10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________________

FORM 10-Q

____________________________________

(Mark One)

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

For the quarterly period ended

June 30, 2023

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

For the transition period from_________to_________

Commission File Number: 001-40034

____________________________________

GRI BIO, INC.

(Exact Name of Registrant as Specified in its Charter)

____________________________________

Delaware	82-4369909
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2223 Avenida de la Playa, #208  La Jolla, CA 92037
(Address of principal executive offices, including zip code)

(619) 400-1170

(Registrant’s telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	GRI	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x  No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	x

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 x

As of August 6, 2023, 2,956,354 shares of the Registrant’s common stock were outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022	3
	Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2023 and 2022	4
	Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and six months ended June 30, 2023 and 2022	5
	Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2023 and 2022	6
	Notes to Unaudited Interim Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
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
Item 1A.	Risk Factors	26
Item 6.	Exhibits	27
	Signatures	29

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

GRI Bio, Inc.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

	June 30, 2023		December 31, 2022
Assets	(unaudited)
Current assets:
Cash and cash equivalents	$	4,799	$	9
Prepaid expenses and other current assets	793		303
Total current assets	5,592		312
Property and equipment, net	9		4
Operating lease right-of-use assets	41		67
Total assets	$	5,642	$	383
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable	$	307	$	1,294
Accrued expenses	1,193		36
Advances from employees	—		5
Warrant liability	63		—
Bridge promissory note, net	—		602
Operating lease liabilities, current	41		57
Total current liabilities	1,604		1,994
Operating lease liabilities, non-current	—		14
Total liabilities	1,604		2,008
Commitments and contingencies (Note 11)
Stockholders' equity (deficit):
Common stock, 0.0001 par value; 250,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 2,956,354 and 999,748 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	—		—
Additional paid-in-capital	31,430		16,871
Accumulated deficit	(27,392)		(18,496)
Total stockholders’ equity (deficit)	4,038		(1,625)
Total liabilities and stockholders' equity (deficit)	$	5,642	$	383

See accompanying notes to unaudited interim consolidated financial statements.

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GRI Bio, Inc.

Consolidated Statements of Operations

(in thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	880	$	59	$	997	$	119
General and administrative	5,054		130		5,926		268
Total operating expenses	5,934		189		6,923		387
Loss from operations	(5,934)		(189)		(6,923)		(387)
Change in fair value of warrant liability	122		—		122		—
Interest expense, net	(934)		(106)		(2,095)		(210)
Net loss	$	(6,746)	$	(295)	$	(8,896)	$	(597)
Net loss per share of common stock, basic and diluted	$	(2.79)	$	(0.35)	$	(5.23)	$	(0.70)
Weighted-average common shares outstanding, basic and diluted	2,417,785		851,419		1,701,864		851,419

See accompanying notes to unaudited interim consolidated financial statements.

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GRI Bio, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

(in thousands, except shares)

(Unaudited)

	Redeemable Convertible Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Stockholders’ Deficit
	Shares	Amount		Shares	Amount
Balance, December 31, 2021	7,816	$	124	851,419	$	—	$	10,430	$	(15,278)	$	(4,848)
Net loss	—	—		—	—		—		(302)		(302)
Balance, March 31, 2022	7,816	$	124	851,419	$	—	$	10,430	$	(15,580)	$	(5,150)
Net loss	—	—		—	—		—		(295)		(295)
Balance, June 30, 2022	7,816	$	124	851,419	$	—	$	10,430	$	(15,875)	$	(5,445)

	Redeemable Convertible Stock			Common Stock			Additional Paid-in Capital		Accumulated Deficit		Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance, December 31, 2022	—	$	—	999,748	$	—	$	16,871	$	(18,496)	$	(1,625)
Stock-based compensation	—	—		—	—		13		—		13
Restricted stock vesting	—	—		467	—		—		—		—
Warrant issuance	—	—		—	—		532		—		532
Net loss	—	—		—	—		—		(2,150)		(2,150)
Balance, March 31, 2023	—	$	—	1,000,215	$	—	$	17,416	$	(20,646)	$	(3,230)
Stock-based compensation	—	—		—	—		13		—		13
Restricted stock vesting	—	—		164,038	—		—		—		—
Warrant exercise	—	—		43,682	—		12		—		12
Issuance of common stock in pre-closing financing	—	—		1,214,912	—		11,721				11,721
Issuance of common stock for settlement of bridge note	—	—		54,298	—		3,333				3,333
Issuance of common stock for reverse recapitalization expenses	—	—		30,542	—		1,875				1,875
Issuance of common stock to Vallon stockholders in reverse recapitalization	—	—		448,667	—		(2,940)				(2,940)
Net loss	—	—							(6,746)		(6,746)
Balance, June 30, 2023	—	$	—	2,956,354	$	—	$	31,430	$	(27,392)	$	4,038

See accompanying notes to unaudited interim consolidated financial statements.

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GRI Bio, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2023		2022
Operating activities:
Net loss	$	(8,896)	$	(597)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation expense	2		1
Amortization of debt discounts and issuance costs	2,104		—
Stock-based compensation expense	26		—
Change in fair value of warrant liability	63		—
Reduction in operating right of use assets	26		23
Change in operating assets and liabilities:
Prepaid expenses and other current assets	(750)		(8)
Accounts payable	4,179		79
Accrued expenses	1,157		409
Operating lease liabilities	(30)		(23)
Cash used in operating activities	(2,119)		(116)
Investing activities:
Purchase of property and equipment	(8)		—
Cash used in investing activities	(8)		—
Financing activities:
Advances from employees	190		35
Repayment of advances from employees	(195)		—
Proceeds from issuance of common stock in pre-closing financing	12,250		—
Proceeds from issuance of bridge promissory note	1,250		—
Proceeds from warrant exercise	12		—
Net liabilities assumed in connection with reverse recapitalization	(2,939)		—
Payment of reverse recapitalization costs	(2,984)		—
Payment of deferred stock issuance costs	(517)		—
Payment of debt issuance costs	(150)		—
Cash provided by financing activities	6,917		35
Net increase (decrease) in cash and cash equivalents	4,790		(81)
Cash and cash equivalents at beginning of period	9		90
Cash and cash equivalents at end of period	$	4,799	$	9
Supplemental disclosure of non-cash financing activities:
Issuance of stock for repayment of bridge promissory note	$	3,333	$	—
Recognition of debt discount and additional paid-in-capital for issuance of warrants in connection with the   issuance of promissory notes	$	532	$	—
Issuance of stock for payment of reverse recapitalization costs	$	1,875	$	—
Issuance of warrants for payment of stock issuance costs	$	18
Merger costs included in accounts payable	$	72	$	—

See accompanying notes to unaudited interim consolidated financial statements.

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GRI Bio, Inc.

Notes to Unaudited Interim Consolidated Financial Statements

(in thousands, except share and per share data)

1.    ORGANIZATION AND DESCRIPTION OF BUSINESS

GRI Bio, Inc. (GRI or the Company), based in La Jolla, CA, was incorporated in Delaware in May 2009, which is the date of inception.

GRI is a clinical-stage biopharmaceutical company focused on discovering, developing, and commercializing innovative therapies that target serious diseases associated with dysregulated immune responses leading to inflammatory, fibrotic, and autoimmune disorders. The Company’s goal is to be an industry leader in developing therapies to treat these diseases and to improve the lives of patients suffering from such diseases. The Company’s lead product candidate, GRI-0621, is an oral inhibitor of type 1 Natural Killer T (iNKT I) cells and is being developed for the treatment of severe fibrotic lung diseases such as idiopathic pulmonary fibrosis (IPF). The Company’s product candidate portfolio also includes GRI-0803 and a proprietary library of 500+ compounds. GRI-0803, the lead molecule selected from the library, is a novel oral agonist of type 2 Natural Killer T (NKT II) cells and is being developed for the treatment of autoimmune disorders, with much of its preclinical work in Systemic Lupus Erythematosus Disease (SLE) or lupus and multiple sclerosis (MS).

Reverse Merger with Vallon Pharmaceuticals, Inc.

On April 21, 2023, the Company (formerly Vallon Pharmaceuticals, Inc.(Vallon)) consummated a merger with GRI Bio Operations, Inc. (formerly GRI Bio, Inc.) (Private GRI) pursuant to an Agreement and Plan of Merger, as amended (the Merger Agreement), by and among the Company, Private GRI and Vallon Merger Sub, Inc. (Merger Sub), a Delaware corporation and wholly-owned subsidiary of the Company (Note 4). The Merger Agreement provided for the merger of Merger Sub with and into Private GRI, with Private GRI surviving the merger as a wholly-owned subsidiary of the Company (the Merger). In connection with the closing of the Merger (the Closing), the Company amended its certificate of incorporation and bylaws to change its name from “Vallon Pharmaceuticals, Inc.” to “GRI Bio, Inc.” In addition, prior to the effective time of the Merger (the Effective Time), the Company effected a reverse stock split of the Company’s common stock at a ratio of 1 for 30 (the Reverse Stock Split). At the Effective Time, each share of Private GRI’s common stock outstanding immediately prior to the Effective Time automatically converted solely into the right to receive a number of shares of the Company's common stock equal to 0.0374 (the Exchange Ratio).

Except as otherwise indicated or as the context requires, references herein to “GRI Bio,” the “Company,” or the “Combined Company,” refer to GRI Bio, Inc. on a post-Merger basis, and references to “Private GRI” refer to the business of GRI Bio, Inc. prior to the completion of the Merger. References to “Vallon” refer to Vallon Pharmaceuticals, Inc. prior to the completion of the Merger.

Basis of Presentation

As discussed in Note 4, the Merger was accounted for as reverse recapitalization under which the historical financial statements of the Company prior to the Merger are the historical financial statements of the accounting acquirer, Private GRI. All common stock, per share and related information presented in the consolidated financial statements and notes prior to the Merger has been retroactively adjusted to reflect the Exchange Ratio and Reverse Stock Split for all periods presented, to the extent applicable.

2.    LIQUIDITY

These financial statements have been prepared on the basis that the Company is a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any significant revenues from operations since inception and does not expect to do so in the foreseeable future. The Company has incurred operating losses since its inception in 2009 and as a result has incurred $27,392 in accumulated deficit through June 30, 2023. The Company has financed its working capital requirements to date through the issuance of equity and debt securities. As of June 30, 2023, the Company had cash of approximately $4,799.

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In connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered the Equity SPA pursuant to which the Investor agreed to invest $12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI common stock immediately prior to the consummation of the Merger. Pursuant to the Equity SPA, immediately prior to the Closing, Private GRI issued 6,787,219 shares of Private GRI common stock (the Initial Shares) to the Investor and 27,148,877 shares of Private GRI common stock (the Additional Shares) into escrow with an escrow agent for net proceeds of $11,704, after deducting offering expenses of $546.

At the closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 253,842 shares of the Company’s common stock and the Additional Shares converted into an aggregate of 1,015,368 shares of the Company’s common stock. On May 8, 2023, in accordance with the terms of the Equity SPA, the Company and the Investor authorized the escrow agent to, subject to beneficial ownership limitations, disburse to the Investor all of the shares of the Company’s common stock issued in exchange for the Additional Shares.

Based on the Company’s current operating plan, the Company believes that its existing cash and cash equivalents, which include the proceeds from the Equity SPA, will be sufficient to fund its operating expenses and capital expenditure requirements for twelve months from the date of the Merger (Note 4), not including the exercise of the Series T Warrants (the Series T Warrant Exercises).

The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its business activities, including its research and development program. The Company intends to raise capital through additional issuances of common stock and/or short-term or long-term notes, but there can be no assurances any such financing will be available when needed or that the Company’s research and development efforts will be successful. If the Company is not able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its future operating requirements, it may be forced to reduce or discontinue its operations entirely. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

3.    BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial periods and pursuant to the rules of the Securities and Exchange Commission (the SEC). Any reference in the accompanying unaudited interim financial statements to “authoritative guidance” is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB). The December 31, 2022 balance sheet was derived from the Company’s audited financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of June 30, 2023, and the results of operations and stockholders’ deficit for the three and six months ended June 30, 2023 and 2022 and cash flows for the three and six months ended June 30, 2023 and 2022. Results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2023. The unaudited interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2022, which are included as Exhibit 99.2 of Amendment No. 2 to the Current Report on Form 8-K filed with the SEC on July 6, 2023.

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates and assumptions are primarily made in relation to the valuation of share options, the embedded derivative of convertible notes, warrant issuance and subsequent revaluations, valuation allowances relating to deferred tax assets, revenue recognition, accrued expenses and estimation of the incremental borrowing rate for the finance lease. If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted

8

in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

Cash and Cash Equivalents

Cash equivalents are highly-liquid investments that are readily convertible into cash with original maturities of three months or less when purchased and as of June 30, 2023 and December 31, 2022 included investments in money market funds. The Company maintains its cash and cash equivalent balances at domestic financial institutions. Bank deposits with US banks are insured up to $250 by the Federal Deposits Insurance Corporation. The Company had an uninsured cash balances of $4,302 at June 30, 2023. The Company’s cash balance as of December 31, 2022 was fully insured.

Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820, Fair Value Measurement, (ASC 820) establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820 are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

As of June 30, 2023, the Company’s financial instruments included cash, cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and certain liability classified warrants. The carrying amounts reported in the balance sheets for cash, cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair value based on the short-term maturity of these instruments. The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. At June 30, 2023, there were no financial assets or liabilities measured at fair value on a recurring basis other than the liability classified warrants.

In May 2022, Vallon issued warrants in connection with a securities purchase agreement. Vallon evaluated the warrants in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC 815-40), and concluded that a provision in the warrants related to the reduction of the exercise price in certain circumstances precludes the warrants from being accounted for as components of equity. As a result, the warrants are recorded as a liability on the balance sheet. Vallon recorded the fair value of the warrants upon issuance using a Black-Scholes valuation model.

The Company is required to revalue the warrants at each reporting date with any changes in fair value recorded in its statement of operations. The valuation of the warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable. The change in the fair value of the Level 3 warrants liabilities is reflected in the statement of operations for the six months ended June 30, 2023.

Deferred Stock Issuance Costs

Deferred stock issuance costs represent incremental legal costs incurred that are directly attributable to proposed offerings of securities. The costs are charged against the gross proceeds of the respective offering upon closing.

Debt Discounts

The relative fair values of warrants and common shares issued and call option rights assigned in connection with principal advances under promissory notes, the increases in fair values of embedded conversion options in connection with convertible promissory note

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modifications, and the intrinsic values of non-contingent beneficial conversion features were recorded as debt discounts that are amortized as additional interest expense over the estimated terms of the notes using the effective interest method.

Debt Issuance Costs

Debt issuance costs represent incremental legal costs and other costs incurred that are directly attributable to issuing debt. The costs are included as a direct reduction of the carrying amount of the respective liability and are amortized as additional interest expense over the estimated term of the debt using the effective interest method.

Stock-Based Compensation

The Company recognizes expense for employee and non-employee stock-based compensation in accordance with ASC Topic 718, Stock-Based Compensation (ASC 718). ASC 718 requires that such transactions be accounted for using a fair value-based method. The estimated fair value of the options is amortized over the vesting period, based on the fair value of the options on the date granted, and is calculated using the Black-Scholes option-pricing model. The Company accounts for forfeitures as incurred. In considering the fair value of the underlying stock when the Company granted options, the Company considered several factors including the fair values established by market transactions. Stock option-based compensation includes estimates and judgments of when stock options might be exercised and stock price volatility. The timing of option exercises is out of the Company's control and depends upon a number of factors including the Company's market value and the financial objectives of the option holders. These estimates can have a material impact on the stock compensation expense but will have no impact on the cash flows. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period the estimates are revised. The Company uses the expected term, rather than the contractual term, for both employee and consultant options issued.

Net Loss Per Common Share

Basic and diluted net loss per common share are calculated by dividing the net loss by the applicable weighted-average number of common shares outstanding during the period. As the Company had a net loss in each of the three and six months ended June 30, 2023 and 2022, diluted net loss per common share is the same as basic net loss per common share for the period because the effects of potentially dilutive securities are antidilutive.

Common stock equivalents excluded from the diluted net loss per common share calculations are as follows:

	June 30,
	2023	2022
Stock options	100,459	89,472
Warrants	3,688,449	10,067
Restricted stock with repurchase rights	164,038	164,038
Stock subject to put right	—	7,816
Convertible promissory note	—	143,544
	3,952,946	414,937

Recent Accounting Pronouncements

The Company considered the applicability and impact of all ASUs issued during the quarter ended June 30, 2023 and each was determined to be either not applicable or expected to have minimal impact on these financial statements.

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4.    MERGER WITH VALLON

On April 21, 2023, pursuant to the Merger Agreement, Merger Sub was merged with and into Private GRI, with Private GRI surviving the Merger as a wholly owned subsidiary of the Company. In connection with the Closing, the Company amended its certificate of incorporation and bylaws to change its name from “Vallon Pharmaceuticals, Inc.” to “GRI Bio, Inc.”

At the Effective Time:

(a)Each share of Private GRI’s common stock outstanding immediately prior to the Effective Time, including any shares of Private GRI’s common stock issued pursuant to the Equity SPA automatically converted solely into the right to receive a number of shares of the Company’s common stock equal to the Exchange Ratio.

(b)Each option to purchase shares of Private GRI’s common stock (each, a GRI Option) outstanding and unexercised immediately prior to the Effective Time under the GRI Bio, Inc. 2015 Equity Incentive Plan (the GRI Plan), whether or not vested, converted into and became an option to purchase shares of the Company’s common stock, and the Company assumed the GRI Plan and each such GRI Option in accordance with the terms of the GRI Plan (the Assumed Options). The number of shares of he Company’s common stock subject to each Assumed Option was determined by multiplying (i) the number of shares of Private GRI’s common stock that were subject to such GRI Option, as in effect immediately prior to the Effective Time, by (ii) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of he Company’s common stock. The per share exercise price for the he Company’s common stock issuable upon exercise of each Assumed Option was determined by dividing (A) the per share exercise price of such Assumed Option, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio and rounding the resulting per share exercise price up to the nearest whole cent. Any restriction on the exercise of any Assumed Option continued in full force and effect and the term, exercisability, vesting schedule, and any other provisions of such Assumed Option otherwise remained unchanged.

(c)Each warrant to purchase shares of Private GRI’s common stock outstanding immediately prior to the Effective Time other than the Bridge Warrants (as defined below) (the GRI Warrants), was assumed by the Company and converted into a warrant to purchase shares of the Company’s common stock (the Assumed Warrants) and thereafter (i) each Assumed Warrant became exercisable solely for shares of the Company’s common stock; (ii) the number of shares of the Company’s common stock subject to each Assumed Warrant was determined by multiplying (A) the number of shares of Private GRI’s common stock that were subject to such GRI Warrant, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of the Company’s common stock; (iii) the per share exercise price for shares of the Company’s common stock issuable upon exercise of each Assumed Warrant was determined by dividing (A) the exercise price per share of Private GRI’s common stock subject to such GRI Warrant, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio, and rounding the resulting exercise price up to the nearest whole cent.

(d)The Bridge Warrants (Note 8) were exchanged for warrants (the Exchange Warrants) to purchase an aggregate of 421,589 shares of the Company’s common stock. The Exchange Warrants contain substantively similar terms to the Bridge Warrants, and have an initial exercise price equal to $14.73 per share.

(e)All rights with respect to Private GRI restricted stock awards were assumed by the Company and converted into Company restricted stock awards with the number of shares subject to each restricted stock award multiplied by the Exchange Ratio and rounding the resulting number down to the nearest whole number of shares of the Company’s common stock. The term, exercisability, vesting schedule and other provisions of the Private GRI restricted stock awards otherwise remained unchanged.

