ck0001824293-20220630

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

June 30, 2022


☐			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)-607-8255

(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

The 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 June 30, 2022 (unaudited) and December 31, 2021	3
	Statements of Operations and Comprehensive Loss (unaudited) for the three and six months ended June 30, 2022 and 2021	4
	Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and six months ended June 30, 2022 and 2021	5
	Statements of Cash Flows (unaudited) for the six months ended June 30, 2022 and 2021	6
	Notes to Unaudited Interim Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	22
Item 4.	Controls and Procedures	22
PART II.	OTHER INFORMATION	23
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23




Item 6.	Exhibits	29
	Signatures	31


	June 30, 2022		December 31, 2021
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	5,221	$	3,702
Marketable securities, available-for-sale	1,749		3,808
Prepaid expenses and other current assets	868		619
Total current assets	7,838		8,129
Other assets	169		206
Total assets	$	8,007	$	8,335

Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	1,810	$	918
Accrued expenses	854		1,430
Warrant liability	1,554		—
Other current liabilities	104		97
Total current liabilities	4,322		2,445
Other liabilities	19		72
Total liabilities	4,341		2,517

Commitments and contingencies (Note 10)

Stockholders' equity:
Common stock, $0.0001 par value; 250,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 10,512,836 and 6,812,836 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively	1		—
Additional paid-in-capital	29,978		27,722
Accumulated other comprehensive loss	(3)		(2)
Accumulated deficit	(26,310)		(21,902)
Total stockholders’ equity	3,666		5,818
Total liabilities and stockholders' equity	$	8,007	$	8,335


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021

Operating expenses:
Research and development	278		1,202		1,548		2,974
General and administrative	1,228		1,108		2,592		1,938
Total operating expenses	1,506		2,310		4,140		4,912
Loss from operations	(1,506)		(2,310)		(4,140)		(4,912)
Other income	—		—		—		61
Revaluation of derivative liability	—		—		—		(89)
Change in fair value of warrant liability	(266)		—		(266)		—
Interest expense, net	(1)		(2)		(2)		(10)
Net loss	$	(1,773)	$	(2,312)	$	(4,408)	$	(4,950)
Other comprehensive income (loss):
Unrealized gain (loss) on investments	$	3	$	—	$	(1)	$	—
Total comprehensive loss	$	(1,770)	$	(2,312)	$	(4,409)	$	(4,950)

Net loss per share of common stock, basic and diluted	$	(0.20)	$	(0.34)	$	(0.57)	$	(0.79)
Weighted-average common shares outstanding, basic and diluted	8,683,166		6,812,836		7,753,167		6,264,854


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Stockholders’ Equity (Deficit)
	Shares	Amount
Balance, December 31, 2020	4,506,216	$	—	$	11,145	$	—	$	(12,599)	$	(1,454)
Issuance of common stock for convertible notes	54,906	—		439		—		—		439
Issuance of common stock for IPO, net of issuance expenses	2,250,000	—		15,104		—		—		15,104
Issuance of common stock for services	1,714	—		9		—		—		9
Issuance of Underwriters Warrants	—	—		399		—		—		399
Stock-based compensation	—	—		168		—		—		168
Net loss	—	—		—		—		(2,638)		(2,638)
Balance, March 31, 2021	6,812,836	—		27,264		—		(15,237)		12,027
Stock-based compensation	—	—		138		—		—		138
Net loss	—	—		—		—		(2,312)		(2,312)
Balance, June 30, 2021	6,812,836	$	—	$	27,402	$	—	$	(17,549)	$	9,853


	As of June 30, 2022
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable Securities:
Debt securities:
Municipal bonds	1,752		—		(3)		1,749
Total	$	1,752	$	—	$	(3)	$	1,749


	As of December 31, 2021
	Adjusted Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Marketable Securities:
Debt securities:
Corporate bonds	$	1,153	$	—	$	(1)	$	1,152
Municipal bonds	2,657		—		(1)		2,656
Total	$	3,810	$	—	$	(2)	$	3,808


	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Assets:
Marketable securities, available-for-sale	$	—	$	1,749	$	—
Liabilities:
Warrant Liability	$	—	$	—	$	1,554


	Warrant Liability
Fair value as of December 31, 2021	$	—
Initial measurement on May 17, 2022	1,288
Change in valuation	266
Balance, June 30, 2022	$	1,554


	(Initial Measurement)
	May 17, 2022	June 30, 2022
Volatility	130.8 %	132.3 %
Expected term in years	2.5	2.5
Dividend rate	0.0 %	0.0 %
Risk-free interest rate	2.665 %	2.955 %


	As of June 30, 2022
Due in 1 year	$	1,749
Due in 1-5 years	—
Due in 5-10 years	—
Due after 10 years	—
Total	$	1,749


	Number of options	Weighted average exercise price		Weighted average remaining contractual term (years)
Outstanding at December 31, 2021	708,490	$	3.60	8.64
Granted	204,500	$	5.22
Exercised	—	—
Forfeited	182,290	—
Outstanding at June 30, 2022	730,700	$	3.92	8.51
Exercisable at June 30, 2022	315,888	$	3.36	7.88


	Six Months Ended June 30,
	2022		2021
Net cash provided by (used in):
Operating activities	$	(3,912)	$	(5,440)
Investing activities	2,030		—
Financing activities	3,401		15,791
Net increase in cash and cash equivalents	$	1,519	$	10,351


	VALLON PHARMACEUTICALS, INC.


Date: July 28, 2022	By:	/s/ Leanne M. Kelly
		Name: Leanne M. Kelly
		Title: Chief Financial Officer
		(Principal Financial and Accounting Officer)


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


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2022		2021		2022		2021
Research and development	$	(129)	$	18	$	(111)	$	39
General and administrative	44		120		207		267
Total	$	(85)	$	138	$	96	$	306


	Three Months Ended June 30,
	2022		2021
Operating expenses:
Research and development	278		1,202
General and administrative	1,228		1,108
Total operating expenses	1,506		2,310
Loss from operations	(1,506)		(2,310)
Change in fair value of warrant liability	(266)		—
Interest expense, net	(1)		(2)
Net loss	$	(1,773)	$	(2,312)


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 Form 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).

3.4						Amendment No. 1 to the Amended and Restated Bylaws of Vallon Pharmaceuticals, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K, filed with the SEC on May 18 2022).

10.1						Placement Agency Agreement, dated May 13, 2022, between Vallon Pharmaceuticals, Inc. and Ladenburg Thalmann & Co., Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed with the SEC on May 13, 2022).

10.2						Non-Employee Director Compensation Program of Vallon Pharmaceuticals, Inc., effective on June 9, 2022.

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.