UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31,September 30, 2022

OR

☐ 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: 001-40582

UNICYCIVE THERAPEUTICS, INC.

(Exact name of Registrant as specified in its charter)

4300 El Camino Real, Suite 210

Los Altos, CA 94022

(650) 351-4495

(Address and telephone number of principal executive offices)

Not applicable

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or Section 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 ☐ No

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 ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

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

As of May 12,November 14, 2022, there were 15,028,51115,088,670 shares of the Company’s common stock, par value $0.001 per share, issued and outstanding.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Unicycive Therapeutics, Inc.

Balance Sheets

(Inin thousands, except for share and per share amounts)

(Unaudited)

See accompanying notes to the financial statements

Unicycive Therapeutics, Inc.

Statements of Operations

(Inin thousands, except for share and per share amounts)

(Unaudited)

See accompanying notes to the financial statements

Unicycive Therapeutics, Inc.

Statements of Stockholders’ (Deficit) Equity

(Inin thousands, except share amounts)

(Unaudited)

See accompanying notes to the financial statements 

Unicycive Therapeutics, Inc.

Statements of Cash Flows

(Inin thousands)

(Unaudited)

See accompanying notes to the financial statements

Unicycive Therapeutics, Inc.

Notes to the Financial Statements (Unaudited)(unaudited)

1. Organization and Description of Business

Overview

Unicycive Therapeutics, Inc. (“the Company”) was incorporated in the State of Delaware on August 18, 2016. The Company was dormant until July 2017 when it began evaluating a number of drug candidates for in-licensing.

The Company in-licensed the drug candidate UNI 494 from Sphaera Pharma Pte. Ltd, a Singapore-based corporation, (“Sphaera”) (Note 3). UNI 494 is a pro-drug of Nicorandill that is being developed as a treatment for acute kidney injury.

In September 2018, the Company purchased a second drug candidate, Renazorb RZB 012 (“Renazorb”) and its trademark, RENALAN, and various patents from Spectrum Pharmaceuticals, Inc. (“Spectrum”) (Note 3). Renazorb is being developed for the treatment of hyperphosphatemia in patients with Chronic Kidney Disease (“CKD”).

The Company continues to evaluate the licensing of additional technologies and drugs, targeting orphan diseases and other renal, liver and other metabolic diseases affecting fibrosis and inflammation.

Liquidity

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, compliance with governmental regulations and the need to obtain additional financing to fund operations. The Company’s product candidates currently under development will require significant additional research and development efforts prior to commercialization. Future revenue streams may consist of collaboration or licensing revenue as well as product sales. The Company has not generated approximately $1.0 million in licensing revenue to date.

The Company has incurred operating losses and negative cash flows from operations since inception and expects to continue to incur negative cash flows from operations for the foreseeable future. As the Company increases its research and development activities, the operating losses are expected to increase. The Company has historically relied on private equity offerings, debt financings and loans from a stockholder to fund its operations. As of December 31, 2021 and March 31,September 30, 2022, the Company had an accumulated deficit of $15.9 million and $19.5$28.7 million, respectively.

As a result of its initial public offering (“IPO”), on July 13, 2021 the Company began trading on the Nasdaq Capital Market under the symbol “UNCY”, and on July 15, 2021 received approximately $22.3 million in net proceeds after deducting the underwriting discounts, commissions and other offering expenses. The Company intends to useis using the net proceeds from the IPO to complete pre-clinical and clinical studies, submit regulatory filings to the FDA, and for general and corporate purposes, including hiring additional management and conducting market research and other commercial planning.

The Company expects to continue incurring losses for the foreseeable future and will be required to raise additional capital in the future to complete its planned clinical trials, pursue product development initiatives and penetrate markets for the sale of its products. Management believes that the Company will continue to have access to capital resources through possible equity offerings, debt financings, corporate collaborations or other means. From January 2021 through May 2021, the Company received an aggregate of $1.1 million upon the issuance of convertible notes. These funds were used primarily to settle outstanding accounts payable as well as to make payments on the loan outstanding from the chief executive officer and principal stockholder. In addition, the Company received approximately $22.3 million in net proceeds from its IPO. There can be no assurance that the Company will be able to obtain additional financing on terms acceptable to the Company, on a timely basis or at all. If the Company is unable to secure additional capital, it may be required to curtail any clinical trials and development of new or existing products and take additional measures to reduce expenses in order to conserve its cash in amounts sufficient to sustain operations and meet its obligations. Based on the Company’s current level of expenditures, and, given the Company’s cash balance of $13.6$7.0 million as of March 31,September 30, 2022, the Company believes that it will need funding before the end of the secondfirst quarter 2023 to continue operations, satisfy its obligations and fund the future expenditures that will be required to conduct the clinical and regulatory work to develop its product candidates.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. There is substantial doubt about the Company’s ability to continue as a going concern for one year after the date that these financial statements are available to be issued. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary from the outcome of this uncertainty.

2. Summary of Significant Accounting Policies

Basis of Presentation

The financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying unaudited financial statements of the Company as of March 31,September 30, 2022 have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X and, accordingly, they do not include all information and footnote disclosures required by accounting principles generally accepted in the U.S. (“GAAP”). The Company believes the footnotes and other disclosures made in the financial statements are adequate for a fair presentation of the results of the interim periods presented. The financial statements include all adjustments (solely of a normal recurring nature) which are, in the opinion of management, necessary to make the information presented not misleading. You should read these financial statements and the accompanying notes in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the U.S. Securities and Exchange Commission (“SEC”) on March 31, 2022.

All common share amounts and per share amounts have been adjusted to reflect a 1-for-4.3 reverse stock split of the Company’s common stock that was effected on June 21, 2021.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain 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 financial statements and the reported amounts of expenses during the periods presented. Management believes that these estimates and assumptions are reasonable; however, actual results may differ and could have a material effect on future results of operations and financial position. Significant items subject to such estimates and assumptions include progress estimates for material third party research and development contracts, stock-based compensation and fair value of the Company’s common stock prior to the Company’s IPO. Actual results may materially differ from those estimates.

Segment Information

The Company operates and manages its business as one reportable operating segment. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for purposes of allocating resources and evaluating financial performance.

Risks and Uncertainties

The Company operates in a dynamic and highly competitive industry and believes that changes in any of the following areas could have a material adverse effect on the Company’s future financial position, results of operations, or cash flows: ability to obtain future financing; advances and trends in new technologies and industry standards; results of clinical trials; regulatory approval and market acceptance of the Company’s products; development of sales channels; certain strategic relationships; litigation or claims against the Company related to intellectual property, product, regulatory, or other matters; and the Company’s ability to attract and retain employees necessary to support its growth.

The Company’s general business strategy may be adversely affected by any such economic downturns (including the current downturn related to the ongoing COVID-19 pandemic), volatile business environments and continued unstable or unpredictable economic and market conditions.

Any product candidates developed by the Company will require approvals from the FDA or other international regulatory agencies prior to commercial sales. There can be no assurance that the Company’s current product candidates or any future product candidates will receive the necessary approvals. If the Company is denied approval, approval is delayed or the Company is unable to maintain approval, it could have a materially adverse impact on the Company.

The Company has expended and will continue to expend substantial funds to complete the research, development and clinical testing of its product candidates. The Company also will be required to expend additional funds to establish commercial-scale manufacturing arrangements and to provide for the marketing and distribution of products that receive regulatory approval. The Company will require additional funds to commercialize its products. The Company is unable to entirely fund these efforts with its current financial resources. If adequate funds are unavailable on a timely basis from operations or additional sources of financing, the Company may have to delay, reduce the scope of or eliminate one or more of its research or development programs, which would materially and adversely affect its business, financial condition and operations.

The Company is dependent upon the services of its employees, consultants and other third parties.

Property, Plant and Equipment

Property, plant, and equipment are recorded at cost less accumulated depreciation. Additions, improvements, and major renewals or replacements that substantially extend the useful life of an asset are capitalized. Repairs and maintenance expenditures are expensed as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or the remaining lease term.

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value at that time. At March 31,September 30, 2022, management determined there were no impairments of the Company’s property and equipment.

Leases

The Company determines whether a contract is, or contains, a lease at inception. Right-of-use assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at lease commencement in determining the present value of unpaid lease payments.

Fair Value of Financial Instruments

The Company’s financial instruments include cash, prepaid expenses, and accounts payable.payable, and in prior periods also included convertible notes and a loan from the Chief Executive Officer and stockholder of the Company. The carrying amounts of these items approximate fair value as of December 31, 2021 and March 31,September 30, 2022 due to their short-term nature.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash. All of the Company’s cash was deposited in one account at a financial institution, and the account balance may at times exceed federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial strength of the depository institution in which the cash is held.

Prepaid Expenses

Prepaid expenses represent costs incurred that benefit future periods. These costs are amortized over specific time periods based on the agreements.

Revenue Recognition

The Company implemented ASC 606, Revenue from Contracts with Customers. These included the development of new policies based on the five-step model provided in the new revenue standard, ongoing contract review requirements, and gathering of information provided for disclosures. The Company recognizes revenue from product sales or services rendered when control of the promised goods are transferred to a counterparty in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as the Company satisfies a performance obligation.

Research and Development Expenses

Substantially all of the Company’s research and development expenses consist of expenses incurred in connection with the development of the Company’s product candidates. These expenses include fees paid to third parties to conduct certain research and development activities on the Company’s behalf and related progress estimates for those activities, consulting costs, costs for laboratory supplies, product acquisition and license costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for the Company’s research and product development employees and allocated overheads, including information technology costs and utilities. The Company expenses both internal and external research and development expenses as they are incurred.

General and Administrative Expenses

General and administrative expenses represent personnel costs for employees involved in general corporate functions, including finance, accounting, legal and human resources, among others. Additional costs included in general and administrative expenses consist of professional fees for legal (including patent costs), audit and other consulting services, stock-based compensation and other general corporate overhead expenses as well as costs from a service agreement with a related party (See Note 7)8).

Patent Costs

The Company expenses all costs as incurred in connection with patent licenses and applications (including direct application fees, and the legal and consulting expenses related to making such applications) and such costs are reflected in general and administrative expenses in the statements of operations.

Stock-Based Compensation

The Company accounts for stock-based compensation for all share-based payments made to employees and non-employees by estimating the fair value on the date of grant and recognizing compensation expense over the requisite service period on a straight-line basis. The Company recognizes forfeitures related to stock-based compensation as they occur. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. The Black-Scholes model requires the input of subjective assumptions, including expected common stock volatility, expected dividend yield, expected term, risk-free interest rate, and the estimated fair value of the Company’s underlying common stock on the date of grant.

Common Stock Valuations

Prior to the Company’s IPO, the fair value of common stock was estimated with the assistance of an independent third-party valuation expert when issuing stock options and computing their estimated stock-based compensation expense. The assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application of significant levels of management judgment. In order to determine the fair value, the Company considered, among other things, contemporaneous transactions involving the sale of common stock to unrelated third parties, the lack of marketability of the common stock and the market performance of comparable publicly traded companies.

Subsequent to the IPO, the Company determines the fair value of common stock from closing prices as quoted on the NASDAQ exchange.

Income Taxes

The Company accounts for corporate income taxes in accordance with GAAP as stipulated in ASC, Topic 740, Income Taxes, (“ASC 740”). This standard entails the use of the asset and liability method of computing the provision for income tax expense. Current tax expense results from corporate tax payable at the Federal and California jurisdictions for the Company, which relate to the current accounting period. Deferred tax expense results primarily from temporary differences between financial statement and tax return reporting, which result in additional tax payable in future periods. Deferred tax assets and liabilities are determined based on the differences between the financial statement basis and tax basis of assets and liabilities using enacted tax rates and law. Net future tax benefits are subject to a valuation allowance when management expects that it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized.

Current and non-current tax assets and liabilities are based upon an estimate of taxes refundable or payable for each of the jurisdictions in which the Company is subject to tax. In the ordinary course of business there is inherent uncertainty in quantifying income tax positions. The Company assess income tax positions and record the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more likely than not that a tax benefit will be sustained, no tax benefit is recognized in the financial statements. The Company’s policy is to recognize interest or penalties related to income tax matters in income tax expense.

The Tax Cuts and Jobs Act of 2017 eliminated the option to immediately deduct research and development expenditures in the year incurred under Section 174, which became effective January 1, 2022. We are monitoring legislation for any further changes to Section 174 and the impact, if any, to the financial statements in 2022.

Comprehensive Loss

Comprehensive loss includes all changes in equity (net assets) during a period from non-owner sources. There were no elements of other comprehensive income (loss) in the periods presented, as a result comprehensive loss is the same as net loss for each period presented.

Net Loss per Share

Basic net loss per common share is calculated by dividing the net loss by the weighted-average number of common shares outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, common stock options and warrants are considered to be potentially dilutive securities. Basic and diluted net loss per share is presented in conformity with the two-class method required for participating securities. The Company has no participating securities and as such, the net loss was attributed entirely to common stockholders. As the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods. All common share amounts and per share amounts have been adjusted to reflect a 1-for-4.3 reverse stock split of the Company’s common stock that was effectuated on June 21, 2021.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective are not expected to have a material impact on the Company’s financial position or results of operations upon adoption.

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies the accounting for convertible instruments. ASU 2020-06 eliminates certain models that require separate accounting for embedded conversion features. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. The guidance also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. This guidance is effective for the Company beginning in the first quarter of 2022 and must be applied using either a modified or full retrospective approach. Early adoption is permitted, but no earlier than annual periods beginning after December 15, 2020. The Company adopted the standard on January 1, 2022 using a modified approach, and the adoption did not have a material effectresult in any adjustments on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the leases with a term of greater than 12 months. This ASU is effective for the Company’s fiscal years beginning after December 15, 2021, with early adoption permitted. The Company has adopted this standard effective as of January 1, 2019. The Company chose to adopt certainthe package of practical expedients available from the FASB. As a policy election, the Company chose to expense and amortize, on a straight line, the leases with terms less than 12 months. In addition, the Company chose not to separate certain lease and non-lease components when evaluating the fair value of a lease. The adoption of this standard did not have a material effect on the Company’s financial statements.

