PART I. FINANCIAL INFORMATION This section provides unaudited interim consolidated financial statements and notes on financial position and operations [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section details unaudited interim consolidated financial statements and accompanying notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202023%20(unaudited)%20and%20December%2031%2C%202022) This section presents unaudited consolidated balance sheets as of June 30, 2023, and December 31, 2022 | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $4,799 | $9 | | Total current assets | $5,592 | $312 | | Total assets | $5,642 | $383 | | Accounts payable | $307 | $1,294 | | Accrued expenses | $1,193 | $36 | | Total current liabilities | $1,604 | $1,994 | | Total liabilities | $1,604 | $2,008 | | Additional paid-in-capital | $31,430 | $16,871 | | Accumulated deficit | $(27,392) | $(18,496) | | Total stockholders' equity (deficit) | $4,038 | $(1,625) | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations%20(unaudited)%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022) This section details unaudited consolidated statements of operations for the reported interim periods | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $880 | $59 | $997 | $119 | | General and administrative | $5,054 | $130 | $5,926 | $268 | | Total operating expenses | $5,934 | $189 | $6,923 | $387 | | Loss from operations | $(5,934) | $(189) | $(6,923) | $(387) | | Change in fair value of warrant liability | $122 | $— | $122 | $— | | Interest expense, net | $(934) | $(106) | $(2,095) | $(210) | | Net loss | $(6,746) | $(295) | $(8,896) | $(597) | | Net loss per share, basic and diluted | $(2.79) | $(0.35) | $(5.23) | $(0.70) | | Weighted-average common shares outstanding | 2,417,785 | 851,419 | 1,701,864 | 851,419 | [Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=5&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)%20(unaudited)%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022) This section presents unaudited consolidated statements of changes in stockholders' equity (deficit) | Metric (in thousands) | December 31, 2022 | March 31, 2023 | June 30, 2023 | | :------------------------------------------ | :---------------- | :--------------- | :-------------- | | Balance, Stockholders' Equity (Deficit) | $(1,625) | $(3,230) | $4,038 | | Additional Paid-in Capital | $16,871 | $17,416 | $31,430 | | Accumulated Deficit | $(18,496) | $(20,646) | $(27,392) | | Common Stock Shares Outstanding | 999,748 | 1,000,215 | 2,956,354 | | Issuance of common stock in pre-closing financing | — | — | $11,721 | | Issuance of common stock for settlement of bridge note | — | — | $3,333 | | Issuance of common stock for reverse recapitalization expenses | — | — | $1,875 | | Net loss | $(2,150) | $(6,746) | [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)%20for%20the%20six%20months%20ended%20June%2030%2C%202023%20and%202022) This section provides unaudited consolidated statements of cash flows for the reported periods | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(8,896) | $(597) | | Cash used in operating activities | $(2,119) | $(116) | | Cash used in investing activities | $(8) | $— | | Cash provided by financing activities | $6,917 | $35 | | Net increase (decrease) in cash and cash equivalents | $4,790 | $(81) | | Cash and cash equivalents at end of period | $4,799 | $9 | | Proceeds from issuance of common stock in pre-closing financing | $12,250 | $— | | Proceeds from issuance of bridge promissory note | $1,250 | $— | | Net liabilities assumed in reverse recapitalization | $(2,939) | $— | | Payment of reverse recapitalization costs | $(2,984) | $— | [Notes to Unaudited Interim Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Unaudited%20Interim%20Consolidated%20Financial%20Statements) This section provides detailed explanations of financial policies, significant events, and account balances [1. Organization and Description of Business](index=8&type=section&id=1.%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) This note describes the company's biopharmaceutical business and the recent reverse merger event - GRI Bio, Inc. is a clinical-stage biopharmaceutical company focused on discovering, developing, and commercializing innovative therapies targeting serious diseases associated with dysregulated immune responses, including inflammatory, fibrotic, and autoimmune disorders[20](index=20&type=chunk) - The company's lead product candidate, **GRI-0621**, is an oral inhibitor of type 1 Natural Killer T (iNKT I) cells, being developed for severe fibrotic lung diseases like idiopathic pulmonary fibrosis (IPF)[20](index=20&type=chunk) - The product candidate portfolio also includes **GRI-0803**, a novel oral agonist of type 2 Natural Killer T (NKT II) cells, being developed for autoimmune disorders such as Systemic Lupus Erythematosus Disease (SLE) and multiple sclerosis (MS), along with a proprietary library of **500+ compounds**[20](index=20&type=chunk) - On **April 21, 2023**, the company (formerly Vallon Pharmaceuticals, Inc.) consummated a reverse merger with GRI Bio Operations, Inc. (Private GRI), with Private GRI surviving as a wholly-owned subsidiary and being accounted for as the accounting acquirer[21](index=21&type=chunk)[23](index=23&type=chunk) [2. Liquidity](index=8&type=section&id=2.%20LIQUIDITY) This note discusses the company's cash position, operating losses, and its ability to continue as a going concern - The company has incurred operating losses since inception in **2009**, resulting in an accumulated deficit of **$27,392 thousand** through June 30, 2023[24](index=24&type=chunk) - As of **June 30, 2023**, the company had cash of approximately **$4,799 thousand**[24](index=24&type=chunk) - Based on the current operating plan, existing cash and cash equivalents, including proceeds from the Equity SPA, are expected to fund operating expenses and capital expenditure requirements for **twelve months** from the date of the Merger[28](index=28&type=chunk) - The company's ability to continue as a going concern is dependent on raising additional capital, leading to substantial doubt about its ability to continue as a going concern[29](index=29&type=chunk) [3. Basis of Presentation and Summary of Significant Accounting Policies](index=9&type=section&id=3.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines accounting principles, fair value measurements, and policies for debt and stock compensation - The unaudited interim financial statements are prepared in accordance with GAAP for interim financial periods and SEC rules, requiring management to make estimates and assumptions that affect reported amounts[30](index=30&type=chunk)[32](index=32&type=chunk) - Fair value measurements for financial instruments, including liability classified warrants, are categorized into a **three-level hierarchy**, with **Level 3** requiring significant unobservable inputs[35](index=35&type=chunk)[38](index=38&type=chunk) - Debt discounts and debt issuance costs are amortized as additional interest expense over the estimated terms of the notes using the effective interest method[41](index=41&type=chunk)[42](index=42&type=chunk) - Stock-based compensation expense for employee and non-employee awards is recognized using a fair value-based method (Black-Scholes option-pricing model) over the vesting period[43](index=43&type=chunk) [4. Merger with Vallon](index=12&type=section&id=4.%20MERGER%20WITH%20VALLON) This note details the reverse recapitalization with Vallon Pharmaceuticals, Inc., and its financial implications - On **April 21, 2023**, the company (formerly Vallon Pharmaceuticals, Inc.) consummated a merger with Private GRI, with Private GRI surviving as a wholly-owned subsidiary and the company changing its name to 'GRI Bio, Inc.'[47](index=47&type=chunk) - The merger was accounted for as a reverse recapitalization, with Private GRI determined to be the accounting acquirer, as its equity holders owned approximately **85%** of the combined company's common stock and Private GRI management holds the majority of board seats and key management positions[47](index=47&type=chunk) - Immediately after the Merger, there were **2,956,354 shares** of the Company's common stock outstanding[48](index=48&type=chunk) Net Liabilities Assumed | Net Liabilities Assumed (in thousands) | April 21, 2023 | | :----------------------------------- | :------------- | | Cash and cash equivalents | $941 | | Prepaid and other assets | $310 | | Accounts payable and accrued expenses | $(4,190) | | Total net liabilities assumed | $(2,939) | | Plus: Transaction costs | $(2,984) | | Total net liabilities assumed plus transaction costs | $(5,923) | [5. Fair Value Measurements](index=13&type=section&id=5.%20FAIR%20VALUE%20MEASUREMENTS) This note explains the company's fair value hierarchy for financial instruments, particularly warrant liabilities - The company measures financial assets and liabilities at fair value using a **three-level hierarchy**, with **Level 3** requiring inputs that are significant to the fair value measurement and unobservable[50](index=50&type=chunk) Liabilities | Liabilities (in thousands) | June 30, 2023 (Level 3) | | :----------------------- | :---------------------- | | Warrant liability | $63 | | Total liabilities | $63 | Warrant Liability | Warrant Liability (in thousands) | Amount | | :------------------------------- | :----- | | Fair value as of December 31, 2022 | $185 | | Change in valuation | $(122) | | Fair value as of June 30, 2023 | $63 | Black-Scholes Valuation Assumptions | Black-Scholes Valuation Assumptions | June 30, 2023 | December 31, 2022 | | :-------------------------------- | :------------ | :---------------- | | Volatility | 167.1 % | 139.9 % | | Expected term in years | 2.5 | 2.5 | | Dividend rate | 0.0 % | 0.0 % | | Risk-free interest rate | 4.68 % | 4.32 % | [6. Property and Equipment](index=14&type=section&id=6.%20PROPERTY%20AND%20EQUIPMENT) This note provides details on the company's property and equipment, including depreciation expenses Property and Equipment | Property and Equipment (in thousands) | June 30, 2023 | December 31, 2022 | | :---------------------------------- | :------------ | :---------------- | | Computer equipment | $21 | $13 | | Furniture and fixtures | $12 | $13 | | Total | $33 | $26 | | Accumulated depreciation | $(24) | $(22) | | Property and equipment, net | $9 | $4 | - Depreciation expense related to property and equipment was **$2 thousand** for the six months ended June 30, 2023, compared to **$1 thousand** for the same period in 2022[53](index=53&type=chunk) [7. Accrued Expenses](index=14&type=section&id=7.%20ACCRUED%20EXPENSES) This note itemizes the company's accrued expenses, including research and development, and payroll Accrued Expenses | Accrued Expenses (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------ | :------------ | :---------------- | | Research and development | $143 | $— | | General and administrative | $188 | $— | | Payroll and related | $862 | $36 | | Total accrued expenses | $1,193 | $36 | [8. Promissory Notes](index=14&type=section&id=8.%20PROMISSORY%20NOTES) This note describes the issuance, settlement, and interest expense related to the company's promissory notes - Private GRI issued senior secured promissory notes (Bridge Notes) in an aggregate principal amount of **$3,333 thousand** for a purchase price of **$2,500 thousand**, with two closings in **December 2022** and **March 2023**[55](index=55&type=chunk)[56](index=56&type=chunk) - Upon the Merger, the outstanding principal and accrued interest on the Bridge Notes were cancelled, and the associated Bridge Warrants were exchanged for Exchange Warrants[59](index=59&type=chunk)[60](index=60&type=chunk) - Interest expense from amortization of debt discounts and issuance costs was **$2,104 thousand** for the six months ended June 30, 2023, compared to **$0** for the same period in 2022[61](index=61&type=chunk) - The TEP Note, a convertible promissory note, had **$3,500 thousand** of outstanding principal and **$650 thousand** of accrued interest automatically convert into **155,210 shares** of Private GRI's common stock in **December 2022**[66](index=66&type=chunk)[68](index=68&type=chunk) [9. Stockholders' Equity](index=17&type=section&id=9.%20STOCKHOLDERS'%20EQUITY) This note details changes in stockholders' equity, including common stock issuance and warrant transactions - In connection with the Merger Agreement, the Investor agreed to invest **$12,250 thousand** in cash and cancel outstanding principal and accrued interest on Bridge Notes in return for Private GRI common stock[70](index=70&type=chunk) - The company issued Series A-1, A-2, and T Warrants (Equity Warrants) to the Investor on **May 8, 2023**, with an allocated fair value of **$5,675 thousand**, classified as equity[74](index=74&type=chunk)[76](index=76&type=chunk) - Bridge Warrants were exchanged for Exchange Warrants to purchase **421,589 shares** of common stock, with an allocated fair value of **$2,860 thousand**, classified as equity[77](index=77&type=chunk) Warrant Details | Warrant Type | Number of Shares | Exercise Price per Share | Expiration Date | | :-------------------------------- | :--------------- | :----------------------- | :------------------------------ | | Series A-1 Warrants | 1,269,210 | $13.51 | 60 months after registration date | | Series A-2 Warrants | 1,142,289 | $14.74 | June 2025 | | Series T Warrants | 814,467 | $12.28 | 24 months after registration date | | Exchange Warrants | 421,590 | $14.73 | 60 months after registration date | | Advisor Warrants | 2,402 | $61.39 | April 2028 | | Other Warrants | 38,232 | Varies | Varies | [10. Stock-Based Compensation](index=19&type=section&id=10.