The accompanying notes are an integral part of these condensed consolidated financial statements.

Processa Pharmaceuticals, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Processa Pharmaceuticals, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 – Organization and Summary of Significant Accounting Policies

Business Activities and Organization

We are a clinical-stage biopharmaceutical company focused on incorporating our Regulatory Science Approach into the development of drug products thatour Next Generation Chemotherapy (NGC) drugs to improve the safety and efficacy of cancer treatment. Our NGC drugs are intendedmodifications of existing FDA-approved oncology drugs resulting in an alteration of the metabolism and/or distribution while maintaining the well-known and established existing mechanisms of killing the cancer cells. By modifying the NGC drugs in this manner, we believe our three NGC treatments will provide improved safety-efficacy profiles when compared to provide treatment for patients who have a high unmet medical need condition that affects survival or the patient’s quality of life and for which few or no treatment optionstheir currently exist. We currently have five drugs: four in various stages of clinical development (PCS499, PCS12852, PCS6422 and PCS3117) and one in nonclinical development (PCS11T). We group our drugs into non-oncology (PCS499 and PCS12852) and oncology (PCS3117, PCS6422 and PCS11T). A summary of each drug is provided below:marketed counterparts.

Impact of COVID-19

The COVID-19 pandemic continues to create uncertainties in expected timelines by causing delays in clinical trials and disruptions in the supply chain for raw materials used in clinical trial work.We have experienced delays in the enrollment of patients in our PCS499 Phase 2B trial due to COVID-19. Some potential patients have died from COVID-19 prior to screening and others continue to be reluctant to travel to our testing sites for fear of contracting COVID-19. Delays in enrollment lengthen the time of studies and increase their costs, which could materially impact our business in future periods. Furthermore, the spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While we are hopeful the infection rate of COVID-19 will continue to decline, we cannot predict the future impact COVID-19 will have on our current and future clinical trials. Continued delays could materially impact our business in future periods and further extend our timelines. For more information on the risks associated with COVID-19, refer to Part I, Item 1A, “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2021.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions of the Securities and Exchange Commission (“SEC”) on Form 10-Q and Article 8 of Regulation S-X.

Accordingly, they do not include all the information and disclosures required by U.S. GAAP for complete financial statements. All material intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments necessary, which are of a normal and recurring nature, for the fair presentation of our financial position and of the results of operations and cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, as filed with the SEC. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for any other interim period or for the full year.

Liquidity

We have incurred losses since inception, devoting substantially all of our efforts toward moving the drugs in our pipeline through the regulatory process and other research and development, activities, and have an accumulated deficit of approximately $45.268.3 million million as of June 30, 2022.at March 31, 2023. During the sixthree months ended June 30, 2022,March 31, 2023, we generated a net loss of approximately $8.44.0 million million, of which $3.5 million represented non-cash expenditures. Net cash used in our operating activities during the six months ended June 30, 2022 was approximately $4.1 million. Weand we expect to continue to generate operating losses and negative cash flow from operations for the foreseeable future. Based on our current plans, we believe our current cash balances are adequate for at least the next twelve months without considering amounts available from the Purchase Agreement with Lincoln Park (see below and Note 3) or potential sales under our ATM Offering (see below).months. Our ability to execute our longer-term operating plans, including unplanned future clinical trials for our portfolio of drugs depend on our ability to obtain additional funding from the sale of equity and/or debt securities, a strategic transaction or other funding transactions. We plan to continue to actively pursue financing alternatives, but there can be no assurance that we will obtain the necessary funding in the future when necessary.

We had 0no revenue during the sixthree months ended June 30, 2022March 31, 2023 and do not have any revenue under contract or any immediate sales prospects. Our primary uses of cash are to fund our planned clinical trials, research and development expenditures and other operating expenses. Cash used to fund operating expenses is impacted by the timing of when we incur and pay these expenses.