3. Significant Agreements

With regards to manufacturing, testing and potential commercial supply of Renazorb, the Company has entered into an agreement with Shilpa Medicare Ltd based in India. According to the terms of the agreement Unicycive will pay the vendor $2 million in the first calendar year when the net revenue reaches $10 million from sales of Renazorb following its approval by the FDA and commercial supply of the product by the vendor (First Payment). Thereafter, wethe Company will pay $2 million per year for four consecutive years, after the first year’s payment, for the total payments of $10 million, provided all commercial supplies are continued to be manufactured and supplied by the vendor. Unicycive is not obligated to make any payments to the vendor until FDA approval of the product is obtained and commercial revenue is generated.

In October 2017, the Company entered into an exclusive license agreement with Sphaera, a stockholder, for the rights to further develop the drug candidate, UNI 494, for commercialization. No payments were made upon execution of the agreement but rather payments for $50,000 will be due commencing with the initiation by the Company of a second clinical trial and $50,000 on completion of such trial. At the time the FDA accepts a NDA application submitted by the Company for the product, the Company will pay Sphaera $1.65 million. Upon commercialization and sale of the drug product, royalty payments will also be payable quarterly to Sphaera equal to 2% of net sales on the preceding quarter.

In September 2018, the Company entered into an Assignment and Asset Purchase Agreement with Spectrum Pharmaceuticals, Inc. (“Spectrum Agreement”) pursuant to which the Company purchased certain assets from Spectrum, including Spectrum’s right, title, interest in and intellectual property related to Renazorb RZB 012, also known as RENALAN™ (“Renalan”) and RZB 014, also known as SPI 014 (“SPI” and together with Renalan, the “Compounds”), to further develop and commercialize Renazorb and related compounds. In partial consideration for the Spectrum Agreement, the Company issued 313,663 shares of common stock to Spectrum valued at approximately $4,000 which represented four percent of the Company on a fully-diluted basis at the date of the execution of the Spectrum Agreement. The Spectrum Agreement has an anti-dilution provision, which provides that Spectrum maintain its ownership interest in the Company at 4% of the Company’s shares on a fully-diluted basis. Fully-diluted shares of common stock for purposes of the Renazorb Purchase Agreement assumes conversion of any security convertible into or exchangeable or exercisable for common stock or any combination thereof, including any common stock reserved for issuance under a stock option plan, restricted stock plan, or other equity incentive plan approved by the Board of Directors of the Company immediately following the issuance of additional shares of the Company’s common stock (but prior to the issuance of any additional shares of common stock to Spectrum). Spectrum’s ownership shall not be subject to dilution until the earlier of thirty-six months from the first date the Company’s stock trades on a public market, or the date upon which the Company attains a public market capitalization of at least $50 million. On July 13, 2021, the Company’s initial public offering resulted in a public market capitalization of at least $50 million, and as a result the Company was required to issue 438,374 anti-dilution shares of common stock. This issuance represented the final anti-dilution calculation required under the Spectrum Agreement, and no further anti-dilution shares will be issued. The Company calculated the fair value of the shares and recognized $2.2 million to research and development expenses as cost to issue those shares during the third quarter of 2021. The Company is also required to pay Spectrum 40% of all of the Company’s sublicense income for any sublicense granted to certain sublicensees during the first 12 months after the Closing Date (as that term is defined in the Renazorb Purchase Agreement) and 20% of all other sublicense income. The Company’s payment obligations to Spectrum will expire on the twentieth (20^th) anniversary of the Closing Date of the Renazorb Purchase Agreement.

On February 8, 2021, In August 2022, the Company entered into a Master Services Agreement (the “Renazorb Development Agreement”) with Ascent Development Services, Inc. (“Ascent”) pursuant to which Ascent will provide strategic services related to the development of Renazorb or other investigational products (the “Compounds”) for clinical use and regulatory approval in Japan and other Asian countries. The Renazorb Development Agreement anticipates services to be provided by Ascent will include market research, facilitation of informal and formal meetings with Japan’s Pharmaceutical and Medical Devices Agency (“PMDA”), management of contract research organizations and clinical trials, and government applications and regulatory filings related to the Asian development of the Compounds. Unicycive will supply the Compounds or other materials necessary for Ascent to perform the development services. The initial Statement of Work (“SOW”) under the Renazorb Development Agreement encompasses the development of clinical strategy as well as both informal and formal meetings with the PMDA. The budget for the initial SOW is approximately 24,000,000 Japanese Yen, andreceived an upfront payment of approximately $87,000, was paid to Ascent upon$1.0 million as a result of a sublicense development agreement with Lee’s Pharmaceutical (HK) Limited. The payment represents sublicense income as described in the executionSpectrum Agreement, and 20% of the Renazorb Development Agreement and deliverablesamount received has been accrued as an R&D expense in the accompanying statements of operations for the initial SOW were completed by December 31, 2021.three and nine months ended September 30, 2022.

On July 19, 2021, the Company entered into an agreement with Syneos Health LLC (“Syneos”) pursuant to which Syneos will provide preclinical research and analysis services related to the development of UNI-494. The budget for the initial study,services, which will also includeincludes clinical pharmacology, translational sciences, and bioanalytical services, is approximately $1.9$2.3 million. Related payments totaling approximately $883,000$1.2 million have been paid to Syneos as of March 31,September 30, 2022, approximately $2.0 million of related expense has been recorded, and approximately $738,000 of this amount is$0.8 million has been recorded as prepaidaccounts payable or accrued expense in the accompanying balance sheet as of March 31,September 30, 2022.

On January 6, 2022, the Company entered into a Master Services Agreement with Quotient Sciences Limited (“Quotient”), a UK based company that provides drug development and analysis services, for the purpose of performing clinical research in support of UNI-494. The budget for the initial study is approximately $3.2$3.7 million. Related payments totaling approximately $321,000$1.3 million have been paid to Quotient as of March 31,September 30, 2022, approximately $0.5 million of related expense has been recorded, and approximately $306,000 of this amount is$0.8 million has been recorded as prepaid expense in the accompanying balance sheet as of March 31,September 30, 2022.

On February 9, 2022, the Company entered into a Master Services Agreement with CBCC Global Research Inc. (“CBCC”), a California based company that provides clinical trial and related service,services, for the purpose of performing clinical research in support of Renazorb. The budget for the initial study iswas approximately $1.4 million. Related paymentsPayments relating to the initial agreement totaling approximately $94,000$0.3 million have been paid to CBCC as of March 31,September 30, 2022, and approximately $58,000$0.4 million of this amountrelated expense has been recorded. In September 2022, a statement of work revised the remaining services budget to approximately $0.1 million.

On June 29, 2022, the Company entered into an Agreement with Inotiv, an Indiana based company that provides preclinical trial and related services, for the purpose of performing research in support of Renazorb. The budget for the services is approximately $1.0 million. Approximately $0.3 million has been paid to Inotiv as of September 30, 2022 and approximately $0.2 million has been recorded as prepaid expense in the accompanying balance sheet as of March 31,September 30, 2022.

On July 14, 2022, the Company entered into a license agreement with Lee’s Pharmaceutical (HK) Limited (see Note 4). Under the terms of the agreement, Lee’s Pharmaceutical will be responsible for development, registration filing and approval for Renazorb in China, Hong Kong, and certain other Asian markets. In addition, Lee’s Pharmaceutical will have sole responsibility for the importation of the drug product from the Company and for the costs of commercialization of Renazorb in the licensed territories. The Company has received an upfront payment of $1.0 million, expects to receive up to $1.0 million in milestone payments upon product launch in China and will be eligible for tiered royalties of between 7% and 10% upon achievement of prespecified regulatory and commercial achievements.

On July 27, 2022, the Company entered into an Agreement with Celerion, a Nebraska based company that provides clinical trial and related services, for the purpose of performing research in support of Renazorb. The budget for the services is approximately $2.7 million. Approximately $0.8 million has been paid to Celerion as of September 30, 2022. $1.4 million has been recorded as prepaid expense with $0.6 million recorded in accounts payable based on contractual terms for future clinical services as of September 30, 2022.

4. Licensing Revenues

On July 14, 2022, the Company entered into a license agreement (“Agreement”) with Lee’s Pharmaceutical (HK) Limited (“Lees”). Under the terms of the agreement, Lee’s Pharmaceutical will be responsible for development, registration filing and approval for Renazorb in China, Hong Kong, and certain other Asian markets. In addition, Lees will have sole responsibility for the importation of the drug product from the Company and for the costs of commercialization of Renazorb in the licensed territories. Both parties agreed to enter into a separate manufacturing and supply agreement whereby Unicycive will supply Lees with Renazorb product. The Company has received an upfront payment of approximately $1.0 million, expects to receive up to $1.0 million in milestone payments upon product launch in China and will be eligible for tiered royalties of between 7% and 10% upon achievement of prespecified regulatory and commercial achievements.

The Company has evaluated the Agreement in accordance with FASB Topics 808 – Collaborative Arrangements and 606 -Revenue for Contracts from Customers. The Company first assessed whether the contractual arrangement is within the scope of ASC 808 which defines a collaborative arrangement as a contractual arrangement that involves a joint operating activity. Under ASC 606, the counterparty is considered a customer only if it is acquiring goods or services that are an output of the entity’s “ordinary activities”. The Agreement is consistent with the Company’s current ongoing operations, which is an operating model adopted by many early-stage biotech companies. The license portion of the contract as well as the future potential transactions under a manufacturing and supply agreement both represent a vendor-customer relationship.

The Company does not believe that its promise to provide goods under a future manufacturing and supply agreement represents a material right to Lees, and therefore the promise does not represent current performance obligation. The Company has concluded the agreement contains one performance obligation – the IP license.

ASC 606 indicates that constrained variable consideration should be included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Variable consideration consisting of milestone payments and sales-based royalties may be received based on the completion of certain clinical, regulatory, and commercial activities. The Company has concluded that the future milestone payments should be excluded from the transaction price due to the uncertainty of achievement as of September 30, 2022. The Company will reassess this conclusion at each reporting date until the uncertainties are resolved.

For the sales-based royalty payments, guidance requires an entity to recognize revenue for a sales-based royalty promised in exchange for a license of intellectual property only when the later of 1) the subsequent sale or usage occurs, or 2) the performance obligation to which some or all the sales-based or usage-based royalty has been allocated has been satisfied or partially satisfied. The Company has concluded that the future sales-based royalties should be excluded from the transaction price as of September 30, 2022. The Company will reassess this conclusion at each reporting date.

The Company has concluded that at contract inception the total transaction price is the $1.0 million upfront fee.

The Company has concluded that the license of the Renazorb IP is functional IP as it contains all the necessary information for Lees to develop for commercialization in the Territory. Unicycive’s ongoing activities do not significantly affect the standalone functionality of the IP. In addition, the functionality of the IP is not expected to substantially change during the license period based on Unicycive’s activities. The revenue should therefore be recognized at a point in time. This intellectual property was transferred to Lees in July 2022, and the Company has recognized $1.0 million in the accompanying statements of operations as licensing revenue for the three and nine months ended September 30, 2022.

5. Balance Sheet Components

Prepaid expenses and other current assets as of December 31, 2021 and March 31,September 30, 2022 consisted of the following (in thousands):

Property, plant and equipment as of December 31, 2021 and March 31,September 30, 2022 consisted of the following (in thousands):

Accounts payable as of December 31, 2021 and March 31,September 30, 2022 consisted of the following (in thousands):

Accrued liabilities as of December 31, 2021 and March 31,September 30, 2022 consisted of the following (in thousands):

5.

6. Operating Lease

The Company leases office space under an operating lease. In December 2021, the Company entered into a lease agreement for 2,367 square feet of office space commencing December 1, 2021. The initial lease term is for two years, and there is an option to extend the lease for an additional year.

In accounting for the leases, the Company adopted ASC 842 Leases on January 1, 2019, which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the lease as an operating lease and, at December 1, 2021, determined that the present value of the lease was approximately $318,000 using a discount rate of 8.0%. In accordance with ASC 842, the right-of-use asset will be amortized over the life of the underlying lease. The Company determined that the option to extend the lease for an additional year was not considered reasonably certain at December 31, 2021or March 31,2021 or September 30, 2022. During the three and nine months ended March 31,September 30, 2022, the Company reflected amortization of right-of-use asset of approximately $37,000,$39,000 and $114,000, respectively, resulting in a right of use asset balance at September 30, 2022 of $268,000.$191,000.

During the threenine months ended March 31,September 30, 2022, the Company made cash payments on the lease of $42,000approximately $127,000 towards the lease liabilities. As of March 31,September 30, 2022, the total lease liability was $269,000.$194,000. ASC 842 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense for the lease for the three and nine months ended March 31,September 30, 2022 was approximately $43,000.$42,000 and $129,000, respectively.

As of March 31,September 30, 2022, maturities of the Company’s lease liabilities are as follows (in thousands, unaudited):

6.7. Debt

Convertible Notes

In January through May 2021, the Company issued convertible notes (the “2021 Notes”) in the aggregate principal amount of approximately $1,098,000. The 2021 Notes bear interest at a rate of 12% per annum, payable at maturity, and mature between January and May, 2022. The 2021 Notes shall automatically convert into shares of the Company’s common stock upon the closing of a financing pursuant to which the Company receives gross proceeds of at least $500,000 (a “Qualified Financing”) or upon a change of control. The 2021 Notes shall convert into such numbers of shares of the Company’s common stock equal to the conversion amount divided by the Conversion Price. “Conversion Price” means (i) in the event of a Qualified Financing, 70% of the price per share (or conversion price, as applicable) of common stock (or securities convertible into common stock, as applicable) sold in such financing or (ii) in the event of a change of control, the price per share reflected in such transaction.

The Company accounted for the 2021 Notes as stock-settled debt and was accreting the carrying amount of the 2021 Notes to the settlement amount through maturity.

In July through November 2020, the Company issued convertible notes (the “2020 Notes”) in the aggregate principal amount of $1,290,000. The 2020 Notes bear interest at a rate of 12% per annum, payable at maturity, and mature between July and November, 2021. The 2020 Notes shall automatically convert into shares of the Company’s common stock upon the closing of a financing pursuant to which the Company receives gross proceeds of at least $500,000 (a “Qualified Financing”) or upon a change of control. The 2020 Notes shall convert into such numbers of shares of the Company’s common stock equal to the conversion amount divided by the Conversion Price. “Conversion Price” means (i) in the event of a Qualified Financing, 70% of the price per share (or conversion price, as applicable) of common stock (or securities convertible into common stock, as applicable) sold in such financing or (ii) in the event of a change of control, the price per share reflected in such transaction.

The Company accounted for the 2020 Notes as stock-settled debt and was accreting the carrying amount of the 2020 Notes to the settlement amount through maturity. As of December 31, 2020, unpaid and accrued interest of $53,000 as well as debt discount accretion expense of approximately $186,000 was included with the convertible notes on the balance sheet.

As a result of the Company’s initial public offering on July 13, 2021, approximately $2,387,000 of principal and $191,000 of unpaid accrued interest related to the 2021 and 2020 Notes was converted into shares of common stock. Additionally, the noteholders were granted warrants equal to 25% of the conversion shares issued. The conversion resulted in a loss of $431,000 that was included as loss on debt conversion in the statement of operations for the three months ended September 30, 2021.$431,000.

Paycheck Protection Program Loan

On April 23, 2020, the Company entered into an $18,000 loan with Silicon Valley Bank pursuant to the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) as well as a $1,000 loan pursuant to the Economic Injury Disaster Assistance Program. The PPP loan proceeds are intended to be used for payroll over the eight-week period following the date of the loan. The loan terms provide that no principal or interest payments are due and interest will accrue at 1% per annum commencing on April 23, 2020 through October 23, 2020 (deferral period). Commencing one month after the deferral period and continuing monthly through the maturity of the loan on April 23, 2022, equal monthly payments of principal and interest are due. The Company classified the loans as a current liability, has applied for and received loan forgiveness in February 2021, and recorded a gain on extinguishment of debt in the statement of operations for the threenine months ended March 31,September 30, 2021.

7.8. Related Party Transactions

Loan from Chief Executive Officer and Stockholder

The Company received advances from the stockholder of $150,000$248,000 during the threenine months ended March 31,September 30, 2021. The Company repaid all remaining amounts owed to the stockholder of $144,000$1,361,000 during the threenine months ended March 31, 2021. The Company repaid all amounts owed to the stockholder during the year ended December 31,September 30, 2021.

Common Stock Purchase Agreement and Service Agreementagreement with Globavir

On July 1, 2017, the Company entered into a Common Stock Purchase Agreement (“Stock Agreement”) with Globavir. The Company’s principal stockholder is also the principal stockholder in Globavir. The Stock Agreement provided for the distribution of 62,181 shares of the Company’s common stock, valued at $0.013 per share, to Globavir’s stockholders as payment for Globavir’s services and shared costs rendered on behalf of the Company in 2017, which were issued in 2018.

On July 1, 2017, as amended on April 6, 2020, the Company entered into a Service Agreement with Globavir Biosciences, Inc. (“Globavir”), a related party (the “Service Agreement”). Globavir provides administrative and consulting services and shared office space and other costs in connection with the Company’s drug development programs. The initial amended term of the Service Agreement expired on December 31, 2020, and the agreement automatically renews for successive one-month periods after the initial termination date. Pursuant to the Service Agreement, the Company paid Globavir $50,000 per month through December 31, 2019 and $10,000 per month commencing on January 1, 2020. During the fourth quarter of 2021, after initially determining that future services under the Service Agreement were no longer required, the Company wrote off the $28,000 remaining prepaid balance due from Globavir as of December 31, 2021. During the threenine months ended March 31,September 30, 2022, after determining that although a shared office space is no longer utilized, consulting services continuecontinued to be provided, the Company plans to amendamended the Service Agreement to reflect the consulting services andat a reduced service fee of $6,000 per month.month and a termination date of June 30, 2022.

9. Commitments and Contingencies

Contingencies

The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s financial statements. The Company currently has no pending claims or legal proceedings.

In March 2021, the Company signed an advisory services agreement with The Benchmark Company LLC (“Benchmark”) pursuant to which the Company would pay Benchmark a $150,000 advisory fee upon the closing of the initial public offering, and Benchmark would provide advisory services with respect to the public offering. The Company paid the advisory fee in July 2021.

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications, including for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but that have not yet been made. To date, the Company has not paid any claims or been required to defend any action related to its indemnification obligations.

The Company believes that the likelihood of conditions arising that would trigger these indemnities is remote and, historically, the Company had not made any significant payment under such indemnification provisions. Accordingly, the Company has not recorded any liabilities relating to these agreements. However, the Company may record charges in the future as a result of these indemnification obligations.

Additionally, the Company has agreed to indemnify its directors and officers for certain events or occurrences while the director or officer is, or was serving, at the Company’s request in such capacity. The indemnification period covers all pertinent events and occurrences during the director’s or officer’s service.

Employee Benefit Plan

In December 2021, the Company implemented a 401K Plan which covers all eligible employees of the Company (the “401K Plan”). Employer matching contributions are immediately 100% vested. The Company’s 401K Plan provides that the Company match each participant's contribution at 100% up to 4% of the employee’s eligible compensation. Company contributions to the 401K Plan totaled approximately $0 and $19,000 for the three months ended March 31, 2021 and 2022, respectively.

9.10. Stockholders’ (Deficit) Equity

Authorized Common Stock

The Company is authorized to issue up to 200,000,000 shares of common stock at par value of $0.001 per share.

Issuance of Common Stock and Warrants

During July 2021, as a result of its IPO, the Company issued 5,000,000 shares of common stock and 4,000,000 warrants to investors in exchange for cash at $5.00 per unit, consisting of $4.99 per share of common stock and $.0125 per four fifths of a warrant. The warrants have a 5-year term and an exercise price of $6.00 per warrant. The underwriters exercised their option to purchase an additional 600,000 warrants, and the Company received $7,500 in proceeds.

As a result of the IPO, the Company’s outstanding convertible notes and unpaid accrued interest were converted into 736,773 shares of common stock. Additionally, in accordance with the original terms of the warrant agreements convertible noteholders were granted a total of 184,193 common stock warrants with a 5-year term and with an exercise price of $6.00 per warrant.

The following table summarizes activity for warrants for the threenine months ended March 31,September 30, 2022:

During the three months ended March 31, 2021, employees and consultants exercised a total of 383,721 stock options and the Company received $119,000 in proceeds. A portion of these options were exercised early (prior to vesting), and as of March 31, 2022, 52,414 of the options remained unvested. Proceeds received related to the unvested options of $53,000 at March 31, 2022 were recorded in accrued liabilities on the accompanying balance sheets and will be reclassified to equity as vesting occurs, provided the employees and consultants continue to provide services to the Company. Proceeds received related to the vested portion of options of $31,000 and $7,000 were reclassified to equity at March 31, 2021 and March 31, 2022, respectively. The vested portion of the exercises was 331,300 shares at March 31, 2022.

Voting Rights of Common Stock

Each holder of shares of common stock shall be entitled to one vote for each share thereof held.

Preferred Stock

As of December 31, 2021 and March 31,September 30, 2022, the Company had 10,000,000 shares of preferred stock authorized, par value of $0.001 per share and no shares of preferred stock were issued or outstanding.

10.11. Stock-based Compensation

On July 15, 2021, in connection with the completion of the Company’s IPO, the Company adopted a new comprehensive equity incentive plan, the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). Following the effective date of the 2021 Plan, no further awards may be issued under the 2018 Plan or the 2019 Plan (collectively, the “Prior Plans”). However, all awards under the Prior Plans that are outstanding as of the effective date of the 2021 Plan will continue to be governed by the terms, conditions and procedures set forth in the Prior Plans and any applicable award agreements. A total of 1,302,326 shares of common stock are reserved for issuance pursuant to the 2021 Plan. The 2021 Plan provides for the issuance of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based awards.

In October 2019, the Company adopted the 2019 Stock Option Plan (“2019 Plan”) which allowed for the granting of incentive stock options (“ISO”), non-qualified stock options (“NSO”) to the employees, members of the board of directors and consultants of the Company. In 2019 and during the first seven months of 2020, the Company granted ISOs and NSOs to consultants and directors from the 2019 Plan. As of December 31, 2019, 232,558 shares were authorized for issuance and 75,581 shares were available for future grant under the 2019 Plan. On April 6, 2020 the Company increased the shares authorized for issuance to 348,837 shares total. On February 17, 2021, the Company increased the shares authorized for issuance to 1,767,442 shares total. As of July 15, 2021, no further awards may be issued under the 2019 Plan due to the adoption of the Company’s 2021 Plan.

In 2018, the Company adopted the 2018 Equity Incentive Plan (“2018 Plan”) which allowed for the granting of incentive stock options (“ISO”), non-qualified stock options (“NSO”), stock appreciation rights, restricted stock and restricted stock units to the employees, members of the board of directors and consultants of the Company. In 2018, the Company granted ISOs and NSOs to consultants and directors from this plan. As of December 31, 2020, 465,116 shares were authorized for issuance and 17,442 shares were available for future grant under the 2018 Plan. As of July 15, 2021, no further awards may be issued under the 2018 Plan due to the adoption of the Company’s 2021 Plan.

The following table summarizes activity for stock options under all plans for the threenine months ended March 31,September 30, 2022:

The grant date fair value of options granted during the nine months ended September 30, 2022 was $11,000.

As of March 31,September 30, 2022, the unrecognized compensation cost related to outstanding stock options was $1.8$1.3 million, which is expected to be recognized as expense over approximately 2.32.1 years.

During the three months ended March 31, 2021, employees and consultants exercised a total of 383,721 stock options and the Company received $119,000 in proceeds. A portion of these options were exercised early (prior to vesting), and as of September 30, 2022, 11,726 of the options remained unvested. Proceeds received related to the unvested options of approximately $38,000 at September 30, 2022 were recorded in accrued liabilities on the accompanying balance sheets and will be reclassified to equity as vesting occurs, provided the employees and consultants continue to provide services to the Company. Proceeds received related to the vested portion of options of $51,000 and $22,000 were reclassified to equity during the nine-month periods ended September 30, 2021 and 2022, respectively. The vested portion of the exercises was 371,988 shares at September 30, 2022.

The Company has recorded stock-based compensation expense, which includes expense related to restricted stock units, allocated by functional cost as follows for the three and nine months ended March 31,September 30, 2021 and 2022 (in thousands):

Fair Value of Stock Options

The assumptions are based on the following for each of the periods presented:

Expected Term -– The expected term is calculated using the simplified method which is used when there is insufficient historical data about exercise patterns and post-vesting employment termination behavior. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the maximum contractual expiration date is used as the expected term under this method.

Common Stock Fair Value -– The fair value of the common stock underlying the Company’s stock options prior to the initial public offering was estimated at each grant date and was determined on a periodic basis and based either on transactions with third parties in which common stock was sold for cash or with the assistance of an independent third-party valuation expert. The assumptions underlying these valuations represented management’s best estimates, which involved inherent uncertainties and the application of significant levels of management judgment.

Volatility -– The expected volatility being used is derived from the historical stock volatilities of a representative industry peer group of comparable publicly listed companies over a period approximately equal to the expected term of the options.

Risk-free Interest Rate -– The risk-free interest rate is based on median U.S. Treasury zero coupon issues with remaining terms similar to the expected term on the options.

Expected Dividend -– The Company has never declared nor paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and therefore, used an expected dividend yield of zero.

The following averaged assumptions were used to calculate the fair value of awards granted to employees, directors and non-employees for the threenine months ended March 31,September 30, 2021 and 2022:

11.12. Net loss per share

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive:

13. Subsequent events

None

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This Quarterly Report on Form 10-Q for the three-month periodthree and nine-month periods ended March 31,September 30, 2022 contains “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements contain information about our expectations, beliefs or intentions regarding our product development and commercialization efforts, business, financial condition, results of operations, strategies or prospects, and other similar matters. These forward-looking statements are based on management’s current expectations and assumptions about future events, which are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict. These statements may be identified by words such as “expects,” “plans,” “projects,” “will,” “may,” “anticipates,” “believes,” “should,” “intends,” “estimates,” and other words of similar meaning.

Actual results could differ materially from those contained in forward-looking statements. Many factors could cause actual results to differ materially from those in forward-looking statements, including those matters discussed below. Readers are urged to read the risk factors set forth in the Company’s recent filings with the U. S. Securities and Exchange Commission (the “SEC”). These filings are available at the SEC’s website (www.sec.gov).

Other unknown or unpredictable factors that could also adversely affect our business, financial condition and results of operations may arise from time to time. Given these risks and uncertainties, the forward-looking statements discussed in this report may not prove to be accurate. Accordingly, you should not place undue reliance on these forward-looking statements, which only reflect the views of the Company’s management as of the date of this report. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results or expectations, except as required by law.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes to those statements included elsewhere in this quarterly report and in our previously filed Form 10-K. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this quarterly report. See “Information Regarding Forward-Looking Statements.” All amounts in this report are in U.S. dollars, unless otherwise noted.

Overview

We are a clinical-stage biotechnology company dedicated to developing treatments for certain medical conditions.serious and life-threatening diseases. Currently, two of our programs are focused on kidney diseasediseases that we believe have the potential to offer medical benefit. As we grow the Company and build our team, we intend to focus on identifying medical conditions within and outside of kidney disease. Our current development programs are focused on the development of two novel therapies: Renazorb, for treatment of hyperphosphatemia in patients with endstage renal disease (ESRD), a latestage chronic kidney disease, and UNI 494,UNI-494, for treatment of acute kidney injury (AKI). Based on the unique mechanism of action of UNI-494 to restore mitochondrial function, UNI-494 has potential applications in several indications in which mitochondrial dysfunction is implicated, such as chronic kidney disease (CKD), liver diseases and ophthalmic diseases.

Chronic kidney disease (CKD) is the gradual loss of kidney function that can get worse over time leading to lasting damage. Our initial focus is developing drugs and getting them approved in the US, and then to partner with global biopharmaceutical companies in the rest of the world. According to estimates by The Centers for Disease Control and Prevention (CDC) in 2019, 37 million (approximately 15%) adults in the United States have CKD and, of these, approximately 2 million patients with CKD stage 3-5, and around 400 thousand patients with end-stage renal disease (ESRD) have hyperphosphatemia. In the European Union (EU), around 20 million (approximately 8%) adults have CKD, more than 1 million CKD stage 3-5 patients, and approximately 180 thousand patients with ESRD have hyperphosphatemia. The number of patients with ESRD in the US is increasing steadily and is projected to reach between 971,000 and 1,259,000 in 2030.

AKI is a sudden episode of kidney failure or kidney damage (within the first 90 days of injury). After 90 days, the patient is considered to have progressed into CKD. AKI affects over 2 million US patients and costs the healthcare system over $9 billion per year. AKI kills more than 300,000 patients per year in the US and is caused by multiple etiologies.

Our business model is to license technologiesdrugs and drugstechnologies, and pursue development, regulatory approval, and commercialization of those products in global markets. Many biotechnology companies utilize similar strategies of in-licensing and then developing and commercializing drugs. We believe, however, that our management team’s broad network and extensive drug development expertise in the biopharmaceutical industry, and successful track record, gives us an advantage in identifying and bringing these assets into the Company at an attractive price with limited upfront cost.

Since our formation we have devoted substantially all of oursubstantial resources to developing our product candidates. We have incurred significant operating losses to date. Our net losses were $10.0$7.3 million and $3.5$12.7 million for the twelvenine months ended December 31,September 30, 2021, and for the threenine months ended March 31,September 30, 2022, respectively. As of March 31,September 30, 2022, we had an accumulated deficit of $19.5$28.7 million. We expect that our operating expenses will increase significantly as we continue to advance our product candidates through pre-clinical and clinical development, seek regulatory approval, and prepare for and, if approved, proceed to commercialization; acquire, discover, validate, and develop additional product candidates; obtain, maintain, protect, and enforce our intellectual property portfolio; and hire additional personnel.personnel to execute our plans. In addition, we expect to incur additional costs associated with operating as a public company.

We have funded our operations primarily from the sale and issuance of common stock, convertible promissory notes and from a loan, including cash and deferred salary from our Chief Executive Officer and principal stockholder.

Our ability to generate product revenue will depend on the successful development, regulatory approval and eventual commercialization of our current product candidates and future product candidates. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through private or public equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Adequate funding may not be available to us on acceptable terms, or at all. If we fail to raise capital or enter into agreements to raise capital as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of our current product candidates and future product candidates.

We plan to continue to use third-party service providers, including contract manufacturing organizations, to carry out our pre-clinical and clinical development and to manufacture and supply the materials to be used during the development and commercialization of our product candidates.

The Impact of the COVID-19 Pandemic and its ImpactsClimate Change on Our Business

In March 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic. This pandemic could result in difficulty securing clinical trial site locations, CROs, and/or trial monitors and other critical vendors and consultants supporting our trial. These situations, or others associated with COVID-19, could cause delays in our clinical trial plans and could increase expected costs, all of which could have a material adverse effect on our business and financial condition. At the current time, we are unable to quantify the potential effects of this pandemic on our future financial statements.

Our suppliers and service providers may also experience a disruption in their business as a result of natural or man-made disasters. A significant natural or man-made disaster, such as an earthquake, prolonged or repeated power outage, fire, drought or other extreme weather events and changing weather patterns, which are increasing in frequency due to the impacts of climate change, could severely damage our facilities or the facilities of our suppliers or service providers, which could have a material adverse effect on our business and financial condition. At the current time, we are unable to quantify the potential effects of climate change on our future financial statements.

Components of Results of Operations

Operating ExpensesRevenues

We recognize revenue from product sales or services rendered when control of the promised goods are transferred to a counterparty in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. To achieve this core principle, we apply the following five steps: identify the contract with the client, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to performance obligations in the contract and recognize revenues when or as we satisfy a performance obligation. We may earn licensing revenue in the future if we negotiate business development arrangements with third parties.

Research and Development Expenses

Substantially all of our research and development expenses consist of expenses incurred in connection with the development of our product candidates. These expenses include fees paid to third parties to conduct certain research and development activities on our behalf, consulting costs, costs for laboratory supplies, product acquisition and license costs, certain payroll and personnel-related expenses, including salaries and bonuses, employee benefit costs and stock-based compensation expenses for our research and product development employees and allocated overheads, including information technology costs and utilities and expenses for the issuance of shares pursuant to the anti-dilution clause in the purchase of in process research and development technology (“IPR&D”). We expense both internal and external research and development expenses as they are incurred.

We do not allocate our costs by product candidate, as a significant amount of research and development expenses include internal costs, such as payroll and other personnel expenses, laboratory supplies and allocated overhead, and external costs, such as fees paid to third parties to conduct research and development activities on our behalf, are not tracked by product candidate.

We expect our research and development expenses to increase substantially for at least the next few years, as we seek to initiate additional clinical trials for our product candidates, complete our clinical programs, pursue regulatory approval of our product candidates and prepare for the possible commercialization of such product candidates. Predicting the timing or cost to complete our clinical programs or validation of our commercial manufacturing and supply processes is difficult and delays may occur because of many factors, including factors outside of our control. For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, we could be required to expend significant additional financial resources and time on the completion of clinical development. Furthermore, we are unable to predict when or if our product candidates will receive regulatory approval with any certainty.

General and Administrative Expenses

General and administrative expenses consist principally of payroll and personnel expenses, including salaries and bonuses, benefits and stock-based compensation expenses, professional fees for legal, consulting, accounting and tax services, including information technology costs and utilities, and other general operating expenses not otherwise classified as research and development expenses.

We anticipate that our general and administrative expenses will increase as a result of increased personnel costs, expanded infrastructure and higher consulting, legal and accounting services costs associated with complying with the applicable stock exchange and the SEC requirements, investor relations costs and director and officer insurance premiums associated with being a public company.

Other ExpensesIncome (Expenses)

Other expenses consist primarily of interest expense related to convertible notes and a loss on conversion of convertible notes.

Results of Operations

Comparison of the Three Months Ended March 31,September 30, 2021 and 2022

The following table summarizes our results of operations for the periods indicated (in thousands):

Licensing Revenues

Licensing revenues of $1.0 million were recorded for the three months ended September 30, 2022 due to a licensing agreement entered into with Lee’s Pharmaceutical (HK) Limited in July 2022. We received an upfront payment of $1.0 million. There was no comparable revenue earned in the prior period. We may earn additional licensing revenue in the future if we negotiate business development arrangements with third parties.

Research and Development Expenses

Research and development expenses increased by approximately $1.5$1.0 million, or 330%27%, from approximately $450,000 for the three months ended March 31, 2021 to approximately $1.9$3.8 million for the three months ended March 31,September 30, 2021 to approximately $4.8 million for the three months ended September 30, 2022. The increase in research and development expenses was primarily due to a $843,000$826,000 increase in drug development costs. Labor costs increased $604,000$213,000 from the prior period. Consulting and otherOther costs increased $123,000.$53,000. Non-cash stock compensation decreased $85,000.$65,000.

General and Administrative Expenses

General and administrative expenses increased by $1.3 million,$763,000, or 471%81%, from approximately $281,000$939,000 for the three months ended March 31,September 30, 2021 to approximately $1.6$1.7 million for the three months ended March 31,September 30, 2022 primarily due to an increase of $389,000$415,000 in insurance expense for directorsconsulting and officers.professional services. Labor costs increased $293,000 from the prior period. Consulting$151,000. Stock compensation increased $92,000, and professional services costs increased $371,000, and stock compensation, travel, rent, and other costs increased $270,000.$105,000.

Other Income (Expenses)

Other income (expenses) decreased by $233,000,$483,000, or 100%99% from approximately $233,000$486,000 for the three months ended March 31,September 30, 2021 to $0$3,000 for the three months ended March 31,September 30, 2022. The decrease was due primarily to the conversion to equity in July 2021 of our outstanding convertible notes, including accrued interest, as a result of our initial public offering.

Comparison of the Nine Months Ended September 30, 2021 and 2022 

The following table summarizes our results of operations for the periods indicated (in thousands):

Licensing Revenues

Licensing revenues of $1.0 million were recorded for the nine months ended September 30, 2022 due to a licensing agreement entered into with Lee’s Pharmaceutical (HK) Limited in July 2022. We received an upfront payment of $1.0 million. There was no comparable revenue earned in the prior period. We may earn additional licensing revenue in the future if we negotiate business development arrangements with third parties.

Research and Development Expenses

Research and development expenses increased by approximately $3.8 million, or 82%, from approximately $4.7 million for the nine months ended September 30, 2021 to approximately $8.6 million for the nine months ended September 30, 2022. The increase in research and development expenses was primarily due to a $2.7 million increase in drug development costs. Labor costs increased $1.4 million from the prior period. Other costs increased $74,000. Non-cash stock compensation decreased $320,000.

General and Administrative Expenses

General and administrative expenses increased by $3.6 million, or 238%, from approximately $1.5 million for the nine months ended September 30, 2021 to approximately $5.1 million for the nine months ended September 30, 2022 primarily due to an increase of $684,000 in insurance expense for directors and officers. Consulting and professional services costs increased $1.0 million, and labor costs increased $748,000 from the prior period. Stock compensation increased $435,000, and travel, rent, and other costs increased $666,000.

Other Income (Expenses)

Other income (expenses) decreased by $1.0 million, or 99% from approximately $1.0 million for the nine months ended September 30, 2021 to $3,000 for the nine months ended September 30, 2022. The decrease was due primarily to the conversion to equity in July 2021 of our outstanding convertible notes, including accrued interest, as a result of our initial public offering. The decrease was partially offset by a gain on debt extinguishment of $19,000 during the threenine months ended March 31,September 30, 2021.

Liquidity and Capital Resources

Sources of Liquidity

Since our formation through March 31,September 30, 2022, we have funded our operations with the sale of common stock, convertible notes, and from a loan from our Chief Executive Officer and principal stockholder.stockholder, and during 2022, with licensing revenue of $1.0 million. During 2020, we raised additional funds through private placements by issuing common stock for $141,000 and by issuing $1.3 million in convertible notes to investors. During the year ended December 31, 2021, we raised $1.1 million through the issuance of convertible notes to investors.

As a result of our initial public offering (“IPO”), on July 13, 2021 we began trading on the Nasdaq Capital Market under the symbol “UNCY”, and on July 15, 2021 we received approximately $22.3 million in net proceeds after deducting the underwriting discounts, commissions and offering expenses. We intend to use the net proceeds from the IPO to complete pre-clinical and clinical studies, submit regulatory filings to the FDA, and for general and corporate purposes, including hiring additional management and conducting market research and other commercial planning.

Future Funding Requirements

We have incurred net losses since our inception. For the threenine months ended March 31,September 30, 2022, we had a net loss of $3.5$12.7 million, and we expect to incur substantial additional losses in future periods. As of March 31,September 30, 2022, we had an accumulated deficit of $19.5$28.7 million.

We expect to continue incurring losses for the foreseeable future and will be required to raise additional capital in the future to complete our clinical trials, pursue product development initiatives and penetrate markets for the sale of our products. We believe that we will continue to have access to capital resources through possible equity offerings, debt financings, corporate collaborations or other means. There can be no assurance that we will be able to obtain additional financing on terms acceptable to us, on a timely basis or at all. If we are unable to secure additional capital, we may be required to curtail any clinical trials and development of new or existing products and take additional measures to reduce expenses in order to conserve our cash in amounts sufficient to sustain operations and meet our obligations. Based on the Company’sour current level of expenditures, after receiving the net proceeds of $22.3 million on July 15, 2021 as a result of the Company’sour IPO and given the Company’sour cash balance of approximately $13.6$7.0 million as of March 31,September 30, 2022, the Company believeswe believe that itwe will need funding before the end of the secondfirst quarter 2023 to continue operations, satisfy itsour obligations and fund the future expenditures that will be required to conduct the clinical and regulatory work to develop itsour product candidates.

The accompanying financial statements have been prepared assuming that the Companywe will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. There is substantial doubt about the Company’sour ability to continue as a going concern for one year after the date that these financial statements are available to be issued. The financial statements do not reflect any adjustments relating to the recoverability and reclassification of assets and liabilities that might be necessary from the outcome of this uncertainty.

We anticipate that we will need to raise substantial additional capital, the requirements for which will depend on many factors, including: