GRI Bio, Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes beginning on page F-1 of this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Item 1A. Risk Factors” and “Special Note Regarding Forward-Looking Statements” of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained herein.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes beginning on page F-1 of this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Item 1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” of this Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained herein.

Previous wording

Our lead product candidate, GRI-0621, is an oral inhibitor of iNKT cells. GRI-0621 is also an oral formulation of tazarotene, a synthetic RAR-beta and gamma selective agonist, that is approved in the United States for topical treatment of psoriasis and acne. As of December 31, 2023, it has been evaluated in over 1,700 patients as an oral product for up to 52-weeks. We are developing GRI-0621 for the treatment of severe fibrotic lung diseases such as IPF, a life-threatening progressive fibrotic disease of the lung that affects approximately 140,000 people in the United States, with up to 40,000 new cases per year in the United States and some estimate that IPF affects 3 million globally. While there are currently two approved therapies for the treatment of lung fibrosis, neither has been associated with improvements in overall survival, and both therapies have been associated with significant side effects leading to poor therapeutic adherence. In preliminary data from our trials to date with GRI-0621, and earlier trials with oral tazarotene, we have observed GRI-0621 to be well-tolerated and to inhibit iNKT cell activity in subjects. We and others have shown that activated iNKT are upregulated in IPF, PSC, NASH, ALD,SLE, MS, UC patients as well as other indications. In these patients activated iNKT cells are correlated with more severe disease. In December 2023, we commenced enrollment in our Phase 2a trial and we expect topline results from this trial to be available in the second half of 2024.

Current wording

Our lead product candidate, GRI-0621, is an oral inhibitor of iNKT cells. GRI-0621 is also an oral formulation of tazarotene, a synthetic RAR-beta and gamma selective agonist, that is approved in the United States for topical treatment of psoriasis and acne. As of December 31, 2024, it has been evaluated in over 1,700 patients as an oral product for up to 52-weeks. We are developing GRI-0621 for the treatment of severe fibrotic lung diseases such as IPF, a life-threatening progressive fibrotic disease of the lung that affects approximately 140,000 people in the United States, with up to 40,000 new cases per year in the United States. Some estimate that IPF affects 3 million people globally. While there are currently two approved therapies for the treatment of lung fibrosis, neither has been associated with improvements in overall survival, and both therapies have been associated with significant side effects leading to poor therapeutic adherence. In preliminary data from our trials to date with GRI-0621, and earlier trials with oral tazarotene, we have observed GRI-0621 to be well-tolerated and to inhibit iNKT cell activity in subjects. We and others have shown that activated iNKT are upregulated in IPF, PSC, MASH, ALD, SLE, MS, UC patients, as well as other indications. In these patients activated iNKT cells are correlated with more severe disease. The FDA has cleared our IND application for GRI-0621 for the treatment of IPF and we plan to evaluate GRI-0621 in a randomized, double-blind, multi-center Phase 2a biomarker study, for which we commenced enrollment in December 2023. Based on our current projections, we expect topline results from this trial to be available in the third quarter of 2025. Additionally, on March 1, 2024, we received authorization of our CTA from the United Kingdom MHRA to initiate the Phase 2a biomarker study evaluating GRI-0621 for the treatment of IPF in the United Kingdom. On September 24, 2024, we received approval from the HREC to initiate the Phase2a biomarker study evaluating GRI-0621 for the treatment of IPF in Australia, after previously receiving authorization on our CTA from the Australian MHRA.

