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Restatement of Previously Issued Unaudited Condensed Financial Statements

6 Months Ended

Jun. 30, 2023

Restatement of Previously Issued Unaudited Condensed Financial Statements

Restatement of Previously Issued Unaudited Condensed Financial Statements

(11) Restatement of Previously Issued Unaudited Condensed Financial Statements

As disclosed in the Form 10-K filed with the SEC on March 31, 2023, during its preparation of its 2022 audited combined financial statements and notes thereto, the Company concluded that there were material research and development expenses and related balance sheet errors in its previously issued unaudited condensed financial statements for the three and six months ended June 30, 2022, primarily relating to the timing of payments for research and development expenses and recognition of expenses.

The Company noted the following items were improperly expensed during the three and six months ended June 30, 2022:

● Payments, in the amount of $2,883,977 were improperly recorded in research and development expenses during the three months ended June 30, 2022. These amounts should have been recorded in prepaid expenses and other current assets as of June 30, 2022. Additionally, $102,232 was expensed during the three months ended June 30, 2022 related to the prior quarter restatements.

These errors, including the errors from the three months ended March 31, 2022, in the accounting for research and development expenses resulted in a cumulative understatement of prepaid assets and other current assets of $3,441,895, as of June 30, 2022, and an overstatement operating expenses and net loss of $2,781,745 and $3,441,895 for the three and six months ended June 30, 2022, respectively. See Note 12 – Restatement of Previously Issued Unaudited Condensed Financial Statements, to the Financial Statements in the Form 10-K for additional information related to the restatements.

In connection with the filing of this Quarterly Report on Form 10-Q, the Company has restated the accompanying interim Condensed Financial Statements for the quarter ended June 30, 2022 to correct for the impact of the misstatements. The applicable notes to the accompanying financial statements have also been corrected to reflect the impact of the restatement. Below, we have presented a reconciliation from the "As Reported" to the "As Restated" amounts for each of our interim Condensed Financial Statements as of and for the three and six months ended June 30, 2022. The amounts "As Reported" are from the "As Reported" amounts as disclosed in Note 12 – Restatement of Previously Issued Unaudited Condensed Financial Statements (Unaudited) in the Form 10-K.


	As of June 30, 2022
	(unaudited)
	As		Restatement		As
	Reported		Impacts		Restated
Assets
Current assets:
Cash and cash equivalents	$	35,974,251	$		$	35,974,251
Prepaid expenses and other current assets		551,072		3,441,895		3,992,967
Deferred clinical materials		—		—		—
Total current assets		36,525,323		3,441,895		39,967,218
Total assets	$	36,525,323	$	3,441,895	$	39,967,218
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	901,841	$		$	901,841
Accrued expenses		397,544				397,544
Total current liabilities		1,299,385		—		1,299,385
Total liabilities	$	1,299,385	$	—	$	1,299,385
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock - $0.0001 par value, 2,000,000 shares authorized and 0 shares issued and outstanding		—				—
Common stock - $0.0001 par value, 35,000,000 shares authorized and 8,163,923 and 8,100,570 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively		816				816
Additional paid-in capital		78,563,673				78,563,673
Accumulated deficit		(43,338,551)		3,441,895		(39,896,656)
Total stockholders' equity		35,225,938		3,441,895		38,667,833
Total liabilities and stockholders' equity	$	36,525,323	$	3,441,895	$	39,967,218


	Three Months Ended June 30, 2022
	As		Restatement		As
	Reported		Impacts		Restated
Operating expenses:
Research and development	$	6,815,708	$	(2,781,745)	$	4,033,963
General and administrative		1,938,447		—		1,938,447
Total operating expenses		8,754,155		(2,781,745)		5,972,410

Operating loss		(8,754,155)		2,781,745		(5,972,410)
Other income:
Interest income		36,024		—		36,024
Grant Income
Total other income		36,024		—		36,024

Loss before income taxes		(8,718,131)		2,781,745		(5,936,386)
Income tax expense (benefit)		—		—		—
Net loss	$	(8,718,131)	$	2,781,745	$	(5,936,386)
Basic and diluted loss per common share	$	(1.07)		—	$	(0.73)
Weighted average number of common shares outstanding, basic and diluted		8,163,923		—		8,163,923


	Six Months Ended June 30, 2022
	As		Restatement		As
	Reported		Impacts		Restated
Operating expenses:
Research and development	$	9,625,499	$	(3,441,895)	$	6,183,604
General and administrative		5,042,518		—		5,042,518
Total operating expenses		14,668,017		(3,441,895)		11,226,122

Operating loss		(14,668,017)		3,441,895		(11,226,122)
Other income:
Interest income		55,673		—		55,673
Grant Income
Total other income		55,673		—		55,673

Loss before income taxes		(14,612,344)		3,441,895		(11,170,449)
Income tax expense (benefit)		—		—		—
Net loss	$	(14,612,344)	$	3,441,895	$	(11,170,449)
Basic and diluted loss per common share	$	(1.79)		—	$	(1.37)
Weighted average number of common shares outstanding, basic and diluted		8,160,702		—		8,160,702


	Six Months Ended June 30, 2022
	As		Restatement	As
	Reported		Impacts	Restated
Cash flows from operating activities:
Net loss	$	(14,612,344)	3,441,895	$	(11,170,449)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		5,338,705	—		5,338,705
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(235,608)	(3,441,895)		(3,677,503)
Accounts payable		213,767	—		213,767
Accrued expenses		(420,896)	—		(420,896)
Net cash used in operating activities		(9,716,376)	—		(9,716,376)
Cash flows from financing activities:
Proceeds from exercise of stock options		4,613	—		4,613
Net cash used in financing activities		4,613	—		4,613
Net (decrease) increase in cash and cash equivalents		(9,711,763)	—		(9,711,763)
Cash and cash equivalents, beginning of period		45,686,014	—		45,686,014
Cash and cash equivalents, end of period	$	35,974,251	—	$	35,974,251