Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement and revision of the financial statements presented in the Original Report discussed in the Explanatory Note, Item 9A. Controls and Procedures and Note 13 of the Notes to Consolidated Financial Statements included in this Amendment No. 2. Other than as disclosed in the Explanatory Note and with respect to the impact of the Restatement, no other information in this Item 7 has been amended and this Item 7 does not reflect any events occurring after the Original Report. For further information, please refer to the Explanatory Note, Item 9A. Controls and Procedures and Note 13 of the Notes to Consolidated Financial Statements included in this Amendment No. 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of the Company. The Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2023. In addition to historical information, this Annual Report on Form 10-K, as amended by Amendment No. 1 and this Amendment No 2. (together, the Annual Report on Form 10-K”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. See “Special Note Regarding Forward-Looking Statements” in this report. Our actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under the Part I, Item 1A. Risk Factors section and elsewhere in this report, as well as, in other reports and documents we file with the Securities and Exchange Commission from time to time. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.
RECENT DEVELOPMENTS
Strategic Updates
In January 2023, we announced our decision to prioritize resources on our kidney transplantation programs, discontinue the Company funded islet cell transplantation program and the IgAN program. We also remain committed to further progressing ALS clinical development and are working with key stakeholders on potential next steps to do so. However, we are unable to continue our clinical development of tegoprubart for people with ALS without additional financing.
Financing Activities
2021 Equity Distribution Agreement
On March 31, 2021, we filed a registration statement on Form S-3 containing a prospectus and prospectus supplement under which we may offer and sell up to $75.0 million in shares of our common stock, from time to time, pursuant to an open market sale agreement with Jefferies LLC and by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933 (the “ATM Program”). Pursuant to the “baby shelf rules” promulgated by the SEC, if our public float is less than $75.0 million as of specified measurement periods, the number of shares of common stock that may be offered and sold by us under a Form S-3 registration statement, including pursuant to the ATM Program, in any twelve-month period is limited to an aggregate amount that does not exceed one-third of the Company’s public float. As of December 31, 2023, due to the SEC’s “baby shelf rules,” we were permitted to sell up to $12.3 million of shares of common stock pursuant to the ATM Program. We will remain subject to the “baby shelf rules” under the Form S-3 registration statement until such time as our public float exceeds $75.0 million. During the years ended December 31, 2023 and 2022, no shares were sold under the Prospectus. This Form S-3 registration statement pursuant to which the ATM Program is registered will expire in May 2024, and no shares of common stock may be sold under the ATM Program after that date.
September 2021 Exchange Agreement
On September 21, 2021, we issued warrants exercisable for 298,692 shares of common stock in exchange for warrants exercisable for 5,376.456 shares of Series X 1 Non-Voting Convertible Preferred Stock previously issued as part of the Anelixis merger. We replaced these Series X 1 Non-Voting Convertible Preferred Stock warrants for the outstanding warrants issued by Anelixis that were not settled upon completion of the merger. For information regarding the terms of our Series X 1
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Non-Voting Convertible Preferred Stock, see Note 10 of the Notes to Financial Statements included in this Annual Report on Form 10-K.
2022 Exchange Agreement
On January 11, 2022, we entered into an exchange agreement (the “Series X 1 Exchange Agreement”) with Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., Biotechnology Value Trading Fund OS, L.P., MSI BVF SPV, L.L.C. (collectively, the “BVF Exchanging Stockholders”), pursuant to which the Series X 1 Exchanging Stockholders exchanged (the “Series X 1 Exchange”) 550,000 shares of our common stock for 9,899.99 shares of Series X 1 Non-Voting Convertible Preferred Stock. For information regarding the terms of our Series X 1 Non-Voting Convertible Preferred Stock, see Note 10 of the Notes to Financial Statements included in this Annual Report on Form 10-K.
2023 Securities Purchase Agreement
On April 28, 2023, we entered into an agreement (the “Securities Purchase Agreement”) with certain institutional and accredited investors (the “Purchasers”), pursuant to which we agreed to issue and sell to the Purchasers in a Private Placement (i) in an initial closing, (a) an aggregate of 15,151,518 shares (the “Shares”) of our common stock, $0.001 par value per share, or pre-funded warrants in lieu thereof (the “Pre-Funded Warrants”), and (b) common stock warrants exercisable into an aggregate of 15,151,518 shares of common stock (or Pre-Funded Warrants in lieu thereof) (the “Common Warrants” and, together with the Pre-Funded Warrants, the “Warrants”); (ii) in a second closing, upon the satisfaction of specified conditions set forth in the Securities Purchase Agreement, an aggregate of 20,202,024 shares of common stock (or Pre-Funded Warrants); and (iii) in a third closing, upon the satisfaction of specified conditions set forth in the Securities Purchase Agreement, an aggregate of 25,252,530 shares of common stock (or Pre-Funded Warrants), in each case subject to customary adjustments as provided in the Securities Purchase Agreement, Pre-Funded Warrant agreement or Common Warrant agreement, as applicable. Each Common Warrant has an exercise price of $3.00 per share and expires five years after issuance. The Pre-Funded Warrants are exercisable immediately and until exercised in full, with an exercise price of $0.001 per share. The Shares, the Warrants, and the shares of common stock issuable upon the exercise of the Warrants, have not been registered under the Securities Act of 1933, as amended, and were offered pursuant to the exemption from registration provided in Section 4(a)(2) under the Securities Act of 1933, as amended, and Rule 506(b) promulgated thereunder.
On May 5, 2023, the initial closing occurred and we received $35.0 million, or net proceeds of approximately $33.0 million after deducting offering costs, in exchange for 8,730,168 shares of common stock and Pre-Funded Warrants to purchase 6,421,350 shares of common stock. We may receive an additional $105.0 million upon sale of the shares to be issued in the second and third closings, subject to achieving specified clinical development milestones and volume weighted average share price levels and trading volume conditions, and an additional $45.5 million assuming the exercise of all Common Warrants issued in the initial closing of the Private Placement.
In connection with the Private Placement, we filed on May 18, 2023, a registration statement on Form S-3 (the “Registration Statement”) with the SEC to register for resale the Shares and the shares of common stock issuable upon the exercise of the Warrants. The Registration Statement became effective on June 2, 2023.
The Company concluded that the Common Warrants, and the potential issuance of Pre-Funded Warrants in lieu of additional shares of common stock in the second and third closings of the Private Placement as specified in the Securities Purchase Agreement (the “Subsequent Closing Warrants”) do not meet the conditions to be classified as equity instruments under Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity,” and must instead be recorded as liabilities on the Company’s consolidated balance sheets at their fair value and remeasured at fair value for each subsequent reporting period.
The Common Warrants have a strike price of $3.00 per share. At the date of their issuance, the fair value of the Common Warrants was $23.8 million utilizing Black-Scholes with the following assumptions: expected term of 5 years, risk-free interest rate of 3.51%, volatility of 92% and a dividend yield of zero. As of the balance sheet date of December 31, 2023, the value of the Common Warrants was $17.1 million.
The Subsequent Closing Warrants are comprised of unique instruments for the second closing (“Second Closing Warrants”) and third closing (“Third Closing Warrants”). Both Subsequent Closing Warrants have a strike price of $3.00 per share. At the date of their issuance, fair value of the Second Closing Warrants and Third Closing Warrants was $35.8 million and $44.8 million, respectively, utilizing Black-Scholes with the following assumptions: expected term of 6.5 years, risk-free
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interest rate of 3.49%, volatility of 88% and a dividend yield of zero. As of the balance sheet date of December 31, 2023, the value of the Second Closing Warrants and Third Closing Warrants was $26.3 million and $32.8 million, respectively.
2023 Conversion Agreement of Non-Voting Convertible Preferred Stock
On May 16, 2023, Cormorant Global Healthcare Master Fund LP provided us notice of its intention to convert (i) 1,782 shares of Series X Non-Voting Convertible Preferred Stock for 99,000 shares of common stock in accordance with the Certificate of Designation of Preferences, Rights and Limitations of the Series X Non-Voting Convertible Preferred Stock, and (ii) 7,883.586 shares of Series X 1 Non-Voting Convertible Preferred Stock for 437,977 shares of common stock in accordance with the Certificate of Designation of Preferences, Rights and Limitations of the Series X 1 Non-Voting Convertible Preferred Stock. The conversion was completed on May 23, 2023. For information regarding the terms of our Series X and Series X 1 Non-Voting Convertible Preferred Stock, see Note 10 of the Notes to Financial Statements included in this Annual Report on Form 10-K.
2023 Exercise of Pre-Funded Warrants
On July 10, 2023, Armistice Capital Master Fund Ltd. (the “Exercising Stockholder”), exercised Pre-Funded Warrants to purchase 501,197 shares of common stock at an exercise price of $0.001 per share, which were issued in conjunction with the Securities Purchase Agreement. On July 14, 2023, we issued 501,197 shares of common stock to the Exercising Stockholder in accordance with such exercise.
On November 2, 2023, Armistice Capital Master Fund Ltd. (the “Exercising Stockholder”), exercised Pre-Funded Warrants to purchase 653,000 shares of common stock at an exercise price of $0.001 per share, which were issued in conjunction with the Securities Purchase Agreement. On November 6, 2023, we issued 653,000 shares of common stock to the Exercising Stockholder in accordance with such exercise.
Common Stock Warrants
As of December 31, 2023, 21,564,302 warrants were exercisable into common stock (after rounding for fractional shares and subject to beneficial ownership conversion blockers). The shares of common stock underlying the registered direct and private placement warrants are registered for offer and sale under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to our effective registration statements on Forms S-1.
Series X 1 Preferred Stock Warrants
As of December 31, 2023, 50,207.419 warrants were exercisable into Series X 1 Non-Voting Convertible Preferred Stock which are convertible into 2,789,301 shares of common stock (after rounding for fractional shares and subject to beneficial ownership conversion blockers). For information regarding the terms of our Series X 1 Non-Voting Convertible Preferred Stock, see Note 10 of the Notes to Financial Statements included in this Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES
Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities as of the date of the financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.
Research and Development Expenses
Research and development expenses include personnel and facility-related expenses, outside contracted services including clinical trial costs, manufacturing and process development costs, research costs and other consulting services and non-cash stock-based compensation. Research and development costs are expensed as incurred. Amounts due under contracts with third parties may be either fixed fee or fee for service, and may include upfront payments, monthly payments and
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payments upon the completion of milestones or receipt of deliverables. Non-refundable advance payments under agreements are capitalized and expensed as the related goods are delivered or services are performed.
The Company’s contracts with third parties to perform various clinical trial activities in the on-going development of potential products. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows to its vendors. Payments under the contracts depend on factors such as the achievement of certain events, successful enrollment of patients, and completion of portions of the clinical trial or similar conditions. The Company’s accrual for clinical trials is based on estimates of the services received and efforts expended pursuant to contracts with clinical trial centers and clinical research organizations. These contracts may be terminated by the Company upon written notice and the Company is generally only liable for actual effort expended by the organizations to the date of termination, although in certain instances the Company may be further responsible for termination fees and penalties. The Company estimates its research and development expenses and the related accrual as of each balance sheet date based on the facts and circumstances known to the Company at that time. There have been no material adjustments to the Company’s prior period accrued estimates for clinical trial activities through December 31, 2023.
Stock-Based Compensation
The Company recognizes compensation expense for all stock-based awards based on the grant-date estimated fair value.
The fair value of stock options is determined using the Black-Scholes option pricing model, using assumptions that are subjective and require significant judgment and estimation by management. The fair value of stock options is determined using the Black-Scholes option pricing model, using assumptions which are subjective and require significant judgment and estimation by management. The risk-free rate assumption was based on observed yields from governmental zero-coupon bonds with an equivalent term. The expected volatility assumption was based on historical volatilities of a group of comparable industry companies whose share prices are publicly available. The peer group was developed based on companies in the pharmaceutical industry. The expected term of stock options represents the weighted-average period that the stock options are expected to be outstanding. Because the Company does not have historical exercise behavior, the Company determined the expected life assumption using the simplified method for stock options granted to employees, which is an average of the options ordinary vesting period and the contractual term. The expected dividend assumption was based on the Company’s history and expectation of dividend payouts. The Company has not paid and does not expect to pay dividends at any time in the foreseeable future. The Company recognizes forfeitures on an actual basis and as such did not estimate forfeitures to calculate stock-based compensation.
Restricted Stock Units (“RSU”) are measured and recognized based on the quoted market price of our common stock on the date of grant.
Warrant Liabilities
Warrants are accounted for as either derivative liabilities or as equity instruments depending on the specific terms of the underlying agreement. Warrants that are equity-classified instruments and recorded in additional paid-in capital at issuance are not subject to remeasurement. The Common Warrants and the Subsequent Closing Warrants issued in April 2023 are liability classified and recorded at fair value using the Black-Scholes option-pricing model at issuance, with any subsequent changes in fair value recognized in the consolidated statements of operations. We periodically evaluate changes in facts and circumstances that could impact the classification of warrants.
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RESULTS OF OPERATIONS
Comparison of the Years Ended December 31, 2023 and 2022
The following table provides comparative results of operations for the years ended December 31, 2023 and 2022 (in thousands):
Year Ended
December 31,
2023
2022
$ Variance
% Variance
(As Restated)
Operating expenses:
Research and development
$
30,312
$
27,080
$
3,232
12
%
General and administrative
12,688
12,700
(12
)
0
%
Goodwill impairment
—
48,648
(48,648
)
-100
%
Total operating expenses
43,000
88,428
(45,428
)
-51
%
Loss from operations
(43,000
)
(88,428
)
45,428
51
%
Other income, net
2,674
462
2,212
479
%
Change in fair value of warrant liabilities and fair value of financial instruments issued in excess of proceeds
(76,211
)
—
(76,211
)
100
%
Net loss and comprehensive loss
$
(116,537
)
$
(87,966
)
$
(28,571
)
-32
%
Research and Development Expenses
Research and development expenses increased $3.2 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase was primarily due to higher clinical development expenses, primarily with external CROs of $5.0 million, and an increase in personnel related costs of $1.2 million, due to increased headcount. The increase was partially offset by a decrease in stock-based compensation of $1.7 million, lower manufacturing costs of $1.0 million, related to the production of clinical trial materials, and a decrease in consulting expenses of $0.3 million.
General and Administrative Expenses
General and administrative expenses were consistent for the years ended December 31, 2023 and 2022.
Goodwill Impairment
The Company recognized $48.6 million of goodwill impairment for the year ended December 31, 2022. No impairment was recorded for the year ended December 31, 2023.
Other Income, Net
The $2.2 million increase in other income, net was primarily due to an increase in interest income associated with higher interest rates on our cash and cash equivalents and short-term investments for the year ended December 31, 2023.
Change in fair value of warrant liabilities and fair value of financial instruments issued in excess of proceeds
The $76.2 million increase in change in fair value of warrant liabilities and fair value of financial instruments issued in excess of proceeds, represents an increase in the fair value of the Common Warrants and the Subsequent Closing Warrants since issuance.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Liquidity
We do not have any approved products for commercial sale and have never generated revenue from product sales and have incurred significant net losses since our inception and expect to continue to incur net operating losses for the foreseeable future. We do not expect to receive any revenue from any product candidates that we develop unless and until we obtain
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regulatory approval and commercialize our product candidates or enter into collaborative arrangements with third parties. We currently have no credit facility or committed sources of capital.
As of December 31, 2023, we had cash and cash equivalents and short-term investments of approximately $51.1 million. To date, our operations have been financed primarily by net proceeds from the sale of preferred and common stock, and the sale of warrants. Additionally, in view of our expectation to incur significant losses for the foreseeable future we will be required to raise additional capital resources in order to fund our operations, although the availability of, and the Company’s access to, such resources is not assured. Accordingly, management believes that there is substantial doubt regarding our ability to continue operating as a going concern. We have based this estimate on assumptions that may prove to be incorrect, and we could utilize our available resources sooner than we currently expect. In addition, we may receive up to an additional $105.0 million in tranche financing in a second and a third closing of the Private Placement, subject to achieving specified clinical development milestones and volume weighted average share price levels and trading volume conditions, and an additional $45.5 million assuming the exercise of all Common Warrants issued in the initial closing of the Private Placement. There is no assurance that the milestones required for the second and third closings will be satisfied or that the Common Warrants will be exercised. If these events do not occur or we are unable to secure additional capital or to do so on acceptable terms, we will be forced to significantly alter our business strategy, substantially curtail our current operations, or liquidate and cease operations altogether. Further, from time to time, our operating plans may change, and we may need additional funds to meet operational needs for clinical studies sooner than planned or to fund additional clinical studies. For example, we do not currently have sufficient liquidity to fund the continued clinical development of tegoprubart for people with ALS without additional financing, notwithstanding the positive topline results of our Phase 2a study of tegoprubart for adult subjects with ALS. We will continue to monitor our liquidity position in light of various financing alternatives and may pursue additional financing or other alternatives to allow us to continue our product development. However, there can be no assurance such financing or other alternatives will be available to us on acceptable terms, or at all.
Material Cash Requirements
Our primary use of cash is to fund operating expenses, which consist of clinical research and development expenses, manufacturing expenses, legal and compliance expenses, compensation and related expenses, and general overhead costs. Cash used to fund operating expenses is impacted by the timing of when we pay or prepay these expenses.
We expect our expenses to increase in connection with our ongoing activities, particularly as we expand our clinical program with tegoprubart, continue the research and development of, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution.
We will continue to require additional financing in order to advance our drug product through clinical development, to manufacture, obtain regulatory approval for and to commercialize our product candidates, to develop, acquire or in-license other potential product candidates, and to fund operations for the foreseeable future. Therefore, we will seek to raise additional capital through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. The ability to raise substantial additional capital will depend on many factors, including:
• the initiation, progress, timing, costs and results of our ongoing and future clinical trials of tegoprubart, including as such activities may be adversely impacted by global events or macroeconomic conditions;
• the impact of global macroeconomic trends and uncertainties, which continue to experience volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, rising interest rates and uncertainty about economic stability;
• the number and scope of indications we decide to pursue for tegoprubart development;
• the cost, timing and outcome of regulatory review of any biologics license application, or BLA, we may submit for tegoprubart;
• the costs and timing of manufacturing for tegoprubart, if approved;
• the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
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• our efforts to enhance operational systems and our ability to attract, hire and retain qualified personnel, including personnel to support the development of tegoprubart;
• the costs associated with being a public company;
• the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
• the extent to which we acquire or in-license other product candidates and technologies; and
• the cost associated with commercializing tegoprubart, if approved for commercial sale.
Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding. As a result of any of the foregoing factors, adequate additional funding may not be available to us on acceptable terms on a timely basis, or at all. The severity and duration of any such impacts cannot be predicted. Any such failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies or cause us to delay our clinical development plans, research and development programs or commercialization efforts, out-license intellectual property rights to our product candidates or sell unsecured assets, or a combination of the above. Any of these actions could materially harm our business. As a result of the shares of our common stock issued in the initial closing or that may be issuable in the second or third closings of the Private Placement or upon the exercise of the Pre-Funded Warrants or the Common Warrants, our stockholders’ ownership interests will be diluted. To the extent that we raise additional capital through the sale of additional equity or convertible debt securities in the future, our stockholders’ ownership interests may be further diluted, and the terms of these securities may also include liquidation or other preferences that adversely affect our stockholders’ rights. Debt financing, if available, would result in fixed payment obligations and may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. Please see the section of this Annual Report titled “Risk Factors” for additional risks associated with our substantial capital requirements and the challenges we may face in raising capital.
On March 31, 2021, we filed a registration statement on Form S-3 containing a prospectus and prospectus supplement under which the Company may offer and sell up to $75.0 million in shares of its common stock, from time to time, pursuant to an open market sale agreement with Jefferies LLC and by any method deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933 (the “ATM Program”). Pursuant to the “baby shelf rules” promulgated by the SEC, if the Company’s public float is less than $75.0 million as of specified measurement periods, the number of shares of common stock that may be offered and sold by the Company under a Form S-3 registration statement, including pursuant to the ATM Program, in any twelve-month period is limited to an aggregate amount that does not exceed one-third of the Company’s public float. As of December 31, 2023, the Company was permitted to sell up to $12.3 million of shares of common stock pursuant to the ATM Program under the SEC's “baby shelf" rules. The Company will remain subject to the “baby shelf ” rules under the Form S-3 registration statement until such time as its public float exceeds $75.0 million. Through December 31, 2023, no shares of common stock have been sold under the ATM Program. This Form S-3 registration statement pursuant to which the ATM Program is registered will expire in May 2024, and no shares of common stock may be sold under the ATM Program after that date.
We lease our office facilities in Irvine, California and Burlington, Massachusetts under non-cancelable operating leases that expire in December 2024 and November 2024, respectively. As of December 31, 2023, we expect to make total lease payments of $0.4 million through December 2024.
We enter into contracts in the normal course of business with third-party contract organizations for preclinical and clinical studies, manufacture and supply of our preclinical and clinical materials and providing other services and products for operating purposes. Contracts for preclinical and clinical studies and other services generally provide for termination following a certain period after notice, and therefore we believe that our non-cancelable obligations under these agreements are not material. We do not have any long-term manufacturing and supply agreements with our third-party contract manufacturers but enter into specific contracts on an as needed basis for individual batch production runs.
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Cash Flows
The following table provides a summary of our net cash flow activity for the years ended December 31, 2023 and 2022 (in thousands):
Year Ended
December 31,
2023
2022
(As Restated)
Net cash used in operating activities
$
(39,527
)
$
(28,424
)
Net cash used in investing activities
(45,287
)
—
Net cash provided by financing activities
33,017
—
Net change in cash and cash equivalents
$
(51,797
)
$
(28,424
)
Operating Activities
For the year ended December 31, 2023, operating activities used $39.5 million of cash, which primarily consisted of our net loss of $116.5 million. Operating activities include adjustments for certain non-cash charges including $76.2 million due to a change in fair value of warrant liabilities and fair value of financial instruments issued in excess of proceeds, $6.5 million of stock-based compensation, and $0.4 million of operating lease amortization, partially offset by accretion of investment discounts of $1.2 million. Net operating assets and liabilities changed by $4.9 million, primarily driven by a decrease in accounts payable and accrued expenses of $2.6 million, a decrease in operating lease liability of $0.4 million and an increase in prepaid expenses and other assets of $2.0 million.
For the year ended December 31, 2022, operating activities used $28.4 million of cash, which primarily consisted of our net loss of $88.0 million. Operating activities include adjustments for certain non-cash charges including $48.6 million of goodwill impairment, $8.1 million of stock-based compensation, and $0.4 million of operating lease amortization. Net operating assets and liabilities changed $2.4 million, primarily driven by an increase in accounts payable and accrued expenses of $2.1 million and a decrease in prepaid expenses and other assets of $0.7 million and a decrease in operating lease liability of $0.4 million.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2023 was $45.3 million. We purchased $78.3 million of short-term investments, which was partially offset by the maturing of $33.0 million of our short-term investments during the year. There was no cash provided by or used in the investing activities for the year ended December 31, 2022.
Financing Activities
Net cash provided by financing activities for the year ended December 31, 2023 consisted of the Private Placement, totaling $33.0 million in net proceeds from the sale of 8.7 million shares of common stock and 6.4 million pre-funded warrants to purchase common stock. There was no cash provided by or used in financing activities for the year ended December 31, 2022.
Item 7A. Quantitative and Qualitati ve Disclosures About Market Risk.
Per §229.305 of Regulation S-K, the Company, designated a Smaller Reporting Company as defined in §229.10(f)(1) of Regulation S-K, is not required to provide the disclosure required by this Item.
Item 8. Financial Statement s and Supplementary Data.
The Report of Independent Registered Public Accounting Firm, our consolidated financial statements and accompanying notes listed under Part IV, Item 15. Exhibits, Financial Statement Schedules of this Annual Report on Form 10-K are set forth beginning on page F-1 immediately following the signature page hereof and incorporated by reference herein.
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Item 9. Changes in and Disagreements with Accoun tants on Accounting and Financial Disclosure.
Not applicable
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.