ck0001824293-20210930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________________

FORM 10-Q

____________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_________to_________

Commission File Number: 001-40034

____________________________________

VALLON PHARMACEUTICALS, INC.

(Exact Name of Registrant as Specified in its Charter)

____________________________________


Delaware						82-4369909
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

100 N. 18th Street, Suite 300, Philadelphia, PA 19103
(Address of principal executive offices, including zip code)

(267)-207-3606

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001
per share

VLON

NASDAQ Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	x


		Page

PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	3
	Statements of Operations and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2021 and 2020	4
	Statements of Stockholders’ Equity (Deficit) (unaudited) for the three and nine months ended September 30, 2021 and 2020	5
	Statements of Cash Flows (unaudited) for the nine months ended September 30, 2021 and 2020	6
	Notes to Unaudited Interim Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	20
PART II.	OTHER INFORMATION	21
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21




Item 6.	Exhibits	23
	Signatures	24


	September 30, 2021		December 31, 2020
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	5,884	$	109
Marketable securities, available-for-sale	3,254		—
Prepaid expenses and other current assets	778		565
Total current assets	9,916		674
Other assets	224		279
Property and equipment, net	—		2
Total assets	$	10,140	$	955

Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable	$	488	$	1,226
Accrued expenses	731		847
Note payable, current	—		47
Other current liabilities	94		105
Total current liabilities	1,313		2,225
Note payable, non-current	—		14
Other liabilities	98		170
Total liabilities	1,411		2,409

Commitments and contingencies (Note 10)

Stockholders' equity (deficit):
Common stock, $0.0001 par value; 250,000,000 shares authorized as of September 30, 2021 and December 31, 2020; 6,812,836 and 4,506,216 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively	—		—
Additional paid-in-capital	27,536		11,145
Accumulated other comprehensive loss	(1)		—
Accumulated deficit	(18,806)		(12,599)
Total stockholders’ equity (deficit)	8,729		(1,454)
Total liabilities and stockholders' equity (deficit)	$	10,140	$	955


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

License revenue-related party	$	—	$	—	$	—	$	100
Operating expenses:
Research and development	215		733		3,189		2,427
General and administrative	1,038		300		2,976		1,001
Total operating expenses	1,253		1,033		6,165		3,428
Loss from operations	(1,253)		(1,033)		(6,165)		(3,328)
Other income	—		—		61		—
Revaluation of derivative liability	—		—		(89)		—
Interest expense, net	(4)		(12)		(14)		(25)
Net loss	(1,257)		(1,045)		(6,207)		(3,353)
Other comprehensive loss:
Unrealized loss on investments	(1)		—		(1)		—
Total comprehensive loss	$	(1,258)	$	(1,045)	$	(6,208)	$	(3,353)

Net loss per share of common stock, basic and diluted	$	(0.18)	$	(0.23)	$	(0.96)	$	(0.74)
Weighted-average common shares outstanding, basic and diluted	6,812,836		4,506,216		6,449,522		4,506,216


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Stockholders’ Equity (Deficit)
	Shares	Amount
Balance, December 31, 2019	4,506,216	$	—	$	10,991	$	—	$	(7,777)	$	3,214
Stock-based compensation	—	—		35		—		—		35
Net loss	—	—		—		—		(1,161)		(1,161)
Balance, March 31, 2020	4,506,216	—		11,026		—		(8,938)		2,088
Stock-based compensation	—	—		28		—		—		28
Net loss	—	—		—		—		(1,147)		(1,147)
Balance, June 30, 2020	4,506,216	—		11,054		—		(10,085)		969
Stock-based compensation	—	—		52		—		—		52
Net loss	—	—		—		—		(1,045)		(1,045)
Balance September 30, 2020	4,506,216	$	—	$	11,106	$	—	$	(11,130)	$	(24)


	As of September 30, 2021
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable Securities:
Debt securities:
Corporate bonds	$	2,316	$	1	$	(1)	$	2,316
Municipal bonds	939		—		(1)		938
Total	$	3,255	$	1	$	(2)	$	3,254


Beginning balance as of January 1, 2021	$	—
Additions during the nine months ended September 30, 2021	89
Transfer out of Level 3	(89)
Balance as of September 30, 2021	$	—


	As of September 30, 2021
Due in 1 year	$	3,134
Due in 1-5 years	120
Due in 5-10 years	—
Due after 10 years	—
Total	$	3,254


Volatility			85.0 %
Expected term in years			2.5
Dividend rate			0.0 %
Risk-free interest rate			0.155 %


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	22	$	29	$	61	$	82
General and administrative	112		23		379		33
Total	$	134	$	52	$	440	$	115


	Number of options	Weighted average exercise price		Weighted average remaining contractual term (years)
Outstanding at December 31, 2020	266,250	$	2.94	8.22
Granted	397,240	$	3.87
Exercised	—	—
Forfeited	—	—
Outstanding at September 30, 2021	663,490	$	3.50	8.81
Exercisable at September 30, 2021	159,600	$	2.92	8.01


	Nine Months Ended September 30,
	2021		2020
Operating activities:
Net loss	$	(6,207)	$	(3,353)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of finance lease right-of-use asset	55		55
Amortization of marketable securities premiums	11		—
Stock-based compensation expense	440		115
Revaluation of derivative liability	89		—
Forgiveness of PPP note	(61)		—
Non-cash interest, depreciation and other expense	2		1
Change in operating assets and liabilities:
Prepaid expenses and other current assets	(213)		(282)
Accounts payable	(729)		273
Accrued expenses	(116)		293
Cash used in operating activities	(6,729)		(2,898)

Investing activities:
Purchase of marketable securities	(3,266)		—
Purchase of property and equipment	—		(2)
Cash used in investing activities	(3,266)		(2)

Financing activities:
Proceeds from PPP loan	—		61
Proceeds from common stock, net of offering expenses	15,503		—
Proceeds from convertible notes	350		—
Payment of finance lease liability	(83)		(58)
Cash provided by financing activities	15,770		3

Net increase (decrease) in cash and cash equivalents	5,775		(2,897)
Cash and cash equivalents, at beginning of period	109		3,821
Cash and cash equivalents, at end of period	$	5,884	$	924
Supplemental disclosure of cash flows information:
Noncash financing activities:
Conversion of convertible notes to common stock	$	350	$	—


	Nine Months Ended September 30,
	2021		2020
Net cash provided by (used in):
Operating activities	$	(6,729)	$	(2,898)
Investing activities	(3,266)		(2)
Financing activities	15,770		3
Net increase (decrease) in cash and cash equivalents	$	5,775	$	(2,897)


	VALLON PHARMACEUTICALS, INC.


Date: November 12, 2021	By:	/s/ Leanne M. Kelly
		Name: Leanne M. Kelly
		Title: Chief Financial Officer
		(Principal Financial and Accounting Officer)


Exhibit Number						Description

3.1						Amended and Restated Certificate of Incorporation of Vallon Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on February 16, 2021).

3.2						Amended and Restated Bylaws of Vallon Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.3 to the Current Report on F orm 8-K, filed with the SEC on February 16, 2021).

3.3						Certificate of Amendment to Amended and Restated Certificate of Incorporation of Vallon Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, filed with the SEC on February 16, 2021).

31.1						Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2						Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1*						Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2*						Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS						iXBRL Instance Document

101.SCH						iXBRL Taxonomy Extension Schema Document

101.CAL						iXBRL Taxonomy Extension Calculation Linkbase Document

101.DEF						iXBRL Taxonomy Extension Definition Linkbase Document

101.LAB						iXBRL Taxonomy Extension Label Linkbase Document

101.PRE						iXBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SEC Form 10-Q filed by Vallon Pharmaceuticals Inc.