and administrative expenses will increase as a result of the continued clinical development and potential commercialization of our product candidates.

Previous wording

As of December 31, 2023, the Company had U.S. federal net operating loss (“NOL”) carryforwards of $38,085,386 which may be available to offset future income tax liabilities. Federal NOL carryforwards generated in 2017 and prior of $2,764,240 will expire beginning 2032. The remaining federal NOL carryforwards generated beginning in 2018, do not expire. NOL carryforwards generated beginning in 2018 are permitted to offset 80% of taxable income in future years. As of December 31, 2023, the Company also had U. S. state NOL carryforwards of $40,632,269 which may be available to offset future income tax liabilities and will expire beginning in 2028.

Current wording

As of December 31, 2024, the Company had U.S. federal net operating loss (“NOL”) carryforwards of $54.1 million, which may be available to offset future income tax liabilities. Federal NOL carryforwards generated in 2017 and prior of $2.8 million will expire beginning 2032. The remaining federal NOL carryforwards generated beginning in 2018, do not expire. NOL carryforwards generated beginning in 2018 are permitted to offset 80% of taxable income in future years. As of December 31, 2024, the Company also had U.S. state NOL carryforwards of $56.6 million, which may be available to offset future income tax liabilities and will expire beginning in 2028.

Previous wording

NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the “IRS”) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code. This could substantially limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. We have not yet conducted a comprehensive study to assess whether a change of ownership as defined by Section 382 has occurred since our inception.

Current wording

NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the “IRS”) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code. This could substantially limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. Subsequent ownership

Previous wording

Operating expenses and other income were comprised of the following:

Current wording

Operating expenses and other income (expense) were comprised of the following:

Previous wording

Change in fair value of warrants decreased by $11,837.2 thousand for the year ended December 31, 2023 compared to the year ended December 31, 2022. This change was attributable to the loss on the change in fair value of our liability-classified Canaccord Warrants from the date of issuance in the fourth quarter of 2023 to December 31, 2023. The change in fair value was primarily driven by the change in our stock price during the fourth quarter of 2023.

Current wording

driven by warrant exercises made at higher stock prices during the third quarter of 2024, triggering remeasurement. The remaining change in fair value was primarily driven by the change in our stock price during 2024. For the year ended December 31, 2023, the change in fair value was primarily attributable to issuance of the liability-classified Canaccord Warrants and the increase in our stock price during the fourth quarter.

Previous wording

Since our inception in 2008, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of common stock, convertible preferred stock and convertible promissory notes. To date, we have not generated any revenues from the sale of products, and we do not anticipate generating any revenues from the sales of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of December 31, 2023, our principal source of liquidity was our cash and cash equivalents, which totaled $5,754.7 thousand.

Current wording

Since our inception in 2008, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the sale of common stock and warrants. To date, we have not generated any revenues from the sale of products, and we do not anticipate generating any revenues from the sales of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of December 31, 2024, our principal source of liquidity was our cash and cash equivalents, which totaled $10.6 million.

Previous wording

We do not have sufficient capital on hand to fund our operations for the next 12 months and will need to raise additional capital to meet our obligations as they become due. We believe that our current cash and cash equivalents and funding from existing grants will be sufficient to fund our operating expenses and capital expenditure requirements until the second quarter of 2024, including our ongoing Phase 2/3 AD Trial and our ongoing Phase 3 PD Trial. We will need to raise substantial additional capital to complete the development and commercialization of our product candidates through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. However, there can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us. We have no committed external sources of funds. If we are unable to raise sufficient additional capital or defer sufficient operating expenses, we may be compelled to reduce the scope of our operations. Accordingly, we have concluded that substantial doubt exists with respect to our ability to continue as a going concern within one year after the date that these financial statements are issued.

Current wording

We do not have sufficient capital on hand to fund our operations for the next 12 months and will need to raise additional capital to meet our obligations as they become due. We believe that our current cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2025. We will need to raise substantial additional capital to complete the development and commercialization of our product candidates through public or private equity offerings, debt financings, collaboration and licensing arrangements or other financing alternatives. However, there can be no assurance that we will be successful in raising additional capital or that such capital, if available, will be on terms that are acceptable to us. If we are unable to raise sufficient additional capital or defer sufficient operating expenses, we may be compelled to reduce the scope of our operations. Accordingly, we have concluded that substantial doubt exists with respect to our ability to continue as a going concern within one year after the date that these financial statements are issued.

Previous wording

We expect to incur significant operating losses for the foreseeable future, and for these losses to further increase, as we ramp up our clinical development programs and begin activities for commercial launch readiness. We may also encounter unforeseen expenses, difficulties, complications, delays and other currently unknown factors that could adversely affect our business.

Current wording

We expect to incur significant operating losses for the foreseeable future. We also expect these losses to further increase, as we ramp up our clinical development programs and begin activities for commercial launch readiness. We may also encounter unforeseen expenses, difficulties, complications, delays and other currently unknown factors that could adversely affect our business.

Previous wording

The following table summarizes our cash flows from operating, investing and financing activities.

Current wording

The following table summarizes our cash flows from operating, investing and financing activities the years ended December 31, 2024 and 2023.

Previous wording

We expect cash used in operating activities to increase in 2024 as compared to 2023 due to an expected increase in our operating losses associated with continued development of our product candidates and planned increases in our personnel count.

Current wording

We expect cash used in operating activities to once again increase in 2025 as compared to 2024, due to an expected increase in our operating losses associated with continued development of our product candidates (i.e., pivotal Phase 3 AD Program) as well as planned increases in our personnel count.

Previous wording

Cash provided by financing activities was $17,344.3 thousand during the year ended December 31, 2023, which was primarily attributable to proceeds from issuance of common stock and warrants for capital raises, as well as proceeds from exercises of our Canaccord Warrants.

Current wording

Cash provided by financing activities was $26.7 million during the year ended December 31, 2024, which was primarily attributable to proceeds from issuance of common stock and warrants for capital raises, including our ELOC and ATM facilities, as well as proceeds from exercises of our Canaccord Warrants.

Previous wording

We have based our management’s discussion and analysis of financial condition and results of operations on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to clinical development expenses and stock-based compensation. The clinical development cost to advance any of our product candidates to marketing approval is substantial and involves numerous risks and uncertainties associated with pharmaceutical product development. As a result, we are unable to accurately predict the timing or amount of increased expenses and, as a result, clinical development expense could be materially different as the costs are incurred. We measure and record compensation expense using the applicable accounting guidance for share-based payments using the Black-Scholes option pricing model to value option awards which requires the use of subjective assumptions, including the expected life of the option and expected share price volatility. These assumptions used in calculating the fair value of stock-based awards represent our best estimates and involve inherent uncertainties and the application of judgment. As a result, if factors change and we used different assumptions, stock-based compensation expense could be materially different for stock-based awards.

Current wording

We have based our management’s discussion and analysis of financial condition and results of operations on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and judgments, including those related to clinical development expenses, fair value of warrants and stock-based compensation. The clinical development cost to advance any of our product candidates to marketing approval is substantial and involves numerous risks and uncertainties associated with pharmaceutical product development. As a result, we are unable to accurately predict the timing or amount of increased expenses and, as a result, clinical development expense could be materially different as the costs are incurred. In determining warrant fair value, we maximize the use of quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. We measure and record stock compensation expense using the applicable accounting guidance for share-based payments using the Black-Scholes option pricing model to value option awards which requires the use of subjective assumptions, including the expected life of the option and expected share price volatility. These assumptions used in calculating the fair value of stock-based awards represent our best estimates and involve inherent uncertainties and the application of judgment. As a result, if factors change and we used different assumptions, stock-based compensation expense could be materially different for stock-based awards.

Previous wording

As part of the process of preparing the consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we are required to estimate and record expenses, for which a large portion are research and development expenses. Research and development expenses include, among other categories, development, clinical trials, patent costs, and regulatory compliance costs incurred with research organizations, contract manufacturers, and other third-party vendors. We rely on third-parties to conduct our clinical studies and to provide many of these services, including data management, statistical analysis and electronic compilation. At the end of each reporting period, the estimation process involves identifying services that have been performed on our behalf by third-parties, estimating and accruing expenses in our consolidated financial statements based on the evaluation of the progress to completion of specific tasks and the facts and circumstances known to us at the time of the estimate, and assessing the accuracy of these estimates going forward to determine if adjustments are required. We periodically collaborate with our third-party vendors to assist in determining our estimates. Payments for these activities performed by our third-party vendors are based on the terms of the individual arrangements with our third-party vendors, which may differ from the pattern of costs incurred, and are reflected in the consolidated financial statements as prepaid or accrued research and development expense, as applicable. We believe our estimates and assumptions are reasonable under the current conditions; however, actual results may differ from these estimates. Any changes to estimates will be recorded in the period in which a circumstance causing a change in estimate becomes known and the impact of any change in estimate could be material.

Current wording

As part of the process of preparing the financial statements included elsewhere in this Annual Report on Form 10-K, we are required to estimate and record expenses, for which a large portion are research and development expenses. Research and development expenses include, among other categories - development, clinical trials, and regulatory compliance costs incurred with research organizations, contract manufacturers, and other third-party vendors. We rely on third-parties to conduct our clinical studies and to provide many of these services, including data and project management, statistical analysis and electronic compilation. At the end of each reporting period, the estimation process involves identifying services that have been performed on our behalf by third-parties, estimating and accruing expenses in our financial statements based on the evaluation of the progress to completion of specific tasks and the facts and circumstances known to us at the time of the estimate, and assessing the accuracy of these estimates going forward to determine if adjustments are required. We periodically collaborate with our third-party vendors to assist in determining our estimates. Payments for these activities performed by our third-party vendors are based on the terms of the individual arrangements with our third-party vendors, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development expense, as applicable. We believe our estimates and assumptions are reasonable under the current conditions; however, actual results may differ from these estimates. Any changes to estimates will be recorded in the

Previous wording

We account for our stock-based compensation awards in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718,Compensation—Stock Compensation (“ASC 718”). We have issued stock-based compensation awards that are stock options, in accordance with ASC 718. ASC 718 requires all stock-based payments, including grants of stock options, to be recognized in the consolidated statements of operations based on their grant date fair values. We use the Black-Scholes option-pricing model to determine the fair value of options granted. We recognize forfeitures as they occur. Expense related to stock-based compensation awards are recorded to research and development expense or general and administrative expense based on the underlying function of the individual that was granted the stock-based compensation award. Estimating the fair value of stock options requires the input of subjective assumptions, including the expected term of the stock option,

Current wording

We account for our stock-based compensation awards in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718,Compensation—Stock Compensation (“ASC 718”). We have issued stock-based compensation awards that are stock options, in accordance with ASC 718. ASC 718 requires all stock-based payments, including grants of stock options, to be recognized in the statements of operations based on their grant date fair values. We use the Black-Scholes option-pricing model to determine the fair value of options granted. We recognize forfeitures as they occur. Expense related to stock-based compensation awards are recorded to research and development expense or general and administrative expense based on the underlying function of the individual that was granted the stock-based compensation award. Estimating the fair value of stock options requires the input of subjective assumptions, including the expected term of the stock option, stock price volatility, the risk-free interest rate, and expected dividends. The assumptions used in our Black-Scholes option-pricing model represent our best estimates and involve a number of variables, uncertainties, assumptions, and the application of our judgment, as they are inherently subjective.

Previous wording

Stock-based compensation expense was $4.6 million and $9.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had $2.2 million of unrecognized stock-based compensation expense, which is expected to be recognized over a remaining weighted-average period of 0.92 years.

Current wording

Stock-based compensation expense was $3.8 million and $4.6 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had $2.4 million of unrecognized stock-based compensation expense, related to service-based options, which will be recognized over a remaining weighted-average period of 1.0 years.

Previous wording

The fair value of Common Stock Warrant Liabilities is determined using a Monte Carlo valuation model. Determining the appropriate fair value model and calculating the fair value of Common Stock Warrants requires considerable judgment. Any change in the estimates used may cause the value to be higher or lower than that reported. The Common Stock Warrants are not traded in an active market and the fair value is determined using valuation techniques. The estimates may be significantly different from those recorded in the financial statements because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market. All changes in the fair value are recorded in the statement of operations each reporting period.

Current wording

The fair value of Common Stock Warrant Liabilities is determined using a Black-Scholes option-pricing model. Determining the appropriate fair value model and calculating the fair value of Common Stock Warrants requires considerable judgment. Any change in the estimates used may cause the value to be higher or lower than that reported. The Common Stock Warrants are not traded in an active market and the fair value is determined using valuation techniques. The estimates may be significantly different from those recorded in the financial statements because of the use of judgment and the inherent uncertainty in estimating the fair value of these instruments that are not quoted in an active market. All changes in the fair value are recorded in the statements of operations each reporting period.

Previous wording

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves income tax disclosures by requiring: (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The ASU indicates that all entities will apply the guidance prospectively with an option for retroactive application to each period presented in the financial statements. The Company has not determined the impact ASU 2023-09 may have on the Company’s financial statement disclosures.

Current wording

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which improves income tax disclosures by requiring: (1) consistent categories and greater disaggregation of information in the rate reconciliation, and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The ASU indicates that all entities will apply the guidance prospectively with an option for retroactive application to each period presented in the financial statements. The Company has not determined the impact ASU 2023-09 may have on the Company’s financial statement disclosures but is not expecting material impacts.

Previous wording

“emerging growth company” can delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Current wording

Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.