Previous wording

Our product candidate portfolio also includes GRI-0803 and a proprietary library of 500+ compounds. GRI-0803, the lead molecule selected from the library, is a novel oral agonist of type 2 NKT cells. We are developing GRI-0803 for the treatment of autoimmune disorders, with much of our preclinical work in SLE or lupus and MS. In lupus, the immune system mistakenly attacks its own healthy tissues, especially joints and skin, but can affect almost every organ and tissue of the body. The condition can be fatal, and often causes debilitating bouts of fatigue and pain that prevent nearly half of adult patients from working. Lupus affects between 160,000 - 200,000 patients in the United States, with around 80,000 – 100,000 patients in the United States suffering from kidney nephritis, one of the most serious manifestations of SLE, typically within five years of diagnosis. There is no cure for lupus, but medical interventions and lifestyle changes can help control it. SLE treatment consists primarily of immunosuppressive drugs that inhibit the activity of the immune system. Only two drugs have been approved for lupus in the past 50 years, and new treatment options are sorely needed. Subject to IND clearance, we intend to evaluate GRI-0803 in a Phase 1a and 1b trial initially targeting SLE. We expect to file an IND with respect to this Phase 1a and 1b trial in the first half of 2024. We will continue to evaluate indications to select the best fit for further development of the program, but our initial focus is on lupus.

Current wording

Our product candidate portfolio also includes GRI-0803 and a proprietary library of 500+ compounds. GRI-0803, the lead molecule selected from the library, is a novel oral agonist of dNKT cells. We are developing GRI-0803 for the treatment of autoimmune disorders, with much of our preclinical work in SLE or lupus and MS. In lupus, the immune system mistakenly attacks its own healthy tissues, especially joints and skin, but can affect almost every organ and tissue of the body. The condition can be fatal, and often causes debilitating bouts of fatigue and pain that prevent nearly half of adult patients from working. Lupus affects between 160,000 – 200,000 patients in the United States, with around 80,000 – 100,000 patients in the United States suffering from kidney nephritis, one of the most serious manifestations of SLE, typically within five years of diagnosis. There is no cure for lupus, but medical interventions and lifestyle changes can help control it. SLE treatment consists primarily of immunosuppressive drugs that inhibit the activity of the immune system. Only two drugs have been approved for lupus in the past 50 years, and new treatment options are sorely needed. Subject to IND clearance, we intend to evaluate GRI-0803 in a Phase 1a and 1b trial initially targeting SLE. We expect to file an IND with respect to this Phase 1a and 1b trial in 2025. We will continue to evaluate indications to select the best fit for further development of the program, but our initial focus is on lupus.

Previous wording

On January 19, 2024, our stockholders approved the January 2024 Reverse Stock Split. Our Board approved the January 2024 Reverse Stock Split ratio of one-for-seven. Following this approval, we filed an amendment to our Charter with the Secretary of State of the State of Delaware to effect the January 2024 Reverse Stock Split as of 4:01 p.m. Eastern Time on January 29, 2024. Shares of our Common Stock began trading on a post-split basis on January 30, 2024. As a result of the January 2024 Reverse Stock Split, every seven shares of our Common Stock, either issued or outstanding, immediately prior to the filing and effectiveness of our amendment to our Charter filed with the Secretary of State of the State of Delaware, was automatically combined and converted (without any further act) into one share of fully paid and nonassessable share of Common Stock. No fractional shares were issued in connection with the January 2024 Reverse Stock Split. Stockholders who otherwise would have received fractional shares of Common Stock received cash in lieu thereof at a price equal to the fraction to which the stockholder would have otherwise been entitled. The January 2024 Reverse Stock Split had the effect of reducing the aggregate number of outstanding shares of Common Stock from 4,520,233 shares on a pre-reverse split basis to a total of 645,738 shares outstanding on a post-reverse split basis.

Current wording

On February 11, 2025, our stockholders approved the February 2025 Reverse Stock Split within a range of not less than one-for-two and not more than one-for-23 and our Board subsequently approved the February 2025 Reverse Stock Split at the ratio of one-for-17. Following these approvals, we filed an amendment to our Charter with the Secretary of State of the State of Delaware to effect the February 2025 Reverse Stock Split as of 4:01 p.m. Eastern Time on February 21, 2025. Shares of our Common Stock began trading on a post-split basis on February 24, 2025. The February 2025 Reverse Stock Split had the effect of reducing the aggregate number of outstanding shares of Common Stock from 8,933,366 shares on a pre-reverse split basis to a total of 525,358 shares outstanding on a post-reverse split basis.

