Inhibikase Therapeutics, Inc. (IKT)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes to those statements included elsewhere in this Annual Report. This discussion and analysis and other parts of this Annual Report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Annual Report. You should carefully read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage pharmaceutical company developing therapeutics to modify the course of cardiopulmonary and other diseases including those that arise from aberrant signaling through the Abelson Tyrosine Kinase, and type III receptor tyrosine kinases including platelet derived growth factor receptors and c-KIT. The Company’s multi-therapeutic pipeline is developing IKT-001, a prodrug of imatinib mesylate, for Pulmonary Arterial Hypertension (“PAH”). We have completed non-human primate safety studies and a bioequivalence clinical trial in healthy volunteers to determine the doses of IKT-001 that are equivalent to imatinib mesylate and the results are being utilized to set the doses in a Phase 2b trial to determine if IKT-001 could be a disease-modifying treatment for PAH. We have also developed risvodetinib (also known as IkT-148009), a selective inhibitor of the non-receptor Abelson Tyrosine Kinases that targets the treatment of Parkinson’s disease inside and outside the brain. In 2021, we commenced clinical development of risvodetinib. In 2023, we initiated the Phase 2 201 trial (“201 Trial”) for risvodetinib (IkT-148009) as a treatment for Parkinson’s disease and completed that trial on October 6, 2024. In January 2025, we reported results from the 201 Trial and decided to pause further development of risvodetinib as we focus our resources on advancing lead program IKT-001 in PAH. We will consider our strategic options for the risvodetinib program.

IKT-001 and PAH

IKT-001 emerged from the Company’s medicinal chemistry program that aimed to develop improvements to drugs that inhibit Abelson Tyrosine Kinase and type III receptor tyrosine kinases. IKT-001, a prodrug of imatinib mesylate, was designed to improve areas of the molecule that might play a role in the gastrointestinal (“GI”) side effects commonly observed with oral imatinib mesylate, the current standard of care. A three-part dose finding/dose equivalence study in 66 healthy volunteers (known as ‘the 501 trial’) was completed with IKT-001 in 2023. The study was designed to evaluate the 96-hour single-dose pharmacokinetics of imatinib delivered as IKT-001 and determine the dose relationship between IKT-001 and imatinib mesylate. Based on this study it was determined that bioequivalence was established with a 300 mg dose of IKT-001 to a dose of 230 mg of imatinib mesylate while a 500 mg dose of IKT-001 was established as bioequivalent to a dose of 383 mg of imatinib mesylate. These doses are adequate to cover the target systemically and were similar to the doses of imatinib mesylate used in the Phase 3 IMPRES trial in PAH.

On January 19, 2024, we met with the Food and Drug Administration (“FDA”) Hematological Malignancy Review Team (“Review Team”) in a Pre-New Drug Application (“pre-NDA”), meeting to discuss our bioequivalence studies of IKT-001 and its path to approval. All questions were addressed and summarized in official meeting minutes the issued by the FDA on February 12, 2024. During the meeting, we inquired whether additional clinical studies would be needed to seek approval and discussed manufacturing and quality control requirements for approval. The Review Team acknowledged that the 505(b)(2) pathway appeared to be the appropriate pathway for approval of IKT-001. The Review Team also discussed the possible difference between IKT-001 and imatinib mesylate absorption in the gut and recommended that we evaluate whether IKT-001 and imatinib mesylate behave differently with respect to certain gut transporters that regulate absorption. This evaluation was completed and determined that IKT-001 and imatinib mesylate have similar behavior toward the transporters P-glycoprotein (“PGP”) and the Breast Cancer Resistance Protein (“BCRP”). Finally, a number of recommendations were discussed to prevent the potential mix-up between IKT-001 and imatinib mesylate either at the pharmacy or by patients for two drugs delivering the same active ingredient. The Company discussed alternate dosage forms for IKT-001 relative to imatinib mesylate as the primary mitigation strategy and will provide a justification of the dosage forms chosen and why they are unlikely to cause medication errors if/when the Company submits a New Drug Application (“NDA”) for approval of IKT-001 in these cancer indications.

PAH is a rare disease of the pulmonary microvasculature found in 15 to 50 persons per million within the United States and Europe. The global PAH market size was valued at $7.66 billion in 2023 and is estimated to grow at a compound annual growth rate of 5.4% between 2024 to 2030. Most of the treatments that constitute the standard of care (e.g. ERAs, PDE5s, prostacyclins) primarily act as vasodilators. In 2024, sotatercept was approved for the treatment of PAH on top of SOC. Sotatercept is recombinant fusion protein

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that acts as a trap for transforming growth factor-beta superfamily ligands, including activin A and bone morphogenetic protein 9. These ligands may play a role in the development and progression of PAH by promoting cell proliferation and fibrosis.

The success of sotatercept has created renewed enthusiasm around the anti-proliferative pathways in PAH. As previously mentioned, imatinib inhibits Abelson Tyrosine Kinase and type III receptor tyrosine kinases and through these pathways inhibits Platelet-derived growth factor receptor which is involved in cell proliferation and angiogenesis as well as Stem cell factor receptor which targets mast cells and other hematopoietic progenitors. Through these targets imatinib may inhibit vascular smooth muscle cell proliferation and fibrosis. This pathway may provide an alternate pathway for disease modification in PAH.

The first reports of the use of imatinib in PAH were published in 2005 and 2006. A phase 2, RCT was subsequently conducted showing clinical benefit of imatinib in PAH. In 2013, the outcome of a Phase 3 trial (IMPRES) evaluating imatinib mesylate as a treatment for PAH was reported, demonstrating that imatinib may improve key parameters associated with PAH. In this study imatinib improved exercise capacity and hemodynamics in patients with advanced PAH but approval was precluded because of the bleeding risk associated with concomitant anti-coagulant therapy and the high discontinuation rate in the imatinib group.

As we considered revisiting the use of imatinib in PAH, we recognized that changes in standard-of-care for these patients may have alleviated much of the safety risk previously observed for imatinib in PAH patients. This analysis prompted us to file a pre-IND (“PIND”) meeting request to discuss the application of IKT-001 as a potential disease-modifying treatment for PAH. To evaluate this further, members of the Company met with the FDA Division of Cardiology and Nephrology in a PIND meeting to discuss our plan to utilize IKT-001 in a Phase 2b efficacy, safety and tolerability study in PAH. At the meeting, the FDA confirmed that IKT-001 would be viewed as a New Molecular Entity (“NME”) and that the appropriate path for approval remained to be the 505(b)(2) statute. This opens up the possibility of IKT-001 being granted NME status and market exclusivity on approval. The FDA requested at the PIND meeting that we conduct a comparative cell-culture based study of the human Ether-a-go-go-related Gene (“hERG”) ion channel, a standard cardiovascular safety test performed for any NME for which a new Investigative New Drug Application (“IND”) is to be opened. Neither IKT-001 nor imatinib mesylate were found to be inhibitors of hERG. Following completion of this study, the IND was filed with the FDA on August 9, 2024 and we were cleared to initiate a Phase 2b trial on September 9, 2024. On October 21, 2024, we closed a private placement with gross proceeds of approximately $110 million, before deducting placement fees and offering expenses, to support this program. If the warrants issued in such offering are exercised for cash, the total gross proceeds from the financing may be up to $275 million. We intend to use the net proceeds from the private placement to finance the initiation of a Phase 2b trial in PAH and for general corporate purposes. We have had discussions with the FDA regarding Orphan Drug Designation (“ODD”) for delivery of imatinib by IKT-001 for PAH and plan to apply for ODD once the required pre-clinical studies are complete.

We currently have commercialization rights to all of our development programs and patent protection in the United States until 2033 for IKT-001 with upcoming patent application filings potentially extending patent protection for certain methods of treatment using IKT-001 until 2045.

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Components of Operating Results

Operating Expenses

Research and Development

Research and development activities account for a significant portion of our operating expenses. Research and development expenses accounted for 60% and 67% of our operating expenses for the years ended December 31, 2024 and 2023, respectively. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and prodrug technologies include:

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external research and development expenses, including expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”), preclinical testing organizations, clinical testing organizations, contract manufacturing organizations (“CMOs”), academic and non-profit institutions and consultants;

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fees related to our license and collaboration agreements;

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personnel related expenses, including salaries, benefits and non-cash stock-based compensation expense; and

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other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis from inception of the program.

Program expenses include expenses associated with our most advanced product candidates and the discovery and development of compounds that are potential future candidates. We also track external expenses associated with our third-party research and development efforts. All external costs are tracked by therapeutic indication. We do not track personnel or other operating expenses incurred for our research and development programs on a program-specific basis. These expenses primarily relate to salaries and benefits and stock-based compensation and office consumables.

At this time, we can only estimate the nature, timing and costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

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our ability to add and retain key research and development personnel and other key employees;

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our ability to successfully file IND and NDA applications with the FDA;

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our ability to conduct and commence trials;

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our ability to establish an appropriate safety profile with IND-enabling toxicology studies;

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our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;

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our successful enrollment in and completion of our current and future clinical trials;

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the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;

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our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules;

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our ability to establish agreements with third party manufacturers for clinical supply for any future clinical trials and commercial manufacturing, if our product candidates are approved;

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the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;

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our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved;

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our receipt of marketing approvals from applicable regulatory authorities;

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the impact of the outbreak of the COVID-19 pandemic or other future pandemics;

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our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and

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the continued acceptable safety profiles of the product candidates following approval.

A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase for the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, laboratory and related expenses, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other research and development expenses in the table below:

Selling, General and Administrative

Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense, expenses for outside professional services and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expenses related to our offices in Lexington, Massachusetts and Atlanta, Georgia not otherwise included in research and development expenses.

We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities and other administrative and professional services. We are also increasing our administrative headcount as a public company and as we advance our product candidates through clinical development, which will also likely require us to increase our selling, general and administrative expenses.

Results of Operations

Comparison of the Years Ended December 31, 2024 and 2023

The following table sets forth the significant components of our results of operations:

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Grant Revenue

Grant revenue for the year ended December 31, 2024 decreased by $260,501 or 100.0% to $0 from $260,501 in the prior year. The Company has no active grants during the period ended December 31, 2024.

Research and Development

Research and development expenses increased by $3,592,200 or 26.4% to $17,210,548 from $13,618,348 in the prior year. The $3.6 million increase was due to an increase of $4.5 million in stock-based compensation, an increase of $1.7 million in PAH expenses, a $0.3 million increase in risvodetinib (IkT-148009) expenses partially offset by a net decrease of $2.9 million in all other research and development activities.

Selling, General and Administrative

Selling, general and administrative expenses increased by $4,646,575 or 69.0% to $11,378,520 from $6,731,945 in the prior year. The $4.6 million increase was primarily driven by an increase of $3.1 million in stock-based compensation, a $2.0 million increase in legal, consulting and compliance related fees partially offset by a $0.3 million decrease in Directors and Officers (“D&O”) insurance, a $0.5 million decrease in advertising and promotions and a net increase of $0.3 million in all other selling, general and administrative expenses.

Interest Income

Interest income increased by $8,273 or 0.8% to $1,069,182 from $1,060,909 in the prior comparable period. The increase was driven by interest earned on our cash, cash equivalents and marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

From our inception up until our December 2020 Initial Public Offering, we funded our operations primarily through private, state and federal contracts and grants.

At December 31, 2024, the Company had cash, cash equivalents, and marketable securities of $97,543,528.

The Company has incurred recurring losses and at December 31, 2024 had an accumulated deficit of $94,420,611.

Future Funding Requirements

To date, we have not generated any revenue from the sale of commercial products. We do not expect to generate any significant revenue from product sales unless and until we obtain regulatory approval of and successfully commercialize any of our product candidates and we do not know when, or if, this will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any future approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, following the completion of the December 2020 initial public offering, we incurred additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, if ever, we expect to finance our incremental cash needs through a combination of equity offerings, debt financings, working capital lines of credit, grant funding and potential licenses and collaboration agreements. Additional working capital may not be available on commercially reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, reduce or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

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Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $94,420,611 at December 31, 2024. We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities.

We may seek to fund our operations through public equity or private equity or debt financings, as well as other sources. However, we may be unable to raise additional working capital, or if we are able to raise additional working capital we may be unable to do so on commercially favorable terms. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to continue to develop our product candidates.

We believe that our existing cash, cash equivalents and marketable securities as of December 31, 2024 will enable us to fund our operating requirements for at least the next twelve months following the date of this Annual Report. However, we have based these estimates on assumptions that may prove to be wrong, and we could deplete our working capital sooner than planned.

The timing and amount of our operating expenditures will depend largely on:

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the timing and progress of preclinical and clinical development activities;

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the number and scope of preclinical and clinical programs we decide to pursue;

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the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements;

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our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements;

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our ability and success in securing manufacturing relationships with third parties or, in the future, in establishing and operating a manufacturing facility;

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the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims;

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the cost and timing of regulatory approvals;

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our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates;

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the costs and ongoing investments to in-license and/or acquire additional technologies; and

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possible delays or interruptions to preclinical studies, clinical trials, our receipt of services from our third-party service providers on whom we rely, or our supply chain due to epidemics or pandemics.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Cash Flows

The following table sets forth a summary of the primary sources and uses of cash for each of the years presented below:

Net Cash Flows Used in Operating Activities

Net cash flows used in operating activities for the year ended December 31, 2024 totaled $19,148,067, and consisted primarily of a net loss of $27.5 million adjusted for non-cash stock compensation of  $8.1 million, a decrease in prepaid expenses and other assets of $0.6 million, an increase in accounts payable of $0.3 million, an increase in accrued expenses and other current liabilities of $0.4 million and an increase in prepaid research and development of $0.1 million.

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Net cash flows used in operating activities for the year ended December 31, 2023 totaled $18,085,043, and consisted primarily of a net loss of $19.0 million adjusted for non-cash stock compensation of  $0.5 million, depreciation and lease expense of $0.2 million, increase in prepaid expenses and other assets of $0.1 million, decrease in accounts payable of $0.5 million, decrease in prepaid research and development of $0.9 million and a decrease in accrued expenses and other current liabilities of $0.1 million.

Cash (Used in) Provided by Investing Activities

Net cash flows used in investing activities for the year ended December 31, 2024, totaled $37,004,201, of which $60.5 million was used for the purchase of marketable securities investments and $23.5 million was provided by maturity of marketable securities.

Net cash flows provided by investing activities for the year ended December 31, 2023, totaled $11,656,666, of which $29.4 million was used for the purchase of marketable securities investments and $41.1 million was provided by maturity of marketable securities.

Cash Provided by Financing Activities

Net cash provided by financing activities for the year ended December 31, 2024 totaled $103,477,668, which consisted of $3.8 million of net proceeds from issuance of common stock and pre-funded warrants in connection with our May 2024 Offering and our ATM Offering and $99.6 million of net proceeds from issuance of common stock and pre-funded warrants in connection with our October 2024 Offering.

Net cash provided by financing activities for the year ended December 31, 2023 totaled $8,405,003, which consisted of $8.5 million net from the issuance of common stock and pre-funded warrants and $0.1 million of deferred offering costs.

Contractual Obligations and Commitments

On April 18, 2022, the Company entered into an operating lease agreement through September 30, 2025 for its office space in Lexington, Massachusetts. The Lexington lease contains escalating payments during the lease period. Upon execution of this lease agreement, the Company prepaid one month of rent, applied to the first month's rent, and a security deposit, which will be held in escrow and credited at the termination of the lease. Our total lease obligation is $114,966, consisting of minimum annual rental obligations of $114,966 for fiscal year 2025.

Critical Accounting Policies and Significant Judgments and Estimates

This 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 generally accepted accounting principles in the United States (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this Annual Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Research and Development Expenses

We record research and development expenses to operations as incurred. Research and development expenses represent costs incurred by us for the discovery and development of our product candidates and the development of our RAMP™ drug discovery program and prodrug technologies and include: employee-related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense; external research and development expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants; costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; license fees; and other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

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As part of the process of preparing consolidated financial statements, we are required to estimate and accrue expenses. A portion of our research and development expenses are external costs, which we track on a program-specific basis. We record the estimated expenses of research and development activities conducted by third party service providers as they are incurred and provided within research and development expense in the statements of operations. These services include the conduct of preclinical studies and consulting services. These costs are a significant component of our research and development expenses. Typically, upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred, except for payments relating to intellectual property rights with future alternative use which will be expensed when the intellectual property is in use. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Costs for research and development activities are recognized based on costs incurred. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from external clinical research organizations and other third-party service providers. Due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

Stock-Based Compensation

We have granted stock-based awards, consisting of non-qualified stock options, to our employees, certain non-employee consultants and members of our board of directors, both past and present. We measure stock-based compensation expense for stock options granted to our employees and directors on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.

We estimate the fair value of stock options granted to our employees and directors on the grant date, and the resulting stock-based compensation expense, using either the Black-Scholes-Merton option pricing model or the Monte Carlo option pricing model.

The intrinsic value of all in the money outstanding options as of December 31, 2024 was approximately $31.1 million, based on the closing price of our common stock of $3.25 per share at December 31, 2024, and $15.8 million of the intrinsic value of options was exercisable.

JOBS Act

The Jumpstart Our Business Startups Act of 2012 (“JOBS Act”) permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards.

We will remain an emerging growth company until the earliest of  (i) the last day of our first fiscal year in which we have total annual gross revenues of  $1.235 billion or more; (ii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years; or (iv) the last day of our fiscal year following the fifth anniversary of the date of the completion of our December 2020 public offering.

Recent Accounting Pronouncements

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards has had or may have a material impact on the Company's consolidated financial statements or disclosures

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes to those statements included elsewhere in this Report. This discussion and analysis and other parts of this Report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Report. You should carefully read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage pharmaceutical company developing protein kinase inhibitor therapeutics to modify the course of Parkinson’s disease (“PD”), Parkinson’s-related disorders and other diseases of the Abelson Tyrosine Kinases. The Company’s multi-therapeutic pipeline has a primary focus on neurodegeneration and its lead program utilizing Risvodetinib (also known as IkT-148009), a selective inhibitor of the non-receptor Abelson Tyrosine Kinases, targets the treatment of Parkinson’s disease inside and outside the brain as well as other diseases that arise from Abelson Tyrosine Kinases. In 2021, we commenced clinical development of Risvodetinib (IkT-148009), which we believe can modify the course of Parkinson’s disease including its manifestation in the gastrointestinal tract, or GI. In January, 2023, the Company initiated its Phase 2 program, termed ‘the 201 trial’ (www.the201trial.com), for Risvodetinib (IkT-148009) as a treatment for Parkinson’s disease and began the process of opening up to 34 sites in the U.S. As of March 22, 2024, 32 sites are open and actively evaluating prospective trial participants. 73 participants have been enrolled, 20 prospective participants are in medical screening and 48 potential participants are being evaluated for suitability to initiate medical screening. Thirty-four participants have completed the 12-week dosing period. As of March 22, 2024, 15 mild and two moderate possibly treatment-related adverse events have been reported across all enrolled patients taking Risvodetinib (IkT-148009). Depending on the timing of the last enrolled patient, results from this trial may be reported in the second half of 2024. Monthly site enrollments have increased month-over-month since our patient outreach program was initiated. As such, we believe a more rapid path to enrollment is emerging through the public outreach/awareness campaign led by the ‘the201trial.com’ website. The emerging path to complete enrollment has prompted us to take further advantage of this multi-dose study by planning to extend the 201 trial by an additional 12 months, subject to additional resources.

The twelve-week 201 trial is evaluating three doses in participants who have untreated Parkinson’s disease on a staggered schedule and will be placebo controlled with 1:1:1:1 randomization. The primary endpoints of this trial are safety and tolerability and a hierarchy of 15 secondary endpoints will evaluate treatment benefit in the brain and GI tract. The recent analysis of 11 patients who participated in the 201 trial prior to the temporary clinical hold issued by the U.S. Food and Drug Administration (“FDA”) in November, 2022, which was lifted in January, 2023, suggested that Risvodetinib (IkT-148009) may have some effect on disease. These participants were withdrawn from the trial following the FDA’s temporary clinical hold. As detailed at the Movement Disorder Society Congress held August 2023, the primary secondary endpoint is a functional assessment comprised of the sum of Parts 2 and 3 of the Movement Disorder Society Universal Parkinson’s Disease Rating Scale (MDS-UPDRS Parts II+III). This sum showed an average -8.7 point improvement in the three participants on the 200 mg dose relative to baseline, while three placebo participants increased by +1.7 points; this represents an average spread of -10.4 points. A lower (or negative) change relative to placebo of greater than -3 to -6 points might be considered a measure of improvement. Given the small sample size on this dose, we believe it is premature to conclude a clinical benefit, but this observation reinforces our desire to extend the trial for an additional 12 months to potentially obtain a clear picture of clinical benefit over a total measurement of 15 months.

In March 2023, we opened our IND for Risvodetinib (IkT-148009) as a treatment for the Parkinson’s-related orphan disease Multiple System Atrophy, or MSA. Our evaluation of Risvodetinib (IkT-148009) in MSA was benefited by a grant received from the National Institute of Neurological Diseases and Stroke, an Institute of the National Institutes of Health, for $0.39 million to fund animal model studies of Risvodetinib (IkT-148009) as a therapy for MSA. Two different animal studies were undertaken to evaluate whether Risvodetinib (IkT-148009) could have an impact on disease in the animal. One model evaluated the ability of Risvodetinib (IkT-148009) to modify disease early in its progression, while the second model is evaluating whether Risvodetinib (IkT-148009) can correct functional loss much later in the disease course. The early progression model study has now been shown to preserve nearly normal functional activity following 20 weeks of once daily dosing relative to untreated controls. Preservation of function in this model occurred with substantial reduction of the underlying alpha-synuclein protein pathology. The second model evaluating Risvodetinib (IkT-148009) late in the disease course is ongoing. In addition, Risvodetinib (IkT-148009) was recently given Orphan Drug Designation by the FDA for the treatment of MSA. We plan to initiate a Phase 2 study in MSA patients in up to nineteen sites in the EU, and up to six sites in the U.S. involving at least 120 patients, and we are presently seeking non-dilutive resources to initiate and execute this trial in its entirety. The proposed Phase 2 study will have primary endpoints in safety, tolerability and efficacy

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following once daily dosing at two dose levels for 12-months. We plan to submit complementary regulatory documents for Risvodetinib (IkT-148009) to European Union authorities in 2024.

We are also developing platform technologies to improve delivery of protein kinase inhibitors in patients. One example of our potential ability to improve drug delivery is IkT-001Pro, a prodrug of the anticancer agent imatinib mesylate, which is intended to treat Stable Phase Chronic Myelogenous Leukemia, or SP-CML. IkT-001Pro has completed a three-part dose finding/dose equivalence study in 66 healthy volunteers (known as ‘the 501 trial’). The study was designed to evaluate the 96-hour pharmacokinetics of imatinib delivered as IkT-001Pro and determine the dose of IkT-001Pro that can deliver the equivalent of either 400 mg or 600 mg imatinib mesylate. As of the date of this Report, bioequivalence to 400 mg imatinib mesylate has been established to our satisfaction for a 600 mg dose of IkT-001Pro. We further evaluated 600 mg imatinib mesylate and believe that a 900 mg dose of IkT-001Pro is the preferred dose of IkT-001Pro to deliver a dose of imatinib equivalent to 600 mg imatinib mesylate. We studied 800 mg IkT-001Pro and found it to be nearly equivalent to 600 mg imatinib mesylate. We intend to study a 1200 mg dose of IkT-001Pro to cover the full range of doses approved for imatinib mesylate to treat up to 11 adult and pediatric blood cancers.

On January 19, 2024, members of the Company along with its medical oncology consultants met with the FDA Review Team (the “Review Team”) from the Division of Hematologic Malignancies in a Pre-NDA meeting to discuss our bioequivalence studies of IkT-001Pro and its path to approval. All questions were addressed and summarized in official meeting minutes issued by the FDA on February 12, 2024. During the meeting we inquired whether additional clinical studies may be needed to seek approval and discussed manufacturing and quality control requirements for approval. The Review Team acknowledged that the 505(b)(2) pathway appears to be the appropriate pathway for approval of IkT-001Pro and indicated that, pending formal review of our clinical data, clinical studies completed to date indicate that 600 mg and 800 mg IkT-001Pro provides similar exposures to 400 mg and 600 mg imatinib mesylate, respectively, subject to review of the NDA upon filing. In addition, given that imatinib mesylate is approved for use between 300 mg and 800 mg once daily for a variety of blood and gastrointestinal cancers, the Review Team stated that if we intend to seek approval across all currently approved indications, we should evaluate additional dose(s) as needed to measure the safety, tolerability and bioequivalent dose of IkT-001Pro that would deliver up to 800 mg, the highest approved dose of imatinib mesylate. The Review Team also discussed the possible difference between IkT-001Pro and imatinib mesylate absorption in the gut and recommended that we evaluate whether IkT-001Pro and imatinib mesylate behave differently with respect to certain gut transporters that regulate absorption. We are in alignment with the FDA and are initiating the necessary pre-clinical test to evaluate this further to ensure that delivery of imatinib by IkT-001Pro mimics imatinib mesylate in all respects. Finally, a number of recommendations were discussed to prevent the potential mix-up between 001Pro and imatinib mesylate either at the pharmacy or by patients for two drugs delivering the same active ingredient. We discussed alternate dosage forms for IkT-001Pro relative to imatinib mesylate as the primary mitigation strategy and will provide a justification of the dosage forms chosen and why they are unlikely to cause medication errors. To ensure that we meet the manufacturing requirements for approval, we will request milestone-based meetings with the Review Team as we complete the required manufacturing and quality control processes.

A second example of our potential ability to improve drug delivery through formulation development is the tablet formulation of Risvodetinib (IkT-148009), which we measured to nearly double the concentration of Risvodetinib (IkT-148009) delivered relative to the same dose previously administered as a gelatin capsule. This provides the opportunity to lower the effective oral dose, which could lead to further safety and tolerability improvements for Risvodetinib (IkT-148009). The Company plans to introduce the tablet formulation into the 12-month extension study, once implemented, as well as in all future clinical trials.

In our opinion, the multi-decade failures in the treatment of neurodegenerative diseases such as PD result from a lack of understanding of the biochemistry of the disease processes involved. Neurodegeneration is marked by a progressive degeneration and loss of function of neurons which send and receive signals to and from the brain. Historically, the cause of a neurodegenerative disease was thought to be a “plaque” made up of a misfolded and/or aggregated protein(s). Therapeutic approaches, therefore, sought to remove “plaque” from the brain. A “plaque”-focused treatment strategy has failed to alter the course of Parkinson’s disease in two Phase 2 trials that reported results in 2020 and 2021. We believe we are different. We identified the proteins that become dysfunctional in a disease pathway and sought to understand how a dysfunctional protein causes disease and published those results in several high-profile peer reviewed publications. We believe our approach to PD and other neurological diseases has identified the underlying cause of disease and led to an understanding of how individual proteins are linked together to define the disease process. We believe our approach to neurodegenerative disease is validated by our 2022 and 2023 publications and oral presentations at the major academic and industry conferences in Parkinson’s and Alzheimer’s diseases.

We currently have worldwide commercialization rights to all of our development programs and IP protection until 2033 for IkT-001Pro and 2036 for Risvodetinib (IkT-148009). Additional filings could extend this period of exclusivity longer.

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Components of Operating Results

Operating Expenses

Research and Development

Research and development activities account for a significant portion of our operating expenses. Research and development expenses accounted for 67% and 66% of our operating expenses for the years ended December 31, 2023 and 2022, respectively. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and prodrug technologies include:

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external research and development expenses, including expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants;

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fees related to our license and collaboration agreements;

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personnel related expenses, including salaries, benefits and non-cash stock-based compensation expense; and

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other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis from inception of the program.

Program expenses include expenses associated with our most advanced product candidates and the discovery and development of compounds that are potential future candidates. We also track external expenses associated with our third-party research and development efforts. All external costs are tracked by therapeutic indication. We do not track personnel or other operating expenses incurred for our research and development programs on a program-specific basis. These expenses primarily relate to salaries and benefits and stock-based compensation and office consumables.

At this time, we can only estimate the nature, timing and costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

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our ability to add and retain key research and development personnel and other key employees;

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our ability to successfully file IND and NDA applications with the FDA;

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our ability to conduct and commence trials;

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our ability to establish an appropriate safety profile with IND-enabling toxicology studies;

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our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;

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our successful enrollment in and completion of our current and future clinical trials;

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the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;

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our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules;

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our ability to establish agreements with third party manufacturers for clinical supply for any future clinical trials and commercial manufacturing, if our product candidates are approved;

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the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;

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our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved;

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our receipt of marketing approvals from applicable regulatory authorities;

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•
the impact of the outbreak of the COVID-19 pandemic or other future pandemics;

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our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and

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the continued acceptable safety profiles of the product candidates following approval.

A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase for the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, laboratory and related expenses, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other research and development expenses in the table below:

Selling, General and Administrative

Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense, expenses for outside professional services and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expenses related to our offices in Lexington, Massachusetts and Atlanta, Georgia not otherwise included in research and development expenses.

We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to further increase our administrative headcount when operating as a public company and as we advance our product candidates through clinical development, which will also likely require us to increase our selling, general and administrative expenses.

Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

The following table sets forth the significant components of our results of operations:

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Grant Revenue

Grant revenue for the year ended December 31, 2023 increased by $137,061 or 111.0% to $260,501 from $123,440 in the prior year. The increase was driven by increased grant research activity during 2023 compared to 2022. The Company utilized its working capital and personnel resources in 2023 to carry on its Phase I and II clinical trials in addition to its grant research activity.

Research and Development

Research and development expenses increased by $1,583,363 or 13.2% to $13,618,348 from $12,034,985 in the prior year. The $1.6 million increase was primarily due to a $1.5 million increase in CML expenditures, a decrease of $0.6 million in PD expenses and a net increase of $0.7 million in all other research and development activities.

Selling, General and Administrative

Selling, general and administrative expenses increased by $514,882 or 8.3% to $6,731,945 from $6,217,063 in the prior year. The increase was primarily the result of an increase in investor relations costs of $1.0 million and an increase in employee costs of $0.3 million that were partly offset by a decrease in D&O insurance of $0.6 million, a decrease in legal and consulting fees of $0.4 million and a net increase of $0.2 million in all other selling, general and administrative expenses.

Interest Income

Interest income increased by $986,456 or 1,324.9% to $1,060,909 from $74,453 in the prior comparable period. The increase was driven by interest earned on U.S. Treasuries and money market instruments commencing in July 2022.

Liquidity and Capital Resources

Sources of Liquidity

From our inception up until our December 2020 Initial Public Offering, we funded our operations primarily through private, state and federal contracts and grants. From our inception through December 31, 2023, we generated aggregate cash proceeds of approximately $23.9 million from private, state and federal contracts and grants. In December 2020, June 2021, and January 2023, the Company raised approximately $14.6 million, $41.1 million, and $8.5 million respectively, in net proceeds from its 2020 IPO, its June 2021 Offering, and its January 2023 Offering, respectively.

On February 1, 2024, the Company entered into an At the Market Offering Agreement (the “At the Market Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (the “Agent”), pursuant to which the Company may, from time to time, issue and sell shares of its Common Stock, in an aggregate offering price of up to $5,659,255 through the Agent. Under the terms of the At the Market Agreement, the Agent may sell the shares of Common Stock at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act. 290,564 shares of Common Stock were sold pursuant to the At the Market Agreement and $777,910 net proceeds were received from the Agent.

At December 31, 2023, the Company had working capital of $10,772,447, an accumulated deficit of $66,900,725, cash and cash equivalents of $9,165,179, marketable securities of $4,086,873 and accounts payable and accrued expenses of $2,906,722.

Future Funding Requirements

To date, we have not generated any revenue from the sale of commercial products. We do not expect to generate any significant revenue from product sales unless and until we obtain regulatory approval of and successfully commercialize any of our product candidates and we do not know when, or if, this will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any future approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, following the completion of the December 2020 initial public offering, we incurred additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

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Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, if ever, we expect to finance our incremental cash needs through a combination of equity offerings, debt financings, working capital lines of credit, grant funding and potential licenses and collaboration agreements. Additional working capital may not be available on commercially reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, reduce or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $66,900,725 at December 31, 2023. We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities.

We may seek to fund our operations through public equity or private equity or debt financings, as well as other sources. However, we may be unable to raise additional working capital, or if we are able to raise additional working capital we may be unable to do so on commercially favorable terms. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to continue to develop our product candidates.

The Company had working capital of $10,772,447 at December 31, 2023. The Company intends to raise additional working capital in order to carry on its operations and current clinical trials. However, as certain elements of the Company’s operating plan are outside of the Company’s control, including the receipt of anticipated future grants and funding from future capital raises, they cannot be considered probable. If the Company does not receive additional working capital from future anticipated grants and future anticipated capital raises, its operating plan will be limited in scope to operating at its pre-IPO levels which were limited to basic research and development but excluded current and planned future clinical trials.

We have identified conditions and events that raise doubt about our ability to continue as a going concern and our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited financial statements for the years ended December 31, 2023 and 2022 included in this Report. These conditions raise substantial doubt regarding our ability to continue as a going concern for a period of one year after the date the financial statements included in this Report are issued. Our management’s plans to alleviate the conditions that raise substantial doubt may include suspending or delaying certain research projects and capital expenditures and eliminating certain future operating expenses in order to fund operations at reduced levels for us to continue as a going concern for a period of 12 months from the date the financial statements are issued.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

The timing and amount of our operating expenditures will depend largely on:

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the timing and progress of preclinical and clinical development activities;

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the number and scope of preclinical and clinical programs we decide to pursue;

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possible delays or interruptions to preclinical studies, clinical trials, our receipt of services from our third-party service providers on whom we rely, or our supply chain due to pandemics such as COVID-19;

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the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements;

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our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements;

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our ability and success in securing manufacturing relationships with third parties or, in the future, in establishing and operating a manufacturing facility;

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the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims;

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the cost and timing of regulatory approvals;

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our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and

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the costs and ongoing investments to in-license and/or acquire additional technologies.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Cash Flows

The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below:

Net Cash Flows Used in Operating Activities

Net cash flows used in operating activities for the year ended December 31, 2023 totaled $18,085,043, and consisted primarily of a net loss of $19,028,883 adjusted for non-cash stock compensation of  $500,148, depreciation and lease expense of $172,746, decrease in accounts receivable of $39,881, increase in prepaid expenses and other assets of $55,387, decrease in accounts payable of $504,406, decrease in prepaid research and development of $897,803 and an decrease in accrued expenses and other current liabilities of $138,481.

Net cash flows used in operating activities for the year ended December 31, 2022 totaled $17,351,103, and consisted primarily of a net loss of $18,054,155 adjusted for non-cash stock compensation of  $458,147, depreciation and lease expense of $34,920, decrease in accounts receivable of $70,258, decrease in prepaid expenses and other assets of $1,339,273, decrease in accounts payable of $61,395, increase in prepaid research and development of $1,010,616 and an increase in accrued expenses and other current liabilities of $317,325.

Cash Provided by (Used in) Investing Activities

Net cash flows provided by investing activities for the year ended December 31, 2023, totaled $11,656,666, of which $14,238 was used for the purchase of equipment, $29,426,101 was used for the purchase of marketable securities investments and $41,097,005 was provided by maturity of marketable securities.

Net cash flows used in investing activities for the year ended December 31, 2022, totaled $16,005,708, of which $243,255 was used for the purchase of equipment, $20,725,462 was used for the purchase of marketable securities investments and $4,963,009 was provided by maturity of marketable securities.

Cash Provided by (Used in) Financing Activities

Net cash provided by financing activities for the year ended December 31, 2023 totaled $8,405,003, which consisted of $8.54 million net from issuance of common stock and pre-funded warrants and $138,556 of deferred offering costs.

Net cash used in financing activities for the year ended December 31, 2022 totaled $204,769, which consisted of $44,142 in proceeds from exercise of stock options and $248,911 in debt payments.

We raised $14.6 million, $41.1 million and $8.5 million in net proceeds from our 2020 IPO, June 2021 Offering and January 2023 Offering. We expect this trend of raising capital from a combination of grants and equity sales to continue for the foreseeable future.

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Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.

Contractual Obligations and Commitments

On April 18, 2022, the Company entered into an operating lease agreement through September 30, 2025 for its office space in Lexington, Massachusetts to replace the office space in Boston, Massachusetts. The Company vacated the Boston office during the third quarter of 2022 without further contractual obligation. The Lexington lease contains escalating payments during the lease period. Upon execution of this lease agreement, the Company prepaid one month of rent, applied to the first month's rent, and a security deposit, which will be held in escrow and credited at the termination of the lease. Our total lease obligation is $265,061, consisting of minimum annual rental obligations of $150,095 for fiscal year 2024 and $114,966 for fiscal year 2025.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Research and Development Expenses

We record research and development expenses to operations as incurred. Research and development expenses represent costs incurred by us for the discovery and development of our product candidates and the development of our RAMP™ drug discovery program and prodrug technologies and include: employee-related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense; external research and development expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants; costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; license fees; and other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

As part of the process of preparing financial statements, we are required to estimate and accrue expenses. A portion of our research and development expenses are external costs, which we track on a program-specific basis. We record the estimated expenses of research and development activities conducted by third party service providers as they are incurred and provided within research and development expense in the statements of operations. These services include the conduct of preclinical studies and consulting services. These costs are a significant component of our research and development expenses. Typically, upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred, except for payments relating to intellectual property rights with future alternative use which will be expensed when the intellectual property is in use. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

Costs for research and development activities are recognized based on costs incurred. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from external clinical research organizations and other third-party service providers. Due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

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Stock-Based Compensation

We have granted stock-based awards, consisting of non-qualified stock options, to our employees, certain non-employee consultants and members of our board of directors, both past and present. We measure stock-based compensation expense for stock options granted to our employees and directors on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.

We estimate the fair value of stock options granted to our employees and directors on the grant date, and the resulting stock-based compensation expense, using the Black-Scholes-Merton option pricing model.

The intrinsic value of all in the money outstanding options as of December 31, 2023 was approximately $0.0 million, based on the closing price of our common stock of $1.27 per share at December 31, 2023, all of which is related to vested options.

JOBS Act

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards.

We will remain an emerging growth company until the earliest of  (i) the last day of our first fiscal year in which we have total annual gross revenues of  $1.07 billion or more; (ii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years; or (iv) the last day of our fiscal year following the fifth anniversary of the date of the completion of our December 2020 public offering.

Recent Accounting Pronouncements

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards has had or may have a material impact on the Company's consolidated financial statements or disclosures

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes to those statements included elsewhere in this Report. This discussion and analysis and other parts of this Report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Report. You should carefully read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

We are a clinical-stage pharmaceutical company developing protein kinase inhibitor therapeutics to modify the course of Parkinson’s disease ("PD"), Parkinson’s-related disorders and other diseases of the Abelson Tyrosine Kinases. The Company’s multi-therapeutic pipeline has a primary focus on neurodegeneration and its lead program utilizing IkT-148009, c-Abl inhibitor, targets the treatment of Parkinson’s disease inside and outside the brain as well as other diseases that arise from Abelson Tyrosine Kinases. In 2021, we commenced clinical development of IkT-148009, which we believe can modify the course of Parkinson’s disease including its manifestation in the gastrointestinal tract, or GI. The FDA review of the Phase 1/1b data and the protocol for the Phase 2a three-month dosing study resulted in the FDA agreeing with the Company’s view that it was appropriate for the Phase 2a study to begin, prompting the Company to initiate the Phase 2a study, the 201 trial, at the end of May 2022. In October 2022, an IND to expand use of IkT-148009 into the Parkinson’s-related disease Multiple System Atrophy, or MSA, was filed with the FDA. On November 7, 2022, following review of the IND for IkT-148009 as a treatment for MSA, the FDA notified the Company that it was placing the IkT-148009 programs for Parkinson’s disease and MSA on clinical hold. The FDA lifted the full clinical hold in January 2023 for the Parkinson’s programs and in March 2023 on the MSA program, opening the IND for MSA. Twenty of 35 planned sites will be open as of this filing, with screening anticipated to start in early 2Q23 and 120 patients planned to be enrolled overall. The 201 in Parkinson’s trial will start screening patients for enrollment at 50 mg and 100 mg, with the 200 mg dose added back into the trial following submission of the safety and steady-state pharmacokinetic data of the 200 mg dose that was collected in March 2023. Once this data is submitted, the 200 mg dose will be added to the trial after 15 patients have been randomized to 50 mg, 100 mg or placebo groups. The FDA further requested the measurement of visual acuity and examination of the cornea and lens to complement the analysis of retina, macula and fundus that was already part of the ocular monitoring program in the 201 trial.

Our evaluation of IkT-148009 in MSA has been benefited by a grant received from the National Institute of Neurological Diseases and Stroke, an Institute of the National Institutes of Health, for $0.39 million to fund animal model studies of IkT-148009 as a therapy for MSA. These animal studies are now under way and our pursuit of clinical development will depend on a demonstration of therapeutic benefit in at least one animal model to proceed with clinical development. We plan to initiate a Phase 2 safety and tolerability study in MSA patients in up to nineteen sites in the EU, and up to six sites in the U.S. involving 60 patients. The proposed Phase 2 study will have primary endpoints in safety and tolerability and secondary endpoints in MSA efficacy following once daily dosing at two dose levels for 6-months. If IkT-148009 is not a successful therapy in MSA animal model studies, the Phase 2 clinical study will not proceed. In this circumstance, the regulatory effort for IkT-148009 in the EU would be applied to future studies of Parkinson’s Disease efficacy in the EU. The Company plans to pursue orphan drug designation for IkT-148009 to treat MSA with regulators in the U.S. and Europe.

The Company is also developing platform technologies for alternate ways to deliver protein kinase inhibitors in patients. Our first example of this technology is IkT-001Pro, a prodrug of the anticancer agent imatinib mesylate, to treat Stable Phase Chronic Myelogenous Leukemia (SP-CML). Pursuant to its IND which was cleared by the FDA in August 2022, IkT-001Pro is being evaluated in a two-part dose finding/dose equivalence study in up to 59 healthy volunteers (the 501 trial). The study is designed to evaluate the 96-hour pharmacokinetics of imatinib delivered as IkT-001Pro and determine the dose of IkT-001Pro that can deliver the equivalent 400 mg imatinib, the standard-of-care dose for SP-CML. As of this writing, three of four dose escalation cohorts have completed the trial; it is anticipated that the dose finding/dose equivalence program will be completed by the end of the second quarter of 2023. Only four mild adverse events have been observed, none of clinical significance for IkT-001Pro. IkT-001Pro has high oral bioavailability and a pharmacokinetic profile of delivered imatinib that closely matches the exposure of imatinib delivered as 400 mg imatinib mesylate. Following the 501 study, Inhibikase will confer with the FDA and seek agreement on the requirements for the NDA process following the proposed approval path for IkT-001Pro under the 505(b)(2) approval pathway. The Company will simultaneously pursue a superiority study comparing the selected doses of IkT-001Pro to standard-of-care 400 mg imatinib in SP-CML patients using a novel, two-period-wait-list- crossover-switching study.

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For both IkT-148009 and IkT-001Pro, we have completed clinical batch manufacturing of a film-coated tablet formulation. The bioequivalence studies with IkT-001Pro have already implemented these tablets into the study. A pharmacokinetic bridging study with two different tablet formulations of IkT-148009 is planned to be completed in 2023.

In our opinion, the multi-decade failures in the treatment of neurodegenerative diseases such as PD result from a lack of understanding of the biochemistry of the disease processes involved. Neurodegeneration is marked by a progressive degeneration and loss of function of neurons which send and receive signals to and from the brain. Historically, the cause of a neurodegenerative disease was thought to be a “plaque” made up of a misfolded and/ or aggregated protein(s). Therapeutic approaches, therefore, sought to remove “plaque” from the brain. A “plaque”-focused treatment strategy has failed to alter the course of Parkinson’s disease in two Phase 2 trials that reported results in 2020 and 2021. We believe we are different. We identified the proteins that become dysfunctional in a disease pathway and sought to understand how a dysfunctional protein causes disease. We believe our approach to PD and other neurological diseases has identified the underlying cause of disease and led to an understanding of how individual proteins are linked together to define the disease process. Using this strategy, we believe we have discovered at least one enzyme that plays a pivotal role in the disease process for PD, the Abelson Tyrosin Kinase c-Abl. We have developed novel protein kinase inhibitors against c-Abl, which we believe can alter the disease course for PD. C-Abl chemically modifies the “plaque” proteins in PD, known as alpha-synuclein. Chemical modification creates what we believe to be the true toxic entity of the disease. Treatment with IkT-148009 may prevent chemical modification and, at least in animal models of progressive disease, leads to near clearance of the toxic form of alpha-synuclein from the affected neurons.

We believe we are one of the pioneers of the application of protein kinase inhibitors to non-oncology indications, including neurodegeneration and infectious diseases, as well as their more traditional role in the treatment of cancer. Prior to becoming a publicly-traded company in 2020, more than 50% of the Company’s total funding had been received from Private, State and Federal granting agencies, including the National Institutes of Health, the Department of Defense and the Michael J. Fox Foundation, with the balance the result of equity sales in the private sector. Private, State and Federal granting agencies use extensive scientific peer review in deciding which projects to fund that could impact human disease. Our ability to advance the Company on the basis of scientific peer review reflects the potential our scientific peers see for the possible success of our therapeutic programs.

Impact of the ongoing military conflict between Russia and Ukraine

In late February 2022, Russia invaded Ukraine, significantly amplifying already existing geopolitical tensions among Russia and other countries in the region and in the west, including the U.S. Russia’s invasion, the responses of countries and political bodies to Russia’s actions, the larger overarching tensions, and Ukraine’s military response and the potential for wider conflict have resulted in financial market volatility and capital markets disruption and inflation, potentially increasing in magnitude, and could have severe adverse effects on regional and global economic markets and international relations. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.

Following Russia’s actions, various countries, including the U.S., Canada and the United Kingdom, as well as the European Union, issued broad-ranging economic sanctions against Russia. Such sanctions included, among other things, a prohibition on doing business with certain Russian companies, officials and oligarchs; a commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications (SWIFT) electronic banking network that connects banks globally; a ban on Russian oil and gas imports to the U.S.; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The current sanctions (and potential further sanctions in response to continued Russian military activity) and other actions may have adverse effects on regional and global economic markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds and increasing the volatility of our stock price. Any of the above mentioned factors could affect our business, prospects, financial condition, and operating results.

We are also monitoring other macro-economic and geopolitical developments such as inflation and cyber security risks so that we can be prepared to react to new developments as they arise.

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Components of Operating Results

Operating Expenses

Research and Development

Research and development activities account for a significant portion of our operating expenses. Research and development expenses accounted for 66% and 64% of our operating expenses for the years ended December 31, 2022 and 2021, respectively. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and prodrug technologies include:

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external research and development expenses, including: expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants;

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fees related to our license and collaboration agreements;

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personnel related expenses, including salaries, benefits and non-cash stock-based compensation expense; and

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other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis from inception of the program.

Program expenses include expenses associated with our most advanced product candidates and the discovery and development of compounds that are potential future candidates. We also track external expenses associated with our third-party research and development efforts. All external costs are tracked by therapeutic indication. We do not track personnel or other operating expenses incurred for our research and development programs on a program-specific basis. These expenses primarily relate to salaries and benefits and stock-based compensation and office consumables.

At this time, we can only estimate the nature, timing and costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

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our ability to add and retain key research and development personnel and other key employees;

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our ability to successfully file IND and NDA applications with the FDA;

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our ability to conduct and commence trials;

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our ability to establish an appropriate safety profile with IND-enabling toxicology studies;

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our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;

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our successful enrollment in and completion of our current and future clinical trials;

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the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;

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our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules;

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our ability to establish agreements with third party manufacturers for clinical supply for any future clinical trials and commercial manufacturing, if our product candidates are approved;

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the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;

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our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved;

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our receipt of marketing approvals from applicable regulatory authorities;

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the impact of the outbreak of the COVID-19 pandemic which has had an adverse impact on our business, including our preclinical studies and clinical trials;

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our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and

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the continued acceptable safety profiles of the product candidates following approval.

A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase for the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

Our direct research and development expenses consist principally of external costs, such as fees paid to investigators, consultants, central laboratories and CROs in connection with our clinical studies, and costs related to acquiring and manufacturing clinical study materials. We allocate salary and benefit costs directly related to specific programs. We do not allocate personnel-related discretionary bonus or stock-based compensation costs, laboratory and related expenses, depreciation or other indirect costs that are deployed across multiple projects under development and, as such, the costs are separately classified as other research and development expenses in the table below:

Selling, General and Administrative

Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense, expenses for outside professional services and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expenses related to our offices in Lexington, Massachusetts and Atlanta, Georgia not otherwise included in research and development expenses.

We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to further increase our administrative headcount when operating as a public company and as we advance our product candidates through clinical development, which will also likely require us to increase our selling, general and administrative expenses.

Results of Operations

Comparison of the Years Ended December 31, 2022 and 2021

The following table sets forth the significant components of our results of operations:

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Grant Revenue

Grant revenue for the year ended December 31, 2022 decreased by $2,977,165 or 96% to $123,440 from $3,100,605 in the prior year. The decrease was driven by decreased grant research activity during 2022 compared to 2021. During 2022, the Company’s focus shifted toward advancing its Phase I and II clinical trials which were not submitted for grant revenue. The Company utilized its working capital and personnel resources in 2022 to carry on its Phase I and II clinical trial in addition to its grant research activity.

Research and Development

Research and development expenses increased by $675,881 or 6% to $12,034,985 from $11,359,104 in the prior year. The increase was driven by a $0.7 million increase due to ongoing non-grant related research and development activities mostly related to the Phase 2a ‘201’ clinical trial.

Selling, General and Administrative

Selling, general and administrative expenses decreased by $290,578 or 4.5% to $6,217,063 from $6,507,641 in the prior year. The decrease was primarily the result of decreased warrant expense of $0.7 million, and stock based compensation of $0.5 million, which were offset by an increase in legal fees of $0.4 million, regulatory and compliance fees of $0.2 million, and a net increase of $0.3 million for other normal operating expenses.

Interest Income

Interest income increased by $74,453 from $nil in the prior comparable period. The increase was driven by interest earned on U.S. Treasuries and money market instruments commencing in July 2022. In the prior comparable period, the Company held cash in non-interest bearing accounts.

Interest Expense

Interest expense decreased by $19,923 or 100% to $nil from $19,923 in the prior year. The decrease was driven by the extinguishment of all outstanding notes payable by January 3, 2022.

Liquidity and Capital Resources

Sources of Liquidity

From our inception up until our December 2020 Initial Public Offering, we funded our operations primarily through private, state and federal contracts and grants. From our inception through December 31, 2022, we generated aggregate cash proceeds of approximately $23.6 million from private, state and federal contracts and grants. In December 2020, June 2021, and January 2023, the Company raised approximately $14.6 million, $41.1 million, and $8.7 million respectively, in net proceeds from its 2020 IPO, its June 2021 Offering, and its January 2023 Offering , respectively.

On May 16, 2022, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co., as sales agent (the “Agent”), pursuant to which the Company may, from time to time, issue and sell shares of its Common Stock, in an aggregate offering price of up to $9,801,287 through the Agent. Under the terms of the Equity Distribution Agreement, the Agent may sell the shares of Common Stock at market prices by any method that is deemed to be an “at the market offering” as defined in Rule 415 under the Securities Act. No shares of Common Stock were sold pursuant to the Equity Distribution Agreement. Effective January 25, 2023, the Company terminated the Equity Distribution Agreement by providing a notice of termination to the Agent in accordance with the terms of the Equity Distribution Agreement.

At December 31, 2022, the Company had working capital of $20,675,677, an accumulated deficit of $47,871,842, cash and cash equivalents of $7,188,553 and marketable securities of $15,861,620 and accounts payable and accrued expenses of $3,549,609.

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Future Funding Requirements

To date, we have not generated any revenue from the sale of commercial products. We do not expect to generate any significant revenue from product sales unless and until we obtain regulatory approval of and successfully commercialize any of our product candidates and we do not know when, or if, this will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any future approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, following the completion of the December 2020 initial public offering, we incurred additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, if ever, we expect to finance our incremental cash needs through a combination of equity offerings, debt financings, working capital lines of credit, grant funding and potential licenses and collaboration agreements. Additional working capital may not be available on commercially reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, reduce or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $47,871,842 at December 31, 2022. We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities.

We may seek to fund our operations through public equity or private equity or debt financings, as well as other sources. However, we may be unable to raise additional working capital, or if we are able to raise additional working capital we may be unable to do so on commercially favorable terms. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to continue to develop our product candidates.

The Company had working capital of $20,675,677 at December 31, 2022. The Company intends to raise additional working capital in order to carry on its operations and current clinical trials. However, as certain elements of the Company’s operating plan are outside of the Company’s control, including the receipt of anticipated future grants and funding from a future capital raise, they cannot be considered probable. If the Company does not receive additional working capital from future anticipated grants and future anticipated capital raises, its operating plan will be limited in scope to operating at its pre-IPO levels which were limited to basic research and development but excluded current and planned future clinical trials.

We believe that our existing cash resources as of December 31, 2022 and our January 2023 offering will enable us to fund our operating requirements into the fourth quarter of 2024. However, we have based these estimates on assumptions that may prove to be wrong, and we could deplete our working capital sooner than planned.

The timing and amount of our operating expenditures will depend largely on:

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the timing and progress of preclinical and clinical development activities;

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the number and scope of preclinical and clinical programs we decide to pursue;

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possible delays or interruptions to preclinical studies, clinical trials, our receipt of services from our third-party service providers on whom we rely, or our supply chain due to the COVID-19 pandemic;

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the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements;

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our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements;

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our ability and success in securing manufacturing relationships with third parties or, in the future, in establishing and operating a manufacturing facility;

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the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims;

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the cost and timing of regulatory approvals;

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our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and

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the costs and ongoing investments to in-license and/or acquire additional technologies.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Cash Flows

The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below:

Net Cash Flows Used in Operating Activities

Net cash flows used in operating activities for the year ended December 31, 2022 totaled $17,351,103, and consisted primarily of a net loss of $18,054,155 adjusted for non-cash stock compensation of  $458,147, depreciation and lease expense of $34,920, decrease in accounts receivable of $70,258, decrease in prepaid expenses and other assets of $1,339,273, decrease in accounts payable of $61,395, increase in prepaid research and development of $1,010,616 and an increase in accrued expenses and other current liabilities of $317,325.

Net cash flows used in operating activities for the year ended December 31, 2021 totaled $14,297,051, and consisted primarily of a net loss of $14,786,063 adjusted for non-cash stock compensation of  $1,531,876, non-cash warrant expense of $688,784, non-cash consulting fees of $60,391, non-cash PPP loan forgiveness of $27,550, decrease in accounts receivable of $110,141, decrease in prepaid expenses and other assets of $1,447,888, decrease in accounts payable of $630,902, decrease in deferred revenue of $2,325,741, increase in prepaid research and development of $667,356 and an increase in accrued expenses and other current liabilities of $2,082,827.

Cash Used in Investing Activities

Net cash flows used in investing activities for the year ended December 31, 2022, totaled $16,005,708, of which $243,255 was used for the purchase of equipment and $20,725,462 was used for the purchase of marketable securities investments and $4,963,009 was provided by maturity of marketable securities.

Cash (Used in)/Provided by Financing Activities

Net cash used by financing activities for the year ended December 31, 2022 totaled $204,769, which consisted of $44,142 in proceeds from exercise of stock options and $248,911 in debt payments.

Net cash flows provided by financing activities for the year ended December 31, 2021 totaled $41,093,671, which consisted of $41,135,357 in proceeds from issuance of common stock in connection with our June 2021 Offering offset by $42,534 in debt payments.

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We raised $14.6 million, $41.1 million and $8.7 million in net proceeds from our 2020 IPO, June 2021 Offering and January 2023 Offering. We expect this trend of raising capital from a combination of grants and equity sales to continue for the foreseeable future.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.

Contractual Obligations and Commitments

In June 2018, the Company entered into a one-year, noncancelable operating lease for space in Boston, Massachusetts. The total lease obligation was $54,000, payable in 12 equal monthly installments commencing August 1, 2018. On April 18, 2022, the Company entered into an operating lease agreement through September 30, 2025 for its office space in Lexington, Massachusetts to replace the office space in Boston, Massachusetts. The Company vacated the Boston office during the third quarter of 2022 without further contractual obligation. The Lexington lease contains escalating payments during the lease period. Upon execution of this lease agreement, the Company prepaid one month of rent, applied to the first month's rent, and a security deposit, which will be held in escrow and credited at the termination of the lease. Our total lease obligation is $444,366, consisting of minimum annual rental obligations of $33,469 for fiscal year 2022, $145,836 for fiscal year 2023, $150,095 for fiscal year 2024 and $114,966 for fiscal year 2025.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Research and Development Expenses

We record research and development expenses to operations as incurred. Research and development expenses represent costs incurred by us for the discovery and development of our product candidates and the development of our RAMP™ drug discovery program and prodrug technologies and include: employee-related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense; external research and development expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants; costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; license fees; and other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

As part of the process of preparing financial statements, we are required to estimate and accrue expenses. A portion of our research and development expenses are external costs, which we track on a program-specific basis. We record the estimated expenses of research and development activities conducted by third party service providers as they are incurred and provided within research and development expense in the statements of operations. These services include the conduct of preclinical studies and consulting services. These costs are a significant component of our research and development expenses. Typically, upfront payments and milestone payments made for the licensing of technology are expensed as research and development in the period in which they are incurred, except for payments relating to intellectual property rights with future alternative use which will be expensed when the intellectual property is in use. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. The prepaid amounts are expensed as the related goods are delivered or the services are performed.

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Costs for research and development activities are recognized based on costs incurred. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from external clinical research organizations and other third-party service providers. Due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

Stock-Based Compensation

We have granted stock-based awards, consisting of non-qualified stock options, to our employees, certain non-employee consultants and members of our board of directors, both past and present. We measure stock-based compensation expense for stock options granted to our employees and directors on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.

We estimate the fair value of stock options granted to our employees and directors on the grant date, and the resulting stock-based compensation expense, using the Black-Scholes-Merton option pricing model. The Black-Scholes-Merton option pricing model requires management to determine the fair market value of the common stock at the date of the award. Prior to our December 2020 initial public offering, the fair market value of the common stock was determined utilizing the risk adjusted net present value, or rNPV, option-pricing model as performed by an independent third-party consultant. Since December 22, 2020, the fair market value of the common stock is determined by reference to the closing price of our common stock on the Nasdaq Capital Market on the grant date of the option.

For options or warrants granted to non-employee consultants prior to January 1, 2020, the fair value of these options was remeasured using the Black-Scholes-Merton option-pricing model reflecting the same assumptions as applied to employee options in each of the reported periods, other than the expected life, which is assumed to be the remaining contractual life of the option.

Prior to January 1, 2020, we accounted for stock-based compensation arrangements with non-employee consultants using a fair value approach. The estimated fair value of unvested options granted to non-employee consultants was remeasured at each reporting date through the date of final vesting. As a result, the non-cash charge to operations for non-employee options with vesting conditions was affected in each reporting period by changes in the estimated fair value of our common stock. We adjust for actual forfeitures as they occur.

On January 1, 2020, the Company adopted ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting ("ASU 2018-07"), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employee consultants. The estimated fair value of unvested options granted to non-employee consultants is no longer remeasured at each reporting date through the date of final vesting. The adoption of this ASU did not have a material impact on the Company’s financial statements.

As there had been no public market for our common stock prior to our December 2020 initial public offering, the estimated fair value of our common stock had been determined by an independent third-party consultant using an rNPV process and approved by our board of directors. The factors utilized by such independent third-party consultant included, but were not limited to: our results of operations, financial position and capital resources; current business conditions and projections; the lack of marketability of our common stock; the hiring of key personnel and the experience of management; the risk inherent in the development of our products and our stage of development and material risks related to its business; the fact that the option grants involve illiquid securities in a private company; and the likelihood of achieving a liquidity event, such as an initial public offering or sale, in light of prevailing market conditions.

All of our common stock valuations prior to our December 2020 initial public offering have been prepared by an independent third-party consultant using the rNPV method.

Following the closing of our December 2020 initial public offering, our board of directors will determine the fair market value of our stock-based awards based on the closing price of our common stock as reported on the date of grant on the Nasdaq Capital Market exchange on which our common stock is traded.

The intrinsic value of all in the money outstanding options as of December 31, 2022 was approximately $0.3 million, based on the closing price of our common stock of $0.50 per share at December 31, 2022, all of which is related to vested options.

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JOBS Act

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards.

We will remain an emerging growth company until the earliest of  (i) the last day of our first fiscal year in which we have total annual gross revenues of  $1.07 billion or more; (ii) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years; or (iv) the last day of our fiscal year following the fifth anniversary of the date of the completion of our December 2020 public offering.

Recent Accounting Pronouncements

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards has had or may have a material impact on the Company's consolidated financial statements or disclosures

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes to those statements included elsewhere in this Report. This discussion and analysis and other parts of this Report contain forward-looking statements based upon current beliefs, plans and expectations related to future events and our future financial performance that involve risks, uncertainties and assumptions, such as statements regarding our intentions, plans, objectives, expectations, forecasts and projections. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the section titled “Risk Factors” and elsewhere in this Report. You should carefully read the “Risk Factors” to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled “Special Note Regarding Forward-Looking Statements.”

Overview

Inhibikase Therapeutics, Inc. ("Inhibikase" or "the Company") is a clinical stage pharmaceutical company developing therapeutics for Parkinson’s Disease, or PD, and related disorders that arise inside and outside of the brain. In 2021, we commenced clinical development of IkT-148009, a small molecule Abelson Tyrosine Kinase inhibitor we believe can modify the course of Parkinson’s disease including its manifestation in the gastrointestinal tract, or GI. Results to date of our ongoing Phase 1 Single and Multiple Ascending Dose escalation study (SAD and MAD, respectively) in older and elderly healthy volunteers have revealed important insights into the safety, tolerability and pharmacokinetics of IkT-148009 in human subjects. We enrolled 88 subjects in the Phase 1 study. Results from the Phase 1 study have shown that IkT-148009 has a half-life of greater than 24 hours and just a 25 mg once daily oral dose in older and elderly healthy subjects in our Phase 1 study reached exposures that are consistent with the exposure to the drug that resulted in therapeutic efficacy in animal models of progressive Parkinson’s disease. In July 2021, the U.S. Food and Drug Administration, or FDA, agreed with the Company’s plan to initiate its Phase 1b study in Parkinson’s patients which commenced dosing October 19, 2021, and one cohort of 8 patients have completed the Phase 1b study to date. The Company anticipates initiating Phase 2 studies of IkT-148009 in Parkinson’s disease in the second quarter of 2022, subject to agreements with the FDA. Clinical development of IkT-148009 for the GI complications in PD patients will cross-reference the Phase 1 study of IkT-148009 for the treatment of PD. Our efforts in Parkinson’s disease are being extended into other Parkinson’s-related indications, such as the Orphan Disease Multiple Systems Atrophy, or MSA. Depending on the outcome of animal model studies of MSA, the Company may initiate Phase 2 studies of IkT-148009 in MSA in the third quarter of 2022 following regulatory submissions in the U.S. and European Union, or EU. Clinical development of the Company’s oncology asset, IkT-001Pro, is anticipated to begin shortly after submission of the Company’s Investigational New Drug application, or IND, for IkT-001Pro; submission of the IND is anticipated to occur in the second quarter of 2022.

Our advancement of the pre-clinical and clinical development program for MSA was benefited by a grant received from the National Institute of Neurological Diseases and Stroke, or NINDS, an Institute of the National Institutes of Health, for $385,888 to fund animal model studies of IkT-148009 as a therapy for MSA. These animal studies are now underway. At the same time, we are preparing regulatory submissions to the European Medicines Agency, or EMA, and to the FDA to enable a Phase 2a safety and tolerability study in MSA patients in up to 19 sites in the EU, and up to 6 sites in the U.S. involving 60 patients. The proposed clinical Phase 2a study will have primary endpoints in safety and tolerability and exploratory endpoints in MSA efficacy parameters with 3 month daily dosing at two different doses. While we complete the set-up of the Phase 2a study in MSA, we will complete at least one model study to support advancing IkT-148009 into patients in the third-quarter of 2022. Dosing of patients with MSA will depend on a positive outcome in animal model studies; if IkT-148009 is not a successful therapy in MSA model studies, the Phase 2a clinical study will not proceed. In this circumstance, the regulatory effort for IkT-148009 in the EU would be applied to future studies of Parkinson’s Disease efficacy in the EU. The Company plans to pursue orphan drug designation for IkT-148009 to treat Multiple System Atrophy with regulators in the U.S. and Europe.

We have also advanced clinical batch manufacturing and pill formulation for our platform prodrug technology involving IkT-001Pro. Clinical batch manufacturing was completed in the fourth quarter of 2021 and an IND is planned to be filed in the second quarter of 2022, to include the production of the data package for the final pill formulation.

In the ensuing 12 months, the Company anticipates reporting the full outcomes of its completed Phase 1 study of IkT-148009 in older and elderly healthy subjects, reporting the outcomes of the completed chronic toxicology studies in rats and monkeys for IkT-148009 to enable chronic drug administration in Parkinson’s patients, completing a Phase 1b extension study of IkT-148009 in Parkinson’s patients and initiating its Phase 2a efficacy study in Parkinson’s patients. Advancement of the Company’s Phase 2a program in PD with IkT-148009 is subject to review and agreements with the FDA. We further anticipate initiating the Phase 2a clinical study in MSA in the U.S. and EU, subject to a successful model study outcome and agreements with regulatory agencies in the U.S. and EU. Finally, we intend to advance IkT-001Pro through IND filing and initiate clinical development, possibly completing clinical development in 2022.

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Our programs utilize small molecule, oral protein kinase inhibitors to treat Parkinson’s Disease, or PD, and its GI complications. We have shown in animal models of progressive PD that our lead clinical candidate, IkT-148009, is a brain penetrant Abelson tyrosine kinase, or c-Abl inhibitor, that halts disease progression and reverses functional loss in the brain and reverses neurological dysfunction in the GI tract. We have not yet observed reversal of functional loss in humans. The ability to halt progression and restore function was shown in animal models of progressive disease that mimic the rate of disease progression and the extent of functional loss in the brain and/or the GI tract as found in patients with PD. We believe our therapeutic approach is disease-modifying. Our understanding of how and why PD progresses has led us to believe that functional loss in Parkinson’s patients may be at least partially reversed. Based on the measurements in animal models, we believe patients treated with IkT-148009 may have their disease progression slowed or halted, we may see a progressive reduction in the need for symptomatic or supportive therapy and/or we may ultimately eliminate the need for symptomatic therapy. However, as of the date of this Report, it is unknown whether the disease modification seen in the animal models will occur in patients following treatment with IkT-148009.

In our opinion, the multi-decade failures in the treatment of neurodegenerative diseases such as PD result from a lack of understanding of the biochemistry of the disease processes involved. Neurodegeneration is marked by a progressive degeneration and loss of function of neurons which send and receive signals from and to the brain. Historically, the cause of a neurodegenerative disease was thought to be a “plaque” made up of a misfolded and/or aggregated protein(s). Therapeutic approaches, therefore, sought to remove “plaque” from the brain. To our knowledge, a “plaque”-focused treatment strategy has not resulted in approval of any medication that can alter the course of a neurodegenerative disease, and has not resulted in a therapeutic benefit in PD. We believe we are different. We identified the proteins that become dysfunctional in a disease pathway and sought to understand how a dysfunctional protein causes disease. We believe our approach to PD and other neurological diseases has identified the underlying cause of disease and led to an understanding of how individual proteins are linked together to define the disease process. Using this strategy, we believe we have discovered at least one enzyme that plays a pivotal role in the disease process for PD, c-Abl. We have developed novel protein kinase inhibitors against c-Abl, which we believe can alter the disease course for PD. c-Abl chemically modifies one of the “plaque” proteins in PD, known as alpha-synuclein. Chemical modification creates what we believe to be the true toxic entity of the disease. Treatment with IkT-148009 may prevent chemical modification and, at least in animal models of progressive disease, leads to clearance of the toxic form of alpha-synuclein from some or all tissues affected in the disease.

In addition to programs in PD, our platform drug discovery and delivery technologies have identified additional opportunities, including a potential treatment for bacterial or viral infections in the brain using a single agent at fixed dose, and an oncology opportunity in stable-phase Chronic Myelogenous Leukemia, or CML. Our product for CML, IkT-001Pro, is a prodrug of the anticancer agent Imatinib. A prodrug is a compound that, after administration, is metabolized by the body into a pharmacologically active drug. Imatinib is an FDA designated orphan drug and is the standard-of-care treatment for stable-phase CML. In the United States, orphan drug designation entitles a party to incentives such as opportunities for grant funding towards clinical trial costs, tax advantages, and user-fee waivers. We plan to submit an IND to initiate clinical development for IkT-001Pro in the second quarter of 2022. We intend to submit a new drug application, or NDA, for IkT-001Pro pursuant to Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, which specifies the requirements for approval. This pathway would allow us to rely, in part, on data in the public domain or the FDA’s prior conclusions regarding the safety and effectiveness of an approved compound. Consistent with FDA guidance on the 505(b)(2) pathway, we will seek input from the FDA as to what should be included in the application prior to submission of the 505(b)(2) application. Pursuit of this oncology opportunity will seek to validate the pharmacology advantage of our prodrug technology in a well understood patient population with an approved drug substance. If we are able to validate IkT-001Pro in oncology, we will evaluate whether the pharmacology advantages we discover about IkT-001Pro could be applied to novel drug substances, such as IkT-148009.

We believe we are one of the pioneers of the application of protein kinase inhibitors to non-oncology indications, including neurodegeneration and infectious diseases, as well as their more traditional role in the treatment of cancer. We have been a frequent recipient of private, state and federal grants for its Research and Development activities, to include funding from the National Institutes of Health, the Department of Defense and the Michael J. Fox Foundation. We believe our ability to advance the Company on the basis of scientific peer review reflects the potential our scientific peers see for the possible success of our therapeutic programs.

The development of our product candidates could be disrupted and materially adversely affected in the future by a pandemic, epidemic or outbreak of an infectious disease like the recent outbreak of COVID-19. For example, as a result of measures imposed by the governments in regions affected by COVID-19, businesses and schools have been suspended due to quarantines or “stay at home” orders intended to contain this outbreak. COVID-19 continues to have a global impact. International stock markets continue to reflect the uncertainty associated with the slow-down in the world economies and the reduced levels of international travel experienced since the beginning of January 2020. As of the date of this Report, the COVID-19 pandemic has had an impact upon our operations, although we believe that impact is not material. We are still assessing our business plans and the impact COVID-19 may have on our ability to advance the development of our product candidates or to raise financing to support the development of our product candidates, but no assurances can be given that this analysis will enable us to avoid part or all of any impact from the spread of COVID-19 or its consequences, including downturns in business sentiment generally or in our sector in particular. The spread of an infectious disease, including COVID-19, may also result in the inability of our suppliers to deliver components or raw materials on a

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timely basis or materially and adversely affect our collaborators’ and potential strategic partners’ ability to perform preclinical studies and clinical trials. See “Risk Factors — The ongoing COVID-19 pandemic could materially affect our operations, as well as the business or operations of third parties with whom we conduct business. Our business could be adversely affected by the effects of current and other future health epidemics or pandemics in regions where we or third parties on which we rely have significant business operations.” for a more detailed presentation of risks associated with the COVID-19 pandemic.

On May 4, 2020, the Company issued a promissory note (the “PPP Note”) in the principal amount of $27,550 to Bank of America in connection with a loan in such amount made by Bank of America under the Paycheck Protection Program (the “PPP Act”) administrated by the United States Small Business Administration (the “SBA”) under provisions of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Note bore interest at a rate of 1% per annum. The PPP Note was payable over a five-year term commencing six months from the date of the PPP Note. The CARES Act provides that all or a portion of the PPP Note may be forgiven if the Company complies with the requirements of the PPP, including utilizing the proceeds of the PPP Note only for permitted purposes, such as payroll costs. Some or all of this loan may be forgiven if the Company expends not less than 60% of the loan proceeds on qualified payroll costs. The lender and the Small Business Administration determined that the Company met the contractual conditions for forgiveness of the entire PPP Loan plus accrued interest and it was forgiven in 2021.

Our Programs

Our portfolio is focused on developing protein kinase inhibitors to treat PD in the brain and GI tract that arise from dysfunctional alpha-synuclein in PD patients. Using IkT-148009, our lead c-Abl protein kinase inhibitor, we clinically evaluated the impact of c-Abl inhibition on newly diagnosed PD patients, patients early in the course of their disease, and PD patients with GI complications. We are pursuing clinical development using a sequential Phase 1/Phase 2 development approach. The Phase 1/Phase 2 development program, subject to FDA approval, would be followed with one or more Phase 3 clinical trials that we believe could lead to completion of the clinical development program in 2024. IkT-148009 is intended to treat PD in treatment-naïve and early-stage PD patients, along with GI complications such as difficulty in swallowing, or dysphagia, and for treatment of neurogenic constipation.

We have also developed an alternate delivery approach for oral kinase inhibitors by converting them into prodrugs. We developed IkT-001Pro of the anticancer drug Imatinib, to alter the way a protein kinase inhibitor is absorbed in the GI tract and believe it may result in a safer, better tolerated treatment for Imatinib-sensitive cancers. We believe demonstrating the benefits of this technology in a well-known patient population will validate the utility of our prodrug technology. We plan to submit an IND for IkT-001Pro in the second quarter of 2022. Subject to future FDA agreements, we will complete the requirements for submission related to the clinical protocol design and execution of the clinical development program. If positive clinical results are obtained, we believe that clinical development could possibly be completed in 2022. Approval of IkT-001Pro would be sought pursuant to FDA rule 505(b)(2). If approved by the FDA, we would seek to partner this program with a pharmaceutical company to produce and market IkT-001Pro to the CML treatment community. Depending on the terms of the partnership, we may realize revenue from this partnership that could financially contribute to our primary efforts in neurodegenerative disease. Successful validation of our prodrug approach in IkT-001Pro would enable extension of this technology to other development programs, including IkT-148009.

In addition to the programs in PD and CML, we are evaluating development opportunities with other molecules that emerged from the RAMPTM discovery program. These opportunities include research programs in a Parkinson’s-related disease, Dementia with Lewy Body or DLB, that shares with Parkinson’s Disease the activation of c-Abl and the formation of alpha-synuclein aggregates that are chemically modified. DLB is related to PD but lacks an early manifestation of motor neuron dysfunction. It is characterized by progressive loss of cognitive function.

We have also begun animal studies related to two orphan diseases, Multiple System Atrophy (MSA) and Progressive Multifocal Leukoencephalopathy (PML). An orphan disease is defined by the FDA as a disease or condition with a patient population of fewer than 200,000 in the United States. MSA is a rare disease characterized by alpha-synuclein chemical modification, but unlike PD itself, the chemically modified alpha-synuclein does not arise in neurons, rather, aggregates of chemically modified alpha-synuclein arise in oligodendroglial cells. There are approximately 15,000 to 50,000 cases of MSA in the United States. MSA is characterized by simultaneous central and autonomic nervous system failures across multiple organ systems. As MSA shares the hallmarks of c-Abl activation and alpha-synuclein chemical modification with PD, we believe that c-Abl inhibitor therapy holds promise as a treatment. We are working in collaboration with experts at Rush University on this research program.

PML is a rare neurological infection that arises from the John Cunningham virus, or JCV, a human polyomavirus. JCV resides in most adult humans in both the kidney and bone marrow, but, when a patient undergoes treatment for certain autoimmune disorders, like MS or Crohn’s Disease, such treatments can stimulate JCV migration into the brain and result in a progressive, fatal disorder. PML is exceedingly rare and generally only arises in patients who have an underlying suppression of viral immune responses or take a primary treatment whose mode of action is to suppress cellular immunity. We are working in collaboration with experts at Louisiana State University to explore this development opportunity.

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Components of Operating Results

Operating Expenses

Research and Development

Research and development activities account for a significant portion of our operating expenses. Research and development expenses accounted for 64% and 25% of our operating expenses for the years ended December 31, 2021 and 2020, respectively. We record research and development expenses as incurred. Research and development expenses incurred by us for the discovery and development of our product candidates and prodrug technologies include:

•
external research and development expenses, including: expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants;

•
fees related to our license and collaboration agreements;

•
personnel related expenses, including salaries, benefits and non-cash stock-based compensation expense; and

•
other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

A portion of our research and development expenses are direct external expenses, which we track on a program-specific basis from inception of the program.

Program expenses include expenses associated with our most advanced product candidates and the discovery and development of compounds that are potential future candidates. We also track external expenses associated with our third-party research and development efforts. All external costs are tracked by therapeutic indication. We do not track personnel or other operating expenses incurred for our research and development programs on a program-specific basis. These expenses primarily relate to salaries and benefits and stock-based compensation and office consumables.

At this time, we can only estimate the nature, timing and costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

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our ability to add and retain key research and development personnel and other key employees;

•
our ability to successfully file IND and NDA applications with the FDA;

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our ability to conduct and commence trials;

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our ability to establish an appropriate safety profile with IND-enabling toxicology studies;

•
our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;

•
our successful enrollment in and completion of our current and future clinical trials;

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the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;

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our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our molecules;

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our ability to establish agreements with third party manufacturers for clinical supply for any future clinical trials and commercial manufacturing, if our product candidates are approved;

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the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;

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our ability to obtain and maintain patent, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates if and when approved;

•
our receipt of marketing approvals from applicable regulatory authorities;

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•
the impact of the outbreak of the COVID-19 pandemic which has had an adverse impact on our business, including our preclinical studies and clinical trials;

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our ability to commercialize products, if and when approved, whether alone or in collaboration with others; and

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the continued acceptable safety profiles of the product candidates following approval.

A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. We expect our research and development expenses to increase for the next several years as we continue to implement our business strategy, advance our current programs, expand our research and development efforts, seek regulatory approvals for any product candidates that successfully complete clinical trials, access and develop additional product candidates and incur expenses associated with hiring additional personnel to support our research and development efforts. In addition, product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials.

Selling, General and Administrative

Selling, general and administrative expenses include personnel related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense, expenses for outside professional services and allocated expenses. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expenses related to our offices in Boston, Massachusetts and Atlanta, Georgia not otherwise included in research and development expenses.

We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relations activities and other administrative and professional services. We also expect to further increase our administrative headcount when operating as a public company and as we advance our product candidates through clinical development, which will also likely require us to increase our selling, general and administrative expenses.

Interest Expense

Interest expense consists primarily of our interest expenses related to outstanding debt instruments issued to McDaniel & Associates, PC, Flagship Consulting, Inc., and Dr. Werner. The debt instrument issued to Flagship Consulting, Inc. was subject to automatic conversion of the unpaid principal and accrued interest into shares of our common stock upon the closing of our December 2020 initial public offering. The Flagship Consulting, Inc. debt instrument plus accrued interest was converted into 44,143 shares of our common stock on December 28, 2020 upon consummation of the December 2020 initial public offering. The debt instrument issued to McDaniel & Associates, PC matured on January 1, 2021 or upon the occurrence of certain conditions including the consummation of an initial public offering. The principal and accrued interest on this debt instrument were settled in full in cash on January 1, 2021. The principal balance and accrued interest on the note to Dr. Werner were settled in full in cash on January 3, 2022.

Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020

The following table sets forth the significant components of our results of operations:

Grant Revenue

Grant revenue for the year ended December 31, 2021 increased by $2,402,137 or 343.9% to $3,100,605 from $698,468 in the prior year. The increase was driven by increased grant research activity during 2021 compared to 2020. During 2020, the Company’s focus was shifted toward advancing its Phase I clinical trials which did not result in grant revenue. The Company utilized its working capital and personnel resources in 2021 to carry on its Phase I clinical trial in addition to its grant research activity.

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Research and Development

Research and development expenses increased by $10,465,302 or 1,170.9% to $11,359,104 from $893,802 in the prior year. The increase was driven by a $2.4 million increase in grant related research expenditures and a $8.0 million increase in non-grant related research. The non-grant related research and development was expended primarily in connection with the Company’s ongoing Phase I PD clinical trial which commenced in 2021.

Selling, General and Administrative

Selling, general and administrative expenses increased by $3,884,483 or 148.1% to $6,507,641 from $2,623,158 in the prior year. The increase was primarily the result of increased director and officer’s liability insurance of $1.4 million, increased legal fees, board fees, investor relation and consulting fees of $1.3 million relating to operating as a public company registrant since December 2020, administrative wages of $0.8 million and a net increase of $0.6 million for other normal operating expenses offset by a decrease in non-cash stock compensation expense of $0.2 million.

Interest Expense

Interest expense decreased by $9,479 or 32.2% to $19,923 from $29,402 in the prior year. The net decrease was driven by a significant decrease in outstanding notes payable which were settled upon completion of the December 2020 IPO, partially offset by interest expense incurred during 2021 in connection with D&O insurance premium financing. The D&O insurance premium loan was repaid in full from the proceeds of the June 2021 Offering. In the 2020 comparable period insurance premiums were not significant, prior to the December 2020 IPO, and were not financed.

Liquidity and Capital Resources

Sources of Liquidity

Up until our 2020 IPO, we funded more than 90% of our operations from federal contracts and federal and non-federal grants. From our inception through December 31, 2021, we generated aggregate cash proceeds of approximately $23.5 million from private, state and federal contracts and grants, and $1.4 million in equity sales of unregistered common stock. On December 28, 2020, the Company completed its IPO, in which the Company sold and issued 1,800,000 shares of its common stock at a price to the public of $10.00 per share. The Company received aggregate net proceeds of approximately $14.6 million after deducting offering costs, underwriting discounts and commissions of $3.4 million. In connection with the June 2021 Offering, the Company issued and sold 15,000,000 fully paid non-assessable shares of its common stock at a public offering price of $3.00 per share. Proceeds from the June 2021 Offering were $41.1 million after deducting offering costs, underwriting discounts and commissions of approximately $3.9 million.

At December 31, 2021, the Company had working capital of $38,415,549, an accumulated deficit of $29,817,687, cash of $40,750,133 and accounts payable and accrued expenses of $3,805,539. The Company had active grants in the amount of $385,888, all of which remained available in accounts held by the U.S. Treasury as of March 14, 2022.

Future Funding Requirements

To date, we have not generated any revenue from the sale of commercial products. We do not expect to generate any significant revenue from product sales unless and until we obtain regulatory approval of and successfully commercialize any of our product candidates and we do not know when, or if, this will occur. We expect to continue to incur significant losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any future approved products. We are subject to all of the risks typically related to the development of new product candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. Moreover, following the completion of the December 2020 initial public offering, we incurred additional costs associated with operating as a public company. We anticipate that we will need substantial additional funding in connection with our continuing operations.

Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, if ever, we expect to finance our incremental cash needs through a combination of equity offerings, debt financings, working capital lines of credit, grant funding and potential licenses and collaboration agreements. Additional working capital may not be available on commercially reasonable terms, if at all. If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, reduce or discontinue the development or commercialization of one or more of our product candidates. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders, increased fixed payment obligations and the existence of securities with rights that may be senior to those of our common stock. If we incur indebtedness, we could become subject to covenants that would restrict our operations and potentially

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impair our competitiveness, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. Additionally, any future collaborations we enter into with third parties may provide capital in the near term but limit our potential cash flow and revenue in the future. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

Since our inception, we have incurred significant losses and negative cash flows from operations. We have an accumulated deficit of $29,817,687 at December 31, 2021. We expect to incur substantial additional losses in the future as we conduct and expand our research and development activities.

We may seek to fund our operations through public equity or private equity or debt financings, as well as other sources. However, we may be unable to raise additional working capital, or if we are able to raise additional working capital we may be unable to do so on commercially favorable terms. Our failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on our business, results of operations and financial condition and our ability to continue to develop our product candidates.

The Company had working capital of $38,415,549 at December 31, 2021 and active grants in the amount of $385,888, all of which remained available in accounts held by the U.S. Treasury as of March 14, 2022. The Company intends to raise additional working capital in order to carry on its operations and current clinical trials beyond the third quarter of 2023. However, as certain elements of the Company’s operating plan are outside of the Company’s control, including the receipt of anticipated future grants and funding from a future capital raise, they cannot be considered probable. If the Company does not receive additional working capital from future anticipated grants and future anticipated capital raises, its operating plan will be limited in scope to operating at its pre-IPO levels which were limited to basic research and development but excluded current and planned future clinical trials.

We believe that our existing cash resources as of December 31, 2021 will enable us to fund our operating requirements into the third quarter of 2023. However, we have based these estimates on assumptions that may prove to be wrong, and we could deplete our working capital sooner than planned.

The timing and amount of our operating expenditures will depend largely on:

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the timing and progress of preclinical and clinical development activities;

•
the number and scope of preclinical and clinical programs we decide to pursue;

•
possible delays or interruptions to preclinical studies, clinical trials, our receipt of services from our third-party service providers on whom we rely, or our supply chain due to the COVID-19 pandemic;

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the progress of the development efforts of third parties with whom we have entered into license and collaboration agreements;

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our ability to maintain our current research and development programs and to establish new research and development, license or collaboration arrangements;

•
our ability and success in securing manufacturing relationships with third parties or, in the future, in establishing and operating a manufacturing facility;

•
the costs involved in prosecuting, defending and enforcing patent claims and other intellectual property claims;

•
the cost and timing of regulatory approvals;

•
our efforts to enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates; and

•
the costs and ongoing investments to in-license and/or acquire additional technologies.

A change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

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Cash Flows

The following table sets forth a summary of the primary sources and uses of cash for each of the periods presented below:

Net Cash Flows Used in Operating Activities

Net cash flows used in operating activities for the year ended December 31, 2021 totaled $14,297,051, and consisted primarily of a net loss of $14,786,063 adjusted for non-cash stock compensation of  $1,531,876, non-cash warrant expense of $688,784, non-cash consulting fees of $60,391, non-cash PPP loan forgiveness of $27,550, decrease in accounts receivable of $110,141, decrease in prepaid expenses and other assets of $1,447,888, decrease in accounts payable of $630,902, decrease in deferred revenue of $2,325,741, increase in prepaid research and development of $667,356 and an increase in accrued expenses and other current liabilities of $2,082,827.

Net cash flows used in operating activities for the year ended December 31, 2020 totaled $1,129,355, and consisted primarily of a net loss of $2,847,894 adjusted for non-cash stock compensation of  $573,695, non-cash warrant expense of $1,443,426, non-cash consulting fees of $148,795, non-cash interest expense of $17,260, decrease in prepaid expenses and other assets of $37,913, decrease in accrued expenses and other current liabilities of $1,076,758, decrease in accounts payable of $247,071 and an increase in deferred revenue of $897,105.

Cash Provided by Financing Activities

Net cash flows provided by financing activities for the year ended December 31, 2021 totaled $41,093,671, which consisted of $41,135,357 in proceeds from issuance of common stock in connection with our June 2021 Offering offset by $42,534 in debt payments.

Net cash flows provided by financing activities for the year ended December 31, 2020 totaled $15,064,411, which consisted of $14,786,741 in proceeds from issuance of common stock in connection with our December 2020 initial public offering and $272,800 in proceeds from a note payable issued to our CEO and $4,870 in proceeds from the issuance of unregistered common stock to a private accredited investor.

Up until our 2020 IPO, we funded more than 90% of our operations from federal contracts and federal and non-federal grants. We raised $16.1 million in net proceeds from our 2020 IPO and $41.1 million in net proceeds from our June 2021 Offering. We expect this trend of raising capital from a combination of grants and equity sales to continue for the foreseeable future.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements.

Contractual Obligations and Commitments

The Company accounts for its lease under ASC 842. The Company has elected to apply the short-term lease exception to leases of one year or less. In June 2018, the Company entered into a one-year, non-cancelable operating lease for space in Boston, Massachusetts. The total lease obligation was $54,000, payable in 12 equal monthly installments commencing August 1, 2018. Since the end of the one-year initial term on July 31, 2019, the lease continues on a month-to-month basis.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities

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that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in more detail in the notes to our financial statements included elsewhere in this Report, we believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Research and Development Expenses

We record research and development expenses to operations as incurred. Research and development expenses represent costs incurred by us for the discovery and development of our product candidates and the development of our RAMP™ drug discovery program and prodrug technologies and include: employee-related expenses, such as salaries, benefits, travel and non-cash stock-based compensation expense; external research and development expenses incurred under arrangements with third parties, such as CROs, preclinical testing organizations, clinical testing organizations, CMOs, academic and non-profit institutions and consultants; costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use; license fees; and other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

As part of the process of preparing financial statements, we are required to estimate and accrue expenses. A portion of our research and development expenses are external costs, which we track on a program-specific basis. We record the estimated expenses of research and development activities conducted by third party service providers as they are incurred and provided within research and development expense in the statements of operations. These services include the conduct of preclinical studies and consulting services. These costs are a significant component of our research and development expenses.

Costs for research and development activities are recognized based on costs incurred. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accrued expenses are dependent, in part, upon the receipt of timely and accurate reporting from external clinical research organizations and other third-party service providers. Due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

Stock-Based Compensation

We have granted stock-based awards, consisting of non-qualified stock options, to our employees, certain non-employee consultants and members of our board of directors, both past and present. We measure stock-based compensation expense for stock options granted to our employees and directors on the date of grant and recognize the corresponding compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award.

We estimate the fair value of stock options granted to our employees and directors on the grant date, and the resulting stock-based compensation expense, using the Black-Scholes-Merton option pricing model. The Black-Scholes-Merton option pricing model requires management to determine the fair market value of the common stock at the date of the award. Prior to our December 2020 initial public offering, the fair market value of the common stock was determined utilizing the risk adjusted net present value, or rNPV, option-pricing model as performed by an independent third-party consultant. Since December 22, 2020, the fair market value of the common stock is determined by reference to the closing price of our common stock on the Nasdaq Capital Market on the grant date of the option.

For options or warrants granted to non-employee consultants prior to January 1, 2020, the fair value of these options was remeasured using the Black-Scholes-Merton option-pricing model reflecting the same assumptions as applied to employee options in each of the reported periods, other than the expected life, which is assumed to be the remaining contractual life of the option.

Prior to January 1, 2020, we accounted for stock-based compensation arrangements with non-employee consultants using a fair value approach. The estimated fair value of unvested options granted to non-employee consultants was remeasured at each reporting date through the date of final vesting. As a result, the noncash charge to operations for non-employee options with vesting conditions was affected in each reporting period by changes in the estimated fair value of our common stock. We adjust for actual forfeitures as they occur.

On January 1, 2020, the Company adopted ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting ("ASU 2018-07"), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employee consultants. The estimated fair value of unvested options granted to non-employee consultants is no longer remeasured at each reporting date through the date of final vesting. The adoption of this ASU did not have a material impact on the Company’s financial statements.

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As there had been no public market for our common stock prior to our December 2020 initial public offering, the estimated fair value of our common stock had been determined by an independent third-party consultant using an rNPV process and approved by our board of directors. The factors utilized by such independent third-party consultant included, but were not limited to: our results of operations, financial position and capital resources; current business conditions and projections; the lack of marketability of our common stock; the hiring of key personnel and the experience of management; the risk inherent in the development of our products and our stage of development and material risks related to its business; the fact that the option grants involve illiquid securities in a private company; and the likelihood of achieving a liquidity event, such as an initial public offering or sale, in light of prevailing market conditions.

All of our common stock valuations prior to our December 2020 initial public offering have been prepared by an independent third-party consultant using the rNPV method.

Following the closing of our December 2020 initial public offering, our board of directors will determine the fair market value of our stock-based awards based on the closing price of our common stock as reported on the date of grant on the Nasdaq Capital Market exchange on which our common stock is traded.

The intrinsic value of all in the money outstanding options as of December 31, 2021 was approximately $2.0 million, based on the closing price of our common stock of $1.47 per share at December 31, 2021, all of which is related to vested options.

July 24, 2020 Valuation Report and August 25, 2020 Warrant Grants

On August 25, 2020, the Company granted a fully-vested warrant to purchase up to 21,854 shares of its common stock to Flagship Consulting, Inc. in connection with consulting services provided to the Company. The warrant is exercisable at a strike price of $5.90 per share and has a contractual term of seven years. The warrant is classified within stockholders' deficit at its fair value as a standalone instrument. The grant date fair value of the warrant was determined to be $87,597 utilizing the Black-Scholes-Merton option-pricing model at the time of issuance and is included in selling, general and administrative expenses for the year ended December 31, 2020.

On August 25, 2020, the Company granted a warrant to purchase up to 150,000 shares of its common stock to Flagship Consulting, Inc. in connection with consulting services to be provided to the Company. The warrant is exercisable at a strike price of $5.90 per share and has a contractual term of seven years. The warrant vests in full and becomes exercisable on the first anniversary of the grant date. The warrant will be classified within stockholders' deficit at its fair value as a standalone instrument. The aggregate grant date fair value of the warrant was determined to be $601,245 utilizing the Black-Scholes-Merton option-pricing model at the time of issuance and will be included in selling, general and administrative expenses as services are rendered during its 12-month vesting period. $210,818 is included in selling, general and administrative expense for the year ended December 31, 2020.

The exercise price of both such warrants was the fair value of our common stock on the date of grant and the aggregate stock-based compensation expense for both such warrants was determined to be $688,842 utilizing the Black-Scholes-Merton option-pricing model at the time of issuance. To the extent the warrants fail to vest, the charges will be reversed against that period’s total stock-based compensation expense.

Our board of directors determined the fair value of our common stock on the date of grant for such warrants based in part on an appraisal of the value of our common stock as of July 24, 2020 that was prepared by an independent third-party valuation specialist. The July 24, 2020 valuation resulted in the $5.90 fair value that was utilized for the warrant grants as our board of directors concluded that no significant internal or external value-generating events had taken place between the July 24, 2020 valuation report and the August 25, 2020 grant date. On September 24, 2020, the same independent third-party valuation specialist updated its July 24, 2020 valuation to assess the fair value of our common stock as of August 25, 2020. The updated appraisal resulted in a $5.87 fair value.

JOBS Act

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards.

We will remain an emerging growth company until the earliest of  (i) the last day of our first fiscal year in which we have total annual gross revenues of  $1.07 billion or more; (ii) the date on which we are deemed to be a “large accelerated filer” under the rules

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of the SEC with at least $700.0 million of outstanding equity securities held by non-affiliates; (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the previous three years; or (iv) the last day of our fiscal year following the fifth anniversary of the date of the completion of our December 2020 public offering.

Recent Accounting Pronouncements

The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.

Accounting Standards Adopted

On January 1, 2020, the Company adopted ASU No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting (ASU 2018-07), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from non-employees. An entity should apply the requirements of Topic 718 to non-employee awards except for specific guidance on inputs to an option pricing model and the attribution of cost (that is, the period of time over which share-based payment awards vest and the pattern of cost recognition over that period). The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU 2016-02”), which applies to all leases. Under ASU 2016-02, a right-of-use asset and lease obligation will be recorded for all leases, whether operating or financing leases, while the statement of operations will reflect lease expense for operating leases and amortization and interest expense for financing leases. ASU 2016-02 is effective for public entities for fiscal years beginning after December 15, 2018 and interim periods within those years, and after December 15, 2020 and interim periods beginning after December 15, 2021 for all other entities. Early adoption is permitted. Entities are required to use a modified retrospective approach of adoption for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

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