UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended September 30, 2021

☐Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 001-40536

Acurx Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)


Delaware		82-3733567
State or other jurisdiction of incorporation or organization		(I.R.S. Employer Identification No.)

259 Liberty Ave Staten Island, NY		10305
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (917)533-1469

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


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.001 par value per share	ACXP	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☐Yes ☒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.


Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☒

Emerging growth company ☒

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 Exchange Act). ☐ Yes ☒ No

As of November 11, 2021, there were 10,215,792 shares of common stock, $0.001 par value, issued and outstanding.

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Acurx Pharmaceuticals, Inc.

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			Page

PART I -		FINANCIAL INFORMATION	5

	Item 1.	Condensed Interim Financial Statements (unaudited)	5

		Condensed Interim Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	5

		Condensed Interim Statements of Operations for the Three Months and Nine Months Ended September 30, 2021 and 2020 (unaudited)	6

		Condensed Interim Statements of Changes in Members’ and Shareholders’ Equity for the Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)	7

		Condensed Interim Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (unaudited)	8

		Notes to the Condensed Interim Financial Statements (unaudited)	9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	24

	Item 4.	Controls and Procedures	24

PART II -		OTHER INFORMATION	25

	Item 1.	Legal Proceedings	25

	Item1A.	Risk Factors	25

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

	Item 3.	Defaults Upon Senior Securities	49

	Item 4.	Mine Safety Disclosure	49

	Item 5.	Other Information	49

	Item 6.	Exhibits	50

		Signatures	51

		Certificates

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) and certain information incorporated herein by reference contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In this Quarterly Report, we refer to Acurx Pharmaceuticals, Inc., together with its subsidiary, as the “Company,” “we,” “our” or “us.” All statements other than statements of historical facts contained herein, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect” or the negative version of these words and similar expressions are intended to identify forward-looking statements.

We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A “Risk Factors.” In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances included herein may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

●

general economic and financial conditions;

●

the adverse effects of public health epidemics, including the recent COVID-19 outbreak, on our business, results of operations and financial condition;

●

the costs of being a public company;

●

our ability to keep pace with technological advances;

●

the success of our marketing activities;

●

a disruption of breach of our information technology systems;

●

our dependence on third parties;

●

the performance of third parties on which we depend;

●

compliance with health and safety laws;

●

our ability to obtain and maintain protection for our intellectual property and proprietary rights;

●

our ability to protect and defend against litigation, including claims related to intellectual property and proprietary rights;

●

product shortages and relationships with key suppliers;

●

our ability to attract key employees;

●

the volatility of the price of our common stock;

●

the marketability of our common stock; and

●

other risks and uncertainties, including those listed in “Risk Factors.”

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. In addition, neither we nor any other person assumes responsibility for

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the accuracy and completeness of any of these forward-looking statements. Any forward-looking statement made by us in this Quarterly Report speaks only as of the date on which it is made. We disclaim any duty to update any of these forward-looking statements after the date of this Quarterly Report to conform these statements to actual results or revised expectations.

Other risks may be described from time to time in our filings made under applicable securities laws. New risks emerge from time to time. It is not possible for our management to predict all risks. All forward-looking statements in this Quarterly Report speak only as of the date made and are based on our current beliefs and expectations. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

ACURX PHARMACEUTICALS, INC.

CONDENSED INTERIM BALANCE SHEETS


	September 30,		December 31,
	2021		2020
	(unaudited)
ASSETS

CURRENT ASSETS
Cash	$	14,459,046	$	3,175,411
Prepaid Expenses		530,582		48,609
TOTAL ASSETS	$	14,989,628	$	3,224,020

LIABILITIES AND MEMBERS' AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts Payable and Accrued Expenses	$	712,437	$	455,931
Paycheck Protection Program Loan		—		16,625
TOTAL CURRENT LIABILITIES		712,437		472,556

NONCURRENT LIABILITIES
Paycheck Protection Program Loan		—		49,878
TOTAL LIABILITIES		712,437		522,434

COMMITMENTS AND CONTINGENCIES

MEMBERS' AND SHAREHOLDERS' EQUITY
Members' Equity, Class A		—		16,402,198
Members' Equity, Class B		—		100,000
Common Stock; $.001 par value, 200,000,000 shares authorized, 10,126,903 shares issued and outstanding at September 30, 2021		10,127		—
Additional Paid-In capital		38,188,287		—
Accumulated Deficit		(23,921,223)		(13,800,612)
TOTAL MEMBERS' AND SHAREHOLDERS' EQUITY		14,277,191		2,701,586

TOTAL LIABILITIES AND MEMBERS' AND SHAREHOLDERS' EQUITY	$	14,989,628	$	3,224,020

See accompanying notes to the condensed interim financial statements.

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ACURX PHARMACEUTICALS, INC.

CONDENSED INTERIM STATEMENTS OF OPERATIONS


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
OPERATING EXPENSES
Research and Development	$	1,126,972	$	659,977	$	1,313,954	$	1,745,446
General and Administrative		3,515,250		654,569		8,873,160		1,761,561

TOTAL OPERATING EXPENSES		4,642,222		1,314,546		10,187,114		3,507,007

Gain on forgiveness of Paycheck Protection Program Loan		—		—		66,503		—

NET LOSS	$	(4,642,222)	$	(1,314,546)	$	(10,120,611)	$	(3,507,007)

LOSS PER SHARE
Basic and diluted net loss per common share/units	$	(0.46)	$	(0.21)	$	(1.27)	$	(0.58)

Weighted average pro forma shares outstanding basic and diluted		10,116,403		6,266,584		7,988,563		6,037,254

See accompanying notes to the condensed interim financial statements.

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ACURX PHARMACEUTICALS, INC.

CONDENSED INTERIM STATEMENTS OF CHANGES IN MEMBERS’ AND SHAREHOLDERS’ EQUITY (unaudited)


	Class A Membership Interests			Class B Membership Interests			Common Stock			Additional		Accumulated		Total
	Number of Units	Amount		Number of Units	Amount		Shares	Amount		Paid-In Capital		Deficit		Members' Equity
Balance at January 1,2020	11,058,666	$	9,920,428	100,000	$	100,000	—	$	—	$	—	$	(9,200,574)	$	819,854

Private Placement Offerings, net of issuance costs of $51,409	182,002		454,980	—		—	—		—		—		—		454,980

Executive Compensation Settled with Membership Interests	312,680		781,700	—		—	—		—		—		—		781,700

Share-Based Compensation	136,111		166,667	—		—	—		—		—		—		166,667

Share-Based Payments to Vendors	57,440		181,100	—		—	—		—		—		—		181,100

Net Loss	—		—	—		—	—		—		—		(1,279,101)		(1,279,101)

Balance at March 31, 2020	11,746,899		11,504,875	100,000		100,000	—		—		—		(10,479,675)		1,125,200

Share-Based Compensation	136,111		166,666	—		—	—		—		—		—		166,666

Share-Based Payments to Vendors	49,438		161,096	—		—	—		—		—		—		161,096

Net Loss	—		—	—		—	—		—		—		(913,360)		(913,360)

Balance at June 30, 2020	11,932,448		11,832,637	100,000		100,000	—		—		—		(11,393,035)		539,602

Private Placement Offerings	533,900		1,735,073	—		—	—		—		—		—		1,735,073

Share-Based Compensation	138,676		175,000	—		—	—		—		—		—		175,000

Share-Based Payments to Vendors	28,967		131,645	—		—	—		—		—		—		131,645

Net Loss	—		—	—		—	—		—		—		(1,314,546)		(1,314,546)

Balance at September 30, 2020	12,633,991	$	13,874,355	100,000	$	100,000	—	$	—	$	—	$	(12,707,581)	$	1,266,774

Balance at January 1,2021	13,493,807	$	16,402,198	100,000	$	100,000	—	$	—	$	—	$	(13,800,612)	$	2,701,586

Executive Compensation Settled with Membership Interests	57,430		186,650	471,042		730,115	—		—		—		—		916,765

Cancellation of Class B Issuance	-		—	(471,042)		—	—		—		—		—		—

Share-Based Compensation	143,814		191,667	—		—	—		—		—		—		191,667

Share-Based Payments to Vendors	30,145		135,471	—		—	—		—		—		—		135,471

Net Loss	—		—	—		—	—		—		—		(1,474,330)		(1,474,330)

Balance at March 31, 2021	13,725,196		16,915,986	100,000		830,115	—		—		—		(15,274,942)		2,471,159

Share-Based Compensation	257,122		563,889	—		—	—		—		1,655,885		—		2,219,774

Share-Based Payments to Vendors	—		37,500	—		—	—		—		—		—		37,500

Corporate Conversion	(13,982,318)		(17,517,375)	(100,000)		(830,115)	7,041,208		7,041		18,340,449		—		—

Initial Public Offering, net of $2,452,868 cash issuance costs	—		—	—		—	2,875,000		2,875		14,794,257		—		14,797,132

Net Loss	—		—	—		—	—		—		—		(4,004,059)		(4,004,059)

Balance at June 30, 2021	—		—	—		—	9,916,208		9,916		34,790,591		(19,279,001)		15,521,506

Share-Based Compensation	—		—	—		—	—		—		2,070,637		—		2,070,637

Share-Based Payments to Vendors	—		—	—		—	210,695		211		1,327,059		—		1,327,270

Net Loss	—		—	—		—	—		—		—		(4,642,222)		(4,642,222)

Balance at September 30, 2021	—	$	—	—	$	—	10,126,903	$	10,127	$	38,188,287	$	(23,921,223)	$	14,277,191

See accompanying notes to the condensed interim financial statements.

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ACURX PHARMACEUTICALS, INC.

CONDENSED INTERIM STATEMENTS OF CASH FLOWS


	Nine Months Ended
	September 30,
	2021		2020
	(unaudited)		(unaudited)
Cash Flow from Operating Activities:
Net loss	$	(10,120,611)	$	(3,507,007)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-Based Compensation		4,482,078		508,333
Share-Based Payments to Vendors		1,500,241		473,841
Executive Compensation Settled with Membership Interests		916,765		781,700
Gain on forgiveness of Paycheck Protection Program Loan		(66,503)		—
(Increase) / Decrease in:
Prepaid Expenses		(481,973)		40,011
Accounts Payable and Accrued Expenses		256,506		(688,682)

Net Cash Used in Operating Activities		(3,513,497)		(2,391,804)

Cash Flow from Financing Activities:
Proceeds from Advanced Receipts of Private Placement Offerings		—		1,058,554
Proceeds from Paycheck Protection Program Loan		—		66,503
Proceeds from Initial Public Offering, net of issuance costs		14,797,132		—
Proceeds from Private Placement Offerings, net of issuance costs		—		2,190,053

Net Cash Provided by Financing Activities		14,797,132		3,315,110

Net Increase in Cash		11,283,635		923,306

Cash at Beginning of Period		3,175,411		2,483,322

Cash at End of Period	$	14,459,046	$	3,406,628

See accompanying notes to the condensed interim financial statements.

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ACURX PHARMACEUTICALS, INC

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – NATURE OF OPERATIONS

Business:

Acurx Pharmaceuticals, Inc., a Delaware corporation, formerly Acurx Pharmaceuticals, LLC (the “Company”) is a publicly-held, clinical stage biopharmaceutical company formed in July 2017, with operations commencing in February 2018. The Company is focused on developing novel antibiotics that address difficult to treat bacterial infections. The Company’s approach is to develop antibiotic candidates that could potentially block an entirely new molecular target, the DNA polymerase IIIC (“Pol IIIC”) enzyme, and its research and development pipeline includes early stage Pol IIIC antibiotic candidates that target other Gram-positive bacteria, including Methicillin-Resistant Staphylococcus aureus (“MRSA”), Vancomycin-Resistant Enterococcus (“VRE”) and Penicillin-Resistant Streptococcus pneumoniae (“PRSP”). The Pol IIIC enzyme is the primary catalyst for the replication of DNA in certain Gram-positive bacterial cells.

In March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of coronavirus, a global pandemic. This outbreak caused major disruptions to businesses and markets worldwide as the virus continued to spread. The COVID-19 pandemic has disrupted, and the Company expects it will continue to disrupt, its operations. The extent of the effect on the Company’s operational and financial performance will depend on future developments, including the duration, spread and intensity of the pandemic, and governmental, regulatory and private sector responses, all of which are uncertain and difficult to predict. Although the Company is unable to estimate the financial effect of the pandemic, at this time, if the pandemic continues over a long period of time, it could have a material adverse effect on the Company’s business, results of operations, financial condition, and cash flows. The financial statements do not reflect any adjustments as a result of the pandemic.

In February 2018, the Company purchased the active pharmaceutical ingredient, the intellectual property and other rights to an antibiotic product candidate known as GLS362E (renamed ACX-362E and now approved for non-proprietary name, ibezapolstat) (the “Asset”) from GLSynthesis, Inc. The Company paid $110,174 in cash, along with granting 100,000 Class B Membership Interests, profits interests as defined in the operating agreement, with an exercise price of $0.10 per share. The Company was also required to make certain milestone payments totaling $700,000 in aggregate if certain milestones are achieved, $50,000 of which has already been paid by the Company and royalty payments equal to 4% of net sales for a period of time equal to the last to expire of any applicable patents, as defined in the asset purchase agreement. The purchase of the Asset has resulted in our lead antibiotic product candidate, ibezapolstat, which targets the treatment of Clostridium difficile Infections (“CDI”).

The Company’s primary activities since inception have included organizational activities and performing research and development activities relating to the development of its two antibiotic candidates and raising funds through equity offerings including its initial public offering (“IPO”) consummated in June 2021. The Company has not generated any revenues since inception.

The Company has experienced net losses and negative cash flows from operations since inception and expects these conditions to continue for the foreseeable future. The Company has needed to raise capital from sales of its securities to sustain operations. On June 29, 2021, the Company completed the IPO issuing 2,875,000 shares of common stock at a price of $6.00 per share, with gross proceeds of approximately $17.3 million. As of September 30, 2021, the Company had a cash balance of approximately $14.5 million. Management believes that the Company will continue to incur losses for the foreseeable future and will need additional resources to sustain its operations until it can achieve profitability and positive cash flows, if ever. Management plans to seek additional equity financing and grant funding, but cannot assure that such financing and funding will be available at acceptable terms, or at all. The accompanying unaudited condensed interim financial statements do not include any adjustments that might result from the outcome of this uncertainty. There can be no assurance that the Company’s research and development will be successfully completed or that any Company product candidate will be approved by the Food and Drug Administration (“FDA”) or any other worldwide regulatory authority or become commercially viable. The Company is subject to risks common to companies in the biopharmaceutical industry including, but not limited to, dependence on collaborative arrangements, development by the Company or its competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, and compliance with FDA and other governmental regulations and approval requirements.

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ACURX PHARMACEUTICALS, INC

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in accordance with the rules and regulations of the United States Securities Exchange Commission for interim reporting. In the opinion of management, these unaudited interim financial statements include all adjustments, consisting only of normal, recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations, and cash flows. The unaudited interim results of operations are not necessarily indicative of the results that may occur for the full fiscal year. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. Management believes that the disclosures provided herein are adequate when these unaudited interim financial statements are read in conjunction with the audited financial statements and notes thereto as of December 31, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Federal Income Taxes

The Company estimates an annual effective tax rate of 0% as the Company incurred losses for the nine months ended September 30, 2021 and is forecasting additional losses through year-end, resulting in an estimated net loss for both financial statement and tax purposes. Therefore, no current federal or state income tax expense has been recorded in the financial statements.

Based on the Company’s history of generating operating losses and its anticipation of operating losses for the foreseeable future, the Company has determined that it is more likely than not that the tax benefits from those net operating losses would not be realized and a full valuation allowance against all deferred tax assets has been recorded. Should the Company’s assessment change, tax benefits associated with the historic net operating loss carryforwards would be limited due to the ownership change.

Prior to the Company’s corporate conversion in June 2021, the Company was organized as a limited liability company. As such, the Company was not a tax paying entity for federal income tax purposes and, therefore, no income tax expense has been recorded in the financial statements. Income or losses of the Company was passed through to the members for inclusion in their respective income tax returns.

Concentration of Credit Risk

The Company maintains its cash balance in one financial institution. The balance is insured up to the maximum allowable by the Federal Deposit Insurance Corporation (“FDIC”). The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant risk of loss on cash. At times, the cash balance may exceed the maximum insured limit of the FDIC. As of September 30, 2021, the Company had cash of $14.5 million in U.S. bank accounts which were not fully insured by the FDIC.

Guaranteed Payments to Members

Prior to the corporate conversion, guaranteed payments to members of the Company that were designated to represent reasonable compensation for services rendered, were accounted for as Company expenses rather than an allocation of the Company’s net income.

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ACURX PHARMACEUTICALS, INC

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

Research and Development

In accordance with Accounting Standards Codification Topic No. 730, Accounting for Research and Development Costs, the Company expenses research and development costs when incurred. At times, the Company may make cash advances for future research and development services. These amounts are deferred and expensed in the period the service is provided.

Share-Based Compensation

The Company accounts for the cost of services performed by officers and directors received in exchange for an award of Company membership interests, common stock or stock options, based on the grant-date fair value of the award. The Company recognizes compensation expense based on the vesting period.

Share-Based Payments to Vendors

The Company accounts for the cost of services performed by vendors in exchange for an award of Company membership interests, common stock, or stock options, based on the grant-date fair value of the award or the fair value of the services rendered; whichever is more readily determinable. Such fair value is measured as of the date the services or the date performance by the other party is complete. The Company recognizes the expense in the same period and in the same manner as if the Company had paid cash for the services.

Foreign Currency Transactions

The financial statements are presented in U.S. dollars (“USD”), the reporting currency of the Company. The Company may engage in transactions denominated in other foreign currencies. These transactions were translated to USD at rates which approximate those in effect on the transaction dates. Monetary assets and liabilities denominated in foreign currencies at year-end will be translated at exchange rates in effect as of those dates. Nonmonetary assets and liabilities are translated at appropriate historical rates.

Major Vendor

The Company had a major vendor that accounted for approximately 52% and 59% of the research and development expenditures for the three months ended September 30,2021 and 2020, and 45% and 40% for the nine months ended September 30, 2021 and 2020, respectively. The same vendor also accounted for approximately 11% and 6% of the total accounts payable and accrued expenses at September 30, 2021, and December 31, 2020, respectively. The Company continues to maintain this vendor relationship and anticipates incurring significant expenses with this vendor over the next 12 months.

NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses as of September 30, 2021 and December 31, 2020 were as follows:


	September 30, 2021		December 31, 2020
Accrued compensation expenses	$	252,117	$	317,068
Accrued research and development		314,984		89,156
Accrued professional fees		133,194		49,707
Other accounts payable and accrued expenses		12,142		—
Total	$	712,437	$	455,931

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ACURX PHARMACEUTICALS, INC

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

NOTE 4 – PAYCHECK PROTECTION PROGRAM LOAN

In May 2020, the Company received a Paycheck Protection Program (“PPP”) loan under the CARES Act, as administered by the U.S. Small Business Administration (”SBA”) in the amount of $66,503. The Company did not provide any collateral or guarantees in connection with the PPP loan, nor did the Company pay any facility charge to obtain the PPP loan.

In May 2021, the Company was notified by its financial institution that the Paycheck Protection Program loan had been forgiven. The Company has accordingly reduced the full amount of the liability and recorded a gain on the forgiveness of debt in the statement of operations.

NOTE 5 – EXECUTIVE COMPENSATION

The Company’s co-founders and original two executives received compensation pursuant to employment agreements effective January 2018 (the “Original Agreements”). The Original Agreements stipulated that the executives would receive a base salary of $277,000 per annum, of which a portion was payable with the issuance of Class A Membership Interests of the Company at the most recent offering price when the service was rendered. The Company also employs a third executive on a part-time basis for $7,500 per month, of which a portion was payable with the issuance of Class A Membership Interests during 2018. The Company did not issue any Class A Membership Interests to executives in 2019.

In 2019, the three executives executed waiver letters, deferring any unpaid compensation per their Original Agreements until the later to occur of (1) the date upon which the Company has raised $2.5 million from equity/debt offerings and/or grants equal to $2.5 million, and (2) January 15, 2020. Accrued deferred compensation per their Original Agreements was recorded in the amount of $0 and $104,000 as of September 30, 2021 and December 31, 2020, respectively.

In January 2020, the Company issued 312,680 Class A Membership Interests at $2.50 per unit to its three executives to settle unpaid year-end compensation for 2019 and a year-end bonus award, which was approved by the board of directors. The year-end bonus component was equal to 244,860 Class A Membership Interests.

In January 2021, the Company issued 57,430 Class A Membership Interests to two of its executives to settle unpaid year-end bonus award and deferred compensation, which was approved by the board of directors. The year-end bonus component was equal to 38,353 Class A Membership Interests, which was included as accrued compensation. In January 2021, the Company also amended the employment agreements for the three executives.

The Company’s board of directors also approved certain grants to members of management as a component of year-end compensation, authorizing the issuance of 1,540,000 Class B Membership Interests to its three executives, as well as 75,000 Class B Membership Interests which were granted to non-employee management team members. The Class B Membership Interests are profits interests with a defined exercise price of $3.25 per interest, the Company’s most recent financing offering price. In March 2021, the Company along with its three executives and non-employee management team agreed voluntarily to cancel the aforementioned equity grants. The Company granted options to purchase 770,000 shares of the Company’s common stock in June 2021 to the three-member management team in replacement of the cancelled year-end grants described above.

The Company is currently managed by three executives, in each case pursuant to new employment agreements effective June 29, 2021.

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ACURX PHARMACEUTICALS, INC

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

NOTE 6 – ISSUANCE OF EQUITY INTERESTS

The Company consummated two private placement equity offerings in 2018 in a total of four closings. These offerings were consummated at $1.00 per share and $1.50 per share, respectively, and both included 50% warrant coverage. Thereafter, on March 29, 2019, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $2.00 per unit. Each unit is comprised of one Class A Membership Interest and a warrant to purchase one-half of the total Class A Membership Interests purchased. The Company issued and sold an aggregate of 277,000 units, comprised of 277,000 Class A Membership Interests and warrants to purchase up to 138,500 additional Class A Membership Interests for gross proceeds of $554,000. Each warrant, exercisable for 10 years from March 29, 2019, has an exercise price of $2.00 per Class A Membership Interest.

On August 8, 2019, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $2.00 per unit. Each unit is comprised of one Class A Membership Interest and a warrant to purchase one-half of the total Class A Membership Interests purchased. The Company issued and sold an aggregate of 1,248,750 units, comprised of 1,248,750 Class A Membership Interests and warrants to purchase up to 624,375 additional Class A Membership Interests for gross proceeds of $2,497,500. Each warrant, exercisable for 10 years from August 8, 2019, has an exercise price of $2.00 per Class A Membership Interest.

On October 18, 2019, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $2.00 per unit. Each unit is comprised of one Class A Membership Interest and a warrant to purchase one-half of the total Class A Membership Interests purchased. The Company issued and sold an aggregate of 483,501 units, comprised of 483,501 Class A Membership Interests and warrants to purchase up to 241,751 additional Class A Membership Interests for gross proceeds of $967,000. Each warrant, exercisable for 10 years from October 18, 2019, has an exercise price of $2.00 per Class A Membership Interest.

On January 6, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests and warrants to purchase its Class A Membership Interests, at a purchase price of $2.50 per unit. Each unit is comprised of one Class A Membership Interest and a warrant to purchase one-fourth of the total Class A Membership Interests purchased. The Company issued and sold an aggregate of 182,002 units, comprised of 182,002 Class A Membership Interests and warrants to purchase up to 45,501 additional Class A Membership Interests for gross proceeds of $455,005. The proceeds were received in 2019 and were recorded as advanced receipts of equity subscriptions. Each warrant, exercisable for 10 years from January 6, 2020, has an exercise price of $2.50 per Class A Membership Interest.

On July 20, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests at a purchase price of $3.25 per unit. The Company issued and sold an aggregate of 533,900 Class A Membership Interests for gross proceeds of $1,735,175. There were no warrants included in this private placement.

On October 16, 2020, the Company entered into a securities purchase agreement for the private placement of the Company’s Class A Membership Interests at a purchase price of $3.25 per unit. The Company issued and sold an aggregate of 705,727 Class A Membership Interests for gross proceeds of $2,293,613. There were no warrants included in this private placement.

On June 23, 2021, Acurx Pharmaceuticals, LLC was converted into a corporation and renamed Acurx Pharmaceuticals, Inc. The Company’s certificate of incorporation authorizes 200,000,000 shares of common stock of which 10,126,903 were outstanding as of September 30, 2021.

On June 29, 2021, the Company completed an IPO issuing 2,875,000 shares of common stock at a price of $6.00 per share, resulting in net proceeds of approximately $14.8 million, with cash issuance costs of approximately $2.4 million. The outstanding Class A and Class B Membership Interests were converted to shares of common stock pursuant to a conversion ratio of one-for-two of the Membership Interests outstanding, resulting in the conversion of 14,082,318 Class A and Class B Membership Interests into 7,041,208 shares of common stock. Warrants to purchase Class A Membership Interests were converted to warrants to purchase common stock at the same ratio, resulting in 1,437,577 warrants to purchase common stock.

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ACURX PHARMACEUTICALS, INC

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)

NOTE 7 – SHARE-BASED COMPENSATION

While the Company was a limited liability company in its pre-IPO phase of corporate development, the Company granted performance-based awards of restricted Class A Membership Interests to board members and corporate advisory council members in exchange for services. All of these awards of membership interests became fully vested upon consummation of the Company’s corporate conversion from Delaware limited liability company to Delaware corporation immediately prior to the Company’s IPO, with the Company recognizing all previously unrecognized compensation expense. The fair value of the membership interests granted during 2020 and 2019 was equal to the per-membership interest value of the most recent private placement ($3.25 per membership interest and $2.50 per membership interest, respectively, with a weighted average of $2.14 per membership interest).

Total share-based compensation expense associated with these awards has been recorded in the amount of $0 and $175,000 for the three months ended September 30, 2021 and 2020, respectively, and $755,556 and $508,333 for the nine months ended September 30, 2021 and 2020, respectively.

The following table summarizes the unvested Class A Membership Interests converted to common stock pursuant to a conversion ratio of one-for-two, and associated activity for the nine months ended September 30, 2021:


		Class A
		Membership Interests
		Converted to common stock at one-for-two ratio

Unvested at December 31, 2020		200,463
Vested		(200,463)
Unvested at September 30, 2021		—

In April 2021, the board of directors approved the creation of the 2021 Equity Incentive Plan (the “Plan”). The Plan became effective as of the completion of the corporate conversion. The Plan currently reserves an aggregate of 2,000,000 shares of common stock, subject to adjustments as provided in the Plan, of which 239,305 are currently still available for issuance. The purpose of the Plan is to attract, retain and incentivize directors, officers, employees, and consultants.

In June 2021, the Company granted stock options to purchase a total of 807,500 shares of common stock to its three executives and three non-employee management team members, to replace the Class B Membership Interests that were cancelled in March 2021. The options were issued at an exercise price of $6.26, with the employee options vesting 40% upon issuance and the balance over 36 months, and the non-employee options vesting at grant date. The Company recorded general and administrative expense of $181,720 and $1,837,605 for the three and nine months ended September 30, 2021.

In July 2021, the Company granted stock options to purchase a total 1,550,000 to its three executives pursuant to their respective employment agreements, the independent directors, and a consultants, all pursuant to the Plan. The options were issued at an exercise price of $