The Merger is accounted for as a reverse recapitalization under U.S. GAAP because the primary assets of Vallon were cash and cash equivalents. For accounting purposes, GRI has been determined to be the accounting acquirer based upon the terms of the Merger and other factors including: (i) the equity holders of Private GRI immediately prior to the Merger owned, or held rights to acquire, in the aggregate approximately 85% of the outstanding shares of the Company’s common stock and the Company’s stockholders immediately prior to the Merger owned approximately 15% of the outstanding shares of the Company’s common stock (ii) Private GRI holds the majority (4 out of 5) of board seats of the combined company, and (iii) Private GRI’s management holds the majority of

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key positions in the management of the combined company. Immediately after the Merger, there were 2,956,354 shares of the Company’s common stock outstanding.

The following table shows the net liabilities assumed in the Merger:

	April 21, 2023
Cash and cash equivalents	$	941
Prepaid and other assets	310
Accounts payable and accrued expenses	(4,190)
Total net liabilities assumed	(2,939)
Plus: Transaction costs	(2,984)
Total net liabilities assumed plus transaction costs	$	(5,923)

In addition to the transactions costs noted above, at the Effective Time, 30,542 shares of the Company’s common stock were issued to Private GRI’s financial advisor for services related to the Merger.

5.    FAIR VALUE MEASUREMENTS

The Company applies the guidance in ASC 820 to account for financial assets and liabilities measured on a recurring basis. Fair value is measured as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value measurements be classified and disclosed in one of the following 3 categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. There were no transfers between Level 1, 2 and 3 during the six months ended June 30, 2023.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2023:

	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Liabilities:
Warrant liability	$	—	$	—	$	63
Total liabilities	$	—	$	—	$	63

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The following table presents the changes is the fair value of the Level 3 liability:

	Warrant Liability
Fair value as of December 31, 2022	$	185
Change in valuation	(122)
Fair value as of June 30, 2023	$	63

The Black-Scholes valuation model was used to estimate the fair value of the warrants with the following weighted-average assumptions:

	June 30, 2023	December 31, 2022
Volatility	167.1 %	139.9 %
Expected term in years	2.5	2.5
Dividend rate	0.0 %	0.0 %
Risk-free interest rate	4.68 %	4.32 %

6.    PROPERTY AND EQUIPMENT

	June 30, 2023		December 31, 2022
Computer equipment	$	21	$	13
Furniture and fixtures	12		13
	33		26
Accumulated depreciation	(24)		(22)
	$	9	$	4

Depreciation expense related to property and equipment was $2 and $1 for the six months ended June 30, 2023 and 2022, respectively.

7.    ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30, 2023		December 31, 2022
Research and development	$	143	$	—
General and administrative	188		—
Payroll and related	862		36
Total accrued expenses	$	1,193	$	36

8.    PROMISSORY NOTES

Bridge Financing

In connection with signing the Merger Agreement, Private GRI entered into a Securities Purchase Agreement, dated as of December 13, 2022 (Bridge SPA), with Altium Growth Fund, LP (the Investor), pursuant to which Private GRI issued senior secured promissory notes (Bridge Notes) in the aggregate principal amount of $3,333, in exchange for an aggregate purchase price of $2,500.

The Bridge Notes were issued in two closings: (i) the first closing for $1,667 in aggregate principal amount (in exchange for an aggregate purchase price of $1,250) closed on December 14, 2022; and (ii) the second closing for $1,667 in aggregate principal amount (in exchange for an aggregate purchase price of $1,250) closed on March 9, 2023. The Bridge Notes were secured by a lien on all of the Company’s assets.

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In addition, upon the funding of each tranche, the Investor received warrants to purchase an aggregate of 1,252,490 shares of the Company’s common stock (the Bridge Warrants). The Bridge Warrants had an exercise price of $1.33 per share, were exercisable at any time on or after the applicable issuance date and had a term of 60 months from the date all shares underlying the Bridge Warrants were freely tradable.

The $1,250 of proceeds from the first closing were allocated to the Bridge Notes and Bridge Warrants based on their relative fair values as of the commitment date, resulting in an allocation of $679 and $571, respectively. The $1,250 of proceeds from the second closing were allocated to the Bridge Notes and Bridge Warrants based on their relative fair values as of the commitment date, resulting in an allocation of $718 and $532, respectively.

In addition to the Bridge SPA, and also in connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered into the Equity SPA (Note 9) pursuant to which the Investor agreed to invest $12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI’s common stock immediately prior to the consummation of the Merger.

On April 21, 2023, the Company completed the Merger and the outstanding principal and accrued interest on the Bridge Notes was cancelled and the Bridge Warrants were exchanged for the Exchange Warrants. The Exchange Warrants contain substantively similar terms to the Bridge Warrants, and have an initial exercise price equal to $14.73 per share subject to adjustments for splits and recapitalization events.

The Bridge Notes were accounted for as share-settled debt under the accounting guidance in ASC 835-30 and, as such, the initial net carrying amounts were accreted to the redemption amounts using the effective interest method. The Company incurred debt issuance costs of $205 during the year ended December 31, 2022 and $90 during the six months ended June 30, 2023 related to its issuance of debt under the Bridge SPA. Unamortized debt discounts and debt issuance costs totaled $1,065 as of December 31, 2022. Interest expense stemming from amortization of debt discounts and issuance costs was $1,161 and $2,104 for the three and six months ended June 30, 2023, respectively.

TEP Note

In November 2018, Private GRI and TEP Biotech, LLC (TEP) entered into a convertible note and warrant purchase agreement pursuant to which TEP agreed to fund up to $5,000 to Private GRI in exchange for a convertible promissory note (the TEP Note) and a warrant to purchase up to 25,245 shares of Private GRI’s common stock at an exercise price of $0.27 per share. The TEP Note was secured by Private GRI’s assets and accrued simple interest on the outstanding principal balance at a rate of 12% per annum. The total outstanding principal and accrued interest balance was initially due on the earlier of Private GRI’s next financing, as defined, and May 2, 2020. The initial $2,500 tranche under the TEP Note was funded upon execution of the agreement in November 2018.

In December 2019, Private GRI and TEP amended the TEP Note. In lieu of TEP funding the second $2,500 tranche, TEP made a first additional advance of $500 to Private GRI in exchange for a convertible promissory note, a warrant to purchase up to 17,269 shares of Private GRI’s common stock at an exercise price of $0.27 per share, and the assignment of Private GRI’s rights under a certain call option agreement. The call option agreement, which was entered into in 2015, provided Private GRI with the right to repurchase up to 39,720 shares of Private GRI’s common stock held by the counterparty for $26.74 per share at any time before April 1, 2025.

In July 2020, the TEP Note maturity date was extended to August 31, 2020, and in March 2021, TEP agreed to forbear on its available right to exercise remedies on account of Private GRI’s failure to pay the past due principal and accrued interest balance until October 31, 2021.

In May 2021, Private GRI and TEP amended the TEP Note, and TEP agreed to make a second additional advance of $500 to Private GRI in exchange for a convertible promissory note with separate, modified conversion options.

In July 2022, Private GRI and TEP further amended the TEP Note, and TEP agreed to make a third additional advance of $125 to Private GRI in exchange for a convertible promissory note and a warrant to purchase up to 1,169 shares of Private GRI’s common stock at an exercise price of $0.27 per share.

In October 2022, Private GRI and TEP entered into a conversion agreement pursuant to which, effective upon the full execution of the Merger Agreement (Note 4), $3,500 of outstanding principal under the TEP Note together with $650 of related accrued interest was to

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automatically convert into 155,210 shares of Private GRI’s common stock at a conversion price of $26.74 per share. Further, upon the closing of the first tranche of the Bridge Notes, Private GRI was to repay, in cash, the $125 third additional advance under the TEP Note along with the $15 of related accrued interest. Upon issuance of the 155,210 conversion shares and payment of the $140 principal and accrued interest balance, Private GRI would fully satisfy all of its obligations under the TEP Note.

In December 2022, upon the full execution of the Merger Agreement and the closing of the first tranche of the Bridge Notes Private GRI issued the 155,210 conversion shares and paid the $140 principal and accrued interest balance as per the terms of the conversion agreement. The share numbers and exercise or conversion prices in this section of Note 8 entitled “TEP Note” reflect the Exchange Ratio retroactively.

As part of the conversion, the $4,150 of converted principal and accrued interest, along with $863 of related forfeited accrued interest through the conversion date, were credited to stockholders’ deficit. Interest expense recognized on the TEP Note was $107 and $210 for the three and six months ended June 30, 2022.

9.    STOCKHOLDERS’ EQUITY

Common Stock

In connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered the Equity SPA pursuant to which the Investor agreed to invest $12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI’s common stock immediately prior to the consummation of the Merger. Pursuant to the Equity SPA, immediately prior to the Closing, Private GRI issued 6,787,219 shares of Private GRI’s common stock (the Initial Shares) to the Investor and 27,148,877 shares of Private GRI’s common stock (the Additional Shares) into escrow with an escrow agent for net proceeds of $11,704, after deducting offering expenses of $546.

At the closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 253,842 shares of the Company’s common stock and the Additional Shares converted into an aggregate of 1,015,368 shares of the Company’s common stock. On May 8, 2023, in accordance with the terms of the Equity SPA, the Company and the Investor authorized the escrow agent to, subject to beneficial ownership limitations, disburse to the Investor all of the shares of the Company’s common stock issued in exchange for the Additional Shares.

Redeemable Common Stock

In November 2018, Private GRI entered into an agreement with a stockholder pursuant to which the stockholder had the right to require Private GRI to purchase all or a portion of 7,816 shares of Private GRI’s common stock held by the stockholder for $15.88 per share (the Put Right). The Put Right was exercisable (i) for a period commencing thirty days prior to the day Private GRI completed an equity or debt financing and ending fifteen business days thereafter, or (ii) at any time following a breach of the agreement by Private GRI.

Management assessed the Put Right and determined that (i) it was not freestanding and, therefore, was not required to be classified as a liability and (ii) it could be exercised by the stockholder at any time, which was not within Private GRI’s control. Therefore, the common shares subject to the Put Right were classified in mezzanine equity. In December 2022, the stockholder exercised the Put Right and Private GRI redeemed the 7,816 shares of Private GRI’s common stock for $124 ($15.88 per share). The redeemed shares were retired by Private GRI. The share numbers and exercise or conversion prices in this section of Note 9 entitled “Redeemable Common Stock” reflect the Exchange Ratio retroactively.

Common Stock Warrants

Pursuant to the Equity SPA, on May 8, 2023, the Company issued to the Investor (i) Series A-1 Warrants to purchase 1,269,210 shares of the Company’s common stock at an exercise price of $13.51, (ii) Series A-2 Warrants to purchase 1,142,289 shares of the Company’s common stock at an exercise price of $14.74 , and (iii) Series T Warrants to purchase (x) 814,467 shares of the Company’s common stock at an exercise price of $12.28 and (y) upon exercise of the Series T Warrants, 814,467 additional Series

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A-1 Warrants and Series A-2 Warrants, each to purchase 814,467 shares of the Company’s common stock at an exercise price of $13.51 and $14.74, respectively (collectively, the Equity Warrants).

The Series A-1 Warrants have a term of 60 months from the date all shares underlying the Series A-1 Warrants are freely tradable. The A-2 warrants have a 2-year term and expire in June 2025. Series T Warrants have a term of 24 months from the date all shares underlying Series T Warrants are freely tradable. The Company may force the exercise of the Series T Warrants subject to the satisfaction of certain equity conditions. The Equity Warrants include certain contingent cashless exercise features and contain certain other rights with regard to asset distributions and fundamental transactions. The exercise price of the Series A-1 Warrants is subject to adjustment for certain dilutive issuances, and all of the Equity Warrants are subject to standard antidilution adjustments. All of the Equity Warrants were outstanding as of June 30, 2023. The Equity Warrants were classified as equity and the allocated fair value of $5,675 is included in additional paid in capital.

Pursuant to the Bridge SPA, upon the funding of each tranche of the Bridge Note, the Investor received the Bridge Warrants. The Bridge Warrants had an exercise price of $1.33 per share, were exercisable at any time on or after the applicable issuance date and had a term of 60 months from the date all shares underlying the Bridge Warrants are freely tradable. Upon the completion of the Merger the Bridge Warrants were exchanged for the Exchange Warrants to purchase an aggregate of 421,589 shares of the Company’s common stock. The Exchange Warrants contain substantively similar terms to the Bridge Warrants, and have an initial exercise price equal to $14.73 per share subject to adjustments for splits and recapitalization events. All of the Bridge Warrants were outstanding as of June 30, 2023. The Bridge Warrants were classified as equity and the allocated fair value of $2,860 is included in additional paid in capital.

In connection with the Closing, Private GRI granted its financial advisor warrants (the Advisor Warrants) to purchase shares of Private GRI’s common stock, which, at the Effective Time, became exercisable for an aggregate of 2,402 shares of the Company’s common stock at an exercise price of $61.39 per share. The Advisor Warrants have a five-year term. All of the Advisor Warrants were outstanding as of June 30, 2023. The Advisor Warrants were classified as equity and the fair value of $18 is included in additional paid in capital.

The Black-Scholes option-pricing model was used to estimate the fair value of the Equity Warrants, the Exchange Warrants and the Advisor Warrants with the following weighted-average assumptions:

Volatility	167.6 %
Expected term in years	1.69
Dividend rate	0.0 %
Risk-free interest rate	4.37 %

As of June 30, 2023, the Company had the following warrants outstanding to purchase common stock.

Number of Shares	Exercise Price per Share	Expiration Date
8,629	$34.76	November 2023
1,438	$34.76	December 2023
1,142,289	$14.74	June 2025
3,758	$300.00	February 2026
24,667	$28.15	May 2027
1,168	$0.01	July 2027
2,402	$61.39	April 2028
421,590	$14.73	60 months after registration date
1,269,210	$13.51	60 months after registration date
814,467	$12.28	24 months after registration date

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10.    STOCK-BASED COMPENSATION

2015 Equity Incentive Plan

Private GRI adopted the GRI Bio, Inc. 2015 Equity Incentive Plan, as amended (the Private GRI Plan), that provided Private GRI with the ability to grant stock options, restricted stock awards and other equity-based awards to employees, directors, and consultants. Stock options granted under the Private GRI Plan generally had a contractual life of up to 10 years. Upon completion of the Merger, the Company assumed the Private GRI Plan and the outstanding and unexercised options issued thereunder, and ceased granting awards under the Private GRI Plan.

Amended and Restated 2018 Equity Incentive Plan

On April 21, 2023, the stockholders of the Company approved the Amended and Restated GRI Bio, Inc. 2018 Equity Incentive Plan, formerly the Vallon Pharmaceuticals, Inc. 2018 Equity Incentive Plan (the A&R 2018 Plan). The A&R 2018 Plan had previously been approved by the Company’s board of directors, subject to stockholder approval. The A&R 2018 Plan became effective on April 21, 2023, with the stockholders approving the amendment to the A&R 2018 Plan to, among other things, (i) to increase the aggregate number of shares by 168,905 shares to 216,666 shares of the Company’s common stock for issuance as awards under the A&R 2018 Plan, (ii) to extend the term of the A&R 2018 Plan through January 1, 2033, (iii) to prohibit any action that would be treated as a “repricing” of an award without further approval by the stockholders of Company, and (iv) to revise the limits on awards to non-employee directors.

The A&R 2018 Plan provides the Company with the ability to grant stock options, restricted stock and other equity-based awards to employees, directors and consultants. Stock options granted by Vallon generally have a contractual life of up to 10 years. As of June 30, 2023, 100,459 shares of the Company's common stock were authorized to be issued under the A&R 2018 Plan, and 116,207 shares were reserved for future awards under the A&R 2018 Plan.

The Company recorded stock-based compensation related to stock options issued under the A&R 2018 Plan in the following expense categories of its accompanying statements of operations for the three and six months ended June 30, 2023 and 2022:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	—	$	—	$	—	$	—
General and administrative	13		—		26		—
Total	$	13	$	—	$	26	$	—

The Company measures equity-based awards granted to employees, and non-employees based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period or performance-based period, which is generally the vesting period of the respective award. The measurement date for service-based equity awards is the date of grant, and equity-based compensation costs are recognized as expense over the requisite service period, which is the vesting period for certain

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performance-based awards. The Company records expense for performance-based awards if it concludes that it is probable that the performance condition will be achieved.

The table below represents the activity of stock options granted to employees and non-employees for the six months ended June 30, 2023:

	Number of options	Weighted average exercise price		Weighted average remaining contractual term (years)
Outstanding at December 31, 2022	112,612	$	39.77	4.71
Granted	—	—
Exercised	—	—
Forfeited/Cancelled	(12,153)	$	130.84
Outstanding at June 30, 2023	100,459	$	28.75	4.73
Exercisable at June 30, 2023	100,459	$	28.75	4.73

The Black-Scholes option-pricing model was used to estimate the grant date fair value of each stock option grant at the time of grant using the following weighted-average assumptions:

	For the Six Months Ended June 30, 2022
Volatility	90.39		%
Expected term in years	5.98
Dividend rate	0.00		%
Risk-free interest rate	2.00		%
Fair value of option on grant date	$	3.86

No options were granted during the six months ended June 30, 2023.

As of June 30, 2023, the unrecognized compensation cost related to unvested stock options expected to vest was $280. This unrecognized compensation is expected to be recognized over a weighted-average amortization period of 3.35 years.

11.    COMMITMENTS AND CONTINGENCIES

Employment Agreements

The Company has entered into employment contracts with its officers that provide for severance and continuation of benefits in the event of termination of employment by the Company without cause or by the employee for good reason. In addition, in the event of termination of employment following a change in control, the vesting of certain equity awards may be accelerated.

Separation and Release Agreement

In connection with the resignation of David Baker, the Company’s Former Chief Executive Officer, pursuant to the Merger, the Company and Mr. Baker entered into a Separation and Release Agreement on April 21, 2023 (the Separation Agreement). Pursuant to the terms of the Separation Agreement and his employment agreement, Mr. Baker will receive continuation of his current salary and certain COBRA benefits for 18 months payable in accordance with the Company’s payroll practices. Mr. Baker also received a lump sum payment equal to 150% of his target bonus and agreed to reduce amounts payable with respect to certain future milestone payments.

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Company’s financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q, the audited financial statements (and notes thereto, management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2022, included in Vallon’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on February 24, 2023, and Private GRI’s financial statements and related notes which are filed as Exhibit 99.1 of Amendment No. 2 to the Current Report on Form 8-K filed with the SEC on July 6, 2023. Some of the information contained in this discussion and analysis, including information with respect to GRI’s plans and strategy for its business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set out under the section entitled “Risk Factors” which is included in the Quarterly Report on Form 10-Q filed by the Combined Company, GRI’s actual results could differ materially from the results described in or implied by these forward-looking statements.

Except as otherwise indicated, references herein to “GRI Bio,” the “Company,” or the “Combined Company,” refer to GRI Bio, Inc. on a post-Merger basis, and references to “Private GRI” refer to the business of GRI Bio, Inc. prior to the completion of the Merger. References to “Vallon” refer to Vallon Pharmaceuticals, Inc. prior to the completion of the Merger.

Overview

We are a clinical-stage biopharmaceutical company focused on discovering, developing, and commercializing innovative therapies that target serious diseases associated with dysregulated immune responses leading to inflammatory, fibrotic, and autoimmune disorders. Our goal is to be an industry leader in developing therapies to treat these diseases and to improve the lives of patients suffering from such diseases.

