What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-03-22 compared with 2022-02-24 · 204 added, 263 removed, 679 unchanged (41% of the section changed)

40 unchanged sentences

Not applicable.

We will file a definitive Proxy Statement for our 2021 Annual Meeting of Stockholders, or the Proxy Statement, with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year.

We intend to file a definitive Proxy Statement for our 2023 Annual Meeting of Stockholders, or the Proxy Statement, with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year.

Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K.

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(incorporated by reference to Exhibit 10.11 to Current Report on Form 8-K filed on April 2, 2019 (File No.

Offer Letter, effective April 1, 2019, by and between Cyclerion Therapeutics, Inc.

and Anjeza Gjino

Offer Letter, effective April 1, 2019, by and between Cyclerion Therapeutics, Inc.

and Cheryl Gault (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed on May 4, 2022 (File No.

Amended and Restated Recognition Bonus Agreement, dated December 21, 2022, by and between Cyclerion Therapeutics, Inc.

and Anjeza Gjino

Amended and Restated Recognition Bonus Agreement, dated December 21, 2022, by and between Cyclerion Therapeutics, Inc.

and Cheryl Gault

Cyclerion Therapeutics, Inc.

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Cyclerion Therapeutics, Inc.

2019 Equity Incentive Plan and forms of agreements thereunder (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-8 filed on March 29, 2019 (File No.

2019 Equity Incentive Plan (incorporated by reference to Exhibit 4.4 to Registration Statement on Form S-8 filed on March 29, 2019 (File No.

Form of Stock Option Agreement under the Cyclerion Therapeutics, Inc.

2019 Equity Incentive Plan (incorporated by reference to Exhibit 10.10 to Form 10 filed on March 4, 2019 (File No.

Form of Non-Employee Director Restricted Stock Agreement under the Cyclerion Therapeutics, Inc.

2019 Equity Incentive Plan (incorporated by reference to Exhibit 10.11 to Form 10 filed on March 4, 2019 (File No.

Form of Restricted Stock Unit Agreement under the Cyclerion Therapeutics, Inc.

2019 Equity Incentive Plan (incorporated by reference to Exhibit 10.12 to Form 10 filed on March 4, 2019 (File No.

Cyclerion Therapeutics, Inc.

1 unchanged sentence

Cyclerion Therapeutics, Inc.

Executive Severance Plan (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 25, 2019 (File No.

Non-Employee Director Compensation Plan (effective June 1, 2019) (incorporated by reference to Exhibit 10.7 on Form 10-Q filed on August 12, 2019 (File No.

Open Market Sale Agreement SM , dated September 3, 2020, by and between Cyclerion Therapeutics, Inc.

and Jefferies LLC (incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K filed on September 3, 2020).

Executive Severance Plan (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed on August 9, 2022 (File No.

Non-Employee Director Compensation Policy (amended and restated as of December 17, 2021) (incorporated by reference to Exhibit 10.6 to Quarterly Report on Form 10-Q filed on May 4, 2022 (File No.

Open Market Sale Agreement, dated September 3, 2020, by and between Cyclerion Therapeutics, Inc.

and Jefferies LLC (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K filed on September 3, 2020 (File No.

License Agreement, dated as of June 3, 2021, by and between Cyclerion Therapeutics, Inc.

and Akebia Therapeutics, Inc (incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q filed on July 30, 2021).

and Akebia Therapeutics, Inc (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q filed on July 29, 2021 (File No.

Common Stock Purchase Agreement, dated as of June 3, 2021, by and between Cyclerion Therapeutics, Inc.

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Not applicable.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized, on February 24, 2022.

CYCLERION THERAPEUTICS, INC.

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Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 24, 2022.

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Peter M.

Hecht and Anjeza Gjino, jointly and severally, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K of Cyclerion Therapeutics, Inc.,

and any or all amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agents, or his, her or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

/s/ Peter Hecht

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/s/ Anjeza Gjino

Chief Financial Officer (Principal Financial Officer and

Principal Accounting Officer)

Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

/s/ Errol De Souza

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Michael Mendelsohn

/s/ Steven Hyman

Index to Consolidated Financial Statements of Cyclerion Therapeutics, Inc.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Cyclerion Therapeutics, Inc

To the Stockholders and the Board of Directors of Cyclerion Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cyclerion Therapeutics, Inc (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss , shareholders' equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Cyclerion Therapeutics, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations, has limited financial resources, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s 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.

We are a public accounting firm registered with the 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.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2018.

Boston, Massachusetts

February 24, 2022

March 22, 2023

/s/ Ernst & Young LLP

Cyclerion Therapeutics, Inc.

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Accounts receivable

Related party accounts receivable

Prepaid expenses

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Total current assets

Restricted cash, net of current portion

Property and equipment, net

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Accounts payable

Related party accounts payable

Accrued research and development costs

Accrued expenses and other current liabilities

Short-term note payable

Current portion of operating lease liabilities

Total current liabilities

Operating lease liabilities, net of current portion

Commitments and contingencies (Note 6)

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Common stock, no par value, 400,000,000 shares authorized and 43,518,724 issued and outstanding at December 31, 2022 and 400,000,000 shares authorized and 43,410,185 issued and outstanding at December 31, 2021

Accumulated deficit

Paid-in capital

Accumulated deficit

Accumulated other comprehensive loss

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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

Interest and other income (expenses), net

Net loss per share:

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Other comprehensive loss:

Foreign currency translation adjustment (loss) gain

Foreign currency translation adjustment gain

Comprehensive loss

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Balance at December 31, 2020

Issuance of common stock - 2020 private placement

Issuance of common stock - 2021 equity private placement and ATM

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

Share-based compensation expense related to issuance of stock options and RSUs to non-employees

Foreign currency translation adjustment

Balance at December 31, 2021

Issuance of common stock - 2021 equity private placement

Issuance of common stock - ATM

Issuance of common stock upon exercise of stock options, RSUs and employee stock purchase plan

Share-based compensation expense related to issuance of stock options and RSUs to employees and employee stock purchase plan

Share‑based compensation expense related to issuance of stock options and RSUs to non-employees

Share-based compensation expense related to issuance of stock options and RSUs to non-employees

Foreign currency translation adjustment

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Net loss on disposal of property and equipment

(Gain) / loss on lease modification and termination

Sublease termination income, net

Loss on lease termination

Gain on extinguishment of debt

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Accrued research and development costs

Accrued expenses and other current liabilities

Operating lease liabilities

Accrued expenses and other current liabilities

Net cash (used in) operating activities

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Proceeds from exercises of stock options and ESPP

Proceeds from short-term note payable

Net cash provided by financing activities

Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Supplemental cash flow disclosure:

Cash paid for initial direct costs of lease modification

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheets

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents and restricted cash

Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

The accompanying notes are an integral part of these consolidated financial statements.

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(“Cyclerion”, the “Company”

or “we”) is a clinical-stage biopharmaceutical company on a mission to develop treatments that restore cognitive function.

Our lead asset, CY6463, is a pioneering, central nervous system (CNS) penetrant, soluble guanylate cyclase (sGC) stimulator that is currently in clinical development for Alzheimer's disease with vascular pathology (ADv), cognitive impairment associated with schizophrenia (CIAS), and Mitochondrial Encephalomyopathy, Lactic Acidosis and Stroke-like episodes (MELAS).

or “we”) is a biopharmaceutical company on a mission to develop treatments for serious diseases.

Our lead internal asset, zagociguat, is a pioneering, central nervous system ("CNS")-penetrant, soluble guanylate cyclase ("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 nitric oxide ("NO") as positive allosteric modulators of sGC to boost production of cyclic guanosine monophosphate ("cGMP").

cGMP is a key second messenger that, when produced by sGC, regulates diverse and critical biological functions in the CNS including neuronal function, neuroinflammation, cellular bioenergetics, and vascular function.

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.

Cyclerion GmbH, a wholly owned subsidiary, was incorporated in Zug, Switzerland on May 3, 2019.

Cyclerion GmbH is an operational entity with one employee who is the Company’s Chief Scientific Officer.

The functional currency is the Swiss franc.

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Company Overview

The Company’s mission is to develop treatments that restore cognitive function.

Its priorities are advancing its ongoing CY6463 clinical programs and next generation compound, CY3018.

CY6463 is an orally administered CNS-penetrant sGC stimulator that is being developed as a symptomatic and potentially disease-modifying therapy for serious CNS diseases.

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 neurodegenerative diseases.

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

On January 13, 2020, we announced positive results from our Phase 1 first-in-human study 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.

On October 14, 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:

The Company’s mission is to develop treatments for serious CNS diseases.

Zagociguat is an orally administered CNS-penetrant sGC stimulator.

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

By compensating for deficient NO-sGC-cGMP signaling, zagociguat may have broad therapeutic potential as a treatment to improve cognition and function in people with serious CNS diseases.

On January 13, 2020, we announced positive results from our Phase 1 first-in-human study that provided the foundation for continued development of zagociguat.

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

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

On October 14, 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 shown to be safe and generally well tolerated.

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.

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.

Zagociguat was safe and generally well tolerated in this study.

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

On June 10, 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 biomarker 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 across several endpoints with each other and with zagociguat plasma concentrations.

Zagociguat was well tolerated with no 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 support the potential of zagociguat to provide therapeutic

benefit to people living with mitochondrial diseases, including Mitochondrial Encephalomyopathy, Lactic Acidosis and Stroke-like episodes ("MELAS").

On July 28, 2022, we announced positive topline data from our signal-seeking clinical study of zagociguat for the potential treatment of Cognitive Impairment Associated with Schizophrenia ("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 demonstrate 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 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.

On October 6, 2022, we announced that we had recently capped enrollment in our signal-seeking clinical study of zagociguat for the potential treatment of Alzheimer's disease with vascular pathology ("ADv")..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").

On March 22, 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 the Akebia License Agreement (as defined below) 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 Separation

On April 1, 2019, Ironwood completed the separation of its sGC business, and certain other assets and liabilities, into a separate, independent publicly traded company by way of a pro-rata distribution of all of the outstanding shares of common stock of Cyclerion Therapeutics, Inc.

through a dividend distribution of one share of the Company’s common stock, with no par value per share, for every 10 shares of Ironwood common stock held by Ironwood stockholders as of the close of business on March 19, 2019, the record date for the Distribution (the entire transaction being the “Separation”).

As a result of the Separation, the Company became an independent public company and commenced trading under the symbol “CYCN”

on the Nasdaq Global Select Market on April 2, 2019.

2020 Equity Private Placement

On July 29, 2020, the Company entered into a Common Stock Purchase Agreement (the “2020 Equity Private Placement”) for the private placement of 6,062,500 shares of the Company’s common stock, for total gross proceeds of approximately $ 24.3 million.

The closing of the 2020 Equity Private Placement occurred on July 29, 2020.

The Company did not utilize the services of a placement agent or broker and accordingly incurred no material related transaction fees, or commissions.

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

2021 Equity Private Placement

On June 3, 2021, the Company entered into a Common Stock Purchase Agreement (the “June 2021 Equity Private Placement”) for the 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.

On June 3, 2021, the Company entered into a Common Stock Purchase Agreement (the “2021 Equity Private Placement”) for the 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 2021 Equity Private Placement occurred on June 7, 2021.

The Company did not utilize the services of a placement agent or broker and accordingly incurred no material related transaction fees or commissions.

At-the-Market Offering

On July 24, 2020, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, debt securities, warrants and units of any combination thereof for an aggregate initial offering price not to exceed $ 150.0 million.

On July 24, 2020, the Company filed a Registration Statement on Form S-3 (the "Shelf") with the Securities and Exchange Commission (the “SEC”) in relation to the registration of common stock, preferred stock, debt securities, warrants and units of any combination thereof for an aggregate initial offering price not to exceed $ 150.0 million.

The Shelf was declared effective as of July 31, 2020.

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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 its common stock for net proceeds of $ 12.5 million under the ATM Offering, after deducting commissions paid to Jefferies of approximately $ 0.4 million.

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.

No shares of common stock have been issued or sold under the ATM Offering during the year ended December 31, 2022.

Basis of Presentation

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The Company is required to make certain additional disclosures if it concludes substantial doubt exists and it is not alleviated by the Company’s plans or when its plans alleviate substantial doubt about the Company’s ability to continue as a going concern.

The Company has experienced negative operating cash flows for all historical periods presented and the Company expects these losses to continue into the foreseeable future as the Company continues the development and clinical testing of its product candidates CY6463, CY3018 and its discovery research programs.

Through December 31, 2021, the Company had raised an aggregate of $ 219.8 million (in net proceeds) from equity private placements and the ATM Offering.

After considering the Company’s current research and development plans and the timing expectations related to the progress of its programs, and after considering its existing cash and cash equivalents of $ 54.0 million as of December 31, 2021 , the Company did not identify conditions or events that would raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements were issued.

In accordance with Accounting Standards Codification ("ASC") 205-40, Going Concern, 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.

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.

Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard

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, Nasdaq notified the Company that it is eligible 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 or will otherwise be in compliance with other Nasdaq Listing Rules.

Summary of Significant Accounting Policies

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Segment Information

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company's chief operating decision maker in deciding how to allocate resources and in assessing performance.

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company's Chief Executive Officer who is the chief operating decision maker in

deciding how to allocate resources and in assessing performance.

The Company currently operates in one reportable business segment - human therapeutics.

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The preparation of consolidated financial statements in accordance with U.S.

GAAP requires the Company’s management to make estimates and judgments 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.

generally accepted accounting principles ("GAAP") requires the Company’s management to make estimates and judgments 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.

On an ongoing basis, the Company’s management evaluates its estimates, judgments and methodologies.

Significant estimates and assumptions in the consolidated financial statements include those related to revenue, impairment of long-lived assets, valuation procedures for right-of-use

("ROU") assets and operating lease liabilities, income taxes, including the valuation allowance for deferred tax assets, research and development expenses, contingencies, share-based compensation, and going concern.

Significant estimates and assumptions in the consolidated financial statements include those related to revenue, impairment of long-lived assets, valuation procedures for right-of-use ("ROU") assets and operating lease liabilities, income taxes, including the valuation allowance for deferred tax assets, research and development expenses, contingencies, share-based compensation, and going concern.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities.

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Changes in estimates are reflected in reported results in the period in which they become known.

Cash and Cash Equivalents including Restricted Cash

Cash and Cash Equivalents

The Company considers all highly liquid investment instruments with a remaining maturity when purchased of three months or less to be cash equivalents.

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The carrying amount of cash equivalents approximates fair value.

As of December 31, 2021, T he Company did not have any restricted cash balances.

As of December 31, 2020, the Company was contingently liable under an unused letter of credit with a bank, related to the Company's facility lease, in the amount of approximately $ 3.8 million.

The Company recorded the collateral used to secure the letter of credit as restricted cash.

The full amount of restricted cash was recorded as a component of non-current assets at December 31, 2020 .

Property and Equipment

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Furniture and fixtures

Included in property and equipment are certain costs of software obtained for internal use.

Costs incurred during the preliminary project stage are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software.

Software costs incurred during the preliminary project stage are expensed as incurred, while costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software.

The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality.

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Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the lease term.

The Company has no capital leases.

Property and equipment that is no longer required for the business is considered disposed of when it ceases to be used.

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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.

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:

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Effective January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842, Leases (“ASC 842”) using the optional transition method.

The adoption of ASC 842 represents a change in accounting principle that aims to increase transparency and comparability among organizations by requiring the recognition of right-of-use assets and lease liabilities on the balance sheet for both operating and finance leases.

The adoption of ASC 842 represents a change in accounting principle that aims to increase transparency and comparability among organizations by requiring the

recognition of right-of-use assets and lease liabilities on the balance sheet for both operating and finance leases.

In addition, the standard requires enhanced disclosures that meet the objective of enabling financial statement users to assess the amount, timing, and uncertainty of cash flows arising from leases.

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The Company reviewed any changes to its lease agreements for potential modifications and/or indicators of impairment of the respective ROU asset.

On October 18, 2019, the Company entered into an agreement to sublease 15,700 rentable square feet of its Head Lease to a subtenant (the “Sublease Agreement”).

Sublease income was recognized on straight-line basis over the term of the sublease agreement and was recorded net of the related rent expense from the Head Lease within interest and other income, net in the consolidated statements of operations and comprehensive loss.

In sublease agreements that contain non-monetary consideration, the Company estimated the fair market value of the non-monetary consideration received using market data and recognized it on a straight-line basis over the sublease term.

Variable lease consideration that did not depend on an index or rate was allocated to a non-lease component and was recognized over time in accordance with the pattern of transfer.

No modification or impairment was deemed to have occurred by entering into the sublease agreement because the Company was not released, either fully or in part, from its obligations under the Head Lease.

See Note 8, Leases .

On February 28, 2020 the Company entered into an amendment to its Head Lease (the “Lease Amendment”).

The Lease Amendment provided for the partial termination of the Company's rights and obligations with respect to a portion of the leased premises of approximately 40,000 rentable square feet.

The Company continued to lease approximately 74,000 rentable square feet under terms of the amended lease.

The Lease Amendment was determined to be a lease modification that qualified as a change of accounting on the existing lease

and not a separate contract.

As such, the ROU assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification and the Company recorded a gain of approximately $ 2.1 million as a component of operating expenses for the year ended December 31, 2020.

No impairment of the ROU asset was deemed to have occurred.

See Note 8, Leases .

On September 15, 2020, the Company entered into an amendment to its Head Lease (the “Second Lease Amendment”).

The Second Lease Amendment provided for the partial termination of the Company's rights and obligations with respect to a portion of the leased premises of approximately 17,000 rentable square feet (the “Surrender Space”).

The Surrender Space included the 15,700 rentable square feet being subleased by the Company to a subtenant.

The Company continued to lease approximately 57,000 rentable square feet under terms of the amended lease.

The Second Lease Amendment was determined to be a lease modification that qualified as a change of accounting on the existing lease and not a separate contract.

As such, the ROU assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification and the Company recorded a loss of approximately $ 0.4 million as a component of operating expenses for the year ended December 31, 2020.

No impairment of the ROU asset was deemed to have occurred.

See Note 8, Leases .

On September 15, 2020, concurrent with the execution of the Second Lease Amendment, the Company entered into an agreement with its subtenant to terminate the Sublease Agreement of approximately 15,700 rentable square feet (“the Sublease Termination Agreement”).

Under the terms of the Sublease Termination Agreement, the former subtenant is obligated to provide licensed rooms and services to the Company free of charge through the original sublease term.

Upon termination of the sublease, the Company recognized sublease termination income of approximately $ 3.1 million related to the prepaid rooms and services, and wrote off the remaining indirect costs from the sublease of approximately $ 0.2 million, in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

See Note 8, Leases .

On April 30, 2021, the Company entered into a Termination Agreement (the "Termination Agreement") for its Head Lease as initially amended on February 28, 2020, and further amended on September 15, 2020.

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expenses on our consolidated statement of operations and comprehensive loss.

On September 15, 2020, the Company entered into a Sublease Termination Agreement (the "Sublease Termination Agreement") to terminate its sublease of 15,700 rentable square feet, of its leased premises under the Head Lease.

Under the terms of the Sublease Termination Agreement, the subtenant was relieved of its obligation to provide future cash rental payments to the Company.

The agreements requiring the former subtenant to provide

licensed rooms and services to the Company free of charge through the original sublease term survived the sublease termination.

The Company gained access to the licensed rooms and services beginning in the third quarter of 2021.

The letter of credit security deposit related to the sublease was released.

The Company determined that the Sublease Termination Agreement constituted a non-monetary exchange under ASC 845 Nonmonetary Transactions ("ASC 845") where, in return for the free rooms and the services, the Company agreed to terminate its rights and obligations under the sublease agreement.

In accordance with ASC 845, the Company determined that the accounting for the transaction should be based on the fair value of assets or services involved.

The Company estimated the fair value of the rooms and services to be approximately $ 1.5 million and $ 2.9 million, respectively.

The Company determined that the licensed rooms represent a lease under ASC Topic 842 Leases.

The Company obtained control of the rooms in the third quarter of 2021 and the prepaid rooms balance of approximately $ 1.4 million was reclassified from other assets to a ROU asset.

The related lease expense is recognized on a straight-line basis over the lease term of 8.88 years.

The Company determined that the licensed services represent a non-lease component, which is recognized separately from the lease component for this asset class.

The expense related to the licensed services is recognized on a straight-line basis over the period the services are received.

Both the lease expense and services expense are recognized as a component of research and development costs in the consolidated statements of operations and comprehensive loss.

In May 2021 the Company signed a 12-month membership agreement to lease space with WeWork at 501 Boylston Street, Boston, Massachusetts, commencing on August 1, 2021.

The agreement was extended for six months on August 1, 2022.

The 12-month agreement and 6-month extension are accounted for as short-term leases.

Paycheck Protection Program Loan

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The loan’s principal and accrued interest were forgivable to the extent that the proceeds were used for eligible purposes, subject to certain limitations, and that the Company maintained its payroll levels over a twenty-four-week period following the loan date.

The loan forgiveness amount may have been reduced if the Company

terminated employees or reduced salaries during the twenty-four-week period.

The loan forgiveness amount may have been reduced if the Company terminated employees or reduced salaries during the twenty-four-week period.

PPP loans are subject to audit and the SBA has indicated that companies that received over $2 million in proceeds should expect an audit.

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Approximately $ 0.1 million of interest expense has been recognized within interest and other income, net in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

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.

The Company recorded a gain on extinguishment of debt of $ 3.6 million representing the principal and accrued interest for the PPP Loan.

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.

The Company recorded a gain on extinguishment of debt of $ 3.6 million in the December 31, 2021 consolidated statements of operations and comprehensive loss, representing the principal and accrued interest for the PPP Loan.

Upon executing a revenue generating arrangement, the Company assesses whether it is probable the Company will collect consideration in exchange for the good or service it transfers to the customer.

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If actual timing of performance or the level of effort varies from the estimate, the Company will adjust the amounts recorded accordingly.

Company has not experienced any material differences between accrued or prepaid costs and actual costs since inception.

The Company has not experienced any material differences between accrued or prepaid costs and actual costs since inception.

Research and development expenses are comprised of costs incurred in performing research and development activities, which may include salary, benefits and other employee-related expenses;

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Interest and Other Income, Net

For the year ended December 31, 2021, interest and other income, net consisted of a de minimis amount of interest income related to interest generated from our cash and cash equivalents balances and a de minimis amount

of interest expense related to the PPP loan.

For the year ended December 31, 2020 , interest and other income, net consisted of $ 0.3 million of interest income related to interest generated from our cash and cash equivalents balances and $ 0.3 million of net sublease income.

For the year ended December 31, 2022, interest and other income, net consisted of a $ 0.3 million of interest income related to interest generated from our cash and cash equivalents balances.

For the year ended December 31, 2021 , interest and other income, net consisted of a de minimis amount of interest income related to interest generated from our cash and cash equivalents balances and a de minimis amount of interest expense related to the PPP loan.

Subsequent Events

The Company considers events or transactions that have occurred after the balance sheet date of December 31, 2021, but prior to the filing of the financial statements with the Securities and Exchange Commission, to provide additional evidence relative to certain estimates or to identify matters that require additional recognition or disclosure.

The Company considers events or transactions that have occurred after the balance sheet date of December 31, 2022, but prior to the filing of the financial statements with the Securities and Exchange Commission, to provide additional evidence relative to certain estimates or to identify matters that require additional recognition

or disclosure.

Subsequent events have been evaluated through the filing of the financial statements accompanying this Annual Report on Form 10-K.

See Note 15, Subsequent Events .

New Accounting Pronouncements

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date.

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The Company is currently evaluating the impact that ASU 2016-13 will have on its financial statements and related disclosures.

Recently Adopted Accounting Pronouncements

In May 2021 the FASB issued Accounting Standards Update No.

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This amendment provides that for an entity that presents earnings per share ("EPS") in accordance with Topic 260, the effects of a modification or an exchange of a freestanding equity-classified written call option that is recognized as a dividend should be an adjustment to net income (or net loss) in the basic EPS calculation.

The amended guidance becomes mandatorily effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and should be applied prospectively to modifications or exchanges occurring on or after the effective date.

The Company is currently evaluating the impact that ASU 2021-04 will have on its financial statements and related disclosures.

The amended guidance effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and should be applied prospectively to modifications or exchanges occurring on or after the effective date.

The Company adopted ASU 2021-04 in the first quarter of 2022, and the adoption of this standard did not have any impact on the Company's financial position or results of operations.

No other accounting standards known by the Company to be applicable to it that have been issued by the FASB or other standard-setting bodies and that do not require adoption until a future date are expected to have a material impact on the Company’s consolidated financial statements upon adoption.

Related Party Transactions

Development Agreement with Ironwood

As part of the Separation from Ironwood, the Company entered into a Development Agreement with Ironwood.

Under the Development Agreement, the Company provided certain research and development services to Ironwood at mutually agreed upon rates and the amounts earned are recorded as revenue from related party for the year ended December 31, 2020.

Such research and development activities were governed by a joint steering

committee composed of representatives of both Ironwood and the Company.

Ironwood and the Company have agreed not to renew the Development Agreement beyond the end of its initial term on March 31, 2021.

These transactions under the Development Agreement were considered related party transactions due to Mark Currie’s role as President of the Company through December 31, 2020, and board member of Ironwood.

In January 2021, Mark Currie’s role transitioned from President of the Company to a senior advisor on a consulting basis.

Therefore, effective January 2021, transactions under the Development Agreement are no longer accounted for as related party transactions.

The Company recorded approximately $ 2.3 million for the year ended December 31, 2020.

Other Related Party Transactions

During the year ended December 31, 2020, the Company recorded approximately $ 1.5 million of research and development costs to a related party which it engaged to provide research and development transaction support services.

The entity became a related party when Mark Currie, the Company’s President through December 31, 2020, joined its board in January 2020.

There was approximately $ 0.3 million due to the related party for the year ended December 31, 2020.

In January 2021, Mark Currie’s role transitioned from President of the Company to a senior advisor on a consulting basis.

Therefore, effective January 2021, transactions under this agreement are no longer accounted for as related party transactions.

Fair Value of Financial Instruments

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The fair value of the Company's cash equivalents, consisting of money market funds, is based on quoted market prices in active markets with no valuation adjustment.

The Company believes the carrying amounts of its prepaid expenses and other current assets, restricted cash, accounts payable, and accrued expenses approximate their fair value due to the short-term nature of these amounts.

The Company believes the carrying amounts of its prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair value due to the short-term nature of these amounts.

Property and Equipment

Property and equipment, net consisted of the following (in thousands):

Computer and office equipment

Leasehold improvements

Computer equipment

Property and equipment, gross

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Property and equipment, net

As of December 31, 2021, and 2020, the Company’s property and equipment was primarily located in Cambridge, Massachusetts.

As of December 31, 2022, and 2021, the Company’s property and equipment was primarily located in Boston, Massachusetts.

Depreciation and amortization expense of the Company’s property and equipment was approximately $ 0.1 million and $ 0.5 million for the years ended December 31, 2022 and 2021 , respectively.

During the year ended December 31, 2021, the Company recorded a non-cash loss of $ 6.3 million, on the disposal of leasehold improvements as a result of its Head Lease (as defined below) termination (see Note 8 to the Consolidated Financial Statements).

The non-cash loss on the disposal of leasehold improvements was recognized as a component of operating expenses in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021 .

Accrued Expenses and Other Current Liabilities

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The Company enters into certain agreements with other parties in the ordinary course of business that contain indemnification provisions.

These typically include agreements with directors and officers, business

partners, contractors, clinical sites and customers.

These typically include agreements with directors and officers, business partners, contractors, clinical sites and customers.

Under these provisions, the Company generally indemnifies and holds harmless the indemnified party for losses suffered or incurred by the indemnified party as a result of the Company’s activities.

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Accordingly, the Company did not have any liabilities recorded for these obligations as of December 31, 2022 or December 31, 2021 .

The FASB issued ASU 2016-02, or the leasing standard or ASC 842, in February 2016.

ASU 2016-02 requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months.

ASU 2016-02 also requires certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.

On April 1, 2019, the Company entered into the Head Lease ("the Head Lease"), a direct operating lease for its former headquarters located at 301 Binney Street, Cambridge, MA consisting of approximately 114,000 rentable square feet of office and laboratory space on the first and second floors.

The Head Lease had a term of 123 months with two five-year extension options and certain expansion rights.

The Head Lease also included a letter of credit of $ 7.7 million, posted with the landlord as a security deposit, which was collateralized by a money market account recorded as restricted cash on the Company’s consolidated balance sheets.

The Company had also entered into customary non-disturbance arrangements with the building landlord’s mortgagee and with the property ground lessor recognizing Company's leasehold interest in this property.

On February 28, 2020 the Company entered into an amendment to its Head Lease.

The Lease Amendment partially terminated the Company’s rights and obligations with respect to an approximately 40,000 rentable square feet.

The Company continued to lease the remaining space of approximately 74,000 square feet including the area covered by the subleased premise, discussed below.

In connection with this Lease Amendment, the Company reduced its remaining lease payments through June 2029 by approximately $ 41.9 million and paid a $ 6.3 million termination fee and $ 0.2 million related to other initial direct costs, which were deferred and recognized over the remaining lease term.

The Company’s security deposit was also reduced by approximately $ 2.7 million to approximately $ 5.0 million.

The Lease Amendment was determined to be a lease modification that qualified as a change of accounting on the existing lease and not a separate contract.

As such, the ROU assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification of 9.7 %, which resulted in a reduction of the ROU asset of $ 21.4 million and a reduction in the operating lease liabilities of $ 23.5 million.

The Company recorded the resulting gain of approximately $ 2.1 million as a component of operating expenses in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

On September 15, 2020 the Company entered into the Second Lease Amendment to its Head Lease.

The Second Lease Amendment provided for the partial termination of the Company’s rights and obligations with respect to a portion of the leased premises of approximately 17,000 rentable square feet.

The Surrender Space included 15,700 rentable square feet being subleased by the Company to a subtenant.

The Company continued to lease approximately 57,000 square feet of space.

The Company reduced its remaining lease payments through June 2029 by approximately $ 16.9 million.

The Company paid no termination or other initial direct costs related to the execution of the Second Lease Amendment.

The Company’s security deposit was reduced by approximately $ 1.2 million to approximately $ 3.8 million, which is classified as restricted cash on the Company’s consolidated balance sheet as of December 31, 2020.

The Second Lease Amendment was determined to be a lease modification that qualified as a change of accounting on the existing lease and not a separate contract.

As such, the ROU assets and operating lease liabilities were remeasured using an incremental borrowing rate at the date of modification of 6.1 %, which resulted in a reduction of the ROU asset of $ 5.9 million and a reduction in the operating lease liabilities of $ 5.5 million.

Company recorded the resulting loss of approximately $ 0.4 million as a component of operating expenses in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2020.

On April 30, 2021, the Company entered into a Termination Agreement (the "Termination Agreement") for its Head Lease (the "Head Lease") for the Company's former headquarters located at 301 Binney Street, Cambridge, MA, as initially amended on February 28, 2020, and further amended on September 15, 2020.

Pursuant to the Termination Agreement, the Company surrendered the leased space of approximately 57,000 square feet to the building’s landlord.

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As a result of the termination of the Head Lease, the related right-of-use asset was written off, the lease liability was derecognized, and the $ 3.8 million security deposit was returned to the Company and recorded as part of our cash balance.

In total, the Company recognized a loss on the termination of the Head Lease of $ 0.9 million for the year ended December 31, 2021.

The loss is included in “General and administrative”

expenses on our consolidated statement of operations and comprehensive loss.

The Company had an operating lease ROU asset of approximately $ 43.4 million related to the amended Head Lease recorded in its consolidated balance sheets as of December 31, 2020.

The Company had current and non-current operating lease liabilities of approximately $ 3.3 million, and $ 38.9 million, respectively, related to the amended Head Lease recorded in its consolidated balance sheets as of December 31, 2020.

Lease cost was recognized on a straight-line basis over the lease term.

For the years ended December 31, 2021 and 2020, the Company recognized a total of approximately $ 2.4 million and $ 8.6 million, respectively, of total lease costs.

Variable lease costs not subject to an index or rate were recognized as incurred.

For the years ended December 31, 2021 and 2020, the Company recognized a total of approximately $ 0.7 million and $ 2.2 million, respectively, of variable lease costs related to the Head Lease, as amended.

In May 2021, the Company signed a membership agreement to lease space with WeWork at 501 Boylston Street, Boston, Massachusetts.

The lease commenced on August 1, 2021 and was accounted for as a short term lease.

The Company recorded $ 0.1 million in lease expense associated with the membership agreement during the year ended December 31, 2021.

For the year ended December 31, 2021 , the Company recognized approximately $ 2.4 million of total lease costs and $ 0.7 million of variable lease costs, related to the Head Lease.

The Company did no t record any lease costs related to the Head Lease during the year ended December 31, 2022.

In May 2021 the Company signed a 12-month membership agreement to lease space with WeWork at 501 Boylston Street, Boston, Massachusetts, commencing on August 1, 2021.

The agreement was extended for six months on August 1, 2022.

The 12-month agreement and 6-month extension are accounted for as short-term leases.

The Company recorded $ 0.3 million and $ 0.1 million, respectively, in lease expense associated with the membership agreement during the years ended December 31, 2022, and 2021.

Supplemental cash flow information related to leases for the periods reported is as follows:

Decrease in right-of-use assets related to lease modifications and termination (in thousands)

Decrease in operating lease liabilities due to lease modifications and termination (in thousands)

Year Ended December 31,

Decrease in right-of-use assets related to lease modifications and termination

Decrease in operating lease liabilities due to lease modifications and termination

Cash paid for amounts included in the measurement of lease liabilities (in thousands)

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Weighted-average discount rate of operating leases

On October 18, 2019, the Company entered into an agreement with a third party to sublease 15,700 rentable square feet of its lease premises under the Head Lease.

The sublease was scheduled to expire on June 30, 2029, unless earlier terminated in accordance with the sublease agreement, and has no extension options.

The sublease provides for annual base rent of approximately $ 1.5 million in the first year, which increases on a yearly basis by 3.0 % (subject to an abatement of base rent of approximately $ 0.7 million for the first six months of the sublease).

As part of the consideration for the sublease, the sublessee agreed to provide licensed rooms and services within the sublease premises to the Company over the sublease term free of charge.

In addition, the sublessee is responsible for its pro rata share of certain costs, taxes and operating expenses related to the subleased space, the consideration for which is variable and is based on the actual operating costs of the lessor.

The Company allocated the total consideration in the sublease agreement between the lease and non-lease components in the contract based on their relative standalone prices.

The Company determined that the variable consideration relates exclusively to non-lease components and will be recognized as incurred.

The sublease included an initial security deposit of $ 0.5 million, which was provided by the sublessee in the form of a letter of credit, and an additional security deposit of $ 0.4 million within nine months of the sublease commencement.

On September 15, 2020, concurrent with execution of the Second Lease Amendment, the Company entered into the Sublease Termination Agreement to terminate its sublease of 15,700 rentable square feet.

Under the terms of the Sublease Termination Agreement, the subtenant is relieved of its obligation to provide future cash rental payments to the Company.

Under the terms of the Sublease Termination Agreement, the subtenant was relieved of its obligation to provide future cash rental payments to the Company.

The agreements requiring the former subtenant to provide licensed rooms and services to the Company free of charge through the original sublease term survived the sublease termination.

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The Company estimated the fair value of the rooms and services to be approximately $ 1.5 million and $ 2.9 million, respectively.

Accordingly, prepaid rooms and services of $ 4.4 million were recorded upon the sublease termination, of which $ 1.6 million was recorded in other current assets and $ 2.8 million was recorded in other assets in the consolidated balance sheets as of December 31, 2020.

Termination fee income of $ 3.1 million was recognized related to the rooms and services, after considering the rent receivable balance of $ 1.3 million outstanding from the subtenant.

The remaining unamortized direct costs of $ 0.2 million were written off.

The effects of the Sublease Termination Agreement were recorded within sublease termination income, net in the consolidated statements of operations and comprehensive loss.

Total gross sublease income of approximately $ 1.5 million, and net sublease income of approximately $ 0.3 million was recorded in interest and other income, net in the consolidated statements of operations and comprehensive loss for year ended December 31, 2020.

The Company determined that the licensed rooms represent a lease under ASC 842.

The Company determined that the licensed rooms represent a lease under ASC Topic 842 Leases.

The Company obtained control of the rooms in the third quarter of 2021 and the prepaid rooms balance of approximately $ 1.4 million was reclassified from other assets to a ROU asset.

The related lease expense is recognized on a straight-line basis over the lease term of 8.88 years.

The Company recorded $ 0.1 million of lease expense during the year ended December 31, 2021.

The Company recorded $ 0.2 million and $ 0.1 million of lease expense during the years ended December 31, 2022 and 2021, respectively.

The Company determined that the licensed services represent a non-lease component, which is recognized separately from the lease component for this asset class.

The expense related to the licensed services is recognized on a straight-line basis over the period the services are received.

The Company recorded $ 0.2 million for the year ended December 31, 2021.

The Company recorded $ 0.4 million and 0.2 million for the years ended December 31, 2022 and 2021, respectively.

Both the lease expense and services expense are recognized as a component of research and development costs in the consolidated statements of operations and comprehensive loss.

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The 2019 Equity Plan provides for stock options and restricted stock units (“RSUs”).

Cyclerion also mirrored two of Ironwood’s existing plans, the Amended and Restated 2005 Stock Incentive Plan (“2005 Equity Plan”) and the Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan (“2010 Equity Plan).

Cyclerion also mirrored two of Ironwood Pharmaceuticals, Inc.

("Ironwood") existing plans, the Amended and Restated 2005 Stock Incentive Plan (“2005 Equity Plan”) and the Amended and Restated 2010 Employee, Director and Consultant Equity Incentive Plan (“2010 Equity Plan").

These mirror plans were adopted to facilitate the exchange of Ironwood equity awards for Cyclerion equity awards upon the Separation as part of the equity conversion.

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The total grant fair value of options granted during the years ended December 31, 2022 and 2021 was $ 1.5 million and $ 2.6 million, respectively.

The total intrinsic value of options exercised for the years ended December 31, 2021 and 2020 was $ 0.1 million and $ 0.1 million, respectively.

The total intrinsic value of options exercised for the year ended December 31, 2021 was $ 0.1 million.

There were no options exercised during the year ended December 31, 2022.

As of December 31, 2022, the unrecognized share-based compensation expense, net of estimated forfeitures, related to all unvested time-based stock options held by the Company’s employees is $ 2.1 million and the weighted average period over which that expense is expected to be recognized is 3.3 years.

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For the years ended December 31, 2022 and 2021, expected volatility was estimated using an average of the historical volatility of the common stock of a group of similar companies that were publicly traded.

Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available.

The Company has granted to certain employees performance based options to purchase shares of common stock.

These options are subject to performance based milestone vesting.

During the year ended December 31, 2021 , 50,000 shares vested as a result of performance milestone achievements and no shares vested during the year ended December 31, 2020.

During the year ended December 31, 2022 , there were no shares that vested as a result of performance milestone achievements and 50,000 shares vested during the year ended December 31, 2021 .

The Company recorded a de minimis and no share-based compensation expense related to these performance-based options for the years ended December 31, 2022, and 2021, respectively.

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The Company does not reverse expense recognized if the share price target(s) are ultimately not achieved but expense is reversed when a stock award recipient has a break in service prior to the completion of the derived service period.

As of December 31, 2021, there was $ 0.2 million of unrecognized compensation costs related to stock options containing market conditions, which is expected to be recognized over a weighted-average period of 2.17 years.

As of December 31, 2022, there was $ 0.1 million of unrecognized compensation costs related to

stock options containing market conditions, which is expected to be recognized over a weighted-average period of 1.2 years.

A summary of stock awards containing market conditions activity for the years ended December 31, 2022 and 2021 is as follows:

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Net deferred tax assets

Management of Cyclerion has evaluated the positive and negative evidence bearing upon the possible realization of its deferred tax assets.

Management has evaluated the positive and negative evidence bearing upon the possible realization of its deferred tax assets.

Management has considered the Company's history of operating losses, in addition to the expected timing of the reversal of existing temporary differences and concluded, in accordance with the applicable accounting standards, that it is more likely than not that the Company will not realize the benefit of its deferred tax assets.

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The valuation allowance increased by approximately $ 12.5 million during the year ended December 31, 2022 primarily due to increases in capitalized research and development expenses, net operating losses, tax credit carryforwards and deferred tax assets related to share-based compensation.

Cyclerion did not generate net operating loss carryforwards or tax credit carryforwards available for its use until its inception and operation as a standalone legal entity.

The Company did not generate net operating loss carryforwards or tax credit carryforwards available for its use until its inception and operation as a standalone legal entity.

At December 31, 2022 and 2021 , Cyclerion has federal net operating loss carryforwards of approximately $ 172 million and $ 160 million, respectively, to offset future federal taxable income that will be carried forward indefinitely until utilized.

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There are no current federal or state income tax audits in progress.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law.

The CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic, which among other things contains numerous income tax provisions, some of which are effective retroactively for fiscal years ended before the date of enactment.

The CARES Act includes certain tax relief provisions, including modifications to the NOL rules, including a provision to carryback losses from 2018 –

2021 tax years, temporary changes to business interest expense disallowance rules (IRC §163(j)), qualified improvement property, payroll tax delays/ credits, and several other tax and non-tax benefits.

These tax provisions should have no significant income tax ramifications for Cyclerion, but the Company will continue to monitor any changes and guidance in order to consider potential opportunities.

The CARES Act also created a program called the Paycheck Protection Program to be administered by the SBA.

Cyclerion received $ 3.5 million of loan proceeds on April 21, 2020 under the PPP, as fully described in Note 2, Summary of Significant Accounting Policies .

Defined Contribution Plan

In 2019, Cyclerion adopted a defined contribution 401(k) Savings Plan similar to the plan in place at Ironwood.

The plan assets under the Ironwood defined contribution 401(k) Savings Plan were transferred to the Cyclerion plan.

Subject to certain IRS limits, eligible employees may elect to contribute from 1 % to 100 % of their

compensation.

Cyclerion contributions to the plan are at the sole discretion of the board of directors.

Currently, Cyclerion provides a matching contribution of 75 % of the employee’s contributions, up to $ 6,000 annually.

The Company has established a defined contribution 401(k) Savings Plan which allows eligible employees to contribute from 1 % to 100 % of their compensation, subject to certain IRS limits.

The Company's contributions to the plan are at the sole discretion of the board of directors.

Currently, the Company provides a matching contribution of 75 % of the employee’s contributions, up to $ 6,000 annually.

Included in compensation expense is approximately $ 0.2 million and $ 0.3 million related to the defined contribution 401(k) Savings Plan for the years ended December 31, 2022 and 2021 , respectively.

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2022 Workforce Reduction

On November 5, 2020, the Company began a reduction of its current workforce by forty-eight (48) full-time employees to align its resources with its current priorities of focusing on the MELAS study, the planned ADv study and further characterization of CY6463 novel pharmacology.

The Company recorded total costs related to the 2020 Workforce Reduction were approximately $ 5.0 million including approximately $ 0.1 million in stock-based compensation from the modification of certain share-based equity awards.

The Company reduced its workforce by thirty-one (31) employees in the fourth quarter of 2020 and recorded approximately $ 4.1 million of severance and benefits costs in accordance with ASC Topic 420, Exit or Disposal Cost Obligations, or ASC 420, including a de minimis amount of stock-based compensation expense, for the year ended December 31, 2020.

The workforce reduction was completed by the end of the first quarter of 2021.

On October 6, 2022, the Company began a reduction of its current workforce by thirteen (13) full-time employees to align its resources with its current priorities of focusing on a mitochondrial disease-focused strategy.

The workforce reduction was completed in the fourth quarter of 2022.

The Company recorded total costs related to the 2022 Workforce Reduction were approximately $ 1.3 million, including a de minimis amount of stock-based compensation from the modification of certain share-based equity awards.

The following table summarizes the accrued liabilities activity recorded in connection with the reduction in workforce for the year ended December 31, 2022 (in thousands):

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Akebia License Agreement

On June 3, 2021, the Company and Akebia entered into a License Agreement (the “License Agreement”) relating to the exclusive worldwide license by the Company to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical products containing the pharmaceutical compound known as praliciguat and other related products and forms thereof enumerated in the License Agreement (collectively, the “Products”).

Pursuant to the License Agreement, Akebia will be responsible for all future research, development, regulatory, and commercialization activities for the Products.

Akebia paid a $ 3.0 million up-front payment to the Company upon signing of the License Agreement and the Company is eligible to receive additional milestone cash payments of up to $ 12.0 million in the next 18 months.

Further milestone cash payments by Akebia are scheduled in the License Agreement based on the initiation of phase 3 clinical trials in the U.S.

On June 3, 2021, the Company and Akebia entered into a License Agreement (the “Akebia License Agreement”) relating to the exclusive worldwide license by the Company to Akebia of our rights to the development, manufacture, medical affairs and commercialization of pharmaceutical products containing the pharmaceutical compound known as praliciguat and other related products and forms thereof enumerated in the

License Agreement (collectively, the “Products”).

Pursuant to the Akebia License Agreement, Akebia will be responsible for all future research, development, regulatory, and commercialization activities for the Products.

Further milestone cash payments by Akebia are scheduled in the Akebia License Agreement based on the initiation of Phase 3 clinical trials in the U.S.

for Products for first and second indication, for FDA approvals, for approvals in certain other major markets, and for certain sales milestones.

In addition to these cash milestone payments, Akebia will pay the Company tiered royalty payments on net sales in certain major markets at percentages ranging from the mid-single digits to the high-teens, subject to certain reductions and offsets.

Pursuant to the License Agreement, the Company determined the License Agreement represents a service arrangement under the scope of ASC 606.

Given the reversion of the rights under the License Agreement represents a penalty in substance for a termination by Akebia, the contract term would be the stated term of the License Agreement.

Pursuant to the Akebia License Agreement, the Company determined the Akebia License Agreement represents a service arrangement under the scope of ASC 606.

Given the reversion of the rights under the Akebia License Agreement represents a penalty in substance for a termination by Akebia, the contract term would be the stated term of the License Agreement.

The Company determined that the grant of license to our patents and trademarks, know how transfer, the assignment of regulatory submissions and trademarks and additional knowledge transfer assistance obligations represent a single promise and performance obligation to be transferred to Akebia over time due to the nature of the promises in the contract.

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Akebia Supply Agreement

On August 3, 2021, the Company and Akebia entered into a Supply Agreement (the “Supply Agreement”) relating to the manufacturing by the Company of the Initial Supply of the Drug Product and placebo ("Initial Supply") for Akebia's use pursuant to the License Agreement.

Akebia will pay the Company for the manufacturing costs at mutually agreed upon rates.

The Company determined the Supply Agreement has stand-alone value under the scope of ASC 606 and should not be combined with the License Agreement.

The Company determined the Supply Agreement has stand-alone value under the scope of ASC 606 and should not be combined with the Akebia License Agreement.

Given that the Supply Agreement can be terminated at any time without cause with 30 days notice, the Company deemed the Supply Agreement to be a month-to-month contract.

The manufacturing of the Initial Supply by the Company represents a single performance obligation and consideration related to the manufacturing costs will be recognized over time as costs are incurred based on an input method.

The Company recorded $ 0.3 million amount as revenue from the Supply Agreement for the year ended December 31, 2021.

The Company recorded approximately $ 0.3 million and approximately $ 0.3 million, respectively, for the years ended December 31, 2022 and 2021 , as revenue from the Supply Agreement.

Grant Revenue

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Under ASC 958-605, revenues will be recognized as the Company incurs expenses related to the PTC Grant.

The Company incurred approximately $ 0.6 million of allowable expenses and recognized a corresponding amount of grant revenue for the year ended December 31, 2021.

The Company incurred approximately $ 1.3 million and approximately $ 0.6 million of allowable expenses and recognized a corresponding amount of grant revenue for the years ended December 31, 2022 and 2021 .

Subsequent Events

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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 9A. Controls and Procedures