On August 20, 2021,During the three months ended March 31, 2023, we entered into an equity distribution agreement (the “Sales Agreement”) with Oppenheimer & Co. Inc. under which we may issue and sell in a registered “at-the-market” offeringraised gross proceeds of $7.0 million (net proceeds of $6.4 million) from the sale of 8,432,192 shares of our common stock, having an aggregate offering price of upas described in Note 2. We plan to $30.0 million from time to time through or to our Sales Agent (the “ATM Offering”). We expect to use the net proceeds from the ATM Offering over time as a sourcethese financings to prepare for future clinical trials; and on research and development expenses, working capital and other general corporate purposes. The shares under the ATM Offering will be sold and issued pursuant to our S-3 shelf registration statement (Registration No. 333-257588) filed on July 30, 2021.

On March 23, 2022, we entered into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) under which we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $15,000,000 of our shares of common stock, par value $0.0001 per share, subject to the terms and conditions in the Purchase Agreement, during the term of the Purchase Agreement. See Note 3 for additional details concerning the Purchase Agreement.

Use of Estimates

In preparing our condensed consolidated financial statements and related disclosures in conformity with U.S. GAAP and pursuant to the rules and regulations of the SEC, we make estimates and judgments that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Estimates are used for, but not limited to preclinical and clinical trial expenses, stock-based compensation, intangible assets, future milestone payments and income taxes. These estimates and assumptions are continuously evaluated and are based on management’s experience and knowledge of the relevant facts and circumstances. While we believe the estimates to be reasonable, actual results could differ materially from those estimates and could impact future results of operations and cash flows.

Income Taxes

We account for income taxes in accordance with ASC Topic 740, Income Taxes. Deferred income taxes are recorded for the expected tax consequences of temporary differences between the basis of assets and liabilities for financial reporting purposes and amounts recognized for income tax purposes. As of June 30, 2022At March 31, 2023 and December 31, 2021,2022, we recorded a valuation allowance equal to the full recorded amount of our net deferred tax assets related to deferred start-up costs, federal orphan drug tax credit and certain other minor temporary differences since it is more-likely-than-not that such benefits will not be realized. The valuation allowance is reviewed quarterly and is maintained until sufficient positive evidence exists to support its reversal.

Under ACS 740-270 Income Taxes – Interim Reporting, we are required to project our annual federal and state effective income tax rate and apply it to the year-to-date ordinary operating tax basis loss before income taxes. Based on the projection, we recognized the tax benefit from our projected ordinary tax loss, which was used to offset the deferred tax liabilities related to the intangible asset and resulted in the recognition of a deferred tax benefit shown in the condensed consolidated statements of operations for six months ended June 30, 2021 and the remainder of 2021. Nono current income tax benefit or expense was recorded or is expected for 2022 or in2023 and the foreseeable future since the deferred tax liability has been offset completely as ofat December 31, 2021 and we expect to generate future taxable net operating losses.

Concentration of Credit Risk

Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of our cash and cash equivalents. We utilize only well-established banks and financial institutions with high credit ratings. Balances on deposit are insured by the Federal Deposit Insurance Corporation (FDIC) up to specified limits. Total cash held by our banks at June 30, 2022March 31, 2023, exceeded FDIC limits.

Recent Accounting Pronouncements

From time to time, the Financial Accounting Standards Board (“FASB”) or other standard setting bodies issue new accounting pronouncements. Updates to the FASB Accounting Standards Codification are communicated through issuance of an Accounting Standards Update (“ASU”). We have implemented all new accounting pronouncements that are in effect and that may impact our condensed consolidated financial statements. We have evaluated recently issued accounting pronouncements and determined that there is no material impact on our condensed consolidated financial position or results of operations.

Note 2 – Intangible Assets

Intangible assets at June 30, 2022 and December 31, 2021 consisted of the following:

Summary of Intangible Assets

Gross intangible assets consist primarily of costs we capitalized when we acquired the license rights to PCS499 in 2018. Amortization expense was $394,248 and $397,664 for the six months ended June 30, 2022 and 2021, respectively, and is included within research and development expense in the accompanying condensed consolidated statements of operations. As of June 30, 2022, our estimated amortization expense for the year ended December 31, 2022 and for annual periods thereafter until the asset is fully amortized is approximately $788,000.

Note 32 – Stockholders’ Equity

Preferred Stock

There were 0no issued or outstanding shares of preferred stock at either June 30, 2022March 31, 2023 or December 31, 2021.2022.

Common Stock

Increase in Our Authorized Number of Shares

On January 1, 2022,During the three months ended March 31, 2023, we amended our Certificate of Incorporation to increase the number of authorizedissued 8,432,192 shares of our common stock from 30,000,000 to 50,000,000. We believe 50,000,000 authorized shares of common stock better aligns our capital structure with our future needs.through several fundraising efforts.

ATM Offering

On August 20, 2021, we entered into the Sales Agreement with the Sales AgentOppenheimer & Co. Inc. (the “Sales Agent”) under which we may issue and sell up to $30.0 million of our common stock from time to time under the ATM Offering. We expect to use net proceeds from the ATM Offering over time as a source for working capital and general corporate purposes. We did not sell any shares duringDuring the sixthree months ended June 30, 2022.March 31, 2023, we sold 569,648 shares at an average price of $1.22 per share for aggregate gross proceeds of $693,000 (net proceeds of $672,000) prior to deducting sales commissions. On February 5, 2023, in connection with our Registered Direct Offering, we suspended the Sales Agreement with the Sales Agent, but we expect to reinstate it during 2023.

Lincoln Park Capital Fund, LLC Purchase Agreement

On March 23, 2022, we entered into the Purchase Agreement with Lincoln Park, pursuant to which Lincoln Park has committed to purchase up to $15.0 million of shares (the “Purchase Shares”) of our common stock, $0.0001 par value per share, subject to the terms and conditions in the Purchase Agreement. We issued 123,609 shares of common stock (valued at $450,000) to Lincoln Park as a commitment fee in connection with entering into the Purchase Agreement and agreed to reimburse Lincoln Park $25,000 for fees incurred in connection with the Purchase Agreement. Concurrent with entering into the Purchase Agreement, we also entered into a registration rights agreement with Lincoln Park (the “Registration Rights Agreement”), pursuant to which we agreed to take certain actions relating to the registration under the Securities Act of 1933, as amended, of the offer and sale of the shares of common stock available for issuance under the Purchase Agreement.

Beginning on March 23, 2022, we have the right to present Lincoln Park with a purchase notice (a “Regular Purchase Notice”), directing Lincoln Park to purchase up to 25,000 Purchase Shares (the “Regular Purchase Amount”) providedincluding that the closing sale price of the common stock on the purchase date is not below a threshold price set forth in the Purchase Agreement (a “Regular Purchase”). The Regular Purchase Amount may be increased to up to 75,000 shares if the closing sale price of our common stock on the applicable purchase date equals or exceeds certain higher threshold prices set forth in the Purchase Agreement. We and Lincoln Park may mutually agree to increase the Regular Purchase Amount with respect to any Regular Purchase under the Purchase Agreement, provided that Lincoln Park’s maximum committed purchase obligation under any single Regular Purchase shall not exceed $1,250,0001.00. The above-referenced share amount limitations and closing sale price thresholds are subject to adjustment for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction as provided in the Purchase Agreement. The purchase price per share for each Regular Purchase will be based on prevailing market prices of the common stock immediately preceding the time of sale as computed in accordance with the terms set forth in the Purchase Agreement. There are no upper limits on the price per share that Lincoln Park must pay for shares of common stock under the Purchase Agreement. Lincoln Park may not assign or transfer its rights and obligations under the Purchase Agreement.

The aggregate number of shares that we can issue to Lincoln Park under the Purchase Agreement may not exceed 3,142,430 shares (subject to proportional adjustments for stock splits, reverse stock splits and similar events as described above), which is equal to 19.99% of the outstanding shares of common stock immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”), unless (i) stockholder approval is obtained to issue shares of common stock in excess of the Exchange Cap, in which case the Exchange Cap will no longer apply, or (ii) the average price of all sales of Purchase Shares to Lincoln Park under the Purchase Agreement equals or exceeds the lower of (i) the Nasdaq official closing price immediately preceding the execution of the Purchase Agreement or (ii) the arithmetic average of the five Nasdaq official closing prices for the common stock immediately preceding the execution of the Purchase Agreement, plus an incremental amount to take into account the issuance of the commitment shares to Lincoln Park under the Purchase Agreement, such that the transactions contemplated by the Purchase Agreement are exempt from the Exchange Cap limitation under applicable Nasdaq rules. In all instances, we may not sell shares of our common stock to Lincoln Park under the Purchase Agreement if it would result in Lincoln Park beneficially owning more than 9.99% of the outstanding shares of common stock.

We may terminate the Purchase Agreement at any time, at our sole discretion, without any cost or penalty, by giving one business day notice to Lincoln Park to terminate the Purchase Agreement. Lincoln Park has covenanted not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the common stock.

There are no limitations on use of proceeds, financial or business covenants, restrictions on future financings (other than restrictions on our ability to enter into variable rate transactions described in the Purchase Agreement), rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. We may deliver Purchase Notices under the Purchase Agreement, subject to market conditions, and in light of our capital needs from time to time and under the limitations contained in the Purchase Agreement. Any proceeds that we receive under the Purchase Agreement are expected to be used for working capital and general corporate purposes. During the three months ended March 31, 2023, we sold 50,000 shares at an average price of $1.08 per share for aggregate gross proceeds of $54,000 under the Purchase Agreement with Lincoln Park.

Repurchase Registered Direct Offering

On February 14, 2023, we closed a registered direct offering (the “Offering”) for the sale of Shares from Aposense, Ltd.7,812,544 shares of common stock at a purchase price of $0.80 per share for gross proceeds of $6.3 million (net proceeds of $5.6 million). The Purchase Agreement provides that, subject to certain exceptions, until the earlier of (i) 90 days after the closing of the Offering or (ii) the trading day following the date that our common stock’s closing price exceeds $2.00 for a period of 10 consecutive trading days, neither we nor our subsidiary will issue or enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or common stock equivalents.

We paid the Placement Agent a cash fee of 8.0% of the gross proceeds from the Offering, excluding proceeds received from our insiders, and reimbursed the Placement Agent for legal fees of $60,000. The engagement agreement with the Placement Agent requires us to indemnify the Placement Agent and certain of its affiliates against certain customary liabilities. On March 29,February 14, 2023, we amended our consulting agreement with Spartan originally entered into on August 24, 2022, extending the term of the consulting agreement until February 10, 2024. As compensation for services under the agreement, on April 17, 2023, we purchasedgranted Spartan 100,000a warrant to purchase 3,160,130 shares of our common stock from Aposense Ltd. forwith an exercise price of $300,0001.02 in a private transaction. The warrant will expire three years from the date of issuance and are holding these shares as treasury stock until they are reissued or retired at the discretion of our Board of Directors.contains both call and cashless exercise provisions.

Note 43 - Stock-based Compensation

On June 19, 2019, our stockholders approved, and we adopted the Processa Pharmaceuticals Inc. 2019 Omnibus Equity Incentive Plan (the “2019 Plan”). The 2019 Plan allows us, under the direction of our Board of Directors or a committee thereof, to make grants of stock options, restricted and unrestricted stock and other stock-based awards to employees, including our executive officers, consultants and directors. The 2019 Plan originally providedprovides for the aggregate issuance of 3,000,0006,000,000 shares of our common stock, with stock. At March 31, 2023, we have 627,0861,394,122 shares available for future grants at June 30, 2022.grants.

On July 11, 2022, our shareholders approved an increase in the aggregate number of shares of our common stock available for issuance under our 2019 plan by 3,000,000 shares to 6,000,000 shares in total.

Stock Compensation Expense

We recorded stock-based compensation expense for the three month ended March 31, 2023 and six month periods ended June 30, 2022 and 2021 as follows:

Schedule of Stock-based Compensation Expense

At March 31, 2023, we recorded an expense and related accrued liability of $1.3 million related to the warrant we issued to Spartan, which is not included in the table above. No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for all net deferred tax assets relating to this expense.

Stock Options

NaNDuring the three months ended March 31, 2023, stock options to purchase 36,885 shares of common stock expired and there were granted, cancelledno exercises or forfeited during the six months ended June 30, 2022.grants of stock options. At June 30, 2022,March 31, 2023, we had outstanding and exercisable options for the purchase of 178,496141,611 shares with a weighted average exercise price of $17.0718.22 and, a weighted average remaining contractual life of 3.12.9 years. Options exercisable at June 30, 2022 for the purchase of 176,315 shares of our common stock had a weighted average exercise price $17.02 and a weighted average remaining contractual life of 3.0 years. We had, as of June 30, 2022, totalAt March 31, 2023, we did not have any unrecognized stock-based compensation expense for theserelated to our granted stock options of approximately $37,000, which is expected to be fully recognized by the end of the third quarter of 2022.options.

Restricted Stock Awards

On January 4, 2022, we granted and issuedActivity with respect to our Restricted Stock Awards (RSAs) during the three months ended March 31, 2023 was as follows:

Schedule of Restricted Stock Awards (“RSAs”) for Activity

9,766

On January 1, 2023, we granted RSAs totaling 90,000 shares of our common stock to a consultantthree directors for servicestheir service for the six month period ending June 30, 2023 in order to be provided in 2022. These RSAs had a fair market value of $50,000align their compensation plan with their service period and change the annual service period to begin and end on the date of grantrespective Annual Meetings rather than the calendar year. Our directors are compensated through a combination of cash and were expensed as stock-basedequity. On March 8, 2023, the directors increased the cash component and decreased the equity component of their compensation duringby equal amounts on a retroactive basis, to the six months ended June 30, 2022. Effective January 1, 2022,beginning of their respective service periods. Accordingly, we also grantedcancelled RSAs representing 72,83226,118 RSAs to our directors for their 2022 service which had a fair market valueshares of $252,000 on the date of grant and will cliff vest on December 31, 2022. Additionally, on March 31, 2022, we issued 17,572 RSAs to our directors in satisfaction of the $120,000 of directors’ fees we had accrued at December 31, 2021. On May 31, 2022, a director did not seek reelection and forfeited the 18,208 RSAs related to their 2022 service. We did not cancel any RSAs during the six months ended June 30, 2022.common stock.

At June 30, 2022, we had unvested RSAs for 145,733 shares with a weighted average grant date fair value of $6.13. Unvested RSAs representing 120,733 shares are expected to vest at various dates in 2022, 12,500 shares are expected to vest inMarch 31, 2023, and the remainder are expected to vest in 2024. As of June 30, 2022, the total unrecognized stock-based compensation expense related to the outstanding and unvested RSAs was approximately $310,000163,100, which is expected to be recognized over a weighted average period of approximately 0.80.5 years.

Restricted Stock Units

Activity with respect to our Restricted Stock Units (“RSUs”) during the sixthree months ended June 30, 2022March 31, 2023 was as follows:

 Schedule of Information About RSU OutstandingRestricted Stock Units (“RSUs”) Activity

As of June 30, 2022,At March 31, 2023, unrecognized stock-based compensation expense of approximately $4.01.2 million million for RSUs is expected to be fully recognized over a weighted average period of 0.82.1 years. The unrecognized expense excludes approximately $349,000322,000 of expense related to certain RSUs with a performance milestone that is not probable of occurring at this time.

During the six months ended June 30, 2022, we granted RSUs related to the future issuance of 243,131shares of our common stock pursuant to agreements with our Executive team and certain other employees where a portion of their base compensation is paid in RSUs. The value of an RSU award is based on the average share price of the month services were provided. These RSUs are vested but must meet distribution requirements before any shares of common stock are issued. Effective July 1, 2022, we established a $5.00 per share floor for the computation of the number of shares our Executive team members could earn under this program.

Included in RSUs awarded during the six months ended June 30, 2022 are RSUs awarded on April 1, 2022 for 1,979,818 shares of our common stock, of which RSUs related to the future issuance of 879,819 shares were subject to shareholder approval, which was received on July 11, 2022. These RSUs vest on January 1, 2023 and are subject to distribution requirements before any shares of common stock are issued. The RSUs that were not subject to shareholder approval had a fair value on April 1, 2022 of $3.3 million while the RSUs that were approved by the shareholders on July 11, 2022 have a fair value, as of the approval date, of $2.9 million. The $3.3 million is being recognized ratably over the period April 1, 2022 through December 31, 2022, while the $2.9 million will be recognized ratably over the remainder of 2022beginning in the third quarter of 2022.

Holders of our vested RSUs will be have our promise to issued shares of our common stock upon meeting the satisfaction of the distribution restrictions contained in their Restricted Stock Unit Award Agreement. The distribution restrictions are typically different (longer) than the vesting schedule, imposing an additional restriction on the holder. Unlike RSAs, while certain employees may hold fully vested RSUs, the individual does not hold any shares or have any rights of a shareholder until the distribution restrictions are met. Upon distribution to the employee, each RSU converts into one share of our common stock. The RSUs contain dividend equivalent rights.

Warrants

During the three months ended March 31, 2023, we agreed to grant a warrant to purchase a total of NaN3,160,130 shares of our common stock as compensation for services provided under an amended consulting agreement with Spartan, the placement agent for the Offering. The warrant was issued and exercisable on April 17, 2023 with an exercise price of $1.02 and expiration date of April 17, 2026. The warrant contains both call and cashless exercise provisions. We recorded $1,310,875 as a general and administrative expense and related accrued liability representing the fair value of this warrant on February 14, 2023, the date we amended the consulting agreement, since there were no contingent conditions on that date through April 17, 2023.

At March 31, 2023, we had outstanding stock purchase warrants, were granted, cancelled or forfeited duringincluding the six months ended June 30, 2022. At June 30, 2022, we had outstanding and vested stock purchase warrantswarrant issued on April 17, 2023, for the purchase of 303,7253,366,480 shares with a weighted average exercise price of $10.661.61 and a weighted average remaining contractual life of 1.32.8 years. Stock purchase warrants for the purchase of 206,350 shares were exercisable at March 31, 2023 and the remaining outstanding stock purchase warrants will be exercisable in the second quarter of 2023.

Effective May 3, 2022,At March 31, 2023, we extended the expiration date of a warrant held by a consultant by one year in connection with the extension of their service agreement. No other terms of the warrant, including the exercise price of $7.18, were changed. We will recognizedid not have any unrecognized stock-based compensation expense of approximately $33,000 related to this warrant modification over a one-year period beginning May 2022.our granted stock purchase warrants.

Note 54 – Net Loss per Share of Common Stock

Net Loss Per Share

Basic net loss per share is computed by dividing our net loss available to common shareholders by the weighted average number of shares of common stock outstanding (which excludes unvested RSAs and includes vested RSUs) during the period. Diluted loss per share is computed by dividing our net loss available to common shareholders by the diluted weighted average number of shares of common stock (which includes the potentially dilutive effect of stock options, unvested RSAs, unvested RSUs and warrants) during the period. Since we experienced a net loss for both periods presented, basic and diluted net loss per share are the same. As such, diluted loss per share for the three months ended March 31, 2023 and six month periods ended June 30, 2022 and 2021 excludes the impact of potentially dilutive common shares since those shares would have an anti-dilutive effect on net loss per share.

The computation of net loss per share for the three months ended March 31, 2023 and six month periods ended June 30, 2022 and 2021 was as follows:

Schedule of Net Loss Per Share Basic and DilutedDilute

Our diluted net loss per share for the three months ended March 31, 2023 and six month periods ended June 30, 2022 and 2021 excluded 1,965,5024,729,094 (including the committed warrant to purchase 3,160,130 shares of common stock) and 709,954795,342 of potentially dilutive common shares, respectively, related to outstanding stock options, stock purchase warrants and unvested restricted stock since those shares would have had an anti-dilutive effect on net loss per share during the periods then ended.

Note 65 – Operating Leases

We lease our office space under an operating lease agreement. This lease does not have significant rent escalation, concessions, leasehold improvement incentives, or other build-out clauses. Further, the lease does not contain contingent rent provisions. Our office space lease includes both lease (e.g., fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g., common-area or other maintenance costs), which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases. We also lease office equipment under an operating lease. Our leases do not provide an implicit rate and, as such, we have used our incremental borrowing rate of 8% to determinein determining the present value of the lease payments based on the information available at the lease commencement date.

Lease costs included in our condensed consolidated statements of operations totaled $24,13722,461 and $21,80121,918 for the three months ended June 30March 31, 2023 and 2021, respectively, and $48,528 and $45,831 for the six months ended June 30, 2022, and 2021, respectively. The weighted average remaining lease terms and discount rate for our operating leases were as follows at June 30, 2022:March 31, 2023:

Schedule of Weighted Average Remaining Lease Terms and Discount Rate for Operating Leases

Annual lease liabilities for all operating leases were as follows as of June 30, 2022:at March 31, 2023:

Schedule of Maturities ofAnnual Lease Liabilities for all Operating Leases