Previous wording

Unless otherwise noted, all financial information, share numbers, option numbers, warrant numbers, other derivative security numbers and exercise prices appearing in this Annual Report have been adjusted to give effect to the January 2024 Reverse Stock Split.

Current wording

Unless otherwise noted, all financial information, share numbers, option numbers, warrant numbers, other derivative security numbers and exercise prices appearing in this Annual Report have been adjusted to give effect to the reverse stock splits described herein.

Previous wording

On February 1, 2024, we entered into the Purchase Agreement, pursuant to which we agreed to issue and sell, in a public offering (i) 330,450 Shares of Common Stock, (ii) 4,669,550 Pre-Funded Warrants exercisable for an aggregate of 4,669,550 shares of Common Stock, (iii) 5,000,000 Series B-1 Common Warrants exercisable for an aggregate of 5,000,000 shares of Common Stock, and (iv) 5,000,000 Series B-2 Common Warrants exercisable for an aggregate of 5,000,000 shares of Common Stock for gross proceeds of $5.5 million. The securities were offered in combinations of (a) one Share or one Pre-Funded Warrant, together with (b) one Series B-1 Common Warrant and one Series B-2 Common Warrant, for a combined purchase price of $1.10 (less $0.0001 for each Pre-Funded Warrant).

Current wording

On June 26, 2024, we entered into a securities purchase agreement (the June 2024 Purchase Agreement), pursuant to which we issued and sold, in a public offering (the June 2024 Offering), (i) 3,529 shares (the June 2024 Shares) of Common Stock, (ii) 125,047 pre-funded warrants (the June 2024 Pre-Funded Warrants) exercisable for an aggregate of 125,047 shares of Common Stock, (iii) 128,577 Series C-1 common warrants (the Series C-1 Common Warrants) exercisable for an aggregate of 128,577 shares of Common Stock, and (iv) 128,577 Series C-2 common warrants (the Series C-2 Common Warrants, and together with the Series C-1 Common Warrants, the Series C Common Warrants) exercisable for an aggregate of 128,577 shares of Common Stock. The securities were offered in combinations of (a) one June 2024 Share or one June 2024 Pre-Funded Warrant, together with (b) one Series C-1 Common Warrant and one Series C-2 Common Warrant, for a combined purchase price of $31.11 (less $0.0017 for each June 2024 Pre-Funded Warrant).

Previous wording

On February 1, 2024, we entered into the Purchase Agreement), pursuant to which we agreed to issue and sell, in a public offering, (i) 330,450 Shares of Common Stock, (ii) 4,669,550 Pre-Funded Warrants exercisable for an aggregate of 4,669,550 shares of Common Stock, (iii) 5,000,000 Series B-1 Common Warrants exercisable for an aggregate of 5,000,000 shares of Common Stock, and (iv) 5,000,000 Series B-2 Common Warrants exercisable for an aggregate of 5,000,000 shares of Common Stock for gross proceeds of $5.5 million. The securities were offered in combinations of (a) one Share or one Pre-Funded Warrant, together with (b) one Series B-1 Common Warrant and one Series B-2 Common Warrant, for a combined purchase price of $1.10 (less $0.0001 for each Pre-Funded Warrant).

Current wording

On February 1, 2024, we entered into a securities purchase agreement (the February 2024 Purchase Agreement), pursuant to which we issued and sold, in a public offering, (i) 1,495 shares (the February 2024 Shares) of Common Stock, (ii) 21,131 pre-funded warrants (the February 2024 Pre-Funded Warrants) exercisable for an aggregate of 21,131 shares of Common Stock, (iii) 22,631 Series B-1 Common Warrants exercisable for an aggregate of 22,631 shares of Common Stock, and (iv) 22,631 Series B-2 Common Warrants exercisable for an aggregate of 22,631 shares of Common Stock. The Series B Common Warrants together with the February 2024 Pre-Funded Warrants are referred to in this Annual Report as the February 2024 Warrants. The securities were offered in combinations of (a) one February 2024 Share or one February 2024 Pre-Funded Warrant, together with (b) one Series B-1 Common Warrant and one Series B-2 Common Warrant, for a combined purchase price of $243.10 (less $0.0221 for each February 2024 Pre-Funded Warrant).

Previous wording

On January 5, 2024, we received a letter (the Letter) from the Staff of Nasdaq indicating that we no longer meet the Minimum Bid Price Rule set forth in Nasdaq Listing Rule 5550(a)(2) because the closing bid price for our common stock was less than $1.00 for the previous 30 consecutive business days. The Letter is in addition to the Notice described above. The Letter has no immediate effect on our continued listing on The Nasdaq Capital Market. Under Nasdaq Listing Rule 5810(c)(3)(A), we have a 180-calendar day period, or until July 3, 2024, to regain compliance with the Minimum Bid Price Rule. The Minimum Bid Price Rule will be met if our common stock has a minimum closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days during the 180-calendar day period, unless Nasdaq exercises its discretion to extend such 10‑day period. If we do not regain compliance by the Compliance Date, we may be eligible for an additional 180-calendar day period, subject to satisfying the conditions in the applicable Nasdaq Listing Rules. If, before the Compliance Date, our common stock has a closing bid price of $0.10 per share or less for ten consecutive trading days, the Staff will issue a Staff Delisting Determination under Nasdaq Listing Rule 5810 with respect to our common stock. On January 29, 2024, we filed an amendment to our Charter to implement the January 2024 Reverse Stock Split to attempt to regain compliance with the Minimum Bid Price Rule, but there can be no assurance that we will be able to regain compliance. There can be no assurance that stock price of our Common Stock will remain above the minimum $1.00 bid price required for any post-split Nasdaq monitoring period or otherwise.

Current wording

The rules of The Nasdaq Capital Market require that we maintain a closing price for shares of our Common Stock of at least $1.00 per share pursuant to Nasdaq Listing Rule 5550(a)(2). On September 10, 2024, we received the Letter from the Staff of Nasdaq, indicating that we no longer met the Minimum Bid Price Rule because the closing bid price for our Common Stock was less than $1.00 for the 30 consecutive business days prior thereto. Subsequently, on March 10, 2025, we received a letter from the Staff indicating that we were once again in compliance with the Minimum Bid Price Rule.

Previous wording

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Current wording

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Previous wording

We recognize expense for employee and non-employee stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation. ASC Topic 718 requires that such transactions be accounted for using a fair value-based method. The estimated fair value of the options is amortized over the vesting period, based on the fair value of the options on the date granted, and is calculated using the Black-Scholes option-pricing model. We account for forfeitures as incurred.

Current wording

We recognize expense for employee and non-employee stock-based compensation in accordance with ASC Topic 718, Compensation-Stock Compensation (ASC Topic 718). ASC Topic 718 requires that such transactions be accounted for using a fair value-based method. The estimated fair value of the options is amortized over the vesting period, based on the fair value of the options on the date granted, and is calculated using the Black-Scholes option-pricing model. We account for forfeitures as incurred.

Previous wording

Estimating the fair value of option shares issued under the employee stock purchase plan requires the input of subjective assumptions, including the estimated fair value of our common stock, the expected life of the option, stock price volatility, the risk-free interest rate and expected dividends. The assumptions used in our Black-Scholes option-pricing model represent management's best estimates and involve a number of variables, uncertainties and assumptions and the application of management's judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.

Current wording

Estimating the fair value of option shares issued under the employee stock purchase plan requires the input of subjective assumptions, including the estimated fair value of our common stock, the expected life of the options, stock price volatility, the risk-free interest rate and expected dividends. The assumptions used in our Black-Scholes option-pricing model represent management's best estimates and involve a number of variables, uncertainties and assumptions and the application of management's judgment, as they are inherently subjective. If any assumptions change, our stock-based compensation expense could be materially different in the future.

Previous wording

•Expected Volatility. The expected volatility is based on historical volatilities of similar entities within our industry which were commensurate with the expected term assumption as described in SAB No. 107.

Current wording

•Expected Volatility. The expected volatility is based on a weighted-average of our historical volatility and the historical volatilities of similar entities within our industry which were commensurate with the expected term assumption as described in SAB No. 107.

Previous wording

•expenses incurred under agreements with CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities as well as consultants that support the implementation of our clinical and non-clinical studies.

Current wording

•expenses incurred under agreements with contract research organizations, contract manufacturing organizations and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities as well as consultants that support the implementation of our clinical and nonclinical studies.

Previous wording

We expect our general and administrative expenses will increase substantially as we incur costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors’ and officers’ insurance, legal and accounting costs and investor relations costs, as well as an increase in personnel expenses as we hire additional personnel.

Current wording

We expect our general and administrative expenses will continue to increase as we incur costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors’ and officers’ insurance, legal and accounting costs and investor relations costs, as well as an increase in personnel expenses as we hire additional personnel.

Previous wording

In May 2022, Vallon issued warrants in connection with a securities purchase agreement. Vallon evaluated the warrants in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC 815-40), and concluded that a provision in the warrants related to the reduction of the exercise price in certain circumstances precludes the warrants from being accounted for as components of equity. As a result, the warrants were measured the fair value upon issuance using a Black-Scholes valuation model and are recorded as a liability on the balance sheet. The fair value of the warrants is measured at each reporting date and changes in fair value are recognized in the consolidated statements of operations in the period of change.

Current wording

In May 2022, Vallon issued warrants (the May 2022 Warrants) in connection with a securities purchase agreement. Vallon evaluated the May 2022 Warrants in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity(ASC 815-40), and concluded that a provision in the May 2022 Warrants related to the reduction of the exercise price in certain circumstances precludes the May 2022 Warrants from being accounted for as components of equity. As a result, the May 2022 Warrants were measured at fair value upon issuance using a Black-Scholes valuation model and are recorded as a liability on the consolidated balance sheet. The fair value of the May 2022 Warrants is measured at each reporting date and changes in fair value are recognized in the consolidated statements of operations in the period of change.

Previous wording

On August 22, 2023, we entered into Asset Purchase Agreement (the Aardvark Agreement) with Aardvark Therapeutics, Inc. (Aardvark), pursuant to which Aardvark agreed to purchase (i) our license agreement with Medice Arzneimittel Pűtter GmbH & Co. KG, dated January 6, 2020, (ii) certain patents related to our ADAIR product candidate, and (iii) files (of contract manufacturing and FDA correspondence) for a formulation described in IND No. 133072, ADAIR for the Treatment of Attention Deficit/Hyperactivity Disorder (ADHD) and Narcolepsy, filed with the United States FDA. Under the terms of the Agreement, we received an upfront cash payment of $0.3 million, which was recognized as other income. We are also eligible to receive potential additional milestone payments contingent upon Aardvark achieving certain future ADAIR regulatory and sales milestones. Other than the upfront payment, we do not anticipate the receipt of any milestone payments from Aardvark in the near term, which potential milestone payments may or may not be achieved, paid or received in the future.

Current wording

On August 22, 2023, we entered into Asset Purchase Agreement (the Aardvark Agreement) with Aardvark Therapeutics, Inc. (Aardvark), pursuant to which Aardvark agreed to purchase (i) our license agreement with Medice Arzneimittel Pűtter GmbH & Co. KG, dated January 6, 2020, (ii) certain patents related to our ADAIR product candidate, and (iii) files (of contract manufacturing and FDA correspondence) for a formulation described in IND No. 133072, ADAIR for the Treatment of Attention Deficit/Hyperactivity Disorder (ADHD) and Narcolepsy, filed with the United States FDA. Under the terms of the Aardvark Agreement, we received an upfront cash payment of $0.3 million, which was recognized as other income. We are also eligible to receive potential additional milestone payments contingent upon Aardvark achieving certain future ADAIR regulatory and sales milestones. Other than the upfront payment, we do not anticipate the receipt of any milestone payments from Aardvark in the near term, which potential milestone payments may or may not be achieved, paid or received in the future.

Previous wording

Interest expense consists of amortization of debt discounts, debt issuance costs and interest expense related to the TEP Notes and the Bridge Notes. Interest income consists of interest earned on our cash and cash equivalents held with institutional banks.

Current wording

Interest expense consists of amortization of debt discounts, debt issuance costs and interest expense related to the senior secured notes in the aggregate principal amount of up to approximately $3.3 million (the Bridge Notes) purchased pursuant to that certain Securities Purchase Agreement, dated December 13, 2022, with Altium Growth Fund LP (Altium) (the Equity SPA). Interest income consists of interest earned on our cash and cash equivalents held with institutional banks.

Previous wording

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in ASU 2023-09 are intended to enhance the transparency and decision usefulness of income tax disclosures through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 for public entities, with early adoption permitted. We are currently evaluating the impact of this update on our financial statements.

Current wording

In December 2023, FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in ASU 2023-09 are intended to enhance the transparency and decision usefulness of income tax disclosures through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 for public entities, with early adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.

Previous wording

In October 2023, FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in ASU 2023-06 represent changes to clarify or improve disclosure and presentation requirements of a variety of topics in the Codification and align those requirements with the SEC’s regulation. For entities subject to the SEC’s existing disclosure requirements, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. We are currently evaluating the impact of this update and its effective dates but do not expect the update to have a material effect on our financial statements.

Current wording

In October 2023, FASB issued ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative. The amendments in ASU 2023-06 represent changes to clarify or improve disclosure and presentation requirements of a variety of topics in the Codification and align those requirements with the SEC’s regulation. For entities subject to the SEC’s existing disclosure requirements, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all entities, if by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the related amendment will be removed from the Codification and will not become effective for any entity. We are currently evaluating the impact of this update and its effective dates but do not expect the update to have a material effect on our consolidated financial statements.

Previous wording

We are an “emerging growth company,” as defined in the JOBS Act and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not applicable to emerging growth companies. These exemptions include:

Current wording

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not applicable to emerging growth companies. These exemptions include:

Previous wording

We have taken advantage of reduced reporting requirements in this report and may continue to do so until such time that we are no longer an emerging growth company. We will remain an “emerging growth company” until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the completion of the IPO, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards.

Current wording

We have taken advantage of reduced reporting requirements in this report and may continue to do so until such time that we are no longer an emerging growth company. We will remain an “emerging growth company” until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the completion of Vallon’s initial public offering, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards.

Previous wording

Research and development expenses were $3.2 million and $0.2 million for the years ended December 31, 2023 and 2022, respectively. The $3.0 million increase in research and development expenses was primarily due to increases of $1.9 million in expenses related to the registration development program of GRI-0621, $0.4 million in personnel expense, $0.6 million in consulting fees, and $0.1 million in intellectual property expenses.

Current wording

Research and development expenses were $3.8 million and $3.2 million for the years ended December 31, 2024 and 2023, respectively. The $0.6 million increase in research and development expenses was primarily due to increases of $0.7 million in expenses related to the registration development program of GRI-0621, offset by a $0.1 million decrease in personnel expense.

Previous wording

General and administrative expenses were $8.2 million and $2.0 million for the years ended December 31, 2023 and 2022, respectively. The $6.1 million increase was primarily due to an increase of $4.2 million in accounting, legal, investment banking and other fees as a result of the Merger and the cost of being a public company, an increase of $1.5 million in personnel costs, an increase of $0.3 million in insurance expense, and an increase of $0.2 million in consulting and other general and administrative expenses.

Current wording

General and administrative expenses were $4.5 million and $8.2 million for the years ended December 31, 2024 and 2023, respectively. The $3.7 million decrease was primarily due to a decrease of $3.4 million in accounting, legal, investment banking and other fees as a result of the Merger and the cost of being a public company, a decrease of $0.4 million in personnel costs, and a decrease $0.1 million in consulting expenses, offset by an increase of $0.1 million in insurance expense and an increase of $0.1 million in other general and administrative expenses.

Previous wording

Other income was $0.3 million for the three months ended December 31, 2023 as a result of payments received under the terms of the Aardvark Agreement entered into in August 2023.

Current wording

Other income was $0.3 million for the year ended December 31, 2023 as a result of payments received under the terms of the Aardvark Agreement.

Previous wording

Interest expense, net, was $2.1 million and $0.7 million for the years ended December 31, 2023 and 2022, respectively, and related to the outstanding promissory notes. The increase in interest expense, net, was due to interest related to the Bridge Notes.

Current wording

Interest income was $25,000 for the year ended December 31, 2024. Interest expense, net, was $2.1 million for the year ended December 31, 2023 and related to the Bridge Notes.

Previous wording

Since inception, we have incurred losses and expect to continue to incur losses for the foreseeable future. We incurred net losses of $13.0 million and $3.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $31.5 million.

Current wording

Since inception, we have incurred losses and expect to continue to incur losses for the foreseeable future. We incurred net losses of $8.2 million and $13.0 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $39.7 million.

Previous wording

We have financed our working capital requirements to date through the issuance of common stock, convertible notes, short-term promissory notes, and a Paycheck Protection Program promissory note. As of December 31, 2023, we had $1.8 million in cash and cash equivalents.

Current wording

We have financed our working capital requirements to date through the issuance of common stock, warrants, convertible notes and promissory notes. As of December 31, 2024, we had $5.0 million in cash and cash equivalents.

Previous wording

For the years ended December 31, 2023 and 2022, $9.0 million and $1.1 million were used in operating activities, respectively. The $7.9 million increase was primarily due to a $9.8 million increase in our net loss and an increase of $1.1 million in cash used for prepaid and other expenses and accrued expenses, offset by a $1.8 million net increase in non-cash adjustments, including stock based compensation expense, the amortization of debt discounts and debt issuance costs, and the loss on extinguishment of debt, and a $1.3 million decrease in cash used for the payment of accounts payable.

Current wording

For the years ended December 31, 2024 and 2023, $8.6 million and $9.0 million were used in operating activities, respectively. The $0.4 million decrease was primarily due to a $4.8 million decrease in our net loss and a decrease of $1.0 million in cash used for prepaid and other expenses and operating lease liabilities, offset by a $2.3 million net decrease in non-cash adjustments, including stock based compensation expense and the amortization of debt discounts and debt issuance costs, and a $3.2 million increase in cash used for the payment of accounts payable.

Previous wording

Net cash provided by investing activities was $8,000 and $3,000 for the years ended December 31, 2023 and 2022, which was related to the purchase of computer equipment.

Current wording

Net cash provided by investing activities was $8,000 for the year ended December 31, 2023, which was related to the purchase of computer equipment.

Previous wording

Net cash provided by financing activities was $10.8 million during the year ended December 31, 2023 as a result of $12.3 million of proceeds from the Equity SPA (as defined below) and $1.3 million of proceeds from the funding of the second tranche of the Bridge Notes and $0.9 million of cash acquired in the connection with the Merger. These proceeds were offset by $3.0 million in costs associated with the Merger, the payment of $0.5 million of debt issuance costs related to the Bridge Notes and $0.2 million of stock issuance costs related the Equity SPA. Net cash provided by financing activities was $1.0 million for the year ended December 31, 2022, which primarily consisted of proceeds from promissory notes.

Current wording

Net cash provided by financing activities was $10.8 million for the year ended December 31, 2023 and was primarily due to of $12.3 million of proceeds from the Equity SPA, $1.3 million of proceeds from the funding of the second tranche of the Bridge Notes and $0.9 million of cash acquired in the connection with the Merger. These proceeds were offset by $3.0 million in costs associated with the Merger, the payment of $0.2 million of debt issuance costs related to the Bridge Notes and $0.5 million of stock issuance costs related the Equity SPA.

Previous wording

In connection with signing the Merger Agreement, Vallon, GRI Operations and the selling stockholder entered the Equity SPA pursuant to which the selling stockholder agreed to invest $12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of GRI Operations’ common stock immediately prior to the consummation of the Merger. Pursuant to the Equity SPA, immediately prior to the Closing, GRI Operations issued the Initial Shares to the selling stockholder and placed the Additional Shares into escrow with an escrow agent for net proceeds of $11,704, after deducting offering expenses of $546.

Current wording

In connection with signing the Merger Agreement, we entered into the Equity SPA with GRI Operations and Altium pursuant to which Altium agreed to invest $12.3 million in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of GRI Operations common stock immediately prior to the consummation of the Merger for net proceeds of $11.7 million, after deducting offering expenses of $0.5 million.

Previous wording

Our net losses were $13.0 million and $3.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had $1.8 million in cash and an accumulated deficit of $31.5 million. We expect to devote substantial financial resources to our planned activities, particularly as we prepare for, initiate, and conduct our planned clinical trials of

Current wording

Our net losses were $8.2 million and $13.0 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had $5.0 million in cash and an accumulated deficit of $39.7 million. We expect to devote substantial financial resources to our planned activities, particularly as we prepare for, initiate, and conduct our planned clinical trials of GRI-0621 and GRI-0803, advance our discovery programs and continue our product development efforts. In addition, we expect to incur additional costs associated with operating as a public company.

Previous wording

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the second half of 2024.

Current wording

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into the second quarter of 2025.

Previous wording

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. The Series T Warrants issued in connection with the Merger are not presently subject to forced exercise by the Company as the equity conditions for their forced exercise, which include, among other things, a requirement that shares of our Common Stock have a value weighted average price of at least $64.47 per share for the periods specified in the Series T Warrants, are not met. We intend to raise capital through additional issuances of equity securities and/or short-term or long-term debt arrangements, but there can be no assurances any such financing will be available when needed, even if our research and development efforts are successful. If we are unable to secure adequate additional funding, we will need to reevaluate our operating plans and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our technology on less favorable terms than we would otherwise choose or cease operations entirely. These actions could materially impact our business, results of operations and future prospects and the value of shares of our Common Stock. In addition, attempting to secure additional financing may divert the time and attention of management from day-to-day activities and distract from our discovery and product development efforts. As a result, there is substantial doubt about our ability to continue as a going concern. We expect to continue to incur significant and increasing operating losses at least for the foreseeable future. We do not expect to generate product revenue unless and until we successfully complete development, obtain regulatory approval for, and successfully commercialize our current, or any future, product candidates.

Current wording

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. We intend to raise capital through additional issuances of equity securities and/or short-term or long-term debt arrangements, but there can be no assurances any such financing will be available when needed on acceptable terms, or at all, even if our research and development efforts are successful. If we are unable to secure adequate additional funding when needed or on acceptable terms, we will need to reevaluate our operating plans and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our technology on less favorable terms than we would otherwise choose or cease operations entirely. These actions could materially impact our business, results of operations and future prospects and the value of shares of our Common Stock. In addition, attempting to secure additional financing may divert the time and attention of management from day-to-day activities and distract from our discovery and product development efforts. As a result, there is substantial doubt about our ability to continue as a going concern. We expect to continue to incur significant and increasing operating losses at least for the foreseeable future. We do not expect to generate product revenue unless and until we successfully complete development, obtain regulatory approval for and successfully commercialize our current, or any future, product candidates.