%20STOCK-BASED%20COMPENSATION) This note outlines the company's stock-based compensation plan and related expenses - The company assumed the Private GRI Plan and approved the Amended and Restated GRI Bio, Inc. 2018 Equity Incentive Plan (A&R 2018 Plan), increasing the aggregate number of shares for awards by **168,905** to **216,666 shares**[81](index=81&type=chunk)[82](index=82&type=chunk) Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | For the Three Months Ended June 30, 2023 | For the Three Months Ended June 30, 2022 | For the Six Months Ended June 30, 2023 | For the Six Months Ended June 30, 2022 | | :-------------------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------------------------------- | :------------------------------------- | | Research and development | $— | $— | $— | $— | | General and administrative | $13 | $— | $26 | $— | | Total | $13 | $— | $26 | $— | - As of **June 30, 2023**, the unrecognized compensation cost related to unvested stock options expected to vest was **$280 thousand**, to be recognized over a weighted-average amortization period of **3.35 years**[86](index=86&type=chunk) [11. Commitments and Contingencies](index=20&type=section&id=11.%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses employment contracts, severance provisions, and potential equity award acceleration - The company has employment contracts with officers that include provisions for severance and continuation of benefits upon termination without cause or for good reason, with potential acceleration of equity awards following a change in control[87](index=87&type=chunk) - A Separation and Release Agreement with the former CEO, David Baker, includes **18 months** of salary and COBRA benefits continuation, and a lump sum payment equal to **150%** of his target bonus[88](index=88&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the company's financial condition, operations, liquidity, and critical accounting policies [Overview](index=21&type=section&id=Overview) This section provides a business overview, highlighting biopharmaceutical therapies and lead product candidates - GRI Bio is a clinical-stage biopharmaceutical company focused on developing therapies for serious diseases associated with dysregulated immune responses, including inflammatory, fibrotic, and autoimmune disorders[91](index=91&type=chunk) - The lead product candidate, **GRI-0621**, an oral inhibitor of type 1 Natural Killer T (iNKT) cells, is being developed for severe fibrotic lung diseases like idiopathic pulmonary fibrosis (IPF); a Phase 2a trial in **36 IPF patients** is initiating in the **second half of 2023**, with topline results expected in the **second half of 2024**[92](index=92&type=chunk) - **GRI-0803**, a novel oral agonist of type 2 Natural Killer T (type 2 NKT) cells, is being developed for autoimmune disorders, with preclinical work in Systemic Lupus Erythematosus Disease (SLE) and multiple sclerosis (MS); an IND filing for a Phase 1a and 1b trial targeting SLE is expected in the **first half of 2024**[93](index=93&type=chunk) [Merger with Vallon Pharmaceuticals, Inc.](index=22&type=section&id=Merger%20with%20Vallon%20Pharmaceuticals%2C%20Inc.) This section details the reverse merger with Vallon Pharmaceuticals and associated equity and warrant transactions - On **April 21, 2023**, the company (formerly Vallon Pharmaceuticals, Inc.) completed a merger with GRI Bio Operations, Inc. (Private GRI), changing its name to 'GRI Bio, Inc.'[94](index=94&type=chunk) - The Equity SPA involved an investor agreeing to invest **$12.25 million** in cash and cancel **$3.3 million** in outstanding principal and accrued interest on Bridge Notes in exchange for Private GRI common stock[95](index=95&type=chunk) - Upon the Merger, Series A-1, A-2, and T Warrants were issued to the Investor, and Bridge Warrants were exchanged for Exchange Warrants to purchase an aggregate of **421,589 shares** of the Company's common stock[96](index=96&type=chunk)[97](index=97&type=chunk) [Financial Operations Overview](index=22&type=section&id=Financial%20Operations%20Overview) This section outlines key financial drivers: R&D, G&A expenses, and warrant liability valuation - Research and development expenses primarily relate to the **GRI-0621** development program and are expected to increase as planned clinical and preclinical activities advance[98](index=98&type=chunk)[99](index=99&type=chunk) - General and administrative expenses are expected to increase substantially due to costs associated with operating as a public company, including compliance, insurance, legal, accounting, investor relations, and increased personnel[101](index=101&type=chunk) - Warrant liability is measured at fair value using a Black-Scholes valuation model and revalued at each reporting date, with changes recognized in the consolidated statements of operations[102](index=102&type=chunk) - Interest expense, net, includes amortization of debt discounts, debt issuance costs, and interest related to the TEP Notes and Bridge Notes[103](index=103&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section analyzes operating expenses, net loss, and interest expense for the reported interim periods Three Months Ended June 30, 2023 and 2022 | Metric (in thousands) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Change (2023 vs 2022) | | :------------------------------------ | :------------------------------- | :------------------------------- | :-------------------- | | Research and development | $880 | $59 | +$821 | | General and administrative | $5,054 | $130 | +$4,924 | | Net loss | $(6,746) | $(295) | $(6,451) | | Interest expense, net | $(934) | $(106) | $(828) | Six Months Ended June 30, 2023 and 2022 | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change (2023 vs 2022) | | :------------------------------------ | :----------------------------- | :----------------------------- | :-------------------- | | Research and development | $997 | $119 | +$878 | | General and administrative | $5,926 | $268 | +$5,658 | | Net loss | $(8,896) | $(597) | $(8,299) | | Interest expense, net | $(2,095) | $(210) | $(1,885) | - The **$5.0 million** increase in General and administrative expenses for the three months ended June 30, 2023, was primarily due to **$3.8 million** in professional fees associated with the Merger, **$0.8 million** in personnel expenses, and **$0.3 million** in consulting, administrative, and insurance expenses related to operating as a public company[106](index=106&type=chunk) - The change in fair value of warrant liability resulted in a **$0.1 million** decrease for the three months ended June 30, 2023, and a **$0.1 million** increase for the six months ended June 30, 2023[107](index=107&type=chunk)[112](index=112&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, funding, and ability to meet future operating needs - The company incurred net losses of **$8.9 million** and **$0.6 million** for the six months ended June 30, 2023 and 2022, respectively, and had an accumulated deficit of **$27.4 million** as of June 30, 2023[114](index=114&type=chunk) - As of **June 30, 2023**, the company had **$4.8 million** in cash, primarily financed through the issuance of common stock, warrants, convertible notes, and promissory notes[115](index=115&type=chunk) Cash Flow Activity | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(2,119) | $(116) | | Net cash used in investing activities | $(8) | $— | | Net cash provided by financing activities | $6,917 | $35 | | Net increase (decrease) in cash and cash equivalents | $4,790 | $(81) | - Cash provided by financing activities for the six months ended June 30, 2023, was **$6.9 million**, primarily due to **$12.3 million** from the Equity SPA and **$1.3 million** from Bridge Notes, offset by merger-related costs and liabilities[118](index=118&type=chunk) - Existing cash and cash equivalents are expected to fund operating expenses and capital expenditure requirements for **twelve months** from the Merger date, but substantial additional funding will be required for continuing operations, raising substantial doubt about the company's ability to continue as a going concern[122](index=122&type=chunk)[123](index=123&type=chunk) [Critical Accounting Policies and Estimates](index=27&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights significant accounting policies and estimates requiring management's judgment - The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses[125](index=125&type=chunk) - Management evaluates these estimates and judgments on an ongoing basis, basing them on historical experience and other reasonable factors, though actual results could differ[125](index=125&type=chunk) [Emerging Growth Company Status](index=27&type=section&id=Emerging%20Growth%20Company%20Status) This section explains the company's 'emerging growth company' status and regulatory exemptions - The company is an 'emerging growth company' (EGC) as defined in the JOBS Act, allowing it to rely on exemptions from certain disclosure requirements applicable to other public companies[127](index=127&type=chunk) - These exemptions include reduced disclosure about executive compensation, no non-binding stockholder advisory votes, and exemption from auditor attestation on internal control over financial reporting[127](index=127&type=chunk) - The company will remain an EGC until the earliest of reaching **$1.235 billion** in annual gross revenues, **December 31, 2026**, issuing over **$1.0 billion** in nonconvertible debt, or becoming a large accelerated filer[127](index=127&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Market risk disclosures are not applicable as the company qualifies as a smaller reporting company - Quantitative and Qualitative Disclosures About Market Risk are not applicable to a smaller reporting company[128](index=128&type=chunk) [Item 4. Controls and Procedures](index=28&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of June 30, 2023, with no material internal control changes - The Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the company's disclosure controls and procedures as of **June 30, 2023**, and concluded they were effective[130](index=130&type=chunk) - No changes in internal control over financial reporting occurred during the fiscal quarter that have materially affected or are reasonably likely to materially affect internal control over financial reporting[131](index=131&type=chunk) PART II. OTHER INFORMATION This section provides additional information on legal proceedings, risk factors, and other disclosures [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - There are no legal proceedings to report[134](index=134&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors previously disclosed in prior annual and quarterly reports - No material changes from the risk factors previously disclosed in Vallon's Annual Report on Form 10-K for the fiscal year ended **December 31, 2022**, and in the company's Quarterly Report on Form 10-Q for the quarter ended **March 31, 2023**[135](index=135&type=chunk) [Item 2. Unregistered Sales of Securities](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Securities) The company reported no unregistered sales of securities - There were no unregistered sales of securities[136](index=136&type=chunk) [Item 3. Defaults Upon Senior Securities](index=29&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There were no defaults upon senior securities[137](index=137&type=chunk) [Item 4. Mine Safety Disclosures](index=29&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reported no mine safety disclosures - There were no mine safety disclosures[138](index=138&type=chunk) [Item 5. Other Information](index=29&type=section&id=Item%205.%20Other%20Information) Employment agreement for Albert Agro, M.D., ratified, detailing salary, bonus, and severance provisions - On **August 10, 2023**, the Compensation Committee ratified an employment agreement with Albert Agro, M.D., effective **July 1, 2023**, superseding a previous consulting agreement[139](index=139&type=chunk) - The Employment Agreement includes an annual base salary of **$325,000** and an annual target cash bonus of **35%**[141](index=141&type=chunk) - Severance provisions include salary continuation and COBRA premium reimbursement for **twelve months** upon termination without 'cause' or resignation for 'good reason'[139](index=139&type=chunk) - In the event of termination following a 'change in control', severance periods increase to **18 months**, all unvested equity awards automatically accelerate, and an additional payment equivalent to **1.5 times** the Annual Base Salary is provided[139](index=139&type=chunk) [Item 6. Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with Form 10-Q, including governance documents, plans, agreements, and certifications - The report includes various exhibits such as the Certificate of Incorporation, Amended and Restated Bylaws, A&R 2018 Equity Incentive Plan, several Employment Agreements, a Separation Agreement, and certifications from the Principal Executive Officer and Principal Financial Officer (Sections 302 and 906 of Sarbanes-Oxley Act)[143](index=143&type=chunk)

For the transition period from_________to_________ Table of Contents 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 March 31, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-40034 _________________ ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________________ FORM 10-K (Mark One) ¨ 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) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | Delaware | 82-4369909 | | --- | --- | ...

[Filing Information](index=1&type=section&id=Filing%20Information) [General Information](index=1&type=section&id=General%20Information) Provides basic filing details for Vallon Pharmaceuticals, Inc.'s Form 10-Q, including incorporation, trading symbol, and filer status - Registrant is Vallon Pharmaceuticals, Inc., incorporated in Delaware, trading symbol **VLON** on The Nasdaq Capital Market[2](index=2&type=chunk) - The company is a non-accelerated filer, smaller reporting company, and emerging growth company[3](index=3&type=chunk) Balance Sheet Summary (in thousands) | Metric | Value | | :--- | :--- | | Shares Outstanding (as of Nov 2, 2022) | 12,742,342 | [Special Note Regarding Forward-Looking Statements](index=5&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Highlights that the report contains forward-looking statements subject to risks and uncertainties, cautioning against reliance - Forward-looking statements are based on management's current expectations and projections, but are not guarantees of future performance or development[9](index=9&type=chunk) - Key areas of forward-looking statements include strategic alternatives, clinical trial outcomes, market opportunities, regulatory approvals, intellectual property, and financial performance[8](index=8&type=chunk) - The company does not plan to publicly update or revise any forward-looking statements after the report's distribution, except as required by law[10](index=10&type=chunk) [PART I. FINANCIAL INFORMATION](index=8&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited interim financial statements, reflecting ongoing operating losses and strategic alternative evaluations [Balance Sheets](index=8&type=section&id=Balance%20Sheets) Balance Sheet Summary (in thousands) | Item | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $4,732 | $3,702 | | Marketable securities, available-for-sale | $419 | $3,808 | | Total current assets | $5,569 | $8,129 | | Total assets | $5,569 | $8,335 | | **Liabilities** | | | | Total current liabilities | $2,110 | $2,445 | | Total liabilities | $2,110 | $2,517 | | **Stockholders' Equity** | | | | Total stockholders' equity | $3,459 | $5,818 | | Accumulated deficit | $(27,343) | $(21,902) | [Statements of Operations and Comprehensive Loss](index=9&type=section&id=Statements%20of%20Operations%20and%20Comprehensive%20Loss) Statements of Operations and Comprehensive Loss (in thousands, unaudited) | Item | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $(18) | $215 | $1,529 | $3,189 | | General and administrative | $1,422 | $1,038 | $4,014 | $2,976 | | Total operating expenses | $1,404 | $1,253 | $5,543 | $6,165 | | Loss from operations | $(1,404) | $(1,253) | $(5,543) | $(6,165) | | Change in fair value of warrant liability | $757 | — | $490 | — | | Loss on warrant conversion | $(388) | — | $(388) | — | | Net loss | $(1,033) | $(1,257) | $(5,441) | $(6,207) | | Net loss per share, basic and diluted | $(0.09) | $(0.18) | $(0.59) | $(0.96) | [Statements of Changes in Stockholders' Equity (Deficit)](index=10&type=section&id=Statements%20of%20Changes%20in%20Stockholders'%20Equity%20(Deficit)) Changes in Stockholders' Equity (Deficit) (in thousands, unaudited) | Item | Balance, Dec 31, 2021 | Balance, Sep 30, 2022 | | :--- | :--- | :--- | | Common Stock (shares) | 6,812,836 | 12,732,836 | | Common Stock (amount) | $0 | $1 | | Additional Paid-in Capital | $27,722 | $30,802 | | Accumulated Other Comprehensive Loss | $(2) | $(1) | | Accumulated Deficit | $(21,902) | $(27,343) | | Total Stockholders' Equity | $5,818 | $3,459 | - Issuance of common stock, net of offering expenses, contributed **$2,161 thousand** to equity during the nine months ended September 30, 2022[19](index=19&type=chunk) - Issuance of common stock upon warrant exercise contributed **$960 thousand** to equity during the nine months ended September 30, 2022[19](index=19&type=chunk) [Statements of Cash Flows](index=11&type=section&id=Statements%20of%20Cash%20Flows) Statements of Cash Flows (in thousands, unaudited) | Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Operating activities | $(5,764) | $(6,729) | | Investing activities | $3,362 | $(3,266) | | Financing activities | $3,432 | $15,770 | | Net increase in cash and cash equivalents | $1,030 | $5,775 | | Cash and cash equivalents, at end of period | $4,732 | $5,884 | [Notes to Unaudited Interim Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Interim%20Financial%20Statements) Provides detailed explanations for interim financial statements, covering business, liquidity, accounting policies, and equity changes [1. Organization and Description of Business](index=12&type=section&id=1.%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20BUSINESS) - Vallon Pharmaceuticals, Inc. is a biopharmaceutical company focused on abuse-deterrent medications for CNS disorders[24](index=24&type=chunk) - Lead product candidate ADAIR (dextroamphetamine for ADHD/narcolepsy) failed to meet its primary endpoint in the SEAL study in March 2022[24](index=24&type=chunk)[26](index=26&type=chunk) - The company is assessing the path forward for ADAIR and ADMIR and has engaged Ladenburg Thalmann & Co. Inc. to evaluate strategic alternatives to maximize stockholder value[26](index=26&type=chunk) [2. Liquidity](index=12&type=section&id=2.%20LIQUIDITY) - The company has incurred operating losses since inception, with an accumulated deficit of **$27,343 thousand** as of September 30, 2022, raising substantial doubt about its ability to continue as a going concern[27](index=27&type=chunk)[32](index=32&type=chunk) - As of September 30, 2022, cash, cash equivalents, and marketable securities totaled approximately **$5,151 thousand**[30](index=30&type=chunk) - Future capital requirements are uncertain and depend on strategic alternatives, potentially leading to dilution or restrictions if additional funds are raised[31](index=31&type=chunk)[32](index=32&type=chunk) [3. Basis of Presentation and Summary of Significant Accounting Policies](index=13&type=section&id=3.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - Unaudited interim financial statements are prepared in accordance with GAAP and SEC rules, with the December 31, 2021 balance sheet derived from audited statements[33](index=33&type=chunk) - Key accounting estimates include valuation of share options, warrant liabilities, deferred tax assets, revenue recognition, and accrued expenses[36](index=36&type=chunk) - Marketable securities are classified as available-for-sale and recorded at fair value, with unrealized gains/losses in comprehensive income[37](index=37&type=chunk) - Warrants issued in May 2022 are classified as derivative liabilities and measured at fair value, with changes recognized in the Statements of Operations[39](index=39&type=chunk) [4. Marketable Securities and Fair Value Measurements](index=15&type=section&id=4.%20MARKETABLE%20SECURITIES%20AND%20FAIR%20VALUE%20MEASUREMENTS) Marketable Securities (Available-for-Sale, in thousands) | Type | Sep 30, 2022 Fair Value | Dec 31, 2021 Fair Value | | :--- | :--- | :--- | | Corporate bonds | $150 | $1,152 | | Municipal bonds | $269 | $2,656 | | Total | $419 | $3,808 | Fair Value Hierarchy (Sep 30, 2022, in thousands) | Item | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | | Marketable securities, available-for-sale | $0 | $419 | $0 | | Warrant liability | $0 | $0 | $225 | - A total of **2,220,000 warrants** were exercised via Alternate Cashless Exercise, resulting in a **$573 thousand** reversal of warrant liability[46](index=46&type=chunk) [5. Accrued Expenses](index=17&type=section&id=5.%20ACCRUED%20EXPENSES) Accrued Expenses (in thousands) | Category | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Research and development | $297 | $894 | | General and administrative | $106 | $183 | | Payroll and related | $297 | $291 | | Licensing related | — | $62 | | Total accrued expenses | $700 | $1,430 | [6. PPP Note and Convertible Notes](index=17&type=section&id=6.%20PPP%20NOTE%20AND%20CONVERTIBLE%20NOTES) - A **$61 thousand** Paycheck Protection Program (PPP) note was forgiven in January 2021, recognized as income[51](index=51&type=chunk) - In January 2021, the company issued **$350 thousand** in 2021 Convertible Notes, which converted into **54,906 shares** of common stock upon IPO completion[52](index=52&type=chunk)[53](index=53&type=chunk) [7. Stockholders' Equity (Deficit)](index=18&type=section&id=7.%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) - In February 2021, the company completed an IPO, issuing **2,250,000 shares** at **$8.00/share**, raising **$15,500 thousand** net proceeds[54](index=54&type=chunk) - In May 2022, the company sold **3,700,000 shares** of common stock at **$1.0632/share** in a registered direct offering, generating approximately **$3,900 thousand** gross proceeds[55](index=55&type=chunk) Warrants Outstanding as of September 30, 2022 | Number of Shares | Exercise Price per Share | Expiration Date | | :--- | :--- | :--- | | 112,500 | $10.00 | February 12, 2026 | | 1,480,000 | $0.9382 | May 17, 2027 | [8. Stock-Based Compensation](index=19&type=section&id=8.%20STOCK-BASED%20COMPENSATION) Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $(97) | $22 | $(208) | $61 | | General and administrative | $(39) | $112 | $168 | $379 | | Total | $(136) | $134 | $(40) | $440 | Stock Option Activity (Nine Months Ended Sep 30, 2022) | Item | Number of options | Weighted average exercise price | | :--- | :--- | :--- | | Outstanding at Dec 31, 2021 | 708,490 | $3.60 | | Granted | 204,500 | $5.22 | | Forfeited | 216,406 | $4.06 | | Outstanding at Sep 30, 2022 | 696,584 | $3.93 | | Exercisable at Sep 30, 2022 | 315,991 | $3.37 | - Unrecognized compensation cost for unvested stock options was **$839 thousand**, expected to be recognized over **2.85 years**[64](index=64&type=chunk) - **188,023** Restricted Stock Units (RSUs) were granted during the nine months ended September 30, 2022, with performance-based RSUs not yet deemed probable of achievement[66](index=66&type=chunk) [9. Related Party Transactions](index=20&type=section&id=9.%20RELATED%20PARTY%20TRANSACTIONS) - In January 2021, the company entered into a Convertible Promissory Note Purchase Agreement with existing stockholders, including Salmon Pharma (an affiliate of Medice) and CEO David Baker, for **$350 thousand** in convertible notes[67](index=67&type=chunk) [10. Commitments and Contingencies](index=21&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) - Employment contracts with officers include provisions for severance and benefit continuation upon certain terminations, with potential equity award acceleration following a change in control[68](index=68&type=chunk) - The global COVID-19 pandemic continues to present uncertainty and unforeseeable risks to operations, clinical development plans, and supply chains, with the company monitoring developments and making necessary operational modifications[69](index=69&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion of financial condition and results, detailing ADAIR trial impact, strategic alternatives, and liquidity challenges [Overview and Recent Developments](index=22&type=section&id=Overview) - Vallon Pharmaceuticals is a clinical-stage biopharmaceutical company focused on abuse-deterrent medications for CNS disorders[72](index=72&type=chunk) - The SEAL study for ADAIR, a lead product candidate for ADHD and narcolepsy, did not meet its primary endpoint (Emax Drug Liking) in March 2022[72](index=72&type=chunk)[74](index=74&type=chunk) - The company is assessing the best path forward for ADAIR and ADMIR development programs and has engaged Ladenburg Thalmann & Co. Inc. to evaluate strategic alternatives, including potential merger, business combination, or asset acquisition/license, while streamlining operations to preserve capital[75](index=75&type=chunk) [License Agreement](index=22&type=section&id=License%20Agreement) - In January 2020, the company entered into an exclusive license agreement with Medice for ADAIR development and commercialization throughout Europe[76](index=76&type=chunk) - Medice paid a **$0.1 million** upfront payment and is obligated to pay up to **$6.3 million** in aggregate milestone payments and low-double digit tiered royalties on net sales[76](index=76&type=chunk) [COVID-19 Impact](index=23&type=section&id=COVID-19) - The global COVID-19 pandemic continues to pose uncertain risks to the company's operations, business plan, and clinical development, including potential impacts on trial enrollment, sites, CROs, and manufacturers[77](index=77&type=chunk) - The company is conducting business with modifications like remote work and reduced employee travel, actively monitoring the situation and prepared to take further actions[77](index=77&type=chunk) [Financial Operations Overview](index=23&type=section&id=Financial%20Operations%20Overview) [Research and Development Expenses](index=23&type=section&id=Research%20and%20Development%20Expenses) - R&D expenses primarily include personnel costs, third-party contractors for research and clinical trials, and manufacturing drug supplies[78](index=78&type=chunk)[79](index=79&type=chunk) - The company plans to significantly decrease R&D expenses while considering future plans for ADAIR and ADMIR programs and strategic alternatives[80](index=80&type=chunk) [General and Administrative Expenses](index=23&type=section&id=General%20and%20Administrative%20Expenses) - G&A expenses consist mainly of compensation, consulting fees, professional fees (legal, accounting), travel, facilities, and public company compliance costs[81](index=81&type=chunk)[82](index=82&type=chunk) - G&A expenses may increase due to professional and advisory fees related to the evaluation of strategic alternatives[82](index=82&type=chunk) [Other Income](index=25&type=section&id=Other%20Income) - Other income primarily consists of income recognized from the forgiveness of the **$61 thousand** PPP promissory note in January 2021[84](index=84&type=chunk)[99](index=99&type=chunk) [Revaluation of Derivative Instruments](index=25&type=section&id=Revaluation%20of%20Derivative%20Instruments) - The mandatory conversion feature of the 2021 Convertible Notes was bifurcated and treated as a derivative liability under ASC 815[85](index=85&type=chunk) - Upon conversion of the notes at the IPO closing, the embedded derivative liability was remeasured and removed from the balance sheet[85](index=85&type=chunk) [Warrant Liability, Change in Fair Value and Warrant Conversion](index=25&type=section&id=Warrant%20Liability,%20Change%20in%20Fair%20Value%20and%20Warrant%20Conversion) - Warrants issued in May 2022 were classified as derivative liabilities under ASC 815-40 due to an exercise price reduction provision[86](index=86&type=chunk) - These warrants are measured at fair value at each reporting date, with changes recognized in the Statements of Operations[86](index=86&type=chunk) - Upon exercise, the intrinsic value of shares issued is transferred to stockholders' equity, and the difference between intrinsic value and warrant fair value is recorded as gain or loss[86](index=86&type=chunk) [Interest Income (Expense), net](index=25&type=section&id=Interest%20Income%20(Expense),%20net) - Interest income (expense), net, includes interest earned on cash/marketable securities, amortization of premiums/discounts on marketable securities, and interest expense on finance leases[87](index=87&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) Net loss decreased due to reduced R&D and favorable warrant liability changes, offset by increased G&A for strategic evaluations [Comparison of the Three Months Ended September 30, 2022 and 2021](index=25&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030,%202022%20and%202021) Operating Results (Three Months Ended Sep 30, in thousands) | Item | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $(18) | $215 | $(233) | | General and administrative | $1,422 | $1,038 | $384 | | Total operating expenses | $1,404 | $1,253 | $151 | | Loss from operations | $(1,404) | $(1,253) | $(151) | | Change in fair value of warrant liability | $757 | — | $757 | | Loss on warrant conversion | $(388) | — | $(388) | | Net loss | $(1,033) | $(1,257) | $224 | - Research and development expenses decreased by **$0.2 million**, primarily due to a decrease in personnel expenses and reversal of stock compensation[89](index=89&type=chunk) - General and administrative expenses increased by **$0.4 million**, mainly due to **$0.6 million** in expenses related to strategic alternative evaluations, partially offset by a **$0.2 million** decrease in personnel expenses[90](index=90&type=chunk) - A **$0.8 million** decrease in the fair value of outstanding warrants was recognized, along with a **$0.4 million** loss on warrant conversion[92](index=92&type=chunk)[93](index=93&type=chunk) [Comparison of the Nine Months Ended September 30, 2022 and 2021](index=27&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030,%202022%20and%202021) Operating Results (Nine Months Ended Sep 30, in thousands) | Item | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Research and development | $1,529 | $3,189 | $(1,660) | | General and administrative | $4,014 | $2,976 | $1,038 | | Total operating expenses | $5,543 | $6,165 | $(622) | | Loss from operations | $(5,543) | $(6,165) | $622 | | Other income | — | $61 | $(61) | | Revaluation of derivative liability | — | $(89) | $89 | | Change in fair value of warrant liability | $490 | — | $490 | | Loss on warrant conversion | $(388) | — | $(388) | | Net loss | $(5,441) | $(6,207) | $766 | - Research and development expenses decreased by **$1.7 million**, primarily due to a **$1.3 million** decrease in ADAIR registration development program expenses, **$0.3 million** in personnel expenses, and **$0.1 million** in consulting expenses[97](index=97&type=chunk) - General and administrative expenses increased by **$1.0 million**, mainly due to increased expenses and fees from the evaluation of strategic alternatives[98](index=98&type=chunk) - A **$0.5 million** decrease in the fair value of warrant liability was recognized from inception to September 30, 2022, along with a **$0.4 million** loss on warrant conversion[103](index=103&type=chunk)[104](index=104&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - The company has incurred significant losses since inception, with a net loss of **$5.4 million** for the nine months ended September 30, 2022, and an accumulated deficit of **$27.3 million**[106](index=106&type=chunk) - As of September 30, 2022, cash and cash equivalents were **$4.7 million**[107](index=107&type=chunk) Cash Flows Summary (Nine Months Ended Sep 30, in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Operating activities | $(5,764) | $(6,729) | | Investing activities | $3,362 | $(3,266) | | Financing activities | $3,432 | $15,770 | | Net increase in cash and cash equivalents | $1,030 | $5,775 | - Net cash provided by financing activities in 2022 was **$3.4 million**, primarily from a registered direct financing, a significant decrease from **$15.8 million** in 2021 which included IPO and convertible note financings[110](index=110&type=chunk) [2021 Convertible Note Financing](index=29&type=section&id=2021%20Convertible%20Note%20Financing) - In January 2021, the company issued **$350,000** in 2021 Convertible Notes to existing stockholders, including related parties[111](index=111&type=chunk) - These notes bore **7.0%** interest and converted into **54,906 shares** of common stock at a **20%** discount to the IPO price immediately prior to the IPO closing[111](index=111&type=chunk) [Future Funding Requirements](index=29&type=section&id=Future%20Funding%20Requirements) - The company has not generated product revenue and its long-term prospects were highly dependent on ADAIR, which failed its primary endpoint[112](index=112&type=chunk) - Future capital requirements are difficult to forecast and depend on strategic alternatives, potentially requiring additional equity or debt financing, which could lead to dilution or restrictive covenants[112](index=112&type=chunk)[113](index=113&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern, as it expects to incur ongoing expenses and operating losses while evaluating strategic options[113](index=113&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company did not have any off-balance sheet arrangements during the periods presented and does not currently have any[115](index=115&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The company's critical accounting policies are described in Note 3 of its Annual Report on Form 10-K for the year ended December 31, 2021[117](index=117&type=chunk) - There have been no material changes to significant accounting policies during the nine months ended September 30, 2022, except for items mentioned in Note 3 of the interim financial statements[117](index=117&type=chunk) [Emerging Growth Company Status](index=30&type=section&id=Emerging%20Growth%20Company%20Status) - The company is an 'emerging growth company' under the JOBS Act, allowing it to rely on exemptions from certain disclosure requirements[118](index=118&type=chunk) - Exemptions include reduced executive compensation disclosure, no non-binding stockholder advisory votes, and exemption from auditor attestation on internal control over financial reporting[122](index=122&type=chunk) - The company has irrevocably elected not to use the extended transition period for complying with new or revised accounting standards[118](index=118&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not applicable as the company qualifies as a smaller reporting company - This item is not applicable to a smaller reporting company[119](index=119&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes in internal control - The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2022[121](index=121&type=chunk) - No changes in internal control over financial reporting occurred during the fiscal quarter that materially affected or are reasonably likely to materially affect internal control over financial reporting[122](index=122&type=chunk) [PART II. OTHER INFORMATION](index=31&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to material legal proceedings, but ordinary course claims could have adverse effects - The company is not currently a party to any material legal proceedings[124](index=124&type=chunk) - Litigation, even if not material, can adversely affect the company due to defense/settlement costs and diversion of management resources[124](index=124&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, focusing on uncertainties from strategic alternatives, potential dissolution, and dependence on key employees - No material changes from previously disclosed risk factors, except for those related to the evaluation of strategic alternatives[125](index=125&type=chunk) - Activities to evaluate strategic alternatives may not be successful, and if no transaction is completed, the board may pursue dissolution and liquidation, potentially leading to stockholders losing all or a significant portion of their investment[126](index=126&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) - The company's prospects were highly dependent on ADAIR, and its clinical trial failure means further development requires substantial capital and time with no guarantee of success or approval[133](index=133&type=chunk) - The company is substantially dependent on remaining employees, particularly the CEO and CFO, to facilitate a strategic transaction, and their loss could harm the company's ability to pursue alternatives and fulfill reporting obligations[134](index=134&type=chunk) - The company has no approved products, a limited operating history, and has incurred net losses since inception, anticipating continued losses, making future performance difficult to predict[136](index=136&type=chunk)[140](index=140&type=chunk) - Additional capital will be required to fund operations and product development, and failure to obtain necessary financing could lead to delays, reductions, or termination of development programs[143](index=143&type=chunk)[147](index=147&type=chunk) [Item 6. Exhibits](index=41&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including corporate documents, amendments, and certifications - The exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, amendments to the Securities Purchase Agreement and Common Stock Purchase Warrant, and certifications from the Principal Executive Officer and Principal Financial Officer[152](index=152&type=chunk) - Interactive Data Files (iXBRL) are provided for the cover page and taxonomy extensions[152](index=152&type=chunk) [Signatures](index=43&type=section&id=SIGNATURES) Contains required signatures, certifying the report was signed by the Chief Financial Officer on November 3, 2022 - The report was signed on November 3, 2022, by Leanne M. Kelly, Chief Financial Officer (Principal Financial and Accounting Officer) of Vallon Pharmaceuticals, Inc[159](index=159&type=chunk)

NASDAQ: VLON vallon-pharma.com | --- | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-----------------------|------------------------------------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Working to Reduce ADHD Medication Abuse | | | | | | Investor Presentation | May 2021 | Forward Looking Statements 2 This presentation contains projections of, and assumptions regarding, future events reflecting our beliefs and expectations. Such events may or ...

NASDAQ: VLON vallon-pharma.com | --- | --- | --- | --- | --- | |-------|-------|-------|-------|------------------------------------------| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Working to Reduce ADHD Medication Abuse | | | | | | Investor Presentation March 2021 | Forward Looking Statements 2 This presentation contains projections of, and assumptions regarding, future events reflecting our beliefs and expectations. Such events may or may not occur. Consequently, t ...