10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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

OR

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

For the transition period from _____to _____

Commission file number: 001-37526

Zynerba Pharmaceuticals, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	26-0389433 (I.R.S. Employer Identification No.)
80 W. Lancaster Avenue, Suite 300 Devon, PA (Address of principal executive offices)	19333 (Zip Code)

(484) 581-7505
(Registrant’s telephone number, including area code)

Not applicable

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

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

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

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

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

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

Large accelerated filer ◻	Accelerated filer ◻
	Smaller reporting company ⌧
Non-accelerated filer ⌧	Emerging growth company ◻

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

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

As of August 9, 2023, the registrant had 53,939,431 shares of common stock, $0.001 par value per share, outstanding.

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION		5
Item 1.	Consolidated Financial Statements (Unaudited)	5
	Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (Unaudited)	5
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	6
	Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	7
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (Unaudited)	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28
PART II—OTHER INFORMATION		29
Item 1.	Legal Proceedings	29
Item 1A.	Risk Factors	29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	32
Item 6.	Exhibits	33
	Signatures	34

2

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements made in this Quarterly Report on Form 10-Q, or this Quarterly Report, that are not statements of historical or current facts, such as those under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. These statements may be preceded by, followed by or include the words “aim,” “anticipate,” “believe,” “continues,” “estimate,” “expect,” “forecast,” “intend,” “outlook,” “plan,” “potential,” “project,” “projection,” “seek,” “may,” “could,” “would,” “will,” “should,” “can,” “can have,” “likely,” the negatives thereof and other words and terms of similar meaning.

Forward-looking statements are inherently subject to risks, uncertainties and assumptions; they are not guarantees of performance. You should not place undue reliance on these statements. We have based these forward-looking statements on our current expectations and projections about future events. Although we believe that our assumptions made in connection with the forward-looking statements are reasonable, we cannot assure you that the assumptions and expectations will prove to be correct.

You should understand that the following important factors could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

● our expectations regarding the planned acquisition by Harmony Biosciences Holdings, Inc. (“Harmony”), including our ability to complete the pending transaction as contemplated by the Agreement and Plan of Merger, the parties’ ability to satisfy the conditions to the consummation of the offer and other conditions set forth in such agreement, the expected timetable for completing the transaction and effects of the offer and merger;

● our expectations, projections and estimates regarding expenses, future revenue, capital requirements, incentive and other tax credit eligibility, collectability and timing and availability of and the need for additional financing, as well as our ability to continue as a going concern;

● the results, cost and timing of our preclinical studies and clinical trials, including any delays to such clinical trials relating to enrollment or site initiation, as well as the number of required trials for regulatory approval and the criteria for success in such trials;

● our dependence on third parties in the conduct of our preclinical studies and clinical trials;

● legal and regulatory developments in the United States and foreign countries, including any actions or advice that may affect the design, initiation, timing, continuation, progress or outcome of clinical trials or result in the need for additional clinical trials;

● the results of our preclinical studies and earlier clinical trials of our product candidates may not be predictive of future results and we may not have favorable results in our ongoing or planned clinical trials;

● the difficulties and expenses associated with obtaining and maintaining regulatory approval of our product candidates, and the indication and labeling under any such approval;

● our plans and ability to develop and commercialize our product candidates;

● the successful development of our commercialization capabilities, including sales and marketing capabilities, whether alone or with potential future collaborators;

● the size and growth of the potential markets for our product candidates, the rate and degree of market acceptance of our product candidates and our ability to serve those markets;

● the coverage and reimbursement status for our product candidates from third-party payors;

● the success of competing therapies and products that are or become available;

● our ability to limit our exposure under product liability lawsuits, shareholder class action lawsuits or other litigation;

● our ability to obtain and maintain intellectual property protection for our product candidates;

● legislative developments impacting our industry or the healthcare system broadly, including but not limited to the Inflation Reduction Act of 2022 and proposed changes to the Patient Protection and Affordable Care Act;

● our ability to obtain and maintain third-party manufacturing for our product candidates on commercially reasonable terms;

● delays, interruptions or failures in the manufacture and supply of our product candidates;

● the performance of third parties upon which we depend, including third-party contract research organizations, or CROs, contract manufacturing organizations, or CMOs, contract laboratories and independent contractors;

3

● our ability to recruit or retain key scientific, commercial or management personnel or to retain our executive officers;

● our ability to maintain proper functionality and security of our internal computer and information systems and to prevent or avoid cyberattacks, malicious intrusion, breakdown, destruction, loss of data privacy or other significant disruption;

● the extent to which health pandemics and other outbreaks of communicable diseases could disrupt our operations or materially and adversely affect our business and financial conditions;

● our ability to regain and maintain compliance with the continued listing requirements of The Nasdaq Capital Market;

● a deterioration of the credit rating for U.S. long-term sovereign debt, and/or actions and uncertainties surrounding the debt ceiling and the federal budget;

● adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our current and projected business operations, financial condition and results of operations;

● the extent to which the volatility of the global financial markets, inflationary pressures, banking instability and global instability, including political instability, such as a deterioration in the relationship between the U.S. and China or the ongoing conflict between Russia and Ukraine, including any additional resulting sanctions, export controls or other restrictive actions that may be imposed by the U.S. and/or other countries against governmental or other entities in, for example, Russia, may disrupt our business operations and/or our financial condition; and

● the other risks, uncertainties and factors discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, or our 2022 Annual Report, and our Quarterly Report on Form 10-Q for the three months ended March 31, 2023, under the caption “Item 1A. Risk Factors”.

In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this Quarterly Report (including the exhibits hereto) might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, even if experience or future developments make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. Except as otherwise indicated, our forward-looking statements do not assume the consummation of the proposed acquisition by Harmony. If such acquisition is consummated, many of the forward-looking statements contained in this Quarterly Report would no longer be applicable.

4

PART I – FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (Unaudited)

ZYNERBA PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	June 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	35,967,515	$	50,640,993
Incentive and tax receivables		1,308,583		1,225,383
Prepaid expenses and other current assets		2,018,874		2,908,731
Total current assets		39,294,972		54,775,107
Property and equipment, net		394,904		409,572
Incentive and tax receivables		567,648		—
Right-of-use assets		219,037		336,215
Total assets	$	40,476,561	$	55,520,894
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	2,479,345	$	1,942,830
Accrued expenses		8,758,767		7,014,882
Lease liabilities		217,879		214,901
Total current liabilities		11,455,991		9,172,613
Lease liabilities, long-term		—		119,524
Total liabilities		11,455,991		9,292,137
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding		—		—
Common stock, $0.001 par value; 200,000,000 shares authorized; 53,939,431 shares issued and outstanding at June 30, 2023 and 47,895,687 shares issued and outstanding at December 31, 2022		53,940		47,896
Additional paid-in capital		324,373,823		320,698,146
Accumulated deficit		(295,407,193)		(274,517,285)
Total stockholders' equity		29,020,570		46,228,757
Total liabilities and stockholders' equity	$	40,476,561	$	55,520,894

See accompanying notes to unaudited consolidated financial statements.

5

ZYNERBA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three months ended June 30,				Six months ended June 30,
	2023		2022		2023		2022
Operating expenses:
Research and development	$	7,166,708	$	5,446,317	$	14,244,789	$	10,592,922
General and administrative		3,969,499		3,722,453		7,362,593		7,479,763
Total operating expenses		11,136,207		9,168,770		21,607,382		18,072,685
Loss from operations		(11,136,207)		(9,168,770)		(21,607,382)		(18,072,685)
Other income (expense):
Interest income		434,718		91,691		882,033		187,735
Foreign exchange loss		(74,576)		(775,927)		(164,559)		(458,675)
Total other income (expense)		360,142		(684,236)		717,474		(270,940)
Net loss	$	(10,776,065)	$	(9,853,006)	$	(20,889,908)	$	(18,343,625)
Net loss per share basic and diluted	$	(0.21)	$	(0.24)	$	(0.42)	$	(0.45)
Basic and diluted weighted average shares outstanding		50,150,138		41,406,803		49,295,103		40,858,688

See accompanying notes to unaudited consolidated financial statements.

6

ZYNERBA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

	Six months ended June 30, 2023
								Total
	Common stock			Additional		Accumulated		stockholders'
	Shares	Amount		paid-in capital		deficit		equity
Balance at December 31, 2022	47,895,687	$	47,896	$	320,698,146	$	(274,517,285)	$	46,228,757
Issuance of common stock, net of issuance costs	3,279,077		3,279		1,747,000		—		1,750,279
Issuance of restricted stock	1,896,167		1,896		(1,896)		—		—
Common stock issued in lieu of annual bonus	431,556		432		278,940		—		279,372
Stock-based compensation expense	—		—		821,986		—		821,986
Net loss	—		—		—		(10,113,843)		(10,113,843)
Balance at March 31, 2023	53,502,487		53,503		323,544,176		(284,631,128)		38,966,551
Issuance of common stock, net of issuance costs	150,000		150		61,350		—		61,500
Issuance of restricted stock	286,944		287		(287)		—		—
Stock-based compensation expense	—		—		768,584		—		768,584
Net loss	—		—		—		(10,776,065)		(10,776,065)
Balance at June 30, 2023	53,939,431	$	53,940	$	324,373,823	$	(295,407,193)	$	29,020,570

	Six months ended June 30, 2022
								Total
	Common stock			Additional		Accumulated		stockholders'
	Shares	Amount		paid-in capital		deficit		equity
Balance at December 31, 2021	41,217,537	$	41,218	$	310,353,595	$	(239,481,479)	$	70,913,334
Issuance of common stock, net of issuance costs	857,060		857		1,582,916		—		1,583,773
Issuance of restricted stock	1,249,500		1,249		(1,249)		—		—
Stock-based compensation expense	—		—		1,160,482		—		1,160,482
Net loss	—		—		—		(8,490,619)		(8,490,619)
Balance at March 31, 2022	43,324,097		43,324		313,095,744		(247,972,098)		65,166,970
Issuance of common stock, net of issuance costs	488,892		489		818,877		—		819,366
Issuance of restricted stock	123,154		123		(123)		—		—
Stock-based compensation expense	—		—		1,108,543		—		1,108,543
Net loss	—		—		—		(9,853,006)		(9,853,006)
Balance at June 30, 2022	43,936,143	$	43,936	$	315,023,041	$	(257,825,104)	$	57,241,873

See accompanying notes to unaudited consolidated financial statements.

7

ZYNERBA PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Six months ended June 30,
	2023		2022
Cash flows from operating activities:
Net loss	$	(20,889,908)	$	(18,343,625)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		117,331		114,727
Stock-based compensation		1,590,570		2,269,025
Changes in operating assets and liabilities:
Incentive and tax receivables		(650,848)		7,545,395
Prepaid expenses and other assets		950,836		1,202,672
Right-of-use assets and liabilities		632		631
Accounts payable		582,894		(199,978)
Accrued expenses		2,000,480		(271,854)
Net cash used in operating activities		(16,298,013)		(7,683,007)
Cash flows from investing activities:
Purchases of property and equipment		(97,948)		(51,607)
Net cash used in investing activities		(97,948)		(51,607)
Cash flows from financing activities:
Proceeds from the issuance of common stock		1,827,512		2,657,567
Payment of financing fees and expenses		(105,029)		(241,318)
Net cash provided by financing activities		1,722,483		2,416,249
Net decrease in cash and cash equivalents		(14,673,478)		(5,318,365)
Cash and cash equivalents at beginning of period		50,640,993		67,808,000
Cash and cash equivalents at end of period	$	35,967,515	$	62,489,635
Supplemental disclosures of cash flow information:
Financing costs included in accounts payable and accrued expenses at end of period	$	27,070	$	134,628
Property and equipment acquired but unpaid at end of period	$	93,632	$	—

See accompanying notes to unaudited consolidated financial statements

8

ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) Nature of Business and Liquidity

a. Nature of Business

Zynerba Pharmaceuticals, Inc., together with its subsidiary, Zynerba Pharmaceuticals Pty Ltd (collectively, “Zynerba,” the “Company,” or “we”), is a clinical stage specialty pharmaceutical company focused on the development of pharmaceutically-produced transdermal cannabinoid therapies for orphan neuropsychiatric disorders, including Fragile X syndrome (“FXS”) and chromosome 22q11.2 deletion syndrome (“22q”). We have been granted orphan drug designations from the United States Food and Drug Administration (“FDA”) and the European Commission for the use of cannabidiol for the treatment of FXS and 22q. In addition, we have received Fast Track designation from the FDA for treatment of behavioral symptoms associated with FXS. The Company has decided to prioritize its resources on FXS and 22q, both of which have no approved products. While we believe the data from the Company’s autism spectrum disorder (“ASD”) clinical development program to date are compelling, given the difficult financial market, the Company has decided to defer the start of the Phase 3 development program in ASD.

The Company is subject to those risks associated with any clinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that the Company's research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants.

b. Liquidity

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (“ASC 205-40”), requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. This standard requires management to 1) identify and disclose if there are initial conditions indicating substantial doubt about the Company’s ability to continue as a going concern within one year of the issuance date of the financial statements, 2) disclose the principal conditions that gave rise to substantial doubt, 3) disclose management’s evaluation of the significance of those conditions in relation to the Company’s ability to meet its obligations and 4) disclose management’s plans that are intended to mitigate the adverse conditions. In accordance with the accounting standard, when considering management’s plans to mitigate the conditions giving rise to substantial doubt, management can only consider those plans which are probable to be successfully implemented.

As of June 30, 2023, the Company had cash and cash equivalents of $36.0 million and an accumulated deficit of $295.4 million. For the six months ended June 30, 2023, the Company reported a net loss of $20.9 million and cash used in operating activities of $16.3 million. The Company expects that its existing cash and cash equivalents will be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements to mid-year 2024, but not more than one year after the date of the filing of this Quarterly Report on Form 10-Q, and therefore management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional funding. Management believes that the Company’s liquidity position as of the date of this filing provides sufficient runway to achieve important research and development milestones. Management intends to raise additional capital through equity offerings and/or debt financings, or from other potential sources of liquidity, which may include new collaborations, licensing or other commercial agreements for one or more of the Company’s research programs or patent portfolios or divestitures of the Company's assets. The Company’s ability to access the capital markets or otherwise raise such capital may be adversely impacted by geopolitical tensions and macroeconomic events and the recent disruptions to, and volatility in, financial markets in the United States and globally resulting from multiple factors such as COVID-19, inflationary pressures, banking instability, rising interest rates and the ongoing conflict in Ukraine. There is no assurance that such financing will be available when needed or on acceptable terms. If the Company is unable to raise capital when needed or on attractive terms, it would be forced to delay, reduce, or eliminate its research and development programs or other operations. If any of these events occur, the Company’s ability to achieve its operational goals would be adversely affected.

9

ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

(2) Summary of Significant Accounting Policies

a. Basis of Presentation

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim unaudited consolidated financial statements have been prepared on the same basis as the consolidated financial statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying consolidated financial statements of the Company include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the consolidated financial statements) considered necessary to present fairly the Company's financial position as of June 30, 2023, its results of operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022. Operating results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2022 Annual Report.

b. Use of Estimates

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

c. Incentive and Tax Receivables

The Company’s subsidiary, Zynerba Pharmaceuticals Pty Ltd (the “Subsidiary”), is incorporated in Australia. The Subsidiary is eligible to participate in an Australian research and development tax incentive program. As part of this program, the Subsidiary is eligible to receive a cash refund from the Australian Taxation Office for a percentage of the research and development costs expended by the Subsidiary in Australia. The cash refund is available to eligible companies with an annual aggregate revenue of less than $20.0 million (Australian) during the reimbursable period. The Company estimates the amount of cash refund it expects to receive related to the Australian research and development tax incentive program and records the incentives when it is probable (1) the Company will comply with relevant conditions of the program and (2) the incentive will be received. The Company evaluates its eligibility under tax incentive programs as of each balance sheet date based on the most current and relevant data available. If the Company is deemed to be ineligible or unable to receive the Australian research and development tax credit, or the Australian government significantly reduces or eliminates the tax credit, the actual cash refund the Company receives may materially differ from its estimates.

In addition, the Subsidiary incurs Goods and Services Tax (“GST”) on services provided by Australian vendors. As an Australian entity, the Subsidiary is entitled to a refund of the GST paid. The Company’s estimate of the amount of cash refund it expects to receive related to GST incurred is included in “Incentive and tax receivables” in the accompanying consolidated balance sheets. As of June 30, 2023, incentive and tax receivables included $0.2 million for refundable GST on expenses incurred with Australian vendors during the three months ended June 30, 2023.

10

ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Current incentive and tax receivables consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Research and development incentive	$	1,063,551	$	977,714
Goods and services tax		245,032		247,669
Total incentive and tax receivables - current assets	$	1,308,583	$	1,225,383

As of June 30, 2023, the Company’s estimate of the amount of cash refund it expects to receive for 2022 eligible spending as part of this incentive program was $1.1 million and was recorded as a current asset. The Company’s estimate of the amount of cash refund it expects to receive for 2023 eligible spending through June 30, 2023 was $0.6 million and was recorded as a non-current asset.

d. Research and Development

Research and development costs are expensed as incurred and are primarily comprised of external research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, consultants and employee-related expenses including salaries and benefits. At the end of each reporting period, the Company compares the payments made to each service provider to the estimated progress towards completion of the related project. Factors that the Company considers in preparing these estimates include the number of patients enrolled in studies, milestones achieved and other criteria related to the efforts of its vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, the Company will record net prepaid or accrued expenses related to these costs. Research and development expenses are recorded net of expected refunds of eligible research and development costs paid pursuant to the Australian research and development tax incentive program and GST incurred on services provided by Australian vendors.

The following table summarizes research and development expenses for the six months ended June 30, 2023 and 2022:

	Six months ended June 30,
	2023		2022
Research and development expenses - before R&D incentive	$	14,930,416	$	11,176,773
Research and development incentive		(685,627)		(583,851)
Total research and development expenses	$	14,244,789	$	10,592,922

e. Net Loss Per Share

Basic net loss per share is determined using the weighted average number of shares of common stock outstanding during each period. Diluted net income per share includes the effect, if any, from the potential exercise or conversion of securities, such as restricted stock and stock options, which would result in the issuance of incremental shares of common stock. Basic and dilutive computations of net loss per share are the same in periods in which a net loss exists as the dilutive effects of restricted stock and stock options would be anti-dilutive.

The following potentially dilutive securities outstanding as of June 30, 2023 and 2022 have been excluded from the computation of diluted weighted average shares outstanding, as their effects on net loss per share for the periods presented would be anti-dilutive:

	June 30,
	2023	2022
Stock options	6,706,432	6,276,016
Unvested restricted stock	3,618,722	2,307,476
	10,325,154	8,583,492

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ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

f. Recent Accounting Pronouncements

In November 2021, the FASB issued Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance (“ASU 2021-10”), which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted ASU 2021-10 effective January 1, 2022, and the adoption did not have a material impact on its consolidated financial statements.

(3) Fair Value Measurements

The Company measures certain assets and liabilities at fair value in accordance with Accounting Standards

Codification (“ASC 820”), Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The guidance in ASC 820 outlines a valuation framework and creates a fair value hierarchy that serves to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value, the Company maximizes the use of quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3 — Valuations based on unobservable inputs and models that are supported by little or no market activity.

In accordance with the fair value hierarchy described above, the following table sets forth the Company's financial assets measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022:

			Fair Value Measurement
	Carrying amount		as of June 30, 2023
	as of June 30, 2023		Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	31,693,849	$	31,693,849	$	—	$	—
	$	31,693,849	$	31,693,849	$	—	$	—

			Fair Value Measurement
	Carrying amount		as of December 31, 2022
	as of December 31, 2022		Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	44,663,395	$	44,663,395	$	—	$	—
	$	44,663,395	$	44,663,395	$	—	$	—

(4) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Prepaid development expenses	$	884,730	$	668,096
Prepaid insurance		288,097		1,546,784
Deferred financing costs		216,935		155,956
Other current assets		629,112		537,895
Total prepaid expenses and other current assets	$	2,018,874	$	2,908,731

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ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(5) Property and Equipment

Property and equipment consisted of the following as of June 30, 2023 and December 31, 2022:

	Estimated
	useful life	June 30,		December 31,
	(in years)	2023		2022
Equipment	2-5	$	1,165,570	$	828,666
Computer equipment	3-5		30,319		30,319
Furniture and fixtures	3-5		311,356		311,356
Leasehold improvements	various		68,881		68,881
Construction in process			—		234,241
Total cost			1,576,126		1,473,463
Less accumulated depreciation			(1,181,222)		(1,063,891)
Property and equipment, net		$	394,904	$	409,572

Depreciation expense was $117,331 and $114,727 for the six months ended June 30, 2023 and 2022 respectively.

(6) Accrued Expenses

Accrued expenses consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Accrued compensation	$	1,494,753	$	2,016,402
Accrued research and development		5,957,323		4,239,719
Other		1,306,691		758,761
Total accrued expenses	$	8,758,767	$	7,014,882

(7) Common Stock

a. At-The-Market Financing

On May 11, 2021, the Company entered into a Controlled Equity Offering^SM Sales Agreement (the “2021 Sales Agreement”) with Cantor Fitzgerald & Co., Canaccord Genuity, LLC, H.C. Wainwright & Co. LLC and Ladenburg Thalmann & Co. Inc., as sales agents, pursuant to which, under a prospectus filed by the Company in May 2022, the Company may sell, from time to time, up to $75.0 million of its common stock. We are currently subject to General Instruction I.B.6 of Form S-3, and the amount of funds we can raise through primary public offerings of securities in any twelve-month period using our existing registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and non-voting common equity held by non-affiliates. We will be subject by this limit until such time as our public float exceeds $75.0 million.

During the six months ended June 30, 2023, the Company sold and issued 1,179,077 shares of common stock under the 2021 Sales Agreement in the open market at a weighted average selling price of $0.56 per share, resulting in gross proceeds of $0.7 million. Net proceeds after deducting commissions and offering expenses were $0.5 million.

b. Equity Purchase Agreement

On July 21, 2022 (the “Effective Date”), the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) pursuant to which Lincoln Park committed to purchase up to $20.0 million of the Company’s common stock. Under the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $20.0 million of the Company’s common stock. Such sales of common stock will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on the Effective

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ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Date. The number of shares the Company may sell to Lincoln Park on any single business day in a regular purchase is 150,000, but that amount may be increased up to 300,000 shares, depending upon the market price of the Company’s common stock at the time of sale and subject to a maximum limit of $2.0 million per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale as computed under the Purchase Agreement. In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases. 

Pursuant to the terms of the Purchase Agreement, in July 2022, the Company issued 347,222 shares of its common stock to Lincoln Park as consideration for its commitment to purchase shares of the Company’s common stock under the Purchase Agreement. 

During the six months ended June 30, 2023, the Company sold and issued 2,250,000 shares of common stock under the Purchase Agreement at a weighted average selling price of $0.52 per share, resulting in gross and net proceeds of $1.2 million.

(8) Stock-Based Compensation

The Company’s board of directors adopted the 2023 Zynerba Pharmaceuticals, Inc. Stock Option and Incentive Plan (the “2023 Plan”) in April 2023, which was subsequently approved by the stockholders in June 2023, under which the Company may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, cash-based awards, and dividend equivalent rights to employees, officers, non-employee directors, consultants, and advisors. The number of shares available for issuance under awards granted pursuant to the 2023 Plan was 6,900,000 shares of the Company’s common stock. Shares of common stock underlying awards granted under the 2023 Plan that are forfeited, canceled or otherwise terminated (other than by exercise) will be added back to the share reserve available for issuance under the 2023 Plan. Notwithstanding the foregoing, the following shares shall not be added to the share reserve authorized for grant under the 2023 Plan: shares tendered or held back upon exercise of an option or shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof. Further, shares reacquired by the Company on the open market will not be added to the share reserve authorized for issuance. As of June 30, 2023, there were 6,182,640 shares available for future issuance under the 2023 Plan.

The Company also maintained the Amended and Restated 2014 Omnibus Incentive Compensation Plan, as amended (the “2014 Plan”), which allows for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units, performance units and other stock-based awards to employees, officers, non-employee directors, consultants, and advisors. In addition, the 2014 Plan provides selected employees with the opportunity to receive bonus awards that are considered “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code. As of June 6, 2023, no additional awards will be granted under the 2014 Plan.

Options issued under the 2023 and 2014 Plans have a contractual life of 10 years and may be exercisable in cash or as otherwise determined by the board of directors. The Company has granted options to employees and non-employee directors. Stock options granted to employees primarily vest 25% upon the first anniversary of the grant date and the balance of unvested options vests in quarterly installments over the remaining three years. Stock options granted annually to non-employee directors vest on the earlier of the one-year anniversary of the grant date, or one day before the date of the Company’s next annual stockholders’ meeting that occurs after the grant date. The Company’s non-employee director compensation policy enables directors to receive stock options in lieu of quarterly cash payments. Any option granted to the directors in lieu of cash compensation vests in full on the grant date. The Company records forfeitures as they occur.

a. Time-Based Restricted Stock Awards:

During 2022, the Company granted 841,654 time-based restricted stock awards to employees, non-employee directors and consultants, of which 595,664 restricted stock awards remain outstanding as of June 30, 2023. During the six months ended June 30, 2023, the Company granted 1,554,944 time-based restricted stock awards to employees and non-employee directors, which all remain outstanding as of June 30, 2023.

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ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

b. Restricted Stock Awards in Lieu of Bonus:

During the six months ended June 30, 2023, the Company granted 431,556 fully vested stock awards to certain employees in lieu of their earned annual bonus. The fair value of those vested stock awards was $0.3 million and was recorded against accrued compensation that existed as of December 31, 2022.

c. Performance-Based Restricted Stock Awards:

Stock-based compensation expense for performance-based grants are recorded when management estimates that the vesting of these shares is probable based on the status of the Company’s research and development programs and other relevant factors, which were established by the Company’s board of directors. The Company’s board of directors determines if the performance conditions have been met.

During 2021, the Company granted 506,911 performance-based restricted stock awards to employees, of which 187,964 restricted stock awards have fully vested and 281,947 restricted stock awards remained outstanding as of June 30, 2023. The performance-based conditions for these performance-based grants were deemed probable of achievement during the six months ended June 30, 2021 and, as of June 30, 2023, the Company has recorded $1.7 million in stock-based compensation expense related to these grants.

During 2022, the Company granted 556,500 performance-based restricted stock awards to employees, of which 548,000 restricted stock awards remained outstanding as of June 30, 2023. During the six months ended June 30, 2023, the Company granted 628,167 performance-based restricted stock awards to employees. As of June 30, 2023, satisfaction of the related performance conditions for both the 2022 and 2023 grants have not been deemed probable of being achieved and there was $1.1 million and $0.3 million, respectively, of unrecognized stock-based compensation expense related to these performance-based awards, which will be expensed over the estimated service period related to each performance condition once the performance conditions have been deemed probable.

For the six months ended June 30, 2023 and 2022, the Company recorded stock-based compensation expense related to its stock option grants and restricted stock awards, as follows:

	Stock Option Grants				Restricted stock awards				Total
	2023		2022		2023		2022		2023			2022
Research and development	$	421,200	$	520,729	$	299,994	$	497,412	$	721,194	$	1,018,141
General and administrative		507,374		638,241		362,002		612,643		869,376		1,250,884
	$	928,574	$	1,158,970	$	661,996	$	1,110,055	$	1,590,570	$	2,269,025

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2023:

		Weighted-		Weighted-
		Average		Average	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Life (in Years)	Value
Outstanding as of December 31, 2022	6,276,016	$	7.52
Granted	430,416		0.35
Outstanding as of June 30, 2023	6,706,432	$	7.06	5.72	$	—
Exercisable as of June 30, 2023	5,159,646	$	8.47	4.86	$	—
Vested and expected to vest as of June 30, 2023	6,706,432	$	7.06

The weighted-average grant date fair values of options granted during the six months ended June 30, 2023 and 2022 were $0.25 and $1.74, respectively.

15

ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The fair values of stock options granted were calculated using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Six months ended June 30,
	2023	2022
Weighted-average risk-free interest rate	3.99%	2.02%
Expected term of options (in years)	5.50	6.11
Expected stock price volatility	87.35%	100.23%
Expected dividend yield	0%	0%

As of June 30, 2023, there was $2.5 million of unrecognized stock-based compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 1.9 years.

The following table summarizes the Company’s restricted stock award activity under the 2014 Plan for the six months ended June 30, 2023:

		Weighted
		Average		Aggregate
		Grant Date		Intrinsic
	Shares	Fair Value		Value
Unvested as of December 31, 2022	2,114,512	$	2.86
Granted	2,614,667		0.56
Vested	(1,110,457)		2.92
Unvested as of June 30, 2023	3,618,722	$	1.21	$	1,179,703
Expected to vest as of June 30, 2023	2,437,555	$	1.38	$	794,643

As of June 30, 2023, excluding performance-based restricted stock awards that have not been deemed probable, there was $1.3 million of unrecognized stock-based compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted-average period of 1.2 years.

(9) Operating Lease Obligations

The Company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), Accounting Standards Codification 842 prospectively using the modified-retrospective method and elected the package of transition practical expedients that does not require reassessment of: (1) whether any existing or expired contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available practical expedients to not separate lease and nonlease components, which consist principally of common area maintenance charges, and to exclude leases with an initial term of 12 months or less.

The Company leases its headquarters where it occupies 10,877 square feet of office space. On March 1, 2021, the Company extended its lease for three additional years until May 31, 2024. The Company’s lease contains variable lease costs that do not depend on a rate or index and consist primarily of common area maintenance, taxes, and insurance charges. As the implicit rate was not readily determinable for the Company’s lease, the Company used an estimated incremental borrowing rate, or discount rate, to determine the initial present value of the lease payments. The discount rate for the lease was calculated using a synthetic credit rating model.

As of March 1, 2021, the effective date of the lease modification, the Company remeasured the lease liability for the remaining portion of the lease and adjusted the lease liability to $755,085 and right-of-use assets to $752,391, which was recorded net of a deferred rent liability of $2,694. As of June 30, 2023, the Company’s right-of-use asset, net of amortization, was $219,037.

16

ZYNERBA PHARMACEUTICALS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Other operating lease information as of June 30, 2023:

Weighted-average remaining lease term - operating leases	0.9	years
Weighted-average discount rate - operating leases	2.76	%

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of June 30, 2023:

	June 30,
Year ending:	2023
December 31, 2023	$	120,210
December 31, 2024		100,175
Total minimum lease payments		220,385
Less: imputed lease interest		(2,506)
Total lease liabilities	$	217,879

Lease expense for the six months ended June 30, 2023 was comprised of the following:

	Six months ended June 30,
		2023		2022
Operating lease expense	$	120,842	$	120,842
Variable lease expense		40,105		32,276
Total lease expense	$	160,947	$	153,118

Total cash payments related to leases were $160,316 and $152,487 for the six months ended June 30, 2023 and 2022, respectively.

10) Subsequent Events

Merger Agreement

On August 14, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Harmony Biosciences Holdings, Inc. (“Harmony”) and Xylophone Acquisition Corp., a wholly owned subsidiary of Harmony (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Harmony will commence a tender offer (the “Offer”) to acquire all of the issued and outstanding shares of common stock, par value $0.001 per share, of the Company (“Company Common Stock”), for (i) approximately $1.1059 per share of Company Common Stock (the “Common Cash Amount”), in cash, subject to any applicable withholding of taxes and without interest, plus (ii) one contingent value right per share of Company Common Stock (the “Common CVR Amount”), which represents the right to receive up to approximately $2.5444 per share of Company Common Stock in the form of one or more potential contingent payments, in cash, subject to any applicable withholding of taxes and without interest, upon the achievement of certain milestones as set forth in, and subject to and in accordance with the terms and conditions of, the Contingent Value Rights Agreement (the Common Cash Amount plus the Common CVR Amount, collectively, or any different amount per share paid pursuant to the Offer to the extent permitted by the Merger Agreement, being the “Offer Price”). The Offer will initially expire at 5:00 p.m. (New York City time) on the date that is 21 business days following the commencement of the Offer, subject to extension under certain circumstances. Following the consummation of the Offer, upon the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger.

The Merger Agreement includes customary representations, warranties and covenants of the Company, Harmony and Merger Sub. However, there can be no assurance that the conditions to the completion of the Offer and the Merger will be satisfied or waived, that the Offer and the Merger will be completed on the expected timeframe or at all, or that the Offer and the Merger will be consummated as contemplated by the Merger Agreement.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited interim consolidated financial statements and related notes appearing elsewhere in this Quarterly Report and the audited consolidated financial statements and notes thereto for the year ended December 31, 2022 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our 2022 Annual Report. The following discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of many factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report, including those set forth under “Cautionary Note Regarding Forward-looking Statements” and “Risk Factors” in this Quarterly Report and our 2022 Annual Report.

Overview

Acquisition by Harmony Biosciences

On August 14, 2023, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Harmony Biosciences Holdings, Inc. (“Harmony”) and Xylophone Acquisition Corp., a wholly owned subsidiary of Harmony (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Harmony will commence a tender offer (the “Offer”) to acquire all of our issued and outstanding shares of common stock, par value $0.001 per share (“Company Common Stock”), for (i) approximately $1.1059 per share of Company Common Stock (“Common Cash Amount”), in cash, subject to any applicable withholding of taxes and without interest, plus (ii) one contingent value right per share of Company Common Stock (the “Common CVR Amount”), which represents the right to receive up to approximately $2.5444 per share of Company Common Stock in the form of one or more potential contingent payments, in cash, subject to any applicable withholding of taxes and without interest, upon the achievement of certain milestones as set forth in, and subject to and in accordance with the terms and conditions of, the Contingent Value Rights Agreement (the Common Cash Amount plus the Common CVR Amount, collectively, or any different amount per share paid pursuant to the Offer to the extent permitted by the Merger Agreement, being the “Offer Price”). The Offer will initially expire at 5:00 p.m. (New York City time) on the date that is 21 business days following the commencement of the Offer, subject to extension under certain circumstances.

Following the consummation of the Offer, upon the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger. Pursuant to the terms and subject to the conditions of the Merger Agreement, the Merger will be effected pursuant to Section 251(h) of the Delaware General Corporation Law, which permits completion of the Merger without a vote of the holders of common stock upon the acquisition by Harmony of a majority of the aggregate voting power of common stock. As a result of the Merger, we will cease to be a publicly traded company. The Merger Agreement includes customary representations, warranties and covenants of us, Harmony and Merger Sub. However, there can be no assurance that the conditions to the completion of the Offer and the Merger will be satisfied or waived, that the Offer and the Merger will be completed on the expected timeframe or at all, or that the Offer and the Merger will be consummated as contemplated by the Merger Agreement. Except as otherwise indicated, we have prepared this Quarterly Report and the forward-looking statements contained in this Quarterly Report as if we were going to remain an independent, standalone company. If the acquisition is consummated, many of the forward-looking statements contained in this Quarterly Report would no longer be applicable.

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Company Overview

We are the leader in pharmaceutically-produced transdermal cannabinoid therapies for orphan neuropsychiatric disorders. We are committed to improving the lives of patients and their families living with severe, chronic health conditions, including Fragile X syndrome, or FXS, and chromosome 22q11.2 deletion syndrome, or 22q.

Cannabinoids are a class of compounds derived from Cannabis plants. The two primary cannabinoids contained in Cannabis are cannabidiol and tetrahydrocannabinol, or THC. Clinical and preclinical data suggest that cannabidiol may have positive effects on treating behavioral symptoms of FXS and 22q.

We are currently developing Zygel (also known as ZYN002), the first and only pharmaceutically-produced cannabidiol formulated as a permeation-enhanced gel for transdermal delivery and manufactured without the presence of THC, which is patent protected through 2030. Additional patents expiring between 2026 and 2040 are directed to methods of use relating to Zygel, including methods of treating FXS or 22q.

In preclinical animal studies, Zygel’s permeation enhancer increased delivery of cannabidiol through the layers of the skin and into the circulatory system. These preclinical studies suggest increased bioavailability, consistent plasma levels and the avoidance of first-pass liver metabolism of cannabidiol when delivered transdermally. In addition, an in vitro study published in Cannabis and Cannabinoid Research in April 2016 demonstrated that cannabidiol is degraded to THC (the major psychoactive cannabinoid in Cannabis) in an acidic environment such as the stomach. As a result, we believe such degradation may lead to increased psychoactive effects if cannabidiol is delivered orally. These effects may be avoided with the transdermal delivery of Zygel, which maintains cannabidiol in a neutral pH.

Zygel is being developed as a clear gel and is targeting treatment of behavioral symptoms of FXS and 22q. We have received orphan drug designations from the United States Food and Drug Administration, or FDA, and the European Commission for cannabidiol, the active ingredient in Zygel, for the treatment of FXS and 22q. In May 2019, we received Fast Track designation from the FDA for treatment of behavioral symptoms associated with FXS. The FDA’s Fast Track program is designed to facilitate the development of drugs intended to treat serious conditions and fill unmet medical needs and can lead to expedited review by the FDA in order to get new important drugs to the patient earlier.

Clinical Development Programs

Our clinical programs for Zygel include ongoing and planned clinical trials evaluating Zygel in the treatment of behavioral symptoms of FXS and 22q.

The Zygel safety database across all clinical studies conducted by us includes data from more than 900 volunteers and patients. Across these clinical studies, Zygel has been generally well-tolerated to date, with a safety profile that has been consistent across our Phase 2 and Phase 3 clinical trials.

19

FXS

CONNECT-FX Trial

In June 2020, we announced results of our CONNECT-FX clinical trial, a multi-national randomized, double-blind, placebo-controlled, 14-week study designed to assess the efficacy and safety of Zygel in children and adolescents ages three through 17 years who have full mutation of the FMR1 gene. While Zygel did not achieve statistical significance versus placebo in the primary endpoint of improvement in the Social Avoidance subscale of the Aberrant Behavior Checklist – Community FXS, or ABC-C_FXS, a pre-planned ad hoc analysis of the most severely impacted patients in the trial, as defined by patients having at least 90% methylation (“highly methylated”) of the impacted FMR1 gene, demonstrated that those patients receiving Zygel achieved statistical significance in the primary endpoint of improvement at 12 weeks of treatment in the Social Avoidance subscale of the ABC-C_FXS compared to placebo. We performed a subsequent analysis of the CONNECT-FX population within those patients having 100% or complete methylation of the impacted FMR1 gene, which demonstrated that these patients having complete methylation and receiving Zygel similarly achieved statistical significance in the primary endpoint of improvement at 12 weeks of treatment in the Social Avoidance subscale of the ABC-C_FXS compared to placebo.

RECONNECT Trial

In September 2021, we initiated our RECONNECT (A Randomized, Double-Blind, Placebo-Controlled, Multiple-Center, Efficacy and Safety Study of ZYN002 Administered as a Transdermal Gel to Children, Adolescents and Young Adults with Fragile X Syndrome) trial, a pivotal, multi-national, confirmatory Phase 3 trial of Zygel in patients with FXS. The trial is designed to confirm the positive results observed in patients having 100% or complete methylation of the impacted FMR1 gene in our CONNECT-FX trial.

RECONNECT is an 18-week trial that is expected to enroll approximately 200 patients, aged three through 22 years, at 29 clinical sites in the United States, Australia and the United Kingdom. Approximately 160 of the patients enrolled will have complete (100%) methylation of their FMR1 gene and approximately 40 patients will have partial methylation of their FMR1 gene. Patients will be randomized 1:1 to either Zygel or placebo. Randomization will be stratified by gender, methylation status and weight.

The primary endpoint for the trial will be the change from baseline to the end of the treatment period in the ABC-C_FXS Social Avoidance subscale in patients who have complete methylation of their FMR1 gene. The ABC-C_FXS Social Avoidance subscale is the same primary endpoint used in the CONNECT-FX trial.

Key secondary efficacy endpoints include: (i) the change from baseline to the end of the treatment period in the ABC-C_FXS Irritability subscale in patients who have complete methylation of their FMR1 gene; (ii) the percent of patients with any improvement on the Caregiver Global Impression of Change, or CaGI-C, at the end of the treatment period for Social Interactions among patients with complete methylation of the FMR1 gene; (iii) the percent of patients rated as improved on the Clinical Global Impression- Improvement, or CGI-I, scale among patients with complete methylation (100%) of the FMR1 gene; and (iv) the change from baseline to the end of the treatment period in the ABC-C_FXS Social Avoidance subscale among all randomized patients (complete and partial methylation of the FMR1 gene).

22q

Phase 2 INSPIRE Trial

In June 2022, we announced top-line results from our Phase 2 INSPIRE clinical trial, a 14-week, open-label clinical trial designed to assess the safety, tolerability and efficacy of Zygel for treatment of behavioral symptoms of 22q. The Phase 2 trial was designed for signal detection by assessing the safety, tolerability and efficacy of Zygel for the treatment of behavioral symptoms of 22q in children and adolescents. Zygel was administered to patients with 22q as an add-on therapy to their standard of care and utilized a variety of efficacy assessments. Patients who completed the initial 14-week treatment period and met certain requirements were eligible to enroll in a 24-week open label extension for a total treatment period of 38 weeks. In December 2022, we announced additional data from patients who completed 38 weeks of treatment in the INSPIRE trial. Key findings from the trial include:

● The total score and all five subscales of the Anxiety, Depression and Mood Scale (ADAMS) showed statistically significant improvements at 14 and 38 weeks of treatment compared to baseline;

20

● All five subscales of the Aberrant Behavior Checklist – Community, or ABC-C, showed statistically significant improvements at 14 and 38 weeks of treatment compared to baseline;

● The Pediatric Anxiety Rating Scale (PARS – R) showed statistically significant improvements at 14 and 38 weeks of treatment compared to baseline; and

● The majority of patients showed clinically meaningful improvements at week 14 as demonstrated by the CGI-I. Seventy-five percent of patients were rated by the clinicians as “improved,” “much improved” or “very much improved” with nearly two-thirds (62.5%) of the patients being “much improved” or “very much improved.”

Zygel was shown to be generally well tolerated over 38 weeks, and the safety profile was consistent with previously released data from other Zygel clinical trials. Three patients reported treatment related adverse events which were all mild application site adverse events. One patient discontinued treatment due to adverse events not related to Zygel.

Based on the positive Phase 2 data, we held an initial meeting with the FDA to obtain feedback on the data and the regulatory path forward for Zygel in the treatment of children and adolescents with 22q.

Impact of Pandemics, Epidemics and Health-Related Crises

In response to the impact of COVID-19, for our clinical development programs, we implemented multiple measures consistent with the FDA’s guidance on the conduct of clinical trials of medical products during COVID-19, including remote site monitoring and patient visits using telemedicine where needed and appropriate, direct-to-patient drug shipments and local study-related clinical laboratory collection. There is a possibility that our current or future clinical trial sites may be affected by COVID-19, or a similar pandemic, epidemic or outbreak of a communicable disease, due to prioritization of hospital resources toward such health crisis, as well as the inability to access sites for initiation, patient enrollment and monitoring. As a result, patient screening, new patient enrollment, monitoring and data collection may be affected or delayed.

In the fall of 2022, there was a significantly higher prevalence of influenza and RSV, in addition to the ongoing presence of COVID-19, leading to a “tripledemic”. The impact of the tripledemic was greatest in children, who are the primary population for our clinical trials.

We are aware that several clinical sites involved in our clinical trials have in the past temporarily stopped or delayed enrolling new patients, with exemptions if appropriate, and it is possible that these or other clinical sites may be similarly affected in the future. These developments may delay or extend our projected clinical trial timelines. Some of our third-party manufacturers, which we use for the supply of materials for product candidates or other materials necessary to manufacture products to conduct preclinical tests and clinical trials, and contract research organizations may be impacted by COVID-19, or a similar pandemic, epidemic or outbreak of a communicable disease. Should they experience disruptions, such as temporary closures or suspension of services, we would likely experience delays in advancing our current or planned clinical trials. As of the date of this Quarterly Report on Form 10-Q, we are not aware of any specific event or circumstance that would require us to update our estimates, assumptions and judgments or revise the carrying value of its assets or liabilities. Actual results could differ from these estimates, and any such differences may be material to our consolidated financial statements.

Operations

We have never been profitable and have incurred net losses since inception. Our net losses were $20.9 million and $18.3 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, our accumulated deficit was $295.4 million. We expect to incur losses for the foreseeable future, and we expect these losses to increase as we continue our development of, and seek regulatory approvals for, our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability.

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Financial Operations Overview

The following discussion sets forth certain components of our consolidated statements of operations as well as factors that impact those items.

Research and Development Expenses 

Our research and development expenses relating to our product candidates consisted of the following:

● expenses associated with preclinical development and clinical trials;

● personnel-related expenses, such as salaries, benefits, travel and other related expenses, including stock-based compensation;

● payments to third-party CROs, CMOs, contractor laboratories and independent contractors; and

● depreciation, maintenance and other facility-related expenses.

We expense all research and development costs as incurred. Clinical development expenses for our product candidates are a significant component of our current research and development expenses. Generally, expenses associated with clinical trials will increase as our clinical trials progress. Product candidates in later stage clinical development generally have higher research and development expenses than those in earlier stages of development, primarily due to increased size and duration of the clinical trials. We track and record information regarding external research and development expenses for each grant, study or trial that we conduct. We use third-party CROs, CMOs, contractor laboratories and independent contractors in preclinical studies and clinical trials. We recognize the expenses associated with third parties performing these services for us in our preclinical studies and clinical trials based on the percentage of each study completed at the end of each reporting period.

Our Australian subsidiary, Zynerba Pharmaceuticals Pty Ltd, or the Subsidiary, is incorporated in Australia and is eligible to participate in an Australian research and development tax incentive program. As part of this program, the Subsidiary is eligible to receive a cash refund from the Australian Taxation Office, or the ATO, for a percentage of the research and development costs expended by the Subsidiary in Australia. The cash refund is available to eligible companies with an annual aggregate revenue of less than $20.0 million (Australian) during the reimbursable period. We estimate the amount of cash refund we expect to receive related to the Australian research and development tax incentive program and record the incentives when it is probable (1) we will comply with relevant conditions of the program and (2) the incentive will be received. We evaluate the Subsidiary’s eligibility under tax incentive programs as of each balance sheet date based on the most current and relevant data available. If the Subsidiary is deemed to be ineligible or unable to receive the Australian research and development tax credit, or the Australian government significantly reduces or eliminates the tax credit, the actual cash refund we receive may materially differ from our estimates.

The following table summarizes research and development expenses for the six months ended June 30, 2023 and 2022:

	Six months ended June 30,
	2023		2022
Research and development expenses - before R&D incentive	$	14,930,416	$	11,176,773
Research and development incentive		(685,627)		(583,851)
Total research and development expenses	$	14,244,789	$	10,592,922

We expect research and development expenses to increase for the year ending December 31, 2023, as compared to 2022, as we continue to conduct our RECONNECT clinical trial for FXS. These expenditures are subject to numerous uncertainties regarding timing and cost to completion. The impact of inflation could significantly impact the cost of our ongoing operations. Completion of our preclinical development and clinical trials may take several years or more and the length of time generally varies according to the type, complexity, novelty and intended use of a product candidate.

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The cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:

● the number of sites included in the clinical trials;

● the length of time required to enroll suitable patients;

● the size of patient populations participating in the clinical trials;

● the duration of patient follow-ups;

● the development stage of the product candidates; and

● the efficacy and safety profile of the product candidates.

Due to the early stages of our research and development, we are unable to determine the duration or completion costs of our development of our product candidates. As a result of the difficulties of forecasting research and development costs of our product candidates as well as the other uncertainties discussed above, we are unable to determine when and to what extent we will generate revenue from the commercialization and sale of an approved product candidate.

General and Administrative Expenses 

General and administrative expenses consist primarily of salaries, benefits and other related costs, including stock-based compensation, for personnel serving in our executive, finance, legal, human resource, investor relations and commercial functions. Our general and administrative expenses also include facility and related costs not included in research and development expenses, professional fees for legal services, including patent-related expenses, litigation settlement expenses, consulting, tax and accounting services, insurance, market research and general corporate expenses. We expect that our general and administrative expenses will increase for the next several years due to inflation and increased labor costs, and as we increase our headcount with the continued development and potential commercialization of our product candidates.

Interest Income

Interest income primarily consists of interest earned on balances maintained in our money market bank account. 

Foreign Exchange Loss

Foreign exchange loss relates to the effect of exchange rates on transactions incurred by the Subsidiary.

Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. Critical accounting estimates and the accounting policies critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements are discussed in our 2022 Annual Report under Part II, Item 7, “Critical Accounting Estimates.” During the

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six months ended June 30, 2023, there have been no material changes to the critical accounting estimates or critical accounting policies discussed in our 2022 Annual Report.

Research and Development Expenses – Critical Accounting Estimates

We rely on third parties to conduct our preclinical studies and clinical trials, and to provide services, including data management, statistical analysis and electronic compilation. At the end of each reporting period, we compare the payments made to each service provider to the estimated progress towards completion of the related project. Factors that we will consider in preparing these estimates include the number of patients enrolled in studies, milestones achieved and other criteria related to the efforts of our vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, we will record net prepaid or accrued expenses related to these costs.

Results of Operations

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

Research and Development Expenses

Research and development expenses increased by $1.8 million, or 32%, to $7.2 million for the three months ended June 30, 2023 from $5.4 million for the three months ended June 30, 2022. The increase was primarily related to increases in manufacturing and clinical costs associated with our Zygel program slightly offset by lower stock-based compensation expenses.

General and Administrative Expenses

General and administrative expenses increased by $0.3 million, or 7%, to $4.0 million for the three months ended June 30, 2023 from $3.7 million for the three months ended June 30, 2022. The increase was primarily related to higher legal fees and increased proxy solicitation costs related to our annual meeting, partially offset by lower stock-based compensation expenses and a decrease in directors’ and officers’ liability insurance costs.

Other Income (Expense)

During the three months ended June 30, 2023 and 2022, we recognized $0.4 million and $0.1 million, respectively, in interest income. The increase in interest income was due to higher average interest rates earned on our investments. During the three months ended June 30, 2023 and 2022, we recognized a foreign currency loss of $0.1 million and $0.8 million, respectively. Foreign currency gains and losses are due primarily to the remeasurement of the Subsidiary’s assets and liabilities, which are denominated in the local currency to the Subsidiary’s functional currency, which is the U.S. dollar.

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

Research and Development Expenses

Research and development expenses increased by $3.6 million, or 34%, to $14.2 million for the six months ended June 30, 2023 from $10.6 million for the six months ended June 30, 2022. The increase was primarily related to increases in manufacturing and clinical costs associated with our Zygel program slightly offset by lower stock-based compensation expenses.

General and Administrative Expenses

General and administrative expenses decreased by $0.1 million, or 2%, to $7.4 million for the six months ended June 30, 2023 from $7.5 million for the six months ended June 30, 2022. The decrease was primarily related to lower stock-based compensation expenses and a decrease in directors’ and officers’ liability insurance costs slightly offset by an increase in legal fees.

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Other Income (Expense)

During the six months ended June 30, 2023 and 2022, we recognized $0.9 million and $0.2 million, respectively, in interest income. The increase in interest income was due to higher average interest rates earned on our investments. During the six months ended June 30, 2023 and 2022, we recognized a foreign currency loss of $0.2 million and $0.5 million, respectively. Foreign currency gains and losses are due primarily to the remeasurement of the Subsidiary’s assets and liabilities, which are denominated in the local currency to the Subsidiary’s functional currency, which is the U.S. dollar.

Liquidity and Capital Resources

Since our inception in 2007, we have devoted most of our cash resources to research and development and general and administrative activities. We have financed our operations primarily with the proceeds from the issuance and sale of equity securities (most notably our initial public offering, our follow-on public offerings and sales under our “at-the-market” offerings and through the Purchase Agreement), convertible promissory notes, state and federal grants and research services.

To date, we have not generated any revenue from the sale of products, and we do not anticipate generating any revenue from the sales of products for the foreseeable future. We have incurred losses and generated negative cash flows from operations since inception. As of June 30, 2023, our principal sources of liquidity were our cash and cash equivalents of $36.0 million. Our working capital was $27.8 million as of June 30, 2023.

Management believes that cash and cash equivalents as of June 30, 2023 will be sufficient to enable us to fund operating expenses and capital expenditure requirements to mid-year 2024, but not more than one year after the date of the filing of this Quarterly Report on Form 10-Q, and therefore management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern. Substantial additional financings will be needed to fund our operations and to complete clinical development of and to commercially develop our product candidates. There can be no assurance that such financing will be available when needed or on acceptable terms. Our ability to access the capital markets or otherwise raise such capital may be adversely impacted by geopolitical tensions and macroeconomic events and the recent disruptions to, and volatility in, financial markets in the United States and globally resulting from multiple factors such as health-related crises, inflationary pressures, banking instability, rising interest rates and the ongoing conflict in Ukraine.

Additionally, while the Merger Agreement is in effect, we are subject to restrictions on our business activities, generally requiring us to conduct our business in the ordinary course, consistent with past practice, and subject to a variety of specified limitations absent Harmony’s prior consent. These limitations include, among other things, restrictions on our ability to acquire other businesses and assets, sell, transfer or license our assets, make investments, repurchase or issue securities, pay dividends, make capital expenditures, amend our organizational documents, issue securities and incur indebtedness.

At-The-Market Financings

On May 11, 2021, we entered into a Controlled Equity Offering^SM Sales Agreement, or the 2021 Sales Agreement, with Cantor Fitzgerald & Co., Canaccord Genuity, LLC, H.C. Wainwright & Co. LLC and Ladenburg Thalmann & Co. Inc., as sales agents, pursuant to which, under a prospectus filed in May 2022, we may sell, from time to time, up to $75.0 million of our common stock. We are currently subject to General Instruction I.B.6 of Form S-3, and the amount of funds we can raise through primary public offerings of securities in any twelve-month period using our existing registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and non-voting common equity held by non-affiliates. We will be subject to this limit until such time as our public float exceeds $75.0 million.

During the six months ended June 30, 2023, we sold and issued 1,179,077 shares of common stock under the 2021 Sales Agreement in the open market at a weighted average selling price of $0.56 per share, resulting in gross proceeds of $0.7 million. Net proceeds after deducting commissions and offering expenses were $0.5 million.

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Equity Purchase Agreement

On July 21, 2022, we entered into a purchase agreement, or the Purchase Agreement, with Lincoln Park Capital Fund, LLC, or Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $20.0 million of our common stock. Under the terms and subject to the conditions of the Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $20.0 million of our common stock. Such sales of common stock will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing on July 21, 2022. The number of shares we may sell to Lincoln Park on any single business day in a regular purchase is 150,000, but that amount may be increased up to 300,000 shares, depending upon the market price of our common stock at the time of sale and subject to a maximum limit of $2.0 million per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of our common stock immediately preceding the time of sale as computed under the Purchase Agreement. In addition to regular purchases, we may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases. 

During the six months ended June 30, 2023, we sold and issued 2,250,000 shares of common stock under the Purchase Agreement at a weighted average selling price of $0.52 per share, resulting in gross and net proceeds of $1.2 million.

Debt

We had no debt outstanding as of June 30, 2023 or December 31, 2022.

Future Capital Requirements

During the six months ended June 30, 2023, net cash used in operating activities was $16.3 million, and our accumulated deficit as of June 30, 2023 was $295.4 million. Our expectations regarding future cash requirements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that we may make in the future. To the extent that we enter into any of those types of transactions, we may need to raise substantial additional capital.

We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval and, subject to obtaining such approval, the eventual commercialization of our product candidates. If we obtain marketing approval for any of our product candidates, we will incur significant sales, marketing and manufacturing expenses. In addition, we expect to incur additional expenses to add operational, financial and information systems and personnel, including personnel to support our planned product commercialization efforts. We also expect to continue to incur significant costs to comply with corporate governance, internal controls and similar requirements associated with operating as a public reporting company.

Our future use of operating cash and capital requirements will depend on many forward-looking factors, including the following:

● the initiation, progress, timing, costs and results of preclinical studies and clinical trials for our product candidates;

● the clinical development plans we establish for these product candidates;

● the number and characteristics of product candidates that we may develop or in-license;

● the terms of any collaboration agreements we may choose to execute;

● the outcome, timing and cost of meeting regulatory requirements established by the FDA, the European Medicines Agency or other comparable foreign regulatory authorities;

● the cost of filing, prosecuting, defending and enforcing our patent claims and other intellectual property rights;

● the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against us;

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● costs and timing of the implementation of commercial scale manufacturing activities;

● the cost of establishing, or outsourcing, sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to independently commercialize our products;

● the extent to which pandemics, epidemics and other outbreaks of communicable diseases could disrupt our operations or materially and adversely affect our business and financial conditions;

● the timing and outcome of the ATO’s review regarding our eligibility to receive tax credits related to the research and development tax incentive program; and

● liquidity constraints, failures and instability in U.S. and international financial banking systems.

We expect to seek additional funding to sustain our future operations and while we have successfully raised capital in the past, the ability to raise capital in future periods is not assured. Based on our available cash as of June 30, 2023, we will need to raise additional capital in the next twelve months to continue as a going concern.

To the extent that our capital resources are insufficient to meet our future operating and capital requirements, we will need to finance our cash needs through the sale of equity securities via the 2021 Sales Agreement or the Purchase Agreement, public or private equity offerings, debt financings, collaborations, licensing or other commercial agreements for one or more of our research programs or patent portfolios, divestitures of our assets, or other financing alternatives. Other than the Purchase Agreement, we have no committed external sources of funds. Additional equity or debt financing or collaboration and licensing arrangements may not be available on acceptable terms, if at all.

If we raise additional funds by issuing equity securities, including through our 2021 Sales Agreement or Purchase Agreement, our stockholders will experience dilution.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities for the six months ended June 30, 2023 and 2022.

	Six Months Ended June 30,
	2023		2022
Statement of Cash Flows Data:
Total net cash (used in) provided by:
Operating activities	$	(16,298,013)	$	(7,683,007)
Investing activities		(97,948)		(51,607)
Financing activities		1,722,483		2,416,249
Net decrease in cash and cash equivalents	$	(14,673,478)	$	(5,318,365)

Operating Activities

For the six months ended June 30, 2023, cash used in operating activities was $16.3 million compared $7.7 million of cash provided by operating activities for the six months ended June 30, 2022. The change from the comparable 2022 period was primarily due to (a) the Company receiving payment of $8.0 million from the ATO, during the six months ended March 31, 2022, for the research and development incentive for the years ended December 31, 2018, 2019 and 2020, (b) increased research and development expenses related to the clinical trial costs of our Zygel program, slightly offset by (c) changes in accounts payable and accrued expenses. Our cash flows used in operations may differ substantially from our net loss due to non-cash charges and changes in balance sheet accounts.

Excluding the $8.0 million of cash received from the ATO in 2022, we expect cash used in operating activities to increase for the year ending December 31, 2023 as compared to 2022, as we continue to conduct our RECONNECT clinical trial for FXS.

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Investing Activities

For the six months ended June 30, 2023 and 2022, cash used in investing activities represented the cost of expenditures made for manufacturing equipment.

Financing Activities

Cash provided by financing activities for the six months ended June 30, 2023 consisted of $0.5 million in net proceeds from sales of our shares of common stock under the 2021 Sales Agreement and $1.2 million in net proceeds from sales of our shares under the Purchase Agreement. Cash provided by financing activities for the six months ended June 30, 2022 consisted of $2.4 million in net proceeds from sales of our shares of common stock under the 2021 Sales Agreement.

Recently Adopted Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance, or ASU 2021-10, which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance is effective for financial statements issued for annual periods beginning after 15 December 2021. The adoption of the guidance on January 1, 2022 did not have a material impact on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to various market risks, which may result in potential losses arising from adverse changes in market rates, such as interest rates and foreign exchange rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes, nor do we engage in any hedging activities. As of June 30, 2023, we had cash and cash equivalents of $36.0 million consisting primarily of cash and money market account balances. Because of the short-term maturities of our cash and cash equivalents, we do not believe that an immediate 10% increase in interest rates would have any significant impact on the realized value of our investments. Accordingly, we do not believe we are exposed to material market risk with respect to our cash and cash equivalents.

We have engaged third parties to manufacture our product candidates in Australia, Canada and the United Kingdom and to conduct clinical trials for our product candidates in the United States, Australia and New Zealand. Manufacturing and research costs related to these operations are paid for in a combination of U.S. dollars and local currencies, limiting our foreign currency exchange rate risk, however, our consolidated financial statements are reported in U.S. dollars and changes in foreign currency exchange rates could significantly affect our financial condition, results of operations, or cash flows. If we conduct clinical trials and seek to manufacture a more significant portion of our product candidates outside of the United States in the future, we could incur significant foreign currency exchange rate risk.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms, promulgated by the Securities and Exchange Commission. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

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Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We may become engaged in legal actions arising in the ordinary course of our business (such as, for example, proceedings relating to employment matters or the initiation or defense of proceedings relating to intellectual property rights) from time to time and, while there can be no assurance, we believe that the ultimate outcome of these legal actions will not have a material adverse effect on our business, results of operations, financial condition or cash flows.

Item 1A. Risk Factors.

You should carefully consider the risk factors described in our 2022 Annual Report, as supplemented by our Quarterly Report on Form 10-Q for the three months ended March 31, 2023, under the caption “Item 1A. “Risk Factors.” Except as set forth below, there have been no material changes in our risk factors since we filed those reports. The risks described in those reports are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

Risks Related to the Pending Acquisition

The completion of the Offer and the Merger are subject to conditions, some or all of which may not be satisfied or completed on a timely basis, if at all. Failure to complete the Offer and the Merger could have material adverse effects on our business, financial condition and results of operations.

On August 14, 2023, we entered into the Merger Agreement with Harmony and Merger Sub. Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Harmony will commence the Offer to acquire all of the issued and outstanding shares of our common stock. Following the consummation of the Offer, upon the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as the surviving corporation in the Merger. The completion of the Offer and the Merger are subject to a number of conditions, which make the completion and timing of the Offer and Merger uncertain. There can be no assurance that the conditions to the completion of the Offer and the Merger will be satisfied or waived, that the Offer and the Merger will be completed on the expected timeframe or at all, or that the Offer and the Merger will be consummated as contemplated by the Merger Agreement.

If the Offer and Merger are not consummated within the expected time frame or at all, we may be subject to a number of material risks and our financial results and operations may be materially adversely affected. Our share price may fluctuate significantly based on announcement by Harmony, other third parties or us regarding the Offer and Merger.

In the event the Offer and the Merger are not timely consummated, the price of our common stock may decline. In addition, some costs related to the Offer and the Merger must be paid whether or not the Offer and the Merger are completed, and we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the proposed transaction, as well as the diversion of management and resources towards the Offer and Merger, for which we will have received little or no benefit if completion of the Merger does not occur. In such an event, we may also experience negative reactions from our investors, suppliers, and employees. In addition, if the Merger Agreement is terminated under specified circumstances, we will be required to pay Harmony a termination fee of $4.5 million.

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The Merger Agreement limits our ability to pursue alternative transactions, which could deter a third party from proposing an alternative transaction.

The Merger Agreement contains customary “no-shop” restrictions that, subject to certain exceptions, inhibit our ability to solicit alternative transaction proposals from third parties and engage in discussions or negotiations with third parties regarding transaction proposals. In the event we receive any alternative transaction proposal, then we are required to provide prompt notice (and in any event within 24 hours after receipt thereof) and certain information concerning such proposal to Harmony. It is possible that these or other provisions in the Merger Agreement, including a termination fee of $4.5 million payable to Harmony under certain circumstances, might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of our outstanding common stock from considering an acquisition or might result in a potential competing acquirer proposing an overall lower per-share consideration amount than it might otherwise have proposed to offer.

Lawsuits may be filed against us and the members of our board of directors arising out of the proposed Offer and Merger, which may delay or prevent the proposed Offer and Merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints may be filed against us, our board of directors, Harmony, Harmony’s board of directors, and others in the future in connection with the transactions contemplated by the Merger Agreement. The outcome of future litigation is uncertain, and we may not be successful in defending against any such future claims. Future lawsuits that may be filed against us, our board of directors, Harmony, or Harmony’s board of directors could delay or prevent the consummation of the Offer and the Merger, divert the attention of our management and employees from our day-to-day business, and otherwise adversely affect us financially.

The following risk factors do not take into account the planned Offer and Merger and assume that we continue to operate our business.

Our failure to meet the continued listing requirements of The Nasdaq Capital Market could result in a de-listing of our common stock.

On November 1, 2022, we received a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market LLC, or Nasdaq, notifying us that for the prior 30 consecutive business days the bid price for our common stock had closed below the minimum $1.00 per share requirement for continued listing, or the Bid Price Rule. Therefore, in accordance with the Nasdaq Listing Rules, we were provided 180 calendar days, or until May 1, 2023, to regain compliance.

In accordance with the deficiency letter and the Nasdaq Listing Rules, we notified Nasdaq of our intention to cure the deficiency and requested an additional 180 calendar days in order to do so. On May 2, 2023, Nasdaq approved our transfer from The Nasdaq Global Market to The Nasdaq Capital Market and granted an additional 180 calendar days, or until October 30, 2023, to regain compliance with the Bid Price Rule. If, at any time before October 30, 2023, the bid price for our common stock closes at $1.00 or more for a minimum of 10 consecutive business days, we will regain compliance with the Bid Price Rule, unless the Nasdaq staff exercises its discretion to extend this 10-day period pursuant to Nasdaq Listing Rules. We have not regained compliance with the Bid Price Rule as of the filing date of this Quarterly Report on Form 10-Q.

We intend to regain compliance with the Bid Price Rule by implementing a reverse stock split. We are seeking stockholder approval of a reverse stock split of our common stock at a ratio of any whole number between 1-for-2 and 1-for-50, or the Reverse Stock Split Proposal, at our 2023 Annual Meeting of Stockholders, or the 2023 Annual Meeting, which requires approval by a majority of the outstanding shares of our common stock entitled to vote. The 2023 Annual Meeting was held on June 13, 2023 and since then has been adjourned twice with respect to the Reverse Stock Split Proposal, most recently until August 25, 2023, in an effort to solicit additional stockholder votes. As of the filing date of this Quarterly Report on Form 10-Q, we continue to solicit votes from our stockholders with respect to the Reverse Stock Split Proposal.

However, there is no assurance that our stockholders will ultimately approve the Reverse Stock Split Proposal by October 30, 2023, or that, even if approved, any such reverse stock split would have the intended effect, or that any other attempt we may undertake will result in compliance with the Bid Price Rule, or that our common stock will not be delisted from Nasdaq. If we fail to regain and/or maintain compliance with Nasdaq’s continued listing requirements, Nasdaq may take steps to delist our common stock. Even if we are not delisted, the perception among investors that we

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are at a heightened risk of delisting could negatively affect the market price and trading volume of our common stock, or our ability to raise capital. If our common stock is delisted from Nasdaq and we are unable to list our common stock on another national securities exchange, we and our stockholders could face significant negative consequences including:

● limited availability of market quotations and liquidity for our securities;

● a determination that our common stock is a “penny stock” which would require brokers trading in the common stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for shares of common stock;

● a limited amount of analyst coverage, if any; and

● a decreased ability to issue additional securities or obtain additional financing in the future.

Our liquidity position raises substantial doubt about our ability to continue as a going concern and we will require substantial additional funding.

Management has concluded that substantial doubt exists about our ability to continue as a going concern for the next twelve months from the date hereof. As of June 30, 2023, we had an accumulated deficit of $295.4 million, cash and cash equivalents of $36.0 million and current liabilities of $11.5 million. Based on available resources, we believe that our cash and cash equivalents on hand will be sufficient to fund our currently anticipated operating and capital expenditure requirements to mid-year 2024. We expect to continue to incur losses for the foreseeable future as we continue our efforts to develop our current and future product candidates.

Substantial additional financing will be needed by us to fund our operations and capital expenditure requirements. Although we currently estimate that available funds could be sufficient to mid-year 2024, we have based these estimates on assumptions that may prove to be wrong, and we could spend our available financial resources much faster than we currently expect. The perception of our ability to continue as a going concern may make it more difficult for us to obtain financing for the continuation of our operations and could result in the loss of confidence by investors and employees. Obtaining additional financing contains risks, including:

● additional equity financing may not be available to us on satisfactory terms, or at all, and any equity we are able to issue could lead to dilution for current stockholders;

● loans or other debt instruments may have terms and/or conditions, such as interest rate, restrictive covenants and control or revocation provisions;

● the current environment in capital markets combined with our capital constraints may prevent us from being able to obtain adequate debt financing; and

● if we fail to obtain required additional financing to grow our business we may need to seek bankruptcy protection in the near term.

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

Recent Sales of Unregistered Securities

None.

Purchase of Equity Securities

We did not purchase any of our registered equity securities during the period covered by this Quarterly Report.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

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Item 5. Other Information.

On August 8, 2023, our Board of Directors appointed Kenneth Jones, the Company’s Corporate Controller, to serve as the Company’s Interim Chief Financial Officer and perform the duties of the principal financial officer and principal accounting officer while James Fickenscher, the Company’s Chief Financial Officer and Vice President, Corporate Development, is on a temporary medical leave of absence. Mr. Jones will continue to serve as the Company’s Corporate Controller during this time. We expect Mr. Fickenscher will resume his position as the Company’s Chief Financial Officer and Vice President, Corporate Development and perform the duties of the principal financial officer and principal accounting officer upon his return.

Mr. Jones, 59, has served as Vice President and Corporate Controller of the Company since March 2017 bringing more than 25 years of experience in high-growth, early-stage private and public companies. Prior to joining us, Mr. Jones served as Controller at Vitae Pharmaceuticals, Inc., a clinical-stage biopharmaceutical company, from December 2006 to March 2017. In this role, Mr. Jones was instrumental in transforming the company from a private start-up to a public development stage company. He was responsible for the overall management of the company’s accounting and financial reporting function until the company was acquired by Allergan plc in 2016. From August 2001 to October 2006, Mr. Jones served as Vice President and Controller at UbiquiTel, Inc., a telecommunications company, where he was responsible for providing both an operational and financial reporting role until the company was acquired by Sprint Nextel Corp. in 2006. Mr. Jones holds a B.S. in Accounting from Bloomsburg University of Pennsylvania and is a certified public accountant.

There are no arrangements or understandings between Mr. Jones and any other persons pursuant to which Mr. Jones was appointed as Interim Chief Financial Officer of the Company. In addition, there are no family relationships between Mr. Jones and any director or executive officer of the Company, and there are no transactions involving Mr. Jones requiring disclosure under Item 404(a) of Regulation S-K.

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Item 6. Exhibits.

The following exhibits are being filed herewith:

EXHIBIT INDEX

Exhibit No.	Exhibit
10.1	Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan
10.2	Form of Incentive Stock Option Agreement under Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan
10.3	Form of Non-Qualified Stock Option Agreement for Company Employees under Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan
10.4	Form of Non-Qualified Stock Option Agreement for Non-Employee Directors under Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan
10.5	Form of Restricted Stock Award Agreement under Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan
10.6	Form of Restricted Stock Award Agreement for Non-Employee Directors under Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101 INS	Inline XBRL Document (filed herewith).
101 SCH	Inline XBRL Taxonomy Extension Schema (filed herewith).
101 CAL	Inline XBRL Taxonomy Extension Schema Calculation Linkbase (filed herewith).
101 DEF	Inline XBRL Taxonomy Extension Schema Definition Linkbase (filed herewith).
101 LAB	Inline XBRL Taxonomy Extension Schema Label Linkbase (filed herewith).
101 PRE	Inline XBRL Taxonomy Extension Schema Presentation Linkbase (filed herewith).
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in exhibit 101)

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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.

	ZYNERBA PHARMACEUTICALS, INC.
Date: August 14, 2023	By:	/s/ ARMANDO ANIDO
		Armando Anido
		Chief Executive Officer
		(Principal Executive Officer)
Date: August 14, 2023	By:	/s/ KENNETH T. JONES
		Kenneth T. Jones
		Interim Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

ZYNERBA PHARMACEUTICALS, INC.

2023 STOCK OPTION AND INCENTIVE PLAN

SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

The name of the plan is the Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan (the “Plan”). The purpose of the Plan is to encourage and enable the officers, employees, Non-Employee Directors and Consultants of Zynerba Pharmaceuticals, Inc. (the “Company”) and its Affiliates upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company or one of its Affiliates.

The following terms shall be defined as set forth below:

“Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations thereunder.

“Administrator” means either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation committee and which is comprised of not less than two Non-Employee Directors who are independent.

“Affiliate” means, at the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405 of the Act. The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.

“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Units, Restricted Stock Awards, Unrestricted Stock Awards, Cash-Based Awards, and Dividend Equivalent Rights.

“Award Agreement” means a written or electronic document setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award Agreement is subject to the terms and conditions of the Plan.

“Board” means the Board of Directors of the Company.

“Cash-Based Award” means an Award entitling the recipient to receive a cash-denominated payment.

“Code” means the U.S. Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.

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“Consultant” means a consultant or adviser who provides bona fide services to the Company or an Affiliate as an independent contractor and who qualifies as a consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Act.

“Dividend Equivalent Right” means an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and held by the grantee.

“Effective Date” means the date on which the Plan becomes effective as set forth in Section 19.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator; provided, however, that if the Stock is listed on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), NASDAQ Global Market, The New York Stock Exchange or another national securities exchange or traded on any established market, the determination shall be made by reference to market quotations. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.

“Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.

“Non-Employee Director” means a member of the Board who is not also an employee of the Company or any Subsidiary.

“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.

“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.

“Restricted Shares” means the shares of Stock underlying a Restricted Stock Award that remain subject to a risk of forfeiture or the Company’s right of repurchase.

“Restricted Stock Award” means an Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of grant.

“Restricted Stock Units” means an Award of stock units subject to such restrictions and conditions as the Administrator may determine at the time of grant.

“Sale Event” shall mean (i) the sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) the following individuals cease for any reason to constitute a majority of the number of directors then serving on the

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Board: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least a majority of the directors then still in office who either were members of the Board on the Effective Date or whose appointment, election or nomination for election was previously so approved (the “Incumbent Directors”); (ii) a merger, reorganization or consolidation with any other corporation or other entity, other than (A) a merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power and outstanding stock immediately prior to such transaction continue to own a majority of the outstanding voting power and outstanding stock or other equity interests of the resulting or successor entity (or its ultimate parent, if applicable) immediately upon completion of such transaction and (B) the Incumbent Directors continuing immediately thereafter to represent at least a majority of the board of directors of the resulting or successor entity (or its ultimate parent, if applicable), (iii) the sale of all of the Stock of the Company to an unrelated person, entity or group thereof acting in concert, or (iv) any other transaction in which the owners of the Company’s outstanding voting power immediately prior to such transaction do not own at least a majority of the outstanding voting power of the Company or any successor entity immediately upon completion of the transaction other than as a result of the acquisition of securities directly from the Company. Notwithstanding anything in the foregoing to the contrary, with respect to compensation (A) that is subject to Section 409A of the Code and (B) for which a Sale Event would accelerate the timing (but not merely the vesting) of payments thereunder, the term “Sale Event” shall mean an event that is both (I) a Sale Event (as defined above) and (II) a “change in control event” (within the meaning of Section 409A of the Code).

“Sale Price” means the value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share of Stock pursuant to a Sale Event.

“Section 409A” means Section 409A of the Code and the regulations and other guidance promulgated thereunder.

“Service Relationship” means any relationship as an employee, Non-Employee Director or Consultant of the Company or any Affiliate. Unless otherwise set forth in an applicable Award Agreement, a Service Relationship shall be deemed to continue without interruption in the event a grantee’s status changes from full-time employee to part-time employee or Consultant).

“Stock” means the Common Stock, par value $0.001 per share, of the Company, subject to adjustments pursuant to Section 3.

“Stock Appreciation Right” means an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Agreement) having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.

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“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or indirectly.

“Ten Percent Owner” means an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation.

“Unrestricted Stock Award” means an Award of shares of Stock free of any restrictions.

SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS

(a)Administration of Plan. The Plan shall be administered by the Administrator.

(b)Powers of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan, including the power and authority:

(i)to select the individuals to whom Awards may from time to time be granted;

(ii)to determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Unrestricted Stock Awards, Cash-Based Awards, and Dividend Equivalent Rights, or any combination of the foregoing, granted to any one or more grantees;

(iii)to determine the number of shares of Stock to be covered by any Award;

(iv)to determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award Agreements;

(v)to accelerate at any time the exercisability or vesting of all or any portion of any Award;

(vi)subject to the provisions of Section 5(c), to extend at any time the period in which Stock Options may be exercised; and

(vii)at any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising in connection with the Plan; and to otherwise supervise the administration of the Plan.

All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.

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(c)Delegation of Authority to Grant Awards. Subject to applicable law, the Administrator, in its discretion, may delegate to a committee consisting of one or more officers of the Company including the Chief Executive Officer of the Company all or part of the Administrator’s authority and duties with respect to the granting of Awards to individuals who are (i) not subject to the reporting and other provisions of Section 16 of the Exchange Act and (ii) not members of the delegated committee. Any such delegation by the Administrator shall include a limitation as to the amount of Stock underlying Awards that may be granted during the period of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The Administrator may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s delegate or delegates that were consistent with the terms of the Plan.

(d)Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth the terms, conditions and limitations for each Award which may include, without limitation, the term of an Award and the provisions applicable in the event the Service Relationship terminates.

(e)Indemnification. Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and the Administrator (and any delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under the Company’s articles or bylaws or any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.

(f)Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries in which the Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan; (ii) determine which individuals outside the United States are eligible to participate in the Plan; (iii) modify the terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines such actions to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or modifications shall increase the share limitations contained in Section 3(a) hereof; and (v) take any action, before or after an Award is made, that the Administrator determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.

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SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

(a)Stock Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 6,900,000 shares, subject to adjustment as provided in this Section 3. For purposes of this limitation, the shares of Stock underlying any awards under the Plan that are forfeited, canceled or otherwise terminated (other than by exercise) shall be added back to the shares of Stock available for issuance under the Plan and, to the extent permitted under Section 422 of the Code and the regulations promulgated thereunder, the shares of Stock that may be issued as Incentive Stock Options. Notwithstanding the foregoing, the following shares shall not be added to the shares authorized for grant under the Plan: (i) shares tendered or held back upon exercise of an Option or settlement of an Award to cover the exercise price or tax withholding, and (ii) shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right upon exercise thereof. In the event the Company repurchases shares of Stock on the open market, such shares shall not be added to the shares of Stock available for issuance under the Plan. Subject to such overall limitations, shares of Stock may be issued up to such maximum number pursuant to any type or types of Award; provided, however, that no more than 35,000,000 shares of the Stock may be issued in the form of Incentive Stock Options. The shares available for issuance under the Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company.

(b)Changes in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation, sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged for securities of the Company or any successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, including the maximum number of shares that may be issued in the form of Incentive Stock Options, (ii) the number and kind of shares or other securities subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per share subject to each outstanding Restricted Stock Award, and (iv) the exercise price for each share subject to any then outstanding Stock Options and Stock Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number of shares subject to Stock Options and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights remain exercisable. The Administrator shall also make equitable or proportionate adjustments in the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other than in the ordinary course or any other extraordinary corporate event. The adjustment by the Administrator shall be final, binding and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator in its discretion may make a cash payment in lieu of fractional shares.

(c)Mergers and Other Transactions. In the case of and subject to the consummation of a Sale Event, the parties thereto may cause the assumption or continuation of Awards

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theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per share exercise prices, as such parties shall agree. To the extent the parties to such Sale Event do not provide for the assumption, continuation or substitution of Awards, upon the effective time of the Sale Event, the Plan and all outstanding Awards granted hereunder shall terminate. In such case, except as may be otherwise provided in the relevant Award Agreement, all Options and Stock Appreciation Rights with time-based vesting conditions or restrictions that are not vested and/or exercisable immediately prior to the effective time of the Sale Event shall become fully vested and exercisable as of the effective time of the Sale Event, all other Awards with time-based vesting, conditions or restrictions shall become fully vested and nonforfeitable as of the effective time of the Sale Event, and all Awards with conditions and restrictions relating to the attainment of performance goals shall become vested at target and nonforfeitable in connection with a Sale Event or to the extent specified in the relevant Award Agreement. In the event of such termination, (i) the Company shall have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied by the number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Stock Appreciation Rights (provided that, in the case of an Option or Stock Appreciation Right with an exercise price equal to or greater than the Sale Price, such Option or Stock Appreciation Right shall be cancelled for no consideration); or (ii) each grantee shall be permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to exercise all outstanding Options and Stock Appreciation Rights (to the extent then exercisable) held by such grantee. The Company shall also have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding other Awards in an amount equal to the Sale Price multiplied by the number of vested shares of Stock under such Awards.

(d)Maximum Awards to Non-Employee Directors. Notwithstanding anything to the contrary in this Plan, the value of all Awards awarded under this Plan and all other cash compensation paid by the Company to any Non-Employee Director in any calendar year shall not exceed $1,000,000 for the first year of service as a Non-Employee Director and $800,000 for each year thereafter for service as a Non-Employee Director; provided that, cash compensation shall not exceed $200,000 in any calendar year. For the purpose of this limitation, the value of any Award shall be its grant date fair value, as determined in accordance with ASC 718 or successor provision but excluding the impact of estimated forfeitures related to service-based vesting provisions.

SECTION 4. ELIGIBILITY

Grantees under the Plan will be such employees, Non-Employee Directors or Consultants of the Company and its Affiliates as are selected from time to time by the Administrator in its sole discretion; provided that Awards may not be granted to employees, Non-Employee Directors or Consultants who are providing services only to any “parent” of the Company, as such term is defined in Rule 405 of the Act, unless (i) the stock underlying the Awards is treated

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as “service recipient stock” under Section 409A or (ii) the Company has determined that such Awards are exempt from or otherwise comply with Section 409A.

SECTION 5. STOCK OPTIONS

(a)Award of Stock Options. The Administrator may grant Stock Options under the Plan. Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve.

Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.

Stock Options granted pursuant to this Section 5 shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock Options may be granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator may establish.

(b)Exercise Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date of grant. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the exercise price of such Incentive Stock Option shall be not less than 110 percent of the Fair Market Value on the date of grant. Notwithstanding the foregoing, Stock Options may be granted with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant (i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals who are not subject to U.S. income tax on the date of grant or (iii) if the Stock Option is otherwise exempt from or compliant with Section 409A.

(c)Option Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than ten years after the date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the term of such Stock Option shall be no more than five years from the date of grant.

(d)Exercisability; Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall be determined by the Administrator at or after the date of grant. The Administrator may at any time accelerate the exercisability of all or any portion of any Stock Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the exercise of a Stock Option and not as to unexercised Stock Options.

(e)Method of Exercise. Stock Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following methods except to the extent otherwise provided in the Award Agreement:

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(i)In cash, by certified or bank check or other instrument acceptable to the Administrator;

(ii)Through the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of shares of Stock that are not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise date;

(iii)By the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Company shall prescribe as a condition of such payment procedure; or

(iv)With respect to Stock Options that are not Incentive Stock Options, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price.

Payment instruments will be received subject to collection. The transfer to the optionee on the records of the Company or of the transfer agent of the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Award Agreement or applicable provisions of laws (including the satisfaction of any taxes that the Company or an Affiliate is obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of attested shares. In the event that the Company establishes, for itself or using the services of a third party, an automated system for the exercise of Stock Options, such as a system using an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through the use of such an automated system.

(f)Annual Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422 of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.

SECTION 6. STOCK APPRECIATION RIGHTS

(a)Award of Stock Appreciation Rights. The Administrator may grant Stock Appreciation Rights under the Plan. A Stock Appreciation Right is an Award entitling the

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recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable Award Agreement) having a value equal to the excess of the Fair Market Value of a share of Stock on the date of exercise over the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation Right shall have been exercised.

(b)Exercise Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of the Fair Market Value of the Stock on the date of grant.

(c)Grant and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any Stock Option granted pursuant to Section 5 of the Plan.

(d)Terms and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall be determined on the date of grant by the Administrator. The term of a Stock Appreciation Right may not exceed ten years. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees.

SECTION 7. RESTRICTED STOCK AWARDS

(a)Nature of Restricted Stock Awards. The Administrator may grant Restricted Stock Awards under the Plan. A Restricted Stock Award is any Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives.

(b)Rights as a Stockholder. Upon the grant of the Restricted Stock Award and payment of any applicable purchase price, a grantee shall have the rights of a stockholder with respect to the voting of the Restricted Shares and receipt of dividends; provided that if the lapse of restrictions with respect to the Restricted Stock Award is tied to the attainment of vesting conditions, any dividends paid by the Company during the vesting period shall accrue and shall not be paid to the grantee until and to the extent the vesting conditions are met with respect to the Restricted Stock Award. Unless the Administrator shall otherwise determine, (i) uncertificated Restricted Shares shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they are subject to forfeiture until such Restricted Shares are vested as provided in Section 7(d) below, and (ii) certificated Restricted Shares shall remain in the possession of the Company until such Restricted Shares are vested as provided in Section 7(d) below, and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator may prescribe.

(c)Restrictions. Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically provided herein or in the Restricted Stock Award Agreement. Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 16 below, in writing after the Award is issued, if a grantee’s employment (or other Service Relationship) with the Company and its Affiliates

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terminates for any reason, any Restricted Shares that have not vested at the time of termination shall automatically and without any requirement of notice to such grantee from or other action by or on behalf of, the Company be deemed to have been reacquired by the Company at its original purchase price (if any) from such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other Service Relationship), and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as a stockholder. Following such deemed reacquisition of Restricted Shares that are represented by physical certificates, a grantee shall surrender such certificates to the Company upon request without consideration.

(d)Vesting of Restricted Shares. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established performance goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Company’s right of repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Shares and shall be deemed “vested.”

SECTION 8. RESTRICTED STOCK UNITS

(a)Nature of Restricted Stock Units. The Administrator may grant Restricted Stock Units under the Plan. A Restricted Stock Unit is an Award of stock units that may be settled in shares of Stock (or cash, to the extent explicitly provided for in the Award Agreement) upon the satisfaction of such restrictions and conditions at the time of grant. Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance goals and objectives. The terms and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and grantees. Except in the case of Restricted Stock Units with a deferred settlement date that complies with Section 409A, at the end of the vesting period, the Restricted Stock Units, to the extent vested, shall be settled in the form of shares of Stock. Restricted Stock Units with deferred settlement dates are subject to Section 409A and shall contain such additional terms and conditions as the Administrator shall determine in its sole discretion in order to comply with the requirements of Section 409A.

(b)Election to Receive Restricted Stock Units in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee to elect to receive a portion of future cash compensation otherwise due to such grantee in the form of an award of Restricted Stock Units. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the Administrator and in accordance with Section 409A and such other rules and procedures established by the Administrator. Any such future cash compensation that the grantee elects to defer shall be converted to a fixed number of Restricted Stock Units based on the Fair Market Value of Stock on the date the compensation would otherwise have been paid to the grantee if such payment had not been deferred as provided herein. The Administrator shall have the sole right to determine whether and under what circumstances to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate. Any Restricted Stock Units that are elected to be received in lieu of cash compensation shall be fully vested, unless otherwise provided in the Award Agreement.

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(c)Rights as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon settlement of Restricted Stock Units; provided, however, that the grantee may be credited with Dividend Equivalent Rights with respect to the stock units underlying his Restricted Stock Units, subject to the provisions of Section 11 and such terms and conditions as the Administrator may determine.

(d)Termination. Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 16 below, in writing after the Award is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically terminate upon the grantee’s termination of employment (or cessation of Service Relationship) with the Company and its Affiliates for any reason.

SECTION 9. UNRESTRICTED STOCK AWARDS

Grant or Sale of Unrestricted Stock. The Administrator may grant (or sell at par value or such higher purchase price determined by the Administrator) an Unrestricted Stock Award under the Plan. An Unrestricted Stock Award is an Award pursuant to which the grantee may receive shares of Stock free of any restrictions under the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.

SECTION 10. CASH-BASED AWARDS

Grant of Cash-Based Awards. The Administrator may grant Cash-Based Awards under the Plan. A Cash-Based Award is an Award that entitles the grantee to a payment in cash upon the attainment of specified performance goals. The Administrator shall determine the maximum duration of the Cash-Based Award, the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based Award shall become vested or payable, and such other provisions as the Administrator shall determine. Each Cash-Based Award shall specify a cash-denominated payment amount, formula or payment ranges as determined by the Administrator. Payment, if any, with respect to a Cash-Based Award shall be made in accordance with the terms of the Award and may be made in cash.

SECTION 11. DIVIDEND EQUIVALENT RIGHTS

(a)Dividend Equivalent Rights. The Administrator may grant Dividend Equivalent Rights under the Plan. A Dividend Equivalent Right is an Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified in the Dividend Equivalent Right (or other Award to which it relates) if such shares had been issued to the grantee. A Dividend Equivalent Right may be granted hereunder to any grantee as a component of an award of Restricted Stock Units or as a freestanding award. The terms and conditions of Dividend Equivalent Rights shall be specified in the Award Agreement. Dividend equivalents credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares of Stock, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the date of reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend Equivalent Rights may be settled in cash or shares of Stock or a

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combination thereof, in a single installment or installments. A Dividend Equivalent Right granted as a component of an Award of Restricted Stock Units shall provide that such Dividend Equivalent Right shall be settled only upon settlement or payment of, or lapse of restrictions on, such other Award, and that such Dividend Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award.

(b)Termination. Except as may otherwise be provided by the Administrator either in the Award Agreement or, subject to Section 16 below, in writing after the Award is issued, a grantee’s rights in all Dividend Equivalent Rights shall automatically terminate upon the grantee’s termination of employment (or cessation of Service Relationship) with the Company and its Affiliates for any reason.

SECTION 12. Transferability of Awards

(a)Transferability. Except as provided in Section 12(b) below or otherwise determined by the Administrator, during a grantee’s lifetime, his or her Awards shall be exercisable only by the grantee, or by the grantee’s legal representative or guardian in the event of the grantee’s incapacity. No Awards shall be sold, assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by the laws of descent and distribution or pursuant to a domestic relations order. No Awards shall be subject, in whole or in part, to attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void.

(b)Administrator Action. Notwithstanding Section 12(a), the Administrator, in its discretion, may provide either in the Award Agreement regarding a given Award or by subsequent written approval that the grantee (who is an employee or Non-Employee Director) may transfer his or her Non-Qualified Stock Options to his or her immediate family members, to trusts for the benefit of such family members, or to partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company to be bound by all of the terms and conditions of this Plan and the applicable Award Agreement. In no event may an Award be transferred by a grantee for value.

(c)Family Member. For purposes of Section 12(b), “family member” shall mean a grantee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the grantee’s household (other than a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50 percent of the beneficial interest, a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these persons (or the grantee) own more than 50 percent of the voting interests.

(d)Designation of Beneficiary. To the extent permitted by the Company and valid under applicable law, each grantee to whom an Award has been made under the Plan may designate a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s death. Any such designation shall be on a form provided for that purpose by the Administrator and shall not be effective until received by the Administrator. If no beneficiary has been designated by a deceased grantee, or if the designated

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beneficiaries have predeceased the grantee, the beneficiary shall be the grantee’s estate or legal heirs.

SECTION 13. TAX WITHHOLDING

(a)Payment by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the grantee for tax purposes, pay to the Company or any applicable Affiliate, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld by the Company with respect to such income. The Company and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to deliver evidence of book entry (or stock certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied by the grantee.

(b)Payment in Stock. The Administrator may require the Company’s tax withholding obligation to be satisfied, in whole or in part, by the Company withholding from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market Value (as of the date the withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid liability accounting treatment. For purposes of share withholding, the Fair Market Value of withheld shares shall be determined in the same manner as the value of Stock includible in income of the grantees. The Administrator may also require any tax withholding obligation of the Company or any applicable Affiliate to be satisfied, in whole or in part, by an arrangement whereby a certain number of shares of Stock issued pursuant to any Award are immediately sold and proceeds from such sale are remitted to the Company or any applicable Affiliate in an amount that would satisfy the withholding amount due.

SECTION 14. Section 409A awards

Awards are intended to be exempt from Section 409A to the greatest extent possible and to otherwise comply with Section 409A. The Plan and all Awards shall be interpreted in accordance with such intent. To the extent that any Award is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A (a “409A Award”), the Award shall be subject to such additional rules and requirements as specified by the Administrator from time to time in order to comply with Section 409A. In this regard, if any amount under a 409A Award is payable upon a “separation from service” (within the meaning of Section 409A) to a grantee who is then considered a “specified employee” (within the meaning of Section 409A), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the grantee’s separation from service, or (ii) the grantee’s death, but only to the extent such delay is necessary to prevent such payment from being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Further, the settlement of any 409A Award may not be accelerated except to the extent permitted by Section 409A.

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SECTION 15. TERMINATION OF SERVICE RELATIONSHIP, TRANSFER, LEAVE OF ABSENCE, ETC.

(a)Termination of Service Relationship. If the grantee’s Service Relationship is with an Affiliate and such Affiliate ceases to be an Affiliate, the grantee shall be deemed to have terminated his or her Service Relationship for purposes of the Plan.

(b)For purposes of the Plan, the following events shall not be deemed a termination of a Service Relationship:

(i)a transfer to the Service Relationship of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another; or

(ii)an approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence was granted or if the Administrator otherwise so provides in writing.

SECTION 16. AMENDMENTS AND TERMINATION

The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in law or for any other lawful purpose, but no such action shall materially and adversely affect rights under any outstanding Award without the holder’s consent. Except as provided in Section 3(b) or 3(c), without prior stockholder approval, in no event may the Administrator exercise its discretion to reduce the exercise price of outstanding Stock Options or Stock Appreciation Rights or effect repricing through cancellation and re-grants or cancellation of Stock Options or Stock Appreciation Rights in exchange for cash or other Awards. To the extent required under the rules of any securities exchange or market system on which the Stock is listed, to the extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code, Plan amendments shall be subject to approval by Company stockholders. Nothing in this Section 16 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(b) or 3(c).

SECTION 17. STATUS OF PLAN

With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.

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SECTION 18. GENERAL PROVISIONS

(a)No Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the shares without a view to distribution thereof.

(b)Issuance of Stock. To the extent certificated, stock certificates to grantees under this Plan shall be deemed delivered for all purposes when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company. Uncertificated Stock shall be deemed delivered for all purposes when the Company or a Stock transfer agent of the Company shall have given to the grantee by electronic mail (with proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last known address on file with the Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records). Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any evidence of book entry or certificates evidencing shares of Stock pursuant to the exercise or settlement of any Award, unless and until the Administrator has determined, with advice of counsel (to the extent the Administrator deems such advice necessary or advisable), that the issuance and delivery is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed, quoted or traded. Any Stock issued pursuant to the Plan shall be subject to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded. The Administrator may place legends on any Stock certificate or notations on any book entry to reference restrictions applicable to the Stock. In addition to the terms and conditions provided herein, the Administrator may require that an individual make such reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in order to comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period limitation, as may be imposed in the discretion of the Administrator.

(c)Stockholder Rights. Until Stock is deemed delivered in accordance with Section 18(b), no right to vote or receive dividends or any other rights of a stockholder will exist with respect to shares of Stock to be issued in connection with an Award, notwithstanding the exercise of a Stock Option or any other action by the grantee with respect to an Award.

(d)Other Compensation Arrangements; No Rights to Continued Service Relationship. Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued employment of other Service Relationship with the Company or any Affiliate.

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(e)Trading Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading policies and procedures, as in effect from time to time.

(f)Clawback Policy. Awards under the Plan shall be subject to the Company’s clawback policy, as in effect from time to time.

SECTION 19. EFFECTIVE DATE OF PLAN

This Plan shall become effective upon stockholder approval in accordance with applicable state law, the Company’s bylaws and articles of incorporation, and applicable stock exchange rules. No grants of Stock Options and other Awards may be made hereunder after the tenth anniversary of the Effective Date and no grants of Incentive Stock Options may be made hereunder after the tenth anniversary of the date the Plan is approved by the Board.

SECTION 20. GOVERNING LAW

This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of the State of State of Delaware, applied without regard to conflict of law principles.

DATE APPROVED BY BOARD OF DIRECTORS: April 5, 2023

DATE APPROVED BY STOCKHOLDERS: June 13, 2023

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EX-10.2

Exhibit 10.2

INCENTIVE STOCK OPTION AGREEMENT
UNDER THE ZYNERBA PHARMACEUTICALS, INC.
2023 STOCK OPTION AND INCENTIVE PLAN

Name of Optionee: ​ ​

No. of Option Shares:​ ​

Option Exercise Price per Share:$​ ​

Grant Date: ​ ​

Expiration Date:​ ​

Pursuant to the Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Zynerba Pharmaceuticals, Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.001 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan.

1.Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as the Optionee continues to have a Service Relationship with the Company or a Subsidiary on such dates:

Incremental Number ofOption Shares Exercisable*	Exercisability Date
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________

* Max. of $100,000 per yr.

Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.

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2.Manner of Exercise.

(a)The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.

Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; or (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments will be received subject to collection.

The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.

(b)The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.

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(c)The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.

(d)Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.

3.Termination of Employment. If the Optionee’s employment by the Company or a Subsidiary (as defined in the Plan) is terminated, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.

(a)Termination Due to Death. If the Optionee’s employment terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 24 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.

(b)Termination Due to Disability. If the Optionee’s employment terminates by reason of the Optionee’s disability (as determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination of employment, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.

(c)Termination for Cause. If the Optionee’s employment terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionee’s duties to the Company.

(d)Other Termination. If the Optionee’s employment terminates for any reason other than the Optionee’s death, the Optionee’s disability, or Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.

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The Administrator’s determination of the reason for termination of the Optionee’s employment shall be conclusive and binding on the Optionee and his or her representatives or legatees.

4.Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

5.Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.

6.Status of the Stock Option. This Stock Option is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), but the Company does not represent or warrant that this Stock Option qualifies as such. The Optionee should consult with his or her own tax advisors regarding the tax effects of this Stock Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited to, holding period requirements. To the extent any portion of this Stock Option does not so qualify as an “incentive stock option,” such portion shall be deemed to be a non-qualified stock option. If the Optionee intends to dispose or does dispose (whether by sale, gift, transfer or otherwise) of any Option Shares within the one-year period beginning on the date after the transfer of such shares to him or her, or within the two-year period beginning on the day after the grant of this Stock Option, he or she will so notify the Company within 30 days after such disposition.

7.Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the minimum required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the minimum withholding amount due.

8.No Obligation to Continue Employment. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the employment of the Optionee at any time.

9.Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.

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10.Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

11.Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

ZYNERBA PHARMACEUTICALS, INC.

By:​ ​

Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.

Dated:​ ​​ ​

Optionee’s Signature

Optionee’s name and address:

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ACTIVE/122002812.6

EX-10.3

Exhibit 10.3

NON-QUALIFIED STOCK OPTION AGREEMENT
FOR COMPANY EMPLOYEES
UNDER ZYNERBA PHARMACEUTICALS, INC.
2023 STOCK OPTION AND INCENTIVE PLAN

Name of Optionee:​ ​

No. of Option Shares:​ ​

Option Exercise Price per Share:$​ ​

Grant Date:​ ​

Expiration Date:​ ​

Pursuant to the Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Zynerba Pharmaceuticals, Inc. (the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.001 per share (the “Stock”) of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.

1.Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated so long as Optionee continues to have a Service Relationship with the Company or a Subsidiary on such dates:

Incremental Number ofOption Shares Exercisable	Exercisability Date
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________

Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.

ACTIVE/122000009.7

2.Manner of Exercise.

(a)The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.

Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.

The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.

(b)The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been

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entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.

(c)The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.

(d)Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.

3.Termination of Service Relationship. If the Optionee’s Service Relationship with the Company or a Subsidiary (as defined in the Plan) is terminated, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.

(a)Termination Due to Death. If the Optionee’s Service Relationship with the Company or any of its Subsidiaries terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 24 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.

(b)Termination Due to Disability. If the Optionee’s Service Relationship with the Company or any of its Subsidiaries terminates by reason of the Optionee’s disability (as determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of disability shall terminate immediately and be of no further force or effect.

(c)Termination for Cause. If the Optionee’s Service Relationship with the Company or any of its Subsidiaries terminates for Cause, any portion of this Stock Option outstanding on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall mean, unless otherwise provided in an employment agreement between the Company and the Optionee, a determination by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance (other than by reason of disability) by the Optionee of the Optionee’s duties to the Company.

(d)Other Termination. If the Optionee’s Service Relationship with the Company or any of its Subsidiaries terminates for any reason other than the Optionee’s death, the Optionee’s disability or Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from the date of termination or until the

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Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.

The Administrator’s determination of the reason for termination of the Optionee’s Service Relationship with the Company or any of its Subsidiaries shall be conclusive and binding on the Optionee and his or her representatives or legatees.

4.Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

5.Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.

6.Tax Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the minimum withholding amount due.

7.No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Optionee in a Service Relationship with the Company or any of its Subsidiaries and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Optionee’s Service Relationship with the Company or any of its Subsidiaries at any time.

8.Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.

9.Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy

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rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

10.Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

ZYNERBA PHARMACEUTICALS, INC.

By:​ ​

Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.

Dated:​ ​​ ​

Optionee’s Signature

Optionee’s name and address:

5

ACTIVE/122000009.7

EX-10.4

Exhibit 10.4

NON-QUALIFIED STOCK OPTION AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
UNDER ZYNERBA PHARMACEUTICALS, INC.
2023 STOCK OPTION AND INCENTIVE PLAN

Name of Optionee:​ ​

No. of Option Shares:​ ​

Option Exercise Price per Share:$​ ​

Grant Date:​ ​

Expiration Date:​ ​

Pursuant to the Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan as amended through the date hereof (the “Plan”), Zynerba Pharmaceuticals, Inc. (the “Company”) hereby grants to the Optionee named above, who is a Non-Employee Director of the Company but is not an employee of the Company, an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.001 per share (the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended.

1.Exercisability Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability schedule hereunder, this Stock Option shall be exercisable with respect to all of the Option Shares on the first to occur of (i) the one-year anniversary of the Grant Date, or (ii) one day before the Company’s next annual meeting of stockholders following the Grant Date, so long as the Optionee remains in a Service Relationship with the Company on such date.

Notwithstanding the foregoing, in the event of a Sale Event, 100% of the then-outstanding and unvested Option Shares shall immediately be deemed vested and exercisable on the date of such Sale Event; provided, that the Optionee remains in a Service Relationship with the Company until such date. In the event that Grantee’s Service Relationship terminates due to his or her death or Disability, 100% of the then-outstanding and unvested Option Shares shall immediately be deemed vested and exercisable. Once exercisable, this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject to the provisions hereof and of the Plan.

ACTIVE/122000012.9

2.Manner of Exercise.

(a)The Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.

Payment of the purchase price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator; (iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment instruments will be received subject to collection.

The transfer to the Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of the Stock Option shall be net of the Shares attested to.

(b)The shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to the Optionee, and the Optionee’s name shall have been

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entered as the stockholder of record on the books of the Company. Thereupon, the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.

(c)The minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under this Stock Option at the time.

(d)Notwithstanding any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.

3.Termination as a Non-Employee Director. If the Optionee ceases to be a Non-Employee Director of the Company, the period within which to exercise the Stock Option may be subject to earlier termination as set forth below.

(a)Termination Due to Death. If the Optionee’s service as a Non-Employee Director terminates by reason of the Optionee’s death, any portion of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the Optionee’s legal representative or legatee for a period of 24 months from the date of death or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of no further force or effect.

(b)Other Termination. If the Optionee ceases to be a Non-Employee Director for any reason other than the Optionee’s death, any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date the Optionee ceased to be a Non-Employee Director, for a period of 12 months from the date the Optionee ceased to be a Non-Employee Director or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date the Optionee ceases to be a Non-Employee Director shall terminate immediately and be of no further force or effect.

4.Incorporation of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

5.Transferability. This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime, only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.

6.No Obligation to Continue as a Non-Employee Director. Neither the Plan nor this Stock Option confers upon the Optionee any rights with respect to continuance as a Non-Employee Director.

7.Integration. This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior agreements and discussions between the parties concerning such subject matter.

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8.Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

9.Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

ZYNERBA PHARMACEUTICALS, INC.

By:​ ​

Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.

Dated:​ ​​ ​

Optionee’s Signature

Optionee’s name and address:

4

ACTIVE/122000012.9

EX-10.5

Exhibit 10.5

RESTRICTED STOCK AWARD AGREEMENT
UNDER THE ZYNERBA PHARMACEUTICALS, INC.
2023 STOCK OPTION AND INCENTIVE PLAN

Name of Grantee:​ ​

No. of Shares:​ ​

Grant Date:​ ​

Pursuant to the Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan (the “Plan”) as amended through the date hereof, Zynerba Pharmaceuticals, Inc. (the “Company”) hereby grants a Restricted Stock Award (an “Award”) to the Grantee named above. Upon acceptance of this Award, the Grantee shall receive the number of shares of Common Stock, par value $0.001 per share (the “Stock”) of the Company specified above, subject to the restrictions and conditions set forth herein and in the Plan. The Company acknowledges the receipt from the Grantee of consideration with respect to the par value of the Stock in the form of cash, past or future services rendered to the Company by the Grantee or such other form of consideration as is acceptable to the Administrator.

1.Award. The shares of Restricted Stock awarded hereunder shall be issued and held by the Company’s transfer agent in book entry form, and the Grantee’s name shall be entered as the stockholder of record on the books of the Company. Thereupon, the Grantee shall have all the rights of a stockholder with respect to such shares, including voting and dividend rights, subject, however, to the restrictions and conditions specified in Section 2 below. The Grantee shall (i) sign and deliver to the Company a copy of this Award Agreement and (ii) deliver to the Company a stock power endorsed in blank.

2.Restrictions and Conditions.

(a)Any book entries for the shares of Restricted Stock granted herein shall bear an appropriate legend, as determined by the Administrator in its sole discretion, to the effect that such shares are subject to restrictions as set forth herein and in the Plan.

(b)Shares of Restricted Stock granted herein may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of by the Grantee prior to vesting.

(c)If the Grantee’s Service Relationship with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason (including death) prior to vesting of shares of Restricted Stock granted herein, all shares of Restricted Stock shall immediately and automatically be forfeited and returned to the Company.

3.Vesting of Restricted Stock. The restrictions and conditions in Section 2 of this Agreement shall lapse on the Vesting Date or Dates specified in the following schedule so long as the Grantee continues to have a Service Relationship the Company or a Subsidiary on such

ACTIVE/122000001.8

Dates. If a series of Vesting Dates is specified, then the restrictions and conditions in Section 2 shall lapse only with respect to the number of shares of Restricted Stock specified as vested on such date.

Incremental Number of Shares Vested	Vesting Date
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________
_____________ (___%)	____________

Subsequent to such Vesting Date or Dates, the shares of Stock on which all restrictions and conditions have lapsed shall no longer be deemed Restricted Stock. The Administrator may at any time accelerate the vesting schedule specified in this Section 3.

4.Dividends. Dividends on shares of Restricted Stock shall be paid currently to the Grantee.

5.Incorporation of Plan. Notwithstanding anything herein to the contrary, this Award shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

6.Transferability. This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.

7.Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. Except in the case where an election is made pursuant to Section 8 below, the Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to be issued or released by the transfer agent a number of shares of Stock with an aggregate Fair Market Value that would satisfy the minimum withholding amount due.

8.Election Under Section 83(b). The Grantee and the Company hereby agree that the Grantee may, within 30 days following the Grant Date of this Award, file with the Internal Revenue Service and the Company an election under Section 83(b) of the Internal Revenue Code. In the event the Grantee makes such an election, he or she agrees to provide a copy of the election to the Company. The Grantee acknowledges that he or she is responsible for obtaining the advice of his or her tax advisors with regard to the Section 83(b) election and that he or she is relying solely on such advisors and not on any statements or representations of the Company or any of its agents with regard to such election.

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9.No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in a Service Relationship with the Company or any of its Subsidiaries and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the Grantee’s Service Relationship with the Company or any of its Subsidiaries at any time.

10.Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.

11.Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

12.Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file

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with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

ZYNERBA PHARMACEUTICALS, INC.

By:​ ​

Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.

Dated:​ ​​ ​

Grantee’s Signature

Grantee’s name and address:

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ACTIVE/122000001.8

EX-10.6

Exhibit 10.6

RESTRICTED STOCK AWARD AGREEMENT

FOR NON-EMPLOYEE DIRECTORS
UNDER THE ZYNERBA PHARMACEUTICALS, INC.
2023 STOCK OPTION AND INCENTIVE PLAN

Name of Grantee:​ ​

No. of Shares:​ ​

Grant Date:​ ​

Pursuant to the Zynerba Pharmaceuticals, Inc. 2023 Stock Option and Incentive Plan (the “Plan”) as amended through the date hereof, Zynerba Pharmaceuticals, Inc. (the “Company”) hereby grants a Restricted Stock Award (an “Award”) to the Grantee named above. Upon acceptance of this Award, the Grantee shall receive the number of shares of Common Stock, par value $0.001 per share (the “Stock”) of the Company specified above, subject to the restrictions and conditions set forth herein and in the Plan. The Company acknowledges the receipt from the Grantee of consideration with respect to the par value of the Stock in the form of cash, past or future services rendered to the Company by the Grantee or such other form of consideration as is acceptable to the Administrator.

1.Award. The shares of Restricted Stock awarded hereunder shall be issued and held by the Company’s transfer agent in book entry form, and the Grantee’s name shall be entered as the stockholder of record on the books of the Company. Thereupon, the Grantee shall have all the rights of a stockholder with respect to such shares, including voting and dividend rights, subject, however, to the restrictions and conditions specified in Section 2 below. The Grantee shall (i) sign and deliver to the Company a copy of this Award Agreement and (ii) deliver to the Company a stock power endorsed in blank.

2.Restrictions and Conditions.

(a)Any book entries for the shares of Restricted Stock granted herein shall bear an appropriate legend, as determined by the Administrator in its sole discretion, to the effect that such shares are subject to restrictions as set forth herein and in the Plan.

(b)Shares of Restricted Stock granted herein may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of by the Grantee prior to vesting.

(c)If the Grantee’s Service Relationship with the Company and its Subsidiaries is voluntarily or involuntarily terminated for any reason (other than due to death or Disability) prior to vesting of shares of Restricted Stock granted herein, all shares of Restricted Stock shall immediately and automatically be forfeited and returned to the Company.

3.Vesting of Restricted Stock. The restrictions and conditions in Section 2 of this Agreement shall lapse on the first to occur of (i) the one-year anniversary of the Grant Date, or

ACTIVE/123766691.7

(ii) one day before the Company’s next annual meeting of stockholders following the Grant Date, so long as the Grantee remains in a Service Relationship with the Company on such date. Notwithstanding the foregoing, in the event of a Sale Event, 100% of the then-outstanding and unvested Restricted Stock shall immediately be deemed vested on such date so long as the Grantee remains in a Service Relationship with the Company through such date. In the event that Grantee’s Service Relationship terminates due to his or her death or Disability, then restrictions and conditions in Section 2 of this Agreement shall immediately lapse and the Restricted Stock shall become immediately and fully vested.

Subsequent to such vesting date, the shares of Stock on which all restrictions and conditions have lapsed shall no longer be deemed Restricted Stock. The Administrator may at any time accelerate the vesting schedule specified in this Section 3.

4.Dividends. Dividends on shares of Restricted Stock shall be paid currently to the Grantee.

5.Incorporation of Plan. Notwithstanding anything herein to the contrary, this Award shall be subject to and governed by all the terms and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

6.Transferability. This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.

7.Tax Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state, and local taxes required by law to be withheld on account of such taxable event. Except in the case where an election is made pursuant to Section 8 below, the Company shall have the authority to cause the required tax withholding obligation to be satisfied, in whole or in part, by withholding from shares of Stock to be issued or released by the transfer agent a number of shares of Stock with an aggregate Fair Market Value that would satisfy the minimum withholding amount due.

8.Election Under Section 83(b). The Grantee and the Company hereby agree that the Grantee may, within 30 days following the Grant Date of this Award, file with the Internal Revenue Service and the Company an election under Section 83(b) of the Internal Revenue Code. In the event the Grantee makes such an election, he or she agrees to provide a copy of the election to the Company. The Grantee acknowledges that he or she is responsible for obtaining the advice of his or her tax advisors with regard to the Section 83(b) election and that he or she is relying solely on such advisors and not on any statements or representations of the Company or any of its agents with regard to such election.

9.No Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan or this Agreement to continue the Grantee in a Service Relationship with the Company or any of its Subsidiaries and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to

2

ACTIVE/123766691.7

terminate the Grantee’s Service Relationship with the Company or any of its Subsidiaries at any time.

10.Integration. This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements and discussions between the parties concerning such subject matter.

11.Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law.

12.Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

ZYNERBA PHARMACEUTICALS, INC.

By:​ ​

Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.

Dated:​ ​​ ​

Grantee’s Signature

Grantee’s name and address:

3

ACTIVE/123766691.7

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Armando Anido, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Zynerba Pharmaceuticals, Inc.;

2. 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;

3. 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;

4. 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

5. 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.

By: /s/ Armando Anido

Name: Armando Anido

Title: Chairman and Chief Executive Officer

Dated: August 14, 2023

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Kenneth T. Jones, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Zynerba Pharmaceuticals, Inc.;

2. 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;

3. 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;

4. 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

5. 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.

By: /s/ Kenneth T. Jones

Name: Kenneth T. Jones

Title: Interim Chief Financial Officer

Dated: August 14, 2023

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Zynerba Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Armando Anido, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Armando Anido

Armando Anido

Chairman and Chief Executive Officer

Dated: August 14, 2023

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Zynerba Pharmaceuticals, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kenneth T. Jones, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Kenneth T. Jones

Kenneth T. Jones

Interim Chief Financial Officer

Dated: August 14, 2023

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2023	Aug. 09, 2023
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Jun. 30, 2023
Entity File Number	001-37526
Entity Registrant Name	Zynerba Pharmaceuticals, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-0389433
Entity Address, Address Line One	80 W. Lancaster Avenue
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Devon
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	19333
City Area Code	484
Local Phone Number	581-7505
Title of 12(b) Security	Common Stock, $0.001 par value per share
Trading Symbol	ZYNE
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	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		53,939,431
Entity Central Index Key	0001621443
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

CONSOLIDATED BALANCE SHEETS - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 35,967,515	$ 50,640,993
Incentive and tax receivables	1,308,583	1,225,383
Prepaid expenses and other current assets	2,018,874	2,908,731
Total current assets	39,294,972	54,775,107
Property and equipment, net	394,904	409,572
Incentive and tax receivables	567,648
Right-of-use assets	219,037	336,215
Total assets	40,476,561	55,520,894
Current liabilities:
Accounts payable	2,479,345	1,942,830
Accrued expenses	8,758,767	7,014,882
Lease liabilities	217,879	214,901
Total current liabilities	11,455,991	9,172,613
Lease liabilities, long-term		119,524
Total liabilities	11,455,991	9,292,137
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued or outstanding
Common stock, $0.001 par value; 200,000,000 shares authorized; 53,939,431 shares issued and outstanding at June 30, 2023 and 47,895,687 shares issued and outstanding at December 31, 2022	53,940	47,896
Additional paid-in capital	324,373,823	320,698,146
Accumulated deficit	(295,407,193)	(274,517,285)
Total stockholders' equity	29,020,570	46,228,757
Total liabilities and stockholders' equity	$ 40,476,561	$ 55,520,894

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2023	Dec. 31, 2022
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	53,939,431	47,895,687
Common stock, shares outstanding	53,939,431	47,895,687

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Operating expenses:
Research and development	$ 7,166,708	$ 5,446,317	$ 14,244,789	$ 10,592,922
General and administrative	3,969,499	3,722,453	7,362,593	7,479,763
Total operating expenses	11,136,207	9,168,770	21,607,382	18,072,685
Loss from operations	(11,136,207)	(9,168,770)	(21,607,382)	(18,072,685)
Other income (expense):
Interest income	434,718	91,691	882,033	187,735
Foreign exchange loss	(74,576)	(775,927)	(164,559)	(458,675)
Total other income (expense)	360,142	(684,236)	717,474	(270,940)
Net loss	$ (10,776,065)	$ (9,853,006)	$ (20,889,908)	$ (18,343,625)
Net loss per share basic	$ (0.21)	$ (0.24)	$ (0.42)	$ (0.45)
Net loss per share diluted	$ (0.21)	$ (0.24)	$ (0.42)	$ (0.45)
Basic weighted average shares outstanding	50,150,138	41,406,803	49,295,103	40,858,688
Diluted weighted average shares outstanding	50,150,138	41,406,803	49,295,103	40,858,688

XML

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY - USD ($)	Common stock	Additional paid-capital	Accumulated deficit	Total
Balance at Dec. 31, 2021	$ 41,218	$ 310,353,595	$ (239,481,479)	$ 70,913,334
Balance (in shares) at Dec. 31, 2021	41,217,537
Increase (Decrease) in Stockholders' Equity (Deficit)
Issuance of common stock, net of issuance costs	$ 857	1,582,916		1,583,773
Issuance of common stock, net of issuance costs (in shares)	857,060
Issuance of restricted stock	$ 1,249	(1,249)
Issuance of restricted stock (in shares)	1,249,500
Stock-based compensation expense		1,160,482		1,160,482
Net loss			(8,490,619)	(8,490,619)
Balance at Mar. 31, 2022	$ 43,324	313,095,744	(247,972,098)	65,166,970
Balance (in shares) at Mar. 31, 2022	43,324,097
Increase (Decrease) in Stockholders' Equity (Deficit)
Issuance of common stock, net of issuance costs	$ 489	818,877		819,366
Issuance of common stock, net of issuance costs (in shares)	488,892
Issuance of restricted stock	$ 123	(123)
Issuance of restricted stock (in shares)	123,154
Stock-based compensation expense		1,108,543		1,108,543
Net loss			(9,853,006)	(9,853,006)
Balance at Jun. 30, 2022	$ 43,936	315,023,041	(257,825,104)	57,241,873
Balance (in shares) at Jun. 30, 2022	43,936,143
Balance at Dec. 31, 2022	$ 47,896	320,698,146	(274,517,285)	46,228,757
Balance (in shares) at Dec. 31, 2022	47,895,687
Increase (Decrease) in Stockholders' Equity (Deficit)
Issuance of common stock, net of issuance costs	$ 3,279	1,747,000		1,750,279
Issuance of common stock, net of issuance costs (in shares)	3,279,077
Issuance of restricted stock	$ 1,896	(1,896)
Issuance of restricted stock (in shares)	1,896,167
Common stock issued in lieu of annual bonus	$ 432	278,940		279,372
Common stock issued in lieu of annual bonus (in shares)	431,556
Stock-based compensation expense		821,986		821,986
Net loss			(10,113,843)	(10,113,843)
Balance at Mar. 31, 2023	$ 53,503	323,544,176	(284,631,128)	38,966,551
Balance (in shares) at Mar. 31, 2023	53,502,487
Balance at Dec. 31, 2022	$ 47,896	320,698,146	(274,517,285)	46,228,757
Balance (in shares) at Dec. 31, 2022	47,895,687
Increase (Decrease) in Stockholders' Equity (Deficit)
Net loss				(20,900,000)
Balance at Jun. 30, 2023	$ 53,940	324,373,823	(295,407,193)	29,020,570
Balance (in shares) at Jun. 30, 2023	53,939,431
Balance at Mar. 31, 2023	$ 53,503	323,544,176	(284,631,128)	38,966,551
Balance (in shares) at Mar. 31, 2023	53,502,487
Increase (Decrease) in Stockholders' Equity (Deficit)
Issuance of common stock, net of issuance costs	$ 150	61,350		61,500
Issuance of common stock, net of issuance costs (in shares)	150,000
Issuance of restricted stock	$ 287	(287)
Issuance of restricted stock (in shares)	286,944
Stock-based compensation expense		768,584		768,584
Net loss			(10,776,065)	(10,776,065)
Balance at Jun. 30, 2023	$ 53,940	$ 324,373,823	$ (295,407,193)	$ 29,020,570
Balance (in shares) at Jun. 30, 2023	53,939,431

XML

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Cash flows from operating activities:
Net loss	$ (20,889,908)	$ (18,343,625)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	117,331	114,727
Stock-based compensation	1,590,570	2,269,025
Changes in operating assets and liabilities:
Incentive and tax receivables	(650,848)	7,545,395
Prepaid expenses and other assets	950,836	1,202,672
Right-of-use assets and liabilities	632	631
Accounts payable	582,894	(199,978)
Accrued expenses	2,000,480	(271,854)
Net cash used in operating activities	(16,298,013)	(7,683,007)
Cash flows from investing activities:
Purchases of property and equipment	(97,948)	(51,607)
Net cash used in investing activities	(97,948)	(51,607)
Cash flows from financing activities:
Proceeds from the issuance of common stock	1,827,512	2,657,567
Payment of financing fees and expenses	(105,029)	(241,318)
Net cash provided by financing activities	1,722,483	2,416,249
Net decrease in cash and cash equivalents	(14,673,478)	(5,318,365)
Cash and cash equivalents at beginning of period	50,640,993	67,808,000
Cash and cash equivalents at end of period	35,967,515	62,489,635
Supplemental disclosures of cash flow information:
Financing costs included in accounts payable and accrued expenses at end of period	27,070	$ 134,628
Property and equipment acquired but unpaid at end of period	$ 93,632

XML

Nature of Business and Liquidity

6 Months Ended

Jun. 30, 2023

Nature of Business and Liquidity

Nature of Business and Liquidity

(1) Nature of Business and Liquidity

a. Nature of Business

Zynerba Pharmaceuticals, Inc., together with its subsidiary, Zynerba Pharmaceuticals Pty Ltd (collectively, “Zynerba,” the “Company,” or “we”), is a clinical stage specialty pharmaceutical company focused on the development of pharmaceutically-produced transdermal cannabinoid therapies for orphan neuropsychiatric disorders, including Fragile X syndrome (“FXS”) and chromosome 22q11.2 deletion syndrome (“22q”). We have been granted orphan drug designations from the United States Food and Drug Administration (“FDA”) and the European Commission for the use of cannabidiol for the treatment of FXS and 22q. In addition, we have received Fast Track designation from the FDA for treatment of behavioral symptoms associated with FXS. The Company has decided to prioritize its resources on FXS and 22q, both of which have no approved products. While we believe the data from the Company’s autism spectrum disorder (“ASD”) clinical development program to date are compelling, given the difficult financial market, the Company has decided to defer the start of the Phase 3 development program in ASD.

The Company is subject to those risks associated with any clinical stage pharmaceutical company that has substantial expenditures for research and development. There can be no assurance that the Company's research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants.

b. Liquidity

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements - Going Concern (“ASC 205-40”), requires management to assess the Company’s ability to continue as a going concern for one year after the date the financial statements are issued. This standard requires management to 1) identify and disclose if there are initial conditions indicating substantial doubt about the Company’s ability to continue as a going concern within one year of the issuance date of the financial statements, 2) disclose the principal conditions that gave rise to substantial doubt, 3) disclose management’s evaluation of the significance of those conditions in relation to the Company’s ability to meet its obligations and 4) disclose management’s plans that are intended to mitigate the adverse conditions. In accordance with the accounting standard, when considering management’s plans to mitigate the conditions giving rise to substantial doubt, management can only consider those plans which are probable to be successfully implemented.

As of June 30, 2023, the Company had cash and cash equivalents of $36.0 million and an accumulated deficit of $295.4 million. For the six months ended June 30, 2023, the Company reported a net loss of $20.9 million and cash used in operating activities of $16.3 million. The Company expects that its existing cash and cash equivalents will be sufficient to enable the Company to fund its operating expenses and capital expenditure requirements to mid-year 2024, but not more than one year after the date of the filing of this Quarterly Report on Form 10-Q, and therefore management has concluded that substantial doubt exists about the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to raise additional funding. Management believes that the Company’s liquidity position as of the date of this filing provides sufficient runway to achieve important research and development milestones. Management intends to raise additional capital through equity offerings and/or debt financings, or from other potential sources of liquidity, which may include new collaborations, licensing or other commercial agreements for one or more of the Company’s research programs or patent portfolios or divestitures of the Company's assets. The Company’s ability to access the capital markets or otherwise raise such capital may be adversely impacted by geopolitical tensions and macroeconomic events and the recent disruptions to, and volatility in, financial markets in the United States and globally resulting from multiple factors such as COVID-19, inflationary pressures, banking instability, rising interest rates and the ongoing conflict in Ukraine. There is no assurance that such financing will be available when needed or on acceptable terms. If the Company is unable to raise capital when needed or on attractive terms, it would be forced to delay, reduce, or eliminate its research and development programs or other operations. If any of these events occur, the Company’s ability to achieve its operational goals would be adversely affected.

The interim consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

XML

Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

(2) Summary of Significant Accounting Policies

a. Basis of Presentation

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim unaudited consolidated financial statements have been prepared on the same basis as the consolidated financial statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying consolidated financial statements of the Company include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the consolidated financial statements) considered necessary to present fairly the Company's financial position as of June 30, 2023, its results of operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022. Operating results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2022 Annual Report.

b. Use of Estimates

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

c. Incentive and Tax Receivables

The Company’s subsidiary, Zynerba Pharmaceuticals Pty Ltd (the “Subsidiary”), is incorporated in Australia. The Subsidiary is eligible to participate in an Australian research and development tax incentive program. As part of this program, the Subsidiary is eligible to receive a cash refund from the Australian Taxation Office for a percentage of the research and development costs expended by the Subsidiary in Australia. The cash refund is available to eligible companies with an annual aggregate revenue of less than $20.0 million (Australian) during the reimbursable period. The Company estimates the amount of cash refund it expects to receive related to the Australian research and development tax incentive program and records the incentives when it is probable (1) the Company will comply with relevant conditions of the program and (2) the incentive will be received. The Company evaluates its eligibility under tax incentive programs as of each balance sheet date based on the most current and relevant data available. If the Company is deemed to be ineligible or unable to receive the Australian research and development tax credit, or the Australian government significantly reduces or eliminates the tax credit, the actual cash refund the Company receives may materially differ from its estimates.

In addition, the Subsidiary incurs Goods and Services Tax (“GST”) on services provided by Australian vendors. As an Australian entity, the Subsidiary is entitled to a refund of the GST paid. The Company’s estimate of the amount of cash refund it expects to receive related to GST incurred is included in “Incentive and tax receivables” in the accompanying consolidated balance sheets. As of June 30, 2023, incentive and tax receivables included $0.2 million for refundable GST on expenses incurred with Australian vendors during the three months ended June 30, 2023.

Current incentive and tax receivables consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Research and development incentive	$	1,063,551	$	977,714
Goods and services tax		245,032		247,669
Total incentive and tax receivables - current assets	$	1,308,583	$	1,225,383

As of June 30, 2023, the Company’s estimate of the amount of cash refund it expects to receive for 2022 eligible spending as part of this incentive program was $1.1 million and was recorded as a current asset. The Company’s estimate of the amount of cash refund it expects to receive for 2023 eligible spending through June 30, 2023 was $0.6 million and was recorded as a non-current asset.

d. Research and Development

Research and development costs are expensed as incurred and are primarily comprised of external research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, consultants and employee-related expenses including salaries and benefits. At the end of each reporting period, the Company compares the payments made to each service provider to the estimated progress towards completion of the related project. Factors that the Company considers in preparing these estimates include the number of patients enrolled in studies, milestones achieved and other criteria related to the efforts of its vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, the Company will record net prepaid or accrued expenses related to these costs. Research and development expenses are recorded net of expected refunds of eligible research and development costs paid pursuant to the Australian research and development tax incentive program and GST incurred on services provided by Australian vendors.

The following table summarizes research and development expenses for the six months ended June 30, 2023 and 2022:

	Six months ended June 30,
	2023		2022
Research and development expenses - before R&D incentive	$	14,930,416	$	11,176,773
Research and development incentive		(685,627)		(583,851)
Total research and development expenses	$	14,244,789	$	10,592,922

e. Net Loss Per Share

Basic net loss per share is determined using the weighted average number of shares of common stock outstanding during each period. Diluted net income per share includes the effect, if any, from the potential exercise or conversion of securities, such as restricted stock and stock options, which would result in the issuance of incremental shares of common stock. Basic and dilutive computations of net loss per share are the same in periods in which a net loss exists as the dilutive effects of restricted stock and stock options would be anti-dilutive.

The following potentially dilutive securities outstanding as of June 30, 2023 and 2022 have been excluded from the computation of diluted weighted average shares outstanding, as their effects on net loss per share for the periods presented would be anti-dilutive:

	June 30,
	2023	2022
Stock options	6,706,432	6,276,016
Unvested restricted stock	3,618,722	2,307,476
	10,325,154	8,583,492

f. Recent Accounting Pronouncements

In November 2021, the FASB issued Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance (“ASU 2021-10”), which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted ASU 2021-10 effective January 1, 2022, and the adoption did not have a material impact on its consolidated financial statements.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2023

Fair Value Measurements

Fair Value Measurements

(3) Fair Value Measurements

The Company measures certain assets and liabilities at fair value in accordance with Accounting Standards

Codification (“ASC 820”), Fair Value Measurements and Disclosures. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The guidance in ASC 820 outlines a valuation framework and creates a fair value hierarchy that serves to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value, the Company maximizes the use of quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 — Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

Level 3 — Valuations based on unobservable inputs and models that are supported by little or no market activity.

In accordance with the fair value hierarchy described above, the following table sets forth the Company's financial assets measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022:

			Fair Value Measurement
	Carrying amount		as of June 30, 2023
	as of June 30, 2023		Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	31,693,849	$	31,693,849	$	—	$	—
	$	31,693,849	$	31,693,849	$	—	$	—

			Fair Value Measurement
	Carrying amount		as of December 31, 2022
	as of December 31, 2022		Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	44,663,395	$	44,663,395	$	—	$	—
	$	44,663,395	$	44,663,395	$	—	$	—

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Prepaid Expenses and Other Current Assets

6 Months Ended

Jun. 30, 2023

Prepaid Expenses and Other Current Assets

Prepaid Expenses and Other Current Assets

(4) Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Prepaid development expenses	$	884,730	$	668,096
Prepaid insurance		288,097		1,546,784
Deferred financing costs		216,935		155,956
Other current assets		629,112		537,895
Total prepaid expenses and other current assets	$	2,018,874	$	2,908,731

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Property and Equipment

6 Months Ended

Jun. 30, 2023

Property and Equipment

Property and Equipment

(5) Property and Equipment

Property and equipment consisted of the following as of June 30, 2023 and December 31, 2022:

	Estimated
	useful life	June 30,		December 31,
	(in years)	2023		2022
Equipment	2-5	$	1,165,570	$	828,666
Computer equipment	3-5		30,319		30,319
Furniture and fixtures	3-5		311,356		311,356
Leasehold improvements	various		68,881		68,881
Construction in process			—		234,241
Total cost			1,576,126		1,473,463
Less accumulated depreciation			(1,181,222)		(1,063,891)
Property and equipment, net		$	394,904	$	409,572

Depreciation expense was $117,331 and $114,727 for the six months ended June 30, 2023 and 2022 respectively.

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Accrued Expenses

6 Months Ended

Jun. 30, 2023

Accrued Expenses

Accrued Expenses

(6) Accrued Expenses

Accrued expenses consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Accrued compensation	$	1,494,753	$	2,016,402
Accrued research and development		5,957,323		4,239,719
Other		1,306,691		758,761
Total accrued expenses	$	8,758,767	$	7,014,882

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Common Stock

6 Months Ended

Jun. 30, 2023

Common Stock

Common Stock

(7) Common Stock

a. At-The-Market Financing

On May 11, 2021, the Company entered into a Controlled Equity Offering^SM Sales Agreement (the “2021 Sales Agreement”) with Cantor Fitzgerald & Co., Canaccord Genuity, LLC, H.C. Wainwright & Co. LLC and Ladenburg Thalmann & Co. Inc., as sales agents, pursuant to which, under a prospectus filed by the Company in May 2022, the Company may sell, from time to time, up to $75.0 million of its common stock. We are currently subject to General Instruction I.B.6 of Form S-3, and the amount of funds we can raise through primary public offerings of securities in any twelve-month period using our existing registration statement on Form S-3 is limited to one-third of the aggregate market value of the voting and non-voting common equity held by non-affiliates. We will be subject by this limit until such time as our public float exceeds $75.0 million.

During the six months ended June 30, 2023, the Company sold and issued 1,179,077 shares of common stock under the 2021 Sales Agreement in the open market at a weighted average selling price of $0.56 per share, resulting in gross proceeds of $0.7 million. Net proceeds after deducting commissions and offering expenses were $0.5 million.

b. Equity Purchase Agreement

On July 21, 2022 (the “Effective Date”), the Company entered into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”) pursuant to which Lincoln Park committed to purchase up to $20.0 million of the Company’s common stock. Under the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $20.0 million of the Company’s common stock. Such sales of common stock will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on the Effective

Date. The number of shares the Company may sell to Lincoln Park on any single business day in a regular purchase is 150,000, but that amount may be increased up to 300,000 shares, depending upon the market price of the Company’s common stock at the time of sale and subject to a maximum limit of $2.0 million per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale as computed under the Purchase Agreement. In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases. 

Pursuant to the terms of the Purchase Agreement, in July 2022, the Company issued 347,222 shares of its common stock to Lincoln Park as consideration for its commitment to purchase shares of the Company’s common stock under the Purchase Agreement. 

During the six months ended June 30, 2023, the Company sold and issued 2,250,000 shares of common stock under the Purchase Agreement at a weighted average selling price of $0.52 per share, resulting in gross and net proceeds of $1.2 million.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2023

Stock-Based Compensation

Stock-Based Compensation

(8) Stock-Based Compensation

The Company’s board of directors adopted the 2023 Zynerba Pharmaceuticals, Inc. Stock Option and Incentive Plan (the “2023 Plan”) in April 2023, which was subsequently approved by the stockholders in June 2023, under which the Company may grant incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, cash-based awards, and dividend equivalent rights to employees, officers, non-employee directors, consultants, and advisors. The number of shares available for issuance under awards granted pursuant to the 2023 Plan was 6,900,000 shares of the Company’s common stock. Shares of common stock underlying awards granted under the 2023 Plan that are forfeited, canceled or otherwise terminated (other than by exercise) will be added back to the share reserve available for issuance under the 2023 Plan. Notwithstanding the foregoing, the following shares shall not be added to the share reserve authorized for grant under the 2023 Plan: shares tendered or held back upon exercise of an option or shares subject to a stock appreciation right that are not issued in connection with the stock settlement of the stock appreciation right upon exercise thereof. Further, shares reacquired by the Company on the open market will not be added to the share reserve authorized for issuance. As of June 30, 2023, there were 6,182,640 shares available for future issuance under the 2023 Plan.

The Company also maintained the Amended and Restated 2014 Omnibus Incentive Compensation Plan, as amended (the “2014 Plan”), which allows for the granting of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units, performance units and other stock-based awards to employees, officers, non-employee directors, consultants, and advisors. In addition, the 2014 Plan provides selected employees with the opportunity to receive bonus awards that are considered “qualified performance-based compensation” under Section 162(m) of the Internal Revenue Code. As of June 6, 2023, no additional awards will be granted under the 2014 Plan.

Options issued under the 2023 and 2014 Plans have a contractual life of 10 years and may be exercisable in cash or as otherwise determined by the board of directors. The Company has granted options to employees and non-employee directors. Stock options granted to employees primarily vest 25% upon the first anniversary of the grant date and the balance of unvested options vests in quarterly installments over the remaining three years. Stock options granted annually to non-employee directors vest on the earlier of the one-year anniversary of the grant date, or one day before the date of the Company’s next annual stockholders’ meeting that occurs after the grant date. The Company’s non-employee director compensation policy enables directors to receive stock options in lieu of quarterly cash payments. Any option granted to the directors in lieu of cash compensation vests in full on the grant date. The Company records forfeitures as they occur.

a. Time-Based Restricted Stock Awards:

During 2022, the Company granted 841,654 time-based restricted stock awards to employees, non-employee directors and consultants, of which 595,664 restricted stock awards remain outstanding as of June 30, 2023. During the six months ended June 30, 2023, the Company granted 1,554,944 time-based restricted stock awards to employees and non-employee directors, which all remain outstanding as of June 30, 2023.

b. Restricted Stock Awards in Lieu of Bonus:

During the six months ended June 30, 2023, the Company granted 431,556 fully vested stock awards to certain employees in lieu of their earned annual bonus. The fair value of those vested stock awards was $0.3 million and was recorded against accrued compensation that existed as of December 31, 2022.

c. Performance-Based Restricted Stock Awards:

Stock-based compensation expense for performance-based grants are recorded when management estimates that the vesting of these shares is probable based on the status of the Company’s research and development programs and other relevant factors, which were established by the Company’s board of directors. The Company’s board of directors determines if the performance conditions have been met.

During 2021, the Company granted 506,911 performance-based restricted stock awards to employees, of which 187,964 restricted stock awards have fully vested and 281,947 restricted stock awards remained outstanding as of June 30, 2023. The performance-based conditions for these performance-based grants were deemed probable of achievement during the six months ended June 30, 2021 and, as of June 30, 2023, the Company has recorded $1.7 million in stock-based compensation expense related to these grants.

During 2022, the Company granted 556,500 performance-based restricted stock awards to employees, of which 548,000 restricted stock awards remained outstanding as of June 30, 2023. During the six months ended June 30, 2023, the Company granted 628,167 performance-based restricted stock awards to employees. As of June 30, 2023, satisfaction of the related performance conditions for both the 2022 and 2023 grants have not been deemed probable of being achieved and there was $1.1 million and $0.3 million, respectively, of unrecognized stock-based compensation expense related to these performance-based awards, which will be expensed over the estimated service period related to each performance condition once the performance conditions have been deemed probable.

For the six months ended June 30, 2023 and 2022, the Company recorded stock-based compensation expense related to its stock option grants and restricted stock awards, as follows:

	Stock Option Grants				Restricted stock awards				Total
	2023		2022		2023		2022		2023			2022
Research and development	$	421,200	$	520,729	$	299,994	$	497,412	$	721,194	$	1,018,141
General and administrative		507,374		638,241		362,002		612,643		869,376		1,250,884
	$	928,574	$	1,158,970	$	661,996	$	1,110,055	$	1,590,570	$	2,269,025

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2023:

		Weighted-		Weighted-
		Average		Average	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Life (in Years)	Value
Outstanding as of December 31, 2022	6,276,016	$	7.52
Granted	430,416		0.35
Outstanding as of June 30, 2023	6,706,432	$	7.06	5.72	$	—
Exercisable as of June 30, 2023	5,159,646	$	8.47	4.86	$	—
Vested and expected to vest as of June 30, 2023	6,706,432	$	7.06

The weighted-average grant date fair values of options granted during the six months ended June 30, 2023 and 2022 were $0.25 and $1.74, respectively.

The fair values of stock options granted were calculated using the Black-Scholes option pricing model with the following weighted-average assumptions:

	Six months ended June 30,
	2023	2022
Weighted-average risk-free interest rate	3.99%	2.02%
Expected term of options (in years)	5.50	6.11
Expected stock price volatility	87.35%	100.23%
Expected dividend yield	0%	0%

As of June 30, 2023, there was $2.5 million of unrecognized stock-based compensation expense related to stock options, which is expected to be recognized over a weighted-average period of 1.9 years.

The following table summarizes the Company’s restricted stock award activity under the 2014 Plan for the six months ended June 30, 2023:

		Weighted
		Average		Aggregate
		Grant Date		Intrinsic
	Shares	Fair Value		Value
Unvested as of December 31, 2022	2,114,512	$	2.86
Granted	2,614,667		0.56
Vested	(1,110,457)		2.92
Unvested as of June 30, 2023	3,618,722	$	1.21	$	1,179,703
Expected to vest as of June 30, 2023	2,437,555	$	1.38	$	794,643

As of June 30, 2023, excluding performance-based restricted stock awards that have not been deemed probable, there was $1.3 million of unrecognized stock-based compensation expense related to unvested restricted stock awards, which is expected to be recognized over a weighted-average period of 1.2 years.

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Operating Lease Obligations

6 Months Ended

Jun. 30, 2023

Operating Lease Obligations

Operating Lease Obligations

(9) Operating Lease Obligations

The Company adopted Accounting Standards Update No. 2016-02, Leases (Topic 842), Accounting Standards Codification 842 prospectively using the modified-retrospective method and elected the package of transition practical expedients that does not require reassessment of: (1) whether any existing or expired contracts are or contain leases, (2) lease classification and (3) initial direct costs. In addition, the Company has elected other available practical expedients to not separate lease and nonlease components, which consist principally of common area maintenance charges, and to exclude leases with an initial term of 12 months or less.

The Company leases its headquarters where it occupies 10,877 square feet of office space. On March 1, 2021, the Company extended its lease for three additional years until May 31, 2024. The Company’s lease contains variable lease costs that do not depend on a rate or index and consist primarily of common area maintenance, taxes, and insurance charges. As the implicit rate was not readily determinable for the Company’s lease, the Company used an estimated incremental borrowing rate, or discount rate, to determine the initial present value of the lease payments. The discount rate for the lease was calculated using a synthetic credit rating model.

As of March 1, 2021, the effective date of the lease modification, the Company remeasured the lease liability for the remaining portion of the lease and adjusted the lease liability to $755,085 and right-of-use assets to $752,391, which was recorded net of a deferred rent liability of $2,694. As of June 30, 2023, the Company’s right-of-use asset, net of amortization, was $219,037.

Other operating lease information as of June 30, 2023:

Weighted-average remaining lease term - operating leases	0.9	years
Weighted-average discount rate - operating leases	2.76	%

The following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of June 30, 2023:

	June 30,
Year ending:	2023
December 31, 2023	$	120,210
December 31, 2024		100,175
Total minimum lease payments		220,385
Less: imputed lease interest		(2,506)
Total lease liabilities	$	217,879

Lease expense for the six months ended June 30, 2023 was comprised of the following:

	Six months ended June 30,
		2023		2022
Operating lease expense	$	120,842	$	120,842
Variable lease expense		40,105		32,276
Total lease expense	$	160,947	$	153,118

Total cash payments related to leases were $160,316 and $152,487 for the six months ended June 30, 2023 and 2022, respectively.

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Subsequent Events

6 Months Ended

Jun. 30, 2023

Subsequent Events

Subsequent Events

10) Subsequent Events

Merger Agreement

On August 14, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Harmony Biosciences Holdings, Inc. (“Harmony”) and Xylophone Acquisition Corp., a wholly owned subsidiary of Harmony (“Merger Sub”). Pursuant to the Merger Agreement, and upon the terms and subject to the conditions therein, Harmony will commence a tender offer (the “Offer”) to acquire all of the issued and outstanding shares of common stock, par value $0.001 per share, of the Company (“Company Common Stock”), for (i) approximately $1.1059 per share of Company Common Stock (the “Common Cash Amount”), in cash, subject to any applicable withholding of taxes and without interest, plus (ii) one contingent value right per share of Company Common Stock (the “Common CVR Amount”), which represents the right to receive up to approximately $2.5444 per share of Company Common Stock in the form of one or more potential contingent payments, in cash, subject to any applicable withholding of taxes and without interest, upon the achievement of certain milestones as set forth in, and subject to and in accordance with the terms and conditions of, the Contingent Value Rights Agreement (the Common Cash Amount plus the Common CVR Amount, collectively, or any different amount per share paid pursuant to the Offer to the extent permitted by the Merger Agreement, being the “Offer Price”). The Offer will initially expire at 5:00 p.m. (New York City time) on the date that is 21 business days following the commencement of the Offer, subject to extension under certain circumstances. Following the consummation of the Offer, upon the terms and conditions set forth in the Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving corporation in the Merger.

The Merger Agreement includes customary representations, warranties and covenants of the Company, Harmony and Merger Sub. However, there can be no assurance that the conditions to the completion of the Offer and the Merger will be satisfied or waived, that the Offer and the Merger will be completed on the expected timeframe or at all, or that the Offer and the Merger will be consummated as contemplated by the Merger Agreement.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2023

Summary of Significant Accounting Policies

Basis of Presentation

a. Basis of Presentation

The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The interim unaudited consolidated financial statements have been prepared on the same basis as the consolidated financial statements as of and for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report”), filed with the Securities and Exchange Commission (the “SEC”). In the opinion of management, the accompanying consolidated financial statements of the Company include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the consolidated financial statements) considered necessary to present fairly the Company's financial position as of June 30, 2023, its results of operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022. Operating results for any interim period are not necessarily indicative of results for any future interim period or for the entire year. The accompanying unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the 2022 Annual Report.

Use of Estimates

b. Use of Estimates

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

Incentive and Tax Receivables

c. Incentive and Tax Receivables

The Company’s subsidiary, Zynerba Pharmaceuticals Pty Ltd (the “Subsidiary”), is incorporated in Australia. The Subsidiary is eligible to participate in an Australian research and development tax incentive program. As part of this program, the Subsidiary is eligible to receive a cash refund from the Australian Taxation Office for a percentage of the research and development costs expended by the Subsidiary in Australia. The cash refund is available to eligible companies with an annual aggregate revenue of less than $20.0 million (Australian) during the reimbursable period. The Company estimates the amount of cash refund it expects to receive related to the Australian research and development tax incentive program and records the incentives when it is probable (1) the Company will comply with relevant conditions of the program and (2) the incentive will be received. The Company evaluates its eligibility under tax incentive programs as of each balance sheet date based on the most current and relevant data available. If the Company is deemed to be ineligible or unable to receive the Australian research and development tax credit, or the Australian government significantly reduces or eliminates the tax credit, the actual cash refund the Company receives may materially differ from its estimates.

In addition, the Subsidiary incurs Goods and Services Tax (“GST”) on services provided by Australian vendors. As an Australian entity, the Subsidiary is entitled to a refund of the GST paid. The Company’s estimate of the amount of cash refund it expects to receive related to GST incurred is included in “Incentive and tax receivables” in the accompanying consolidated balance sheets. As of June 30, 2023, incentive and tax receivables included $0.2 million for refundable GST on expenses incurred with Australian vendors during the three months ended June 30, 2023.

Current incentive and tax receivables consisted of the following as of June 30, 2023 and December 31, 2022:

	June 30,		December 31,
	2023		2022
Research and development incentive	$	1,063,551	$	977,714
Goods and services tax		245,032		247,669
Total incentive and tax receivables - current assets	$	1,308,583	$	1,225,383

As of June 30, 2023, the Company’s estimate of the amount of cash refund it expects to receive for 2022 eligible spending as part of this incentive program was $1.1 million and was recorded as a current asset. The Company’s estimate of the amount of cash refund it expects to receive for 2023 eligible spending through June 30, 2023 was $0.6 million and was recorded as a non-current asset.

Research and Development

d. Research and Development

Research and development costs are expensed as incurred and are primarily comprised of external research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, consultants and employee-related expenses including salaries and benefits. At the end of each reporting period, the Company compares the payments made to each service provider to the estimated progress towards completion of the related project. Factors that the Company considers in preparing these estimates include the number of patients enrolled in studies, milestones achieved and other criteria related to the efforts of its vendors. These estimates will be subject to change as additional information becomes available. Depending on the timing of payments to vendors and estimated services provided, the Company will record net prepaid or accrued expenses related to these costs. Research and development expenses are recorded net of expected refunds of eligible research and development costs paid pursuant to the Australian research and development tax incentive program and GST incurred on services provided by Australian vendors.

The following table summarizes research and development expenses for the six months ended June 30, 2023 and 2022:

	Six months ended June 30,
	2023		2022
Research and development expenses - before R&D incentive	$	14,930,416	$	11,176,773
Research and development incentive		(685,627)		(583,851)
Total research and development expenses	$	14,244,789	$	10,592,922

Net Loss Per Share

e. Net Loss Per Share

Basic net loss per share is determined using the weighted average number of shares of common stock outstanding during each period. Diluted net income per share includes the effect, if any, from the potential exercise or conversion of securities, such as restricted stock and stock options, which would result in the issuance of incremental shares of common stock. Basic and dilutive computations of net loss per share are the same in periods in which a net loss exists as the dilutive effects of restricted stock and stock options would be anti-dilutive.

The following potentially dilutive securities outstanding as of June 30, 2023 and 2022 have been excluded from the computation of diluted weighted average shares outstanding, as their effects on net loss per share for the periods presented would be anti-dilutive:

	June 30,
	2023	2022
Stock options	6,706,432	6,276,016
Unvested restricted stock	3,618,722	2,307,476
	10,325,154	8,583,492

Recent Accounting Pronouncements

f. Recent Accounting Pronouncements

In November 2021, the FASB issued Accounting Standards Update No. 2021-10, Government Assistance (Topic 832): Disclosure by Business Entities about Government Assistance (“ASU 2021-10”), which improves the transparency of government assistance received by most business entities by requiring the disclosure of: (1) the types of government assistance received; (2) the accounting for such assistance; and (3) the effect of the assistance on a business entity’s financial statements. This guidance is effective for financial statements issued for annual periods beginning after December 15, 2021. The Company adopted ASU 2021-10 effective January 1, 2022, and the adoption did not have a material impact on its consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2023

Summary of Significant Accounting Policies

Schedule of incentive and tax receivables

	June 30,		December 31,
	2023		2022
Research and development incentive	$	1,063,551	$	977,714
Goods and services tax		245,032		247,669
Total incentive and tax receivables - current assets	$	1,308,583	$	1,225,383

Schedule of research and development expenses

	Six months ended June 30,
	2023		2022
Research and development expenses - before R&D incentive	$	14,930,416	$	11,176,773
Research and development incentive		(685,627)		(583,851)
Total research and development expenses	$	14,244,789	$	10,592,922

Summary of potentially dilutive securities excluded from the computation of diluted weighted average shares outstanding

	June 30,
	2023	2022
Stock options	6,706,432	6,276,016
Unvested restricted stock	3,618,722	2,307,476
	10,325,154	8,583,492

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2023

Fair Value Measurements

Summary of financial assets measured at fair value on a recurring basis

			Fair Value Measurement
	Carrying amount		as of June 30, 2023
	as of June 30, 2023		Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	31,693,849	$	31,693,849	$	—	$	—
	$	31,693,849	$	31,693,849	$	—	$	—

			Fair Value Measurement
	Carrying amount		as of December 31, 2022
	as of December 31, 2022		Level 1		Level 2		Level 3
Cash equivalents (money market accounts)	$	44,663,395	$	44,663,395	$	—	$	—
	$	44,663,395	$	44,663,395	$	—	$	—

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Prepaid Expenses and Other Current Assets (Tables)

6 Months Ended

Jun. 30, 2023

Prepaid Expenses and Other Current Assets

Schedule of prepaid expenses and other current assets

	June 30,		December 31,
	2023		2022
Prepaid development expenses	$	884,730	$	668,096
Prepaid insurance		288,097		1,546,784
Deferred financing costs		216,935		155,956
Other current assets		629,112		537,895
Total prepaid expenses and other current assets	$	2,018,874	$	2,908,731

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Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2023

Property and Equipment

Schedule of property and equipment

	Estimated
	useful life	June 30,		December 31,
	(in years)	2023		2022
Equipment	2-5	$	1,165,570	$	828,666
Computer equipment	3-5		30,319		30,319
Furniture and fixtures	3-5		311,356		311,356
Leasehold improvements	various		68,881		68,881
Construction in process			—		234,241
Total cost			1,576,126		1,473,463
Less accumulated depreciation			(1,181,222)		(1,063,891)
Property and equipment, net		$	394,904	$	409,572

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2023

Accrued Expenses

Schedule of accrued expenses

	June 30,		December 31,
	2023		2022
Accrued compensation	$	1,494,753	$	2,016,402
Accrued research and development		5,957,323		4,239,719
Other		1,306,691		758,761
Total accrued expenses	$	8,758,767	$	7,014,882

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2023

Stock-Based Compensation

Schedule of stock-based compensation expense

	Stock Option Grants				Restricted stock awards				Total
	2023		2022		2023		2022		2023			2022
Research and development	$	421,200	$	520,729	$	299,994	$	497,412	$	721,194	$	1,018,141
General and administrative		507,374		638,241		362,002		612,643		869,376		1,250,884
	$	928,574	$	1,158,970	$	661,996	$	1,110,055	$	1,590,570	$	2,269,025

Summary of stock option activity

		Weighted-		Weighted-
		Average		Average	Aggregate
	Number	Exercise		Contractual	Intrinsic
	of Shares	Price		Life (in Years)	Value
Outstanding as of December 31, 2022	6,276,016	$	7.52
Granted	430,416		0.35
Outstanding as of June 30, 2023	6,706,432	$	7.06	5.72	$	—
Exercisable as of June 30, 2023	5,159,646	$	8.47	4.86	$	—
Vested and expected to vest as of June 30, 2023	6,706,432	$	7.06

Schedule of weighted-average assumptions used to calculate fair values of stock options

	Six months ended June 30,
	2023	2022
Weighted-average risk-free interest rate	3.99%	2.02%
Expected term of options (in years)	5.50	6.11
Expected stock price volatility	87.35%	100.23%
Expected dividend yield	0%	0%

Summary of restricted stock activity

		Weighted
		Average		Aggregate
		Grant Date		Intrinsic
	Shares	Fair Value		Value
Unvested as of December 31, 2022	2,114,512	$	2.86
Granted	2,614,667		0.56
Vested	(1,110,457)		2.92
Unvested as of June 30, 2023	3,618,722	$	1.21	$	1,179,703
Expected to vest as of June 30, 2023	2,437,555	$	1.38	$	794,643

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Operating Lease Obligations (Tables)

6 Months Ended

Jun. 30, 2023

Operating Lease Obligations

Schedule of other operating lease information

Weighted-average remaining lease term - operating leases	0.9	years
Weighted-average discount rate - operating leases	2.76	%

Schedule of operating lease liabilities maturity analysis

	June 30,
Year ending:	2023
December 31, 2023	$	120,210
December 31, 2024		100,175
Total minimum lease payments		220,385
Less: imputed lease interest		(2,506)
Total lease liabilities	$	217,879

Schedule of lease expense

	Six months ended June 30,
		2023		2022
Operating lease expense	$	120,842	$	120,842
Variable lease expense		40,105		32,276
Total lease expense	$	160,947	$	153,118

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Nature of Business and Liquidity (Details) - USD ($)	3 Months Ended				6 Months Ended
	Jun. 30, 2023	Mar. 31, 2023	Jun. 30, 2022	Mar. 31, 2022	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Nature of Business and Liquidity
Cash and cash equivalents	$ 35,967,515				$ 35,967,515		$ 50,640,993
Accumulated deficit	295,407,193				295,407,193		$ 274,517,285
Net loss	$ 10,776,065	$ 10,113,843	$ 9,853,006	$ 8,490,619	20,900,000
Cash used in operating activities					$ 16,298,013	$ 7,683,007

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Summary of Significant Accounting Policies - Incentive and Tax Receivable (Details) - Australian Taxation Office $ in Millions	Jun. 30, 2023 USD ($)
Incentive and Tax Receivable
Aggregate revenue maximum to be eligible to receive a cash refund	$ 20.0
Incentive And Tax Receivables Current
Incentive and Tax Receivable
Estimated GST receivable	$ 0.2

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Summary of Significant Accounting Policies - Current incentive and Tax Receivable (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Incentive and Tax Receivable
Total incentive and tax receivables - current assets	$ 1,308,583	$ 1,225,383
Australian Taxation Office
Incentive and Tax Receivable
Research and development incentive	1,063,551	977,714
Goods and services tax	245,032	247,669
Total incentive and tax receivables - current assets	1,308,583	$ 1,225,383
Australian Taxation Office | Incentive And Tax Receivables Current
Incentive and Tax Receivable
Cash refund from research and development incentive program	1,100,000
Australian Taxation Office | Incentive And Tax Receivables Noncurrent.
Incentive and Tax Receivable
Cash refund from research and development incentive program	$ 600,000

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Summary of Significant Accounting Policies - Research and Development (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2023	Jun. 30, 2022
Research and Development
Research and development expenses - before R&D incentive			$ 14,930,416	$ 11,176,773
Research and development incentive			(685,627)	(583,851)
Total research and development expense	$ 7,166,708	$ 5,446,317	$ 14,244,789	$ 10,592,922

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Summary of Significant Accounting Policies - Anti-dilutive securities (Details) - shares	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share
Anti-dilutive securities	10,325,154	8,583,492
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share
Anti-dilutive securities	6,706,432	6,276,016
Restricted stock
Antidilutive Securities Excluded from Computation of Earnings Per Share
Anti-dilutive securities	3,618,722	2,307,476

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Fair Value Measurements (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Carrying value
Fair value on a recurring basis
Cash equivalents (money market accounts)	$ 31,693,849	$ 44,663,395
Total	31,693,849	44,663,395
Recurring | Fair Value Measurement | Level 1
Fair value on a recurring basis
Cash equivalents (money market accounts)	31,693,849	44,663,395
Total	$ 31,693,849	$ 44,663,395

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Prepaid Expenses and Other Current Assets (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Prepaid Expenses and Other Current Assets
Prepaid development expenses	$ 884,730	$ 668,096
Prepaid insurance	288,097	1,546,784
Deferred financing costs	216,935	155,956
Other current assets	629,112	537,895
Total prepaid expenses and other current assets	$ 2,018,874	$ 2,908,731

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Property and Equipment (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022
Property, Plant and Equipment
Total cost	$ 1,576,126		$ 1,473,463
Less accumulated depreciation	(1,181,222)		(1,063,891)
Property and equipment, net	394,904		409,572
Depreciation expense	117,331	$ 114,727
Equipment
Property, Plant and Equipment
Total cost	$ 1,165,570		$ 828,666
Equipment | Minimum
Property, Plant and Equipment
Estimated useful life	2 years		2 years
Equipment | Maximum
Property, Plant and Equipment
Estimated useful life	5 years		5 years
Computer equipment
Property, Plant and Equipment
Total cost	$ 30,319		$ 30,319
Computer equipment | Minimum
Property, Plant and Equipment
Estimated useful life	3 years		3 years
Computer equipment | Maximum
Property, Plant and Equipment
Estimated useful life	5 years		5 years
Furniture and fixtures
Property, Plant and Equipment
Total cost	$ 311,356		$ 311,356
Furniture and fixtures | Minimum
Property, Plant and Equipment
Estimated useful life	3 years		3 years
Furniture and fixtures | Maximum
Property, Plant and Equipment
Estimated useful life	5 years		5 years
Leasehold improvements
Property, Plant and Equipment
Total cost	$ 68,881		$ 68,881
Construction in process
Property, Plant and Equipment
Total cost			$ 234,241

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Accrued Expenses (Details) - USD ($)	Jun. 30, 2023	Dec. 31, 2022
Accrued Expenses
Accrued compensation	$ 1,494,753	$ 2,016,402
Accrued research and development	5,957,323	4,239,719
Other	1,306,691	758,761
Total accrued expenses	$ 8,758,767	$ 7,014,882

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Common Stock (Details) - USD ($)		6 Months Ended
	Jul. 21, 2022	Jun. 30, 2023	Jun. 30, 2022	May 11, 2021
Sales of Stock
Proceeds from the issuance of common stock		$ 1,827,512	$ 2,657,567
2021 Sales Agreement
Sales of Stock
Maximum aggregate value of common stock available for offering				$ 75,000,000.0
Shares issued		1,179,077
Weighted average selling price per share		$ 0.56
Proceeds from the issuance of common stock		$ 700,000
Net proceeds from the issuance of common stock		$ 500,000
Equity Purchase Agreement
Sales of Stock
Maximum aggregate value of common stock available for offering	$ 20,000,000.0
Shares issued	347,222	2,250,000
Weighted average selling price per share		$ 0.52
Proceeds from the issuance of common stock		$ 1,200,000
Maximum time period for right to sell shares from the effective date	36 months
Maximum number of shares that may sell per day in regular purchase	150,000
Maximum number of shares that may sell per day depending upon closing price	300,000
Maximum value limit per regular purchase	$ 2,000,000.0

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Stock-Based Compensation - Stock Based Compensation Narrative (Details) - USD ($)	6 Months Ended		12 Months Ended
	Jun. 30, 2023	Jun. 30, 2022	Dec. 31, 2022	Dec. 31, 2021	Jun. 06, 2023
Stock-Based Compensation
Number of shares available for issuance under the plan	6,900,000
Shares available for issuance	6,182,640
Stock options
Stock-Based Compensation
Contractual life (in years)	10 years
Stock options | Employees
Stock-Based Compensation
Vesting percentage	25.00%
Vesting period	3 years
Stock options | Board of Directors
Stock-Based Compensation
Vesting period	1 year
2014 Plan
Stock-Based Compensation
Number of additional awards granted					0
Share based compensation expense	$ 1,590,570	$ 2,269,025
2014 Plan | Stock options
Stock-Based Compensation
Share based compensation expense	$ 928,574	$ 1,158,970
2014 Plan | Time Based Restricted Stock | 2022 Award
Stock-Based Compensation
Shares granted			841,654
Shares outstanding	595,664
2014 Plan | Time Based Restricted Stock | 2023 Award
Stock-Based Compensation
Shares granted	1,554,944
Shares outstanding	1,554,944
2014 Plan | Performance-based awards | 2022 Award
Stock-Based Compensation
Unrecognized stock based compensation expense	$ 1,100,000
2014 Plan | Performance-based awards | 2023 Award
Stock-Based Compensation
Unrecognized stock based compensation expense	$ 300,000
2014 Plan | Performance Based Restricted Awards | 2021 Award
Stock-Based Compensation
Shares granted				506,911
Shares outstanding	281,947
Share based compensation expense	$ 1,700,000
Restricted stock vested	187,964
2014 Plan | Performance Based Restricted Awards | 2022 Award
Stock-Based Compensation
Shares granted			556,500
Shares outstanding	548,000
2014 Plan | Performance Based Restricted Awards | 2023 Award
Stock-Based Compensation
Shares granted	628,167
2014 Plan | Restricted Stock in Lieu of Bonus
Stock-Based Compensation
Shares granted	431,556
Fair value of the restricted stock recorded against accrued compensation	$ 300,000

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Stock-Based Compensation - Stock-Based Compensation Expense (Details) - 2014 Plan - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Stock-Based Compensation
Stock-based compensation	$ 1,590,570	$ 2,269,025
Research and development
Stock-Based Compensation
Stock-based compensation	721,194	1,018,141
General and administrative
Stock-Based Compensation
Stock-based compensation	869,376	1,250,884
Stock options
Stock-Based Compensation
Stock-based compensation	928,574	1,158,970
Stock options | Research and development
Stock-Based Compensation
Stock-based compensation	421,200	520,729
Stock options | General and administrative
Stock-Based Compensation
Stock-based compensation	507,374	638,241
Restricted stock
Stock-Based Compensation
Stock-based compensation	661,996	1,110,055
Restricted stock | Research and development
Stock-Based Compensation
Stock-based compensation	299,994	497,412
Restricted stock | General and administrative
Stock-Based Compensation
Stock-based compensation	$ 362,002	$ 612,643

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Stock-Based Compensation - Options Activity, Unrecognized Costs, Valuation (Details) - 2014 Plan - Stock options - USD ($) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Options
Balance (in shares)	6,276,016
Granted (in shares)	430,416
Balance (in shares)	6,706,432
Options exercisable (in shares)	5,159,646
Options vested and expected to vest (in shares)	6,706,432
Weighted average exercise price per share
Balance (in dollars per shares)	$ 7.52
Granted (in dollars per shares)	0.35
Balance (in dollars per shares)	7.06
Options exercisable (in dollars per shares)	8.47
Options vested and expected to vest (in dollars per share)	$ 7.06
Additional disclosures
Options Outstanding Weighted Average Contractual term	5 years 8 months 19 days
Options Vested and Expected to Vest Weighted Average Contractual Life	4 years 10 months 9 days
Expected stock based compensation expense	$ 2.5
Recognition period for compensation costs	1 year 10 months 24 days
Weighted Average Grant Date Fair Value
Granted (in dollars per share)	$ 0.25	$ 1.74
Assumptions and Methodology
Weighted average risk-free interest rate (as a percent)	3.99%	2.02%
Expected term of options (in years)	5 years 6 months	6 years 1 month 9 days
Expected stock price volatility (as a percent)	87.35%	100.23%
Expected dividend yield (as a percent)	0.00%	0.00%

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Stock-Based Compensation - Restricted Stock Activity, Unrecognized Costs (Details) - 2014 Plan - Restricted stock	6 Months Ended
	Jun. 30, 2023 USD ($) $ / shares shares
Restricted stock award activity
Unvested balance (in shares) | shares	2,114,512
Granted (in shares) | shares	2,614,667
Vested (in shares) | shares	(1,110,457)
Unvested balance (in shares) | shares	3,618,722
Weighted Average Grant Date Fair Value
Unvested balance (in dollars per share) | $ / shares	$ 2.86
Granted (in dollars per share) | $ / shares	0.56
Vested (in dollars per share) | $ / shares	2.92
Unvested balance (in dollars per share) | $ / shares	$ 1.21
Aggregate intrinsic value | $	$ 1,179,703
Unvested restricted stock awards expected to vest (in shares) | shares	2,437,555
Vested and expected to vest - Weighted average grant date fair value | $ / shares	$ 1.38
Vested and expected to vest - Aggregate Intrinsic Value | $	$ 794,643
Unrecognized compensation expense related to unvested awards | $	$ 1,300,000
Recognition period for compensation costs	1 year 2 months 12 days

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Operating Lease Obligations - Narrative (Details)		6 Months Ended
	Mar. 01, 2021 USD ($)	Jun. 30, 2023 USD ($) ft²	Dec. 31, 2022 USD ($)
Operating Lease Obligations
Practical expedients - Package		true
Practical expedients - Single lease component		true
Area of leasable office space | ft²		10,877
Extended term of lease	3 years
Operating lease liability	$ 755,085	$ 217,879
Right-of-use assets	752,391	$ 219,037	$ 336,215
Deferred rent liability included in right-of-use assets	$ 2,694

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Operating Lease Obligations - Other Operating Lease Information (Details)	Jun. 30, 2023
Operating Lease Obligations
Weighted-average remaining lease term - operating leases	10 months 24 days
Weighted-average discount rate - operating leases	2.76%

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Operating Lease Obligations - Maturities (Details) - USD ($)	Jun. 30, 2023	Mar. 01, 2021
Maturity Analysis of Operating Lease Liabilities
December 31, 2023	$ 120,210
December 31, 2024	100,175
Total minimum lease payments	220,385
Less: imputed lease interest	(2,506)
Total lease liabilities	$ 217,879	$ 755,085

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Operating Lease Obligations - Lease Expense and Payments (Details) - USD ($)	6 Months Ended
	Jun. 30, 2023	Jun. 30, 2022
Lease expense
Operating lease expense	$ 120,842	$ 120,842
Variable lease expense	40,105	32,276
Total lease expense	160,947	153,118
Cash payments related to leases	$ 160,316	$ 152,487

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Subsequent Events (Details)	Aug. 14, 2023 item $ / shares	Jun. 30, 2023 $ / shares	Dec. 31, 2022 $ / shares
Subsequent Events
Common stock, par value		$ 0.001	$ 0.001
Subsequent Event | Harmony
Subsequent Events
Common stock, par value	$ 0.001
Share price	$ 1.1059
Number of contingent value rights per share of common stock issued | item	1
Maximum value of contingent right per share of common stock	$ 2.5444
Minimum number of potential contingent payments | item	1
Expiration period for merger tender offer	21 days