Alto Neuroscience, Inc.
For the period ended Dec 31, 2024. Filed Mar 20, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 20, 2025
ANRO$25.16+15.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-21.
0001999480-24-000010
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-20.
0001999480-25-000025
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 157 previous paragraphs and 163 current paragraphs.
118 unchanged; 26 reworded; 17 added; 11 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 4 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (17)
Current report
Our clinical-stage product candidates are being advanced based on extensive preclinical and clinical data that suggest the potential to bring significant improvements to patient populations not adequately treated with current standard-of-care medications.
Current report
•an increase of approximately $3.3 million related to our ongoing ALTO-300 Phase 2b clinical trial, which began in 2023, and an increase of $4.5 million related to our ALTO-203 and ALTO-101 Phase 2 POC clinical trials, which began in 2024;
Current report
•an increase of approximately $2.0 million related to development milestones achieved under licensing agreements covering ALTO-203 and ALTO-101; and
Current report
•an increase of approximately $5.8 million in salary and personnel related costs, which includes $1.5 million of non-cash stock based compensation.
Current report
•an increase of approxima tely $6.4 million in salary and personnel related costs, which includes $3.3 million of non-cash stock-based compensation; and
Current report
•an increase of approximately $8.2 million in consulting fees and professional fees and other expenses related to being a publicly traded company.
Current report
Amended Loan and Security Agreement
Current report
Borrowings under the Amended Loan Agreement bear interest at (i) a variable per annum cash pay rate equal to the Prime Rate plus 1.45% (subject to a floor of 8.45% per annum) and (ii) a fixed per annum paid-in-kind rate equal to 1.0%. Interest is due and payable monthly in arrears. The Term Loan is secured by substantially all of our assets, excluding intellectual property. Upon final payment or prepayment of the Term Loan, we are required to pay a final payment equal to 5.95% of the amount borrowed.
Current report
Following an initial period with no financial covenants, beginning January 1, 2026, we must maintain a cash runway of at least five months, provided that this covenant will be waived during any period in which our market capitalization exceeds $700.0 million.
Current report
Convertible Grant Agreement
Current report
In July 2024, we entered into the Convertible Grant Agreement with Wellcome. The Convertible Grant Agreement provides for an unsecured convertible loan, or the Convertible Loan, from Wellcome of up to approximately $11.7 million, payable in six tranches, $1.3 million of which was funded upon the execution of the Convertible Grant Agreement, and the remainder of which will be funded upon draw down of the remaining initiation payment or the completion of certain milestones as set forth in the Convertible Grant Agreement, subject to certain conditions described therein which may or may not be achieved. As of January 2025, we achieved a milestone under the Convertible Grant Agreement giving us the right to draw down a total of $3.8 million which represents the milestone and the remaining portion of the initiation payment.
Current report
We may use proceeds from the Convertible Loan solely to advance development of ALTO-100 in bipolar depression. In addition, if we do not exploit or develop ALTO-100 (other than for safety or efficacy concerns) within a specified period following the completion of our Phase 2b clinical trial evaluating ALTO-100 in patients with bipolar depression, the Convertible Grant Agreement provides Wellcome with a limited right to exploit ALTO-100, solely in bipolar depression, subject to a revenue share between Wellcome and us of any proceeds arising from Wellcome’s exploitation. Outstanding amounts under the Convertible Loan accrue interest at an annual rate equal to the Sterling Overnight Index Rate plus 2%, subject to potential adjustment if such interest rate equals or exceeds 9% at any time. At any time after the second anniversary of the effective date of the Convertible Grant Agreement or in connection with an event of default, Wellcome has the right, at its election, to convert some or all of the Convertible Loan into shares of our common stock at a price per share equal to a 20% discount to the thirty-day volume-weighted average price of Common Stock on the New York Stock Exchange at the date of such conversion. The Convertible Grant Agreement provides that in no event shall the aggregate number of shares of our common stock issued pursuant to conversion of the Convertible Loan exceed 5,363,326, which is equal to 19.9% of the number of shares of our common stock outstanding as of the date of the Convertible Grant Agreement. At any time after the fifth anniversary of the date of the Convertible Grant Agreement or in connection with an event of default, Wellcome may require repayment of the Convertible Loan in full, together with accrued interest, to the extent not converted as described above.
Current report
Shelf Registration Statement and Sales Agreement
Current report
On February 3, 2025, we filed a shelf registration statement on Form S-3 with the SEC in relation to the registration of common stock, preferred stock, debt securities, warrants and units or any combination thereof up to a total aggregate offering price of $300.0 million. We also simultaneously entered into a Sales Agreement, or the Sales Agreement, with Leerink Partners LLC, or the Sales Agent, pursuant to which we may issue and sell, from time to time at our discretion, shares of our common stock having an aggregate offering price of up to $75.0 million through or to the Sales Agent. No shares of common stock have been issued and sold to date pursuant to the Sales Agreement.
Current report
•increased non-cash expenses including stock-based compensation expenses which increased by $4.7 million to $7.6 million for the year ended December 31, 2024, compared to $2.9 million for the year ended December 31, 2023, and $0.7 million of non-cash expense in the year ended December 31, 2024 related to the achievement of a milestone related to a license agreement which was settled, in part, through the issuance of shares of our common stock.
Current report
•increased accrued expenses and other liabilities of $4.0 million in the year ended December 31, 2024 compared to a decrease in accrued expenses and other liabilities of $0.4 million in the year ended December 31, 2023.
Current report
Net cash provided by financing activities was $135.7 million for the year ended December 31, 2024, related to the issuance of 9,246,000 shares of common stock in our IPO at a price to the public of $16.00 per share, offset by $3.2 million of other offering expenses related to our IPO that were paid during the year ended December 31, 2024.
Removed paragraphs (11)
Previous report
We have successfully completed Phase 2a trials for our two most advanced product candidates, ALTO-100 and ALTO-300, in more than 200 patients each. In each of these trials, we identified patient populations who demonstrated greater response based on objectively defined biomarker profiles, and then prospectively replicated these biomarker findings in independent datasets from within the same trial. Based on these biomarker findings we initiated a placebo-controlled, double-blind, randomized Phase 2b trial for each candidate in patients with MDD characterized by an objective biomarker. Specifically, in the ALTO-100 Phase 2b trial we are enrolling 266 patients with MDD characterized by a cognitive biomarker, and we expect to report topline data from this trial in the second half of 2024; and in the ALTO-300 Phase 2b trial we are enrolling 200 patients with MDD characterized by an EEG biomarker, and we expect to report topline data from this trial in the first half of 2025. We estimate one or both of these two independent biomarkers are present in approximately three-quarters of the overall MDD population.
Previous report
In addition to our two most advanced programs, we expect to initiate proof-of-concept trials evaluating ALTO-101 and ALTO-203 in the first half of 2024. ALTO-101 is being developed for patients with CIAS and ALTO-203 is being developed for patients with MDD and higher levels of anhedonia, or the lack of motivation or pleasure. We expect to report topline data from these trials in 2025 and the first half of 2025, respectively. We also plan to develop ALTO-202, our novel, oral NMDA receptor antagonist, for the treatment of patients with MDD.
Previous report
Loan and Security Agreement
Previous report
Borrowings under the Term Loan bear interest at a rate equal to the greater of either (i) 6.70% and (ii) the sum of (A) the Prime Rate as reported in The Wall Street Journal, plus (B) 1.20%. The Term Loan is secured by substantially all of our assets, excluding intellectual property. We are required to make monthly interest-only payments through December 2024. Subsequent to the interest-only period, we are required to make equal monthly principal payments plus any accrued interest until the loan matures in September 2025. Upon final payment or prepayment of the loan, we are required to pay a final payment equal to 6.25% of the amount borrowed. In addition, each tranche funded also accrues a deferred interest amount equal to 1% annually of the outstanding principal and becomes payable at the end of the 48-month term, or earlier in the instance of a repayment.
Previous report
The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants include restrictions on, among other things, indebtedness, liens, investments, mergers, dispositions, transactions with affiliates, and dividends and other distributions.
Previous report
As of December 31, 2023, there was $0.9 million of unrecognized stock-based compensation expense related to our granted performance-based vesting options, which will be recognized in the three months ended March 31, 2024 as the performance condition was tied to the completion of the Company’s IPO which occurred in February 2024.
Previous report
Common Stock Valuations and Stock Option Grants in 2023
Previous report
In the course of preparing our consolidated financial statements for the year ended December 31, 2023 included in this Annual Report, we assessed the fair value of our common stock as of December 20, 2023 solely for financial reporting purposes. We concluded that the fair value of the common stock at the date of grant was $6.23 per share. As a result of this assessment, we will recognize stock compensation expense of $4.4 million over the amortization period of the December 20, 2023 grants.
Previous report
Of this total expense, approximately $0.9 million was recognized at the time of the completion of our IPO as a portion of the equity awards vested based upon a performance condition tied to successful completion of an IPO and the remainder will be recognized ratably over a 48-month period.
Previous report
Following our IPO, the fair value of our common stock will be determined based on the quoted market price of our common stock. In connection with the IPO, all outstanding shares of our convertible preferred stock were converted into shares of our common stock.
Previous report
Our preferred stock warrants require liability classification and accounting as the underlying convertible preferred stock is considered contingently redeemable and may obligate us to transfer assets to the holders at a future date upon the occurrence of a deemed liquidation event. In determining the fair value of the preferred stock warrant liability, the OPM treats preferred stock warrants as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under the OPM, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. The warrants were recorded at fair value upon issuance and were subject to remeasurement to fair value at each balance sheet date, with any changes in fair value recognized in other income, net in the statements of operations and comprehensive loss. At the time of the IPO, the Series A Preferred Stock warrants were exercised, see Item 8. Financial Statements – Note 16. Subsequent Events. In addition, at the time of the IPO the K2 Preferred Stock warrants converted to common stock warrants.
Reworded paragraphs (26)
Previous wording
We are a clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options. Building on more than a decade of research by our founder, Dr. Amit Etkin, we aim to deeply understand brain function and match patients to the right medication more efficiently through the use of treatments that, if approved, are tailored to specific patient populations. As a result, we believe we can help patients avoid the often lengthy process of trying multiple ineffective treatments before finding one to which they respond, potentially helping patients get better faster. Through insights derived from our scalable and proprietary Platform, which applies rigorous data science and robust analytics to data gathered by neurocognitive assessments, EEG, and wearable devices, we aim to discover brain-based biomarkers to better identify which patients are more likely to respond to our novel product candidates. Our approach is designed to improve patient outcomes and increase the likelihood of clinical success and commercial impact of our product candidates by using neurobiological profiles to identify more homogeneous patient groups. We build upon and leverage vast data sets of longitudinal clinical and biomarker data from thousands of patients across CNS disorders, which we believe serves as a foundation for applying our approach across numerous patient populations. Ultimately, if we are successful, we believe our approach can substantially improve upon the traditional, all-comer approach to CNS drug development. Our current pipeline consists of five clinical-stage assets initially targeting MDD and schizophrenia populations characterized by independent brain-based biomarkers. Each of our clinical-stage product candidates has been evaluated through at least initial Phase 1 clinical trials and observed to be well tolerated. Our most advanced programs, including our two product candidates being evaluated in ongoing late-stage (Phase 2b or later) trials, are supported by prospectively replicated evidence of clinical activity in biomarker-characterized populations.
