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, 2022

☐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 10, 2022, there were 11,592,609 shares of common stock, $0.001 par value, issued and outstanding.

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Acurx Pharmaceuticals, Inc.

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PART I -		FINANCIAL INFORMATION	5

	Item 1.	Condensed Interim Financial Statements	5

		Condensed Interim Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021	5

		Condensed Interim Statements of Operations for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	6

		Condensed Interim Statements of Changes in Members’ and Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021 (unaudited)	7

		Condensed Interim Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021 (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	16

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

	Item 4.	Controls and Procedures	25

PART II -		OTHER INFORMATION	26

	Item 1.	Legal Proceedings	26

	Item1A.	Risk Factors	26

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

	Item 3.	Defaults Upon Senior Securities	51

	Item 4.	Mine Safety Disclosure	51

	Item 5.	Other Information	51

	Item 6.	Exhibits	52

		Signatures	53

		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:

●

our ability to obtain and maintain regulatory approval of ibezapolstat and/or our other product candidates;

●

our ability to successfully commercialize and market ibezapolstat and/or our other product candidates, if approved;

●

our ability to contract with third-party suppliers, manufacturers and other service providers and their ability to perform adequately;

●

the potential market size, opportunity and growth potential for ibezapolstat and/or our other product candidates, if approved;

●

our ability to build our own sales and marketing capabilities, or seek collaborative partners, to commercialize ibezapolstat and/or our other product candidates, if approved;

●

our ability to obtain funding for our operations;

●

the initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;

●

the timing of anticipated regulatory filings;

●

the timing of availability of data from our clinical trials;

●

the impact of the ongoing COVID-19 pandemic and our response to it;

●

the accuracy of our estimates regarding expenses, capital requirements and needs for additional financing;

●

our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

●

our ability to advance product candidates into, and successfully complete, clinical trials;

●

our ability to recruit and enroll suitable patients in our clinical trials and the timing of enrollment;

●

the timing or likelihood of the accomplishment of various scientific, clinical, regulatory and other product development objectives;

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●

the pricing and reimbursement of our product candidates, if approved;

●

the rate and degree of market acceptance of our product candidates, if approved;

●

the implementation of our business model and strategic plans for our business, product candidates and technology;

●

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

●

developments relating to our competitors and our industry;

●

the development of major public health concerns, including the novel coronavirus outbreak or other pandemics arising globally, and the future impact of it and COVID-19 on our clinical trials, business operations and funding requirements;

●

the effects of the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide from the conflict between Russia and Ukraine;

●

the volatility of the price of our common stock;

●

our financial performance; 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 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. CONDENSED INTERIM FINANCIAL STATEMENTS.

ACURX PHARMACEUTICALS, INC.

CONDENSED INTERIM BALANCE SHEETS


	September 30,		December 31,
	2022		2021
	(unaudited)		(Note 2)
ASSETS

CURRENT ASSETS
Cash	$	10,607,341	$	12,958,846
Prepaid Expenses		337,807		295,304
TOTAL ASSETS	$	10,945,148	$	13,254,150

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts Payable and Accrued Expenses	$	1,182,080	$	843,909
TOTAL CURRENT LIABILITIES		1,182,080		843,909

TOTAL LIABILITIES		1,182,080		843,909

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Common Stock; $.001 par value, 200,000,000 shares authorized, 11,592,609 and 10,215,792 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		11,593		10,216
Additional Paid-In Capital		45,132,049		38,948,334
Accumulated Deficit		(35,380,574)		(26,548,309)

TOTAL SHAREHOLDERS’ EQUITY		9,763,068		12,410,241

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	10,945,148	$	13,254,150

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,
	2022		2021		2022		2021
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
OPERATING EXPENSES
Research and Development	$	1,591,043	$	1,126,972	$	3,321,623	$	1,313,954
General and Administrative		1,950,551		3,515,250		5,510,642		8,873,160

TOTAL OPERATING EXPENSES		3,541,594		4,642,222		8,832,265		10,187,114

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

NET LOSS	$	(3,541,594)	$	(4,642,222)	$	(8,832,265)	$	(10,120,611)

LOSS PER SHARE
Basic and diluted net loss per common share/units	$	(0.32)	$	(0.46)	$	(0.84)	$	(1.27)

Weighted average common shares/units outstanding basic and diluted		11,148,402		10,116,403		10,551,503		7,988,563

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			Class B Membership
	Interests			Interests			Common Stock								Total
											Additional				Members’
	Number of			Number							Paid-In		Accumulated		and Shareholders’
	Units	Amount		of Units	Amount		Shares		Amount		Capital		Deficit		Equity
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 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

Balance at January 1, 2022	—	$	—	—	$	—	10,215,792	$	10,216	$	38,948,334	$	(26,548,309)	$	12,410,241

Share-Based Compensation	—		—	—		—	—		—		761,069		—		761,069

Share-Based Payments to Vendors	—		—	—		—	43,889		44		188,056		—		188,100

Cashless Warrant Exercise	—		—	—		—	3,521		3		(3)		—		—

Net Loss	—		—	—		—	—		—		—		(2,670,138)		(2,670,138)

Balance at March 31, 2022	—	$	—	—	$	—	10,263,202	$	10,263	$	39,897,456	$	(29,218,447)	$	10,689,272

Share-Based Compensation	—		—	—		—	—		—		716,682		—		716,682

Net Loss	—		—	—		—	—		—		—		(2,620,533)		(2,620,533)

Balance at June 30, 2022	—	$	—	—	$	—	10,263,202	$	10,263	$	40,614,138	$	(31,838,980)	$	8,785,421

Share-Based Compensation	—		—	—		—	—		—		696,965		—		696,965

Share-Based Payments to Vendors	—		—	—		—	36,000		36		127,044		—		127,080

Issuance of shares of common stock and pre-funded warrants in registered direct offering, net of $529,805 cash issuance costs	—		—	—		—	1,159,211		1,159		3,694,024		—		3,695,183

Cashless Warrant Exercise	—		—	—		—	3,427		4		(4)		—		—

Pre-funded Warrant Exercise	—		—	—		—	130,769		131		(118)		—		13

Net Loss	—		—	—		—	—		—		—		(3,541,594)		(3,541,594)

Balance at September 30, 2022	—	$	—	—	$	—	11,592,609	$	11,593	$	45,132,049	$	(35,380,574)	$	9,763,068

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,
	2022		2021
	(unaudited)		(unaudited)
Cash Flow from Operating Activities:
Net Loss	$	(8,832,265)	$	(10,120,611)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Share-Based Compensation		2,174,716		4,482,078
Share-Based Payments to Vendors		315,180		1,500,241
Executive Compensation Settled with Membership Interests		—		916,765
Gain on Forgiveness of Paycheck Protection Program Loan		—		(66,503)
(Increase) / Decrease in:
Prepaid Expenses		(42,503)		(481,973)
Accounts Payable and Accrued Expenses		338,171		256,506
Net Cash Used in Operating Activities		(6,046,701)		(3,513,497)

Cash Flow from Financing Activities:
Proceeds from Initial Public Offering, net of issuance costs		—		14,797,132
Proceeds from Registered Direct Offering, net of issuance costs		3,695,183		—
Pre-funded warrant exercise		13		—
Net Cash Provided by Financing Activities		3,695,196		14,797,132
Net (Decrease) / Increase in Cash		(2,351,505)		11,283,635
Cash at Beginning of Period		12,958,846		3,175,411
Cash at End of Period	$	10,607,341	$	14,459,046
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES
Warrants issued in connection with offerings	$	171,409		—
Accrued Registered Direct Offering costs	$	16,847		—

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 clinical stage biopharmaceutical company formed in July 2017, with operations commencing in February 2018. The Company is focused on developing a novel class of antibiotics that address serious or life threatening bacterial infections.