Our lead product candidate, GRI-0621, is an oral inhibitor of type 1 Natural Killer T (iNKT) cells. GRI-0621 is also an oral formulation of tazarotene, a synthetic retinoid acid receptor (RAR)-beta and gamma selective agonist, that is approved in the United States for topical treatment of psoriasis and acne. As of March 31, 2023, it has been evaluated in over 1,700 patients as an oral product for up to 52-weeks. We are developing GRI-0621 for the treatment of severe fibrotic lung diseases such as idiopathic pulmonary fibrosis (IPF), a life-threatening progressive fibrotic disease of the lung that affects approximately 140,000 people in the United States, with up to 40,000 new cases per year in the United States and some estimate that IPF affects 3 million globally. While there are currently two approved therapies for the treatment of lung fibrosis, neither has been associated with improvements in overall survival, and both therapies have been associated with significant side effects leading to poor therapeutic adherence. In preliminary data from our trials to date with GRI-0621, and earlier trials with oral tazarotene, we have observed GRI-0621 to be well-tolerated and to inhibit iNKT cell activity in subjects. We and others have shown that activated iNKT are upregulated in IPF, primary sclerosing cholangitis (PSC), non-alcoholic steatohepatitis (NASH), alcoholic liver disease (ALD), Systemic Lupus Erythematosus Disease (SLE), multiple sclerosis (MS), ulcerative colitis (UC) patients as well as other indications. In these patients activated iNKT cells are correlated with more severe disease. We are initiating a Phase 2a trial in 36 IPF patients in the second half of 2023 and expects topline results from this trial to be available in the second half of 2024.

Our product candidate portfolio also includes GRI-0803 and a proprietary library of 500+ compounds. GRI-0803, the lead molecule selected from the library, is a novel oral agonist of type 2 Natural Killer T (type 2 NKT) cells. We are developing GRI-0803 for the treatment of autoimmune disorders, with much of our preclinical work in SLE or lupus and MS. In lupus, the immune system mistakenly attacks its own healthy tissues, especially joints and skin, but can affect almost every organ and tissue of the body. The condition can be fatal, and often causes debilitating bouts of fatigue and pain that prevent nearly half of adult patients from working. Lupus affects between 160,000 - 200,000 patients in the United States, with around 80,000 – 100,000 patients in the United States suffering from kidney nephritis, one of the most serious manifestations of SLE, typically within five years of diagnosis. There is no cure for lupus, but medical interventions and lifestyle changes can help control it. SLE treatment consists primarily of immunosuppressive drugs that inhibit the activity of the immune system. Only two drugs have been approved for lupus in the past 50 years, and new treatment options are sorely needed. Subject to IND clearance, we intend to evaluate GRI-0803 in a Phase 1a and 1b trial initially targeting SLE. We expect to file an IND with respect to this Phase 1a and 1b trial in the first half of 2024. We will continue to evaluate indications to select the best fit for further development of the program, but our initial focus is on lupus.

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Merger with Vallon Pharmaceuticals, Inc.

On April 21, 2023, the Company (formerly Vallon Pharmaceuticals, Inc.) consummated a merger with GRI Bio Operations, Inc. (formerly GRI Bio, Inc.) (Private GRI) pursuant to an Agreement and Plan of Merger, as amended (the Merger Agreement), by and among the Company, Private GRI and Vallon Merger Sub, Inc. (Merger Sub), a Delaware corporation and wholly-owned subsidiary of the Company. The Merger Agreement provided for the merger of Merger Sub with and into Private GRI, with Private GRI continuing as a wholly-owned subsidiary of the Company and the surviving corporation of the merger (the Merger). In connection with the closing of the Merger (the Closing), the Company amended its certificate of incorporation and bylaws to change its name from “Vallon Pharmaceuticals, Inc.” to “GRI Bio, Inc.”

In connection with signing the Merger Agreement, Private GRI entered into a Securities Purchase Agreement, dated as of December 13, 2022 (the Bridge SPA), with Altium Growth Fund, LP (the Investor), pursuant to which Private GRI issued senior secured promissory notes (the Bridge Notes) in the aggregate principal amount of $3.3 million, in exchange for an aggregate purchase price of $2.5 million. The Bridge Notes were issued in two closings: (i) the first closing for $1.67 million in aggregate principal amount (in exchange for an aggregate purchase price of $1.25 million) closed on December 14, 2022; and (ii) the second closing for $1.67 million in aggregate principal amount (in exchange for an aggregate purchase price of $1.25 million) closed on March 9, 2023. In addition, upon the funding of each tranche, the Investor received warrants to purchase an aggregate of 1,252,490 shares of Private GRI’s common stock (the Bridge Warrants).

In addition to the Bridge SPA, and also in connection with signing the Merger Agreement, the Company, Private GRI and the Investor entered into a Securities Purchase Agreement on December 13, 2022 (the Equity SPA) pursuant to which the Investor agreed to invest $12.25 million in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI’s common stock immediately prior to the consummation of the Merger. Pursuant to the Equity SPA, immediately prior to the Closing, Private GRI issued 6,787,219 shares of Private GRI’s common stock (the Initial Shares) to the Investor and 27,148,877 shares of Company common stock (the Additional Shares) into escrow with an escrow agent. At the closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 253,842 shares of the Company’s common stock and the Additional Shares converted into an aggregate of 1,015,368 shares of the Company’s common stock . On May 8, 2023, in accordance with the terms of the Equity SPA, the Company and the Investor authorized the escrow agent to, subject to beneficial ownership limitations, disburse to the Investor all of the shares of the Company’s common stock issued in exchange for the Additional Shares.

Pursuant to the Equity SPA, on May 8, 2023, the Company issued to the Investor (i) Series A-1 Warrants to purchase 1,269,210 shares of the Company’s common stock with an initial exercise price of $13.51 per share, (ii) Series A-2 Warrants to purchase 1,142,289 shares of the Company’s common stock with an initial exercise price of $14.74 per share, and (iii) Series T Warrants to purchase at an exercise price of $12.28 per share (x) 814,467 shares of the Company’s common stock and (y) upon exercise of the Series T Warrants, an additional amount of Series A-1 Warrants and Series A-2 Warrants, each to purchase 814,467 shares of the Company’s common stock (collectively, the Equity Warrants).

Upon the completion of the Merger, the outstanding principal and accrued interest on the Bridge Notes was cancelled and the Bridge Warrants were exchanged for warrants (the Exchange Warrants) to purchase an aggregate of 421,589 shares of the Company’s common stock .

Financial Operations Overview

Research and Development Expenses

Research and development expenses include personnel costs associated with research and development activities, including third party contractors to perform research, conduct clinical trials and manufacture drug supplies and materials.

Our research and development expenses have consisted primarily of costs related to our development program for our lead product candidate GRI-0621. These expenses include:

•employee-related expenses, such as salaries, bonuses and benefits, consultant-related expenses such as consultant fees and bonuses, stock-based compensation, overhead-related expenses and travel-related expenses for our research and development personnel; and

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•expenses incurred under agreements with CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities as well as consultants that support the implementation of our clinical and non-clinical studies.

Although our direct research and development expenses are tracked by product candidate, we do not allocate employee costs and costs associated with our discovery efforts, laboratory supplies and facilities, including other indirect costs, to specific product candidates as these costs are deployed across multiple programs. We expect our research and development expenses to increase over the next several years as we conduct our planned clinical and preclinical activities for our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation and consulting related expenses for executives and other administrative personnel, professional fees and other corporate expenses, including legal and accounting fees, travel expenses, facilities-related expenses, and consulting services relating to corporate matters.

We expect our general and administrative expenses will increase substantially as we incur costs associated with being a public company, including expenses related to services associated with maintaining compliance with The Nasdaq Capital Market and SEC requirements, directors’ and officers’ insurance, legal and accounting costs and investor relations costs, as well as an increase in personnel expenses as we hire additional personnel.

Warrant Liability

In May 2022, Vallon issued warrants in connection with a securities purchase agreement. Vallon evaluated the warrants in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC 815-40), and concluded that a provision in the warrants related to the reduction of the exercise price in certain circumstances precludes the warrants from being accounted for as components of equity. As a result, the warrants were measured the fair value upon issuance using a Black-Scholes valuation model and are recorded as a liability on the balance sheet. The fair value of the warrants is measured at each reporting date and changes in fair value are recognized in the consolidated statements of operations in the period of change.

Interest Expense, net

Interest expense consists of amortization of debt discounts, debt issuance costs and interest expense related to the TEP Notes and the Bridge Notes.

Results of Operations

Comparison of the Three Months Ended June 30, 2023 and 2022

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

	Three Months Ended June 30,
	2023		2022
Operating expenses:
Research and development	$	880	$	59
General and administrative	5,054		130
Total operating expenses	5,934		189
Loss from operations	(5,934)		(189)
Change in fair value of warrant liability	122		—
Interest expense, net	(934)		(106)
Net loss	$	(6,746)	$	(295)

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Research and Development Expenses

Research and development expenses were $0.9 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively. The $0.8 million increase in research and development expenses was primarily due to increases of $0.4 million in expenses related to the development program of GRI-0621, $0.2 million in consulting fees and $0.2 million in personnel expenses.

General and Administrative Expenses

General and administrative expenses were $5.1 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively. The $5.0 million increase was primarily related to increased costs for professional fees, including legal, accounting and investment banking fees associated with the Merger of $3.8 million, personnel expenses of $0.8 million as a result of increased headcount, and increases in consulting, administrative and insurance expenses of $0.3 million as a result of operating as a public company.

Change in Fair Value of Warrant Liability

The change in fair value of $0.1 million represents a decrease in the fair value of the warrants outstanding during the three months ended June 30, 2023.

Interest Expense, net

Interest expense, net, was $0.9 million and $0.1 million for the three months ended June 30, 2023 and 2022, respectively and related to the outstanding promissory notes. The increase in interest expense, net, was due to interest related to the Bridge Notes.

Comparison of the Six Months Ended June 30, 2023 and 2022

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

	Six Months Ended June 30,
	2023		2022
Operating expenses:
Research and development	$	997	$	119
General and administrative	5,926		268
Total operating expenses	6,923		387
Loss from operations	(6,923)		(387)
Change in fair value of warrant liability	122		—
Interest expense, net	(2,095)		(210)
Net loss	$	(8,896)	$	(597)

Research and Development Expenses

Research and development expenses were $1.0 million and $0.1 million for the six months ended June 30, 2023 and 2022, respectively. The $0.9 million increase in research and development expenses was primarily due to increases of $0.4 million in expenses related to the development program of GRI-0621, $0.3 million in consulting fees and $0.2 million in personnel expenses.

General and Administrative Expenses

General and administrative expenses were $5.9 million and $0.3 million for the six months ended June 30, 2023 and 2022, respectively. The $5.6 million increase was primarily related to increased costs for professional fees, including legal, accounting and investment banking fees associated with the Merger of $4.5 million, personnel expenses of $0.8 million as a result of increased headcount, and increases in consulting, administrative and insurance expenses of $0.3 million as a result of operating as a public company.

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Change in Fair Value of Warrant Liability

The change in fair value of $0.1 million represents an increase in the fair value of the warrants outstanding during the six months ended June 30, 2023.

Interest Expense, net

Interest expense, net, was $2.1 million and $0.2 million for the six months ended June 30, 2023 and 2022, respectively, and related to the outstanding promissory notes. The increase in interest expense, net, was due to interest related to the Bridge Notes.

Liquidity and Capital Resources

Since inception, we have incurred losses and expect to continue to incur losses for the foreseeable future. We incurred net losses of $8.9 million and $0.6 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, we had an accumulated deficit of $27.4 million.

We have financed our working capital requirements to date through the issuance of common stock, warrants, convertible notes and promissory notes. As of June 30, 2023, we had $4.8 million in cash.

The following table summarizes our cash flows for the periods indicated (in thousands):

	Six Months Ended June 30,
	2023		2022
Net cash provided by (used in):
Operating activities	$	(2,119)	$	(116)
Investing activities	(8)		—
Financing activities	6,917		35
Net increase (decrease) in cash and cash equivalents	$	4,790	$	(81)

Cash Flows from Operating Activities

For the six months ended June 30, 2023 and 2022, $2.1 million was provided by and $0.1 million was used in operating activities, respectively. The $2.0 million increase was primarily due to a $8.3 million increase in net loss and a $0.7 million decrease in prepaid and other assets, offset by an increase in non-cash adjustments of $2.1 million related to the amortization of debt discounts and debt issuance costs and $0.1 million related to the revaluation of the warrant liability, as well as a $4.1 million increase in accounts payable and a $0.7 million increase in accrued expenses.

Cash Flows from Investing Activities

Net cash used in investing activities was $8 thousand for the six months ended June 30, 2023, which was related to the purchase of computer equipment.

Cash Flows from Financing Activities

Net cash provided by financing activities was $6.9 million for the six months ended June 30, 2023. The $6.9 million increase was primarily due to $12.3 million of proceeds from the Equity SPA and $1.3 million of proceeds from the funding of the second tranche of the Bridge Notes. The increase was offset by $2.9 million of net liabilities assumed in the connection with the Merger, $3.0 million in costs associated with the Merger, the payment of $0.5 million of debt issuance costs related to the Bridge Notes and $0.1 million of stock issuance costs related the Equity SPA.

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Equity Securities Purchase Agreement

In connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered the Equity SPA pursuant to which the Investor agreed to invest $12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI’s common stock immediately prior to the consummation of the Merger. Pursuant to the Equity SPA, immediately prior to the Closing, Private GRI issued 6,787,219 shares of Private GRI’s common stock (the Initial Shares) to the Investor and 27,148,877 shares of Private GRI’s common stock (the Additional Shares) into escrow with an escrow agent for net proceeds of $11,704, after deducting offering expenses of $546.

At the closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 253,842 shares of the Company’s common stock and the Additional Shares converted into an aggregate of 1,015,368 shares of the Company’s common stock . On May 8, 2023, in accordance with the terms of the Equity SPA, we, along with the Investor, authorized the escrow agent to, subject to beneficial ownership limitations, disburse to the Investor all of the shares of the Company’s common stock issued in exchange for the Additional Shares.

Future Funding Requirements

Our net losses were $8.9 million and $0.6 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, we had $4.8 million in cash and an accumulated deficit of $27.4 million. We expect to devote substantial financial resources to our planned activities, particularly as we prepare for, initiate, and conduct our planned clinical trials of GRI-0621 and GRI-0803, advance our discovery programs and continue our product development efforts. In addition, we expect to incur additional costs associated with operating as a public company.

Based on our current operating plan, we believe that our existing cash and cash equivalents, which include the proceeds from the Equity SPA, will be sufficient to fund our operating expenses and capital expenditure requirements for twelve months from the date of the Merger, not including the exercise of the Series T Warrants (the Series T Warrant Exercises).

Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to secure adequate additional funding, we will need to reevaluate our operating plans and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our technology on less favorable terms than we would otherwise choose. These actions could materially impact our business, results of operations and future prospects. In addition, attempting to secure additional financing may divert the time and attention of management from day-to-day activities and distract from our discovery and product development efforts. As a result, there is substantial doubt about our ability to continue as a going concern. We expect to continue to incur significant and increasing operating losses at least for the foreseeable future. We do not expect to generate product revenue unless and until we successfully complete development, obtain regulatory approval for, and successfully commercialize our current, or any future, product candidates.

Off-Balance Sheet Arrangements

We are not party to any off-balance sheet transactions. We have no guarantees or obligations other than those which arise out of normal business operations.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of its financial condition and results of operations is based on its unaudited interim financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed financial statements requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Management evaluates these estimates and judgments on an ongoing basis. Management bases its estimates on historical experience and on various other factors that it believes are reasonable under the circumstances. Actual results could differ from those estimates.

Our significant accounting policies are described in more detail in Note 1, “The Company and a Summary of its Significant Accounting Policies”, in the notes to its financial statements as of and for the years ended December 31, 2022 and 2021, which is Exhibit 99.2 of Amendment No. 2 to the Current Report on Form 8-K filed with the SEC on July 6, 2023.

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Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company for up to five years. For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not applicable to emerging growth companies. These exemptions include:

•reduced disclosure about our executive compensation arrangements;

•no non-binding stockholder advisory votes on executive compensation or golden parachute arrangements; and

•exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We have taken advantage of reduced reporting requirements in this report and may continue to do so until such time that we are no longer an emerging growth company. We will remain an “emerging growth company” until the earliest of (a) the last day of the fiscal year in which we have total annual gross revenues of $1.235 billion or more, (b) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the completion of the IPO, (c) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (d) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable to a smaller reporting company.

Item 4. Controls and Procedures.

Management’s Evaluation of our Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e)) of the Securities Exchange Act of 1934 (the Exchange Act)) as of June 30, 2023. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in its periodic and current reports that we file with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives. In reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Based on the evaluation of our disclosure controls and procedures as of June 30, 2023, our Chief Executive Officer and Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures, as defined above, are effective.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fiscal quarter covered by this report that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Vallon’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.

Item 2. Unregistered Sales of Securities.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

On August 10, 2023, our Compensation Committee ratified and approved, effective as of July 1, 2023, an employment agreement with Albert Agro, M.D. (the Employment Agreement), which superseded the previous consulting agreement by and between the Company and Dr. Agro, and includes the following terms:

• an annual base salary of $325,000 (the Annual Base Salary); and

• an annual target cash bonus of 35%.

The Employment Agreement also provide that if the Company terminates Dr. Agro's employment without “cause” or if Dr. Agro resigns his employment for “good reason,” each as defined in the Employment Agreement, Dr. Agro will be entitled to receive salary continuation and COBRA premium reimbursement for twelve months. In the case of a termination without cause or resignation for good reason that occurs during the period beginning upon the occurrence of a “change in control” (as defined in the Employment Agreement) and ending twelve months thereafter, (a) these severance-related periods will be increased to 18 months, (b) all unvested equity awards will automatically accelerate, (c) all vested stock options will remain exercisable for the full duration of their term, and (d) Dr. Agro will receive an additional payment equivalent to 1.5 times his Annual Base Salary.

The foregoing description of the Employment Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the text of the Employment Agreement that is filed herewith as Exhibit 10.6.

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Item 6. Exhibits.

Exhibit Number	Description	Filed Herewith	Form	Incorporated by Reference File No.	Date Filed
3.1	Certificate of Incorporation of GRI Bio, Inc., as amended.		8-K	001-40034	4/21/2023
3.2	Amended and Restated Bylaws.		8-K/A	001-40034	5/26/2023
4.1#	A&R 2018 Equity Incentive Plan.		10-Q	001-40034	5/15/2023
10.1#	Employment Agreement, by and between GRI Bio, Inc. and Marc Hertz, Ph.D., dated as of February 20, 2023.		S-4/A	333-268977	2/24/2023
10.2#	Employment Agreement, by and between GRI Bio, Inc. and Leanne M. Kelly, dated as of February 20, 2023.		S-4/A	333-268977	2/24/2023
10.3#	Employment Agreement, by and between GRI Bio, Inc. and Vipin Kumar Chaturvedi dated as of February 20, 2023.		S-4/A	333-268977	2/24/2023
10.4#	Consulting Agreement, by and between GRI Bio, Inc. and Albert Agro, Ph.D., dated as of January 9, 2023.		8-K	001-40034	4/21/2023
10.5#	Separation Agreement, by and between GRI Bio, Inc. and David Baker, dated as of April 21, 2023		8-K	001-40034	4/21/2023
10.6#	Employment Agreement, by and between GRI Bio, Inc. and Albert Agro, Ph.D., dated as of July 1, 2023.	X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1*	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101.INS	iXBRL Instance Document
101.SCH	iXBRL Taxonomy Extension Schema Document
101.CAL	iXBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	iXBRL Taxonomy Extension Definition Linkbase Document
101.LAB	iXBRL Taxonomy Extension Label Linkbase Document
101.PRE	iXBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

____________________________________

Unless otherwise indicated, exhibits are filed herewith.

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#	Indicates a management contract or any compensatory plan, contract or arrangement.
*	This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, except to the extent specifically incorporated by reference into such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GRI BIO, INC.
Date: August 14, 2023	By:	/s/ Leanne M. Kelly
		Name: Leanne M. Kelly
		Title: Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-10.6

Exhibit 10.6

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of the 1st day of July, 2023 (the “Effective Date”), between GRI Bio, Inc. (the “Company”) and Albert Agro, PhD. (“Executive”), and shall become effective on the date provided herein.

WHEREAS, the Company and Executive, in connection with the Merger, entered into a Consulting Agreement dated as of January 9, 2023 (the “Consulting Agreement”); and

WHEREAS, the Company and Executive wish to enter into this Employment Agreement that will supersede the Consulting Agreement in all respects.

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Executive agree as follows:

1.    Employment Term. The Company shall employ Executive, and Executive accepts employment with the Company, upon the terms and subject to the conditions set forth in this Agreement, for the period beginning on the Effective Date and ending on the Date of Termination (as defined in Section 4(e) of this Agreement) (the “Term”).

2.    Terms of Employment.

(a)    Position and Duties. During the Term, Executive shall be employed by the Company as Chief Medical Officer and shall have such duties, responsibilities and authorities as are customarily associated with his position and such additional duties and responsibilities consistent with his position as may, from time to time, be properly and lawfully assigned to him. Executive shall report to the Company’s Chief Executive Officer (the “CEO”). Executive shall act at all times in compliance in all respects with the policies, rules and decisions adopted from time to time by the Company and perform all of the duties and obligations required of him by this Agreement in a loyal and conscientious manner.

(b)    Engaging in Other Activities. During the Term, Executive shall devote his full time and attention to the Company and its affiliates and shall not be employed by or provide services to any other person or entity, except that Executive may devote ten percent (10%) of his working time to certain consulting projects he has disclosed to the Company, which projects are expected to be completed by December 31, 2023. During the Term, it shall not be a violation of this Agreement for Executive, subject to the requirements of Section 8 hereof, to (i) serve on civic, charitable or religious boards or engage in other activities for such organizations, (ii) with the consent of the Company’s Board of Directors (the “Board”), which consent shall not be unreasonably withheld, serve on up to one corporate board unrelated to the Company (and retain all compensation in whatever form for such service), and (iii) manage personal investments, so long as such activities (individually or in the aggregate) do not interfere with the performance of Executive's responsibilities as set forth in Sections 2(a) or 2(b) of this Agreement or Executive's fiduciary duties to the Company.

(c)    Location. Executive’s primary work location shall be from the New York City home office. Executive may be required to travel from time to time to the Company’s San Diego office, the expenses for which shall be reimbursed pursuant to Company policy.

3.    Compensation and Benefits.

(a)    Base Salary. During the Term, the Company shall pay Executive an annualized base salary (“Annual Base Salary”) of $325,000, payable in regular installments in accordance with the Company's normal payroll practices, and subject to usual payroll deductions. During

the Term, the Annual Base Salary shall be reviewed by the Board or a committee thereof at such time as the salaries of other senior executives of the Company are reviewed generally, but no less frequently than once a year. The Annual Base Salary shall not be reduced other than in connection with an across-the-board salary reduction which applies in a comparable manner to other senior executives of the Company. If so increased or reduced, then such adjusted salary will thereafter be the Annual Base Salary for all purposes under this Agreement.

(b)    Performance Bonus. Executive shall be eligible to receive a performance bonus, the earning of which shall be subject to the discretion and determination of the Board or a committee thereof (the “Performance Bonus”) in an amount equal to thirty-five percent (35%) of Executive’s Annual Base Salary. The determination of the amount, if any, of the Performance Bonus each year shall be made no later than sixty (60) days following the conclusion of each applicable year of the Term, and shall be paid, if at all, within sixty (60) days of such determination.

(c)    PTO. During the Term, Executive shall be eligible for at least four (4) weeks paid time off (“PTO”) per year in accordance with the Company's policies in effect from time to time.

(d)    Expense Reimbursement. Executive shall be reimbursed for all reasonable travel and other out-of-pocket expenses actually and properly incurred by Executive prior to and during the Term in connection with carrying out her duties hereunder in accordance with the Company's policies in effect from time to time for its senior executives generally.

(e)    Benefits. During the Term, Executive shall be eligible to participate in all welfare, perquisite, fringe benefit, insurance, retirement and other benefit plans, practices, policies and programs, maintained by the Company and its affiliates applicable to senior executives of the Company generally, in each case as amended from time to time. In the event the Company does not purchase a policy of long-term disability insurance, the Company will reimburse Executive for his purchase of such a policy, up to a maximum annual amount of $7,500.

4.    Termination of Employment.

(a)    Death and Disability. Executive's employment shall terminate automatically upon Executive's death. If the Company determines in good faith that the Disability (as defined below) of Executive has occurred during the Term, it may give to Executive written notice in accordance with Section 11 of this Agreement of its intention to terminate Executive's employment; provided that (i) such notice is provided no later than 150 calendar days following the determination of Executive's Disability, and (ii) Executive has not returned to full-time employment during the period between such determination and the giving of such notice. In such event, Executive's employment shall terminate effective on the 30th calendar day after receipt of such notice by Executive (the “Disability Effective Date”), provided that, within the 30 calendar days after such receipt, Executive shall not have returned to full-time performance of Executive's duties. For purposes of this Agreement, “Disability” shall mean the inability of Executive to perform the essential duties of the position held by Executive by reason of any medically determined physical or mental impairment that is reasonably expected to result in death or lasts for 120 calendar days in any one-year period, all as determined by an independent licensed physician mutually acceptable to the Company and Executive or Executive's legal representative.

(b)    Cause. Executive's employment with the Company may be terminated by the Company with or without Cause. For purposes of this Agreement, “Cause” shall mean: (i) the continued failure of Executive to perform Executive's duties as set forth in Section 2 hereof or Executive's material disregard of the reasonable and lawful directives of the Company (in each case other than any such failure resulting from any medically determined physical or mental

2

impairment) that is not cured by Executive within 20 calendar days after a written demand for performance is delivered to Executive by the Company which specifically identifies the manner in which the Company believes that Executive has not performed Executive's duties or disregarded a directive of the CEO; (ii) Executive's commission of any material act of fraud, misappropriation or embezzlement against or in connection with the Company or any of its affiliates or their respective businesses or operations; (iii) Executive's commission of, or indictment for or otherwise being formally charged with, any crime involving dishonesty or for any felony; (iv) the engaging by Executive in misconduct that is materially detrimental to the financial condition or business reputation of the Company or any of its affiliates, including due to any adverse publicity; or (v) a material breach by Executive of his obligations under Section 8, or his representations under Section 9, of this Agreement. In addition to the notice and opportunity to cure set forth in subsection (i) above, to the extent that any of the grounds set forth in subsections (iv) or (v) above is capable of being cured, the Company shall not have Cause unless it has furnished Executive with written notice specifically identifying the conduct allegedly giving rise to Cause, and he has failed to cure such ground within 20 days of the delivery of such notice.

(c)    Good Reason. Executive's employment with the Company may be terminated by Executive with or without Good Reason. For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following without Executive's consent: (i) a material reduction by the Company of Executive's title, duties, responsibilities, authority or reporting relationship set forth in Section 2(a); (ii) a material reduction by the Company of Executive's Annual Base Salary; (iii) a material breach of the Company of this Agreement; or (iv) a material change in geographic location at which Executive must principally perform services under this Agreement from the location at which Executive was principally employed. A termination of Executive's employment by Executive under Sections 4(c)(i), (ii),(iii) or (iv) shall not be deemed to be for Good Reason unless (x) Executive gives notice to the Company of the existence of the event or condition constituting Good Reason within 30 calendar days after becoming aware of the initial occurrence or existence of such event or condition, and (y) the Company fails to cure such event or condition within 30 calendar days after receiving such notice. Additionally, Executive must terminate his employment within 90 calendar days after the initial occurrence of the circumstance constituting Good Reason for such termination to be “Good Reason” hereunder.

(d)    Notice of Termination. Any termination by the Company for Cause, or by Executive for Good Reason, shall be communicated by Notice of Termination to the other party in accordance with Section 11. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated, and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the Date of Termination.

(e)    Date of Termination. “Date of Termination” means, as applicable, the date of Executive's death, the Disability Effective Date, or the date on which the termination of Executive's employment by the Company for Cause or without Cause or by Executive for Good Reason or without Good Reason is effective.

(f)    Resignation from All Positions. Notwithstanding any other provision of this Agreement, upon the termination of Executive's employment for any reason, unless otherwise requested by the CEO, Executive shall immediately resign from all positions that he holds or has ever held with the Company and its affiliates, including the boards of directors or committees of the Company's affiliates. Executive hereby agrees to execute any and all documentation to effectuate such resignations upon request by the Company, but he shall be treated for all purposes as having so resigned upon termination of his employment, regardless of when or whether he executes any such documentation.

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5.    Severance Payments.

(a)    Any Termination of Employment. If, during or at the expiration of the Term, Executive's employment with the Company and its affiliates shall terminate for any reason or no reason, then:

(i)    Accrued Benefits. The Company shall pay, or cause to be paid, to Executive the sum of: (A) the portion of Executive's Annual Base Salary earned through the Date of Termination, to the extent not previously paid, (B) the amount of the Performance Bonus that the Board of Directors (or subcommittee thereof) has decided has been earned by Executive preceding the Date of Termination, but has not yet been paid to Executive, and (C) any unreimbursed business expenses to the extent reimbursable in accordance with the Company's reimbursement policies (the sum of the amounts described in clauses (A) through and including (C) shall be referred to as the “Accrued Benefits”). The Accrued Benefits shall be paid to Executive in a single lump sum within 30 calendar days after the Date of Termination or such earlier date if required by law.

(ii)    Other Benefits. To the extent not previously paid or provided, the Company shall pay or provide, or cause to be paid or provided, to Executive (or his estate) any other amounts or benefits (including, as applicable, any payment of long-term incentive awards) required to be paid or provided or which Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company, including any benefits to which Executive is entitled under COBRA (such other amounts and benefits described in this Section 5(a)(ii) shall be hereinafter referred to as the “Other Benefits”) in accordance with the terms and normal procedures of each such plan, program, policy or practice or contract or agreement, based on accrued and vested benefits through the Date of Termination.

(b)    Good Reason, Other than for Cause. If, during the Term, the Company shall terminate Executive's employment other than for Disability or Cause, or if Executive shall terminate employment for Good Reason, then, in addition to providing the Accrued Benefits and Other Benefits, as set forth in Section 5(a) above, and subject to Sections 6 and 8(f) below, the Company shall pay or provide the following amounts and benefits to Executive:

(i)    Severance. The Company shall continue to pay to Executive the Annual Base Salary, as of the Date of Termination, for the period beginning on the Date of Termination and ending twelve (12) months thereafter (the “Severance Period”), which shall be payable over the Severance Period in regular installments in accordance with the Company's normal payroll practices as they may exist from time to time, with the installments that otherwise would be paid prior to the first payroll date following the date the Release described in Section 6 becomes effective and irrevocable in accordance with its terms (the “Release Effective Date”) being paid (without interest) on such payroll date in a lump sum and the remaining installments being paid as otherwise scheduled assuming payments had begun immediately after the Date of Termination.

(ii)    Continued Health Insurance. If Executive elects COBRA coverage under the applicable medical and dental plans of the Company, the Company will subsidize a portion of the applicable monthly COBRA premium during the Severance Period, so that Executive will only be required to pay the premiums applicable to continuing employees during that time; provided that such subsidy shall cease on the date on which Executive becomes eligible for medical and dental coverage from a third party.

(iii)    Performance Bonus. Executive will be eligible to receive the Performance Bonus for the fiscal year during which the Date of Termination occurs, based on actual performance results during the entire fiscal year and without regard to any discretionary adjustments that have the effect of reducing the amount of the Performance Bonus (other than

4

discretionary adjustments applicable to all senior executives who did not terminate employment), pro-rated based on the number of days in the Company's fiscal year through (and including) the Date of Termination (“Pro-Rated Performance Bonus”), which, if earned, shall be payable in a single lump sum at the same time that payments are made to other participants in the annual bonus plan for that fiscal year; provided, however, that Executive shall be entitled to such a Pro-Rated Performance Bonus only if Executive was employed by the Company for at least six months during the fiscal year in which the Date of Termination occurred.

(c)    Good Reason, Other than for Cause During the Change in Control Protection Period. If, during the Term and during the period beginning upon the occurrence of a “Change in Control” (as defined in the Equity Plan) and ending on the first anniversary of the occurrence of the Change in Control (the “Change in Control Protection Period”), the Company shall terminate Executive's employment other than for Disability or Cause, or if Executive shall terminate employment for Good Reason, then, in addition to providing the Accrued Benefits and Other Benefits, as set forth in Section 5(a) above, and subject to Sections 6 and 8(f) below, the Company shall pay or provide the benefits set forth in Section 5(b) except that Executive shall receive a lump sum amount equivalent to 1.5 times his Annual Base Salary (in lieu of the amount paid during the Severance Period as provided in Section 5(b)), and the Performance Bonus, which shall not be pro-rated, within fourteen (14) business days of the effective date of the Release provided for in Section 6 and Executive shall thereafter be entitled to 18 months of subsidized COBRA premiums. In addition, and notwithstanding anything contained in the applicable Company equity plan and award agreements to the contrary, all outstanding and unvested equity awards of the Company granted to Executive shall become immediately vested and exercisable upon such date of termination. In addition, all outstanding and vested Company stock options (including those that vest pursuant to the operation of the immediately preceding sentence) will remain exercisable for the full duration of their term.

(d)    Section 280G. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any accrual, acceleration, payment, benefit or distribution by the Company or any of its affiliated companies to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “Payment”) would be an excess parachute payment within the meaning of section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) (such excess only, an “Excess Payment”), then Executive shall forfeit all Excess Payments if the after-tax value to Executive of the Payments, as reduced by such forfeiture, would be greater than the after-tax value to Executive of the Payments absent such forfeiture. The forfeiture of Excess Payments, if applicable, shall be applied to the severance described in Section 5(c) hereof, then to cancellation of accelerated vesting of performance-based equity awards (based on the reverse order of the date of grant), then to cancellation of accelerated vesting of other equity awards (based on the reverse order of the date of grant), and then to any other Payments on a pro-rata basis. All determinations required to be made under this Section 5(d), including whether and when a Payment is subject to section 280G of the Code, and the value of a Payment for purposes of section 280G of the Code, and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm with expertise in such matters designated by the Company (the “Accounting Firm”). The Company will direct the Accounting Firm to provide its determination and detailed supporting calculations both to the Company and Executive within 15 business days after the date of the event giving rise to the Payment or such other time as is requested by the Company. Any determination by the Accounting Firm shall be binding upon the Company and Executive. All fees and expenses of the Accounting Firm for services performed pursuant to this Section 5(d) shall be borne solely by the Company.

6.    Release. Notwithstanding anything contained herein to the contrary, the Company shall not be obligated to make any payment or provide any benefit under Section 5(b) or 5(c) hereof unless: (a) Executive or Executive's legal representative first executes within 21 calendar days after the Date of Termination (or such longer period as required by applicable law)

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a release of claims (the “Release”); (b) Executive does not revoke the Release; and (c) the Release becomes effective and irrevocable in accordance with its terms.

7.    Full Settlement. The Company's obligation to make the payments provided for in this Employment Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company or any of its affiliates may have against Executive or others, except as otherwise may be provided in Section 8 hereof. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not Executive obtains other employment.

8.    Executive’s Covenants.

(a)    Confidentiality. During the Term and thereafter, Executive agrees to keep secret and confidential, and not to use or disclose to any third parties, except as directly required for Executive to perform Executive's responsibilities for the Company under this Agreement, any of the Company's Confidential Information (as defined in paragraph (l) below) acquired by Executive during the course of, or in connection with, Executive's employment with the Company. Executive acknowledges that the Confidential Information is the exclusive property of the Company. Upon termination of Executive's employment with the Company, for any reason, or at the request of the Company at any time, Executive shall promptly return to the Company all property then in Executive's possession, custody or control belonging to the Company, including all Confidential Information. Executive shall not retain any copies of correspondence, memoranda, reports, notebooks, drawings, photographs or other documents in any form whatsoever (including information contained in computer or other electronic memory or on any computer or electronic storage device) relating in any way to the affairs of the Company and which were entrusted to Executive or obtained by Executive at any time during the Term.

(b)    Assignment of Rights. Executive shall promptly disclose to the Company and hereby assigns and transfers to the Company all of Executive's right, title and interest in and to:

(i)    any and all patents, inventions, discoveries, concepts, processes, methods, formulas, techniques, trade secrets, know-how, and related rights, whether or not patentable; and

(ii)    any and all copyrights and works of authorship, whether or not copyrightable, if and only to the extent that such intellectual property was conceived, created or reduced to tangible form by Executive in the course of performing her duties for the Company, and either relates to the business of the Company, or was conceived, created or reduced to tangible form with the use or assistance of the Company's facilities, materials or personnel. Without limiting the generality of the foregoing, this assignment requirement applies to applications for U.S. or foreign letters patent and copyright registration granted upon such inventions, discoveries, and works of authorship and similar items as hereinabove set forth.

(c)    Executive shall deliver to the Company any and all instruments necessary to confirm complete ownership by the Company of any and all rights as described above, and upon the failure of Executive to furnish such documents, this Agreement shall constitute such documentation for all purposes. Executive further agrees during and after Executive's employment by the Company, to cooperate fully, including giving testimony in support of Executive's inventorship, as may be necessary in the opinion of the Company to obtain and/or maintain letters patent and to vest the entire ownership of such letters patent with the Company.

(d)    Non-Disparagement. Executive agrees that he will not do or say anything that could reasonably be expected to disparage or impact negatively the name or reputation in the

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marketplace of the Company or any of its affiliates, employees, officers, directors, stockholders, members, principals or assigns. Subject to Executive's continuing obligations to comply with Section 8(a) (Confidential Information) hereof, nothing in this Section 8(f) shall preclude Executive from responding truthfully to any legal process or truthfully testifying in a legal or regulatory proceeding, provided that, to the extent permitted by law and Section 8(i) hereof, Executive promptly informs the Company of any such obligation prior to participating in any such proceedings. The Company, defined for purposes of this Section 8(f) as the Board and its individual members, agrees in turn that it will not do or say anything that could reasonably be expected to disparage or impact negatively the name or reputation in the marketplace of Executive, provided that nothing in this Section 8(f) shall prevent the Company from responding truthfully to any legal process or truthfully testifying in a legal or regulatory proceeding.

(e)    Divisible Provisions. The individual terms and provisions of this Section 8 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of this Section 8 shall thereby be affected. It is the intention of Executive and the Company that the potential restrictions on Executive's solicitation and future employment imposed by this Section 8 be reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any provisions of this Section 8 unreasonable in duration or geographic scope or otherwise, Executive and the Company agree that the restrictions and prohibitions contained herein may be modified by a court of competent jurisdiction and shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

(f)    Injunctive Relief and Remedies. In event of a breach or threatened breach of any of Executive's duties and obligations under this Section 8, the Company shall be entitled, in addition to any other legal or equitable remedies it may have in connection therewith (including any right to damages it may suffer), to (i) seek temporary, preliminary and permanent injunctive relief restraining such breach or threatened breach, (ii) cease making payments or providing benefits under Section 5 of this Agreement (other than paragraph 5(a) thereof), and (iii) seek any other relief obtainable through statutory or common law means (including, but not limited to, applicable trade secrets law). Executive hereby expressly acknowledges that the harm that might result to the Company's business as a result of any noncompliance by Executive with the provisions of this Section 8 may be largely irreparable. The restrictions stated in this Section 8 are in addition to and not in lieu of protections afforded to trade secrets and confidential information under applicable law. Nothing in this Section 8 is intended to or shall be interpreted as diminishing or otherwise limiting the Company's right under applicable law to protect its trade secrets and confidential information.

(g)    Protected Activity. Nothing contained in this Agreement, or any other agreement, policy, practice, procedure, directive or instruction maintained by the Company shall prohibit Executive from reporting possible violations of federal, state or local laws or regulations to any federal, state or local governmental agency or commission (a “Government Agency”) or from making other disclosures that are protected under the whistleblower provisions of federal, state or local laws or regulations. Executive does not need prior authorization of any kind to make any such reports or disclosures to any Government Agency and Executive is not required to notify the Company that Executive has made such reports or disclosures. Nothing in this Agreement limits any right Executive may have to receive a whistleblower award or bounty for information provided to any Government Agency. Executive hereby acknowledges that the Company has informed Executive, in accordance with 18 U.S.C. § 1833(b), that Executive may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret where the disclosure: (i) is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

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(h)    Notification/Survival. To enable the Company to monitor Executive's compliance with the obligations imposed by this Section 8, Executive agrees to inform the Company of the identity of any subsequent employer and Executive's new job title. Executive agrees that he will disclose the existence of this Section 8 to any subsequent employer. Following the expiration of the Term or this Agreement, this Section 8 shall survive and be of full force and effect.

(i)    Definitions. As used in this Section 8, the following definitions shall apply

“Company” means the Company and its subsidiaries and affiliates.

“Confidential Information” means information pertaining to the business of the Company that is generally not known to or readily ascertainable to the industry in which the Company competes, and that gives or tends to give the Company a competitive advantage over persons who do not possess such information or the secrecy of which is otherwise of value to the Company in the conduct of its business regardless of when and by whom such information was developed or acquired, and regardless of whether any of these are described in writing, copyrightable or considered copyrightable, patentable or considered patentable. Confidential Information includes, but is not limited to, the Company's trade secrets, financial information or plans, pricing and profit information, sales and marketing information or plans, business or strategic plans, information concerning methods of operation, proprietary systems or software, legal or regulatory information, cost and pricing information or policies, information concerning new or potential products or markets, clinical data, medical or other data relating to participants in clinical trials, or research and/or analysis, information related to present and potential customers, vendors and suppliers (including, but not limited to, lists, contact information, requirements, contract terms, and pricing), methods of operations, research and development, product information, business technical information, including technical data, techniques, solutions, test methods, quality control systems, processes, design specifications, technical formulas, procedures and information, all agreements, schematics, manuals, studies, reports, and statistical information relating to the Company, all formulations, database files, information technology, strategic alliances, products, services, programs and processes used or sold, and all software licensed or developed by the Company, computer programs, systems and/or software, ideas, inventions, business information, know-how, improvements, designs, redesigns, creations, discoveries and developments of the Company. Confidential Information includes all forms of the information, whether oral, written or contained in electronic or any other format.

9.    Representations. Executive hereby represents and warrants to the Company that Executive is not party to any contract, understanding, agreement or policy, whether or not written, with his current employer (or any other previous employer) or otherwise, that would be breached by Executive's entering into, or performing services under, this Agreement. Executive further represents that he has disclosed to the Company in writing all material threatened, pending, or actual claims against Executive that are unresolved and still outstanding as of the Effective Date, in each case of which he is aware, resulting or arising from his service with his current employer (or any other previous employer) or his membership on any boards of directors.

10.    Cooperation. During the Term and thereafter, Executive shall cooperate with the Company and its affiliates, without additional consideration, in any internal investigation or administrative, regulatory, or judicial proceeding as reasonably requested by the Company including, without limitation, Executive's being available to the Company and its affiliates upon reasonable notice for interviews and factual investigations, appearing at the Company's request to give testimony without requiring service of a subpoena or other legal process, volunteering to the Company all pertinent information, and turning over to the Company all relevant documents that are or may come into Executive's possession, all at times and on schedules that are reasonably consistent with Executive's other permitted activities and commitments and otherwise taking into account Executive's reasonable business obligations. Executive shall be reimbursed for the reasonable expenses Executive incurs in connection with any such cooperation and/or

8

assistance. Executive shall also receive from the Company hourly compensation equal to the Annual Base Salary immediately prior to the Date of Termination divided by 2,200 hours, in each case in connection with any assistance or cooperation that occurs after the Date of Termination. Any such reimbursements or per diem compensation shall be paid to Executive no later than the 15th day of the month immediately following the month in which such expenses were incurred or such cooperation and/or assistance was provided (subject to Executive’s timely submission to the Company of proper documentation with respect thereto).

11.    Notices. Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, sent by electronic mail, or sent by reputable overnight carrier, in each case with proof of receipt, to the recipient. Notices to Executive shall be sent to the address of Executive most recently provided to the Company. Notices to the Company should be sent to the attention of the Company’s Chief Executive Officer. Any notice under this Agreement will be deemed to have been given when so delivered or sent (subject to proof of delivery and receipt).

12.    Severability. The invalidity or unenforceability of any particular provision in this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if the invalid or unenforceable provision were omitted.

13.    Complete Agreement. This Agreement embodies the complete agreement and understanding between the parties with respect to the subject matter hereof and effective as of its date supersedes and preempts any prior understandings, agreements (including without limitation the Consulting Agreement) or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way.

14.    Withholding of Taxes. The Company and its affiliates may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company and its affiliates are required to withhold pursuant to any law or government regulation or ruling.

15.    Successors and Assigns.

(a)    This Agreement is personal to Executive, and, without the prior written consent of the Company, shall not be assignable by Executive other than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives.

(b)    This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. Except as provided in Section 15(c), without the prior written consent of Executive this Agreement shall not be assignable by the Company, except to an affiliate.

(c)    The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. “Company” means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.

16.    Choice of Law/Dispute Resolution. This Agreement shall be governed, construed, interpreted and enforced in accordance with the substantive laws of the State of New York, without regard to conflicts of law principles. The parties shall execute simultaneously herewith a mutual agreement to arbitrate claims, which arbitration shall take place in New York.

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17.    Amendment and Waiver. The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

18.    Section 409A Compliance.

(a)    In General. The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code (“Section 409A”) or are exempt therefrom and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered so as to be in compliance therewith.

(b)    Separation from Service. A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to Section 409A upon or following a termination of employment un-less such termination is also a “separation from service” within the meaning of Section 409A, and for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service” within the meaning of Section 409A.

(c)    Reimbursements or In-Kind Benefits. With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A: (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year; and (iii) such payments shall be made on or before the last day of Executive's taxable year following the taxable year in which the expense occurred, or such earlier date as required hereunder.

(d)    Six Month Delay. Notwithstanding anything contained in this Agreement to the contrary, if Executive is a “specified employee,” as determined under the Company's policy for identifying specified employees on the Date of Termination, then to the extent required in order to comply with Section 409A, all payments, benefits or reimbursements paid or provided under this Agreement that constitute a “deferral of compensation” within the meaning of Section 409A, that are provided as a result of a “separation from service” within the meaning of Section 409A and that would otherwise be paid or provided during the first six months following such Date of Termination shall be accumulated through and paid or provided (without interest), within 20 calendar days after the first business day that is more than six months after the date of her separation from service (or, if Executive dies during such six-month period, within 20 calendar days after Executive's death).

(e)    Payment Dates. In the event the payment period under this Agreement for any nonqualified deferred compensation commences in one calendar year and ends in a second calendar year, the payments shall not be paid (or installments commenced) until the later of the first payroll date of the second calendar year, or the date that such Release becomes effective and irrevocable, to the extent necessary to comply with Section 409A. For purposes of Section 409A, Executive’s right to receive any “installment” payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.

19.    Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by electronic mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

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GRI BIO, INC.

/s/ W. Marc Hertz    

By: W. Marc Hertz

Its: President & CEO

EXECUTIVE

/s/ Albert Agro, Ph.D.    

Albert Agro, Ph.D.

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, W. Marc Hertz, certify that:

I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 of GRI Bio, Inc.;

1.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

2.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

3.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

4.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2023	By:	/s/ W. Marc Hertz
		W. Marc Hertz
		President and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Leanne M. Kelly, certify that:

I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 of GRI Bio, Inc.;

1.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

2.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

3.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

4.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2023	By:	/s/ Leanne M. Kelly
		Leanne M. Kelly
		Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, W. Marc Hertz, President and Chief Executive Officer of GRI Bio, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2023 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: August 14, 2023	By:	/s/ W. Marc Hertz
		W. Marc Hertz
		President and Chief Executive Officer
		(Principal Executive Officer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Leanne M. Kelly, Chief Financial Officer of GRI Bio, Inc. (the “Company”), do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

1.the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2023 (the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2.the information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein.

Date: August 14, 2023	By:	/s/ Leanne M. Kelly
		Leanne M. Kelly
		Chief Financial Officer
		(Principal Financial Officer)

The foregoing certification is being furnished solely to accompany the Report pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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	Jun. 30, 2023	Aug. 06, 2023
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Document Type	10-Q
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Document Period End Date	Jun. 30, 2023
Document Transition Report	false
Entity File Number	001-40034
Entity Registrant Name	GRI BIO, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	82-4369909
Entity Address, Address Line One	2223 Avenida de la Playa
Entity Address, Address Line Two	#208
Entity Address, City or Town	La Jolla
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	92037
City Area Code	619
Local Phone Number	400-1170
Title of 12(b) Security	Common Stock, par value $0.0001per share
Trading Symbol	GRI
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		2,956,354
Entity Central Index Key	0001824293
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

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Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 4,799	$ 9
Prepaid expenses and other current assets	793	303
Total current assets	5,592	312
Property and equipment, net	9	4
Operating lease right-of-use assets	41	67
Total assets	5,642	383
Current liabilities:
Accounts payable	307	1,294
Accrued expenses	1,193	36
Advances from employees	0	5
Warrant liability	63	0
Bridge promissory note, net	0	602
Operating lease liabilities, current	41	57
Total current liabilities	1,604	1,994
Operating lease liabilities, non-current	0	14
Total liabilities	1,604	2,008
Commitments and contingencies (Note 11)
Stockholders' equity (deficit):
Common stock, 0.0001 par value; 250,000,000 shares authorized as of June 30, 2023 and December 31, 2022; 2,956,354 and 999,748 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	0	0
Additional paid-in-capital	31,430	16,871
Accumulated deficit	(27,392)	(18,496)
Total stockholders’ equity (deficit)	4,038	(1,625)
Total liabilities and stockholders' equity (deficit)	$ 5,642	$ 383
Common stock, par value (in usd per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	250,000,000	250,000,000

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Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2023	Dec. 31, 2022
Statement of Financial Position [Abstract]
Common stock, par value (in usd per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	250,000,000	250,000,000
Common stock, shares issued (in shares)	2,956,354	999,748
Common stock, shares outstanding (in shares)	2,956,354	999,748

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Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Operating expenses:
Research and development	$ 880	$ 59	$ 997	$ 119
General and administrative	5,054	130	5,926	268
Total operating expenses	5,934	189	6,923	387
Loss from operations	(5,934)	(189)	(6,923)	(387)
Change in fair value of warrant liability	122	0	122	0
Interest expense, net	(934)	(106)	(2,095)	(210)
Net loss	$ (6,746)	$ (295)	$ (8,896)	$ (597)
Net loss per share of common stock, basic (in usd per share)	$ (2.79)	$ (0.35)	$ (5.23)	$ (0.70)
Net loss per share of common stock, diluted (in usd per share)	$ (2.79)	$ (0.35)	$ (5.23)	$ (0.70)
Weighted-average common shares outstanding, basic (in shares)	2,417,785	851,419	1,701,864	851,419
Weighted-average common shares outstanding, diluted (in shares)	2,417,785	851,419	1,701,864	851,419

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Consolidated Statements of Changes in Stockholders’ Equity (Deficit) - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2021	7,816
Beginning balance at Dec. 31, 2021	$ 124
Ending balance (in shares) at Mar. 31, 2022	7,816
Ending balance at Mar. 31, 2022	$ 124
Beginning balance (in shares) at Dec. 31, 2021		851,419
Beginning Balance at Dec. 31, 2021	(4,848)	$ 0	$ 10,430	$ (15,278)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(302)			(302)
Ending balance (in shares) at Mar. 31, 2022		851,419
Ending Balance at Mar. 31, 2022	$ (5,150)	$ 0	10,430	(15,580)
Beginning balance (in shares) at Dec. 31, 2021	7,816
Beginning balance at Dec. 31, 2021	$ 124
Ending balance (in shares) at Jun. 30, 2022	7,816
Ending balance at Jun. 30, 2022	$ 124
Beginning balance (in shares) at Dec. 31, 2021		851,419
Beginning Balance at Dec. 31, 2021	(4,848)	$ 0	10,430	(15,278)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(597)
Ending balance (in shares) at Jun. 30, 2022		851,419
Ending Balance at Jun. 30, 2022	$ (5,445)	$ 0	10,430	(15,875)
Beginning balance (in shares) at Mar. 31, 2022	7,816
Beginning balance at Mar. 31, 2022	$ 124
Ending balance (in shares) at Jun. 30, 2022	7,816
Ending balance at Jun. 30, 2022	$ 124
Beginning balance (in shares) at Mar. 31, 2022		851,419
Beginning Balance at Mar. 31, 2022	(5,150)	$ 0	10,430	(15,580)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	(295)			(295)
Ending balance (in shares) at Jun. 30, 2022		851,419
Ending Balance at Jun. 30, 2022	$ (5,445)	$ 0	10,430	(15,875)
Beginning balance (in shares) at Dec. 31, 2022	999,748	999,748
Beginning Balance at Dec. 31, 2022	$ (1,625)	$ 0	16,871	(18,496)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	13		13
Restricted stock vesting		467
Warrant issuance	532		532
Net loss	(2,150)			(2,150)
Ending balance (in shares) at Mar. 31, 2023		1,000,215
Ending Balance at Mar. 31, 2023	$ (3,230)	$ 0	17,416	(20,646)
Beginning balance (in shares) at Dec. 31, 2022	999,748	999,748
Beginning Balance at Dec. 31, 2022	$ (1,625)	$ 0	16,871	(18,496)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss	$ (8,896)
Ending balance (in shares) at Jun. 30, 2023	2,956,354	2,956,354
Ending Balance at Jun. 30, 2023	$ 4,038	$ 0	31,430	(27,392)
Beginning balance (in shares) at Mar. 31, 2023		1,000,215
Beginning Balance at Mar. 31, 2023	(3,230)	$ 0	17,416	(20,646)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	13		13
Restricted stock vesting		164,038
Warrant exercise (in shares)		43,682
Warrant exercise	12		12
Issuance of common stock in pre-closing financing (in shares)		1,214,912
Issuance of common stock in pre-closing financing	11,721		11,721
Issuance of common stock for settlement of bridge note (in shares)		54,298
Issuance of common stock for settlement of bridge note	3,333		3,333
Issuance of common stock for reverse recapitalization expenses (in shares)		30,542
Issuance of common stock for reverse recapitalization expenses	1,875		1,875
Issuance of common stock to Vallon stockholders in reverse recapitalization (in shares)		448,667
Issuance of common stock to Vallon stockholders in reverse recapitalization	(2,940)		(2,940)
Net loss	$ (6,746)			(6,746)
Ending balance (in shares) at Jun. 30, 2023	2,956,354	2,956,354
Ending Balance at Jun. 30, 2023	$ 4,038	$ 0	$ 31,430	$ (27,392)

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Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Operating activities:
Net loss	$ (8,896)	$ (597)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation expense	2	1
Amortization of debt discounts and issuance costs	2,104	0
Stock-based compensation expense	26	0
Change in fair value of warrant liability	63	0
Reduction in operating right of use assets	26	23
Change in operating assets and liabilities:
Prepaid expenses and other current assets	(750)	(8)
Accounts payable	4,179	79
Accrued expenses	1,157	409
Operating lease liabilities	(30)	(23)
Cash used in operating activities	(2,119)	(116)
Investing activities:
Purchase of property and equipment	(8)	0
Cash used in investing activities	(8)	0
Financing activities:
Advances from employees	190	35
Repayment of advances from employees	(195)	0
Proceeds from issuance of common stock in pre-closing financing	12,250	0
Proceeds from issuance of bridge promissory note	1,250	0
Proceeds from warrant exercise	12	0
Net liabilities assumed in connection with reverse recapitalization	(2,939)	0
Payment of reverse recapitalization costs	(2,984)	0
Payment of deferred stock issuance costs	(517)	0
Payment of debt issuance costs	(150)	0
Cash provided by financing activities	6,917	35
Net increase (decrease) in cash and cash equivalents	4,790	(81)
Cash and cash equivalents at beginning of period	9	90
Cash and cash equivalents at end of period	4,799	9
Supplemental disclosure of non-cash financing activities:
Issuance of stock for repayment of bridge promissory note	3,333	0
Recognition of debt discount and additional paid-in-capital for issuance of warrants in connection with the issuance of promissory notes	532	0
Issuance of stock for payment of reverse recapitalization costs	1,875	0
Issuance of warrants for payment of stock issuance costs	18
Merger costs included in accounts payable	$ 72	$ 0

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ORGANIZATION AND DESCRIPTION OF BUSINESS

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

ORGANIZATION AND DESCRIPTION OF BUSINESS

GRI Bio, Inc. (GRI or the Company), based in La Jolla, CA, was incorporated in Delaware in May 2009, which is the date of inception.

GRI is a clinical-stage biopharmaceutical company focused on discovering, developing, and commercializing innovative therapies that target serious diseases associated with dysregulated immune responses leading to inflammatory, fibrotic, and autoimmune disorders. The Company’s goal is to be an industry leader in developing therapies to treat these diseases and to improve the lives of patients suffering from such diseases. The Company’s lead product candidate, GRI-0621, is an oral inhibitor of type 1 Natural Killer T (iNKT I) cells and is being developed for the treatment of severe fibrotic lung diseases such as idiopathic pulmonary fibrosis (IPF). The Company’s product candidate portfolio also includes GRI-0803 and a proprietary library of 500+ compounds. GRI-0803, the lead molecule selected from the library, is a novel oral agonist of type 2 Natural Killer T (NKT II) cells and is being developed for the treatment of autoimmune disorders, with much of its preclinical work in Systemic Lupus Erythematosus Disease (SLE) or lupus and multiple sclerosis (MS).

Reverse Merger with Vallon Pharmaceuticals, Inc.

On April 21, 2023, the Company (formerly Vallon Pharmaceuticals, Inc.(Vallon)) consummated a merger with GRI Bio Operations, Inc. (formerly GRI Bio, Inc.) (Private GRI) pursuant to an Agreement and Plan of Merger, as amended (the Merger Agreement), by and among the Company, Private GRI and Vallon Merger Sub, Inc. (Merger Sub), a Delaware corporation and wholly-owned subsidiary of the Company (Note 4). The Merger Agreement provided for the merger of Merger Sub with and into Private GRI, with Private GRI surviving the merger as a wholly-owned subsidiary of the Company (the Merger). In connection with the closing of the Merger (the Closing), the Company amended its certificate of incorporation and bylaws to change its name from “Vallon Pharmaceuticals, Inc.” to “GRI Bio, Inc.” In addition, prior to the effective time of the Merger (the Effective Time), the Company effected a reverse stock split of the Company’s common stock at a ratio of 1 for 30 (the Reverse Stock Split). At the Effective Time, each share of Private GRI’s common stock outstanding immediately prior to the Effective Time automatically converted solely into the right to receive a number of shares of the Company's common stock equal to 0.0374 (the Exchange Ratio).

Except as otherwise indicated or as the context requires, references herein to “GRI Bio,” the “Company,” or the “Combined Company,” refer to GRI Bio, Inc. on a post-Merger basis, and references to “Private GRI” refer to the business of GRI Bio, Inc. prior to the completion of the Merger. References to “Vallon” refer to Vallon Pharmaceuticals, Inc. prior to the completion of the Merger.

Basis of Presentation

As discussed in Note 4, the Merger was accounted for as reverse recapitalization under which the historical financial statements of the Company prior to the Merger are the historical financial statements of the accounting acquirer, Private GRI. All common stock, per share and related information presented in the consolidated financial statements and notes prior to the Merger has been retroactively adjusted to reflect the Exchange Ratio and Reverse Stock Split for all periods presented, to the extent applicable.

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LIQUIDITY

6 Months Ended

Jun. 30, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

LIQUIDITY

LIQUIDITYThese financial statements have been prepared on the basis that the Company is a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not generated any significant revenues from operations since inception and does not expect to do so in the foreseeable future. The Company has incurred operating losses since its inception in 2009 and as a result has incurred $27,392 in accumulated deficit through June 30, 2023. The Company has financed its working capital requirements to date through the issuance of equity and debt securities. As of June 30, 2023, the Company had cash of approximately $4,799.

In connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered the Equity SPA pursuant to which the Investor agreed to invest $12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI common stock immediately prior to the consummation of the Merger. Pursuant to the Equity SPA, immediately prior to the Closing, Private GRI issued 6,787,219 shares of Private GRI common stock (the Initial Shares) to the Investor and 27,148,877 shares of Private GRI common stock (the Additional Shares) into escrow with an escrow agent for net proceeds of $11,704, after deducting offering expenses of $546.

At the closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 253,842 shares of the Company’s common stock and the Additional Shares converted into an aggregate of 1,015,368 shares of the Company’s common stock. On May 8, 2023, in accordance with the terms of the Equity SPA, the Company and the Investor authorized the escrow agent to, subject to beneficial ownership limitations, disburse to the Investor all of the shares of the Company’s common stock issued in exchange for the Additional Shares.

Based on the Company’s current operating plan, the Company believes that its existing cash and cash equivalents, which include the proceeds from the Equity SPA, will be sufficient to fund its operating expenses and capital expenditure requirements for twelve months from the date of the Merger (Note 4), not including the exercise of the Series T Warrants (the Series T Warrant Exercises).

The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its business activities, including its research and development program. The Company intends to raise capital through additional issuances of common stock and/or short-term or long-term notes, but there can be no assurances any such financing will be available when needed or that the Company’s research and development efforts will be successful. If the Company is not able to obtain additional financing on acceptable terms and in the amounts necessary to fully fund its future operating requirements, it may be forced to reduce or discontinue its operations entirely. Therefore, there is substantial doubt about the Company’s ability to continue as a going concern. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial periods and pursuant to the rules of the Securities and Exchange Commission (the SEC). Any reference in the accompanying unaudited interim financial statements to “authoritative guidance” is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB). The December 31, 2022 balance sheet was derived from the Company’s audited financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of June 30, 2023, and the results of operations and stockholders’ deficit for the three and six months ended June 30, 2023 and 2022 and cash flows for the three and six months ended June 30, 2023 and 2022. Results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2023. The unaudited interim financial statements, presented herein, do not contain the required disclosures under GAAP for annual financial statements. The accompanying unaudited interim financial statements should be read in conjunction with the annual audited financial statements and related notes as of and for the year ended December 31, 2022, which are included as Exhibit 99.2 of Amendment No. 2 to the Current Report on Form 8-K filed with the SEC on July 6, 2023.

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates and assumptions are primarily made in relation to the valuation of share options, the embedded derivative of convertible notes, warrant issuance and subsequent revaluations, valuation allowances relating to deferred tax assets, revenue recognition, accrued expenses and estimation of the incremental borrowing rate for the finance lease. If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted

in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

Cash and Cash Equivalents

Cash equivalents are highly-liquid investments that are readily convertible into cash with original maturities of three months or less when purchased and as of June 30, 2023 and December 31, 2022 included investments in money market funds. The Company maintains its cash and cash equivalent balances at domestic financial institutions. Bank deposits with US banks are insured up to $250 by the Federal Deposits Insurance Corporation. The Company had an uninsured cash balances of $4,302 at June 30, 2023. The Company’s cash balance as of December 31, 2022 was fully insured.

Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820, Fair Value Measurement, (ASC 820) establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820 are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

As of June 30, 2023, the Company’s financial instruments included cash, cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and certain liability classified warrants. The carrying amounts reported in the balance sheets for cash, cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair value based on the short-term maturity of these instruments. The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. At June 30, 2023, there were no financial assets or liabilities measured at fair value on a recurring basis other than the liability classified warrants.

In May 2022, Vallon issued warrants in connection with a securities purchase agreement. Vallon evaluated the warrants in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC 815-40), and concluded that a provision in the warrants related to the reduction of the exercise price in certain circumstances precludes the warrants from being accounted for as components of equity. As a result, the warrants are recorded as a liability on the balance sheet. Vallon recorded the fair value of the warrants upon issuance using a Black-Scholes valuation model.

The Company is required to revalue the warrants at each reporting date with any changes in fair value recorded in its statement of operations. The valuation of the warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable. The change in the fair value of the Level 3 warrants liabilities is reflected in the statement of operations for the six months ended June 30, 2023.

Deferred Stock Issuance Costs

Deferred stock issuance costs represent incremental legal costs incurred that are directly attributable to proposed offerings of securities. The costs are charged against the gross proceeds of the respective offering upon closing.

Debt Discounts

The relative fair values of warrants and common shares issued and call option rights assigned in connection with principal advances under promissory notes, the increases in fair values of embedded conversion options in connection with convertible promissory note

modifications, and the intrinsic values of non-contingent beneficial conversion features were recorded as debt discounts that are amortized as additional interest expense over the estimated terms of the notes using the effective interest method.

Debt Issuance Costs

Debt issuance costs represent incremental legal costs and other costs incurred that are directly attributable to issuing debt. The costs are included as a direct reduction of the carrying amount of the respective liability and are amortized as additional interest expense over the estimated term of the debt using the effective interest method.

Stock-Based Compensation

The Company recognizes expense for employee and non-employee stock-based compensation in accordance with ASC Topic 718, Stock-Based Compensation (ASC 718). ASC 718 requires that such transactions be accounted for using a fair value-based method. The estimated fair value of the options is amortized over the vesting period, based on the fair value of the options on the date granted, and is calculated using the Black-Scholes option-pricing model. The Company accounts for forfeitures as incurred. In considering the fair value of the underlying stock when the Company granted options, the Company considered several factors including the fair values established by market transactions. Stock option-based compensation includes estimates and judgments of when stock options might be exercised and stock price volatility. The timing of option exercises is out of the Company's control and depends upon a number of factors including the Company's market value and the financial objectives of the option holders. These estimates can have a material impact on the stock compensation expense but will have no impact on the cash flows. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period the estimates are revised. The Company uses the expected term, rather than the contractual term, for both employee and consultant options issued.

Net Loss Per Common Share

Basic and diluted net loss per common share are calculated by dividing the net loss by the applicable weighted-average number of common shares outstanding during the period. As the Company had a net loss in each of the three and six months ended June 30, 2023 and 2022, diluted net loss per common share is the same as basic net loss per common share for the period because the effects of potentially dilutive securities are antidilutive.

Common stock equivalents excluded from the diluted net loss per common share calculations are as follows:

	June 30,
	2023	2022
Stock options	100,459	89,472
Warrants	3,688,449	10,067
Restricted stock with repurchase rights	164,038	164,038
Stock subject to put right	—	7,816
Convertible promissory note	—	143,544
	3,952,946	414,937

Recent Accounting Pronouncements

The Company considered the applicability and impact of all ASUs issued during the quarter ended June 30, 2023 and each was determined to be either not applicable or expected to have minimal impact on these financial statements.

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MERGER WITH VALLON

6 Months Ended

Jun. 30, 2023

Business Combination and Asset Acquisition [Abstract]

MERGER WITH VALLON

MERGER WITH VALLON

On April 21, 2023, pursuant to the Merger Agreement, Merger Sub was merged with and into Private GRI, with Private GRI surviving the Merger as a wholly owned subsidiary of the Company. In connection with the Closing, the Company amended its certificate of incorporation and bylaws to change its name from “Vallon Pharmaceuticals, Inc.” to “GRI Bio, Inc.”

At the Effective Time:

(a)Each share of Private GRI’s common stock outstanding immediately prior to the Effective Time, including any shares of Private GRI’s common stock issued pursuant to the Equity SPA automatically converted solely into the right to receive a number of shares of the Company’s common stock equal to the Exchange Ratio.

(b)Each option to purchase shares of Private GRI’s common stock (each, a GRI Option) outstanding and unexercised immediately prior to the Effective Time under the GRI Bio, Inc. 2015 Equity Incentive Plan (the GRI Plan), whether or not vested, converted into and became an option to purchase shares of the Company’s common stock, and the Company assumed the GRI Plan and each such GRI Option in accordance with the terms of the GRI Plan (the Assumed Options). The number of shares of he Company’s common stock subject to each Assumed Option was determined by multiplying (i) the number of shares of Private GRI’s common stock that were subject to such GRI Option, as in effect immediately prior to the Effective Time, by (ii) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of he Company’s common stock. The per share exercise price for the he Company’s common stock issuable upon exercise of each Assumed Option was determined by dividing (A) the per share exercise price of such Assumed Option, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio and rounding the resulting per share exercise price up to the nearest whole cent. Any restriction on the exercise of any Assumed Option continued in full force and effect and the term, exercisability, vesting schedule, and any other provisions of such Assumed Option otherwise remained unchanged.

(c)Each warrant to purchase shares of Private GRI’s common stock outstanding immediately prior to the Effective Time other than the Bridge Warrants (as defined below) (the GRI Warrants), was assumed by the Company and converted into a warrant to purchase shares of the Company’s common stock (the Assumed Warrants) and thereafter (i) each Assumed Warrant became exercisable solely for shares of the Company’s common stock; (ii) the number of shares of the Company’s common stock subject to each Assumed Warrant was determined by multiplying (A) the number of shares of Private GRI’s common stock that were subject to such GRI Warrant, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio, and rounding the resulting number down to the nearest whole number of shares of the Company’s common stock; (iii) the per share exercise price for shares of the Company’s common stock issuable upon exercise of each Assumed Warrant was determined by dividing (A) the exercise price per share of Private GRI’s common stock subject to such GRI Warrant, as in effect immediately prior to the Effective Time, by (B) the Exchange Ratio, and rounding the resulting exercise price up to the nearest whole cent.

(d)The Bridge Warrants (Note 8) were exchanged for warrants (the Exchange Warrants) to purchase an aggregate of 421,589 shares of the Company’s common stock. The Exchange Warrants contain substantively similar terms to the Bridge Warrants, and have an initial exercise price equal to $14.73 per share.

(e)All rights with respect to Private GRI restricted stock awards were assumed by the Company and converted into Company restricted stock awards with the number of shares subject to each restricted stock award multiplied by the Exchange Ratio and rounding the resulting number down to the nearest whole number of shares of the Company’s common stock. The term, exercisability, vesting schedule and other provisions of the Private GRI restricted stock awards otherwise remained unchanged.

The Merger is accounted for as a reverse recapitalization under U.S. GAAP because the primary assets of Vallon were cash and cash equivalents. For accounting purposes, GRI has been determined to be the accounting acquirer based upon the terms of the Merger and other factors including: (i) the equity holders of Private GRI immediately prior to the Merger owned, or held rights to acquire, in the aggregate approximately 85% of the outstanding shares of the Company’s common stock and the Company’s stockholders immediately prior to the Merger owned approximately 15% of the outstanding shares of the Company’s common stock (ii) Private GRI holds the majority (4 out of 5) of board seats of the combined company, and (iii) Private GRI’s management holds the majority of

key positions in the management of the combined company. Immediately after the Merger, there were 2,956,354 shares of the Company’s common stock outstanding.

The following table shows the net liabilities assumed in the Merger:

	April 21, 2023
Cash and cash equivalents	$	941
Prepaid and other assets	310
Accounts payable and accrued expenses	(4,190)
Total net liabilities assumed	(2,939)
Plus: Transaction costs	(2,984)
Total net liabilities assumed plus transaction costs	$	(5,923)

In addition to the transactions costs noted above, at the Effective Time, 30,542 shares of the Company’s common stock were issued to Private GRI’s financial advisor for services related to the Merger.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The Company applies the guidance in ASC 820 to account for financial assets and liabilities measured on a recurring basis. Fair value is measured as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability.

The Company uses a fair value hierarchy, which distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs). The guidance requires that fair value measurements be classified and disclosed in one of the following 3 categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities; and

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each reporting period. There were no transfers between Level 1, 2 and 3 during the six months ended June 30, 2023.

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2023:

	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Liabilities:
Warrant liability	$	—	$	—	$	63
Total liabilities	$	—	$	—	$	63

The following table presents the changes is the fair value of the Level 3 liability:

	Warrant Liability
Fair value as of December 31, 2022	$	185
Change in valuation	(122)
Fair value as of June 30, 2023	$	63

The Black-Scholes valuation model was used to estimate the fair value of the warrants with the following weighted-average assumptions:

	June 30, 2023	December 31, 2022
Volatility	167.1 %	139.9 %
Expected term in years	2.5	2.5
Dividend rate	0.0 %	0.0 %
Risk-free interest rate	4.68 %	4.32 %

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PROPERTY AND EQUIPMENT

6 Months Ended

Jun. 30, 2023

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

	June 30, 2023		December 31, 2022
Computer equipment	$	21	$	13
Furniture and fixtures	12		13
	33		26
Accumulated depreciation	(24)		(22)
	$	9	$	4

Depreciation expense related to property and equipment was $2 and $1 for the six months ended June 30, 2023 and 2022, respectively.

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ACCRUED EXPENSES

6 Months Ended

Jun. 30, 2023

Payables and Accruals [Abstract]

ACCRUED EXPENSES

ACCRUED EXPENSES

Accrued expenses consist of the following:

	June 30, 2023		December 31, 2022
Research and development	$	143	$	—
General and administrative	188		—
Payroll and related	862		36
Total accrued expenses	$	1,193	$	36

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PROMISSORY NOTES

6 Months Ended

Jun. 30, 2023

Debt Disclosure [Abstract]

PROMISSORY NOTES

PROMISSORY NOTES

Bridge Financing

In connection with signing the Merger Agreement, Private GRI entered into a Securities Purchase Agreement, dated as of December 13, 2022 (Bridge SPA), with Altium Growth Fund, LP (the Investor), pursuant to which Private GRI issued senior secured promissory notes (Bridge Notes) in the aggregate principal amount of $3,333, in exchange for an aggregate purchase price of $2,500.

The Bridge Notes were issued in two closings: (i) the first closing for $1,667 in aggregate principal amount (in exchange for an aggregate purchase price of $1,250) closed on December 14, 2022; and (ii) the second closing for $1,667 in aggregate principal amount (in exchange for an aggregate purchase price of $1,250) closed on March 9, 2023. The Bridge Notes were secured by a lien on all of the Company’s assets.

In addition, upon the funding of each tranche, the Investor received warrants to purchase an aggregate of 1,252,490 shares of the Company’s common stock (the Bridge Warrants). The Bridge Warrants had an exercise price of $1.33 per share, were exercisable at any time on or after the applicable issuance date and had a term of 60 months from the date all shares underlying the Bridge Warrants were freely tradable.

The $1,250 of proceeds from the first closing were allocated to the Bridge Notes and Bridge Warrants based on their relative fair values as of the commitment date, resulting in an allocation of $679 and $571, respectively. The $1,250 of proceeds from the second closing were allocated to the Bridge Notes and Bridge Warrants based on their relative fair values as of the commitment date, resulting in an allocation of $718 and $532, respectively.

In addition to the Bridge SPA, and also in connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered into the Equity SPA (Note 9) pursuant to which the Investor agreed to invest $12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI’s common stock immediately prior to the consummation of the Merger.

On April 21, 2023, the Company completed the Merger and the outstanding principal and accrued interest on the Bridge Notes was cancelled and the Bridge Warrants were exchanged for the Exchange Warrants. The Exchange Warrants contain substantively similar terms to the Bridge Warrants, and have an initial exercise price equal to $14.73 per share subject to adjustments for splits and recapitalization events.

The Bridge Notes were accounted for as share-settled debt under the accounting guidance in ASC 835-30 and, as such, the initial net carrying amounts were accreted to the redemption amounts using the effective interest method. The Company incurred debt issuance costs of $205 during the year ended December 31, 2022 and $90 during the six months ended June 30, 2023 related to its issuance of debt under the Bridge SPA. Unamortized debt discounts and debt issuance costs totaled $1,065 as of December 31, 2022. Interest expense stemming from amortization of debt discounts and issuance costs was $1,161 and $2,104 for the three and six months ended June 30, 2023, respectively.

TEP Note

In November 2018, Private GRI and TEP Biotech, LLC (TEP) entered into a convertible note and warrant purchase agreement pursuant to which TEP agreed to fund up to $5,000 to Private GRI in exchange for a convertible promissory note (the TEP Note) and a warrant to purchase up to 25,245 shares of Private GRI’s common stock at an exercise price of $0.27 per share. The TEP Note was secured by Private GRI’s assets and accrued simple interest on the outstanding principal balance at a rate of 12% per annum. The total outstanding principal and accrued interest balance was initially due on the earlier of Private GRI’s next financing, as defined, and May 2, 2020. The initial $2,500 tranche under the TEP Note was funded upon execution of the agreement in November 2018.

In December 2019, Private GRI and TEP amended the TEP Note. In lieu of TEP funding the second $2,500 tranche, TEP made a first additional advance of $500 to Private GRI in exchange for a convertible promissory note, a warrant to purchase up to 17,269 shares of Private GRI’s common stock at an exercise price of $0.27 per share, and the assignment of Private GRI’s rights under a certain call option agreement. The call option agreement, which was entered into in 2015, provided Private GRI with the right to repurchase up to 39,720 shares of Private GRI’s common stock held by the counterparty for $26.74 per share at any time before April 1, 2025.

In July 2020, the TEP Note maturity date was extended to August 31, 2020, and in March 2021, TEP agreed to forbear on its available right to exercise remedies on account of Private GRI’s failure to pay the past due principal and accrued interest balance until October 31, 2021.

In May 2021, Private GRI and TEP amended the TEP Note, and TEP agreed to make a second additional advance of $500 to Private GRI in exchange for a convertible promissory note with separate, modified conversion options.

In July 2022, Private GRI and TEP further amended the TEP Note, and TEP agreed to make a third additional advance of $125 to Private GRI in exchange for a convertible promissory note and a warrant to purchase up to 1,169 shares of Private GRI’s common stock at an exercise price of $0.27 per share.

In October 2022, Private GRI and TEP entered into a conversion agreement pursuant to which, effective upon the full execution of the Merger Agreement (Note 4), $3,500 of outstanding principal under the TEP Note together with $650 of related accrued interest was to

automatically convert into 155,210 shares of Private GRI’s common stock at a conversion price of $26.74 per share. Further, upon the closing of the first tranche of the Bridge Notes, Private GRI was to repay, in cash, the $125 third additional advance under the TEP Note along with the $15 of related accrued interest. Upon issuance of the 155,210 conversion shares and payment of the $140 principal and accrued interest balance, Private GRI would fully satisfy all of its obligations under the TEP Note.

