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-therapeuticpipeline 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 sizewas 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:
Year ended December 31,
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:
Year ended December 31, Change
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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:
Year ended December 31,
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 RAMPTM 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 7A. Quantitative and Qualitative Disclosures About Market Risk.
As a smaller reporting company, we are not required to provide disclosure regarding quantitative and qualitative market risk.
Item 8. Financial Statements and Supplementary Data.
The consolidated financial statements and the report of our independent registered public accounting firm (PCAOB ID:596) required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those consolidated financial statements is found on page F-1 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
As of the end of the period covered by this Annual Report, management performed, with the participation of our principal executive and principal financial officers, an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based on the evaluation, our principal executive and principal financial officers concluded that, as of December 31, 2024, our disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Management evaluated the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control Integrated Framework (“2013 Framework”). Based on this assessment, our management concluded that, as of December 31, 2024, our internal control over financial reporting was effective based on those criteria. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Attestation Report of the Registered Public Accounting Firm
This annual report does not include an attestation report of our registered public accounting firm due to the transition period established by the JOBS Act for emerging growth companies.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
Rule 10b5-1 Trading Plans
None of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted or terminated a Rule 10b5-1 trading plan or arrangement or a non-Rule 10b5-1 trading plan or arrangement, as defined in Item 408(c) of Regulation S-K, during the three months ended December 31, 2024 covered by this Annual Report.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item 10 will be included in our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year, and is incorporated herein by reference.
Our board of directors has adopted a Code of Business Conduct and Ethics applicable to all officers, directors, and employees, which is available on our website (https://www.inhibikase.com) under “Governance Documents.” We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of our Code of Business Conduct and Ethics by posting such information on the website address and location specified above.
Item 11. Executive Compensation.
The information required by this Item 11 will be included in our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year, and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item 12 will be included in our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year, and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 will be included in our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year, and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information required by this Item 14 will be included in our definitive proxy statement relating to our 2025 Annual Meeting of Stockholders, which we will file with the SEC within 120 days of the end of the fiscal year, and is incorporated herein by reference.
82
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB #596) F-1
Consolidated Balance Sheets as of December 31, 2024 and 2023 F-2
Notes to Consolidated Financial Statements F-6
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders of Inhibikase Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Inhibikase Therapeutics, Inc. and Subsidiary (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023,and the results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ CohnReznick LLP
We have served as the Company’s auditor since 2018.
Holmdel, New Jersey
March 27, 2025
F-1
Inhibikase Therapeutics, Inc.
Consolidated Balance Sheets
Assets
Current assets:
Liabilities and stockholders’ equity
Current liabilities:
Insurance premium financing payable - 381,784
Lease obligation, net of current portion - 90,124
Commitments and contingencies (see Note 14)
Stockholders’ equity:
Accumulated other comprehensive (loss) income (37,248 ) 877
See accompanying notes to consolidated financial statements.
F-2
Inhibikase Therapeutics, Inc.
Consolidated Statements of Operations and Comprehensive Loss
Year ended December 31,
Revenue:
Costs and expenses:
Other comprehensive loss, net of tax
Unrealized loss on marketable securities (38,125 ) (103,841 )
Net loss per share – basic and diluted $ (1.16 ) $ (3.16 )
See accompanying notes to consolidated financial statements.
F-3
Inhibikase Therapeutics, Inc.
Consolidated Statements of Stockholders’ Equity
Common Stock
Other comprehensive loss — — — (38,125 ) — (38,125 )
See accompanying notes to consolidated financial statements.
F-4
Inhibikase Therapeutics, Inc.
Consolidated Statements of Cash Flows
Year ended December 31,
Cash flows from operating activities
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash consulting and marketing fees — 31,536
Changes in operating assets and liabilities:
Accounts receivable — 39,881
Accrued expenses and other current liabilities 420,075 (138,481 )
Cash flows from investing activities
Purchases of equipment and improvements — (14,238 )
Cash flows from financing activities
Deferred offering costs — (138,556 )
Supplemental disclosures of cash flow information
Insurance premium financing $ - $ 381,784
See accompanying notes to consolidated financial statements.
F-5
Inhibikase Therapeutics, Inc.
Notes to Consolidated Financial Statements
1. Nature of Business
Inhibikase Therapeutics, Inc. is a clinical-stage pharmaceutical company developing protein kinase inhibitor therapeutics to modify the course of cardiopulmonary and neurodegenerative diseases and other diseases that arise from aberrant signaling through the Abelson Tyrosine Kinases. The Company’s pipeline includes IkT-001, a prodrug of the anticancer agent imatinib, for the treatment of Pulmonary Arterial Hypertension. IkT-001 has completed bioequivalence dose calibration studies in preparation for a future late-stage trial in Pulmonary Arterial Hypertension (PAH).
Liquidity
As of 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.
To date, the Company has funded its operations primarily through public offerings of its common stock, private placements of its common stock and ATM sales. In December 2020, June 2021, January 2023, May 2024 and October 2024, the Company raised approximately $14.6 million, $41.1 million, $8.5 million, $3.2 million and $99.6 million, respectively, in net proceeds from its 2020 IPO, its June 2021 Offering, its January 2023 Offering, its May 2024 Offering and its October 2024 Offering, respectively and $0.5 million in ATM proceeds in 2024.
The Company is subject to a variety of risks similar to other early-stage life science companies including, but not limited to, the successful development, regulatory approval, and market acceptance of the Company’s product candidates, development by its competitors of new technological innovations, protection of proprietary technology, and raising additional working capital. The Company has incurred significant research and development expenses, general and administrative expenses related to its product candidate programs and negative cash flows from operations. The Company anticipates costs and expenses to increase in the future as the Company continues to develop its product candidates.
The Company may seek to fund its operations, particularly with respect to its pulmonary arterial hypertension programs, through additional public equity, private equity, or debt financings, as well as other sources. However, the Company may be unable to raise additional working capital, or if it is able to raise additional capital, it may be unable to do so on commercially favorable terms. In addition, potential proceeds under the Series A-1 Warrants or the Series B-1 Warrants may not be available to the Company in a timely fashion, or at all. The Company’s failure to raise capital or enter into such other arrangements if and when needed would have a negative impact on the Company’s business, results of operations and financial condition and the Company’s ability to continue to develop its product candidates.
The October 2024 Offering has mitigated the Company's substantial doubt to continue as a going concern. The Company estimates that its cash and cash equivalents and marketable securities at December 31, 2024 is sufficient to fund its normal operations for at least the next twelve months from the date of issuance of these consolidated financial statements.
The accompanying consolidated 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 consolidated 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.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements for the years ended December 31, 2024 and 2023, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) for financial information, which prescribes elimination of all significant inter-company accounts and transactions in the accounts of the Company and its wholly owned subsidiary, IKT Securities Corporation, which was incorporated in the Commonwealth of Massachusetts in December 2021. In the opinion of management, these consolidated financial statements reflect all adjustments which are necessary for a fair statement of the Company’s financial position and results of its operations, as of and for the periods presented. Any reference in these notes to applicable guidance is meant to refer to the authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).
F-6
On June 30, 2023, we effected a reverse stock split at the ratio of 1 post-split share for every 6 pre-split shares. All common stock, options, warrant amounts, per share information and references have been retroactively adjusted for all figures presented to reflect this split unless specifically stated otherwise.
Consolidation
The accompanying consolidated financial statements include the Company and its wholly owned subsidiary, IKT Securities Corporation. The Company has eliminated all inter-company transactions for the years presented.
Use of Estimates
The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company utilizes certain estimates in the determination of our liquidity and working capital adequacy, the fair value of its stock options and warrants, deferred tax valuation allowances and revenue recognition, to record expenses relating to research and development contracts and accrued expenses. The Company bases its estimates on historical experience and other market-specific or other relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ from such estimates.
Off-Balance Sheet Risk and Concentrations of Credit Risk
The Company has no significant off-balance sheet risks, such as foreign exchange contracts, option contracts, or other foreign hedging arrangements. Financial instruments that subject the Company to credit risk primarily consist of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash to the extent recorded on the consolidated balance sheets.
The Company has not experienced any losses in such accounts and management believes that the Company does not have significant credit risk with respect to such cash and cash equivalents and marketable securities.
No grant revenue was recognized for the year ended December 31, 2024. For the year ended December 31, 2023, the Company derived 100% of its total revenue from a single source, the United States Government, in the form of federal research grants.
Segment Information
Operating segments are defined as components of an enterprise for which separate discrete information is available for evaluation by the chief operating decision maker or decision-making group in deciding how to allocate resources and in assessing performance. The Company views is operations and manages its business as one operating and reporting segment, which is the business of developing protein kinase inhibitor therapeutics (See Note 16).
Cash and cash equivalents
The Company considers all highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months or less at date of purchase to be cash equivalents. The Company had cash and cash equivalents of $56.5 million and $9.2 million at December 31, 2024 and 2023, respectively.
Accounts receivable
The Company makes judgments as to its ability to collect outstanding receivables and provides an allowance for receivables when collection becomes doubtful. Provisions are made based upon a specific review of all significant outstanding invoices and the overall quality and age of those invoices. To date, the Company has not had any provision for credit losses, and the Company did not have any expected credit losses as of December 31, 2024 and 2023. The balance of accounts receivable as of December 31, 2022 was $39,881.
Leases
The Company accounts for its leases under ASU 2021-09, ASU 2018-10, and ASC Topic 842, Leases (“ASC 842”). ASC 842 requires a lessee to record a right-of-use asset and a corresponding lease liability for most lease arrangements on the Company's balance sheet. Under the standard, disclosure of key information about leasing arrangements to assist users of the consolidated financial statements with assessing the amount, timing and uncertainty of cash flows arising from leases is required.
F-7
Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria.
For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease.
The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred if any, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the secured incremental borrowing rate for the same term as the underlying lease.
Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.
Lease cost for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions, and is recognized on a straight-line basis over the lease term. Included in lease cost are any variable lease payments incurred in the period that are not included in the initial lease liability and lease payments incurred in the period for any leases with an initial term of 12 months or less. Lease cost for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense.
The Company has made an accounting policy election to not recognize leases with an initial term of 12 months or less within our consolidated balance sheets and to recognize those lease payments on a straight-line basis in our consolidated statements of operations and comprehensive loss over the lease term.
Equipment and Improvements
Equipment and improvements are stated at cost, less accumulated depreciation. For financial reporting purposes, depreciation is recognized using the straight-line method, allocating the cost of the assets over their estimated usefulness from three to five years for network equipment, office equipment, and furniture classified as fixed assets.
Estimated Useful Econcomic Life
Furniture and office equipment 5 years
IT equipment 3 years
Fair Value Measurements
The Company has certain financial assets and liabilities recorded at fair value which have been classified as Level 1, 2 or 3 within the fair value hierarchy as described in the accounting standards for fair value measurements.
·Level 1 — Fair values are determined utilizing quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;
·Level 2 — Fair values are determined by utilizing quoted prices for identical or similar assets and liabilities in active markets or other market observable inputs such as interest rates, yield curves and foreign currency spot rates; and
·Level 3 — Inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The Company’s financial assets, which include cash equivalents and marketable securities, have been initially valued at the transaction price, and subsequently revalued at the end of each reporting period, utilizing third-party pricing services. The pricing services utilize industry standard valuation models, including both income and market based approaches, to determine value and improvements are stated at cost, less accumulated depreciation.
F-8
Marketable Securities
The Company's marketable securities consist of U.S. Treasury securities with maturities of less than one year which are classified as available-for-sale and included in current assets on the consolidated balance sheets. Available-for-sale debt securities are carried at fair value with unrealized gains and losses reported as a component of stockholders’ equity in accumulated other comprehensive income (loss). Realized gains and losses, if any, are included in other income, net in the consolidated statements of operations and comprehensive loss.
Available-for-sale securities are reviewed for possible impairment at least quarterly, or more frequently if circumstances arise that may indicate impairment. When the fair value of the securities declines below the amortized cost basis, impairment is indicated and it must be determined whether it is other than temporary. Impairment is considered to be other than temporary if the Company: (i) intends to sell the security, (ii) will more likely than not be forced to sell the security before recovering its cost, or (iii) does not expect to recover the security’s amortized cost basis. If the decline in fair value is considered other than temporary, the cost basis of the security is adjusted to its fair market value and the realized loss is reported.
Revenue Recognition
The Company generates revenue from research and development grants under contracts with third parties that do not create customer-vendor relationships. The Company’s research and development grants are non-exchange transactions and are not within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Contribution revenue earned from activities performed pursuant to research and development grants is reported as grant revenue in the Company’s consolidated statements of operations. Revenue from these grants is recognized as the Company incurs qualifying expenses as stipulated by the terms of the respective grant. Cash received from grants in advance of incurring qualifying expenses is recorded as deferred revenue. The Company records revenue and a corresponding receivable when qualifying costs are incurred before the grants are received.
Research and Development Costs
Costs incurred in the research and development of the Company’s product candidates are expensed as incurred. Research and development expenses consist of costs incurred in performing research and development activities, including activities associated with performing services under grant revenue contracts and include salaries and benefits, stock compensation, research-related subcontractors and consultants, supplies and overhead costs. Advance payments made to suppliers and contract research organizations are classified as prepaid research and development and are expensed as research and development as the supplies are consumed and the contract services are provided. During the years ended December 31, 2024 and 2023 the company incurred expenses of approximately $307 thousand and $76 thousand, respectively with a related party vendor included in research and development expenses. As of December 31, 2024 and 2023, the Company had a payable balance with a related party vendor of approximately $0 and $14 thousand, respectively, included in accounts payable.
Stock-Based Compensation
The Company has a stock-based compensation plan which is more fully described in Note 9. The Company records stock-based compensation for options granted to employees and to members of the board of directors for their services on the board of directors, based on the grant date fair value of awards issued, and the expense is recorded on a straight-line basis over the applicable service period, which is generally one to two years. The Company accounts for non-employee stock-based compensation arrangements based upon the fair value of the consideration received or the equity instruments issued, whichever is more reliably measurable. Stock-based compensation costs for non-employee awards are recognized as services are provided, which is generally the vesting period.
The Company uses a Monte Carlo simulation to determine the fair value of complex option structures. For all non-complex option structures, the Company uses the Black-Scholes-Merton option-pricing model to determine the fair value of stock options. The use of the Black-Scholes-Merton option-pricing model requires management to make assumptions with respect to the expected term of the option, the expected volatility of the common stock consistent with the expected life of the option, risk-free interest rates and expected dividend yields of the common stock. The Company has concluded that the historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term. Therefore, the expected term was determined according to the simplified method, which is the average of the vesting tranche dates and the contractual term. Due to the lack of Company specific historical and implied volatility data, we have based our estimate of expected volatility primarily on the historical volatility of a group of similar companies that are publicly traded. For these analyses, companies with comparable characteristics are selected, including enterprise value and position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The Company computes the historical volatility data using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of its stock-based awards. The risk-free interest rate is determined by reference to U.S. Treasury zero-coupon issues with remaining maturities similar to the expected term of the options. The Company has not paid, and does not anticipate paying, cash dividends on shares of common stock.
F-9
Income Taxes
The Company provides for income taxes using the asset and liability method. The Company provides deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the Company’s financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates expected to be in effect in the years in which the differences are expected to reverse. A valuation allowance is provided to reduce the deferred tax assets to the amount that will more likely than not be realized.
The Company does not have any material uncertain tax positions for which reserves would be required. The Company will recognize interest and penalties related to uncertain tax positions, if any, in income tax expense.
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss applicable to common stockholders by the weighted-average number of shares outstanding during the period which includes Pre-Funded Warrants and shares held in abeyance from date of issuance, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting the weighted-average number of shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the diluted net loss per share calculation, warrants to purchase common stock and stock options are considered to be common stock equivalents, but have been excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive for all periods presented. Therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.
Recent Accounting Standards
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and are generally adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, as amended (“JOBS Act”). The JOBS Act permits an emerging growth company such as the Company 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. The Company has 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, the Company 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 it either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.
In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The new guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company adopted this standard as of January 1, 2024 and concluded it did not have a material impact on the Company's consolidated financial statements.
On December 14, 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which amends the guidance in ASC 740, Income Taxes. The ASU is intended to improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The ASU’s amendments are effective for public business entities for annual periods beginning after December 15, 2024. Entities are permitted to early adopt the standard “for annual financial statements that have not yet been issued or made available for issuance.” Adoption is either prospectively or retrospectively; the Company will adopt this ASU on a prospective basis. The Company is currently evaluating the impact of the ASU, but does not expect any material impact upon adoption.
On November 2024, the FASB issued ASU 2024-03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU requires more detailed disclosures about the types of expenses in commonly presented expense captions such as cost of sales, selling, general and administrative expenses and research and development expenses. This includes separate footnote disclosure for expenses such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. Public business entities are required to apply the guidance prospectively and may apply it retrospectively. The ASU's amendments are effective for public business entities for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Public
F-10
business entities are required to apply the guidance prospectively and may apply it retrospectively. The Company is currently evaluating the effect of adopting this ASU.
3. Supplemental Balance Sheet Information
Accrued expenses and other current liabilities consist of the following:
Total accrued expenses and other current liabilities $ 2,680,030 $ 2,259,955
4. Fair Value of Financial Instruments
The following table summarizes cash equivalents and marketable securities measured at their fair value on a recurring basis as of:
Fair Value Measurements as of December 31, 2024:
Level 1 Level 2 Level 3 Total
Cash equivalents:
Marketable securities, available-for-sale:
Fair Value Measurements as of December 31, 2023:
Level 1 Level 2 Level 3 Total
Cash equivalents:
Marketable securities, available-for-sale:
5. Marketable Securities
Marketable securities consisted of the following:
December 31, 2024 Amortized Cost Unrealized Gain Unrealized Loss Fair Value
Marketable securities, available-for-sale:
F-11
December 31, 2023 Amortized Cost Unrealized Gain Unrealized Loss Fair Value
Marketable securities, available-for-sale:
As of December 31, 2024, the Company held seven U.S. Treasury debt securities that were in an unrealized loss position totaling $37,248. As of December 31, 2023, the Company held three U.S. Treasury debt securities that were in an unrealized gain position totaling $877. All U.S. treasury obligations were due to mature in less than one year for the years ended December 31, 2024 and 2023, respectively.
The Company received proceeds of $23.5 million from maturities of marketable securities for the year ended December 31, 2024. The Company received proceeds of $41.1 million from maturities of marketable securities for the year ended December 31, 2023.
6. Equipment and Improvements
Equipment and Improvements, net
Year ended December 31,
Depreciation expense for the year ended December 31, 2024 was $26,272. Depreciation expense for the year ended December 31, 2023 was $177,398.
7. Insurance Premium Financing Payable
Year ended December 31,
Total insurance premium financing payable $ — $ 381,784
Insurance premium financing Payable to AON
In December 2023, the Company entered into an insurance premium financing and security agreement with AON Premium Finance, LLC (“AON”). Under the agreement, the Company financed $381,784 of certain premiums at an 8.59% annual interest rate. As of December 31, 2024 and December 31, 2023, the outstanding principal of the loan was $0 and $381,784, respectively, and is included on the balance sheet in Insurance premium financing payable. The final payment was paid in November 2024.
8. Stockholders’ Equity
Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of all classes of stock outstanding. As of December 31, 2024, a total 15,106,412 shares of common stock were reserved for issuance upon the exercise of outstanding stock options and warrants under the 2020 Equity Incentive Plan and the 2011 Equity Incentive Plan.
F-12
Share Issuances
On October 21, 2024, the Company announced the closing of a private placement of approximately $110 million from the issuance and sale of shares of the Company's common stock and accompanying warrants with potential aggregate financing of up to approximately $275 million upon the full cash exercise of the warrants issued in the private placement, before deducting placement agent fees and offering expenses (“October 2024 Offering”). The October 2024 Offering consisted of (i) 58,310,000 shares of common stock sold at $1.37 per share, or, in lieu thereof, pre-funded warrants (“Pre-Funded Warrants”) to purchase up to 21,985,000 shares of common stock with an exercise price of $0.001, (ii) Series A-1 Warrants to purchase an aggregate of 40,139,474 shares of common stock with an exercise price of $1.37, or in lieu thereof, Pre-Funded Warrants to purchase the same number of shares of common stock (“Series A-1 Warrants”), and (iii) Series B-1 Warrants to purchase an aggregate of 73,813,529 shares of common stock with an exercise price of $1.37, or in lieu thereof, Pre-Funded Warrants to purchase the same number of shares of common stock (“Series B-1 Warrants”). The Pre-Funded Warrants and Pre-Funded Warrants underlying the Series A-1 Warrants and Series B-1 Warrants are exercisable at any time after their original issuance and will not expire. The Series A-1 Warrants and the Series B-1 Warrants will become exercisable at the earlier of (a) the 75th calendar day following the initial filing of the resale registration statement covering the resale of the shares of common stock issuable upon the exercise of the Series A-1 Warrants and Series B-1 Warrants, if the SEC notifies the Company that it will review such resale registration statement and (b) the 5th business day after the date the Company is notified by the SEC that such resale registration statement will not be subject to further review. Each Series A-1 Warrant will be exercisable for one share of common stock and will expire at 5:00 p.m. (New York City time) on the 30th day following the later of (a) the Company’s public announcement of the Phase 2b 12 week safety readout for IKT-001 for PAH and (b) the Company both obtaining stockholder approval for and filing an amendment to its charter to increase the number of authorized shares of common stock to a number of shares of common stock sufficient to allow for the full exercise of the warrants (“Charter Amendment”). Each Series B-1 Warrant will be exercisable for one share of common stock, will become exercisable by an investor once all of such investor’s Series A-1 Warrants have been exercised and will expire at 5:00 p.m. (New York City time) on the 30th day following the later of (a) the Company’s public announcement of its Phase 2b efficacy readout for IKT-001 with respect to PAH and (b) the Company both obtaining stockholder approval for and filing the Charter Amendment. The Series A-1 Warrants have an exercise price of $1.37 per share and the Series B-1 Warrants have an exercise price of $1.49 per share. The Company intends 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. As of December 31, 2024, the Company had 19,815,131 pre-funded warrants outstanding.
On May 20, 2024, the Company entered into a securities purchase agreement with a single institutional investor in connection with a registered direct offering and concurrent private placement with the same institutional investor (collectively the "May 2024 Offering”). The May 2024 Offering consisted of (i) 714,527 shares of the Company's common stock sold at $1.68 per share, (ii) Pre-Funded Common Warrants to purchase up to 957,925 shares of common stock with an exercise price of $0.0001 which are immediately exercisable after the issuance until exercised in full, (iii) Series A Common Warrants to purchase 1,672,452 shares of common stock with an exercise price of $1.68 per share which expire on the one-year anniversary from the date of stockholder approval, and (iv) Series B Common Warrants to purchase 1,672,452 shares of common stock with an exercise price of $1.68 per share which expire on the five-year anniversary from the date of stockholder approval. All of the warrants in the May 2024 Offering were issued to a single investor. During the third quarter 2024, the investor exercised 247,925 Pre-Funded Common Warrants and exercised the remaining 710,000 Pre-Funded Common Warrants as of the date of this report. The Company received net proceeds from the May 2024 Offering of approximately $2.2 million.
On May 20, 2024, the Company also entered into a warrant inducement agreement with the same investor to exercise certain outstanding warrants that the Company issued in January 2023 (“January 2023 Existing Warrants”). Pursuant to the warrant inducement agreement, the investor agreed to exercise outstanding warrants to purchase an aggregate of 708,500 shares of the Company's common stock at an amended exercise price of $1.68 per share. These shares are held in abeyance and not considered outstanding. The shares held in abeyance will be held in abeyance until notice from the investor that the balance, or portion thereof, may be issued in compliance with a beneficial ownership limitation provision in the warrants. The Company also agreed to reduce the exercise price of the remaining unexercised portion of such warrants to purchase 1,229,484 shares of common stock to $1.68 per share and to issue the investor Series C Common Warrants to purchase 708,500 shares of the Company's common stock and Series D Common Warrants to purchase 708,500 shares of the Company's common stock (“January 2023 New Warrants”). Each will have an exercise price of $1.68 per share and will be exercisable beginning on the effective date of stockholder approval. The Series C Common Warrants will expire on the one-year anniversary from the date of stockholder approval and the Series D Common Warrants will expire on the five-year anniversary from the date of stockholder approval. The shares held in abeyance were all issued to the investor in 2024.
The repricing of the January 2023 Existing Warrants and issuance of the Series C Common Warrants and the Series D Common Warrants is considered a modification of the January 2023 Existing Warrants under the guidance of ASU 2021-04. The modification is consistent with the "Equity Issuance" classification under that guidance as the reason for the modification was to induce the holder to cash exercise their warrants, resulting in the imminent exercise of the January 2023 Existing Warrants, which raised equity capital and
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generated net proceeds for the Company of approximately $1.0 million. The total fair value of the consideration of the modification includes the incremental fair value of the January 2023 Existing Warrants (determined by comparing the fair values immediately prior to and immediately after the modification) and the initial fair value of the January 2023 New Warrants. The fair values were calculated using the Black-Scholes model and the Company determined that the total fair value of the consideration related to the modification of the January 2023 Existing Warrants, including the initial fair value of the January 2023 New Warrants was $1.8 million.
On January 25, 2023, the Company entered into a securities purchase agreement in connection with a registered direct offering and concurrent private placement with an institutional investor. The Company also entered into a securities purchase agreement and a registration rights agreement in connection with a concurrent private placement with the same institutional investor (collectively the "January 2023 Offering”). The January 2023 Offering consisted of (i) 466,799 shares of Common Stock sold at $5.16 per share, (ii) Common Warrants to purchase up to 1,937,985 shares of Common Stock with an exercise price of $5.16, and (iii) Pre-Funded Warrants to purchase up to 1,471,187 shares of Common Stock with an exercise price of $0.06, all issued to Armistice Capital Master Fund Ltd (“Armistice”). The warrants will expire on January 27, 2028. As part of the January 2023 Offering, the Company further issued warrants to H.C. Wainwright & Co., LLC (“Placement Agent Warrants”) to purchase up to 67,830 shares of Common Stock with an exercise price of $6.45 and an expiration date of January 25, 2028. As of December 31, 2023 the institutional investor has exercised all 1,471,187 Pre-Funded Warrants.
The Company received net proceeds from the January 2023 Offering of approximately $8.5 million. Effective January 25, 2023, the Company terminated the Equity Distribution Agreement with Piper Sandler & Co. by providing a notice of termination in accordance with the terms of the Equity Distribution Agreement (see Note 10).
In September 2023 and December 2023, the Company issued 12,000 shares respectively of its stock in exchange for digital media consulting services. The fair value of the stock was $17,280 and $14,280 respectively based upon the closing price of the shares on the date of the transaction. Issuance costs were not material. No additional rights or options were granted to this accredited investor in connection with this issuance. This issuance is exempt from registration pursuant to Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering.
9. Stock-Based Compensation
2020 Equity Incentive Plan
On July 21, 2020, the Company’s board of directors and its stockholders approved the 2020 Equity Incentive Plan (“2020 Plan”). The 2020 Plan became effective immediately prior to the closing of the Company’s December 2020 IPO. The 2020 Plan provides for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock or restricted stock units to any of its employees, directors, consultants and other service providers or those of its affiliates. The board of directors has initially designated the compensation committee to administer the 2020 Plan. The compensation committee has broad authority to administer the plan and to determine the vesting conditions for awards. Neither the compensation committee nor the board of directors are authorized to reprice outstanding options or stock appreciation rights without shareholder consent. In addition, any amendments to increase the total number of shares reserved for issuance under the 2020 Plan or modification of the classes of participants eligible to awards requires ratification by the stockholders. On June 7, 2024, the stockholders of Registrant approved an amendment to the 2020 Plan, pursuant to which the number of shares of Common Stock reserved and available for issuance under the 2020 Plan increased by 2,500,000 shares. On January 3, 2025, the stockholders of the Company approved an amendment to the 2020 Plan, pursuant to which the number of shares of Common Stock reserved and available for issuance under the 2020 Plan increased by 27,453,993 shares. Subject to certain adjustments, the maximum number of shares of common stock that may be issued under the 2020 Plan after the stockholder's approval on January 3, 2025 in connection with awards is limited to 31,417,517 shares.
Following the effectiveness of the 2020 Plan, the Company ceased making grants under the 2011 Plan. However, the 2011 Plan continues to govern the terms and conditions of the outstanding awards granted under the 2011 Plan. Shares of common stock subject to awards granted under the 2011 Plan that cease to be subject to such awards by forfeiture or otherwise after the effective date of the 2020 Plan will become available for issuance under the 2020 Plan.
2011 Equity Incentive Plan
Prior to the closing of its IPO, the Company maintained the 2011 Plan, pursuant to which the Company made grants of non-qualified stock options to eligible employees and other service providers.
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Stock Options
On October 9, 2024, the Company modified only the exercise price on all outstanding previously issued stock options. A total of 31 grantees were affected resulting in approximately $0.2 million of total incremental fair value expense recognized. The Company determined that the modification of the stock options, both vested and unvested, was a probable to probable (Type 1) modification. The Company recognized the grant date fair value and any incremental fair value on the modification date. For all options previously vested, all prior expense had been recognized and only the incremental fair value will be recognized. For the options not fully vested, any remaining grant date fair value plus the incremental fair value will be recognized ratably over the remaining vesting term.
The following is a summary of option activity under the 2011 Plan and the 2020 Plan:
Exercised — — —
Cancelled — — —
Exercised — — —
As of December 31, 2024, the intrinsic value of options outstanding was $31.1 million and $15.8 million of the intrinsic value of options was exercisable. Intrinsic value is calculated based on the aggregate difference between the closing price of the Company’s common stock on the last trading day of 2024 and the exercise price of each in the money stock option award. We adjust for actual forfeitures as they occur.
During the year ended December 31, 2024, certain performance conditions were met. There were no options to purchase stock that vested upon the achievement of performance conditions at December 31, 2023.
The weighted-average fair values of options granted in the years ended December 31, 2024 and 2023 were $0.62 and $3.03, per share, respectively, and were calculated using the following estimated assumptions:
Year ended December 31,
Weighted-average risk-free interest rate 4.11 % 4.27 %
Expected dividend yield 0.00 % 0.00 %
Expected terms 9.50 years 4.38 years
The total fair values of stock options that vested during the years ended December 31, 2024 and 2023 were $7,863,021 and $608,539, respectively.
As of December 31, 2024, there was $2,763,814 of total unrecognized compensation cost related to non-vested stock options granted under the 2011 Plan and the 2020 Plan. The Company expects to recognize that cost over a remaining weighted-average period of 1.57 years as of December 31, 2024.
Restricted Stock Units
During the years ended December 31, 2024 and 2023, there were no restricted stock units issued or outstanding.
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Stock-Based Compensation Expense
The following table summarizes the stock-based compensation expense for stock options granted to employees and non-employees:
Year ended December 31,
10. ATM Program
On May 16, 2022, the Company entered into an Equity Distribution Agreement (“Piper Agreement”) with Piper Sandler & Co. as sales agent (“Agent”), pursuant to which the Company may, from time to time, issue and sell shares of its common stock, at an aggregate offering price of up to $9.8 million (“Shares”) through the Agent. Under the terms of the Agreement, the Agent may sell the Shares at market prices by any method that is deemed to be an “ATM” as defined in Rule 415 under the Securities Act, as amended.
Subject to the terms and conditions of the Agreement, the Agent will use its commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. The Company has no obligation to sell any of the Shares, and may at any time suspend sales under the Agreement or terminate the Agreement in accordance with its terms. The Company has provided the Agent with customary indemnification rights, and the Agent will be entitled to a fixed commission of 3.0% of the aggregate gross proceeds from the Shares sold. The Agreement contains customary representations and warranties, and the Company is required to deliver customary closing documents and certificates in connection with sales of the Shares.
Effective January 25, 2023, the Company terminated the Piper Agreement by providing a notice of termination to the Agent in accordance with the terms of the Equity Distribution Agreement. No shares were sold under the Piper Agreement prior to termination.
On February 1, 2024, the Company entered into an At the Market Offering Agreement (“ATM”) with H.C. Wainwright & Co., LLC, as sales agent (“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 or to the Agent. Under the terms of the ATM Agreement with the Agent (“ATM Agreement”), the Agent may sell the shares of the Company’s 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 of 1933, as amended. 315,338 shares of the Company’s common stock were sold pursuant to the ATM Agreement for an aggregate gross sales price of $849,187. On May 20, 2024, the Company filed with the Securities and Exchange Commission a prospectus supplement to reduce the maximum aggregate gross sales price of its common stock that may be offered, issued and sold under the ATM Agreement from and after May 20, 2024 to $50,000, not including the shares of the Company’s common stock previously sold. No sales of the Company’s common stock pursuant to the ATM Agreement have occurred since this date. On December 2, 2024, the Company provided to the Agent a notice of termination of the ATM Agreement, with such termination to be effective December 11, 2024 in accordance with the terms of the ATM Agreement.
11. Warrants
On October 27, 2018, the Company granted a warrant to purchase 4.9% of its issued and outstanding shares of common stock at the time of the issuance of the warrant, or 66,811 shares. The warrant has a term of 7 years and is exercisable at $28.76 per share.
On January 1, 2019, the Company issued a seven-year warrant to a service provider to purchase 3,423 shares of the Company’s common stock with an exercise price of $28.76 per share. The warrants vested immediately. The Company received legal services, as needed, during 2019 under an unwritten agreement with the service provider.
On March 31, 2020, the Company issued a warrant to purchase up to 4,371 shares of its stock to one of its consultants in exchange for legal services, as needed, during 2020. The warrant contains a strike price of $34.04 per share and has a seven-year contractual term.
On August 25, 2020, the Company granted a fully vested warrant to purchase up to 3,643 shares of its common stock to one of its consultants. The warrant is exercisable at a strike price of $35.42 per share and has a contractual term of seven years.
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On August 25, 2020, the Company granted a warrant to purchase up to 25,000 shares of its common stock to one of its consultants. The warrant is exercisable at a strike price of $35.42 per share and has a contractual term of seven years.
On December 28, 2020, the Company issued a seven-year warrant to purchase up to a total of 17,073 shares of the Company’s common stock with an exercise price of $60.00 per share to certain 2018 investors in consideration for completing the IPO later than March 2019 (“Late IPO Warrants”).
The Company issued and sold to its underwriters warrants to purchase up to 15,000 shares of its common stock and up to 125,000 shares of its common stock in connection with its December 2020 IPO and its June 2021 Offering, respectively. The warrants were sold for an aggregate purchase price of $100 for each set of warrants and have five-year terms. The IPO warrant is exercisable beginning June 20, 2021 at an initial exercise price of $75.00 per share of common stock. The June 2021 Offering warrant is exercisable beginning June 15, 2022 at an initial exercise price of $22.50 per share of common stock.
On June 15, 2021, the Company issued a warrant to purchase an aggregate of 125,000 shares of common stock for an aggregate purchase price of $100. The warrant has an initial exercise price of $22.50 per share of common stock and expires June 15, 2026.
On January 25, 2023, the Company issued warrants to purchase up to 1,937,985 shares of Common Stock with an exercise price of $5.16, and pre-funded warrants to purchase up to 1,471,187 shares of Common Stock with an exercise price of $0.06. The warrants will expire on January 27, 2028. The Company further issued warrants to purchase up to 67,830 shares of common stock with an exercise price of $1.68 and an expiration date of January 25, 2028. As of December 31, 2024 2,179,687 warrants were exercised.
On May 20, 2024, the Company issued pre-funded warrants to purchase up to 957,925 shares of common stock with an exercise price of $0.0001 which are immediately exercisable after the issuance until exercised in full, series A common warrants to purchase 1,672,452 shares of common stock with an exercise price of $1.68 per share which expire on the one-year anniversary from the date of stockholder approval, and series B common warrants to purchase 1,672,452 shares of common stock with an exercise price of $1.68 per share which expire on the five-year anniversary from the date of stockholder approval. All of the warrants in the May 2024 Offering were issued to a single investor. All of the pre-funded warrants were exercised in 2024.
On May 20, 2024, the Company also entered into a warrant inducement agreement with the same investor to exercise certain outstanding warrants that the Company issued in January 2023 (“January 2023 Existing Warrants”). Pursuant to the warrant inducement agreement, the investor agreed to exercise outstanding warrants to purchase an aggregate of 708,500 shares of the Company's common stock at an amended exercise price of $1.68 per share. These shares are held in abeyance and not considered outstanding. The shares held in abeyance will be held in abeyance until notice from the investor that the balance, or portion thereof, may be issued in compliance with a beneficial ownership limitation provision in the warrants. The Company also agreed to reduce the exercise price of the remaining unexercised portion of such warrants to purchase 1,229,484 shares of common stock to $1.68 per share and to issue the investor Series C Common Warrants to purchase 708,500 shares of the Company's common stock and Series D Common Warrants to purchase 708,500 shares of the Company's common stock (“January 2023 New Warrants”). Each will have an exercise price of $1.68 per share and will be exercisable beginning on the effective date of stockholder approval. The Series C Common Warrants will expire on the one-year anniversary from the date of stockholder approval and the Series D Common Warrants will expire on the five-year anniversary from the date of stockholder approval. As of December 2024, 708,500 abeyance shares were exercised.
On October 21, 2024, the Company issued pre-funded warrants to purchase up to 21,985,000 shares of common stock with an exercise price of $0.001, series A-1 warrants to purchase an aggregate of 40,139,474 shares of common stock with an exercise price of $1.37, or in lieu thereof, pre-funded warrants to purchase the same number of shares of common stock, and series B-1 warrants to purchase an aggregate of 73,813,529 shares of common stock with an exercise price of $1.37, or in lieu thereof, pre-funded warrants to purchase the same number of shares of common stock. The pre-funded warrants and pre-funded warrants underlying the series A-1 warrants and series B-1 warrants are exercisable at any time after their original issuance and will not expire. The series A-1 warrants and the series B-1 warrants will become exercisable at the earlier of (a) the 75th calendar day following the initial filing of the resale registration statement covering the resale of the shares of common stock issuable upon the exercise of the series A-1 warrants and series B-1 warrants, if the SEC notifies the Company that it will review such resale registration statement and (b) the 5th business day after the date the Company is notified by the SEC that such resale registration statement will not be subject to further review. Each series A-1 warrant will be exercisable for one share of common stock and will expire at 5:00 p.m. (New York City time) on the 30th day following the later of (a) the Company’s public announcement of the Phase 2b 12 week safety readout for IKT-001 for PAH and (b) the Company both obtaining stockholder approval for and filing an amendment to its charter to increase the number of authorized shares of common stock to a number of shares of common stock sufficient to allow for the full exercise of the warrants (“Charter Amendment”). Each series B-1 warrant will be exercisable for one share of common stock, will become exercisable by an investor once all of such investor’s series A-1 warrants have been exercised and will expire at 5:00 p.m. (New York City time) on the 30th day following the later of (a) the Company’s public announcement of its Phase 2b efficacy readout for IKT-001 with respect to PAH and
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(b) the Company both obtaining stockholder approval for and filing the Charter Amendment. The series A-1 warrants have an exercise price of $1.37 per share and the series B-1 warrants have an exercise price of $1.49 per share. As of December 31, 2024, 2,169,869 pre-funded warrants were exercised.
12. Net Loss Per Share
The following table presents the calculation of basic and diluted net loss per share applicable to common stockholders. Basic net loss per share is calculated by dividing net loss attributable to common shareholders by the weighted-average number of shares outstanding during the period which includes Pre-Funded Warrants and shares held in abeyance from date of issuance.
Year ended December 31,
Numerator:
Denominator:
The following shares were excluded from the calculation of diluted net loss per share applicable to common stockholders, prior to the application of the treasury stock method, because their effect would have been anti-dilutive for the periods presented:
Year ended December 31,
13. Income Taxes
No provision or benefit for federal or state income taxes has been recorded, as the Company has incurred a net loss for all of the periods presented, and the Company has provided a full valuation allowance against its deferred tax assets.
At December 31, 2024, the Company had federal net operating loss carryforwards of approximately $1.6 million which will begin to expire in varying amounts annually beginning in 2030 and $46.5 million of federal net operating losses with no expiration. At December 31, 2024, the Company had state net operating loss carryforwards of approximately $36.1 million which will begin to expire in varying amounts annually beginning in 2030. Utilization of net operating losses may be subject to substantial annual limitations due to the “change in ownership” provisions of the Internal Revenue Code, and similar state provisions. The Company is in the process of completing a Section 382 study through December 31, 2024, and preliminarily determined there were likely ownership changes on June 5, 2021 and October 21, 2024, which will result in annual base limitations. The limitations are still being finalized, though the analysis determined there will be sufficient annual limitation to allow for the absorption of pre-change NOLs, and therefore, the Company will not write them off. Conversely, the analysis provides that the Company's federal R&D credits will expire unutilized, and as a result, the Company has written off the deferred tax assets related to these credits.
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The reconciliation of the U.S. federal statutory rate to the Company’s effective tax rate is as follows:
Year ended December 31,
State income taxes 2.98 % 5.54 %
Stock-based compensation (2.42 )% (0.11 )%
Limitation on tax attributes (6.56 )% 0.00%
Change in valuation Allowance (16.21 )% (33.50 )%
Effective tax rate 0.00 % 0.00 %
On December 4, 2023, Massachusetts enacted supplemental tax law changes modifying the adoption of a single sales apportionment factor effective on January 1, 2025 to use the property and payroll factors if no sales factor exits. As required under ASC 740, the Company has accounted for the deferred tax impacts of this tax law change in the period the tax law was enacted, which has the impact of decreasing its state deferred tax assets. The impact of the tax law change is offset by a change in valuation allowance.
The significant components of the Company’s deferred tax assets (liabilities) consist of the following at December 31, 2024 and 2023:
Deferred tax assets:
R&D tax credits carryforwards — 1,093,839
Net deferred tax asset $ — $ —
The Company has maintained a full valuation allowance against its deferred tax assets in all periods presented. A valuation allowance is required to be recorded when it is not more likely than not that some portion or all of the net deferred tax assets will be realized. Since the Company cannot determine that it is more likely than not that it will generate taxable income, and thereby realize the net deferred tax assets, a full valuation allowance has been provided. The valuation allowance increased $4.5million and $6.4 million for the years ended December 31, 2024 and 2023, respectively. The increases in 2024 and 2023 are primarily related to each year’s taxable loss as well as the increase in stock-based compensation in 2024. The Company has no uncertain tax positions at December 31, 2024 and 2023 that would affect its effective tax rate. Since the Company is in a loss carryforward position, the Company is generally subject to U.S. federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available.
The Tax Cuts and Jobs Act (“TCJA”) resulted in significant changes to the treatment of research and developmental (R&D) expenditures under Section 174. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business. Specifically, costs for U.S.-based R&D activities must be amortized over five years and costs for foreign R&D activities must be amortized over 15 years- both using a midyear convention. During the year ended December 31, 2024, the Company capitalized for tax purposes $11.3 million and $0.7million of domestic and foreign R&D expenses, respectively.
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14. Commitments and Contingencies
Operating Leases
On April 18, 2022, the Company entered into an operating lease agreement for office space at its new location in Lexington, Massachusetts (“Office Lease”). On August 8, 2022, the Company commenced occupancy of the leased space. The lease runs through September 30, 2025 or a remaining lease period of 9 months. We have an option to extend the lease term for an additional three (3) years thereafter.
The Company accounts for the Office Lease under the provisions of ASU No. 2021-09, ASU 2018-10, and ASC 842. We recorded a right-of-use asset and a corresponding operating lease liability on the Company's consolidated balance sheets upon the accounting commencement date in August 2022. The lease liability was measured at the accounting commencement date utilizing 12% which is the Company's incremental borrowing rate. The right-of-use asset had a balance of $101,437 at December 31, 2024. The operating lease obligations totaled $110,517 at December 31, 2024, all of which is included under current liabilities. The Company recorded lease expense relating to the Office Lease of $141,182 and short-term payments of $21,959 for the year ended December 31, 2024 and lease expense relating to the Office Lease of $141,182 and short-term payments of $22,209 for the year ended December 31, 2023 included in selling, general and administrative expenses.
The Office Lease contains escalating payments during the lease period. Upon execution of the Office Lease, the Company prepaid one month of rent and a security deposit, one of which will be held in escrow and credited at the termination of the lease and the other of which will be applied to the first month’s rent. As of December 31, 2024, a security deposit of approximately $25,000 was included in prepaid expenses and other current assets on the Company’s consolidated balance sheets related to the Office Lease.
Future minimum lease payments under these leases at December 31, 2024, are presented by calendar year as follows:
Year
Less: imputed interest (4,449 )
Present value of operating lease liabilities $ 110,517
Guarantees
As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The term of the indemnification is for the officer’s or director’s lifetime. The maximum potential amount of future payments the Company could be required to make is unlimited; however, the Company has directors’ and officers’ insurance coverage that limits its exposure and enables it to recover a portion of any future amounts paid.
The Company leases office space on a month-to-month basis. The Company has standard indemnification arrangements under the lease that require it to indemnify the landlord against all costs, expenses, fines, suits, claims, demands, liabilities, and actions directly resulting from any breach, violation or nonperformance of any covenant or condition of the Company’s lease.
In the ordinary course of business, the Company enters into indemnification agreements with certain suppliers and business partners where the Company has certain indemnification obligations limited to the costs, expenses, fines, suits, claims, demands, liabilities and actions directly resulting from the Company’s gross negligence or willful misconduct, and in certain instances, breaches, violations or nonperformance of covenants or conditions under the agreements.
As of December 31, 2024, and 2023, the Company had not experienced any material losses related to these indemnification obligations, and no material claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves were established.
License Agreements
Sphaera Pharma Pte. Ltd.
On March 2, 2012, we entered into a collaborative research and development agreement, (“Sphaera Agreement”), with Sphaera Pharma Pte. Ltd. (“Sphaera”), to collaborate on the development of the prodrug technology to be applied to protein kinase inhibitors
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for oncology and non-oncology indications. Under the terms of the Sphaera Agreement, each party would retain its preexisting intellectual property, but any intellectual property conceived or reduced to practice under and certain results arising from the Sphaera Agreement would be assigned to us. On October 5, 2012, we and Sphaera amended the Sphaera Agreement to reflect joint patent applications in the U.S. and India by us and Sphaera for a series of novel compounds. While the underlying intellectual property would be jointly owned, we have the exclusive right to commercialize thirteen of the twenty-four linkers detailed in the filed patent applications (“Company Compounds”), including the linker attached to imatinib that comprises IKT-001 with the remaining nine linkers owned by Sphaera (“Sphaera Compounds”). Sphaera has the right to develop the Company Compounds for oncology indications but may not commercialize the Company Compounds unless we abandon the Company Compounds. We have notified Sphaera that we do not intend to abandon the Company Compounds. We do not currently have the right to develop the Sphaera Compounds. Additionally, if either party files an IND for a Company Compound that has been abandoned by the other party for an oncology indication in humans, the non-filing party is prohibited from developing such Company Compound. In 2023, Sphaera liquidated and transferred its interests to Pivot Holding LLC, a U.S. entity (“Pivot”). On September 30, 2024, the Company and Pivot agreed to amend the agreement and for the Company to pay $500,000 upon signing as well as payment of the following milestones by the Company. A one-time payment of $4.4 million upon FDA Approval (as described in the Sphaera Agreement) and a single low digit royalty on net sales of an FDA approved drug. The parties agreed that no further FDA Approval milestone payment(s) shall be due to Pivot in the event that the Company receives additional FDA Approval(s).
The prosecution of patents related to the Company Compounds, which includes the prodrug technology, is the responsibility of the Company.
Litigation
From time to time, the Company may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. When the Company is aware of a claim or potential claim, it assesses the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, the Company will record a liability for the loss. In addition to the estimated loss, the recorded liability would include probable and estimable legal costs associated with the claim or potential claim. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business. We are not currently a party to any material litigation or legal proceedings.
15. Simple Retirement Account for Employees (“Simple IRA”)
The Company established an individual retirement plan for employees effective January 1, 2013 under Section 408(p) of the Internal Revenue Code. The Simple IRA covers substantially all employees of the Company who received at least $5,000 in compensation from the Company during any two preceding years and are reasonably expected to receive at least $5,000 in compensation from the Company in the current year of participation. Subject to certain overall statutory limitations, the Company must match employee contributions up to 3% of employees’ qualified compensation for the year. Company contributions under the Simple IRA were $59,905 and $59,511 for the years ended December 31, 2024 and 2023, respectively.
16. Segment Information
The Company views its operations and manages its business as one operating and reportable segment, which is the business of developing protein kinase inhibitor therapeutics. Consistent with the operational structure, the Chief Executive Officer, as the chief operating decision maker (“CODM”), manages and allocates resources on a consolidated basis using consolidated net income (loss) as a measure of profit/loss for the single reportable segment. This decision making process reflects the way in which the financial
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information is regularly reviewed and used by the CODM to evaluate performance, set operational targets, forecast future financial results, and allocate resources.
Year ended December 31,
Revenues and other income
Costs and expenses:
Research and development (excluding share-based compensation) expense:
17. Subsequent Events
On February 21, 2025 (“Closing Date”), the Company entered into an Agreement and Plan of Merger and Reorganization (“Merger Agreement”) with Project IKT Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), CorHepta Pharmaceuticals, Inc., a Delaware corporation (“CorHepta”), and Preston S. Klassen, solely in his capacity as sellers’ representative. Pursuant to the Merger Agreement, on the Closing Date, Merger Sub merged with and into CorHepta (“Merger”), with CorHepta surviving the Merger as a wholly-owned subsidiary of the Company. On the Closing Date, the Company paid consideration for CorHepta of $15.0 million, subject to a customary purchase price adjustment mechanism. The Company paid the purchase price pursuant to the issuance of an aggregate of 4,979,101 shares (“Consideration Shares”) of the Company’s common stock, par value $0.001 per share (“Common Stock”), to the former stockholders of CorHepta (“CorHepta Stockholders”), of which 3,319,397 were issued as upfront consideration (“Upfront Consideration”). 82,979 Consideration Shares of the Upfront Consideration were deposited in a twelve-month escrow for purposes of satisfying potential indemnity obligations of the CorHepta Stockholders under the Merger Agreement. The remaining Consideration Shares were issued as contingent consideration (“Contingent Consideration”), which will vest upon achievement of a certain milestone. If the vesting condition is not satisfied as of the first anniversary of the Closing Date, then the Contingent Consideration will be forfeited. The Company is currently evaluating the accounting implications for the Merger Agreement.
In January 2025, in connection with the October 2024 Offering, the Company issued 702,625 warrants with an exercise price of $1.7125 and an expiration date of January 25, 2028.
On January 3, 2025, the number of the Company's authorized shares of common stock was increased from 100,000,000 shares to 500,000,000 shares. Also, the number of authorized shares of common stock reserved for issue under the Company's 2020 Equity Incentive plan was increased by 27,453,993 shares.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(1) For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.
(2) Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto. Those financial statement schedules required to be filed by Item 8 of this form, and by paragraph (b) below.
(3) The information required by this Item is set forth on the exhibit index of this Annual Report on Form 10-K.
EXHIBIT INDEX
Where Located
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10.30 Form of Non-Qualified Stock Option Agreement (Non-Plan Inducement Grant) X
19.1 Amended & Restated Insider Trading Policy X
21.1 Subsidiaries of the Registrant X
23.1 Consent of Independent Registered Public Accounting Firm. X
24.1 Power of Attorney (included on signature) X
101.SCH Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents X
(#) A contract, compensatory plan or arrangement to which a director or executive officer is a party or in which one or more directors or executive officers are eligible to participate.
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(†) Annexes, schedules and/or exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted attachment to the SEC on a confidential basis upon request.
(*) Portions of this exhibit (indicated by asterisks) have been omitted in accordance with Item 601(b)(10) of Regulation S-K.
(**) Furnished herewith.
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
INHIBIKASE THERAPEUTICS, INC.
Date: March 27, 2025 By: /s/ MARK IWICKI
Mark Iwicki
Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
KNOW ALL BY THESE PRESENT, that each individual whose signature appears below hereby constitutes and appoints each of Mark Iwicki and Garth Lees-Rolfe, as such person’s true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Annual Report, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that any said attorney-in-fact and agent, or any substitute or substitutes of any of them, may lawfully do or cause to be done by virtue hereof.
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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Name Title Date
Mark Iwicki
Garth Lees-Rolfe
/s/ ROBERTO BELLINI Director March 27, 2025
Roberto Bellini
/s/ ROY FREEMAN, M.D. Director March 27, 2025
Roy Freeman, M.D.
/s/ DAVID CANNER, PH.D. Director March 27, 2025
David Canner, Ph.D.
/s/ DENNIS BERMAN Director March 27, 2025
Dennis Berman
/s/ ARVIND KUSH Director March 27, 2025
Arvind Kush
/s/ AMIT MUNSHI Director March 27, 2025
Amit Munshi
/s/ VINCENT AURENTZ Director March 27, 2025
Vincent Aurentz
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