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, direct and indirect economic effects as a result of inflation, supply chain disruptions and labor shortages 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 C. difficile infections (“CDI”).

The Company’s primary activities since inception aside from organizational activities have included 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. On July 27, 2022, the Company completed a registered direct offering and a concurrent private placement, issuing 1,159,211 shares of common stock and 130,769 pre-funded warrants and series A warrants to purchase 1,289,980 shares of common stock and series B warrants to purchase 1,289,980 shares of common stock for gross proceeds of approximately $4.2 million. As of September 30, 2022, the Company had a cash balance of approximately $10.6 million, which based on current estimates will be sufficient to meet its anticipated cash requirements for at least 12 months from the issuance of the condensed financial statements for the period ended September 30, 2022. 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 condensed 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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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 condensed interim financial statements are read in conjunction with the audited financial statements and notes thereto as of December 31, 2021 filed in Form 10-K.

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.

Income Taxes

The Company estimates an annual effective tax rate of 0% as the Company incurred net losses for the nine months ended September 30, 2022 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 could be limited due to future ownership changes.

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 had 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, 2022, the Company had cash of approximately $10.6 million in U.S. bank accounts which was not fully insured by the FDIC.

Research and Development

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. The Company incurred research and development expenses in the amount of $1,591,043 and $1,126,972 for the three months ended September 30, 2022 and 2021, respectively, and $3,321,623 and $1,313,954 for the nine months ended September 30, 2022 and 2021, respectively.

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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 requisite service period.

Compensation expense associated with stock option awards is recognized over the requisite service period based on the fair value of the option at the grant date determined based on the Black-Scholes option pricing model. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value computation using the Black-Scholes option pricing model. Because there is no public market for the Company’s stock options and very little historical experience with the Company’s stock, similar public companies were used for the comparison of volatility and the dividend yield. The risk-free rate of return was derived from U.S. Treasury notes with comparable maturities.

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.

Major Vendor

The Company had a major vendor that accounted for approximately 66% and 52% of the research and development expenditures for the three months ended September 30, 2022 and 2021, respectively, and 50% and 45% for the nine months ended September 30, 2022 and 2021, respectively. The same vendor also accounted for approximately 55% and 5% of the total accounts payable and accrued expenses as of September 30, 2022 and December 31, 2021, 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, 2022 and December 31, 2021 were as follows:


	September 30, 2022		December 31, 2021
Accrued compensation expenses	$	296,655	$	508,343
Accrued research and development		764,296		229,090
Accrued professional fees		115,189		43,102
Other accounts payable and accrued expenses		5,940		63,374
Total	$	1,182,080	$	843,909

NOTE 4 – EXECUTIVE COMPENSATION

In January 2021, the Company issued 57,430 Class A Membership Interests at $3.25 per unit, equal to the value of the most recent private placement, 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 board of directors also approved certain grants to members of management as a component of their 2020 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.

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

NOTE 5 – ISSUANCE OF EQUITY INTERESTS

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 11,592,609 were outstanding as of September 30, 2022.

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 cash 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 one-for two conversion ratio, resulting in 1,437,577 warrants to purchase common stock with a weighted average exercise price of $2.88.

In connection with the IPO, the Company issued 150,000 warrants to the underwriter. Each warrant is exercisable for 4.5 years from December 21, 2021 at an exercise price of $7.50 per share. The Company used the Black-Scholes model to calculate the value of the warrants with an estimated fair value of $618,000. The inputs utilized in the calculation were as follows: four and a half-year term, 0.79% risk-free rate, stock price at grant date of $6.26, and a 94% volatility utilizing comparable companies. This amount was recorded as both an increase to additional paid-in capital and as a non-cash issuance cost of the offering.

On July 25, 2022, the Company entered into securities purchase agreements (the “Purchase Agreements”) with two of the Company’s executives and a member of the Company’s board of directors (collectively, the “Affiliate Investors”), and a single U.S. institutional investor (the “Investor”) pursuant to which the Company issued and sold in a registered direct offering an aggregate of 1,159,211 shares of common stock, par value $0.001 per share and pre-funded warrants to purchase an aggregate of 130,769 shares of common stock. The Affiliate Investors purchased an aggregate of 59,211 shares of common stock at a purchase price of $3.80 per share. The Investor purchased an aggregate of 1,100,000 shares of common stock at a purchase price of $3.25 per share and an aggregate of 130,769 prefunded warrants at a purchase price of $3.2499 per pre-funded warrant. The pre-funded warrants sold to the Investor have an exercise price of $0.0001, were immediately exercisable. As of September 30, 2022, all of the pre-funded warrants were exercised. The Company also issued to the Affiliate Investors and the Investor, series A warrants to purchase 1,289,980 shares of common stock and series B warrants to purchase 1,289,980 shares of common stock, all of which are deemed equity classified. These warrants included 59,211 series A warrants and an aggregate of 59,211 series B warrants to the Affiliate Investors with an exercise price per share of $3.55 and an aggregate of 1,230,769 series A warrants and an aggregate of 1,230,769 series B warrants to the Investor with an exercise price per share of $3.25. The series A warrants will be exercisable commencing on January 27, 2023 and will expire on January 27, 2028. The series B warrants will be exercisable commencing on January 27, 2023 and will expire on January 27, 2024. The registered direct offering closed on July 27, 2022.

The gross proceeds to the Company from the registered direct offering were $4.2 million and net proceeds after deducting the placement agents’ fees and other offering expenses payable by the Company were approximately $3.7 million.

On July 25, 2022, the Company entered into a co-placement agent agreement (the “Placement Agent Agreement”), with two placement agents in connection with the registered direct offering pursuant to which the Company paid the Placement Agents a cash fee of $287,874 and issued to the Placement Agents an aggregate of 63,018 warrants to purchase shares of common stock. The warrants have an exercise price of $3.60 per share (representing 110% of the weighted average public offering price of the aggregate number of shares of common stock sold in the registered direct offering to the Investor and Affiliate Investors) and expire on July 27, 2027. The Company used the Black-Scholes model to calculate the value of the warrants with an estimated fair value of $171,409. The inputs utilized in the calculation were as follows: five year term, 2.82% risk free rate, stock price at grant date of $3.70 and a 95% volatility utilizing comparable companies. This amount was recorded as both an increase to additional paid-in capital and as a non-cash issuance cost of the offering.

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The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at September 30, 2022:


		Weighted Average
	Number of Warrants	Exercise Price
Balance, December 31, 2021	1,588,477	$	3.32
Issued	2,773,747	$	3.12
Exercised	(147,144)	$	0.27
Balance, September 30, 2022	4,215,080	$	3.29

The weighted average contractual life of the outstanding warrants is 4.30 years.

NOTE 6 – 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 a Delaware limited liability company to a Delaware corporation immediately prior to the Company’s IPO in June 2021, 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. Total share-based compensation associated with these awards had been recorded as general and administrative expenses in the amount of $0 and $755,556 for the three and nine months ended September 30, 2021, respectively.

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, with an annual evergreen provision pursuant to the Plan. The Plan currently reserves an aggregate of 2,408,631 shares of common stock, subject to adjustments as provided in the Plan, of which 537,936 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 $545,160 for the three and nine months ended September 30, 2022, respectively, and $181,720 and $1,837,605 for the three and nine months ended September 30, 2021, respectively, related to compensation expense for these options.

In the second quarter of 2021, the Company entered into a number of agreements with vendors pursuant to which the Company granted a total of 175,000 shares of common stock, cash payments in the amount of $343,500 and 100,000 options which were included as a part of the July 2021 grant. These contracts have terms which range from six months to three years. The common stock was valued based on the grant date fair value and the options valued utilizing Black-Scholes option pricing model. The cash payments were expensed over the service period and the equity component expensed consistent with the contractual vesting. The Company recorded general and administrative expense of $0 for the three and nine months ended September 30, 2022, respectively, and $0 and $1,095,500 for the three and nine months ended September 30, 2021, respectively, related to compensation expense for these shares.

In July 2021, the Company granted stock options to purchase a total of 1,550,000 shares of common stock to its three executives pursuant to their respective employment agreements, the independent directors, and one consultant, pursuant to the Plan. The options were issued at an exercise price of $6.18, the grant date fair value, with one-quarter of the executive’s options vesting upon issuance and the balance over 36 months, and the options granted to the directors and consultants vesting over 36 months. The Company recorded general and administrative expenses of $490,917 and $1,472,750 for the three and nine months ended September 30, 2022, respectively, and $1,888,917 for the three and nine months ended September 30, 2021, respectively, related to compensation expense for these options.

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In January 2022, the Company granted stock options to purchase a total of 80,000 shares of common stock to seven consultants pursuant to the Plan. The options were issued at an exercise price of $4.44, the grant date fair value, with one-quarter of the options vesting upon issuance and the balance over 36 months. The Company recorded general and administrative expenses of $18,950 and $126,333 for the three and nine months ended September 30, 2022 related to compensation expense for these options.

In April 2022, the Company granted stock options to purchase a total of 30,000 shares of common stock to a new employee pursuant to the Plan. The options were issued at an exercise price of $3.79, the grant date fair value, with one-quarter of the options vesting upon issuance and the balance over 36 months. The Company recorded general and administrative expenses of $5,378 and $30,473 for the three and nine months ended September 30, 2022, related to compensation expense for these options.

Compensation expense associated with these awards is recognized over the vesting period based on the fair value of the option at the grant date determined based on the Black-Scholes model. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company’s employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially affect the fair value computation using the Black-Scholes option pricing model. Because there is no public market for the Company’s stock options and very little historical experience with the Company’s stock, similar public companies were used for the comparison of volatility and the dividend yield. The risk-free rate of return was derived from U.S. Treasury notes with comparable maturities.

The Company determined the fair value of the option awards using the Black-Scholes option pricing model using the following weighted average assumptions:


	Nine Months Ended
	September 30, 2022
Expected term		9	years
Volatility		90	%
Dividend yield		—	%
Risk-free interest rate		2.01	%
Weighted average grant date fair value	$	3.54

A summary of the Company’s stock option activity is as follows:


	Nine Months Ended	Weighted Average
	September 30, 2022	Exercise Price
Outstanding at the beginning of the period	2,357,500	$	6.21
Granted	110,000	$	4.26
Vested	(1,402,792)	$	6.15
Outstanding and expected to vest	1,064,708	$	6.08

The total compensation expense not yet recognized as of September 30, 2022 was $4,940,891. The weighted average vesting period for the unvested options is 1.79 years. The intrinsic value of the stock options as of September 30, 2022 was $0, with a remaining weighted average contractual life of 8.78 years. The weighted average grant date fair value for all options is $4.67 as of September 30, 2022. The Company records the impact of any forfeitures of options as they occur.

NOTE 7 – SHARE-BASED PAYMENTS TO VENDORS

While the Company was a limited liability company in its pre-IPO phase of corporate development, the Company granted Class A Membership Interests to certain vendors in the ordinary course of business in exchange for consulting services relating to research and development activities and investor relations. The Company granted 0 and 30,145 Class A Membership Interests for the three and nine months ended September 30, 2021. The fair value of the Class A Membership Interests granted was equal to the value of the most recent private placement. The Company recognized the expense in the same period and in the same manner as if the Company had paid cash for the services. The Company recorded general and administrative expenses and research and development expenses for vendor equity grants in the amounts of $37,500 and $0 for the three months ended September 30, 2021, respectively, and $