Current wording
We are a clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options. Through insights derived from our scalable and proprietary Platform, we aim to discover brain-based biomarkers to better identify which patients are more likely to respond to our novel product candidates. Our current pipeline consists of five clinical-stage assets addressing high-need therapeutic areas, including MDD, BPD, and schizophrenia. Our most advanced programs are supported by prospectively replicated evidence of clinical activity in biomarker-characterized populations.
Previous wording
Since our inception in 2019, we have devoted substantially all of our resources to the research and development of our product candidates by conducting clinical trials and preclinical studies, building our Precision Psychiatry Platform, and recruiting management and technical staff to support these operations. To date, we have funded our operations primarily through the aggregate net proceeds of approximately $275.8 million from equity financings (including from our IPO and pre-IPO sales of our convertible preferred stock) and borrowings under our loan and security agreement.
Current wording
Since our inception in 2019, we have devoted substantially all of our resources to the research and development of our product candidates by conducting clinical trials and preclinical studies, building our Precision Psychiatry Platform, and recruiting management and technical staff to support these operations. To date, we have funded our operations primarily through the aggregate net proceeds from equity financings (including from our IPO and pre-IPO sales of our convertible preferred stock) and borrowings under our loan and security agreement.
Previous wording
We have not generated any revenue from product sales and we have incurred recurring losses since our inception. Our net losses were $36.3 million and $27.7 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $77.0 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future. We anticipate that our operating expenses and capital expenditures will increase substantially with our ongoing activities, particularly as we:
Current wording
We have not generated any revenue from product sales and we have incurred recurring losses since our inception. Our net losses were$61.4 million and $36.3 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $138.4 million. We expect to continue to generate operating losses and negative operating cash flows for the foreseeable future. We anticipate that our operating expenses and capital expenditures will increase substantially with our ongoing activities, particularly as we:
Previous wording
As of December 31, 2023, we had cash and cash equivalents of $82.5 million. In 2023, we raised additional net proceeds of approximately $24.8 million and $44.4 million through the issuance and sale of our Series B and Series C convertible preferred stock, respectively. We believe that the estimated net proceeds from these offerings, together with proceeds from our IPO and our existing cash and cash equivalents, will be sufficient to fund our operating expenses and capital expenditure requirements for at least 36 months. See “—Liquidity and Capital Resources.”
Current wording
As of December 31, 2024, we had cash, cash equivalents, and restricted cash of$168.7 million. In February 2024, we raised net proceeds of approximately $133.0 million in our IPO. We believe that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into 2028. See “—Liquidity and Capital Resources.”
Previous wording
Other income (expense) consists primarily of interest income on our cash and cash equivalents, interest expense on borrowings under our loan and security agreement, and non-cash changes in the fair value of our outstanding preferred stock warrant liability. Other income (expense) also included grant income from our NIH-funded research grants which were complete as of December 31, 2022. The government grants do not have any repayment or royalty obligations.
Current wording
Other income (expense) consists primarily of interest income on our cash and cash equivalents, interest expense on borrowings under our loan and security agreement, and non-cash changes in the fair value of our Convertible Grant Agreement and our preferred stock warrant liability.
Previous wording
Research and development expenses were $30.3 million for the year ended December 31, 2023, compared to $23.7 million for the year ended December 31, 2022. The increase of $6.6 million was primarily due to increased personnel related costs and other direct costs associated with the launch of our ALTO-100 and ALTO-300 Phase 2b clinical trials, which began in 2023.
Current wording
Research and development expenses were $47.0 million for the year ended December 31, 2024, compared to $30.3 million for the year ended December 31, 2023. The increase of $16.7 million was primarily due to the following:
Previous wording
General and administrative expenses were $7.5 million for the year ended December 31, 2023, compared to $5.5 million for the year ended December 31, 2022. The increase of $2.0 million during 2023 was primarily due to increased salary and personnel related costs of $1.2 million, which includes non-cash stock-based compensation of $1.1 million, and increased professional service costs of $0.6 million.
Current wording
General and administrative expenses were $21.6 million for the year ended December 31, 2024, compared to $7.5 million for the year ended December 31, 2023. The increase of $14.1 million during 2024 was primarily due to the following:
Previous wording
Other income, net was $1.5 million for both the years ended December 31, 2023 and December 31, 2022. Interest income increased $2.2 million in the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase in interest income was offset by increases in interest expense of $1.4 million in 2023 compared to 2022, primarily due to execution of the Loan Agreement in December 2022 and a decrease in grant income of $1.7 million in 2023 compared to 2022.
Current wording
Other income, net was $7.2 million for the year ended December 31, 2024, compared to $1.5 million for the year ended December 31, 2023. The increase in Other income, net of $5.7 million was primarily due to the increase in interest income of $6.5 million in the year ended December 31, 2024 compared to the year ended December 31, 2023. The increase in interest income was partially offset by an increase in expense related to changes in fair value of $0.8 million, driven primarily by expenses related to changes in the fair value of our warrant liability in 2024, compared to income related to changes in the fair value of our warrant liability in 2023.
Previous wording
We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. We have not yet commercialized any of our product candidates, which are in various phases of development, and we do not expect to generate revenue from sales of any of our product candidates for several years, if at all. As we progress through the phases of development, we anticipate that we will incur increasing losses in future quarters and years compared to historical periods. To date, we have funded our operations primarily through the aggregate net proceeds of approx imately $275.8 million from equity financings (including from our IPO and pre-IPO sales of our convertible preferred stock) and borrowings under our loan and security agreement.
Current wording
We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. We have not yet commercialized any of our product candidates, which are in various phases of development, and we do not expect to generate revenue from sales of any of our product candidates for several years, if at all. As we progress through the phases of development, we anticipate that we will incur increasing losses in future quarters and years compared to historical periods. To date, we have funded our operations primarily through the aggregate net proceeds from equity financings (including from our IPO and pre-IPO sales of our convertible preferred stock) and borrowings under our loan and security agreement.
Previous wording
As of December 31, 2023 and December 31, 2022, we had cash and cash equivalents of $82.5 million and $48.3 million, respectively. On February 6, 2024, we issued 9,246,000 shares of common stock in our IPO, which included the exercise in full by the underwriters of their option to purchase 1,206,000 additional shares. The price to the public for each share was $16.00. The aggregate net proceeds from our IPO were $133.1 million, after underwriting discounts and commissions and other offering expenses of $4.5 million.
Current wording
As of December 31, 2024 and December 31, 2023, we had cash and cash equivalents of $168.2 million and $82.5 million, respectively. On February 6, 2024, we issued 9,246,000 shares of common stock in our IPO, which included the exercise in full by the underwriters of their option to purchase 1,206,000 additional shares. The price to the public for each share was $16.00. The aggregate net proceeds from our IPO were $133.0 million, after underwriting discounts and commissions and other offering expenses of $4.6 million.
Previous wording
In December 2022, we entered into the Loan Agreement with the Lender, K2 HealthVentures LLC, as administrative agent for the Lender, and Ankura Trust Company, LLC, as collateral agent for the Lender. The Loan Agreement provides for up to an aggregate principal amount of $35.0 million in term loans, which we refer to collectively as the Term Loan, consisting of a first tranche term loan of $10.0 million, two subsequent tranches of term loans of $7.5 million each to be funded upon the achievement of certain time-based, clinical milestones, and an additional uncommitted tranche term loan of up to $10.0 million, or the Fourth Tranche. We drew $10.0 million upon entry into the Loan Agreement and, as of December 31, 2023, we had an outstanding principal balance of $10.0 million under the Term Loan. Based upon the terms of the Loan Agreement we could potentially access up to $10.0 million of the remaining $25.0 million of the credit facility.
Current wording
In December 2022, we entered into the Original Loan Agreement with the Lender, K2 HealthVentures LLC, as administrative agent for the Lender, and Ankura Trust Company, LLC, as collateral agent for the Lender. In January 2025, we entered into an amendment to the Original Loan Agreement (the Amendment, and the Original Loan Agreement as amended thereby, the Amended Loan Agreement) to, among other things, extend the Term Loan (as defined below) maturity date and increase the maximum available amount of term loans. The Amended Loan Agreement provides for up to an aggregate principal amount of $75.0 million in term loans, which we refer to collectively as the Term Loan, consisting of a first tranche term loan of $20.0 million, a second tranche term loan of up to an additional $30.0 million available at our request until December 15, 2025, subject to certain time-based, clinical milestones, and an additional third tranche term loan of up to an additional$25.0 million available at our request subject to the Lender’s approval. We drew $20.0 million upon entry into the Amendment(approximately $10.0 million of which was used to refinance obligations under the Original Loan Agreement and pay fees and expenses incurred in connection with the Amendment).
Previous wording
The Term Loan matures on December 1, 2026. The Loan Agreement provides for an interest only period until January 1, 2025, which may be extended to January 1, 2026 subject to certain conditions, following which the Terms Loan shall be repaid in equal monthly payments through the maturity date.
Current wording
The Term Loan matures on January 1, 2029. The Amended Loan Agreement provides for an interest only period until January 1, 2027, which may be extended to January 1, 2028, subject tothe funding of at least $20.0 million of the second tranche term loan, following which the Terms Loan shall be repaid in equal monthly payments through the Term Loan maturity date.
Previous wording
We have the option to prepay the Term Loan prior to the maturity date, which would require that we pay the Lender a prepayment penalty fee based on a percentage of the outstanding principal balance, equal to 3% if the payment occurs on or before 24 months after the initial funding date, 2% if the prepayment occurs more than 24 months after, but on or before 36 months after the initial funding date, or 1% if the prepayment occurs more than 36 months after the initial funding date. We were also obligated to pay the Lender a one-time facility fee of $175,000 on the closing date of the loan and a 0.7% fee multiplied by the Fourth Tranche amount at the time of funding of the Fourth Tranche.
Current wording
We have the option to prepay all, but not less than all, of the Term Loan prior to the Term Loan maturity date, which would require that we pay the Lender a prepayment penalty fee based on a percentage of the outstanding principal balance, equal to 3% if the payment occurs on or before 24 months after the initial funding date, 2% if the prepayment occurs more than 24 months after, but on or before 36 months after the initial funding date, or 1% if the prepayment occurs more than 36 months after the initial funding date. No prepayment penalty fee is required if the Term Loan is prepaid within six months prior to the Term Loan maturity date or refinanced with the Lender. We were obligated to pay the Lender a one-time facility fee of $250,000 on the closing date of the Amendment. We are also obligated to pay a 0.5% fee multiplied by the third tranche term loan amount at the time of funding of the third trance term loan. Our obligation under the Original Loan Agreement to pay the Lender a one-time fee of $625,000 on the earlier of December 1, 2026 or earlier prepayment of the Term Loan remains outstanding.
Previous wording
Additionally, under the terms of the Loan Agreement, the Lender may, at its option, elect to convert up to $4.0 million of the then outstanding Term Loan into shares of our common stock.
Current wording
Additionally, under the terms of the Amended Loan Agreement, the Lender may, at its option, elect to convert up to $9.0 million of the then outstanding Term Loan ($4.0 million of which was reflected in the Original Loan Agreement and $5.0 million of which is reflected in the Amendment) into shares of our common stock.
Previous wording
Net cash used in operating activities was $33.4 million for the year ended December 31, 2023, as compared to $20.4 million for the year ended December 31, 2022. The increase in cash used was primarily the result of the increase in net loss of $8.6 million, primarily attributable to our increased spending on research and development expenses, and the decrease in accrued liabilities during the year ended December 31, 2023 compared to the increase in accrued liabilities during the year ended December 31, 2022 of $2.1 million.
Current wording
Net cash used in operating activities was $47.4 million for the year ended December 31, 2024, as compared to $33.4 million for the year ended December 31, 2023. The increase in cash used was primarily the result of the increase in net loss of $25.1 million. The increase in net loss was offset by:
Previous wording
Net cash used in investing activities was $0.5 million for the year ended December 31, 2023, as compared to $0.7 million for the year ended December 31, 2022 for corporate and clinical trial related capital expenditures, primarily related to the purchase of EEG machines utilized in our clinical trials.
Current wording
Net cash used in investing activities was $2.1 million for the year ended December 31, 2024, as compared to $0.5 million for the year ended December 31, 2023 for corporate and clinical trial related capital expenditures, primarily related to the purchase of EEG machines utilized in our clinical trials.
Previous wording
Net cash provided by financing activities was $68.1 million for the year ended December 31, 2023, related to the issuance of Series B convertible preferred stock of $25.0 million, and issuance of Series C preferred stock of $45.0 million, partially offset by share issuance costs of $0.7 million and payment of deferred offering costs of $1.4 million.
Current wording
Net cash provided by financing activities was$68.1 million for the year ended December 31, 2023, related to the issuance of Series B convertible preferred stock of $25.0 million, and issuance of Series C preferred stock of $45.0 million, partially offset by share issuance costs of $0.7 million and payment of deferred offering costs of $1.4 million.
Previous wording
We believe that our existing cash and cash equivalents, together with the net proceeds from our IPO which was completed in February 2024, will be sufficient to fund our operating expenses and capital expenditure requirements for at least 36 months. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could expend our capital resources sooner than we currently expect.
Current wording
We believe that our existing cash and cash equivalents, together with the net proceeds from our IPO which was completed in February 2024, will be sufficient to fund our operating expenses and capital expenditure requirements into 2028. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could expend our capital resources sooner than we currently expect.
Previous wording
To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute the ownership interests of our stockholders. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings on acceptable terms when needed, we may be required to delay, limit, reduce, or terminate our drug development or future commercialization efforts or grant rights to develop and market our current or any future product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Current wording
Until such time, if ever, as we can generate substantial revenue from product sales to support our cost structure, we expect to finance our cash needs through the public or private sale of equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute the ownership interests of our stockholders. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates or may have to grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings on acceptable terms when needed, we may be required to delay, limit, reduce, or terminate our drug development or future commercialization efforts or grant rights to develop and market our current or any future product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Previous wording
In addition to ongoing needs to fund our operations, our material cash requirements as of December 31, 2023 consist primarily of obligations under our Term Loan. For additional information regarding our Term Loan, see “Item 8. Financial Statements - Note 8. Debt”.
Current wording
In addition to ongoing needs to fund our operations, our material cash requirements as of December 31, 2024 consist primarily of obligations under our Amended Loan Agreement, and lease commitment over the next five years. For additional information regarding our Loan Agreement and the Amended Loan Agreement, see “Item 8. Financial Statements - Note 8. Debt”. For additional information regarding our lease commitment, see “Item 8. Financial Statements - Note 7. Leases”.
Previous wording
This management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis, including those related to accrued research and development expenses, preferred stock warrant liabilities, and stock-based compensation. 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
This management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. In accordance with GAAP, we evaluate our estimates and judgments on an ongoing basis, including those related to accrued research and development expenses and stock-based compensation. 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 estimate the fair value of each award on the date of grant using the Black-Scholes option-pricing model. This model requires the use of highly subject assumptions to determine the fair value of each stock-based award, including:
Current wording
We estimate the fair value of each award on the date of grant using the Black-Scholes option-pricing model. This model requires the use of highly subjective assumptions to determine the fair value of each stock-based award, including:
Previous wording
As of December 31, 2023, there was $8.4 million of unrecognized stock-based compensation expense related to our granted service-based vesting options, which we expect to recognize over a remaining weighted-average period of 3.0 years.
Current wording
As of December 31, 2024, there was$19.9 million of unrecognized stock-based compensation expense related to our granted service-based vesting options, which we expect to recognize over a remaining weighted-average period of 2.9 years.
Previous wording
As there was no public market for our common stock prior to our IPO, the estimated fair value of our common stock underlying our stock-based awards historically has been determined by our board of directors as of each option grant date with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid. In valuing our common stock, the equity value of the business was determined using the backsolve method, a form of the subject company transaction method, wherein the equity value for a privately held company is derived from a recent transaction in our securities. The value is then allocated using the hybrid method allocation methodology. In accordance with Practice Aid, we use a hybrid method, which is a hybrid between the option pricing method, or OPM, and the probability-weighted expected return method, or PWERM. The hybrid method is a combination of the PWERM and OPM. The OPM allocates the overall company value to the various share classes based on differences in liquidation preferences, participation rights, dividend policy, and conversion rights, using a series of call options. The call right is valued using a Black-Scholes option pricing model. The PWERM employs additional information not used in the OPM, including various market approach calculations depending upon the likelihood of various discrete future liquidity scenarios, such as an initial public offering or sale of the company, as well as the probability of remaining a private company. In a hybrid method, various exit scenarios are analyzed. A discount for lack of marketability of our common stock is then applied to arrive at an indication of value for the common stock.
Current wording
As there was no public market for our common stock prior to our IPO, the estimated fair value of our common stock underlying our stock-based awards historically has been determined by our board of directors as of each option grant date with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid. In valuing our common stock, the equity value of the business was determined using the backsolve method, a form of the subject company transaction method, wherein the equity value for a privately held company is derived from a recent transaction in our securities. The value was then allocated using the hybrid method allocation methodology. In accordance with Practice Aid, we used a hybrid method, which is a hybrid between the option pricing method, or OPM, and the probability-weighted expected return method, or PWERM. The hybrid method is a combination of the PWERM and OPM.
Previous wording
The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we used significantly different estimates and assumptions, our stock-based compensation expense could be materially different.
Current wording
The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we used significantly different estimates and assumptions, our stock-based compensation expense could be materially different. Following the IPO, the fair value of our common stock is determined based on the quoted market price of our common stock on the New York Stock Exchange.
Previous wording
Since our inception, we have not had any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements, and we have not engaged in any other off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
Current wording
In connection with our office lease, we have a standby letter of credit issued on our behalf with $0.5 million available and no amounts outstanding as of December 31, 2024. Since our inception, we have not had any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangement.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
As of December 31, 2024, we had an outstanding principal balance of $10.0 million under the Original Loan Agreement and, as of such date, based upon the terms of the Original Loan Agreement we could potentially access up to $10.0 million of the remaining $25.0 million available under the Original Loan Agreement. As of the date of the Amendment, and following the related refinancing, we had an outstanding principal balance of $20.0 million under the Term Loan.
Current report — wording carried from elsewhere
The OPM allocates the overall company value to the various share classes based on differences in liquidation preferences, participation rights, dividend policy, and conversion rights, using a series of call options. The call right is valued using a Black-Scholes option pricing model. The PWERM employs additional information not used in the OPM, including various market approach calculations depending upon the likelihood of various discrete future liquidity scenarios, such as an initial public offering or sale of the company, as well as the probability of remaining a private company. In a hybrid method, various exit scenarios are analyzed. A discount for lack of marketability of our common stock was then applied to arrive at an indication of value for the common stock.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Net cash provided by financing activities was $43.8 million for the year ended December 31, 2022, related to the issuance of Series B convertible preferred stock of $34.3 million and the issuance of our Term Loan of $9.8 million, partially offset by share issuance costs of $0.2 million.
Previous report — wording carried elsewhere
Until such time, if ever, as we can generate substantial revenue from product sales to support our cost structure, we expect to finance our cash needs through the public or private sale of equity, government or private party grants, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions.