What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-22 compared with 2022-02-24 · 100 added, 83 removed, 148 unchanged (55% of the section changed)

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Market Information for Common Stock

Our common stock is listed on the Nasdaq Global Select Market under the symbol “CYCN.”

Our common stock is listed on the Nasdaq Capital Market under the symbol “CYCN.”

Holders of Record

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Unregistered Sales of Equity Securities

The following sets forth information as to all securities we sold in 2021 which were not registered under the Securities Act:

On June 3, 2021, the Company entered into a Common Stock Purchase Agreement (the “June 2021 Equity Private Placement”) for a private placement of 5,735,988 shares of the Company’s common stock for total gross proceeds of approximately $18 million.

The closing of the June 2021 Equity Private Placement occurred on June 7, 2021.

The June 2021 Equity Private Placement was exempt from registration under the Securities Act pursuant to Regulation D thereunder.

The Company did not use a placement agent or broker in connection with the June 2021 Equity Private Placement and incurred no commissions and no material direct transaction fees.

In connection with the June 2021 Equity Private Placement transaction, on June 16, 2021, the Company filed a registration statement on Form S-3, with the U.S.

Securities and Exchange Commission, registering for resale the shares of common stock and shares of common stock sold in the June 2021 Equity Private Placement, which registration statement was declared effective by the SEC on June 23, 2021.

Purchase of Equity Securities by the Issuer and Affiliated Parties

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in Item 1A of this Annual Report on Form 10‑K, our actual results may differ materially from those anticipated in these forward‑looking statements.

We are a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing innovative medicines for people with serious diseases of the CNS, including cognitive and neurodegenerative disorders.

Our current lead asset, CY6463, is a pioneering, CNS-penetrant sGC stimulator in clinical development for ADv, CIAS, and MELAS.

sGC stimulators are small molecules that act synergistically with NO on sGC to boost production of cyclic guanosine monophosphate, or cGMP.

cGMP is a key second messenger that, when produced by sGC, regulates diverse and critical biological functions in the CNS including blood flow and vascular dynamics, inflammatory and fibrotic processes, bioenergetics, metabolism and neuronal function.

We are a clinical-stage biopharmaceutical company on a mission to develop treatments for serious diseases.

Zagociguat is a pioneering CNS-penetrant sGC stimulator that has shown rapid improvements across a range of endpoints reflecting multiple domains of disease activity, including mitochondrial disease-associated biomarkers.

sGC stimulators are small molecules that act synergistically with NO as positive allosteric modulators of sGC to boost production of cGMP.

cGMP is a key second messenger that, when produced by sGC, regulates diverse and critical biological functions such as mitochondrial function, neuronal function, inflammation and vascular dynamics.

We operate in one reportable business segment—human therapeutics.

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All research and development expenses are charged to operations as incurred.

The core of our portfolio is CY6463 , an orally administered CNS-penetrant sGC stimulator that is being developed as a symptomatic and potentially disease-modifying therapy for CNS diseases associated with cognitive impairment.

NO-sGC-cGMP is a fundamental CNS signaling network, but it has not yet been leveraged for its full therapeutic potential.

CY6463 enhances the brain’s natural ability to produce cGMP, an important second messenger in the CNS, by stimulating sGC, a key node in the NO-sGC-cGMP pathway.

This pathway is critical to basic CNS functions, and deficient NO-sGC-cGMP signaling is believed to play an important role in the pathogenesis of many CNS diseases.

Agents that stimulate sGC to produce cGMP may compensate for deficient NO signaling.

In January 2020, we announced positive Phase 1 study results that provided the foundation for continued development of CY6463.

The Phase 1 healthy participant study results indicate that CY6463 was well tolerated.

Pharmacokinetic (PK) data, obtained from both blood and cerebral spinal fluid (CSF), support once-daily dosing with or without food and demonstrated CY6463 penetration of the blood-brain-barrier with CSF concentrations expected to be pharmacologically active.

In October 2020, we announced positive topline results from our CY6463 Phase 1 translational pharmacology study in healthy elderly participants.

Treatment with CY6463 for 15 days in this 24-subject study confirmed and extended results seen in the earlier first-in-human Phase 1 study:

Zagociguat is an orally administered CNS-penetrant sGC stimulator.

NO-sGC-cGMP is a fundamental signaling network, including in the brain where it is critical to basic CNS functions.

Deficient NO-sGC-cGMP signaling is believed to play an important role in the pathogenesis of many neurological disorders.

As an sGC stimulator, zagociguat amplifies endogenous NO signaling by acting as a positive allosteric modulator to sensitize the sGC enzyme to NO, and increase the production of cGMP.

By compensating for deficient NO-sGC-cGMP signaling, zagociguat may have broad therapeutic potential as a treatment for people with serious diseases.

In January 2020, we announced positive results from our Phase 1 first-in-human study that provided the first clinical data supporting the development of zagociguat.

The results from this study indicate that zagociguat was well tolerated.

Pharmacokinetic data, obtained from both blood and cerebral spinal fluid, support once-daily dosing with or without food and demonstrated zagociguat penetration of the blood-brain-barrier with concentrations in the CSF expected to be pharmacologically active.

In October 2020, we announced positive topline results from our zagociguat Phase 1 translational pharmacology study in healthy elderly participants.

Treatment with zagociguat for 15 days in this 24-subject study confirmed and extended results seen in the earlier first-in-human Phase 1 study:

once-daily oral treatment demonstrated blood-brain-barrier penetration with expected CNS exposure and target engagement.

Results also showed significant improvements in neurophysiological and objective performance measures as well as in inflammatory biomarkers associated with aging and neurodegenerative diseases.

CY6463 was safe and generally

well tolerated in this study.

Significant effects on cerebral blood flow and markers of bioenergetics were not observed in this study of healthy elderly participants.

We believe that these results, together with nonclinical data, support continued development of CY6463 as a potential new medicine for serious CNS diseases.

We have initiated exploratory clinical trials with CY6463 ADv, CIAS, and MELAS.

The ADv study will be supported in part by a grant from the Alzheimer's Association’s Part the Cloud-Gates Partnership Grant Program, which provides Cyclerion with $2 million of funding over two years.

Our next-generation CNS asset, CY3018, is a differentiated CNS-penetrant sGC stimulator with greater CSF-to-plasma exposure relative to CY6463 based on nonclinical studies, CY3018 is intended to expand the potential of sGC stimulation for the treatment of disorders of the CNS.

Non-CNS assets.

We have other assets that are outside of our current strategic focus.

These non-core assets are not being internally developed at this time.

Results also showed significant improvements in neurophysiological and objective performance measures as well as decreases in inflammatory biomarkers associated with aging and neurodegenerative diseases.

Zagociguat was safe and generally well tolerated in the study.

These results, together with nonclinical data, support continued development of zagociguat as a potential new medicine for serious CNS diseases.

In June 2022, we announced positive topline clinical data for zagociguat in our signal-seeking clinical study for the potential treatment of MELAS.

In this open-label, single-arm study of the oral, once-daily sGC stimulator in eight adults aged 18 or older with MELAS, improvements were seen across a range of endpoints reflecting multiple domains of disease activity, including mitochondrial disease-associated biomarkers such as lactate and GDF-15, a broad panel of inflammatory biomarkers, cerebral blood flow, and functional connectivity between neural networks.

These positive effects after 29 days of dosing were supported by correlations among several endpoints with each other and with zagociguat plasma concentrations.

Zagociguat was well tolerated with no serious or severe adverse events and no events leading to discontinuation.

Pharmacokinetics were consistent with the Phase 1 studies in healthy volunteers.

The positive data from this study supports the potential of zagociguat to provide therapeutic benefit to people living with mitochondrial diseases, including MELAS.

In July 2022, we announced positive topline data from our signal-seeking clinical study of zagociguat for the potential treatment of CIAS.

Data from the 14-day, double blind, randomized, placebo-controlled, multiple-ascending-dose study in 48 adults aged 18-50 with stable schizophrenia on a stable, single, atypical antipsychotic regimen demonstrated that once-daily zagociguat was safe and well tolerated, with no reports of serious adverse events, severe adverse events, or treatment discontinuation due to adverse events.

We further announced that study data demonstrated a strong effect on cognitive performance after two weeks of 15mg once-daily dosing and that positive movement on inflammatory biomarkers was also observed.

These signals on exploratory endpoints are consistent with the pro-cognitive and anti-inflammatory effects of zagociguat observed in preclinical studies and prior clinical trials and support the further development of oral, once-daily zagociguat.

In October 2022, the WHO International Nonproprietary Names committee and the United States Adopted Name Council selected zagociguat as a nonproprietary name for CY6463.

In October 2022, we announced that we had recently capped enrollment in our signal-seeking clinical study of zagociguat for the potential treatment of ADv, to enable the Company to channel its resources to its most urgent priorities in MELAS.

Data from the ADv study are expected in the first half of 2023.

The ADv study is supported in part by a $2 million grant from the Alzheimer's Association’s Part the Cloud-Gates Partnership Grant Program (the "PTC Grant").

In March 2023, we announced that given the significant capital and capabilities necessary to ensure that the MELAS Phase 2b study is executed efficiently and with the highest quality, and the currently unfavorable capital market conditions, we are actively evaluating the best combination of capital, capabilities, and transactions available to us to advance the development of zagociguat and our other clinical development candidates and to maximize shareholder value.

CY3018 is a CNS-targeted sGC stimulator in preclinical development that preferentially localizes to the brain and has a pharmacology profile that suggests its potential for the treatment of neuropsychiatric diseases and disorders.

Praliciguat is an orally administered, once-daily systemic sGC stimulator.

On June 3, 2021, we entered into a License Agreement with Akebia relating to the exclusive worldwide license to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical products containing the pharmaceutical compound praliciguat and other related products and forms, thereof enumerated in such agreement.

On June 3, 2021, we entered into a license agreement with Akebia relating to the exclusive worldwide license to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical products containing praliciguat and other related products and forms, thereof enumerated in such agreement.

Cyclerion is eligible to receive up to $225 million in pre-commercial milestones and total potential future development, regulatory, and commercialization milestone payments could result in up to $585 million.

Cyclerion is also eligible to receive tiered, sales-based royalties ranging from single-digit to high-teen percentages.

Olinciguat is an orally administered, once-daily, vascular sGC stimulator that was evaluated in a Phase 2 study of participants with sickle cell disease.

We released topline results from this study in October 2020.

Olinciguat is available for licensing to a third party partner.

The following table summarizes our research and development expenses, employee and facility related costs allocated to research and development expense, and discovery and pre-clinical phase programs, for the years ended December 31, 2021 and 2020.

The product pipeline expenses relate primarily to external costs associated with nonclinical studies and clinical trial costs, which are presented by development candidate.

We continue to work to out-license olinciguat to an entity with strong cardiovascular and/or cardiopulmonary capabilities.

ended December 31, 2022 and 2021.

The product pipeline expenses relate primarily to external costs associated with nonclinical studies and clinical trial costs, which are presented by development candidates.

(in thousands)

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Securing regulatory approvals for new drugs is a lengthy and costly process.

Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product development efforts and our business overall.

Any failure by us to obtain, or any delay in obtaining, regulatory approvals would materially adversely affect our product candidate development efforts and our business overall.

Given the inherent uncertainties of pharmaceutical product development, we cannot estimate with any degree of certainty how our programs will evolve, and therefore the amount of time or money that would be required to obtain regulatory approval to market them.

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The successful development of our product candidates is highly uncertain and subject to a number of risks including, but not limited to:

The full impact of COVID-19 pandemic continues to develop and could continue to adversely affect our programs and operations, including our clinical trials, corporate development, and other activities.

The continuing impact of COVID-19, which could continue to adversely affect our programs and operations, including our development activities, corporate development, and other activities.

Cyclerion works closely with its clinical trial sites and investigators to deliver trials in a manner consistent with the safety of study participants and healthcare professionals.

The duration of clinical trials may vary substantially according to the type and complexity of the product candidate and may take longer than expected.

There is substantial doubt regarding our ability to continue as a going concern.

We will need to raise additional funding, which may not be available on acceptable terms, or if at all.

Failure to obtain necessary capital may force us to delay, limit or terminate our development efforts or other operations.

The United States FDA and comparable agencies outside the United States impose substantial and varying requirements on the introduction of therapeutic pharmaceutical products, which typically require lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures.

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As a result of the factors listed above, including the factors discussed under the “Risk Factors”

section in Item 1A of this Annual Report on Form 10-K, we are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of our product candidates or when, or to what extent, we will generate revenues from the commercialization and sale of our product candidates.

section in Item 1A of this Annual Report on Form 10-K, we are unable to determine the duration and costs to complete current or future nonclinical and clinical stages of our product candidates, including as licensed to third parties, or when, or to what extent, we may generate revenues from the commercialization and sale of our product candidates.

Development timelines, probability of success and development costs vary widely.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with U.S.

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements prepared in accordance with GAAP.

The preparation of these financial statements requires us to make certain estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the amounts of expenses during the reported periods.

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The following discussion summarizes the key factors we believe are necessary for an understanding of our consolidated financial statements.

Revenues and Expenses

(dollars in thousands)

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Revenue from grants

Revenue from related party

Total revenues

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General and administrative

Loss/ (Gain) on lease modification and termination

Loss on lease termination

Total cost and expenses

Loss from operations

Sublease termination income, net

Gain on Extinguishment of Debt

Interest and other (expenses) income, net

As of January 2021, revenues earned from the services performed under the Development Agreement for Ironwood, are not considered to be related party revenues (see Note 3).

The increase in revenue of approximately $1.6 million for the year ended December 31, 2021, compared to the year ended December 31, 2020, can be attributed to $3.0 million in revenue from the License Agreement (see Note 14), approximately $0.6 million in revenue associated with the PTC Grant (see Note 15) and approximately $0.3 million in revenue from the Akebia Supply Agreement (see Note 14), offset by a decrease in revenue generated from services performed under the Development Agreement, which ended on March 31, 2021.

Interest and other income (expenses), net

The decrease in revenue of approximately $2.3 million for the year ended December 31, 2022, compared to the year ended December 31, 2021, can be attributed to receiving $3.0 million in revenue from the Akebia License Agreement in 2021 (see Note 13), and offset by approximately $0.7 million in revenue associated with the PTC Grant (see Note 14).

Research and development expenses.

The decrease in research and development expenses of approximately $18.8 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily driven by a decrease of approximately $16.1 million in salaries, and other employee-related expenses, including $4.5 million in stock-based compensation, primarily due to lower average headcount, a decrease of approximately $9.2 million in facilities and other operating costs allocated to research and development primarily due to the reduction in the Company's total leased premises, partially offset of approximately $2.3 million in external research costs, and approximately $4.2 million related to a non-cash write-off of leasehold improvements related to the Termination Agreement in 2021.

The increase in external research costs was primarily due to an increase of approximately $6.8 million in clinical trial costs for CY6463 in MELAS, CIAS and ADv, an increase of approximately $3.3 million associated with CY3018, offset by approximately $6.6 million related to olinciguat and approximately $0.7 million related to praliciguat studies, due to the completion of both studies, and a decrease of approximately $0.5 million in discovery costs.

The decrease in research and development expenses of approximately $6.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily driven by a decrease of approximately $1.0 million in non-cash stock-based compensation, a decrease of approximately $2.6 million in the Company's reduced total leased premises, approximately $4.2 million related to a non-cash write-off of leasehold improvements related to the Termination Agreement in 2021, and approximately $0.7 million in salaries and other employee-related costs, partially offset by an increase of approximately $0.4 million related to workforce reduction costs, and approximately $2.0 million in external research costs.

The increase in external research costs was primarily due to an increase of approximately $1.2 million in clinical trial costs for zagociguat in MELAS, CIAS and ADv, approximately $0.7 million associated with IND-enabling activities for CY3018, and approximately $0.1 million related to discovery costs.

General and administrative expenses.

The decrease in general and administrative expenses of approximately $8.2 million for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily driven by a decrease of approximately $5.4 million in salaries and other employee-related costs, including $2.5 million in stock-based compensation, primarily due to lower average headcount, a decrease of approximately $2.0 million in facilities and operating costs, primarily due to the reduction in Company's total leased

premises, a decrease of approximately $2.3 million in outside professional and corporate expenses, including a decrease of approximately $1.7 million in professional expenses related to the Company's 2020 financing activities, and a decrease of approximately $0.6 million of administrative costs, partially offset by an increase of approximately $2.1 million related to a non-cash write-off of leasehold improvements related to the Termination Agreement in 2021.

Loss (Gain) on lease modification and termination.

The loss on lease modification and termination of approximately $0.9 million recorded for the year ended December 31, 2021 is related to the lease termination of the Head Lease at 301 Binney Street in Cambridge, Massachusetts that was executed on April 30, 2021, compared to a gain on lease modification and termination of approximately $1.7 million in the year ended December 31, 2020 related to the Lease Amendment of the Head Lease at 301 Binney Street in Cambridge, Massachusetts that was executed in February 28, 2020 (see Note 8 to the Consolidated Financial Statements).

Sublease termination income, net.

The sublease termination income, net of $2.9 million recorded in the year ended December 31, 2020 represents the difference between the consideration received and the consideration given up related to the Sublease Termination Agreement that was executed on September 15, 2020.

The decrease in general and administrative expenses of approximately $6.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily driven by decreases of approximately $2.3 million in non-cash stock-based compensation, approximately $1.0 million in salaries and other employee-related costs, approximately $2.1 million in facilities and operating costs related to a non-cash write-off of leasehold improvements related to the Termination Agreement in 2021, and approximately $0.7 million in professional services expense.

Loss on lease modification and termination.

Gain on Extinguishment of Debt.

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Interest and other (expenses) income, net.

Interest and other (expenses) income, net decreased by approximately $0.6 million for the year ended December 31, 2021, compared to the year ended December 31, 2020 due to a decrease of approximately $0.3 million in interest income driven by lower interest rates in the current year as compared to the prior year, and a decrease of approximately $0.3 million due to net sublease income recorded in 2020.

Interest and other (expenses) income, net increased by approximately $0.3 million for the year ended December 31, 2022, compared to the year ended December 31, 2021 due to the increase of approximately $0.3 million in interest income driven by higher interest rates in the current year as compared to the prior year.

Liquidity and Capital Resources

Prior to the Separation, the primary source of liquidity for our business was cash flow allocated to Cyclerion from Ironwood.

Post Separation, transfers of cash to and from Ironwood related to the Development Agreement and provisions of the Separation Agreement, have been reflected in the consolidated statement of cash flows.

After the Separation on April 1, 2019, we raised approximately $165 million net of direct financing expenses with the closing of the 2019 Equity Private Placement on April 2, 2019.

On July 29, 2020, we closed on a private placement of 6,062,500 shares of our common stock, pursuant to a Common Stock Purchase Agreement, for total gross proceeds of approximately $24.3 million .

There were no material fees or commissions related to the transaction.

The Company intends to use the proceeds to fund working capital and other general corporate purposes.

On September 3, 2020, the Company entered into a sales agreement (which we refer to as the "Sales Agreement") with Jefferies with respect to the ATM Offering under the Registration Statement on Form S-3 (the "Shelf").

On September 3, 2020, the Company entered into a sales agreement (the "Sales Agreement") with Jefferies with respect to an at-the-market offering (the "ATM Offering") under the Registration Statement on Form S-3.

Under the ATM Offering, the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, having an aggregate offering price of up to $50.0 million through Jefferies as its sales agent.

The Company will pay to Jefferies cash commissions of 3.0 percent of the gross proceeds of sales of common stock under the Sales Agreement.

During the year ended December 31, 2021, the Company sold 3,353,059 shares of common stock for net proceeds of $12.5 million under the ATM Offering.

On June 7, 2021, the Company closed on a private placement of 5,735,988 shares of common stock, pursuant to a Common Stock Purchase Agreement, for total gross proceeds of approximately $18 million.

There were no material fees or commissions related to the transactions.

The Company agreed to pay Jefferies cash commissions of 3.0 percent of the gross proceeds of sales of common stock under the Sales Agreement.

The Company has sold 3,353,059 shares of its common stock for net proceeds of $12.5 million under the ATM Offering for the year ended December 31, 2021, since entering into the Sales Agreement with no shares of common stock issued or sold under the ATM Offering during the year ended December 31, 2022.

There can be no assurances that the Company will retain or seek to utilize this facility.

On June 7, 2021, we closed on a private placement of our 5,735,988 shares of common stock, pursuant to a Common Stock Purchase Agreement, for total gross proceeds of approximately $18 million.

There were no material fees or commissions related to the transaction.

The Company intends to use the proceeds to fund working capital and other general corporate purposes.

Our ability to continue to fund our operations and meet capital needs will depend on our ability to generate cash from operations and access to capital markets and other sources of capital, as further described below.

anticipate that our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures and other general corporate purposes.

We anticipate that our principal uses of cash in the future will be primarily to fund our operations, working capital needs, capital expenditures and other general corporate purposes.

On December 31, 2022, we had approximately $13.4 million of unrestricted cash and cash equivalents.

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rated or equivalent, with a remaining final maturity when purchased of less than twelve months, so as to primarily achieve liquidity and capital preservation.

Continued Nasdaq Listing

On June 1, 2022, the Company received a notice from the Nasdaq Stock Market ("Nasdaq") notifying the Company that, for the last 30 consecutive business days, the closing bid price for the Company's common stock listed on Nasdaq has been below the minimum $1.00 per share required for continued listing on the Nasdaq Global Select Market pursuant to Nasdaq Listing Rule 5450(a)(1) (the "Bid Price Requirement").

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company was provided a period of 180 calendar days, or until November 28, 2022, to regain compliance with the Bid Price Requirement.

The Company did not regain compliance with the Bid Price Requirement by the initial compliance date.

On November 29, 2022, however, Nasdaq notified the Company of its eligibility for an additional 180 calendar day period, or until May 29, 2023 (the "Extended Compliance Date"), to regain compliance with the Bid Price Requirement.

Nasdaq’s determination was based on the Company meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market with the exception of the Bid Price Requirement, and the Company’s written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

Effective November 25, 2022, the Company transferred its listing of the Company's common stock from the Nasdaq Global Market to the Nasdaq Capital Market, a continuous trading market that operates in substantially the same manner as the Nasdaq Global Market.

The Company’s common stock continues to trade under the symbol “CYCN”.

If at any time before May 29, 2023, the bid price of the Company's common stock closes at a $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq will provide written notification to the Company that it has regained compliance with the Bid Price Requirement.

If the Company does not regain compliance with the Bid Price Requirement by the end of the second compliance period, the Company's stock will be subject to delisting.

The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Bid Price Requirement, including initiating a reverse stock split.

However, there can be no assurance that the Company will be able to regain compliance with the Bid Price Requirement, would receive sufficient shareholder support for a reverse stock split, or will otherwise be in compliance with other Nasdaq Listing Rules.

Going Concern

Based on the timing expectations of our research and development plans, including our clinical trials, we expect that our existing cash and cash equivalents as of December 31, 2021, will be sufficient to fund our planned operating expenses and capital expenditure requirements through the next 12 months following the date of this Annual Report on Form 10-K.

We have based this estimate on assumptions that may prove to be wrong, particularly as the process of testing drug candidates in clinical trials is costly and the timing of progress in these trials is uncertain.

The Company evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.

This evaluation initially does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented as of the date the financial statements are issued.

When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern.

The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that these consolidated financial statements are issued.

In performing its analysis, management excluded certain elements of its operating plan that cannot be considered probable.

Under ASC 205-40, the future receipt of potential funding from future partnerships, equity or debt issuances, and the potential milestones from the Akebia agreement cannot be considered probable at this time because these plans are not entirely within the Company’s control and/or have not been approved by the Board of Directors as of the date of these consolidated financial statements.

The Company has incurred recurring losses since its inception, including a net loss of $44.1 million for the year ended December 31, 2022.

In addition, as of December 31, 2022, the Company had an accumulated deficit of $259.2 million.

The Company expects to continue to generate operating losses for the foreseeable future.

The Company expects that its cash, cash equivalents and marketable securities as of December 31, 2022 will not be sufficient to fund operations for at least the next twelve months from the date of issuance of these consolidated financial statements and the Company will need to obtain additional funding.

Accordingly, the Company has concluded that substantial doubt exists about the Company’s ability to continue as a going concern for a period of at least 12 months from the date of issuance of these consolidated financial statements.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of the uncertainties described above.

The following is a summary of cash flows for the years ended December 31, 2022 and 2021:

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Net cash used in operating activities was $40.6 million for the year ended December 31, 2022 compared to $36.5 million for the year ended December 31, 2021.

The decrease in net cash used in operations of $36.0 million primarily relates to a decrease in our net loss of $26.2 million, non-cash leasehold improvement write off of $6.3 million in the current year, the recording of non-cash loss on lease termination of $0.9 million in the current year and non-cash gain on lease modification of $1.7 million in prior year, non-cash gain on lease termination of sublease for $2.9 million in prior year, and a decrease in working capital accounts of $8.8 million, partially offset by the recording of a non-cash gain on extinguishment of debt of $3.6 million due to the PPP Loan forgiveness in the current year and a decrease of stock-based compensation and other non-cash items of $7.2 million.

The increase in net cash used in operations of $4.1 million primarily relates to the non-cash leasehold improvement write off of $6.3 million, non-cash loss on lease termination of $0.9 million in the prior year, a decrease of non-cash stock-based compensation and other non-cash items of $3.8 million in the current year and an increase in working capital accounts of $4.3 million, partially offset by a decrease in our net loss of $7.6 million and non-cash gain on extinguishment of debt for $3.6 million in the prior year.

Cash Flows from Investing Activities

Net cash provided by investing activities was $1.5 million for the year ended December 31, 2021 compared to net cash provided by investing activities of a de minimis amount for the year ended December 31, 2020.

The increase in net cash provided by investing activities of $1.4 million was primarily from an increase in cash received from sale of lab equipment in 2021.

Net cash provided by investing activities was $1.5 million from cash received from sale of lab equipment in 2021.

Cash Flows from Financing Activities

Net cash provided by financing activities was $30.8 million for the year ended December 31, 2021 compared to $28.1 million for the year ended December 31, 2020.

The increase of $2.7 million was the result of cash received from the June 2021 Equity Private Placement of $18 million, net proceeds from the ATM Offering of $12.5 million, partially offset by the cash received from the 2020 Equity Private Placement of $24.3 million, and the cash received from the short-term note payable of $3.5 million in 2020.

Net cash provided by financing activities of $30.8 million for the year ended December 31, 2021 was related to the June 2021 Equity Private Placement of $18 million, net proceeds from the ATM Offering of $12.5 million and proceeds from ESPP shares of $0.3 million.

Debt –

Paycheck Protection Program

On April 21, 2020, we received loan proceeds in the amount of approximately $3.5 million pursuant to a promissory note agreement (the “Promissory Note”) with a bank under the Paycheck Protection Program of which certain key terms were adjusted by the Paycheck Protection Program Flexibility Act (“PPPFA”).

On April 21, 2020, we received loan proceeds in the amount of approximately $3.5 million pursuant to a promissory note agreement (the “Promissory Note”) with a bank under the Paycheck Protection Program ("PPP") of which certain key terms were adjusted by the Paycheck Protection Program Flexibility Act (“PPPFA”).

The Promissory Note had an initial loan maturity of April 20, 2022, a stated interest rate of 1.0% per annum, and had payments of principal and interest that were due monthly after an initial deferral period where interest accrued, but no payments were due.

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The Promissory Note provided for customary events of default, including, among others, those relating to failure to make payment when due and breaches of representations.

The loan is subject to all the terms and conditions applicable under the PPPFA and is subject to review by the SBA for compliance with program requirements.

The loan is subject to all the terms and conditions applicable under the PPPFA and is subject to review by the Small Business Association ("SBA") for compliance with program requirements.

In August 2021, the Company applied with the SBA for forgiveness of the PPP loan and was notified on November 4, 2021, that the SBA has approved our application to forgive the entire amount of the loan and accrued interest.

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Funding Requirements

We expect our expenses to fluctuate as we advance the preclinical activities and clinical trials of our product candidates.

We believe that our existing cash and cash equivalents as of December 31, 2021 will enable us to fund our planned operating expenses and capital expenditure requirements at least through the next 12 months following the date of this Annual Report on Form 10-K, excluding net cash flows from potential business development activities.

We based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

We expect our expenses to fluctuate as we engage in preclinical activities and clinical trials of our product candidates, continue to maintain out-license opportunities and seek to broaden our portfolio through in-licensing of complementary CNS assets.

Based on our cash and cash equivalents position as of December 31, 2022 and our planned operating expenses and capital expenditure requirements there is substantial doubt regarding our ability to continue as a going concern for a period of one year after the date of this Annual Report on Form 10-K.

We will need to raise additional capital in upcoming periods, which may not be available on acceptable terms, if at all.

Failure to obtain necessary capital when needed may delay current development of our product candidates, halt new development phases, or other operations.

Because of the many risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount of our working capital requirements.

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A change in any of these or other variables with respect to the development of any of our product candidates could significantly change the costs and timing of the development of that product candidate.

Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances or licensing arrangements with third parties.

To the extent that we raise additional capital through the sale of equity

or convertible debt securities, outstanding equity ownership may be materially diluted, and the terms of securities sold in such transactions could include liquidation or other preferences that adversely affect the rights of holders of common stock.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, outstanding equity ownership may be materially diluted, and the terms of securities sold in such transactions could include liquidation or other preferences that adversely affect the rights of holders of common stock.

Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity