Candel Therapeutics, Inc. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended). We maintain “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, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, 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. Internal Control Over Financial Reporting In preparation of our financial statements to meet the requirements of our IPO, we determined that material weaknesses in our internal control over financial reporting existed during fiscal 2020 and remain unremediated as of December 31, 2021. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis. The material weaknesses we identified are related to; (1) the fact that we did not have sufficient finance and accounting staff with U.S. GAAP technical and accounting expertise to evaluate and account for significant transactions and oversee our third-party consultants. As a result we did not design and maintain formal accounting policies, processes and controls to analyze, account for and disclose certain complex transactions, which led to inappropriate accounting conclusions associated with stock compensation expenses. (2) the fact that we lacked proper monitoring entity level controls and segregation of duties due to our small accounting staff. Remediation Activities Management has been actively engaged in remediating the above described material weaknesses. The following remedial actions have been taken during the year ended December 31, 2021; (1) hiring an experienced Chief Financial Officer with experience serving as acting chief financial officer of a public company and serving as an audit partner at a major accounting firm and a Controller with experience working at a public company and as a manager at a major public accounting firm; (2) strengthening supervisory reviews by our financial management, and (3) expanding our accounting and finance team to add additional qualified accounting and finance resources, which may include augmenting our finance team with third-party consultants that possess the required expertise to assist management with their review. The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies. This may include the hiring of additional qualified personnel and implementation of a new accounting system. 119 While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls. Additional time is required to complete implementation and to assess and ensure the sustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above and we will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively. Management’s Report on Internal Control Over Financial Reporting This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies. Changes in Internal Control Over Financial Reporting The items described in “Remediation Activities” above are considered a change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection. Not applicable. 120 PART III Item 10. Directors, Executive Officers and Corporate Governance. The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report on Form 10-K. Name Age Position Executive Officers Paul Peter Tak, M.D., Ph.D., FMedSci 62 President, Chief Executive Officer, and Director Francesca Barone, M.D., Ph.D. 45 Chief Scienctific Officer Nathan Caffo 53 Chief Business Officer John Canepa 66 Chief Financial Officer Susan Stewart, J.D. 61 Chief Regulatory Officer Non-employee Directors Paul B. Manning (2) 66 Chairman of the Board of Directors Alan E. Smith, Ph.D., FRS, CBE (2) 76 Director Chris Martell (1) (2) 43 Director Diem Nguyen, Ph.D., M.B.A. 50 Director Edward J. Benz, Jr., M.D. (3) 75 Director Estuardo Aguilar-Cordova, M.D., inf., Ph.D. (3) 64 Director Shaan C. Gandhi, M.D., D.Phil (1)(3) 36 Director Udi Meirav, Ph.D. (1) 61 Director (1) Member of audit committee (2) Member of compensation committee (3) Member of nominating and corporate governance committee Executive officers Paul Peter Tak, M.D., Ph.D., FMedSci , has served as President and Chief Executive Officer of Candel since September 2020. He received his medical degree cum laude from the Free University in Amsterdam and was trained as an internist, rheumatologist and immunologist at Leiden University Medical Center, where he also received his Ph.D. He has been Clinical Associate Professor of Medicine at the University of California San Diego. Next, he served as Professor of Medicine and founding Chair of the Department of Clinical Immunology and Rheumatology at the Academic Medical Centre/University of Amsterdam (AMC). During this time, he founded Arthrogen b.v., a biotech company focused on gene therapy. He has published extensively in peer-reviewed journals and received numerous awards. He has been elected Fellow of the Academy of Medical Sciences (U.K.). At GlaxoSmithKline he served as Senior Vice President, Chief Immunology Officer, and Global Development Leader from 2011 to 2018. He oversaw the creation of a portfolio of new medicines for immune-mediated inflammatory diseases, cancer, infectious disease and pain, including anti-OSM antibody, anti-LAG3 antibody, ESM-BET inhibitor, RIP1 kinase inhibitor, anti-GM-CSF antibody, anti-CCL17 antibody, Benlysta sc, gepotidacin, molibresib (BET inhibitor), belantamab mafodotin (anti-BCMA antibody-drug conjugate), and NY-ESO1 SPEAR T cell therapy. He was the Chair of the Scientific Review Board, the governing body accountable for the scientific assessment of GSK’s R&D portfolio. From 2018 to 2020, Dr. Tak served as venture partner at Flagship Pioneering and also as President and CEO of Kintai Therapeutics, a start-up focused on enteric signaling networks, where he oversaw the creation of a portfolio of proprietary small molecules called precision enteric medicines for the treatment of obesity, neurological disease, and cancer. In addition, he has served as President and CEO of Tempero Pharmaceuticals, Board Member of Galvani Bioelectronics, ViiV Healthcare, Sitryx Therapeutics (co-founder), Omega Therapeutics, Levicept, and Citryll. Francesca Barone, M.D., Ph.D., has been Candel's Chief Scientific Officer since February 2022 and previously served as our Vice President, Head of Research from November 2020 to February 2022. She joined Candel in November 2020 as Head of experimental medicine and discovery, overseeing the implementation of biological measures of outcome and biomarker studies in the clinical pipeline, and directing the design of Candel novel discovery platform. Before joining Candel, Dr. Barone served as VP and Head of Experimental Medicine at Kintai Therapeutics, Inc, a Flagship Pioneering, Inc. company, from May 2019 through its merger into Senda Biosciences, Inc. in November 2021. While serving in that position she was responsible both for preclinical development, leading the biology team while supporting the definition of the company clinical strategy in the areas of immune-oncology, metabolic disease and neuroinflammation. Prior to moving to industry, Dr. Barone served as Reader (Associate Professor) in Experimental Rheumatology at the University of Birmingham (UK). During her tenure she also served as Academic Director of Business Engagement for the College of Medical and Dental Sciences and Director of the laboratories for Immuno-phenotyping in the Institute of Translational Medicine. She has published extensively in peer-reviewed journals, was the recipient of two fellowship to support her research program and led efforts to establish collaborative alliances between 121 the University of Birmingham and world leader pharmacology industries. She received her medical degree cum laude from the University of Rome, Sapienza and was trained in the same university as Rheumatologist. She received her Ph.D. at Kings College, London. Nathan Caffo , has been Candel’s Chief Business Officer since September 2020. From September 2018 to September 2020, he was CBO at ALX Oncology, an immuno-oncology company, where he played a central role in the company’s financing including series B and C and debt financings totaling $120 million, as well as the company’s $186 million initial public offering. He was also responsible for all strategic partnering activities. Prior to ALX Oncology, he was President and CEO of Presage Biosciences, an oncology company that developed the first intratumoral microdosing platform for evaluation of multiple oncology agents where he worked from April 2009 to August 2018. While at Presage he led the company’s partnering strategy, resulting in over $30 million in upfront cash. Mr. Caffo’s 26-year industry career has been focused on cancer therapeutics, personalized medicine, and applications of genomic technology. Mr. Caffo also led drug in-licensing at Perlegen Sciences, a genomic medicine spin-off of Affymetrix. Prior to that, he worked at Applied Biosystems (now Life Technologies) and its sister company Celera (now Quest Diagnostics) for 11 years in a number of technical and business roles, including managing the company’s genomics service business. Mr. Caffo has a B.S. in Microbiology from Pennsylvania State University. John Canepa , has been Candel’s Chief Financial Officer since December 2020. Mr. Canepa has over 40 years of experience in the life science industry as an audit partner with a large international public accounting firm, and as a financial executive with public and private life science companies. Prior to joining Candel, he served as Senior Advisor, Acting CFO of Frequency Therapeutics from December 2018 until November 2020. During this time, Frequency completed several public and private financings, including its initial public offering in October 2019, and dramatically expanded its operations. Prior to joining Frequency, Mr. Canepa served as CFO of Agilis Biotherapeutics from December 2017 to August 2018 and was instrumental in its sale to PTC Therapeutics in August 2018. Prior to Agilis, he was COO and CFO of Asterand Bioscience from October 2012 to August 2017 and led its sale to a private equity group in 2017. Mr. Canepa began his career at Arthur Andersen & Co. and was with the firm for 23 years. He was a partner in the Boston office technology practice and the worldwide leader of the firm’s life science practice. Mr. Canepa received a B.A. in Economics from Denison University and a Master’s Degree in Finance from Michigan State University. John is a Trustee of Mount Auburn Hospital in Cambridge Massachusetts and is on the board of the Beth Israel Lahey Health network. Susan Stewart, J.D. , has served as Candel’s Chief Regulatory Officer since October 2020. Ms. Stewart has worked for more than 28 years in biopharmaceutical regulatory affairs, with significant experience devising innovative strategies for novel therapeutics, overseeing regulatory submissions at various stages of product development and leading interactions with global health authorities. As an independent consultant, she also serves as Chief Regulatory Officer at Kaleido Biosciences, and had served as senior vice president of regulatory affairs and quality at Kaleido Biosciences, senior vice president of regulatory affairs, quality, and compliance at Tokai Pharmaceuticals and vice president, regulatory affairs at Transmolecular. She also spent 13 years at Genzyme Corporation in regulatory and compliance roles, including serving as vice president, regulatory affairs after beginning her career with Abbott Laboratories. She received her J.D. from Concord Law School at Purdue University Global, her LL.M. from the Maurice A. Deane School of Law at Hofstra University and her B.A. from the University of Massachusetts. She is a Fellow of the Regulatory Affairs Professionals Society (RAPS), a Director of the Board, and holds Regulatory Affairs Certifications (RAC) for both the United States and Europe. Non-Employee Directors Paul B. Manning has served as a member of Candel's board of directors since November 2018. Mr. Manning currently serves as the Chief Executive Officer of PBM Capital Group, LLC, or PBM Capital, a private equity investment firm in the business of investing in healthcare and life-science related companies, which he founded in 2010. Mr. Manning is a member of the board of directors of Liquidia Corporation (NASDAQ: LQDA) and Taysha Gene Therapies, Inc. (NASDAQ: TSHA), and he currently serves as Chairman of the board of directors of Verrica Pharmaceuticals Inc. (NASDAQ: VRCA) He previously served on the board of directors of Dova Pharmaceuticals, Inc., a biopharmaceutical company, from September 2016 to November 2019, and AveXis, Inc., a gene therapy company, from April 2014 to May 2018. Mr. Manning received a B.S. in microbiology from the University of Massachusetts. We believe Mr. Manning’s 30 years of managerial and operational experience in the healthcare industry and as an investor in healthcare related companies provides him with the appropriate set of skills to serve as a member of our board of directors. Estuardo Aguilar-Cordova, M.D., Ph.D., has served as Candel's Founder and as Chief Scientific Officer from September 2020 to February 2022, and previously served as our Chief Executive Officer from 2002 until September 2020. He has more than 30 years of experience in the fields of biotherapeutics, cancer research and drug development, including serving as principal or co-investigator in more than 25 clinical trials ranging from Phase I to Phase III. Prior to starting Candel, Dr. Aguilar-Cordova held academic positions for nearly two decades. Most recently, he was deputy director of the Harvard Gene Therapy Initiative at Harvard Medical School in Boston and was a faculty member in Pediatrics, Hematology-Oncology at Baylor College of Medicine in Houston. He has served on numerous national oversight committees, including roles as chairman and member of the NIH Recombinant Advisory Committee (RAC), as a 122 consultant to the FDA Biological Response Modifiers Advisory Committee (BRMAC), and as a member of the Vaccine and Related Products Advisory Committee (VRPAC). Dr. Aguilar-Cordova has also held other appointments including president of the Latin American Gene Therapy Society. Dr. Aguilar-Cordova has published more than 80 peer-reviewed scientific publications and book chapters, is on the editorial board of various professional journals and is an inventor on several patent applications. Dr. Aguilar-Cordova has an undergraduate degree in Biology and Chemistry from California State University, Bakersfield, an M.D. Inf. from the University del Valle de Guatemala and a Ph.D. from the University of California, Davis. Edward J. Benz, Jr., M.D. , has served as a member of Candel's board of directors since September 2017. Dr. Benz is the President and CEO Emeritus of the Dana-Farber Cancer Institute and a member of the Dana-Farber Cancer Institute Board of Directors. Dr. Benz is an expert in blood disorders and is board certified in both hematology and internal medicine. He is an active clinical hematologist and a National Institutes of Health (NIH) funded researcher with a focus on the molecular basis and genetics around inherited blood disorders. From October 2000 until his retirement in October 2016, Dr. Benz served as President and CEO of Dana-Faber Cancer Institute and the Richard and Susan Smith Professor of Medicine and Professor of Genetics at Harvard Medical School. Prior to his role at Dana-Farber, Dr. Benz served as chairman for the Department of Medicine and Sir William Osler Professor of Medicine at Johns Hopkins University School of Medicine, as well as physician in chief at Johns Hopkins Hospital. Dr. Benz has also served as President of the American Society of Hematology, the Association of American Cancer Institutes, the American Society for Clinical Investigation, the American Clinical and Climatological Society, and the Friends of the National Institute of Nursing Research. Over the course of his career, Dr. Benz has authored more than 300 articles, books, reviews and abstracts and has received numerous awards. Dr. Benz serves on the board of directors of F-star Therapeutics, Inc. (NASDAQ: FSTX) and Deciphera Pharmaceuticals, Inc. (NASDAQ: DCPH), and also serves on the board of directors of Renovacor, Inc. (NYSE: RCOR) and serves on our Research Advisory Board. We believe Dr. Benz’s experience in the field of hematology and blood disorders provides him with the appropriate set of skills to serve as a member of our board of directors. Chris Martell has served as a member of Candel's board of directors since November 2018. Chris Martell is the manager of GTAM1 2012 ADV LLC and an investor at Martell Capital. Previously, Chris was a Partner at PBM Capital in 2018. Prior to joining PBM Capital, Chris had an 18-year career at J.P. Morgan where he was a managing director in the Healthcare Investment Banking and Mergers and Acquisitions groups. He led the execution of a wide range of transactions including mergers and acquisitions, spin-offs and corporate separations, initial public offerings and equity and debt financings for Medical Device, Life Science Tool and Diagnostic, Pharmaceutical and Biotechnology companies. Chris graduated from Yale University with a B.A. in Ethics, Politics and Economics. We believe Mr. Martell’s broad financial and investment banking experience, financial and transactional expertise and acumen in mergers and acquisitions and complex financial transactions provides him with the appropriate set of skills to serve as a member of our board of directors. Udi Meirav, Ph.D. , has served as a member of Candel's board of directors since 2004. Dr. Meirav is CEO of Calibre Biometrics, Inc., a company developing and manufacturing wearable devices for respiratory measurements and metabolic tracking. He is also the President and Founder of Boston-based EnVerid, Inc., an energy-efficiency materials company, a role he has served in since 2010 and was previously the Chief Executive Officer of Luminus Devices, Inc., a manufacturer of high performance LEDs for solid state lighting. Dr. Meirav has served on numerous boards of directors of companies involved in IT, life sciences, semiconductors and solid state lighting. He has also worked with Stata Venture Partners, an early stage venture capital fund, and with Strategic Decisions Group, a premier consulting firm with focus on pharmaceuticals and biomedical technology. Dr. Meirav has a Ph.D. in Physics from the Massachusetts Institute of Technology and a Bachelor of Science degree in Mathematics and Physics from Tel Aviv University. We believe Dr. Meirav’s multidisciplinary background with executive experience in technology and finance provides him with the appropriate set of skills to serve as a member of our board of directors. Diem Nguyen, Ph.D., MBA , has served as a member of Candel's board of directors since July 2021. Dr. Nguyen is the Chief Executive Officer and member of the board of directors of Xalud Therapeutics, a private biotechnology company, which is majority-owned by PBM Capital. Previously, Dr. Nguyen was the Executive Vice President of PPD, a leading global clinical research organization providing drug development services, a position she held from April 2018 to April 2020. Since 2008, Dr. Nguyen has held various leadership roles at Pfizer Inc., last serving as Global President, Americas of Pfizer Essential Health from January 2017 to March 2018. Dr. Nguyen is a director at Verrica Pharmaceuticals Inc. (NASDAQ: VRCA) and Children’s Hospital of Philadelphia. She received a B.A. in Chemistry with Specialization in Biochemistry and a Ph.D. in Biochemistry and Molecular Genetics from the University of Virginia, and an MBA in General Management from the University of Virginia’s Darden Graduate School of Business Administration. We believe that Dr. Nguyen’s managerial, commercial and medical experience in the pharmaceutical industry provides her with the appropriate set of skills to serve as a member of our board of directors. Alan E. Smith, Ph.D., FRS, CBE , has served as a member of Candel's board of directors since October 2015. Dr. Smith is the former Senior Vice President (1989-2011) and Chief Scientific Officer of Genzyme Corporation, Cambridge, MA, a position he held from 1997 to 2011. Prior to its acquisition by Genzyme in 1989, Dr. Smith was the Vice President and 123 Scientific Director of Integrated Genetics, a Massachusetts start-up biotechnology company. Dr. Smith sits on the Scientific Advisory Board of Pharnext, a start-up genomics company in Paris, France, and he is on the Board of Directors of Arecor, a start-up biotechnology company in Cambridge UK. From 2014 to 2020, he was chairman of the Board of Cambridge in America, the representative body of the University and Colleges of Cambridge in North America, and from 2016 -2019, he was chairman of Native Plant Trust, the first plant conservation organization in the United States. Dr. Smith has published extensively on the genetic code and protein synthesis, tumour virology, cell biology and cystic fibrosis. He holds a B.A. from Christ’s College, Cambridge UK and a Ph.D. from the Laboratory of Molecular Biology, Cambridge, England. He is a fellow of the Royal Society of London and of Christ’s College. We believe Dr. Smith’s executive experience provides him with the appropriate set of skills to serve as a member of our board of directors. Shaan C. Gandhi, M.D., D.Phil. has served as a member of Candel's board of directors since May 2020. Dr. Gandhi is a Director at Northpond Ventures, LLC (Northpond Ventures), a global science, medical and technology-focused venture capital firm, where he leads the firm’s work in biotechnologies. Previously, Dr. Gandhi was a Principal at the Longwood Fund from 2018 to 2020, where he created and invested in life sciences companies, including Pyxis Oncology, a cancer immunotherapy company focused on novel modulators of the tumor microenvironment, which he co-founded and served as President. He was an attending hospitalist at Massachusetts General Hospital from 2018 to 2019, where he also did his residency in internal medicine from 2015 to 2018. He serves on the boards of directors of two other public companies, DICE Therapeutics (NASDAQ: DICE) and Vigil Neuroscience (NASDAQ: VIGL), as well as the boards of various private companies, including CAMP4 Therapeutics, Garuda Therapeutics, Kyverna Therapeutics, Mestag Therapeutics, Parthenon Therapeutics, StrideBio, Teckro, and Totus Medicines. He holds an M.D. from Harvard Medical School; an M.B.A. from Harvard Business School, where he was a Baker Scholar; a D.Phil. in medical oncology from the University of Oxford, where he was a Rhodes Scholar; and a B.S. with honors in biochemistry from Case Western Reserve University. We believe that Dr. Gandhi’s financial, managerial and medical experience coupled with his substantial experience as an investor in emerging biotechnology companies provides him with the appropriate set of skills to serve as a member of the board of directors. Family Relationships There are no family relationships among any of our directors or executive officers. Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our equity securities to file reports of holdings and transactions in securities of the Company with the SEC. Based solely on a review of on Forms 3, 4 and 5 and any amendments thereto filed electronically with the Securities and Exchange Commission with respect to the most recent fiscal year and written representations from the reporting persons, we believe all Section 16(a) filing requirements were satisfied in 2021 with the exception of the following filing: a Form 5 filing filed on February 14, 2022 by Diem Nguyen with respect to options granted by the Company in July 2021. Code of Business Conduct and Ethics Our board of directors has adopted a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions), agents and representatives, including directors and consultants. The full text of our Code of Business Conduct and Ethics is posted on our website at www.candeltx.com . We intend to disclose future amendments to certain provisions of our Code of Business Conduct and Ethics on our website. The inclusion of our website address in this Annual Report does not include or incorporate by reference the information on our website into this Annual Report, and you should not consider that information a part of this Annual Report. Audit Committee The members of our audit committee are Shaan C. Gandhi, M.D., D.Phil, Chris Martell, and Udi Meirav, Ph.D. Christopher Martell is the chair of the audit committee. Our board of directors has determined that all members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq listing rules and that Christopher Martell is an “audit committee financial expert” (within the meaning of applicable SEC regulations). Each of the members of the audit committee are independent pursuant to applicable Nasdaq listing standards. 124 Recommendation of Director Nominees by Stockholders There have been no material changes to the procedures by which our stockholders may recommend nominees to the board of directors. Limitations on Liability and Indemnification As permitted by Delaware law, provisions in our amended and restated certificate of incorporation and amended and restated bylaws limit or eliminate the personal liability of directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, a director exercise an informed business judgment based on all material information reasonably available to him or her. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for: • any breach of the director’s duty of loyalty to us or our stockholders; • any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; • any act related to unlawful stock repurchases, redemptions or other distributions or payments of dividends; or • any transaction from which the director derived an improper personal benefit. These limitations of liability do not limit or eliminate our rights or any stockholder’s rights to seek non-monetary relief, such as injunctive relief or rescission. These provisions will not alter a director’s liability under other laws, such as the federal securities laws or other state or federal laws. Our amended and restated certificate of incorporation also authorizes us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law. As permitted by Delaware law, our amended and restated bylaws provide that: • we will indemnify our directors, officers, employees and other agents to the fullest extent permitted by law; • we must advance expenses to our directors and officers, and may advance expenses to our employees and other agents, in connection with a legal proceeding to the fullest extent permitted by law; and • the rights provided in our amended and restated bylaws are not exclusive. If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director or officer, then the liability of our directors or officers will be so eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our amended and restated bylaws will also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our bylaws permit such indemnification. We have obtained such insurance. In addition to the indemnification that is provided for in our amended and restated certificate of incorporation and amended and restated bylaws, we have entered into indemnification agreements with each of our directors and executive officers, which may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements may require us, among other things, to indemnify our directors and executive officers for some expenses, including attorneys’ fees, expenses, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of his service as one of our directors or executive officers or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers. This description of the indemnification provisions of our amended and restated certificate of incorporation, our amended and restated bylaws and our indemnification agreements is qualified in its entirety by reference to these documents, each of which is attached as an exhibit to this Annual Report. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act), may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. 125 There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer. Item 11. Executive Compensation. Executive Compensation Overview As an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act. This section provides an overview of the compensation awarded to and earned by each individual who served as our principal executive officer at any time during our years ended December 31, 2021 and 2020 and to our next two most highly compensated executive officers in respect of their service to our company for our years ended December 31, 2021 and 2020. We refer to these individuals as our named executive officers. Our named executive officers are: • Paul Peter Tak, M.D., Ph.D., FMedSci, our President and Chief Executive Officer; • Estuardo Aguilar-Cordova, M.D., Ph.D., our Founder, former Chief Scientific Officer and former Chief Executive Officer; and • John Canepa, our Chief Financial Officer. Our executive compensation program is based on a pay-for-performance philosophy. Compensation for our executive officers is composed primarily of the following main components: base salary, bonus and equity incentives in the form of stock options. Our executive officers, like all full-time employees, are eligible to participate in our health and welfare benefit plans. As we complete our transition from a private company to a publicly traded company, we intend to evaluate our compensation values and philosophy and compensation plans and arrangements as circumstances require. At a minimum, we expect to review executive compensation annually with input from a compensation consultant. As part of this review process, we expect the board of directors and the compensation committee to apply our values and philosophy, while considering the compensation levels needed to ensure our executive compensation program remains competitive. We will also review whether we are meeting our retention objectives and the potential cost of replacing a key employee. Summary Compensation Table The following table sets forth information regarding compensation awarded to and earned by our named executive officers for services rendered to us in all capacities during our years ended December 31, 2021 and 2020. NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) STOCK AWARDS OPTION AWARDS (2) NON EQUITY INCENTIVE PLAN COMP ENSATION (3) NON QUALIFIED DEFERRED COMP ENSATION ON EARNINGS ALL OTHER COMP ENSATION (4) TOTAL Paul Peter Tak, M.D., Ph.D., FMedSci, 2021 $ 545,116 $ 85,000 $ - $ - $ 167,500 $ - $ 159,184 $ 956,800 President and Chief Executive Officer 2020 134,615 85,000 - 2,316,446 90,450 - - 2,626,511 Estuardo Aguilar-Cordova, M.D., Ph.D., 2021 520,192 - - - - - 6,194 526,386 Founder and Former Chief Executive Officer and Chief Scientific Officer (5) 2020 444,903 104,000 - - 191,250 - - 740,153 John Canepa 2021 370,000 - - - 74,000 - 5,123 449,123 Chief Financial Officer 2020 14,231 75,000 - 1,230,085 - - - 1,319,316 126 (1) The amounts reported in this column reflect the $170,000 total sign-on bonus pursuant to Dr. Tak’s employment agreement with the Company, payable in four quarterly installments following September 12, 2020, a $104,000 discretionary bonus paid to Dr. Aguilar-Cordova for performance in 2020, and a $75,000 sign-on bonus paid to Mr. Canepa pursuant to his employment agreement with the Company. (2) The amounts reported in the “Option Awards” column reflects the aggregate grant date fair value of share-based compensation awarded during the indicated year computed in accordance with the provisions of Financial Accounting Standards Board ASC Topic 718. See Note 10 to our consolidated financial statements appearing elsewhere in this Annual Report regarding assumptions underlying the valuation of equity awards. (3) The amounts reported reflect annual bonuses earned based upon achievement of company and individual performance metrics. Amounts reflected are paid in the year subsequent to the performance year. (4) Other compensation consists of the following: (1) 401K employer match and (2) for Dr. Tak only, $152,638 of housing and travel benefits. (5) In February 2022, Dr. Aguilar-Cordova was removed from his position as Chief Scientific Officer of the Company. Narrative to the Summary Compensation Table Base Salary Our named executive officers each receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. Base salaries are reviewed annually, typically in connection with our annual performance review process, approved by our board of directors or the compensation committee, and may be adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience. For the fiscal year ended December 31, 2021, the annual base salary for Dr. Aguilar-Cordova and Mr. Canepa were $500,000, and $370,000, respectively, and the annual base salary for Dr. Tak was $500,000 through August of 2021. In September 2021, Dr. Tak’s annual base salary was increased to $670,000. Annual Bonus For the fiscal year ended December 31, 2021, each of the named executive officers was eligible to earn an annual cash bonus based on the achievement of certain corporate and individual performance milestones. The target annual bonus for each of Dr. Tak, Dr. Aguilar-Cordova and Mr. Canepa for the fiscal year ended December 31, 2021 were 50%, 50% and 40% of annual base salary, respectively. Equity Compensation Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executive officers with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executive officers and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentives our executive officers to remain in our employment during the vesting period. Accordingly, our board of directors periodically reviews the equity incentive compensation of our executives, including our named executive officers, and from time to time may grant equity incentive awards to them in the form of stock options. We typically grant stock option awards at the start of employment to each executive officer and our other employees as well as on an annual basis for retention purposes. We award our stock options on the date our board of directors or the CEO approves the grant. We set the option exercise price equal to the fair market value of our common stock on the date of grant. 401(k) Plan We maintain a tax-qualified retirement plan (the 401(k) Plan) that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to defer eligible compensation subject to applicable annual Code limits. Employees’ pre-tax or Roth contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully vested in their contributions. Our 401(k) Plan is intended to be qualified under Section 401(a) of the Code with our 401(k) Plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a 127 tax-qualified retirement plan, contributions to our 401(k) Plan and earnings on those contributions are not taxable to the employees until distributed from our 401(k) Plan. Health and Welfare Benefits All of our named executive officers are eligible to participate in our employee benefit plans, including our medical, dental and vision insurance plans, in each case on the same basis as all of our other full-time employees. We believe the perquisites described above are necessary and appropriate to provide a competitive compensation package to our named executive officers. Rule 10b5-1 Sales Plans Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from the director or officer. The director or officer may amend or terminate the plan in some circumstances. Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information. Employment Arrangements and Severance Agreements with our Named Executive Officers We have entered into employment agreements with each of our named executive officers. Paul Peter Tak, M.D., Ph.D. Effective September 12, 2020, we entered into an employment agreement with Dr. Tak, or the Tak Employment Agreement, for the position of President and Chief Executive Officer. The Tak Employment Agreement provides for an annual base salary and an annual bonus opportunity. Pursuant to the Tak Employment Agreement Dr. Tak’s annual base salary will increase to $670,000 per year effective on the first anniversary of the commencement of his employment if the Company has completed an underwritten public offering on or prior to such date. The Tak Employment Agreement provides for a signing bonus in the gross amount of $170,000, payable in four equal quarterly installments of $42,500 each, commencing on the first payroll date following the commencement of his employment and on each 3-month anniversary of employment following his start date, provided that he remains employed through each date of payment. Pursuant to the Tak Employment Agreement, Dr. Tak is eligible to receive a lump sum payment of $80,000 to assist with relocation to the Greater Boston Area if and when he relocates in 2022, subject to repayment if Dr. Tak terminates his employment other than for “good reason” or we terminate his employment for “cause” (as such terms are defined in the Tak Employment Agreement) within 12 months of receipt of the relocation assistance payment. Pursuant to the Tak Employment Agreement, we will reimburse Dr. Tak for reasonable costs related to travel to Massachusetts and temporary housing in Massachusetts, not to exceed $20,000, which amount will be grossed up in respect of any related taxes, reasonable legal fees related to obtaining a visa, reasonable fees for independent tax and accounting advise not to exceed $10,000 per year, and reasonable legal fees related to negotiation of his employment agreement, not to exceed $10,000. Dr. Tak is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans. Pursuant to the Tak Employment Agreement, in the event that Dr. Tak’s employment is terminated by us without cause or by Dr. Tak for good reason outside of the 3 month period preceding and 12 month period following the first event constituting a change in control (such period, the “change in control period”), subject to the execution and effectiveness of a severance and release of claims agreement within 60 days of such termination, he will be entitled to receive (i) an amount equal to 12 months of base salary plus Dr. Tak’s target bonus for the then-current year, less any payments Dr. Tak receives pursuant to his restrictive covenants agreement with the Company, payable in installments over 12 months commencing within 60 days of termination, and (ii) subject to the Dr. Tak’s timely election to continue COBRA health coverage and copayment of premium amounts at the applicable active employees’ rate, we will continue to pay the share of the premiums that we would have paid to provide health insurance to Dr. Tak until the earlier of (A) 12 months following termination or (B) Dr. Tak’s eligibility for group medical plan benefits under any other employer’s group medical plan. In the event that such termination occurs during the change in control period, Dr. Tak will, subject to the execution and effectiveness of a general severance and release of claims agreement within 60 days of such termination, be entitled to receive (x) a lump sum payment equal to 1.5 times the sum of Dr. Tak’s then-current base salary (or base salary in effect immediately prior to the change in control, if higher), plus his target bonus for the then-current year (or his target bonus in effect immediately prior to the change in control, if higher), less any payments pursuant to Dr. Tak receives pursuant to his restrictive covenants agreement with the Company, and (y) the benefits set forth in clause (ii) of the preceding sentence but for a period of 18 months. In addition, pursuant to the Tak Employment 128 Agreement, all equity awards held by Dr. Tak that are subject to time based vesting will fully accelerate as of the earlier of the consummation of a “change in control” of the Company (as defined in the Tak Employment Agreement) or the termination of Dr. Tak’s employment by the Company without cause or by Dr. Tak for good reason. Furthermore, in the event of a change of control or Dr. Tak’s termination without cause or for good reason, Dr. Tak will have no less than 12 months to exercise vested, unexpired stock options. Estuardo Aguilar-Cordova, M.D., Ph.D. Effective November 13, 2018, we entered into an amended and restated employment agreement with Dr. Aguilar-Cordova, or the Estuardo Aguilar-Cordova Employment Agreement, for the position of President and Chief Executive Officer. Dr. Aguilar-Cordova subsequently transitioned to the role of our Chief Scientific Officer in September 2020 until February 2022. The Estuardo Aguilar-Cordova Employment Agreement provides for an annual base salary and an annual target bonus opportunity. Dr. Aguilar-Cordova is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans. The Estuardo Aguilar-Cordova Employment Agreement was terminated in February 2022. As Dr. Aguilar-Cordova’s employment was terminated by us without “cause” (as such term was defined in the Estuardo Aguilar-Cordova Employment Agreement), upon the execution and effectiveness of a severance and release of claims agreement, he received (i) 12 months of base salary continuation, and (ii) subject to Dr. Aguilar-Cordova’s timely election to continue COBRA health coverage, we will pay the premiums necessary to continue Dr. Aguilar-Cordova’s and his covered dependents’ health insurance coverage until the earlier of (A) 12 months following termination or (B) Dr. Aguilar-Cordova’s eligibility for group medical plan benefits under any other employer’s group medical plan. John Canepa Effective December 1, 2020, we entered into an employment agreement with Mr. Canepa, or the Canepa Employment Agreement, for the position of Chief Financial Officer. The Canepa Employment Agreement provides for an annual base salary and an annual target bonus opportunity. Pursuant to the Canepa Employment Agreement Mr. Canepa received a signing bonus in the gross amount of $75,000, which is subject to repayment if Mr. Canepa voluntarily terminates his employment with the Company or if the Company terminates his employment for reasons excluding redundancy, ill health or a transfer of the part of the business in which he works within 12 months of the commencement of his employment. Mr. Canepa is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans. Pursuant to the Canepa Employment Agreement, in the event that Mr. Canepa’s employment is terminated by us without cause or by Mr. Canepa for good reason, subject to the execution and effectiveness of a severance and release of claims agreement within 60 days of such termination, he will be entitled to receive (i) an amount equal to nine months of base salary plus Mr. Canepa’s target bonus for the then-current year, less any payments Mr. Canepa receives pursuant to his restrictive covenants agreement with the Company, payable in installments over 9 months commencing within 60 days of termination, and (ii) subject to the Mr. Canepa’s timely election to continue COBRA health coverage and copayment of premium amounts at the applicable active employees’ rate, we will continue to pay the share of the premiums that we would have paid to provide health insurance to Mr. Canepa until the earlier of (A) nine months following termination or (B) Mr. Canepa’s eligibility for group medical plan benefits under any other employer’s group medical plan. Pursuant to the Canepa Employment Agreement, all equity awards held by Mr. Canepa that are subject to time based vesting will fully accelerate if Mr. Canepa’s employment is terminated by the Company without “cause” or by Mr. Canepa for “good reason” within one month prior to or 12 months following the consummation of a “change in control” (as such terms are defined in the Canepa Employment Agreement). 129 Outstanding Equity Awards The following table sets forth information concerning outstanding equity awards held by our named executive officers as of December 31, 2021. Option Awards (1) Name NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE EQUITY INCENTIVE PLAN AWARS: NUMBER OF SECURITIES UNDERLYING UNEXERCISED UNEARNED OPTIONS(#) OPTION EXERCISE PRICE OPTION EXPIRATION DATE Paul Peter Tak, M.D., Ph.D. 962,470 814,398 (2) - $ 1.55 10/10/2030 President and Chief Executive Officer - - 296,144 (3) $ 1.55 10/10/2030 Estuardo Aguilar-Cordova, M.D., Ph.D. (4) 57,537 19,180 (5) - $ 1.46 11/12/2028 Founder and Former Chief Executive Officer and Chief Scientific Officer - - 76,717 (6) $ 1.46 11/12/2028 9,153 3,052 (7) - $ 1.46 8/17/2028 John Canepa 112,948 209,762 (8) - $ 1.55 12/15/2030 Chief Financial Officer (1) Each of the outstanding equity awards in the table above was granted pursuant to our 2015 Stock Plan, as amended, or the 2015 Plan (2) Represents stock option granted on October 10, 2020. The shares underlying this option vest as follows: 25% vested upon grant date, 25% vesting on the first anniversary of October 10, 2020, and the remainder vesting thereafter in 36 equal monthly installments (3) The shares underlying this option shall vest (if at all) if a specified stock price is obtained on or prior to September 12, 2023. (4) In February 2022, Dr. Aguilar-Cordova was removed from his position as Chief Scientific Officer of the Company and all of his stock options became fully vested. (5) Represents stock option granted on October 13, 2018. The shares underlying this option vest in four equal annual installments following October 13, 2018. (6) The shares underlying this option shall vest upon achievement of a specified clinical milestone on or prior to November 12, 2023. (7) Represents stock option granted on January 1, 2019. The shares underlying this option vest as follows: 25% upon grant date and the remainder vest in three equal annual installments following January 1, 2019. (8) Represents stock option granted on December 15, 2020. The shares underlying this option vest as follows: 35% vesting on the first anniversary of December 1, 2020, 35% vest in equal monthly installments over months 13 to 24 following December 1, 2020, 15% vest in equal monthly installments over months 25 to 36 following December 1, 2020, and 15% vest in equal monthly installments over months 37 to 48 following December 1, 2020. Compensation Risk Assessment We believe that although a portion of the compensation provided to our executive officers and other employees is performance-based, our executive compensation program does not encourage excessive or unnecessary risk taking. This is primarily due to the fact that our compensation programs are designed to encourage our executive officers and other employees to remain focused on both short-term and long-term strategic goals. As a result, we do not believe that our compensation programs are reasonably likely to have a material adverse effect on us. Director Compensation The following table presents the total compensation for each person who served as a non-employee member of our board of directors and received compensation for such service during the year ended December 31, 2021. Other than as set forth in the table and described more fully below, we did not pay any compensation, make any equity awards to, or pay any other compensation to any of the non-employee members of our board of directors in 2021. Dr. Tak, our President and Chief Executive Officer, and Dr. Aguilar-Cordova, our Founder and former Chief Executive Officer and Chief Scientific Officer, did not receive any additional compensation for their service as a member of our board of directors. Dr. Tak’s and Dr. Aguilar-Cordova’s compensation for service as an employee for year ended December 31, 2021 is presented in “Executive Compensation-Summary Compensation Table.” We reimburse non-employee members of our board of directors for reasonable travel and out-of-pocket expenses incurred in connection with attending board of directors and committee meetings. 130 Director Compensation Table - 2021 Name FEES EARNED OR PAID IN CASH ($) OPTION AWARDS ($) (1) ALL OTHER COMPENSATION ($) TOTAL ($) Paul B. Manning $ 16,667 $ - $ - $ 16,667 Edward J. Benz, Jr., M.D. 17,917 73,542 - 91,459 Carrie Cox 56,250 254,675 - 310,925 Shaan C. Gandhi, M.D., D.Phil (2) - - - - Chris Martell 25,000 73,542 - 98,542 Udi Meirav, Ph.D. 17,708 73,542 - 91,250 Diem Nguyen, Ph.D. M.B.A. 14,583 157,865 - 172,448 Alan E Smith, Ph.D., FRS, CBE 16,667 73,542 - 90,209 (1) Represents stock options granted in 2021. In accordance with SEC rules, these columns reflect the aggregate grant date fair value of the option awards granted during 2021 computed in accordance with Financial Accounting Standard Board ASC Topic 718 for stock-based compensation transactions. (2) Dr. Gandhi disclaimed director compensation in connection with service on our board of directors in accordance with the standard policy of Northpond Ventures . Non-Employee Director Compensation Policy Our board of directors has adopted a non-employee director compensation policy that is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. The fees paid to independent non-employee directors for service on our board of directors and for service on each committee of our board of directors on which the director is a member are set forth below: Name MEMBER ANNUAL FEE ($) CHAIRMAN ADDITIONAL ANNUAL FEE ($) Board of Directors (1) $ 35,000 $ 30,000 Audit Committee 7,500 15,000 Compensation Committee 5,000 10,000 Nominating and Corporate Governance Committee 4,000 8,000 (1) Dr. Gandhi disclaims director compensation in connection with service on our board of directors in accordance with the standard policy of Northpond Ventures . In addition, each non-employee director elected or appointed to our board of directors will be granted an initial one-time non-qualified stock option to purchase 28,480 shares of our common stock, based on the current fair market value of our common stock, which shall vest in equal monthly installments over three years from the date of grant, subject to continued service through such vesting date(s). In addition, at the end of each year, each non-employee director, other than a director receiving an initial equity award, will be granted a non-qualified stock option to purchase 14,240 shares of our common stock, based on the then fair market value of our common stock, which will vest and become fully exercisable upon the earlier of (i) the first anniversary of the grant date or (ii) our next annual meeting of stockholders, subject to such director’s continued service as a director through such vesting date(s). 131 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Securities authorized for issuance under equity compensation plans The following table provides information relating to our equity compensation plans as of December 31, 2021. As of December 31, 2021, we had two equity compensation plans, our 2021 Stock Option and Incentive Plan and our Employee Stock Purchase Plan, which were approved by our Board of Directors and our stockholders. Number of securities to be issued upon exercise of outstanding Options, Warrants and Rights Weighted-average exercise price of outstanding options, warrants, and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by stockholders 4,783,333 2.34 1,878,997 Equity compensation plans not approved by stockholders - - - Total 4,783,333 2.34 1,878,997 Security Ownership of Certain Beneficial Owners The following table sets forth certain information known to us regarding beneficial ownership of our capital stock outstanding as of March 1, 2022 for: • each person, or group of affiliated persons, who is known by us to be the beneficial owner of five percent or more of our outstanding common stock; • each of our directors; • each of our named executive officers; and • all of our current directors and executive officers as a group. We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities as well as any shares of common stock that the person has the right to acquire within 60 days of March 1, 2 022 through the exercise of stock options or other rights. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Each individual or entity shown on the table has furnished information with respect to beneficial ownership. Except as otherwise indicated below, the address of each officer, director and five percent stockholder listed below is c/o Candel Therapeutics, Inc., 117 Kendrick St, Suite 450, Needham, Massachusetts 02494. 132 The percentage of beneficial ownership in the table below is based o n 28,691,088 sha res of common stock deemed to be outstanding as of Marc h 1, 20 22. Shares Percentage 5% or Greater Shareholders: Laura K. Aguilar (1) 6,339,579 22.0 % Northpond Ventures, LP (2) 1,685,326 5.9 % Entities Affiliated with FMR, LLC (3) 2,262,842 7.9 % Named Executive Officers and Directors: Paul Peter Tak, M.D., Ph.D. FMedSci (4) 1,088,476 3.8 % Paul B. Manning (5) 4,073,316 14.2 % Alan E Smith, Ph.D., FRS, CBE (6) 69,164 * Chris Martell (7) 724,576 2.5 % Diem Nguyen, Ph.D. M.B.A. (8) 17,120 * Edward J. Benz, Jr., M.D. (9) 69,164 * Estuardo Aguilar-Cordova, M.D., inf., Ph.D. (10) 6,339,579 22.0 % Shaan C. Gandhi, M.D., D.Phil - Udi Meirav, Ph.D. (11) 164,773 * Francesca Barone, M.D., Ph.D. (12) 19,185 * Nathan Caffo (13) 123,223 * John Canepa (14) 161,485 * Susan Stewart (15) 10,442 * All Executive Officers and Directors as a group (13 persons) (16) 12,860,503 44.8 % * Less than one percent. (1) Consists of (i) 931,039 shares of common stock, of which 898,640 shares of common stock are held solely by Dr. Aguilar, and 32,399 shares of common stock are held jointly with her spouse, Estuardo Aguilar-Cordova, M.D., inf., Ph.D., (ii) 2,013,100 shares held for the benefit of Dr. Aguilar by the Laura K. Aguilar 2020 Irrevocable Trust, (iii) 171,335 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022, and (iv) 3,224,105 shares deemed to be beneficially owned by her spouse, of which 983,524 shares of common stock are held solely by her spouse, 2,074,942 shares are held for the benefit of her spouse by the Estuardo Aguilar-Cordova 2020 Irrevocable Trust and 165,639 shares of common stock are issuable upon the exercise of options exercisable within 60 days after March 1, 2022. Laura shares voting and investment power over the securities held by her spouse. (2) Consists of 1,685,768 shares of our common stock issued upon conversion of our Series C Preferred Stock held by Northpond Ventures, LP (“Northpond”). Northpond LP is managed by Northpond Ventures GP, LLC (“Northpond LLC”) and Northpond LLC may be deemed to beneficially own such shares. Michael Rubin is the managing member of Northpond LLC and may also be deemed to beneficially own such shares. The business address for each person and entity named in this footnote is 7500 Old Georgetown Rd, Suite 850, Bethesda, MD 20814. (3) Based solely on information contained in the most recently filed Schedule 13G of FMR LLC filed with the SEC on February 9, 2022, reflecting beneficial ownership as of December 31, 2021. According to this Schedule 13G, FMR LLC and its Chairman, Abigail P. Johnson, reported the beneficial ownership of 2,262,842 shares on behalf of Fidelity Management & Research Company LLC, , a wholly owned subsidiary of FMR LLC and a registered investment adviser, and had no sole voting power these shares, no shared voting power, sole dispositive power for 2,262,842 of these shares and no shared dispositive power. The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210 (4) Consists of 25,000 shares of common stock and 1,063,476 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (5) Consists of (i) 1,681,000 shares of common stock held by Paul and Diane Manning, JTWROS; (ii) 642,406 shares of the Issuer’s common stock held by The Paul B. Manning Revocable Trust dated May 10, 2000; (iii) 642,406 shares of common stock issuable upon the exercise of a warrant within 60 days of December 31, 2021 held by The Paul B. Manning Revocable Trust dated May 10, 2000; (iv) 553,752 shares of the Issuer’s common stock held by BKB Growth Investments, LLC; and (v) 553,752 shares of common stock issuable upon the exercise of a warrant within 60 days of December 31, 2021 held by BKB Growth Investments, LLC. Mr. Manning is a co-manager of Tiger Lily Capital, LLC, the manager of BKB, and has shared voting and investment power with respect to the shares held by BKB. (6) Consists of 32,548 shares of common stock and 36,616 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. 133 (7) Consists of (i) 32,548 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022, (ii) 283,514 shares of common stock held by GTAM1 2012 ADV LLC, of which Mr. Martell serves as Manager, (iii) 283,514 warrants held by GTAM1 2012 Trust, of which Mr. Martell serves as trustee but is not a beneficiary, and (iv) 125,000 shares of common stock held by GTAM1 2012 Trust. Mr. Martell disclaims beneficial ownership over all of these interests, except for his beneficial ownership in the 32,548 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (8) Consists of 10,000 shares of common stock and 7,120 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (9) Consists of 69,164 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (10) Consists of (i) 1,015,923 shares of common stock, of which 983,524 shares of common stock are held solely by Dr. Aguilar-Cordova, and 32,399 shares of common stock are held jointly with his spouse, Laura K. Aguilar, M.D., Ph.D., (ii) 2,074,942 shares held for the benefit of Dr. Aguilar-Cordova by the Estuardo Aguilar-Cordova 2020 Irrevocable Trust (iii) 165,639 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022, and (iv) 3,083,075 shares deemed to be beneficially owned by his spouse, of which 898,640 shares of common stock are held solely by his spouse, 2,013,100 shares are held for the benefit of his spouse by the Laura K. Aguilar 2020 Irrevocable Trust and 171,335 shares of common stock are issuable upon the exercise of options exercisable within 60 days after March 1, 2022. Dr. Aguilar-Cordova shares voting and investment power over the securities held by his spouse. (11) Consists of 48,822 shares of common stock and 115,951 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (12) Consists of 1,500 shares of common stock and 17,685 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (13) Consists of 6,000 shares of common stock and 117,223 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (14) Consists of 10,125 shares of common stock and 151,360 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (15) Consists of 10,442 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022. (16) Consists of (i) 7,706,690 shares common stock, (ii) options to purchase 1,854,989 shares of common stock exercisable within 60 days of March 1, 2022 and (iii) warrants to purchase 283,514 shares of common stock exercisable within 60 days of March 1, 2022, held by thirteen executive officers and directors, and entities affiliated with such executive officers and directors, as described in notes (4) through (15) above. Communications with the Board of Directors Stockholders who want to communicate with members of the Board, including the independent directors, individually or as a group, should address their communications to the Board, the Board members or the Board committee, as the case may be, and send them by mail to c/o Candel Therapeutics, Inc., 117 Kendrick St, Suite 450, Needham, Massachusetts 02494. The Chair of the Audit Committee will forward all such communications directly to such Board members. Any such communications may be made on an anonymous and confidential basis. A copy of any such written communication may also be forwarded to the Company’s legal counsel and a copy of such communication may be retained for a reasonable period of time. The director may discuss the matter with the Company’s legal counsel, with independent advisors, with non-management directors, or with the Company’s management, or may take other action or no action as the director determines in good faith, using reasonable judgment, and applying his or her own discretion. The Audit Committee oversees the procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or audit matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting, internal accounting controls or auditing matters. The Company has also established a toll-free telephone number for the reporting of such activity, which is 855-590-2335. 134 Board Committees Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance committee, each of which operates pursuant to a charter adopted by our Board of Directors. We believe that the composition and functioning of all of our committees will comply with the applicable requirements of Nasdaq, the Sarbanes-Oxley Act of 2002 and SEC rules and regulations that will be applicable to us. We intend to comply with future requirements to the extent they become applicable to us. The full text of our Audit Committee charter, Compensation Committee charter, and Nominating and Corporate Governance charter are posted on the investor relations portion of our website at www.candeltx.com. We do not incorporate the information contained on, or accessible through, our corporate website into this Annual Report, and you should not consider it a part of this Annual Report. Item 13. Certain Relationships and Related Transactions, and Director Independence. The following is a description of transactions or series of transactions since January 1, 2021 to which we were or will be a party, in which: • the amount involved in the transaction exceeds, or will exceed, $120,000 (or, if less, 1% of the average of our total assets amounts at December 31, 2019 and 2020); and • in which any of our executive officers, directors or holder of five percent or more of any class of our capital stock, including their immediate family members or affiliated entities, had or will have a direct or indirect material interest. Compensation arrangements for our named executive officers and our directors are described elsewhere in this Annual Report under “Director Compensation” and “Executive Compensation.” All amounts in thousands unless otherwise noted. Participation in our Initial Public Offering Certain of our directors, executive officers and our 5% stockholders purchased shares of our common stock in our IPO at the initial public offering price. The following table sets forth the number of shares of our common stock purchased by directors, executive officers and 5% stockholders and their affiliates and the aggregate purchase price paid for such shares. Shares of Common Stock Purchased Aggregate Cash Purchase Price Nathan Caffo 6,000 $ 48,000 John Canepa 10,125 $ 81,000 Paul Peter Tak, M.D., Ph.D., FMedSci 25,000 $ 200,000 Diem Nguyen, Ph.D., M.B.A. 10,000 $ 80,000 GTAM1 2012 LLC (1) 125,000 $ 1,000,000 Paul B. Manning 1,625,000 $ 13,000,000 (1) GTAM1 2012 LLC is wholly owned by a trust for which Christopher Martell serves as trustee Amended and Restated Investors’ Rights Agreement We are a party to an amended and restated investors’ rights agreement, or the Investors’ Rights Agreement, dated as of March 19, 2020, with certain of our stockholders, including principal stockholders and their affiliates. The Investors’ Rights Agreement provides these holders the right to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing. Employment Agreements We have entered into employment agreements with certain of our executive officers. See “Item 11-Executive Compensation-Employment Arrangements and Severance Agreements with our Named Executive Officers.” 135 Equity Grants We have granted stock options to certain of our executive officers and members of our board of directors. See “Item 11-Executive Compensation.” Indemnification Agreements As permitted by Delaware law, provisions in our amended and restated certificate of incorporation and amended and restated bylaws limit or eliminate the personal liability of directors for a breach of their fiduciary duty of care as a director. In addition, we have entered into indemnification agreements with each of our executive officers and the members of our board of directors which may require us to indemnify them. See “Item 11-Executive Compensation-Limitations on Liability and Indemnification” Policies for Approval of Related Party Transactions Our board of directors reviews and approves transactions with directors, officers and holders of 5% or more of our voting securities and their affiliates, each a related party. Prior to our initial public offering, the material facts as to the related party’s relationship or interest in the transaction were disclosed to our board of directors prior to their consideration of such transaction, and the transaction was not considered approved by our board of directors unless a majority of the directors who are not interested in the transaction approved the transaction. Further, when stockholders were entitled to vote on a transaction with a related party, the material facts of the related party’s relationship or interest in the transaction were disclosed to the stockholders, who must have approved the transaction in good faith. In connection with our initial public offering, our board of directors adopted a written related party transactions policy. Pursuant to this policy, the audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members. Director Independence Under the Nasdaq listing rules, independent directors must comprise a majority of a listed company’s board of directors within twelve months from the date of listing. In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent within twelve months from the date of listing. Audit committee members must also satisfy additional independence criteria, including those set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), and compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. Under Nasdaq listing rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries, other than compensation for board service; or (2) be an affiliated person of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C-1, the board of directors must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director, and whether the director is affiliated with the company or any of its subsidiaries or affiliates. 136 Director Affiliations Some of our directors are affiliated with and serve on the board of directors as representatives of entities which beneficially own or owned 5% or more of our common stock, as indicated below: Name Principal Stockholder Paul B. Manning PBM Capital Shaan C. Gandhi, M.D., D.Phil Northpond Ventures, L.P. Item 14. Principal Accounting Fees and Services. Our independent public accounting firm is KPMG LLP, McLean, Virginia, PCAOB Auditor ID : 185 . The Audit Committee has selected KPMG LLP as our independent registered public accounting firm for the years ended December 31, 2021 and 2020. In addition to retaining KPMG LLP to audit our consolidated financial statements for years ended December 31, 2021 and 2020, we may engage the firm from time to time during the year to perform other services. The following table sets forth the aggregate fees billed by KPMG LLP in connection with services rendered during the last two fiscal years. For the Year Ended 2021 2020 Audit fees $ 918,292 $ 310,000 $ 918,292 $ 310,000 Audit Fees consist of fees for professional services rendered in connection with the audit of our annual consolidated financial statements, the review of the interim consolidated financial statements included in quarterly reports, services rendered in connection with SEC registration statements, including the IPO, and services that are normally provided by KPMG LLP, such as comfort letters, in connection with statutory and regulatory filings or engagements. In fiscal 2021 and 2020, no services other than those discussed above were provided by KPMG LLP. The Audit Committee has adopted a policy requiring pre-approval of all audit and non-audit related services to be performed by the Company’s independent auditor regardless of amount. These services may include audit services, audit-related services, tax services and other related services. KPMG LLP and management are required to periodically report to the Audit Committee regarding the extent of services provided by KPMG LLP in accordance with this pre-approval and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Audit Committee annually evaluates the qualifications, performance and independence of the Company’s independent registered public accounting firm. It selected KPMG as the Company’s independent registered public accounting firm for 2021. This selection was subsequently approved by the Board . The Audit Committee has reviewed and discussed with management and with KPMG the Company’s audited consolidated financial statements for the year ended December 31, 2021. In addition, the Audit Committee has discussed with KPMG the matters that independent registered public accounting firms must communicate to audit committees under applicable PCAOB standards. The Audit Committee has also discussed and confirmed with KPMG its independence from the Company and received all written disclosures and correspondence required by the PCAOB Ethics and Independence requirement s. The Audit Committee has evaluated and concluded the non-audit services provided by KPMG to the Company do not impair KPMG’s independence. Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board that the audited consolidated financial statements for the year ended December 31, 2021 and the related footnotes be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. 137 PART IV Item 15. Exhibits, Financial Statement Schedules. (1) For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference. (2) Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto. (3) Exhibits: Exhibit Number Description 3.1 Amended and Restated Certificate of Incorporation of Candel Therapeutics, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 30, 2021) 3.2 Amended and Restated Bylaws of Candel Therapeutics, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 30, 2021) 4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 4.2* Description of Securities 4.3 Investors’ Rights Agreement (incorporated by reference to Exhibit 4.2 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on June 25, 2021) 4.4 Form of November 2018 Unconditional Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.3 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 4.5 Form of November 2018 Conditional Warrant to Purchase Common Stock (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 4.6 Form of Warrant to Purchase Series A Convertible Preferred Stock (incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on June 25, 2021) 10.1# 2015 Stock Plan, as amended, and forms of award agreements thereunder (incorporated by reference to Exhibit 10.1 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.2# 2021 Stock Option and Incentive Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.2 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.3# Senior Executive Cash Incentive Bonus Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.4# Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.4 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.5.1# Employment Agreement by and between Advantagene, Inc. d/b/a Candel Therapeutics and Paul Peter Tak, M.D., Ph.D. dated September 12, 2020 (incorporated by reference to Exhibit 10.5.1 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.5.2# Amended and Restated Employment Agreement by and between Advantagene, Inc. and Estuardo Aguilar-Cordova dated November 13, 2018 (incorporated by reference to Exhibit 10.5.2 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.5.3# Amended and Restated Employment Agreement by and between Advantagene, Inc. and Laura Aguilar, M.D., Ph.D. dated November 13, 2018 (incorporated by reference to Exhibit 10.5.3 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.5.4# Employment Agreement by and between Advantagene, Inc. d/b/a Candel Therapeutics and John Canepa dated December 1, 2020 (incorporated by reference to Exhibit 10.5.4 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.5.5# Employment Agreement by and between Advantagene, Inc. d/b/a Candel Therapeutics and Nathan Caffo dated September 24, 2020 (incorporated by reference to Exhibit 10.5.5 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.6# Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 138 10.7 Exclusive License Agreement by and between Advantagene, Inc. and Ventagen, LLC dated March 1, 2014 (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.8 Exclusive License Agreement by and between Advantagene, Inc., d/b/a Candel Therapeutics and Periphagen, Inc. dated December 9, 2019 (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.9 Exclusive Patent License Agreement by and between Advantagene, Inc. and Mass General Brigham (formerly known as The Brigham and Women’s Hospital, Inc.) dated September 15, 2020 (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.10 Lease of Premises at 117 Kendrick Street, Needham, Massachusetts by and between 117 Kendrick DE, LLC and the Registrant dated as of February 4, 2019 (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1/A (File No. 333- 257444) filed with the SEC on July 16, 2021) 10.11* Loan and Security Agreement by and between the Registrant and Silicon Valley Bank, dated February 24, 2022 10.12#* Employment Agreement by and between Candel Therapeutics and Francesca Barone dated February 3, 2022 10.13#* Consulting Agreement by and between Candel Therapeutics, Inc. and Susan Stewart dated October 19, 2021. 21.1* List of Subsidiary 23.1* Consent of KPMG LLP, Independent Registered Public Accounting Firm 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32*+ Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) * Filed herewith. + The certifications furnished in Exhibit 32.1 hereto are deemed to be furnished with this Annual Report on form 10-K and will not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference. # Indicates a management contract or any compensatory plan, contract or arrangement Item 16. Form 10-K Summary None. 139 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized . Company Name Date: March 29, 2022 By: /s/ Paul Peter Tak Paul Peter Tak, M.D., Ph.D., FMedSci President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Paul Peter Tak President and Chief Executive Officer (Principal Executive Officer) March 29, 2022 Paul Peter Tak, M.D., Ph.D. FMedSci /s/ John Canepa Chief Financial Officer (Principal Financial and Accounting Officer) March 29, 2022 John Canepa /s/ Paul B Manning Chairman March 29, 2022 Paul B Manning /s/ Edward J. Benz Jr. Director March 29, 2022 Edward J. Benz, Jr, M.D. /s/ Chris Martell Director March 29, 2022 Chris Martell /s/ Udi Meirav Director March 29, 2022 Udi Meirav, Ph.D. /s/ Alan E. Smith Director March 29, 2022 Alan E. Smith, Ph.D., FRS, CBE /s/ Estuardo Aguilar-Cordova Director March 29, 2022 Estuardo Aguilar-Cordova, M.D. Ph.D. /s/ Shaan C. Gandhi Director March 29, 2022 Shaan C. Gandhi, M.D., D. Phil /s/ Diem Nguyen Director March 29, 2022 Diem Nguyen, Ph.D., MBA 140 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets F- 3 Consolidated Statement of Operations and Comprehensive Loss F- 4 Consolidated Statement of Convertible Preferred Stock and Stockholders’ Equity (Deficit ) F- 5 Consolidated Statement of Cash Flows F- 6 Notes to Consolidated Financial Statements F- 7 - 21 F- 1 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Candel Therapeutics, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Candel Therapeutics, Inc and subsidiary (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a re asonable basis for our opinion. /s/ KPMG LLP We have served as the Company’s auditor since 2019 McLean, Virginia March 29, 2022 F- 2 Candel Therapeutics, Inc. Consolidated Ba lance Sheets (In thousands, except share and per share amounts) DECEMBER 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 82,642 $ 35,053 Prepaid expenses and other current assets 2,303 93 Total current assets 84,945 35,146 Fixed assets, net 3,836 2,787 Other long-term assets 424 349 Total assets $ 89,205 $ 38,282 Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable $ 1,590 $ 921 Accrued expenses 3,438 3,142 Paycheck protection program loan — 463 Other current liabilities 334 187 Total current liabilities 5,362 4,713 Deferred revenue — 125 Long-term debt 560 483 Deferred rent 894 632 Warrant liability 18,252 6,831 Total liabilities 25,068 12,784 Commitments and contingencies (Note 14) Convertible preferred stock: Series B convertible preferred stock, $ 0.01 par value; 0 and 11,155,506 shares authorized, issued and outstanding at December 31, 2021 and 2020, respectively. — 26,560 Series C convertible preferred stock, $ 0.01 par value; 0 and 6,032,170 shares authorized, issued and outstanding at December 31, 2021 and 2020, respectively. — 22,500 Stockholders’ deficit: Preferred stock, $ 0.01 par value; 10,000,000 shares authorized at December 31, 2021, no shares issued or outstanding at December 31, 2021 — — Common stock, $ 0.01 par value; 150,000,000 and 75,000,000 shares authorized at December 31, 2021 and 2020, respectively, shares issued and outstanding 28,689,842 and 11,635,094 at December 31, 2021 and 2020, respectively. 286 116 Additional paid-in capital 144,146 20,493 Accumulated deficit ( 80,295 ) ( 44,171 ) Total stockholders’ equity (deficit) 64,137 ( 23,562 ) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $ 89,205 $ 38,282 The accompanying notes are an integral part of these consolidated financial statements. F- 3 Candel Therapeutics, Inc. Consolidated Statements of Ope rations and Comprehensive Loss (In thousands, except share and per share amounts) YEAR ENDED DECEMBER 31, 2021 2020 Research and development service revenue, related party $ 125 $ 125 Operating expenses: Research and development 15,178 8,754 General and administrative 10,673 5,181 Total operating expenses 25,851 13,935 Loss from operations ( 25,726 ) ( 13,810 ) Other income (expense): Grant income 1,076 624 Interest, dividend and investment income (expense), net ( 53 ) 111 Change in fair value of warrant liability ( 11,421 ) ( 4,605 ) Total other income (expense), net ( 10,398 ) ( 3,870 ) Net loss $ ( 36,124 ) $ ( 17,680 ) Other comprehensive gain: Unrealized gain on available-for-sale securities — 19 Comprehensive loss $ ( 36,124 ) $ ( 17,661 ) Net loss per share attributable to common stockholders, basic and diluted ( 1.91 ) ( 1.52 ) Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 18,873,048 11,615,208 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Candel Thrapeutics, Inc. Consolidated Statements of Convertible Pre ferred Stock and Stockholders’ Equity (Deficit) (In thousands, except share and per share amounts) SERIES B CONVERTIBLE PREFERRED STOCK SERIES C CONVERTIBLE PREFERRED STOCK COMMON STOCK SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ADDITIONAL PAID-IN CAPITAL ACCUMULATED OTHER COMPREHENSIVE LOSS ACCUMULATED DEFICIT STOCKHOLDERS’ EQUITY (DEFICIT) Balance as of December 31, 2019 11,155,506 $ 26,560 6,032,170 $ 22,500 11,613,735 $ 116 $ 18,356 $ ( 19 ) $ ( 26,491 ) $ ( 8,038 ) Options exercised — — — — 21,359 — 30 — — 30 Stock-based compensation — — — — — — 1,412 — — 1,412 Increase in fair value of NC Ohio Trust Warrants — — — — — — 695 — — 695 Recognition of unrealized loss on marketable securities — — — — — — — 19 — 19 Net loss — — — — — — — — ( 17,680 ) ( 17,680 ) Balance as of December 31, 2020 11,155,506 $ 26,560 6,032,170 $ 22,500 11,635,094 $ 116 $ 20,493 $ — $ ( 44,171 ) $ ( 23,562 ) Options exercised — — — — 24,410 — 35 — — 35 Warrants exercised — — — — 75,946 1 429 — — 430 Stock-based compensation — — — — — — 2,588 — — 2,588 Change in fair value of NC Ohio Trust Warrants — — — — — — 375 — — 375 Conversion of Series B Preferred Stock to Common Stock ( 11,155,506 ) ( 26,560 ) — — 4,538,578 45 26,515 — — 26,560 Conversion of Series C Preferred Stock to Common Stock — — ( 6,032,170 ) ( 22,500 ) 2,527,820 25 22,475 — — 22,500 Proceeds from IPO, net — — — — 9,887,994 99 71,236 — — 71,335 Net loss — — — — — — — — ( 36,124 ) ( 36,124 ) Balance as of December 31, 2021 — $ — — $ — 28,689,842 $ 286 $ 144,146 $ — $ ( 80,295 ) $ 64,137 The accompanying notes are an integral part of these consolidated financial statements. F- 5 Candel Therapeutics, Inc. Consolidated Statements of Cas h Flows (In thousands, except share and per share amounts) YEAR ENDED DECEMBER 31, 2021 2020 Cash Flows from Operating Activities: Net loss $ ( 36,124 ) $ ( 17,680 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 232 91 Impairment on manufacturing equipment 553 — Non-cash stock compensation expense 2,963 2,107 Non-cash interest expense 76 32 Change in fair value of warrant liability 11,421 4,605 PPP loan forgiveness ( 463 ) — Changes in operating assets and liabilities: Prepaid expenses and other current assets ( 2,210 ) 60 Other long term assets 83 ( 83 ) Accounts payable 669 289 Accrued expenses 297 1,512 Deferred revenue ( 125 ) ( 125 ) Deferred rent 410 121 Net cash used in operating activities ( 22,218 ) ( 9,071 ) Cash Flows from Investing Activities: Purchase of available-for-sale securities — ( 6 ) Proceeds from maturities and sales of available-for-sale securities — 39,937 Purchase of fixed assets ( 1,835 ) ( 1,476 ) Net cash provided by (used in) investing activities ( 1,835 ) 38,455 Cash Flows from Financing Activities: Proceeds from IPO 71,335 — Proceeds from paycheck protection program loan — 460 Proceeds from warrant exercises 430 — Proceeds from option exercises 35 30 Net cash provided by financing activities 71,800 490 Net increase in cash 47,747 29,874 Cash, cash equivalents and restricted cash at beginning of period 35,319 5,445 Cash, cash equivalents and restricted cash at end of period $ 83,066 $ 35,319 Supplemental Disclosures of Cash Flow Information: Cash paid for taxes $ 29 $ 93 Capital expenditures in accounts payable and accrued expenses $ — $ 977 The accompanying notes are an integral part of these consolidated financial statements. F- 6 Candel Therapeutics, Inc. Notes to fin ancial statements (Amounts in thousands, except share and per share amounts) 1. Organization and basis of presentation Candel Therapeutics, Inc., formerly known as Advantagene, Inc. (the “Company”) is a late clinical stage biotechnology company that was incorporated in Delaware in June 2003. On November 30, 2020, the Company changed its name to Candel Therapeutics, Inc. The Company is focused on helping patients fight cancer with oncolytic viral immunotherapies. The Company’s engineered viruses are designed to induce immunogenic cell death through direct viral – mediated cytotoxicity in cancer cells, thus releasing tumor neo-antigens and creating a pro-inflammatory microenvironment at the site of injection. The Company has established two oncolytic viral immunotherapy platforms and our two product candidates, CAN-2409 and CAN-3110, are in clinical trials for a number of tumor types. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales. The Company has funded its operations primarily with proceeds from the sale of its capital stock and convertible notes. The Company has incurred recurring losses since its inception, including a net loss of $ 36,124 and $ 17,680 for the years ended December 31, 2021, and 2020, respectively. In addition, as of December 31, 2021, the Company had an accumulated deficit of $ 80,295 . The Company expects to continue to generate operating losses for the foreseeable future. On July 29, 2021, the Company completed its initial public offering of common stock, or the IPO, at which time the Company issued 9,000,000 shares of its common stock at a price to the public of $ 8.00 per share, and on August 13, 2021, the Company issued an additional 887,994 common shares at $ 8.00 per share as a partial exercise of the underwriters’ option to purchase additional shares, resulting in net proceeds to the Company of $ 71,335 , after deducting underwriting discounts and commissions and offering expenses. Upon closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 7,066,398 shares of common stock. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurances that additional funding will be available on terms acceptable to the Company, or at all. The Company believes that existing resources will fund planned operations for at least 12 months from the date that these consolidated financial statements were available to be issued. Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business. Reverse stock split On July 14, 2021, the Company’s board of directors and stockholders approved a one-for- 2.4579 reverse stock split of the Company’s issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for the outstanding shares of convertible preferred stock which became effective on July 15, 2021. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split. 2. Summary of significant accounting policies Basis of presentation The accompanying condensed consolidated financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (FASB). The FASB sets GAAP that the Company follows to ensure its financial condition, results of operations, and cash flows are consistently reported. References to GAAP F- 7 issued by the FASB in these notes to the financial statements are to the FASB Accounting Standards Codification (ASC). Principles of consolidation The consolidated financial statements include the accounts of Candel Therapeutics, Inc. and its wholly owned subsidiary Candel Therapeutics Securities Corporation. All intercompany transactions and balances have been eliminated. Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company and the Company's chief operating decision maker, the Company's chief executive officer, views the Company's operations and manages its business as a single operating segment. The Company only operates in the United States. Emerging growth company The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (Jobs Act). Under the Jobs Act emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the Jobs Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the Jobs Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. Use of estimates The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company’s management evaluates its estimates, which include but are not limited to management’s judgments of accrued expenses, valuation of share-based awards, valuations of warrants, fair value of debt and income taxes. Actual results could differ from those estimates. Prior to the IPO, the Company utilized significant estimates and assumptions in determining the fair value of its common stock. The Company has utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation (the Practice Aid), to estimate the fair value of its common stock and warrants. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to the Company’s common stock at the time of, and the likelihood of, achieving a liquidity event, such as an initial public offering or sale. Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date. Comprehensive income (loss) Components of comprehensive income or loss, including net income or loss, are reported in the consolidated financial statements in the period in which they are recognized. Other comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances. Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss). Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events. For the period presented, the Company had no elements of other comprehensive loss other than its net loss and unrealized gain on marketable securities. Cash and cash equivalents The Company considers all highly liquid investments purchased with original final maturities of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents comprise marketable securities with maturities of less than 90 days when purchased. Cash equivalents are reported at fair value. F- 8 Restricted cash The Company has $ 424 and $ 266 of restricted cash as of December 31, 2021 and 2020, respectively, which represents cash held in a restricted bank account u nder the terms of the Company’s Needham, Massachusetts facility lease and as security for the Company credit card. Fair value measurements Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable: ▪ Level 1—Quoted prices in active markets for identical assets or liabilities. ▪ Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. ▪ Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques. The carrying values of cash and cash equivalents, accounts payable, accrued expenses and Paycheck protection plan loan approximate their fair values due to the short-term nature of these assets and liabilities. The Company’s warrant liability is carried at fair value and is classified as Level 3 measurements (see Note 4). The carrying value of the Company's long-term debt assumed from the Periphagen transaction is classified as Level 3 (See Note 3 and 4). Property and equipment Property and equipment consist of networking and computer equipment, furniture and fixtures and leasehold improvements. Property and equipment are recorded at cost, and depreciated using the straight-line method over the es timated useful lives of the respective assets: ASSET ESTIMATED USEFUL LIFE Networking and computer equipment 5 years Laboratory equipment 5 years Manufacturing equipment 5 years Furniture and fixtures 5 years Leasehold improvements Shorter of the useful life or remaining lease term Leases The Company accounts for leases in accordance with ASC 840. Rent expense for leases is recognized on a straight-line basis beginning on the date premises were delivered. Minimum lease payments comprise of only base rent. Concentrations of credit risk Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and marketable securities. Periodically, the Company maintains deposits and investments in accredited financial institutions in-excess of the federally insured limits. The Company deposits its cash in financial institutions with a high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal risk associated with commercial banking relationships. Impairment of long-lived assets Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment F- 9 loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows . Long-lived assets consist of fixed assets. In the fourth quarter of 2021, the Company recorded an impairment charge of approximately $ 553 related to manufacturing equipment that the Company has determined that it does not plan to use for its intended use and recorded a reserve to reduce the carrying value to its estimated realizable value. The Company has not recorded any other impairment losses on such long-lived assets. Revenue recognition The Company applies Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, (ASC 606). This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and then assesses whether or not each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Research and development costs and accruals Research and development expenses include salaries and benefits, materials and supplies, preclinical and clinical trial expenses, stock-based compensation expense, depreciation of equipment, contract services and other outside expenses. The Company has entered into various research and development-related contracts with clinical and research institutions, contract research organizations, and other companies. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. Costs of certain development activities, such as manufacturing, pre-clinical and clinical trial expenses, are recognized based on an evaluation of the progress to completion of specific tasks. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Costs incurred in obtaining technology licenses and intellectual property are charged to research and development expenses as acquired in-process research and development if the technology licensed or intellectual property acquired has not reached technological feasibility and has no alternative future use. Patent costs All patent-related costs incurred in connection with preparing, filing, maintaining and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified in general and administrative expenses. Stock-based compensation The Company accounts for its stock-based compensation in accordance with ASC Topic 718, Compensation—Stock Compensation (ASC 718). ASC 718 requires all share-based payments to employees and directors to be recognized as expense in the consolidated statements of operations and comprehensive loss based on their grant date fair values. In addition, in accordance with FASB Accounting Standards Update (ASU) 2016-09 which identifies areas for simplification of several areas of share-based payment transactions, the Company treats non-employee grants the same as employee grants. The Company estimates the fair value of options granted using the Black-Scholes option pricing model for stock option grants to both employees and non-employees. The Company believes the fair value of the stock options granted to non-employees is more reliably determinable than the fair value of the services provided. The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (a) the expected stock price volatility, (b) the expected term of the award, (c) the risk-free interest rate and (d) expected dividends. Due to a lack of company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The Company uses the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a F- 10 reasonable basis upon which to estimate the expected term. The expected term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population. For options granted to non-employees, the Company utilizes the contractual term of the share-based payment as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. There are significant judgments and estimates inherent in the determination of the fair value of the Company’s common stock prior to the IPO. These estimates and assumptions included a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to its common stock at the time of, and the likelihood of, achieving a liquidity event, such as an initial public offering or sale. The Company expenses the fair value of its share-based compensation awards to employees and non-employees on a straight-line basis over the requisite service period, which is generally the vesting period. Government grants The Company has applied for grants for the reimbursement of expenditures with the National Institutes of Health for certain qualified operating expenditures. The Company recognizes government grants when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received. Government grants for research and development efforts are recorded as grant income and classified in other income in the statements of operations and comprehensive loss. The Company recognized government grants of $ 1,076 and $ 624 for the years ended December 31, 2021 and 2020 , respectively, as a component of other income/(expense), net in the consolidated statements of operations and comprehensive loss. Income taxes The Company accounts for income taxes using the asset and liability method in accordance with ASC Topic 740, Income Taxes (ASC 740) which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. At December 31, 2021 and 2020, the Company has concluded that a full valuation allowance is necessary for its deferred tax assets (see Note 11) . The Company accounts for uncertainty in income taxes, by applying the two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax is then assessed as the amount of benefit to be recognized in the consolidated financial statements. The amount of benefits, that may be used, are the largest amounts that have a greater than 50 % likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties. Net loss per share Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock. Diluted net loss per share is the same as basic net loss per share for the years ended December 31, 2021 and 2020 since all potential shares of common stock instruments are anti-dilutive as a result of the loss for such periods. The Company’s convertible preferred stock contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reported a net loss, such losses will not be allocated to such participating securities. In periods where the Company reported a net loss attributable to common stockholders, diluted net loss per share is the same as basic net loss per share, since dilutive shares of common stock are not assumed to have been issued if their F- 11 effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the years ended December 31, 2021 and 2020 . Recently adopted accounting standards In December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020 for public companies. The standard was adopted by the Company on January 1, 2021 . The Company’s adoption of ASU 2019-12 as of January 1, 2021 did no t have an impact on the Company’s financial statements and related disclosures. Recently issued accounting standards In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2021. The Company has substantially completed its assessment of the impact ASU 2016-02 will have on its financial position, results of operations, and related footnotes. The Company expects it will elect to utilize the available package of practical expedients permitted under the transition guidance within the new standard, which does not require the reassessment of the following: i) whether existing or expired arrangements are or contain a lease, ii) the lease classification of existing or expired leases, and iii) whether previous initial direct costs would qualify for capitalization under the new lease standard. Additionally, the Company expects it will make an accounting policy election to keep leases with an initial term of 12 months or less off of its balance sheet. Based on the Company’s initial assessment, this standard will only require capitalization of the lease for its corporate headquarters at 117 Kendrick Street, Needham, Massachusetts. Upon adoption of the standard, the Company expects to record a right of use asset and lease liability of approximately $ 1,300 an d $ 2,400 re spectively on its consolidated balance sheets. The company expects the impact to its consolidated statements of operations and comprehensive loss to be immaterial. In November 2021, the FASB issued ASU 2021-10 which created Topic 832, Government Assistance, which requires business entities to disclose information about certain government assistance they receive. The ASU requires qualitative and quantitative disclosures around the nature of transactions and related accounting policy used, the line items on the balance sheet and income statement that are affected, and the significant terms and conditions of the transactions. The ASU is effective for fiscal years beginning after December 15, 2021. Based on the Company's initial assessment, the historical disclosure already meets the requirements of the new standard. Upon adoption, the Company will finalize its assessment and update any applicable disclosure as necessary. 3. Fair value of financial assets and liabilities The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values: FAIR VALUE MEASUREMENTS AS OF DECEMBER 31, 2021 USING: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Liabilities: Long-term debt $ — $ — $ 560 $ 560 Warrant liability — — 18,252 18,252 Total $ — $ — $ 18,812 $ 18,812 FAIR VALUE MEASUREMENTS AS OF DECEMBER 31, 2020 USING: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Liabilities: Long-term debt $ — $ — $ 483 $ 483 Warrant liability — — 6,831 6,831 Total $ — $ — $ 7,314 $ 7,314 Valuation of long-term debt The Company’s valuation technique used to measure the fair value of the long-term debt assumed as part of an asset acquisition (see Note 7) was a present value calculation based upon a credit rating estimated for the Company at the time the debt was assumed. The determined credit rating used by the company was CCC based upon the financial position and stage of the Company. The estimated rate was 15.83 % for an unsecured note due in November 2027 for a F- 12 CCC rated company. The fair value of the long-term debt based on this approach plus the accrued interest represents a Level 3 measurement within the fair value hierarchy. Valuation of warrant liability In connection with the Series B Convertible Preferred Stock issuance, the Company issued warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet, se e Note 9. The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the warrant liability uses various valuation methods, including the Monte Carlo method, the option-pricing method, probability-weighted expected return and the hybrid method, all of which incorporate assumptions and estimates, to value the common stock warrants. The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of common stock prior to the IPO, risk-free interest rate, expected dividend yield, expected volatility of the price of the underlying preferred stock, and the remaining contractual term of the warrants. The most significant assumption in the model impacting the fair value of the common stock warrants is the fair value of the Company’s common stock as of each remeasurement date. Prior to the IPO, the Company determined the fair value per share of the underlying common stock by taking into consideration the most recent sales of preferred stock, results obtained from third-party valuations and additional factors that are deemed relevant. The following table provides a roll forward of the aggregate fair values of the Company’s liabilities, for which fair value is determined by Level 3 inputs: SERIES B WARRANT LIABILITY PROMISSORY NOTE Balance at January 1, 2020 $ 2,226 $ 420 Change in fair value 4,605 63 Balance at December 31, 2020 $ 6,831 $ 483 Change in fair value 11,421 77 Balance at December 31, 2021 $ 18,252 $ 560 4. Fixed assets, net Fixed assets, net consisted of the following: DECEMBER 31, 2021 2020 Construction in progress $ — $ 1,216 Laboratory equipment 77 24 Manufacturing equipment 933 1,213 Furniture and fixtures 112 112 Networking and computer equipment 72 47 Leasehold improvements 2,994 309 Total fixed assets $ 4,188 $ 2,921 Less accumulated depreciation ( 352 ) ( 134 ) Fixed assets, net $ 3,836 $ 2,787 Depreciation and amortization expense related to the fixed assets was $ 232 and $ 91 for the years ended December 31, 2021 and 2020 , respectively. 5. Accrued expenses Accrued expenses consisted of the following: DECEMBER 31, 2021 2020 Payroll and employee related expenses $ 2,096 $ 1,198 Third-party research and development expenses 632 1,299 Professional fees and other 710 645 $ 3,438 $ 3,142 F- 13 6. Borrowings under Paycheck Protection Program On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security (the CARES Act), which, among other things, outlines the provisions of the PPP. Section 1106 of the CARES Act contains provisions for the forgiveness of all or a portion of a PPP loan, subject to the satisfaction of certain requirements. The amount eligible for forgiveness is, subject to certain limitations, the sum of the Company’s payroll costs, rent and utilities paid by the Company during the 24-week period beginning on the funding date of the PPP loan. On April 28, 2020, the Company, as obligor, entered into a promissory note evidencing an unsecured loan in the approximate amount of $ 460 under the PPP pursuant to the CARES Act. The note matures two years after the date of the loan disbursement and bears interest at a fixed annual rate of 1.00 %, with the first six months of principal and interest deferred. Under the terms of the CARES Act, as amended by the Flexibility Act, and the PPP, the Company can apply for and be granted forgiveness for all or a portion of the loan issued under the PPP and the loan is expected to be forgiven to the extent the proceeds are used in accordance with the PPP to cover payroll, mortgage interest, rent, and utility costs incurred by the Company over the 24-week period following the loan disbursement date. In April 2021, the loan of $ 460 was forgiven and has been recorded as a component of grant income in the consolidated statements of operations and comprehensive loss. 7. Long-Term Debt On December 9, 2019, the Company entered into a series of asset purchase agreements with Periphagen, Inc., a biopharmaceutical company focused on the development of gene therapy vectors. Under the terms of the asset purchase agreements, the Company assumed a $ 1,000 promissory note bearing a contractual interest rate of 2 % compounded annually, with the outstanding balance and accrued interest due upon maturity in November 2027 , with no interim installments due. The estimated market rate for the Company for an unsecured loan with a maturity in November 2027 was determined to be 15.83 %. Although the Company does not have a public credit rating, management estimates a CCC credit rating based on the Company’s financial position and stage of development. Using the commensurate rate for a CCC rated company and based on the amount due at maturity, the present value of the future cash outflow was determined to be $ 417 at the transaction date. As of December 31, 2021, the present value of future cash flows outflows is $ 560 . 8. Capital stock Convertible preferred stock As of December 31, 2020, the Company had authorized 17,187,676 shares of Preferred Stock (the Preferred Stock) and had designated 11,155,506 shares as Series B Convertible Preferred Stock (Series B Preferred) and 6,032,170 shares as Series C Convertible Preferred Stock (Series C Preferred). Since the Preferred Stock was redeemable upon a liquidation event, which was not considered to be within the Company’s control, it has been classified in temporary equity on the accompanying consolidated balance sheets at December 31, 2020. The carrying value of the Preferred Stock is the proceeds received less issuance costs. Upon closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 7,066,398 shares of common stock. Issuances of Preferred Stock On November 13, 2018, the Company entered into a Series B Preferred Stock Agreement whereby the Company was authorized to issue 11,155,506 shares of Series B Preferred, $ 0.01 par value, at a purchase price of $ 2.7696 per share. The Company issued 9,026,618 shares of Series B Preferred for gross proceeds of $ 25,000 . As further consideration, the purchaser of Series B Preferred received two warrants to purchase, in the aggregate, up to 7,344,982 shares of the common stock of the Company for $ 6.81 per share. See Note 9 for description of the warrants issued in connection with the issuance of the Series B Preferred. In addition, in November 2018, the Company issued 1,751,658 shares of Series B Preferred as payment of convertible notes and 377,130 shares of Series B Preferred as partial repayment of the outstanding related party notes payable. On March 13, 2019, the Company entered into the Series C Preferred Stock Agreement whereby the Company issued 6,032,170 shares of Series C Preferred, $ 0.01 par value, at a purchase price of $ 3.73 per share for total gross proceeds of $ 22,500 . The Preferred Stock had the following rights, preferences, privileges and restrictions: Voting The holders of Preferred Stock were entitled to vote together with all other holders of the Company’s voting stock on an “as converted” basis on all matters submitted to a vote of the holders. The Series B Preferred and Series C Preferred stockholders voted as separate classes on certain issues that solely affect their rights and privileges. F- 14 Conversion Each share of Preferred Stock was convertible into one share of common stock, subject to change per certain anti-dilution provisions in the Company’s charter and the reverse stock split discussed below. All shares of Preferred Stock were subject to a mandatory conversion into common stock upon the closing of the sale of shares of common stock to the public of at least $ 25,000 in a firm commitment underwritten public offering pursuant an effective registration statement under the Securities Act of 1933 or upon a vote by or written consent of the requisite number stockholders. Liquidation preference Upon a voluntary or involuntary liquidation, dissolution or winding up of the Company, proceeds would have been distributed in the following order: First, to the holders of the Series C Preferred in an amount for each such share of Series C Preferred equal to the greater of (i) two and one-half times the Series C Preferred original issuance price, plus any dividends declared but unpaid thereon or (ii) such amount per share as would have been payable had all shares of Series C Preferred been converted into common stock immediately prior to such liquidation event. If the Company has insufficient assets to permit payment of such amounts in full, the assets of the Company will be distributed to the holders of Series C Preferred pro rata in proportion to the amounts to which each such holder would otherwise be entitled. Second, to the holders of the Series B Preferred in an amount for each such share of Series B Preferred equal to the greater of (i) the Series B Preferred original issuance price, plus any dividends declared but unpaid thereon or (ii) such amount per share as would have been payable had all shares of Series B Preferred been converted into common stock immediately prior to such liquidation event. If the Company has insufficient assets to permit payment of such amounts in full, the assets of the Company will be distributed to the holders of Series B Preferred pro rata in proportion to the amounts to which each such holder would otherwise be entitled. Third, upon the distribution of liquidation preference amounts in full to the holders of Preferred Stock, the remaining assets of the Company available for distribution to stockholders shall be distributed among the common stock pro rata based on the number of shares of common stock held by such holders. Redemption The Preferred Stock was not subject to mandatory redemption except in the case of a merger or sale of the Company that has been approved by greater than 50% of the Series C Preferred and the Series B Preferred. Preferred Stock The Company has authorized 10,000,000 shares of $ 0.01 par value preferred stock at December 31, 2021. Common stock The Company has authorized 150,000,000 shares of $ 0.01 par value common stock at December 31, 2021 and had authorized 75,000,000 shares of $ 0.01 par value common stock at December 31, 2020 of which 28,689,842 and 11,635,094 are issued and outstanding as of December 31, 2021 and 2020, respectively. Common shares are voting and dividends may be paid when, as and if declared by the board of directors, subject to the limitations and preferences of the Preferred Stock. Common stock reserved The Company has reserved the following shares of common stock for future issuance as of: DECEMBER 31, 2021 2020 Series B Preferred conversion — 4,538,592 Series C Preferred conversion — 2,454,196 Stock options outstanding 4,783,333 4,013,311 Shares available for future grant under stock option plan 1,878,997 87,042 Warrants 7,507,708 7,632,518 14,170,038 18,725,659 Reverse stock split On July 14, 2021, the Company’s board of directors and stockholders approved a one-for-2.4579 reverse stock split of the Company’s issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for the outstanding shares of convertible preferred stock which became effective on July 15, 2021. Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split. F- 15 Initial public offering The Company completed the IPO, including the partial exercise of the underwriters’ option to purchase additional shares, at which time the Company issued 9,887,994 shares of its common stock at a price to the public of $ 8.00 per share, resulting in net proceeds to the Company of $ 71,335 , after deducting underwriting discounts and commissions and offering expenses. Upon closing of the IPO, all outstanding shares of the Company’s Preferred Stock automatically converted into 7,066,398 shares of common stock. 9. Warrants The Company has the following warrants outstanding for the purchase of common stock as of December 31, 2021: WARRANT SHARES OF COMMON STOCK SUBJECT TO WARRANTS EXERCISE PRICE PER SHARE EXPIRATION DATES Series B Warrants 3,672,484 $ 6.81 November 2025 Series B Conditional Warrants 3,672,484 $ 6.81 November 2025 NC Ohio Trust 162,740 $ 1.46 March 2029 Series B warrants In connection with the November 13, 2018 issuance of Series B Preferred, the Company issued warrants to purchase 3,672,484 shares of common stock for $ 6.81 per share to the purchaser of the Series B preferred (the “Series B Warrants”) which are exercisable upon issuance. In addition, the Company issued to the same stockholder additional five-year warrants for the purchase of 3,672,484 shares of common for $ 6.81 per share which are only exercisable in the event that the Company completes a future financing that meets certain financial milestones or achieves certain share prices (the “Conditional Series B Warrants”). The Series B Warrants and the Conditional Series B Warrants contain provisions allowing cashless exercise. The Company recorded the Series B Warrants as a component of stockholder’s equity at the time of issuance at their estimated fair value of $ 2,124 and recorded the Conditional Series B Warrants as a liability on the consolidated balance sheet as the number of shares used to calculate the settlement is not a fixed number of shares. The Conditional Series B Warrants are remeasured to their fair value at each reporting date with changes in the fair value recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss. The Company will continue to recognize changes in the fair value of the conditional warrant liability until each Conditional Series B Warrant is exercised, expires or qualifies for equity classification. The Conditional Series B Warrant liability fair value was $ 18,252 and $ 6,831 as of December 31, 2021 and 2020, respectively. On June 24, 2021, the Company’s board of directors approved and on July 14, 2021 the stockholders approved, effective upon the closing of the IPO, an amendment to the terms of the Series B Warrant and the Conditional Series B Warrants to extend the expiration date from November 2023 to November 2025 . In addition, the terms of the Conditional Series B Warrants were amended such that in the event the future financing milestones or certain share prices are achieved, the warrants would only be exercisable in conjunction with the sale of the Company or in November 2025 through a cashless exercise. NC Ohio trust warrants On March 20, 2019, the Company established the NC Incorporated Ohio Trust, an irrevocable trust funded by the Company. The beneficiary in the trust agreement has provided past services to the Company for more than 15 years and is a non-employee. The warrant provides the beneficiary the right to purchase 162,740 shares of the Company’s common stock, $ 0.01 par value at an exercise price of $ 1.46 per share, subject to adjustments as specified in the warrant agreement. The arrangement is unknown to the beneficiary as the arrangement is a silent trust. The Company recognizes the warrants as compensation expense within the consolidated statement of operations and comprehensive loss when the warrants are granted or at the service inception date if the service inception date precedes the grant date. In the period in which the grant date occurs, cumulative compensation cost shall be adjusted to reflect the cumulative effect of measuring compensation cost based on the fair value at the grant date rather than the fair value previously used at the service inception date or subsequent reporting dates. As of December 31, 2021 and 2020 , a grant date was not established as there was not a mutual understanding of key terms. The Company remeasures the fair value of the award at each reporting date, as the service date preceded the grant date. The value of the warrants for 162,740 shares of common stock was $ 1,070 and $ 695 as of December 31, 2021 and 2020 , respectively, and was recorded as stock compensation expense within research and development expense and a credit to stockholders’ equity in the consolidated financial statements. F- 16 10. Stock options, restricted stock and stock—based compensation The Company’s 2015 Stock Plan, as amended, (the "2015 Plan") provides for the Company to sell or issue common shares or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the board of directors and consultants of the Company. The 2015 Plan is administered by the board of directors and exercise prices, vesting and other restrictions are determined at its discretion. All stock option grants are non-statutory stock options except option grants to employees intended to qualify as incentive stock options under the Internal Revenue Code of 1986, as amended. Incentive stock options may not be granted at less than the fair market value of the Company’s common stock on the date of grant, as determined in good faith by the board of directors at its sole discretion. Nonqualified stock options may be granted at an exercise price established by the board of directors at its sole discretion and the vesting periods may vary. Vesting periods are generally four years and are determined by the board of directors. Stock options become exercisable as they vest. Options granted under the 2015 Plan expire no more than ten years from the date of grant. As of December 31, 2021 , there will be no additional grants under the 2015 Plan and the 2015 Plan continues to govern the terms and conditions of the outstanding awards under the 2015 Plan. On July 14, 2021, the Company’s 2021 Equity Incentive Plan, or the 2021 Plan, was approved by the Company’s stockholders, and became effective upon completion of the IPO and serves as the successor to the 2015 Plan. There are 2,054,000 shares of common stock reserved for issuance under the 2021 Plan and 1,878,997 shares remained available for grant as of December 31, 2021. Stock option activity is summarized as follows: NUMBER OF STOCK OPTIONS WEIGHTED- AVERAGE EXERCISE PRICE WEIGHTED- AVERAGE REMAINING CONTRACTUAL TERM (IN YEARS) AGGREGATE INTRINSIC VALUE Outstanding as of January 1, 2020 928,286 $ 1.43 3.51 $ 120 Granted 3,221,378 1.55 3.83 10,997 Exercised ( 21,359 ) 1.46 Cancelled or forfeited ( 114,994 ) 1.46 Outstanding as of December 31, 2020 4,013,311 $ 1.52 4.45 $ 13,818 Granted 808,711 6.34 9.34 1,194 Exercised ( 24,410 ) 1.46 Cancelled or forfeited ( 14,279 ) 1.55 - - Outstanding as of December 31, 2021 4,783,333 $ 2.34 8.51 $ 26,393 Exercisable as of December 31, 2021 2,052,111 $ 1.84 8.18 $ 12,272 Unvested as of December 31, 2021 2,731,222 $ 2.72 8.76 $ 14,121 The fair value of stock options granted was estimated on the grant date using the Black-Scholes option pricing model based on the following weighted-average assumptions: YEAR ENDED DECEMBER 31, 2021 2020 Expected option life (years) 5.00 - 10.00 5.00 - 10.00 Risk-free interest rate 0.89 % - 1.35 % 0.45 % - 0.92 % Expected volatility 83.80 % - 89.02 % 74.86 % - 89.07 % Expected dividend yield 0 % 0 % Exercise price $ 4.97 - $ 11.23 $ 1.55 -$ 1.55 Fair value of common stock $ 4.97 - $ 11.23 $ 1.55 - $ 4.97 The total intrinsic value of stock options vested during the years ended December 31, 2021 and 2020 was $ 6,648 and $ 12 , respectively. Stock-based compensation expense for the years ended December 31, 2021 and 2020 was classified in the consolidated statements of operations and comprehensive loss as follows: YEAR ENDED DECEMBER 31, 2021 2020 Research and development $ 1,226 $ 847 General and administrative 1,737 1,260 Total stock based compensation expense $ 2,963 $ 2,107 F- 17 As of December 31, 2021 and 2020, total unrecognized compensation cost related to the unvested stock-based awards was $ 6,298 and $ 4,778 , respectively. These amounts are expected to be recognized over a weighted average period of 2.26 and 3.05 years, respectively. 11. Income taxes Income tax expense for 2021 and 2020 consists of the following: YEAR ENDED DECEMBER 31, 2021 2020 Current expense (benefit): Federal $ — $ — State — — Total current expense (benefit): — — Deferred expense (benefit): Federal — — State — — Total deferred expense (benefit): — — Total income tax expense (benefit): $ — $ — A reconciliation of income tax expense at the federal statutory income tax rate to the income tax expense at the Company’s effective income tax rate is as follows: YEAR ENDED DECEMBER 31, 2021 2020 Income at US statutory rate 21.00 % 21.00 % Permanent adjustments ( 0.59 )% ( 1.07 )% Mark to market ( 6.64 )% ( 5.47 )% State taxes, net of federal benefit 4.01 % 6.65 % Valuation allowance ( 19.86 )% ( 23.95 )% Tax credits 2.08 % 2.84 % — — Net deferred tax assets as of December 31, 2021 and 2020 consist of the following: YEAR ENDED DECEMBER 31, 2021 2020 Net operating losses $ 13,892 $ 7,934 Intangibles 654 750 Accrued expenses & other 243 346 Deferred revenue 34 68 Stock Compensation 820 431 Credits 2,850 1,789 Total deferred tax assets 18,493 11,318 Valuation allowance ( 18,493 ) ( 11,318 ) Net deferred tax assets (liability) $ — $ — As of December 31, 2021 , the Company has gross federal and state net operating loss carryforwards of approximately $ 8,815 and $ 48,363 which begin to expire in 2027 and 2032 , respectively. Additionally, the Company has $ 42,780 of the federal net operating loss carryforwards that can be carried forward indefinitely. As of December 31, 2021, the Company has gross federal and state tax credit carryforwards of approximate ly $ 1,950 and $ 1,139 , respectively, which begin to expire in 2036 and 2028 , respectively. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and certain tax credits. Management has considered the Company’s history of cumulative net losses incurred since inception, as well as its lack of product revenue since inception, and has determined that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. As a result, a full valuation allowance has been established at December 31, 2021 and 2020. F- 18 Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), contains rules that limit the ability of a company that undergoes in ownership change to utilize its net operating losses (“NOLs”) and tax credits existing as of the date of such ownership change. Under the rules, such an ownership change is generally any change in ownership of more than 50% of a company’s stock within a rolling three-year period. The rules generally operate by focusing on changes in ownership of all stock considered by the rules as owning, directly or indirectly, 5% or more of the stock of a company and any change in ownership arising from new issuances of stock by the company. The Company has not yet determined if such a limitation would be placed against its available net operating losses. The Company will make such a determination prior to the utilization of any future net operating losses. A summary of changes in the valuation allowance for deferred tax assets during the year ended December 31, 2021 and 2020 were a s follows: YEAR ENDED DECEMBER 31, 2021 2020 Valuation allowance $ 11,318 $ 7,089 Increases recorded to income tax provision 7,175 4,248 Decreases recorded to income tax provision — ( 19 ) Valuation allowance $ 18,493 $ 11,318 The Company files income tax returns in the United States and various state and local jurisdictions. The federal and state tax returns are generally subject to examination for the years ended December 31, 2014 through December 31, 2021 . There are currently no pending tax examinations. To the extent the Company has tax attribute carryforwards, the tax year in which the attribute was generated may still be adjusted upon examination. 12. Exclusive licensing agreement with a related party In March 2014, the Company entered into an exclusive licensing agreement with Ventagen, LLC (“Ventagen”) which provides Ventagen the right to develop products for commercial sale and distribution within Mexico, Belize, Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua, Panama, Colombia, and Bolivia. Ventagen paid the Company $ 1,000 upon the signing of the agreement and agreed to a fixed future payment to the Company of $ 2,500 . The future payment will be made upon the achievement of $ 5,000 of sales of an approved product by Ventagen and is subject to reduction if Ventagen’s costs to develop an approved product exceeds $ 4,000 . In addition to the upfront payment and the future payment, Ventagen agreed to purchase from the Company all manufactured product that is required for clinical or commercial purposes at a price of cost plus 25 % of the wholesale price of the approved product subject to a minimum or maximum price. In the event the Company is unable or unwilling to manufacture supply under the terms of the agreement, Ventagen has the right to manufacture its own supply and will be required to pay a fixed fee per dose sold. The Company also agreed to provide certain services to Ventagen related to Ventagen’s development plan. Stockholders of the Company own 49.5 % of the voting stock of Ventagen, including 47 % by the Company’s founders who are currently senior executives and significant stockholders of the Company, and trusts for the benefit of their children. The Company is recognizing the $ 1,000 upfront license fee as research and development service revenue, related party, as the Company’s license agreement with Ventagen is within the scope of ASC 606. The license agreement met the contract existence criteria and contained distinct, identifiable performance obligations for which the stand-alone selling prices were readily determinable and allocable. The terms of the agreement contained multiple, distinct performance obligations, including transfer of a license for the territory, research and development oversight for the trials run by Ventagen, and clinical data sharing. The Company estimated the transaction prices, including any variable consideration, at contract inception and determined the fair value of such obligations. The performance obligation associated with the license transfer was satisfied at a point in time, or at contract inception; however, the Company assigned no value to the license transfer. The remaining $ 1,000 transaction price was allocated between the research and development oversight and clinical data sharing. The Company is recognizing revenue for these obligations over an 8-year period, beginning in 2015, by measuring the progress towards satisfaction of the performance obligations. As clinical oversight and clinical data sharing occurs over the 8 —year clinical trial period, the revenue is recognized over the same period in which the cost for these services is incurred. The Company defers recognition of the portion of the $ 1,000 non-refundable upfront license fee for the portion of the performance obligations that are not satisfied. The Company recognized revenue of $ 125 in the years ended December 31, 2021 and 2020 . The license agreement includes a $ 2,500 potential future milestone payment due to the Company upon successful completion of certain separate, distinct events. At this time, the Company cannot estimate when the milestone-related performance obligations are expected to be achieved and will recognize revenue once F- 19 satisfaction is probable. There was no additional variable consideration, significant financing components, noncash consideration, or consideration payable to the customer in this agreement. 13. Technology license agreement On January 20, 2018 the Company entered into an exclusive option agreement (Option Agreement) with MGB. Pursuant to the Option Agreement, the Company has obtained the exclusive right from MGB to negotiate an exclusive license to make, develop and commercialize rQNestin, a genetically modified oncolytic herpes simplex virus for the treatment of certain types of cancers. Pursuant to the Option Agreement, the Company will support a clinical trial to be conducted at MGB pursuant to the terms of a clinical trial agreement to be negotiated and the Company has committed to remitting $ 750 in support of such clinical trial over the course of approximately three years . Upon execution of the Option Agreement, the Company remitted a non-refundable fee of $ 40 to MGB to be applied toward the Company’s on-going obligations to reimburse patent expenses. In the years ended December 31, 2021 and 2020 , respectively, the Company expensed $ 28 and $ 269 , respectively, for startup and patient fees for clinical trials performed by MGB. On September 15, 2020, the Company exercised the Option Agreement with MGB and entered into an exclusive worldwide patent license agreement with MGB (“the MGB License”). In connection with the MGB License, the Company paid a fee of $ 100 and agreed to reimburse patent costs incurred by MGB, including $ 141 paid at the time of entering into the MGB License. Prior to the first commercial sale, the Company is required to pay MGB an annual license fee of $ 50 beginning following the fourth anniversary of the effective date. The MGB License contains cumulative milestone payments equaling a maximum amount of $ 39,000 upon the achievement of various clinical, commercial and sales milestones of both primary and secondary products. Following the first commercial sale, the Company is required to pay royalties to MGB, which are paid at an increasing rate as net sales increase, ranging from low single digits to high single digits. In addition, after the first commercial sale, the Company is required to pay MGB a pre-determined fixed annual minimum royalty, which amount may be credited against earned royalties starting in the fourth year following the first commercial sale. The Company is also agreed to pay a single digit royalty rate on net sales of any derived products. 14. Commitments and contingencies Related party leases In January 2008, the Company entered into an operating lease agreement with a term through December 31, 2022 with Ellka Holdings, LLC (“Ellka”) for the space in which the Company operated in Auburndale, MA. This lease was terminated and a termination payment of $ 115 was made to Ellka and included in operating expenses for the year ended December 31, 2020. In May 2016, the Company entered into a second lease agreement with Ellka for living space for employees, also in Auburndale, MA which was also was terminated at the end of 2020. Ellka is owned and operated by the company’s founders, who were senior executives and are significant stockholders of the Company, and members of their immediate family. Facility lease On February 4, 2019, the Company signed a lease agreement for its new corporate headquarters at 117 Kendrick Street in Needham, Massachusetts. The facility consists of a 15,197 square foot property which houses the corporate, clinical and manufacturing operations for the Company. The lease term ends on August 31, 2026 . Prior to occupying the new space, the Company had construction performed to modify the space to meet its needs. The cost of this construction was $ 765 and was paid for by the landlord provided allowance in the lease agreement. The $ 765 lease incentive was recorded as deferred rent and is being amortized over the life of the lease. Total rent expense under these leases was $ 459 and $ 619 for the years ended December 31, 2021 and 2020, respectively. The future minimum lease payments at December 31, 2021, are as follows: 2022 $ 567 2023 583 2024 598 2025 613 Thereafter 415 Total minimum lease payments $ 2,776 Guarantees The Company has identified the guarantees described below as disclosable, in accordance with ASC 460, Guarantees . As permitted under Delaware law, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. The maximum potential amount of future payments the Company could be required to make is unlimited; however, the Company has directors’ F- 20 and officers’ insurance coverage that should limit its exposure and enable it to recover a portion of any future amounts paid. The Company is a party to a number of agreements entered into in the ordinary course of business that contain typical provisions that obligate the Company to indemnify the other parties to such agreements upon the occurrence of certain events. Such indemnification obligations are usually in effect from the date of execution of the applicable agreement for a period equal to the applicable statute of limitations. The aggregate maximum potential future liability of the Company under such indemnification provisions is uncertain. The Company leases office space under a seven – year noncancelable operating lease expiring in 2026 . The Company has standard indemnification arrangements under this lease that require it to indemnify the landlord against all costs, expenses, fines, suits, claims, demands, liabilities, and actions directly resulting from any breach, violation, or nonperformance of any covenant or condition of the lease. As of December 31, 2021 , the Company had no t experienced any losses related to these indemnification obligations, and no material claims with respect thereto were outstanding. The Company does not expect significant claims related to these indemnification obligations and, consequently, concluded that the fair value of these obligations is negligible, and no related reserves have been established. Legal proceedings The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities. 15. Net loss per share Net loss per share Basic and diluted net loss per share attributable to common stockholders was calculated as follows: YEAR ENDED DECEMBER 31, 2021 2020 Numerator: Net loss attributable to common stockholders $ ( 36,124 ) $ ( 17,680 ) Denominator: Weighted-average shares of common stock outstanding-basic and diluted 18,873,048 11,615,208 Net loss per share attributed to common stockholders-basic and diluted $ ( 1.91 ) $ ( 1.52 ) The Company’s potentially dilutive securities have been excluded from the computation of dilutive net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential shares of common stock from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect. YEAR ENDED DECEMBER 31, 2021 2020 Series B Preferred (as converted to common stock) — 4,538,592 Series C Preferred (as converted to common stock) — 2,454,196 Outstanding warrants for common stock 7,507,708 7,632,518 Outstanding stock options (as converted to common stock) 4,783,333 4,013,311 12,291,041 18,638,617 16. Sub sequent events On February 24, 2022 , the Company entered into a loan and security agreement (the “Loan Agreement”) with a bank pursuant to which the bank has agreed to provide term loans to the Company in an aggregate principal amount of up to $ 25.0 million. The Company borrowed $ 20.0 million upon entering into the Loan Agreement. The Company can borrow up to an additional aggregate principal amount not to exceed $ 5.0 million, at any time on or prior to December 31, 2022, following the Company having provided evidence to the bank of (a) achievement of positive Phase 2 clinical activity data from the Company’s CAN-2409 NSCLC clinical trial, (b) dosing of its first patient in its Phase 3 CAN-2409 high F- 21 grade glioma clinical trial and (c) receipt on or prior to December 31, 2022, of net cash proceeds in an amount equal to at least $ 75.0 million from the issuance and sale of equity securities to investors acceptable to SVB. The term loans are secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property, which is subject to a negative pledge under the Loan Agreement. The term loans bear interest at a floating rate per annum equal to the greater of (A) 5.75 % and (B) the prime rate (as published in the money rates section of The Wall Street Journal) plus 2.50 %. The Company is required to make monthly interest payments, and commencing on February 1, 2024 , 24 consecutive installments of principal plus monthly payments of accrued interest. Upon repayment in full of the term loans, the Company will be required to pay a final payment fee equal to 4.50 % of the original principal amount of any funded term loan being repaid. The Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB Term Loans, subject to a prepayment premium of 1 % to 3 % based upon the timing of the prepayment. F- 22