In December 2022, upon the full execution of the Merger Agreement and the closing of the first tranche of the Bridge Notes Private GRI issued the 155,210 conversion shares and paid the $140 principal and accrued interest balance as per the terms of the conversion agreement. The share numbers and exercise or conversion prices in this section of Note 8 entitled “TEP Note” reflect the Exchange Ratio retroactively.

As part of the conversion, the $4,150 of converted principal and accrued interest, along with $863 of related forfeited accrued interest through the conversion date, were credited to stockholders’ deficit. Interest expense recognized on the TEP Note was $107 and $210 for the three and six months ended June 30, 2022.

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STOCKHOLDERS’ EQUITY

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

STOCKHOLDERS’ EQUITY

STOCKHOLDERS’ EQUITY

Common Stock

In connection with signing the Merger Agreement, Vallon, Private GRI and the Investor entered the Equity SPA pursuant to which the Investor agreed to invest $12,250 in cash and cancel any outstanding principal and accrued interest on the Bridge Notes in return for the issuance of shares of Private GRI’s common stock immediately prior to the consummation of the Merger. Pursuant to the Equity SPA, immediately prior to the Closing, Private GRI issued 6,787,219 shares of Private GRI’s common stock (the Initial Shares) to the Investor and 27,148,877 shares of Private GRI’s common stock (the Additional Shares) into escrow with an escrow agent for net proceeds of $11,704, after deducting offering expenses of $546.

At the closing, pursuant to the Merger, the Initial Shares converted into an aggregate of 253,842 shares of the Company’s common stock and the Additional Shares converted into an aggregate of 1,015,368 shares of the Company’s common stock. On May 8, 2023, in accordance with the terms of the Equity SPA, the Company and the Investor authorized the escrow agent to, subject to beneficial ownership limitations, disburse to the Investor all of the shares of the Company’s common stock issued in exchange for the Additional Shares.

Redeemable Common Stock

In November 2018, Private GRI entered into an agreement with a stockholder pursuant to which the stockholder had the right to require Private GRI to purchase all or a portion of 7,816 shares of Private GRI’s common stock held by the stockholder for $15.88 per share (the Put Right). The Put Right was exercisable (i) for a period commencing thirty days prior to the day Private GRI completed an equity or debt financing and ending fifteen business days thereafter, or (ii) at any time following a breach of the agreement by Private GRI.

Management assessed the Put Right and determined that (i) it was not freestanding and, therefore, was not required to be classified as a liability and (ii) it could be exercised by the stockholder at any time, which was not within Private GRI’s control. Therefore, the common shares subject to the Put Right were classified in mezzanine equity. In December 2022, the stockholder exercised the Put Right and Private GRI redeemed the 7,816 shares of Private GRI’s common stock for $124 ($15.88 per share). The redeemed shares were retired by Private GRI. The share numbers and exercise or conversion prices in this section of Note 9 entitled “Redeemable Common Stock” reflect the Exchange Ratio retroactively.

Common Stock Warrants

Pursuant to the Equity SPA, on May 8, 2023, the Company issued to the Investor (i) Series A-1 Warrants to purchase 1,269,210 shares of the Company’s common stock at an exercise price of $13.51, (ii) Series A-2 Warrants to purchase 1,142,289 shares of the Company’s common stock at an exercise price of $14.74 , and (iii) Series T Warrants to purchase (x) 814,467 shares of the Company’s common stock at an exercise price of $12.28 and (y) upon exercise of the Series T Warrants, 814,467 additional Series

A-1 Warrants and Series A-2 Warrants, each to purchase 814,467 shares of the Company’s common stock at an exercise price of $13.51 and $14.74, respectively (collectively, the Equity Warrants).

The Series A-1 Warrants have a term of 60 months from the date all shares underlying the Series A-1 Warrants are freely tradable. The A-2 warrants have a 2-year term and expire in June 2025. Series T Warrants have a term of 24 months from the date all shares underlying Series T Warrants are freely tradable. The Company may force the exercise of the Series T Warrants subject to the satisfaction of certain equity conditions. The Equity Warrants include certain contingent cashless exercise features and contain certain other rights with regard to asset distributions and fundamental transactions. The exercise price of the Series A-1 Warrants is subject to adjustment for certain dilutive issuances, and all of the Equity Warrants are subject to standard antidilution adjustments. All of the Equity Warrants were outstanding as of June 30, 2023. The Equity Warrants were classified as equity and the allocated fair value of $5,675 is included in additional paid in capital.

Pursuant to the Bridge SPA, upon the funding of each tranche of the Bridge Note, the Investor received the Bridge Warrants. The Bridge Warrants had an exercise price of $1.33 per share, were exercisable at any time on or after the applicable issuance date and had a term of 60 months from the date all shares underlying the Bridge Warrants are freely tradable. Upon the completion of the Merger the Bridge Warrants were exchanged for the Exchange Warrants to purchase an aggregate of 421,589 shares of the Company’s common stock. The Exchange Warrants contain substantively similar terms to the Bridge Warrants, and have an initial exercise price equal to $14.73 per share subject to adjustments for splits and recapitalization events. All of the Bridge Warrants were outstanding as of June 30, 2023. The Bridge Warrants were classified as equity and the allocated fair value of $2,860 is included in additional paid in capital.

In connection with the Closing, Private GRI granted its financial advisor warrants (the Advisor Warrants) to purchase shares of Private GRI’s common stock, which, at the Effective Time, became exercisable for an aggregate of 2,402 shares of the Company’s common stock at an exercise price of $61.39 per share. The Advisor Warrants have a five-year term. All of the Advisor Warrants were outstanding as of June 30, 2023. The Advisor Warrants were classified as equity and the fair value of $18 is included in additional paid in capital.

The Black-Scholes option-pricing model was used to estimate the fair value of the Equity Warrants, the Exchange Warrants and the Advisor Warrants with the following weighted-average assumptions:

Volatility	167.6 %
Expected term in years	1.69
Dividend rate	0.0 %
Risk-free interest rate	4.37 %

As of June 30, 2023, the Company had the following warrants outstanding to purchase common stock.

Number of Shares	Exercise Price per Share	Expiration Date
8,629	$34.76	November 2023
1,438	$34.76	December 2023
1,142,289	$14.74	June 2025
3,758	$300.00	February 2026
24,667	$28.15	May 2027
1,168	$0.01	July 2027
2,402	$61.39	April 2028
421,590	$14.73	60 months after registration date
1,269,210	$13.51	60 months after registration date
814,467	$12.28	24 months after registration date

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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

2015 Equity Incentive Plan

Private GRI adopted the GRI Bio, Inc. 2015 Equity Incentive Plan, as amended (the Private GRI Plan), that provided Private GRI with the ability to grant stock options, restricted stock awards and other equity-based awards to employees, directors, and consultants. Stock options granted under the Private GRI Plan generally had a contractual life of up to 10 years. Upon completion of the Merger, the Company assumed the Private GRI Plan and the outstanding and unexercised options issued thereunder, and ceased granting awards under the Private GRI Plan.

Amended and Restated 2018 Equity Incentive Plan

On April 21, 2023, the stockholders of the Company approved the Amended and Restated GRI Bio, Inc. 2018 Equity Incentive Plan, formerly the Vallon Pharmaceuticals, Inc. 2018 Equity Incentive Plan (the A&R 2018 Plan). The A&R 2018 Plan had previously been approved by the Company’s board of directors, subject to stockholder approval. The A&R 2018 Plan became effective on April 21, 2023, with the stockholders approving the amendment to the A&R 2018 Plan to, among other things, (i) to increase the aggregate number of shares by 168,905 shares to 216,666 shares of the Company’s common stock for issuance as awards under the A&R 2018 Plan, (ii) to extend the term of the A&R 2018 Plan through January 1, 2033, (iii) to prohibit any action that would be treated as a “repricing” of an award without further approval by the stockholders of Company, and (iv) to revise the limits on awards to non-employee directors.

The A&R 2018 Plan provides the Company with the ability to grant stock options, restricted stock and other equity-based awards to employees, directors and consultants. Stock options granted by Vallon generally have a contractual life of up to 10 years. As of June 30, 2023, 100,459 shares of the Company's common stock were authorized to be issued under the A&R 2018 Plan, and 116,207 shares were reserved for future awards under the A&R 2018 Plan.

The Company recorded stock-based compensation related to stock options issued under the A&R 2018 Plan in the following expense categories of its accompanying statements of operations for the three and six months ended June 30, 2023 and 2022:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	—	$	—	$	—	$	—
General and administrative	13		—		26		—
Total	$	13	$	—	$	26	$	—

The Company measures equity-based awards granted to employees, and non-employees based on their fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period or performance-based period, which is generally the vesting period of the respective award. The measurement date for service-based equity awards is the date of grant, and equity-based compensation costs are recognized as expense over the requisite service period, which is the vesting period for certain

performance-based awards. The Company records expense for performance-based awards if it concludes that it is probable that the performance condition will be achieved.

The table below represents the activity of stock options granted to employees and non-employees for the six months ended June 30, 2023:

	Number of options	Weighted average exercise price		Weighted average remaining contractual term (years)
Outstanding at December 31, 2022	112,612	$	39.77	4.71
Granted	—	—
Exercised	—	—
Forfeited/Cancelled	(12,153)	$	130.84
Outstanding at June 30, 2023	100,459	$	28.75	4.73
Exercisable at June 30, 2023	100,459	$	28.75	4.73

The Black-Scholes option-pricing model was used to estimate the grant date fair value of each stock option grant at the time of grant using the following weighted-average assumptions:

	For the Six Months Ended June 30, 2022
Volatility	90.39		%
Expected term in years	5.98
Dividend rate	0.00		%
Risk-free interest rate	2.00		%
Fair value of option on grant date	$	3.86

No options were granted during the six months ended June 30, 2023.

As of June 30, 2023, the unrecognized compensation cost related to unvested stock options expected to vest was $280. This unrecognized compensation is expected to be recognized over a weighted-average amortization period of 3.35 years.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Employment Agreements

The Company has entered into employment contracts with its officers that provide for severance and continuation of benefits in the event of termination of employment by the Company without cause or by the employee for good reason. In addition, in the event of termination of employment following a change in control, the vesting of certain equity awards may be accelerated.

Separation and Release Agreement

In connection with the resignation of David Baker, the Company’s Former Chief Executive Officer, pursuant to the Merger, the Company and Mr. Baker entered into a Separation and Release Agreement on April 21, 2023 (the Separation Agreement). Pursuant to the terms of the Separation Agreement and his employment agreement, Mr. Baker will receive continuation of his current salary and certain COBRA benefits for 18 months payable in accordance with the Company’s payroll practices. Mr. Baker also received a lump sum payment equal to 150% of his target bonus and agreed to reduce amounts payable with respect to certain future milestone payments.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Basis of Accounting

The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial periods and pursuant to the rules of the Securities and Exchange Commission (the SEC). Any reference in the accompanying unaudited interim financial statements to “authoritative guidance” is meant to refer to GAAP as found in the Accounting Standards Codification (ASC) and Accounting Standards Updates (ASU) of the Financial Accounting Standards Board (FASB). The December 31, 2022 balance sheet was derived from the Company’s audited financial statements.

Use of Estimates

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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates and assumptions are primarily made in relation to the valuation of share options, the embedded derivative of convertible notes, warrant issuance and subsequent revaluations, valuation allowances relating to deferred tax assets, revenue recognition, accrued expenses and estimation of the incremental borrowing rate for the finance lease. If actual results differ from the Company’s estimates, or to the extent these estimates are adjusted

in future periods, the Company’s results of operations could either benefit from, or be adversely affected by, any such change in estimate.

Cash and Cash Equivalents

Cash and Cash Equivalents

Cash equivalents are highly-liquid investments that are readily convertible into cash with original maturities of three months or less when purchased and as of June 30, 2023 and December 31, 2022 included investments in money market funds. The Company maintains its cash and cash equivalent balances at domestic financial institutions. Bank deposits with US banks are insured up to $250 by the Federal Deposits Insurance Corporation. The Company had an uninsured cash balances of $4,302 at June 30, 2023. The Company’s cash balance as of December 31, 2022 was fully insured.

Fair Value Measurements

Fair Value Measurements

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase consistency and comparability in fair value measurements and related disclosures, ASC 820, Fair Value Measurement, (ASC 820) establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The three levels of fair value hierarchy defined by ASC 820 are described below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liabilities.

Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

As of June 30, 2023, the Company’s financial instruments included cash, cash equivalents, prepaid expenses and other current assets, accounts payable, accrued expenses and certain liability classified warrants. The carrying amounts reported in the balance sheets for cash, cash equivalents, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair value based on the short-term maturity of these instruments. The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer. At June 30, 2023, there were no financial assets or liabilities measured at fair value on a recurring basis other than the liability classified warrants.

In May 2022, Vallon issued warrants in connection with a securities purchase agreement. Vallon evaluated the warrants in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC 815-40), and concluded that a provision in the warrants related to the reduction of the exercise price in certain circumstances precludes the warrants from being accounted for as components of equity. As a result, the warrants are recorded as a liability on the balance sheet. Vallon recorded the fair value of the warrants upon issuance using a Black-Scholes valuation model.

The Company is required to revalue the warrants at each reporting date with any changes in fair value recorded in its statement of operations. The valuation of the warrants is considered under Level 3 of the fair value hierarchy due to the need to use assumptions in the valuation that are both significant to the fair value measurement and unobservable. The change in the fair value of the Level 3 warrants liabilities is reflected in the statement of operations for the six months ended June 30, 2023.

Deferred Stock Issuance Costs

Deferred Stock Issuance Costs

Deferred stock issuance costs represent incremental legal costs incurred that are directly attributable to proposed offerings of securities. The costs are charged against the gross proceeds of the respective offering upon closing.

Debt Discounts and Debt Issuance Costs

Debt Discounts

The relative fair values of warrants and common shares issued and call option rights assigned in connection with principal advances under promissory notes, the increases in fair values of embedded conversion options in connection with convertible promissory note

modifications, and the intrinsic values of non-contingent beneficial conversion features were recorded as debt discounts that are amortized as additional interest expense over the estimated terms of the notes using the effective interest method.

Debt Issuance Costs

Debt issuance costs represent incremental legal costs and other costs incurred that are directly attributable to issuing debt. The costs are included as a direct reduction of the carrying amount of the respective liability and are amortized as additional interest expense over the estimated term of the debt using the effective interest method.

Stock-Based Compensation

Stock-Based Compensation

The Company recognizes expense for employee and non-employee stock-based compensation in accordance with ASC Topic 718, Stock-Based Compensation (ASC 718). ASC 718 requires that such transactions be accounted for using a fair value-based method. The estimated fair value of the options is amortized over the vesting period, based on the fair value of the options on the date granted, and is calculated using the Black-Scholes option-pricing model. The Company accounts for forfeitures as incurred. In considering the fair value of the underlying stock when the Company granted options, the Company considered several factors including the fair values established by market transactions. Stock option-based compensation includes estimates and judgments of when stock options might be exercised and stock price volatility. The timing of option exercises is out of the Company's control and depends upon a number of factors including the Company's market value and the financial objectives of the option holders. These estimates can have a material impact on the stock compensation expense but will have no impact on the cash flows. The estimation of share-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period the estimates are revised. The Company uses the expected term, rather than the contractual term, for both employee and consultant options issued.

Net Loss Per Common Share

Net Loss Per Common Share

Basic and diluted net loss per common share are calculated by dividing the net loss by the applicable weighted-average number of common shares outstanding during the period. As the Company had a net loss in each of the three and six months ended June 30, 2023 and 2022, diluted net loss per common share is the same as basic net loss per common share for the period because the effects of potentially dilutive securities are antidilutive.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

The Company considered the applicability and impact of all ASUs issued during the quarter ended June 30, 2023 and each was determined to be either not applicable or expected to have minimal impact on these financial statements.

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2023

Accounting Policies [Abstract]

Schedule of Common Stock Equivalents Excluded From Diluted Net Loss Per Share Calculation

Common stock equivalents excluded from the diluted net loss per common share calculations are as follows:

	June 30,
	2023	2022
Stock options	100,459	89,472
Warrants	3,688,449	10,067
Restricted stock with repurchase rights	164,038	164,038
Stock subject to put right	—	7,816
Convertible promissory note	—	143,544
	3,952,946	414,937

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MERGER WITH VALLON (Tables)

6 Months Ended

Jun. 30, 2023

Business Combination and Asset Acquisition [Abstract]

Schedule of the Net Liabilities Assumed in the Merger

The following table shows the net liabilities assumed in the Merger:

	April 21, 2023
Cash and cash equivalents	$	941
Prepaid and other assets	310
Accounts payable and accrued expenses	(4,190)
Total net liabilities assumed	(2,939)
Plus: Transaction costs	(2,984)
Total net liabilities assumed plus transaction costs	$	(5,923)

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Liabilities Measured on Recurring Basis

The following table presents, for each of the fair value hierarchy levels required under ASC 820, the Company’s liabilities that are measured at fair value on a recurring basis at June 30, 2023:

	Quoted Prices in Active Markets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Other Unobservable Inputs (Level 3)
Liabilities:
Warrant liability	$	—	$	—	$	63
Total liabilities	$	—	$	—	$	63

Schedule of the Changes is the Fair Value

The following table presents the changes is the fair value of the Level 3 liability:

	Warrant Liability
Fair value as of December 31, 2022	$	185
Change in valuation	(122)
Fair value as of June 30, 2023	$	63

Schedule of the Fair Value of the Warrants

The Black-Scholes valuation model was used to estimate the fair value of the warrants with the following weighted-average assumptions:

	June 30, 2023	December 31, 2022
Volatility	167.1 %	139.9 %
Expected term in years	2.5	2.5
Dividend rate	0.0 %	0.0 %
Risk-free interest rate	4.68 %	4.32 %

The Black-Scholes option-pricing model was used to estimate the fair value of the Equity Warrants, the Exchange Warrants and the Advisor Warrants with the following weighted-average assumptions:

Volatility	167.6 %
Expected term in years	1.69
Dividend rate	0.0 %
Risk-free interest rate	4.37 %

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PROPERTY AND EQUIPMENT (Tables)

6 Months Ended

Jun. 30, 2023

Property, Plant and Equipment [Abstract]

Schedule of Property and Equipment

	June 30, 2023		December 31, 2022
Computer equipment	$	21	$	13
Furniture and fixtures	12		13
	33		26
Accumulated depreciation	(24)		(22)
	$	9	$	4

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ACCRUED EXPENSES (Tables)

6 Months Ended

Jun. 30, 2023

Payables and Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses consist of the following:

	June 30, 2023		December 31, 2022
Research and development	$	143	$	—
General and administrative	188		—
Payroll and related	862		36
Total accrued expenses	$	1,193	$	36

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STOCKHOLDERS’ EQUITY (Tables)

6 Months Ended

Jun. 30, 2023

Equity [Abstract]

Schedule of the Fair Value of the Warrants

The Black-Scholes valuation model was used to estimate the fair value of the warrants with the following weighted-average assumptions:

	June 30, 2023	December 31, 2022
Volatility	167.1 %	139.9 %
Expected term in years	2.5	2.5
Dividend rate	0.0 %	0.0 %
Risk-free interest rate	4.68 %	4.32 %

The Black-Scholes option-pricing model was used to estimate the fair value of the Equity Warrants, the Exchange Warrants and the Advisor Warrants with the following weighted-average assumptions:

Volatility	167.6 %
Expected term in years	1.69
Dividend rate	0.0 %
Risk-free interest rate	4.37 %

Schedule of Warrants Outstanding to Purchase Common Stock

As of June 30, 2023, the Company had the following warrants outstanding to purchase common stock.

Number of Shares	Exercise Price per Share	Expiration Date
8,629	$34.76	November 2023
1,438	$34.76	December 2023
1,142,289	$14.74	June 2025
3,758	$300.00	February 2026
24,667	$28.15	May 2027
1,168	$0.01	July 2027
2,402	$61.39	April 2028
421,590	$14.73	60 months after registration date
1,269,210	$13.51	60 months after registration date
814,467	$12.28	24 months after registration date

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STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Stock-based Compensation Expense

The Company recorded stock-based compensation related to stock options issued under the A&R 2018 Plan in the following expense categories of its accompanying statements of operations for the three and six months ended June 30, 2023 and 2022:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	—	$	—	$	—	$	—
General and administrative	13		—		26		—
Total	$	13	$	—	$	26	$	—

Schedule of Activity of Stock Options

The table below represents the activity of stock options granted to employees and non-employees for the six months ended June 30, 2023:

	Number of options	Weighted average exercise price		Weighted average remaining contractual term (years)
Outstanding at December 31, 2022	112,612	$	39.77	4.71
Granted	—	—
Exercised	—	—
Forfeited/Cancelled	(12,153)	$	130.84
Outstanding at June 30, 2023	100,459	$	28.75	4.73
Exercisable at June 30, 2023	100,459	$	28.75	4.73

Schedule of Valuation Assumptions

The Black-Scholes option-pricing model was used to estimate the grant date fair value of each stock option grant at the time of grant using the following weighted-average assumptions:

	For the Six Months Ended June 30, 2022
Volatility	90.39		%
Expected term in years	5.98
Dividend rate	0.00		%
Risk-free interest rate	2.00		%
Fair value of option on grant date	$	3.86

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ORGANIZATION AND DESCRIPTION OF BUSINESS (Details)	Apr. 21, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Reverse stock split	0.0333
Common stock, exchange ratio	0.0374

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LIQUIDITY (Details) - USD ($) $ in Thousands		6 Months Ended
	Apr. 21, 2023	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit		$ (27,392)		$ (18,496)
Cash and cash equivalents		$ 4,799		$ 9
Related Party Transaction [Line Items]
Common stock, shares issued (in shares)		2,956,354		999,748
Proceeds from issuance of common stock in pre-closing financing	$ 11,704	$ 12,250	$ 0
Offering expenses	$ 546
Common Stock
Related Party Transaction [Line Items]
Conversion of stock (in shares)	253,842
Additional shares converted into common stock (in shares)	1,015,368
GRI Bio, Inc
Related Party Transaction [Line Items]
Common stock placed into escrow (in shares)	27,148,877
Investor
Related Party Transaction [Line Items]
Investment in cash	$ 12,250
Investor | Private GRI
Related Party Transaction [Line Items]
Common stock, shares issued (in shares)	6,787,219

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) $ in Thousands	Jun. 30, 2023 USD ($)
Accounting Policies [Abstract]
FDIC insured amount	$ 250
Uninsured cash balances	$ 4,302

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BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Diluted Net Loss Per Common Share (Details) - shares	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in usd per share)	3,952,946	414,937
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in usd per share)	100,459	89,472
Warrants
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in usd per share)	3,688,449	10,067
Restricted stock with repurchase rights
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in usd per share)	164,038	164,038
Stock subject to put right
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in usd per share)	0	7,816
Convertible promissory note
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities (in usd per share)	0	143,544

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MERGER WITH VALLON - Narrative (Details) - $ / shares	Apr. 21, 2023	Jun. 30, 2023	Apr. 20, 2023	Dec. 31, 2022	Jul. 31, 2022	Dec. 31, 2019	Nov. 30, 2018
Business Acquisition [Line Items]
Ownership percentage in common stock (as a percent)			15.00%
Common stock, shares issued (in shares)		2,956,354		999,748
Issuance of common stock for reverse recapitalization expenses (in shares)	30,542
Private GRI
Business Acquisition [Line Items]
Warrants granted (in shares)					1,169	17,269	25,245
Warrant exercise price (in usd per share)					$ 0.27	$ 0.27	$ 0.27
Ownership percentage in common stock (as a percent)			85.00%
Exchange Warrants
Business Acquisition [Line Items]
Warrants granted (in shares)	421,589
Warrant exercise price (in usd per share)	$ 14.73

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MERGER WITH VALLON - Schedule of the Net Liabilities Assumed in the Merger (Details) - Private GRI $ in Thousands	Apr. 21, 2023 USD ($)
Business Acquisition [Line Items]
Cash and cash equivalents	$ 941
Prepaid and other assets	310
Accounts payable and accrued expenses	(4,190)
Total net liabilities assumed	(2,939)
Plus: Transaction costs	(2,984)
Total net liabilities assumed plus transaction costs	$ (5,923)

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FAIR VALUE MEASUREMENTS - Schedule of Fair Value, Liabilities Measured on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability	$ 63	$ 0
Quoted Prices in Active Markets (Level 1)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability	0
Total liabilities	0
Significant Other Observable Inputs (Level 2)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability	0
Total liabilities	0
Significant Other Unobservable Inputs (Level 3)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability	63
Total liabilities	$ 63

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FAIR VALUE MEASUREMENTS - Liability Measured at Estimated Fair Value (Details) - Warrant Liability $ in Thousands	6 Months Ended
	Jun. 30, 2023 USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Fair value as of December 31, 2022	$ 185
Change in valuation	(122)
Fair value as of June 30, 2023	$ 63

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FAIR VALUE MEASUREMENTS - Derivative Liability Measurement Inputs (Details) - Weighted Average	Jun. 30, 2023	Dec. 31, 2022
Volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants outstanding, measurement input	1.671	1.399
Expected term in years
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants outstanding, measurement input	2.5	2.5
Dividend rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants outstanding, measurement input	0.000	0.000
Risk-free interest rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrants outstanding, measurement input	0.0468	0.0432

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PROPERTY AND EQUIPMENT - Schedule of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 33	$ 26
Accumulated depreciation	(24)	(22)
Property and equipment, net	9	4
Computer equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	21	13
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 12	$ 13

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PROPERTY AND EQUIPMENT - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 2	$ 1

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ACCRUED EXPENSES (Details) - USD ($) $ in Thousands	Jun. 30, 2023	Dec. 31, 2022
Payables and Accruals [Abstract]
Research and development	$ 143	$ 0
General and administrative	188	0
Payroll and related	862	36
Total accrued expenses	$ 1,193	$ 36

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PROMISSORY NOTES - Bridge Financing (Details) $ / shares in Units, $ in Thousands					3 Months Ended	6 Months Ended
	Apr. 21, 2023 USD ($) $ / shares shares	Mar. 09, 2023 USD ($) $ / shares shares	Dec. 14, 2022 USD ($)	Dec. 13, 2022 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2023 USD ($)	Jun. 30, 2022 USD ($)	May 08, 2023 $ / shares shares	Dec. 31, 2022 USD ($)	Jul. 31, 2022 $ / shares shares	Dec. 31, 2019 $ / shares shares	Nov. 30, 2018 $ / shares shares
Debt Instrument [Line Items]
Proceeds from issuance of notes						$ 1,250	$ 0
Unamortized debt discounts and debt issuance costs									$ 1,065
Amortization of debt discounts and issuance costs					$ 1,161	2,104	$ 0
Bridge Warrants
Debt Instrument [Line Items]
Proceeds from issuance of notes		$ 532	$ 571
Exchange Warrants
Debt Instrument [Line Items]
Warrants granted (in shares) | shares	421,589
Warrant exercise price (in usd per share) | $ / shares	$ 14.73
Bridge SPA
Debt Instrument [Line Items]
Debt instrument, face amount		1,667	1,667
Aggregate purchase price		1,250	1,250
Number of closings				2
Proceeds from issuance of notes		$ 718	$ 679
Debt issuance costs					$ 90	$ 90			$ 205
Private GRI
Debt Instrument [Line Items]
Warrants granted (in shares) | shares										1,169	17,269	25,245
Warrant exercise price (in usd per share) | $ / shares										$ 0.27	$ 0.27	$ 0.27
Investor
Debt Instrument [Line Items]
Investment in cash	$ 12,250
Investor | Bridge Warrants
Debt Instrument [Line Items]
Warrants granted (in shares) | shares		1,252,490						421,589
Warrant exercise price (in usd per share) | $ / shares		$ 1.33						$ 1.33
Warrants, outstanding term		60 months						60 months
Investor | Exchange Warrants
Debt Instrument [Line Items]
Warrant exercise price (in usd per share) | $ / shares								$ 14.73
Investor | Private GRI | Bridge SPA
Debt Instrument [Line Items]
Debt instrument, face amount				$ 3,333
Aggregate purchase price				$ 2,500

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PROMISSORY NOTES - TEP Note (Details) - USD ($)	1 Months Ended						3 Months Ended	6 Months Ended
	Dec. 31, 2022	Oct. 31, 2022	Jul. 31, 2022	May 31, 2021	Dec. 31, 2019	Nov. 30, 2018	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2015
Debt Instrument [Line Items]
Proceeds from issuance of bridge promissory note								$ 1,250,000	$ 0
Common stock, shares issued (in shares)	999,748							2,956,354
Private GRI
Debt Instrument [Line Items]
Warrants granted (in shares)			1,169		17,269	25,245
Warrant exercise price (in usd per share)			$ 0.27		$ 0.27	$ 0.27
Number of shares to be issued upon conversion		155,210
Conversion price (in usd per share)		$ 26.74
Convertible notes, converted, shares issued (in shares)	155,210
Private GRI | Call Option
Debt Instrument [Line Items]
Common stock, shares issued (in shares)										39,720
Call option price (in usd per share)										$ 26.74
Private GRI | Convertible Notes Payable | TEP Note
Debt Instrument [Line Items]
Debt instrument, face amount					$ 2,500,000	$ 5,000,000
Convertible notes interest rate (as a percent)						12.00%
Proceeds from issuance of bridge promissory note			$ 125,000	$ 500,000	$ 500,000	$ 2,500,000
Principal amount of debt to be converted		$ 3,500,000
Amount of accrued interest to be converted		650,000
Long-term debt, gross		125,000
Accrued interest		15,000
Long-term debt, including interest		$ 140,000
Payment of notes payable	$ 140,000
Conversion of convertible notes to common stock	4,150,000
Accrued interest forfeited	$ 863,000
Interest expense							$ 107,000		$ 210,000

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STOCKHOLDERS’ EQUITY - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended	6 Months Ended
	Apr. 21, 2023	Dec. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	May 08, 2023	Mar. 09, 2023	Jul. 31, 2022	Dec. 31, 2019	Nov. 30, 2018
Class of Stock [Line Items]
Common stock, shares issued (in shares)		999,748	2,956,354
Proceeds from issuance of common stock	$ 11,704		$ 12,250	$ 0
Offering expenses	$ 546
Outsanding warrants		$ 0	$ 63
Banker Warrants
Class of Stock [Line Items]
Warrant exercise price (in usd per share)			$ 61.39
Warrants, outstanding term					5 years
Number of shares (in shares)			2,402
Exchange Warrants
Class of Stock [Line Items]
Warrants granted (in shares)	421,589
Warrant exercise price (in usd per share)	$ 14.73
Common Stock
Class of Stock [Line Items]
Conversion of stock (in shares)	253,842
Additional shares converted into common stock (in shares)	1,015,368
GRI Bio, Inc
Class of Stock [Line Items]
Common stock placed into escrow (in shares)	27,148,877
Private GRI
Class of Stock [Line Items]
Stock repurchased during period, shares		7,816
Stock repurchased during period, value		$ 124
Purchase price (in usd per share)		$ 15.88
Warrants granted (in shares)							1,169	17,269	25,245
Warrant exercise price (in usd per share)							$ 0.27	$ 0.27	$ 0.27
Private GRI | Put Option
Class of Stock [Line Items]
Common stock, shares issued (in shares)									7,816
Put right, share price (in usd per share)									$ 15.88
Investor
Class of Stock [Line Items]
Investment in cash	$ 12,250
Investor | Series A-1 Warrants
Class of Stock [Line Items]
Warrants granted (in shares)					1,269,210
Warrant exercise price (in usd per share)					$ 13.51
Warrants, outstanding term					60 months
Investor | Series A-2 Warrants
Class of Stock [Line Items]
Warrants granted (in shares)					1,142,289
Warrant exercise price (in usd per share)					$ 14.74
Warrants, outstanding term					2 years
Investor | Series T Warrants
Class of Stock [Line Items]
Warrants granted (in shares)					814,467
Warrant exercise price (in usd per share)					$ 12.28
Warrants, outstanding term					24 months
Investor | Bridge Warrants
Class of Stock [Line Items]
Warrants granted (in shares)					421,589	1,252,490
Warrant exercise price (in usd per share)					$ 1.33	$ 1.33
Warrants, outstanding term					60 months	60 months
Investor | Exchange Warrants
Class of Stock [Line Items]
Warrant exercise price (in usd per share)					$ 14.73
Investor | Common Stock | Series A-1 Warrants
Class of Stock [Line Items]
Warrants granted (in shares)					814,467
Warrant exercise price (in usd per share)					$ 13.51
Investor | Common Stock | Series A-2 Warrants
Class of Stock [Line Items]
Warrants granted (in shares)					814,467
Warrant exercise price (in usd per share)					$ 14.74
Investor | Additional Paid-in Capital | Equity Warrants
Class of Stock [Line Items]
Outsanding warrants			$ 5,675
Investor | Additional Paid-in Capital | Bridge Warrants
Class of Stock [Line Items]
Outsanding warrants			2,860
Investor | Additional Paid-in Capital | Banker Warrants
Class of Stock [Line Items]
Outsanding warrants			$ 18
Investor | Private GRI
Class of Stock [Line Items]
Common stock, shares issued (in shares)	6,787,219

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STOCKHOLDERS’ EQUITY - Estimate of the Fair Value of the Warrants and Assumptions (Details) - Weighted Average	Jun. 30, 2023	Dec. 31, 2022
Volatility
Class of Stock [Line Items]
Warrants outstanding, measurement input	1.671	1.399
Expected term in years
Class of Stock [Line Items]
Warrants outstanding, measurement input	2.5	2.5
Dividend rate
Class of Stock [Line Items]
Warrants outstanding, measurement input	0.000	0.000
Risk-free interest rate
Class of Stock [Line Items]
Warrants outstanding, measurement input	0.0468	0.0432
Equity Warrants, Exchange Warrants and Banker Warrants | Volatility
Class of Stock [Line Items]
Warrants outstanding, measurement input	1.676
Equity Warrants, Exchange Warrants and Banker Warrants | Expected term in years
Class of Stock [Line Items]
Warrants outstanding, measurement input	1.69
Equity Warrants, Exchange Warrants and Banker Warrants | Dividend rate
Class of Stock [Line Items]
Warrants outstanding, measurement input	0.000
Equity Warrants, Exchange Warrants and Banker Warrants | Risk-free interest rate
Class of Stock [Line Items]
Warrants outstanding, measurement input	0.0437

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STOCKHOLDERS’ EQUITY - Schedule of Warrants Outstanding to Purchase Common Stock (Details)	6 Months Ended
	Jun. 30, 2023 $ / shares shares
Warrants Expiring In November 2023
Class of Stock [Line Items]
Number of Shares | shares	8,629
Exercise Price per Share (in usd per share) | $ / shares	$ 34.76
Warrants Expiring In December 2023
Class of Stock [Line Items]
Number of Shares | shares	1,438
Exercise Price per Share (in usd per share) | $ / shares	$ 34.76
Warrants Expiring In June 2025
Class of Stock [Line Items]
Number of Shares | shares	1,142,289
Exercise Price per Share (in usd per share) | $ / shares	$ 14.74
Warrants Expiring In February 2026
Class of Stock [Line Items]
Number of Shares | shares	3,758
Exercise Price per Share (in usd per share) | $ / shares	$ 300.00
Warrants Expiring In May 2027
Class of Stock [Line Items]
Number of Shares | shares	24,667
Exercise Price per Share (in usd per share) | $ / shares	$ 28.15
Warrants Expiring In July 2027
Class of Stock [Line Items]
Number of Shares | shares	1,168
Exercise Price per Share (in usd per share) | $ / shares	$ 0.01
Warrants Expiring In April 2028
Class of Stock [Line Items]
Number of Shares | shares	2,402
Exercise Price per Share (in usd per share) | $ / shares	$ 61.39
Warrants Expiring in 60 Months After Registration Date
Class of Stock [Line Items]
Number of Shares | shares	421,590
Exercise Price per Share (in usd per share) | $ / shares	$ 14.73
Expiration period	60 months
Warrants Expiring in 60 Months After Registration Date
Class of Stock [Line Items]
Number of Shares | shares	1,269,210
Exercise Price per Share (in usd per share) | $ / shares	$ 13.51
Expiration period	60 months
Warrants Expiring in 24 Months After Registration Date
Class of Stock [Line Items]
Number of Shares | shares	814,467
Exercise Price per Share (in usd per share) | $ / shares	$ 12.28
Expiration period	24 months

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STOCK-BASED COMPENSATION - Narrative (Details) - USD ($) $ in Thousands		6 Months Ended
	Apr. 21, 2023	Jun. 30, 2023
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Granted (in shares)		0
Unrecognized compensation cost		$ 280
Stock options
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Unrecognized compensation, weighted average amortization period (in years)		3 years 4 months 6 days
2015 Plan | Stock options | Maximum
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock awards, contractual life (up to)		10 years
A&R 2918 Plan
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Number of additional shares authorized	168,905
Number of shares authorized	216,666
Common shares reserved for future awards (in shares)		116,207
A&R 2918 Plan | Stock options | Maximum
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock awards, contractual life (up to)		10 years
2018 Plan
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Number of shares authorized		100,459

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STOCK-BASED COMPENSATION - Schedule of Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation	$ 13	$ 0	$ 26	$ 0
Research and development
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation	0	0	0	0
General and administrative
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation	$ 13	$ 0	$ 26	$ 0

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STOCK-BASED COMPENSATION - Activity of Stock Options (Details) - $ / shares	6 Months Ended	12 Months Ended
	Jun. 30, 2023	Dec. 31, 2022
Number of options
Outstanding, Beginning Balance (in shares)	112,612
Granted (in shares)	0
Exercised (in shares)	0
Forfeited/Cancelled (in shares)	(12,153)
Outstanding, Ending Balance (in shares)	100,459	112,612
Exercisable, Ending Balance (in shares)	100,459
Weighted average exercise price
Outstanding, Beginning Balance (in usd per share)	$ 39.77
Granted (in usd per share)	0
Exercised (in usd per share)	0
Forfeited (in usd per share)	130.84
Outstanding, Ending Balance (in usd per share)	28.75	$ 39.77
Exercisable, Ending Balance (in usd per share)	$ 28.75
Weighted average remaining contractual term (years)
Outstanding (years)	4 years 8 months 23 days	4 years 8 months 15 days
Exercisable (years)	4 years 8 months 23 days

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STOCK-BASED COMPENSATION - Assumptions Used to Estimate Fair Value of Options (Details) - Stock options	6 Months Ended
	Jun. 30, 2022 $ / shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Volatility	90.39%
Expected term in years	5 years 11 months 23 days
Dividend rate	0.00%
Risk-free interest rate	2.00%
Fair value of option on grant date (in usd per share)	$ 3.86

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COMMITMENTS AND CONTINGENCIES (Details) - Former Chief Executive Officer	Apr. 21, 2023
Loss Contingencies [Line Items]
COBRA benefits, payment period (in months)	18 months
Percentage of target bonus (as a percent)	150.00%