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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended September 30, 2024
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission
file number: 001-39717
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
(Exact
name of registrant as specified in its charter)
Delaware |
|
20-2903526 |
(State
or other jurisdiction of |
|
(I.R.S.
Employer |
incorporation
or organization) |
|
Identification
Number) |
680
East Colorado Boulevard, Suite 180
Pasadena,
California 91101
(Address
of principal executive offices, including Zip Code)
(631)
830-7092
(Registrant’s
telephone number, including area code)
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
Common
Stock, par value $0.0001 per share |
|
LIXT |
|
The
Nasdaq Stock Market LLC |
Warrants
to Purchase Common Stock, par value $0.0001 per share |
|
LIXTW |
|
The
Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes
☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Yes
☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ☐ |
Accelerated
filer ☐ |
Non-accelerated
filer ☒ |
Smaller
reporting company ☒ |
|
Emerging
growth company ☐ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
☐ No ☒
As
of November 1, 2024, the Company had 2,249,290 shares of common stock issued and outstanding.
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
TABLE
OF CONTENTS
PART
I - FINANCIAL INFORMATION
ITEM
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September
30, 2024
|
|
|
December
31, 2023
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
1,637,627 |
|
|
$ |
4,203,488 |
|
Advances on research and development
contract services |
|
|
— |
|
|
|
78,016 |
|
Prepaid insurance |
|
|
17,081 |
|
|
|
17,116 |
|
Other
prepaid expenses |
|
|
34,256 |
|
|
|
10,000 |
|
Total current assets |
|
|
1,688,964 |
|
|
|
4,308,620 |
|
Deferred
offering costs |
|
|
6,928 |
|
|
|
— |
|
Total
assets |
|
$ |
1,695,892 |
|
|
$ |
4,308,620 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses, including $0 and $36,250 to related parties at September 30, 2024 and December 31, 2023, respectively |
|
$ |
72,859 |
|
|
$ |
156,758 |
|
Research
and development contract liabilities, including $0 and $120,768 to related parties at September 30, 2024 and December 31, 2023, respectively |
|
|
256,097 |
|
|
|
157,100 |
|
Total
current liabilities |
|
|
328,956 |
|
|
|
313,858 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred Stock, $0.0001 par
value; authorized – 10,000,000 shares; issued and outstanding – 350,000 shares of Series A Convertible Preferred Stock,
$10.00 per share stated value, liquidation preference based on assumed conversion into common shares – 72,917 shares at September
30, 2024 and December 31, 2023 |
|
|
3,500,000 |
|
|
|
3,500,000 |
|
Common stock, $0.0001 par value; authorized –
100,000,000 shares; issued and outstanding – 2,249,290 shares at September 30, 2024 and December 31, 2023 |
|
|
225 |
|
|
|
225 |
|
Additional paid-in capital |
|
|
49,316,710 |
|
|
|
48,976,265 |
|
Accumulated
deficit |
|
|
(51,449,999 |
) |
|
|
(48,481,728 |
) |
Total
stockholders’ equity |
|
|
1,366,936 |
|
|
|
3,994,762 |
|
Total
liabilities and stockholders’ equity |
|
$ |
1,695,892 |
|
|
$ |
4,308,620 |
|
See
accompanying notes to condensed consolidated financial statements.
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended |
|
|
Nine
Months Ended |
|
|
|
September
30, |
|
|
September
30, |
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
to related parties, including stock-based compensation expense of $106,827 and $112,106 for the three months ended September 30,
2024 and 2023, respectively, and $340,445 and $669,146 for the nine months ended September 30, 2024 and 2023, respectively |
|
|
283,053 |
|
|
|
356,001 |
|
|
|
907,069 |
|
|
|
1,398,042 |
|
Patent
and licensing legal and filing fees and costs |
|
|
45,416 |
|
|
|
178,012 |
|
|
|
192,239 |
|
|
|
835,362 |
|
Other
costs and expenses |
|
|
293,158 |
|
|
|
357,681 |
|
|
|
1,168,582 |
|
|
|
1,081,893 |
|
Research
and development costs, including $76,278 and $51,568 for the three months ended September 30, 2024 and 2023, respectively, and $210,362
and $156,950 for the nine months ended September 30, 2024 and 2023, respectively, to a related party |
|
|
361,630 |
|
|
|
132,487 |
|
|
|
691,402 |
|
|
|
749,029 |
|
Total
costs and expenses |
|
|
983,257 |
|
|
|
1,024,181 |
|
|
|
2,959,292 |
|
|
|
4,064,326 |
|
Loss from operations |
|
|
(983,257 |
) |
|
|
(1,024,181 |
) |
|
|
(2,959,292 |
) |
|
|
(4,064,326 |
) |
Interest income |
|
|
1,437 |
|
|
|
5,809 |
|
|
|
6,529 |
|
|
|
13,538 |
|
Interest expense |
|
|
(1,049 |
) |
|
|
(279 |
) |
|
|
(12,389 |
) |
|
|
(6,088 |
) |
Foreign
currency gain (loss) |
|
|
(3,161 |
) |
|
|
(109 |
) |
|
|
(3,119 |
) |
|
|
2,102 |
|
Net
loss |
|
$ |
(986,030 |
) |
|
$ |
(1,018,760 |
) |
|
$ |
(2,968,271 |
) |
|
$ |
(4,054,774 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share – basic and diluted |
|
$ |
(0.44 |
) |
|
$ |
(0.49 |
) |
|
$ |
(1.32 |
) |
|
$ |
(2.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding – basic and diluted |
|
|
2,249,290 |
|
|
|
2,074,938 |
|
|
|
2,249,290 |
|
|
|
1,803,466 |
|
See
accompanying notes to condensed consolidated financial statements.
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Three
Months and Nine Months Ended September 30, 2024 and 2023
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Par
Value |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|
|
Convertible Series
A Preferred
Stock
|
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Accumulated |
|
|
Total
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Par
Value |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2024 |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
2,249,290 |
|
|
$ |
225 |
|
|
$ |
49,209,883 |
|
|
$ |
(50,463,969 |
) |
|
$ |
2,246,139 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
106,827 |
|
|
|
— |
|
|
|
106,827 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(986,030 |
) |
|
|
(986,030 |
) |
Balance, September 30,
2024 |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
2,249,290 |
|
|
$ |
225 |
|
|
$ |
49,316,710 |
|
|
$ |
(51,449,999 |
) |
|
$ |
1,366,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2023 |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
2,249,290 |
|
|
$ |
225 |
|
|
$ |
48,976,265 |
|
|
$ |
(48,481,728 |
) |
|
$ |
3,994,762 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
340,445 |
|
|
|
— |
|
|
|
340,445 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,968,271 |
) |
|
|
(2,968,271 |
) |
Balance, September 30,
2024 |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
2,249,290 |
|
|
$ |
225 |
|
|
$ |
49,316,710 |
|
|
$ |
(51,449,999 |
) |
|
$ |
1,366,936 |
|
(continued)
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(Continued)
Three
Months and Nine Months Ended September 30, 2024 and 2023
|
|
Convertible Series
A Preferred
Stock
|
|
|
Common
Stock |
|
|
Additional
Paid-in |
|
|
Accumulated |
|
|
Total
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Par
Value |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2023 |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
1,665,956 |
|
|
$ |
166 |
|
|
$ |
45,623,081 |
|
|
$ |
(46,430,713 |
) |
|
$ |
2,692,534 |
|
Proceeds from sale of securities
in registered direct offering, net of offering costs |
|
|
— |
|
|
|
— |
|
|
|
180,000 |
|
|
|
18 |
|
|
|
3,137,021 |
|
|
|
— |
|
|
|
3,137,039 |
|
Exercise of pre-funded common
stock warrants |
|
|
— |
|
|
|
— |
|
|
|
403,334 |
|
|
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
112,106 |
|
|
|
— |
|
|
|
112,106 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,018,760 |
) |
|
|
(1,018,760 |
) |
Balance, September 30,
2023 |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
2,249,290 |
|
|
$ |
225 |
|
|
$ |
48,872,208 |
|
|
$ |
(47,449,473 |
) |
|
$ |
4,922,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2022 |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
1,664,706 |
|
|
$ |
166 |
|
|
$ |
45,059,760 |
|
|
$ |
(43,394,699 |
) |
|
$ |
5,165,227 |
|
Balance |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
1,664,706 |
|
|
$ |
166 |
|
|
$ |
45,059,760 |
|
|
$ |
(43,394,699 |
) |
|
$ |
5,165,227 |
|
Proceeds from sale of securities
in registered direct offering, net of offering costs |
|
|
— |
|
|
|
— |
|
|
|
180,000 |
|
|
|
18 |
|
|
|
3,137,021 |
|
|
|
— |
|
|
|
3,137,039 |
|
Exercise of pre-funded common
stock warrants |
|
|
— |
|
|
|
— |
|
|
|
403,334 |
|
|
|
41 |
|
|
|
— |
|
|
|
— |
|
|
|
41 |
|
Exercise of common stock options |
|
|
— |
|
|
|
— |
|
|
|
1,250 |
|
|
|
— |
|
|
|
6,281 |
|
|
|
— |
|
|
|
6,281 |
|
Stock-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
669,146 |
|
|
|
— |
|
|
|
669,146 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,054,774 |
) |
|
|
(4,054,774 |
) |
Balance, September 30,
2023 |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
2,249,290 |
|
|
$ |
225 |
|
|
$ |
48,872,208 |
|
|
$ |
(47,449,473 |
) |
|
$ |
4,922,960 |
|
Balance |
|
|
350,000 |
|
|
$ |
3,500,000 |
|
|
|
2,249,290 |
|
|
$ |
225 |
|
|
$ |
48,872,208 |
|
|
$ |
(47,449,473 |
) |
|
$ |
4,922,960 |
|
See
accompanying notes to condensed consolidated financial statements.
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
2024 |
|
|
2023 |
|
|
|
Nine
Months Ended September 30, |
|
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
Cash flows from operating
activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,968,271 |
) |
|
$ |
(4,054,774 |
) |
Adjustments to reconcile net
loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation expense
included in - |
|
|
|
|
|
|
|
|
General
and administrative costs |
|
|
340,445 |
|
|
|
669,146 |
|
Research
and development costs |
|
|
— |
|
|
|
— |
|
Changes in operating assets
and liabilities: |
|
|
|
|
|
|
|
|
(Increase) decrease in - |
|
|
|
|
|
|
|
|
Advances
on research and development contract services |
|
|
78,016 |
|
|
|
69,002 |
|
Prepaid
insurance |
|
|
35 |
|
|
|
25,994 |
|
Other
prepaid expenses |
|
|
(24,256 |
) |
|
|
(17,460 |
) |
Increase (decrease) in - |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
|
(90,827 |
) |
|
|
(8,593 |
) |
Research
and development contract liabilities |
|
|
98,997 |
|
|
|
(74,457 |
) |
Net cash
used in operating activities |
|
|
(2,565,861 |
) |
|
|
(3,391,142 |
) |
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of securities
in registered direct offering, net of offering costs |
|
|
— |
|
|
|
3,137,039 |
|
Exercise of pre-funded
common stock warrants |
|
|
— |
|
|
|
41 |
|
Exercise of common stock
options |
|
|
— |
|
|
|
6,281 |
|
Net cash
provided by financing activities |
|
|
— |
|
|
|
3,143,361 |
|
|
|
|
|
|
|
|
|
|
Cash: |
|
|
|
|
|
|
|
|
Net decrease |
|
|
(2,565,861 |
) |
|
|
(247,781 |
) |
Balance at beginning of
period |
|
|
4,203,488 |
|
|
|
5,353,392 |
|
Balance at end of period |
|
$ |
1,637,627 |
|
|
$ |
5,105,611 |
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing
activities: |
|
|
|
|
|
|
|
|
Deferred
offering costs accrued |
|
$ |
6,928 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of
cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for - |
|
|
|
|
|
|
|
|
Interest |
|
$ |
12,389 |
|
|
$ |
6,088 |
|
Income
taxes |
|
$ |
— |
|
|
$ |
— |
|
See
accompanying notes to condensed consolidated financial statements.
LIXTE
BIOTECHNOLOGY HOLDINGS, INC.
AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three
Months and Nine Months Ended September 30, 2024 and 2023
1.
Organization and Basis of Presentation
The
condensed consolidated financial statements of Lixte Biotechnology Holdings, Inc., a Delaware corporation), including its wholly-owned
Delaware subsidiary, Lixte Biotechnology, Inc. (collectively, the “Company”), at September 30, 2024, and for the three months
and nine months ended September 30, 2024 and 2023, are unaudited. In the opinion of management of the Company, all adjustments, including
normal recurring accruals, have been made that are necessary to present fairly the financial position of the Company as of September
30, 2024, and the results of its operations for the three months and nine months ended September 30, 2024 and 2023, and its cash flows
for the nine months ended September 30, 2024 and 2023. Operating results for the interim periods presented are not necessarily indicative
of the results to be expected for a full fiscal year. The condensed consolidated balance sheet at December 31, 2023 has been derived
from the Company’s audited consolidated financial statements at such date.
The
condensed consolidated financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities
and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations.
These condensed consolidated financial statements should be read in conjunction with the financial statements and other information included
in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as filed with the SEC.
Business
The
Company is a clinical-stage biopharmaceutical company focused on identifying new targets for cancer drug development and developing and
commercializing cancer therapies. The Company’s corporate office is located in Pasadena, California.
The
Company’s product pipeline is primarily focused on inhibitors of Protein Phosphatase 2A, which is used to enhance cytotoxic agents,
radiation, immune checkpoint blockers and other cancer therapies. The Company believes that inhibitors of protein phosphatases have significant
therapeutic potential for a broad range of cancers. The Company is focusing on the clinical development of a specific protein phosphatase
inhibitor, referred to as LB-100, which has been shown to have clinical anti-cancer activity at doses that produce little or no toxicity.
The
Company’s activities are subject to significant risks and uncertainties, including the need for additional capital. The Company
has not yet commenced any revenue-generating operations, does not have positive cash flows from operations, relies on stock-based compensation
for a substantial portion of employee and consultant compensation, and is dependent on periodic infusions of equity capital to fund its
operating requirements.
Nasdaq
Compliance
The
Company’s common stock and the warrants are traded on the Nasdaq Capital Market (“Nasdaq”) under the symbols “LIXT”
and “LIXTW”, respectively. On June 2, 2023, the Company effected a 1-for-10 reverse split of its outstanding shares of common
stock in order to remain in compliance with the $1.00 minimum closing bid price requirement of Nasdaq. However, there can be no assurances
that the Company will be able to remain in compliance with the $1.00 minimum closing bid price requirement of Nasdaq over time. In addition,
Nasdaq has other continued listing requirements, one of which is maintaining a minimum net stockholders’ equity of $2,500,000.
On
August 19, 2024, the Company received a deficiency letter from the Listing Qualifications Department of Nasdaq indicating that it was
not in compliance with Nasdaq Listing Rule 5550(b)(1) (the “Stockholders’ Equity Rule”), which requires the Company
to maintain a minimum stockholders’ equity of $2,500,000. This notice of non-compliance has no immediate impact on the continued
listing or trading of the Company’s securities on Nasdaq, which will continue to be listed and traded on Nasdaq, subject to the
Company’s compliance with the other Nasdaq continued listing requirements.
On
October 3, 2024, the Company submitted a letter to Nasdaq with its plan to regain compliance with the Stockholders’ Equity Rule,
which outlined the Company’s proposed initiatives to regain compliance by raising equity capital through various registered equity
offerings.
On
October 21, 2024, Nasdaq provided the Company notice that it had granted an extension through February 18, 2025 for the Company to regain
compliance with the Stockholders’ Equity Rule. The Company must complete its capital raising initiatives and evidence compliance
with the Stockholders’ Equity Rule through filing a Current Report on Form 8-K with the SEC providing certain required information
by February 18, 2025.
If
the Company fails to evidence compliance with the Stockholders’ Equity Rule upon filing its periodic report for the quarter ending
March 31, 2025 with the SEC, the Company may be subject to delisting. If Nasdaq determines to delist the Company’s common stock,
the Company will have the right to appeal to a Nasdaq hearings panel. The hearing request would stay any suspension or delisting action
pending the conclusion of the hearing process.
The
Company intends to take reasonable measures available to regain compliance under Nasdaq’s listing rules and to remain listed on
Nasdaq. However, there can be no assurances that the Company will ultimately regain compliance with the Stockholders’ Equity Rule,
or be able to maintain compliance with all other applicable requirements for continued listing on Nasdaq. If the Company does not regain
compliance with Nasdaq’s listing rules within the time period permitted by Nasdaq, then the Company’s securities will be
delisted from Nasdaq.
Going
Concern
For
the nine months ended September 30, 2024, the Company recorded a net loss of $2,968,271 and used cash in operations of $2,565,861. At
September 30, 2024, the Company had cash of $1,637,627 available to fund its operations. Because the Company is currently engaged in
various early-stage clinical trials, it is expected that it will take a significant amount of time and resources to develop any product
or intellectual property capable of generating sustainable revenues. Accordingly, the Company’s business is unlikely to generate
any sustainable operating revenues in the next several years and may never do so. Even if the Company is able to generate revenues through
licensing its technology, product sales or other commercial activities, there can be no assurance that the Company will be able to achieve
and maintain positive earnings and operating cash flows. At September 30, 2024, the Company’s remaining financial contractual commitments
pursuant to clinical trial agreements and clinical trial monitoring agreements not yet incurred aggregated approximately $3,918,000 (see
Note 8), which are currently scheduled to be incurred through approximately December 31, 2027.
The
Company’s consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates
the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements also
do not reflect any adjustments relating to the recoverability of assets and liabilities that might be necessary if the Company is unable
to continue as a going concern. The Company has no recurring source of revenues and has experienced negative operating cash flows since
inception. The Company has financed its working capital requirements through the recurring sale of its equity securities.
Based
on the foregoing, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern
within one year after the date that the consolidated financial statements are being issued. In addition, our independent registered public
accounting firm has included an explanatory paragraph in their report with respect to this uncertainty that accompanies our audited consolidated
financial statements as of and for the year ended December 31, 2023. The Company’s consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
The
Company’s ability to continue as a going concern is dependent upon its ability to raise additional equity capital to fund its research
and development activities and to ultimately achieve sustainable operating revenues and profitability. The amount and timing of future
cash requirements depends on the pace, design, and results of the Company’s clinical trial program, which, in turn, depends on
the availability of operating capital to fund such activities.
Based
on current operating plans, the Company estimates that its existing cash resources at September 30, 2024 will provide sufficient working
capital to fund the current clinical trial program with respect to the development of the Company’s lead anti-cancer clinical compound,
LB-100, through the first quarter of 2025. As existing cash resources will not be sufficient to complete the clinical development of,
and obtain regulatory approval for, the Company’s product candidate, the Company will need to raise additional capital in one or
more tranches to fund its operations during the next few months in order to be able to effectively manage its current business plan during
2025 and thereafter, as well as to maintain its listing on Nasdaq. Furthermore, the Company’s operating plans and capital requirements
may change as a result of many factors that are currently unknown and/or outside of the control of the Company. The Company is considering
various strategies and alternatives to obtain the required additional capital.
As
market conditions present uncertainty as to the Company’s ability to secure additional funds, there can be no assurance that the
Company will be able to secure additional financing on acceptable terms, as and when necessary, to continue to conduct operations.
If
cash resources are insufficient to satisfy the Company’s ongoing cash requirements, the Company would be required to scale back
or discontinue its clinical trial program, or obtain funds, if available, through strategic alliances or joint ventures that could require
the Company to relinquish rights to and/or control of LB-100, or to discontinue operations entirely.
2.
Summary of Significant Accounting Policies
Principles
of Consolidation
The
accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States generally
accepted accounting principles (“GAAP”) and include the financial statements of Lixte Biotechnology Holdings, Inc. and its
wholly-owned subsidiary, Lixte Biotechnology, Inc. Intercompany balances and transactions have been eliminated in consolidation.
Segment
Information
The
Company operates and reports in one segment, which consists of the development of a drug class called Protein Phosphatase 2A inhibitors.
The Company’s operating segment is reported in a manner consistent with the internal reporting provided to the Company’s
Chief Operating Decision Maker, which is the Company’s President and Chief Executive Officer.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.
Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under
different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed
to be reasonable in relation to the financial statements taken, as a whole, 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. Management
regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes
in facts and circumstances, historical experience, and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates
are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions
used in the calculation of accruals for clinical trial costs and other potential liabilities, and valuing equity instruments issued for
services.
Cash
Cash
is held in a cash bank deposit program maintained by Morgan Stanley Wealth Management, a division of Morgan Stanley Smith Barney LLC
(“Morgan Stanley”). Morgan Stanley is a FINRA-regulated broker-dealer. The Company’s policy is to maintain its cash
balances with financial institutions in the United States with high credit ratings and in accounts insured by the Federal Deposit Insurance
Corporation (the “FDIC”) and/or by the Securities Investor Protection Corporation (the “SIPC”). The Company periodically
has cash balances in financial institutions in excess of the FDIC and SIPC insurance limits of $250,000 and $500,000, respectively. Morgan
Stanley Wealth Management also maintains supplemental insurance coverage for the cash balances of its customers. The Company has not
experienced any losses to date resulting from this policy.
Research
and Development
Research
and development costs consist primarily of fees paid to consultants and contractors, and other expenses relating to the negotiation,
design, development, conduct and management of clinical trials with respect to the Company’s clinical compound and product candidate.
Research and development costs also include the costs to manufacture compounds used in research and clinical trials, which are charged
to operations as incurred. The Company’s inventory of LB-100 for clinical use has been manufactured separately in the United States
and in the European Union in accordance with the laws and regulations of such jurisdictions.
Research
and development costs are generally charged to operations ratably over the life of the underlying contracts, unless the achievement of
milestones, the completion of contracted work, the termination of an agreement, or other information indicates that a different expensing
schedule is more appropriate. However, payments for research and development costs that are contractually defined as non-refundable are
charged to operations as incurred.
Obligations
incurred with respect to mandatory scheduled payments under agreements with milestone provisions are recognized as charges to research
and development costs in the Company’s consolidated statement of operations based on the achievement of such milestones, as specified
in the respective agreement. Obligations incurred with respect to mandatory scheduled payments under agreements without milestone provisions
are accounted for when due, are recognized ratably over the appropriate period, as specified in the respective agreement, and are recorded
as liabilities in the Company’s consolidated balance sheet, with a corresponding charge to research and development costs in the
Company’s consolidated statement of operations.
Payments
made pursuant to contracts are initially recorded as advances on research and development contract services in the Company’s consolidated
balance sheet and are then charged to research and development costs in the Company’s consolidated statement of operations as those
contract services are performed. Expenses incurred under contracts in excess of amounts advanced are recorded as research and development
contract liabilities in the Company’s consolidated balance sheet, with a corresponding charge to research and development costs
in the Company’s consolidated statement of operations. The Company reviews the status of its various clinical trial and research
and development contracts on a quarterly basis.
Prepaid
Insurance
Prepaid
insurance represents the premiums paid for directors and officers insurance coverage and for general liability insurance coverage in
excess of the amortization of the total policy premium charged to operations at each balance sheet date. Such amount is determined by
amortizing the total policy premium charged on a straight-line basis over the respective policy period. As the policy premiums incurred
are generally amortizable over the ensuing twelve-month period, they are recorded as a current asset in the Company’s consolidated
balance sheet at each reporting date and appropriately amortized to the Company’s consolidated statement of operations for each
reporting period.
Deferred
Offering Costs
Deferred
offering costs consist of costs incurred with respect to pending equity financing transactions, including legal fees. Such costs are
deferred and charged to additional paid-in capital upon the successful completion of such financings, or are charged to operations if
and when such financings are abandoned or terminated.
Patent
and Licensing Legal and Filing Fees and Costs
Due
to the significant uncertainty associated with the successful development of commercially viable products based on the Company’s
research efforts and related patent applications, all patent and licensing legal and filing fees and costs related to the development
and protection of the Company’s intellectual property are charged to operations as incurred. Patent and licensing legal and filing
fees and costs were $45,416 and $178,012 for the three months ended September 30, 2024 and 2023, respectively, and $192,239 and $835,362
for the nine months ended September 30, 2024 and 2023, respectively. Patent and licensing legal and filing fees and costs are included
in general and administrative costs in the Company’s consolidated statement of operations.
Concentration
of Risk
The
Company periodically contracts with vendors and consultants to provide services related to the Company’s operations. Charges incurred
for these services can be for a specific period (typically one year) or for a specific project or task. Costs and expenses incurred that
represented 10% or more of general and administrative costs or research and development costs for the three months ended September 30,
2024 and 2023 are described below.
General
and administrative costs for the three months ended September 30, 2024 and 2023 include charges from legal firms and other vendors for
general licensing and patent prosecution costs relating to the Company’s intellectual properties representing 7.3% and 20.0% of
total general and administrative costs, respectively. General and administrative costs for the three months ended September 30, 2024
and 2023 also included charges for the cost of directors and officer’s insurance of 18.4% and 11.9%, respectively, corporate legal
fees of 9.8% and 10.6%, respectively, and for the fair value of stock options granted to directors and corporate officers representing
17.2% and 12.6%, respectively, of total general and administrative costs.
Research
and development costs for the three months ended September 30, 2024 include charges from three vendors and consultants representing 57.2%,
21.1% and 15.1%, respectively, of total research and development costs. Research and development costs for the three months ended September
30, 2023 include charges from four vendors and consultants representing 38.9%, 24.9%, 15.9% and 14.9%, respectively, of total research
and development costs.
Costs
and expenses incurred that represented 10% or more of general and administrative costs or research and development costs for the nine
months ended September 30, 2024 and 2023 are described below.
General
and administrative costs for the nine months ended September 30, 2024 and 2023 include charges from legal firms and other vendors for
general licensing and patent prosecution costs relating to the Company’s intellectual properties representing 8.5% and 25.2% of
total general and administrative costs, respectively. General and administrative costs for the nine months ended September 30, 2024 and
2023 also included charges for the cost of directors and officer’s insurance of 16.0% and 9.3%, respectively, corporate legal fees
of 11.5% and 7.5%, respectively, and for the fair value of stock options granted to directors and corporate officers representing 15.0%
and 20.2%, respectively, of total general and administrative costs.
Research
and development costs for the nine months ended September 30, 2024 include charges from three vendors and consultants representing 41.2%,
30.4% and 12.6%, respectively, of total research and development costs. Research and development costs for the nine months ended September
30, 2023 include charges from three vendors and consultants representing 35.9%, 21.0%, and 12.4%, respectively, of total research and
development costs.
Income
Taxes
The
Company accounts for income taxes under an asset and liability approach for financial accounting and reporting for income taxes. Accordingly,
the Company recognizes deferred tax assets and liabilities for the expected impact of differences between the financial statements and
the tax basis of assets and liabilities.
The
Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. Due
to the uncertainty of the Company’s ability to realize the benefit of the deferred tax assets, the net deferred tax assets are
fully offset by a valuation allowance at September 30, 2024 and December 31, 2023. In the event the Company was to determine that it
would be able to realize its deferred tax assets in the future in excess of its recorded amount, an adjustment to the deferred tax assets
would be credited to operations in the period such determination was made. Should the Company determine that it would not be able to
realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to operations
in the period such determination was made.
The
Company is subject to U.S. federal income taxes and income taxes of various state tax jurisdictions. As the Company’s net operating
losses have yet to be utilized, all previous tax years remain open to examination by Federal authorities and other jurisdictions in which
the Company currently operates or has operated in the past. The Company had no unrecognized tax benefits as of September 30, 2024 or
December 31, 2023 and does not anticipate any material amount of unrecognized tax benefits through December 31, 2024.
The
Company accounts for uncertainties in income tax law under a comprehensive model for the financial statement recognition, measurement,
presentation, and disclosure of uncertain tax positions taken or expected to be taken in income tax returns as prescribed by GAAP. The
tax effects of a position are recognized only if it is “more-likely-than-not” to be sustained by the taxing authority as
of the reporting date. If the tax position is not considered “more-likely-than-not” to be sustained, then no benefits of
the position are recognized. The Company had not recorded any liability for uncertain tax positions as of September 30, 2024 or December
31, 2023. Subsequent to September 30, 2024, any interest and penalties related to uncertain tax positions will be recognized as a component
of income tax expense.
Stock-Based
Compensation
The
Company periodically issues common stock and stock options to officers, directors, employees, Scientific Advisory Committee members,
contractors and consultants for services rendered. Options vest and expire according to terms established at the issuance date of each
grant. Stock grants, which are generally time vested, are measured at the grant date fair value and charged to operations ratably over
the vesting period.
The
Company accounts for stock-based payments to officers, directors, employees, Scientific Advisory Committee members, contractors, and
consultants by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards,
with the cost recognized as compensation expense on the straight-line basis in the Company’s financial statements over the vesting
period of the awards. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid
cash for the services.
The
fair value of stock options granted as stock-based compensation is determined utilizing the Black-Scholes option-pricing model, and is
affected by several variables, the most significant of which are the expected life of the stock option, the exercise price of the stock
option as compared to the fair market value of the common stock on the grant date, and the estimated volatility of the common stock.
Unless sufficient historical exercise data is available, the expected life of the stock option is calculated as the mid-point between
the vesting period and the contractual term (the “simplified method”). The estimated volatility is based on the historical
volatility of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of
the stock option being granted. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant.
The fair market value of the common stock is determined by reference to the quoted market price of the Company’s common stock on
the grant date. The expected dividend yield is based on the Company’s expectation of dividend payouts and is assumed to be zero.
The
Company recognizes the fair value of stock-based compensation awards in general and administrative costs and in research and development
costs, as appropriate, in the Company’s consolidated statements of operations. The Company issues new shares of common stock to
satisfy stock option exercises.
Warrants
The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities
from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the
warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether
the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the
Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance
outside of the Company’s control, among other conditions for equity classification. The Company has determined that the warrants
issued in the July 20, 2023 equity financing (see Note 4) meet the requirements for equity classification. This assessment, which requires
the use of professional judgment, is conducted when the warrants are issued and at the end each subsequent quarterly period while the
warrants are outstanding. For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required
to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet
all of the criteria for equity classification, the warrants are required to be liability classified and recorded at their initial fair
value on the date of issuance and remeasured at fair value at each balance sheet date thereafter. Changes in the estimated fair value
of the warrants that are liability classified are recognized as a non-cash gain or loss in the statement of operations.
Earnings
(Loss) Per Share
The
Company’s computation of earnings (loss) per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as
the income (loss) attributable to common stockholders divided by the weighted average common shares outstanding for the period. Diluted
EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., preferred shares,
warrants and stock options) as if they had been converted at the beginning of the respective periods presented, or issuance date, if
later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share)
are excluded from the calculation of diluted EPS.
Loss
per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the respective periods.
Basic and diluted loss per common share was the same for all periods presented because all preferred shares, warrants and stock options
outstanding were anti-dilutive.
At
September 30, 2024 and 2023, the Company excluded the outstanding securities summarized below, which entitle the holders thereof to acquire
shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.
Schedule
of Anti-dilutive Securities Excluded from Computation of Earnings Per Share
|
|
2024 |
|
|
2023 |
|
|
|
September
30, |
|
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
Series A Convertible
Preferred Stock |
|
|
72,917 |
|
|
|
72,917 |
|
Common stock warrants |
|
|
808,365 |
|
|
|
808,365 |
|
Common
stock options, including options issued in the form of warrants |
|
|
623,232 |
|
|
|
674,896 |
|
Total |
|
|
1,504,514 |
|
|
|
1,556,178 |
|
Foreign
Currency Translation
The
consolidated financial statements are presented in the United States dollar, which is the functional and reporting currency of the Company.
The
Company periodically incurs a cost or expense in a foreign jurisdiction denominated in a local currency. The Company purchases the required
foreign currency to pay such cost or expense on an as-needed basis. Such cost or expense is converted into United States dollars for
financial statement purposes based on the foreign currency conversion rate in effect on the transaction date. The Company purchases the
requisite foreign currency to pay such cost or expense on an as-needed basis. Any gain or loss resulting from the purchase of the foreign
currency is included as foreign currency gain (loss) in the consolidated statement of operations.
During
the three months ended September 30, 2024 and 2023, the Company incurred various costs and expenses denominated in Euros, which were
converted into United States dollars at the average rate of 1.0991 and 1.0885, respectively. During the nine months ended September 30,
2024 and 2023, the Company incurred various costs and expenses denominated in Euros, which were converted into United States dollars
at the average rate of 1.0991 and 1.0839, respectively. As of September 30, 2024 and December 31, 2023, the Company did not hold any
currencies other than the United States dollar in its bank accounts, and was not a party to any foreign currency forward or exchange
contracts.
Fair
Value of Financial Instruments
The
authoritative guidance with respect to fair value established a fair value hierarchy that prioritizes the inputs to valuation techniques
used to measure fair value into three levels and requires that assets and liabilities carried at fair value be classified and disclosed
in one of three categories, as presented below. Disclosure as to transfers in and out of Levels 1 and 2, and activity in Level 3 fair
value measurements, is also required.
Level
1. Observable inputs such as quoted prices in active markets for an identical asset or liability that the Company has the ability to
access as of the measurement date. Financial assets and liabilities utilizing Level 1 inputs include active-exchange traded securities
and exchange-based derivatives.
Level
2. Inputs, other than quoted prices included within Level 1, which are directly observable for the asset or liability or indirectly observable
through corroboration with observable market data. Financial assets and liabilities utilizing Level 2 inputs include fixed income securities,
non-exchange-based derivatives, mutual funds, and fair-value hedges.
Level
3. Unobservable inputs in which there is little or no market data for the asset or liability which requires the reporting entity to develop
its own assumptions. Financial assets and liabilities utilizing Level 3 inputs include infrequently traded non-exchange-based derivatives
and commingled investment funds and are measured using present value pricing models.
The
Company determines the level in the fair value hierarchy within which each fair value measurement falls in its entirety, based on the
lowest level input that is significant to the fair value measurement in its entirety. In determining the appropriate levels, the Company
performs an analysis of the assets and liabilities at each reporting period end.
The
carrying value of financial instruments, which consists of accounts payable and accrued expenses is considered to be representative of
their respective fair values due to the short-term nature of those instruments.
Recent
Accounting Pronouncements
In
July 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-03,
Presentation of Financial Statements (Topic 205), Income Statement — Reporting Comprehensive Income (Topic 220), Distinguishing
Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation — Stock Compensation (Topic 718) Presentation of Financial
Statements (“ASU 2023-03”). ASU 2023-03 amends the FASB Accounting Standards Codification to include Amendments to SEC Paragraphs
pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and SEC Staff Accounting
Bulletin Topic 6.B, Accounting Series Release 280 — General Revision of Regulation S-X: Income or Loss Applicable to Common Stock.
As ASU 2023-03 did not provide any new guidance, there was no transition or effective date associated with its adoption. Accordingly,
the Company adopted ASU 2023-03 immediately upon its issuance in July 2023. The adoption of ASU 2023-03 did not have any impact on the
Company’s consolidated financial statements, including their presentation and related disclosures.
Management
does not believe that any other recently issued, but not yet effective, authoritative guidance, if currently adopted, would have a material
impact on the Company’s financial statements, including their presentation and related disclosures.
3.
Research and Development Costs
A
summary of research and development costs for the three months and nine months ended September 30, 2024 and 2023, including costs associated
with clinical trials involving the Company’s lead clinical compound LB-100, are summarized below based on the respective geographical
regions where such costs have been incurred.
Schedule
of Research and Development Costs
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
Three
Months Ended September
30,
|
|
|
Nine
Months Ended September
30,
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States |
|
$ |
278,808 |
|
|
$ |
68,315 |
|
|
$ |
427,736 |
|
|
$ |
291,846 |
|
Spain |
|
|
6,544 |
|
|
|
9,496 |
|
|
|
51,022 |
|
|
|
283,035 |
|
China |
|
|
— |
|
|
|
3,108 |
|
|
|
2,282 |
|
|
|
17,198 |
|
Netherlands |
|
|
76,278 |
|
|
|
51,568 |
|
|
|
210,362 |
|
|
|
156,950 |
|
Total |
|
$ |
361,630 |
|
|
$ |
132,487 |
|
|
$ |
691,402 |
|
|
$ |
749,029 |
|
Research
and development costs |
|
$ |
361,630 |
|
|
$ |
132,487 |
|
|
$ |
691,402 |
|
|
$ |
749,029 |
|
4.
Stockholders’ Equity
Preferred
Stock
The
Company is authorized to issue a total of 10,000,000 shares of preferred stock, par value $0.0001 per share. On March 17, 2015, the Company
filed a Certificate of Designations, Preferences, Rights and Limitations of its Series A Convertible Preferred Stock with the Delaware
Secretary of State to amend the Company’s certificate of incorporation. The Company has designated a total of 350,000 shares as
Series A Convertible Preferred Stock, which are non-voting and are not subject to increase without the written consent of a majority
of the holders of the Series A Convertible Preferred Stock or as otherwise set forth in the Preferences, Rights and Limitations. The
holders of each tranche of 175,000 shares of the Series A Convertible Preferred Stock are entitled to receive a per share dividend equal
to 1% of the annual net revenue of the Company divided by 175,000, until converted or redeemed. As of September 30, 2024 and December
31, 2023, the Company had 9,650,000 shares of undesignated preferred stock, which may be issued with such rights and powers as the Board
of Directors may designate.
Each
share of Series A Convertible Preferred Stock may be converted, at the option of the holder, into 0.20833 shares of common stock (subject
to customary anti-dilution provisions) and the Series A Convertible Preferred Stock is subject to mandatory conversion at the conversion
rate in the event of a merger or sale transaction resulting in gross proceeds to the Company of at least $21,875,000. The Series A Convertible
Preferred Stock has a liquidation preference based on its assumed conversion into shares of common stock. The Series A Convertible Preferred
Stock does not have any cash liquidation preference rights or any registration rights. The 350,000 outstanding shares of Series A Convertible
Preferred Stock were convertible into a total of 72,917 shares of common stock at September 30, 2024 and December 31, 2023.
Based
on the attributes of the Series A Convertible Preferred Stock as previously described, the Company has accounted for the Series A Convertible
Preferred Stock as a permanent component of stockholders’ equity.
Common
Stock
The
Company is authorized to issue a total of 100,000,000 shares of common stock, par value $0.0001 per share. As of September 30, 2024 and
December 31, 2023, the Company had 2,249,290 shares of common stock issued and outstanding.
On
June 2, 2023, the Company effected a 1-for-10 reverse split of its outstanding shares of common stock.
The
authorized number of shares of common stock and the par value per share were not affected by the reverse stock split. No fractional shares
were issued in connection with the reverse stock split, with all fractional shares being rounded up to the next whole share.
All
share and per share amounts and information presented herein have been retroactively adjusted to reflect the reverse stock split for
all periods presented.
Effective
March 10, 2023, the Company issued 1,250 shares of common stock upon the exercise of a stock option in the form of a warrant held by
a consultant to the Company for 1,250 shares exercisable at $5.025 per share for total cash proceeds of $6,281.
Effective
July 20, 2023, the Company sold 180,000 shares of common stock at a price of $6.00 per share and pre-funded warrants to purchase 403,334
shares of common stock at a price of $5.9999 per pre-funded warrant to an institutional investor in a registered direct offering. The
pre-funded warrants had an exercise price of $0.0001 per share, were immediately exercisable upon issuance, and were valid and exercisable
until all pre-funded warrants were exercised in full.
During
the period from July 24, 2023 through August 7, 2023, the 403,334 pre-funded warrants, exercisable at $0.0001 per common share, were
exercised for total cash proceeds of $41, resulting in the issuance of 403,334 shares of common stock. The pre-funded warrants were determined
to be common stock equivalents.
In
a concurrent private placement to the institutional investor, the Company also sold warrants to purchase 583,334 shares of common stock.
Each common warrant had an initial exercise price of $6.00 per share, was immediately exercisable upon issuance, and expires five years
thereafter on July 20, 2028. The common warrants and the shares of common stock issuable upon exercise of the common warrants were not
registered under the Securities Act of 1933, as amended (the “Securities Act”) and were offered pursuant to the exemption
provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder. The shares of common stock issuable upon
exercise of the warrants were registered for resale on a registration statement on Form S-3 declared effective by the SEC on May 2, 2024.
The
registered direct offering and the concurrent private placement generated gross proceeds of $3,499,964. The total cash costs of the registered
direct offering and the private placement were $362,925, resulting in net proceeds of $3,137,039. Pursuant to the placement agent agreement,
the Company granted the placement agent warrants to purchase 35,000 shares of common stock at an exercise price of $6.60 per share and
expiring on July 20, 2028.
The
exercise prices of the warrants issued to the institutional investor (exercisable at $6.00 per share) and to the placement agent (exercisable
at $6.60 per share) are subject to customary adjustments for stock splits, stock dividends, stock combinations, reclassifications, reorganizations,
or similar events affecting the Company’s common stock. In addition, the warrants issued to the institutional investor contain
a “fundamental transaction” provision which provides that if any defined fundamental transactions are within the Company’s
control and are consummated, the holder of the unexercised common stock warrants would be entitled to receive, at its option, in exchange
for extinguishment of such warrants, cash consideration equal to a Black-Scholes valuation amount, as defined in the warrant agreement.
The fundamental transaction provision includes (i) a sale, lease, assignment, transfer, conveyance or other disposition of all or substantially
all of the assets of the Company in one or a series of related transactions, or (ii) a change in control of the Company by which it,
directly or indirectly, in one or more related transactions, consummates a stock or share purchase agreement or other business combination
with another person or group, whereby such other person or group acquires more than 50% of the voting power of the common equity of the
Company.
If
such fundamental transaction is not within the Company’s control, including not being approved by the Company’s Board of
Directors, the warrant holder would only be entitled to receive the same type or form of consideration (and in the same proportion) equal
to the Black-Scholes valuation amount of the remaining unexercised portion of the warrant on the date of consummation of such fundamental
transaction as the holders of the Company’s common stock receive. Accordingly, these warrants are classified as a component of
permanent stockholders’ equity. The Company will account for any cash payment for a warrant redemption as a distribution from stockholders’
equity, as and when a fundamental transaction is consummated and such cash payment is required to be made.
Common
Stock Warrants
A
summary of common stock warrant activity, including warrants to purchase common stock that were issued in conjunction with the Company’s
public offering, during the nine months ended September 30, 2024 is presented below.
Schedule
of Warrants Outstanding
|
|
Number
of Shares |
|
|
Weighted
Average Exercise
Price
|
|
|
Weighted
Average Remaining Contractual Life
(in Years)
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding at December
31, 2023 |
|
|
808,365 |
|
|
$ |
16.407 |
|
|
|
|
|
Issued |
|
|
— |
|
|
|
— |
|
|
|
|
|
Exercised |
|
|
— |
|
|
|
— |
|
|
|
|
|
Expired |
|
|
— |
|
|
|
— |
|
|
|
|
|
Warrants outstanding
at September 30, 2024 |
|
|
808,365 |
|
|
$ |
16.407 |
|
|
|
3.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants exercisable
at December 31, 2023 |
|
|
808,365 |
|
|
$ |
16.407 |
|
|
|
|
|
Warrants exercisable
at September 30, 2024 |
|
|
808,365 |
|
|
$ |
16.407 |
|
|
|
3.24 |
|
At
September 30, 2024, the outstanding warrants are exercisable at the following prices per common share:
Schedule
of Warrants Outstanding and Exercisable
Exercise
Prices |
|
|
Warrants
Outstanding (Shares) |
|
|
|
|
|
|
$ |
6.000 |
|
|
|
583,334 |
|
$ |
6.600 |
|
|
|
35,000 |
|
$ |
20.000 |
|
|
|
29,000 |
|
$ |
37.000 |
|
|
|
11,331 |
|
$ |
57.000 |
|
|
|
149,700 |
|
|
|
|
|
|
808,365 |
|
The
warrants exercisable at $57.00 per share at September 30, 2024 consist of 1,497,000 publicly-traded warrants, described herein on a pre-split
1-for-10 basis, that were issued as part of the Company’s November 2020 public offering of units, and are exercisable for a period
of five years thereafter. As a result of the 1-for-10 reverse split of the Company’s common stock effective June 2, 2023, each
such publicly-traded warrant currently now represents the right to purchase 1/10th of a share of common stock at the original exercise
price of $5.70 per share. Accordingly, the exercise of 10 warrants, each exercisable at $5.70, are required to acquire one share of post-split
common stock, which is equivalent to a purchase price of $57.00 per share.
Based
on the closing fair market value of $1.87 per share on September 30, 2024, there was no intrinsic value attributed to exercisable but
unexercised common stock warrants at September 30, 2024.
Information
with respect to the issuance of common stock in connection with various stock-based compensation arrangements is provided at Note 6.
5.
Related Party Transactions
Related
party transactions include transactions with the Company’s officers, directors and affiliates.
Employment
Agreements with Officers
During
July and August 2020, the Company entered into one-year employment agreements with each of its executive officers at that time, consisting
of Dr. John S. Kovach, Eric J. Forman, Dr. James S. Miser, and Robert N. Weingarten, payable monthly, as described below. These employment
agreements were automatically renewable for additional one-year periods unless terminated by either party upon 60 days written notice
prior to the end of the applicable one-year period, or by death, or by termination for cause. Except as noted below, these employment
agreements were automatically renewed for additional one-year periods in July and August 2021, 2022, 2023 and 2024.
The
Company entered into an employment agreement with Dr. Kovach dated July 15, 2020, effective October 1, 2020, to provide for Dr. Kovach
to continue to act as the Company’s President, Chief Executive Officer and Chief Scientific Officer, with an annual salary of $250,000.
The employment agreement with Dr. Kovach terminated upon his death on October 5, 2023. During the three months and nine months ended
September 30, 2023, the Company paid $62,500 and $187,500, respectively, to Dr. Kovach under this employment agreement, which costs are
included in general and administrative costs in the Company’s consolidated statement of operations for such periods.
The
Company entered into an employment agreement with Dr. James S. Miser, M.D., effective August 1, 2020, to act as the Company’s Chief
Medical Officer, with an annual salary of $150,000. Effective May 1, 2021, Dr. Miser’s annual salary was increased to $175,000.
Dr. Miser was required to devote at least 50% of his business time to the Company’s activities. During the three months ended September
30, 2024 and 2023, the Company paid $14,583 and $43,750, respectively, to Dr. Miser under this employment agreement, which costs are
included in general and administrative costs in the Company’s consolidated statements of operations for such periods. During the
nine months ended September 30, 2024 and 2023, the Company paid $102,083 and $131,250, respectively, to Dr. Miser under this employment
agreement, which costs are included in general and administrative costs in the Company’s consolidated statement of operations for
such periods. On May 29, 2024, the Company elected not to renew its employment agreement with Dr. Miser, as a result of which such employment
agreement expired on July 31, 2024.
The
Company entered into an employment agreement with Eric J. Forman effective July 15, 2020, as amended on August 12, 2020, to act as the
Company’s Chief Administrative Officer, with an annual salary of $120,000. Mr. Forman is the son-in-law of Gil Schwartzberg (deceased),
a former member of the Company’s Board of Directors who died on October 30, 2022 and was a significant stockholder of and consultant
to the Company, and is the son of Dr. Stephen Forman, a member of the Company’s Board of Directors. Julie Forman, the wife of Mr.
Forman and the daughter of Gil Schwartzberg, is Vice President of Morgan Stanley Wealth Management, at which firm the Company’s
cash is on deposit and with which the Company maintains a continuing banking relationship. Effective May 1, 2021, Mr. Forman’s
annual salary was increased to $175,000. Additionally, effective November 6, 2022, Mr. Forman was promoted to Vice President and Chief
Operating Officer with an annual salary of $200,000. Effective October 1, 2022, Mr. Forman has been provided a monthly office rent allowance,
pursuant to which for the three months ended September 30, 2024 and 2023, the Company paid $3,218 and $7,323 respectively, on Mr. Forman’s
behalf. For the nine months ended September 30, 2024 and 2023, Mr. Forman has been provided a monthly office rent allowance, pursuant
to which the Company paid $13,099 and $11,436 respectively, on Mr. Forman’s behalf. During the three months ended September 30,
2024 and 2023, the Company paid $50,000 and $50,000, respectively, to Mr. Forman under this employment agreement, which costs are included
in general and administrative costs in the Company’s consolidated statements of operations for such periods. During the nine months
ended September 30, 2024 and 2023, the Company paid $150,000 and $150,000, respectively, to Mr. Forman under this employment agreement,
which costs are included in general and administrative costs in the Company’s consolidated statement of operations for such periods.
The
Company entered into an employment agreement with Robert N. Weingarten effective August 12, 2020 to act as the Company’s Vice President
and Chief Financial Officer, with an annual salary of $120,000. Effective May 1, 2021, Mr. Weingarten’s annual salary was increased
to $175,000. During the three months ended September 30, 2024 and 2023, the Company paid $43,750 and $43,750, respectively, to Mr. Weingarten
under this employment agreement, which costs are included in general and administrative costs in the Company’s consolidated statements
of operations for such periods. During the nine months ended September 30, 2024 and 2023, the Company paid $131,250 and $131,250, respectively,
to Mr. Weingarten under this employment agreement, which costs are included in general and administrative costs in the Company’s
consolidated statement of operations for such periods.
The
Company entered into an employment agreement with Bastiaan van der Baan effective September 26, 2023 to act as the Company’s President
and Chief Executive Officer and as Vice Chairman of the Board of Directors, with an annual salary of $150,000. Effective October 6, 2023,
Mr. van der Baan was appointed as Chairman of the Board of Directors upon the death of Dr. Kovach on October 5, 2023. Mr. van der Baan’s
annual salary may be increased from time to time at the sole discretion of the Board of Directors. In addition, Mr. van der Baan is eligible
to receive an annual bonus as determined at the sole discretion of the Board of Directors. The term of the employment agreement is for
three years and is automatically renewable for additional one-year periods unless terminated by either party, subject to early termination
provisions as described in the employment agreement. During the three months ended September 30, 2024 and 2023, the Company paid $39,175
and $1,667, respectively, to Mr. van der Baan under this employment agreement, which costs are included in general and administrative
costs in the Company’s consolidated statement of operations for such periods. During the nine months ended September 30, 2024 and
2023, the Company paid $115,754 and $1,667, respectively, to Mr. van der Baan under this employment agreement, which costs are included
in general and administrative costs in the Company’s consolidated statement of operations for such periods.
On
May 31, 2024, the Company entered into a consulting agreement with Dr. Jan H.M. Schellens, M.D., Ph.D., Pursuant to the agreement, effective
July 1, 2024, the Company engaged Dr. Schellens as a consultant, and, effective August 1, 2024, as the Company’s Chief Medical
Officer. The term of the agreement are in effect from July 1, 2024 until the earliest of (i) termination by either party upon sixty days’
notice, (ii) Dr. Schellens’ death or disability, or (iii) termination by the Company for breach as provided in the agreement. Under
the agreement, Dr. Schellens provides his services for two days per week with the specific days in each week based on arrangements agreed
to from time to time between Dr. Schellens and the Company’s Chief Executive Officer. The Company pays Dr. Schellens an annual
compensation of 104,000 Euros (approximately $116,000 as of September 30, 2024), payable on a monthly basis. During the three months
and nine months ended September 30, 2024, the Company paid $28,718 and $28,718, respectively, to Dr. Schellens under this consulting
agreement, which costs are included in general and administrative costs in the Company’s consolidated statement of operations for
such periods.
Appointment
of Dr. René Bernards to the Board of Directors
Effective
as of June 15, 2022, Dr. René Bernards was appointed to the Company’s Board of Directors as an independent director. Dr.
Bernards is a leader in the field of molecular carcinogenesis and is employed by the Netherlands Cancer Institute in Amsterdam. Upon
his appointment, it was agreed that Dr. Bernards would receive annual compensation for his services on the Board only in the form of
cash, in lieu of the annual June 30 grant of stock options as provided to the Company’s other non-officer directors. During the
three months ended September 30, 2024 and 2023, the Company recorded charges to general and administrative costs in the consolidated
statement of operations of $0 and $10,000, respectively, with respect to his annual cash board compensation. During the nine months ended
September 30, 2024 and 2023, the Company recorded charges to general and administrative costs in the consolidated statement of operations
of $10,000 and $30,000, respectively, with respect to his annual cash board compensation.
In
conjunction with the Company’s efforts to preserve cash, effective with the quarter ended June 30, 2024, Dr. Bernards agreed to
receive equity-based compensation for his services on the Board, for the quarters ended June 30, 2024, September 30, 2024 and December
31, 2024. In order to reconcile his Board compensation with that of the other non-officer directors, Dr. Bernards has agreed to receive
the same Board compensation, both in form and amount, as the other non-officer directors.
Previously,
on October 8, 2021, the Company had entered into a Development Collaboration Agreement (subsequently amended and extended) with the Netherlands
Cancer Institute, Amsterdam, one of the world’s leading comprehensive cancer centers, and Oncode Institute, Utrecht, a major independent
cancer research center, to identify the most promising drugs to be combined with LB-100, and potentially LB-100 analogues, to be used
to treat a range of cancers, as well as to identify the specific molecular mechanisms underlying the identified combinations (see Note
8).
Compensatory
Arrangements for Members of the Board of Directors
Effective
April 9, 2021, the Board of Directors approved a comprehensive cash and equity compensation program for the non-officer directors for
their services on the Board of Directors (the “Board Plan”), which was subsequently amended effective May 25, 2022 and July
9, 2024. Officers who also serve on the Board of Directors are not compensated separately for their service on the Board of Directors.
Cash
compensation for directors, payable quarterly, is as follows:
Base
director compensation - $20,000 per year (except for Dr. Bernards, who was paid an additional annual cash fee of $40,000, in lieu of
the annual June 30 grant of stock option as described below, through March 31, 2024)
Chairman
of audit committee – additional $10,000 per year
Chairman
of any other committees – additional $5,000 per year
Member
of audit committee – additional $5,000 per year
Member
of any other committees – additional $2,500 per year
In
conjunction with the Company’s efforts to preserve cash, the Board approved an amendment to the Board Plan, such that for the quarters
ended June 30, 2024, September 30, 2024 and December 31, 2024, the non-officer directors (including Dr. Bernards) will receive, in lieu
of cash compensation, stock options exercisable for a period of five years, vesting immediately, to purchase common stock at an exercise
price based on the closing market price at the end of each of the applicable quarters, with the amount of such stock options equal to
the cash payment such director would otherwise have been entitled to receive for such quarter, divided by their quarter-end value as
determined pursuant to the Black-Scholes option-pricing model. The Board may extend this amendment to the Board Plan for additional quarterly
periods subsequent to December 31, 2024.
Equity
compensation for directors is as follows:
Appointment
of new directors – The Company grants options to purchase 25,000 shares of common stock, exercisable for a period of five years,
at the closing market price on the date of grant, vesting 50% on the grant date and the remaining 50% vesting 12.5% on the last day of
each calendar quarter beginning in the quarter immediately subsequent to the date of the grant until fully vested, subject to continued
service. At the discretion of the Board of Directors, for a nominee to the Board of Directors who is restricted by their respective institution
or employer from receiving equity-based compensation, in lieu of the grant of such stock options, the Company may elect to pay a one-time
cash fee of $100,000 to such director, payable upfront.
Annual
grant of options to directors – Effective on the last business day of the month of June, the Company grants options to purchase
10,000 shares of common stock, exercisable for a period of five years, at the closing market price on the date of grant, vesting 12.5%
on the last day of each calendar quarter beginning in the quarter immediately subsequent to the date of grant until fully vested, subject
to continued service. If any director has served for less than 12 full calendar months on the grant date, the amount of such stock option
grant is prorated based on the length of service of such director. At the discretion of the Board of Directors, for a nominee to the
Board of Directors who is restricted by their respective institution or employer from receiving equity-based compensation, in lieu of
the grant of such stock options, the Company may elect to pay an annual cash fee of $40,000 to such director, payable quarterly.
Total
cash compensation paid to non-officer directors was $0 and $42,228, respectively, for the three months ended September 30, 2024 and 2023.
Total cash compensation paid to non-officer directors was $38,819 and $127,229, respectively, for the nine months ended September 30,
2024 and 2023.
Stock-based
compensation granted to members of the Company’s Board of Directors, officers and affiliates is described at Note 6.
A
summary of related party costs, including compensation under employment and consulting agreements and fees paid to non-officer directors
for their services on the Board of Directors, for the three months and nine months ended September 30, 2024 and 2023, is presented below.
Summary
of Related Party Costs
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
Three
Months Ended September
30,
|
|
|
Nine
Months Ended September
30,
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash-based |
|
$ |
176,226 |
|
|
$ |
243,895 |
|
|
$ |
566,624 |
|
|
$ |
728,896 |
|
Stock-based |
|
|
106,827 |
|
|
|
112,106 |
|
|
|
340,445 |
|
|
|
669,146 |
|
Total |
|
$ |
283,053 |
|
|
$ |
356,001 |
|
|
$ |
907,069 |
|
|
$ |
1,398,042 |
|
6.
Stock-Based Compensation
The
Company periodically issues common stock and stock options as incentive compensation to directors and as compensation for the services
of employees, contractors, and consultants of the Company.
On
July 14, 2020, the Board of Directors of the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which was subsequently
approved by the stockholders of the Company. The 2020 Plan provides for the granting of equity-based awards, consisting of stock options,
restricted stock, restricted stock units, stock appreciation rights, and other stock-based awards to employees, officers, directors and
consultants of the Company and its affiliates, initially for a total of 233,333 shares of the Company’s common stock, under terms
and conditions as determined by the Company’s Board of Directors. On October 7, 2022, the stockholders of the Company approved
an amendment to the 2020 Plan to increase the number of common shares issuable thereunder by 180,000 shares, to a total of 413,333 shares.
On November 27, 2023, the stockholders of the Company approved an amendment to the 2020 Plan to increase the number of common shares
issuable thereunder by 336,667 shares, to a total of 750,000 shares.
As
of September 30, 2024, unexpired stock options for 623,232 shares were issued and outstanding under the 2020 Plan and 126,768 shares
were available for issuance under the 2020 Plan.
The
fair value of a stock option award is calculated on the grant date using the Black-Scholes option-pricing model. The risk-free interest
rate is based on the U.S. Treasury yield curve in effect as of the grant date. The expected dividend yield assumption is based on the
Company’s expectation of dividend payouts and is assumed to be zero. The estimated volatility is based on the historical volatility
of the Company’s common stock, calculated utilizing a look-back period approximately equal to the contractual life of the stock
option being granted. Unless sufficient historical exercise data is available, the expected life of the stock option is calculated as
the mid-point between the vesting period and the contractual term (the “simplified method”). The fair market value of the
common stock is determined by reference to the quoted market price of the common stock on the grant date.
For
stock options requiring an assessment of value during the nine months ended September 30, 2024, the fair value of each stock option award
was estimated using the Black-Scholes option-pricing model with the following assumptions:
Schedule
of Fair Value of Each Option Award Estimated Assumption
Risk-free interest rate |
|
|
3.550%
to 4.290 |
% |
Expected dividend
yield |
|
|
0 |
% |
Expected volatility |
|
|
125.59%
to 126.45 |
% |
Expected life |
|
|
2.5
to 3.5 years |
|
For
stock options requiring an assessment of value during the nine months ended September 30, 2023, the fair value of each stock option award
was estimated using the Black-Scholes option-pricing model with the following assumptions:
Risk-free
interest rate |
|
|
4.565%
to 4.843 |
% |
Expected
dividend yield |
|
|
0 |
% |
Expected
volatility |
|
|
138.05 |
% |
Expected
life |
|
|
4.0
years |
|
On
July 15, 2020, as amended on August 12, 2020, in connection with the employment agreement with Eric J. Forman, Mr. Forman was granted
stock options to purchase 5,833 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options
are exercisable for a period of five years at an exercise price of $71.40 per share, which was equal to the closing market price of the
Company’s common stock on the grant date. The options vested 25% on August 12, 2020, 2021 and 2022, respectively, with the final
25% vesting on August 12, 2023. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model,
was determined to be $400,855 ($68.718 per share), of which $100,214 was attributable to the portion of the stock options fully vested
on August 12, 2020 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock
options was charged to operations ratably from August 12, 2020 through August 12, 2023. The Company recorded a charge to general and
administrative costs in the consolidated statement of operations for the three months and nine months ended September 30, 2023 of $11,806
and $61,501, respectively, with respect to these stock options.
On
August 1, 2020, in connection with an employment agreement with Dr. James S. Miser, M.D., Dr. Miser was granted stock options to purchase
8,333 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options are exercisable for a
period of five years at an exercise price of $71.40 per share, which was equal to the closing market price of the Company’s common
stock on the effective date of the employment agreement. The options vested 25% on August 1, 2020, 2021 and 2022, respectively, with
the final 25% vesting on August 1, 2023. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing
model, was determined to be $572,650 ($68.718 per share), of which $143,163 was attributable to the portion of the stock options fully
vested on August 1, 2020 and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the
stock options was charged to operations ratably from August 1, 2020 through August 1, 2023. The Company recorded a charge to general
and administrative costs in the consolidated statement of operations for the three months and nine months ended September 30, 2023 of
$12,551 and $83,544, respectively, with respect to these stock options.
On
August 12, 2020, in connection with the employment agreement with Robert N. Weingarten, Mr. Weingarten was granted stock options to purchase
5,833 shares of the Company’s common stock. The options can be exercised on a cashless basis. The options are exercisable for a
period of five years at an exercise price of $71.40 per share, which was equal to the closing market price of the Company’s common
stock on the grant date. The options vested 25% on August 12, 2020, 2021 and 2022, respectively, with the final 25% vesting on August
12, 2023. The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to
be $400,855 ($68.718 per share), of which $100,214 was attributable to the portion of the stock options fully vested on August 12, 2020
and was therefore charged to operations on that date. The remaining unvested portion of the fair value of the stock options was charged
to operations ratably from August 12, 2020 through August 12, 2023. The Company recorded a charge to general and administrative costs
in the consolidated statement of operations for the three months and nine months ended September 30, 2023 of $11,806 and $61,501, respectively,
with respect to these stock options.
On
May 11, 2021, the Board of Directors appointed Regina Brown to the Board of Directors. In connection with her appointment to the Board
of Directors, and in accordance with the Company’s cash and equity compensation package for members of the Board of Directors,
Ms. Brown was granted stock options to purchase 25,000 shares of the Company’s common stock, exercisable for a period of five years
at an exercise price of $28.00 per share (the closing market price on the grant date), vesting 50% on the grant date and the remainder
vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested. The fair value of these stock options, as calculated
pursuant to the Black-Scholes option-pricing model, was determined to be $658,363 ($26.335 per share), of which $329,188 was attributable
to the portion of the stock options fully vested on May 11, 2021 and was therefore charged to operations on that date. The remaining
unvested portion of the fair value of the stock options was charged to operations ratably from May 11, 2021 through June 30, 2023. The
Company recorded a charge to general and administrative costs in the consolidated statement of operations for the three months and nine
months ended September 30, 2023 of $0 and $76,388, respectively, with respect to these stock options.
On
June 30, 2021, the Board of Directors, in accordance with the Company’s cash and equity compensation package for members of the
Board of Directors, granted to each of the five non-officer directors of the Company stock options to purchase 10,000 shares (a total
of 50,000 shares) of the Company’s common stock, exercisable for a period of five years at an exercise price of $30.30 per share
(the closing market price on the grant date), vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested.
The fair value of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $1,421,095
($28.423 per share), which was charged to operations ratably from July 1, 2021 through June 30, 2023. The Company recorded a charge to
general and administrative costs in the consolidated statement of operations for the three months and nine months ended September 30,
2023 of $0 and $211,413, respectively, with respect to these stock options.
On
June 17, 2022, the Board of Directors appointed Bas van der Baan to the Board of Directors. In connection with his appointment to the
Board of Directors, and in accordance with the Company’s cash and equity compensation package for members of the Board of Directors,
Mr. Baan was granted stock options to purchase 25,000 shares of the Company’s common stock, exercisable for a period of five years
at an exercise price of $7.40 per share (the closing market price on the grant date), vesting 50% on the grant date and the remainder
vesting 12.5% on the last day of each subsequent calendar quarter-end until fully vested, subject to continued service. The fair value
of these stock options, as calculated pursuant to the Black-Scholes option-pricing model, was determined to be $158,525 ($6.341 per share),
of which $79,263 was attributable to the portion of the stock options fully vested on June 17, 2022 and was therefore charged to operations
on that date. The remaining unvested portion of the fair value of the stock options was charged to operations ratably from June 17, 2022
through June 30, 2024. During the three months ended September 30, 2024 and 2023, the Company recorded charges to general and administrative
costs in the consolidated statement of operations of $0 and $