What changed in this filing

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Item 1. Financial Statements

2022-05-12 compared with 2021-11-12 · 98 added, 253 removed, 269 unchanged (57% of the section changed)

3 unchanged sentences

(In thousands, except share data)

September 30,

Current assets:

10 unchanged sentences

Total current liabilities

Deferred tax liabilities

Deferred tax liability

Non-current operating lease liability

3 unchanged sentences

Series X 1 non-voting convertible preferred stock, $ 0.001 par value, 515,000 shares

108,070 shares issued and outstanding at September 30, 2021 and

117,970 and 108,070 shares issued and outstanding at March 31, 2022

and December 31, 2021, respectively

Series X non-voting convertible preferred stock, $ 0.001 par value, 10,000 shares

6,204 shares issued and outstanding at March 31, 2022 and

December 31, 2021

Series X preferred stock, $ 0.001 par value, 10,000 shares authorized;

shares issued and outstanding at September 30, 2021 and December 31, 2020,

Common stock, $ 0.001 par value, 200,000,000 shares authorized at September 30, 2021

Common stock, $ 0.001 par value, 200,000,000 shares authorized at March 31, 2022

and December 31, 2021;

13,756,788 and 14,306,788 shares issued and

outstanding at September 30, 2021 and December 31, 2020, respectively

outstanding at March 31, 2022 and December 31, 2021, respectively

Additional paid-in capital

7 unchanged sentences

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

Ended March 31,

Operating expenses

1 unchanged sentence

General and administrative

Restructuring expense

Total operating expenses

Loss from operations

Other income, net

Warrant inducement expense

Other income/(expense), net

Loss before income tax benefit

2 unchanged sentences

Net loss per share, basic and diluted

Weighted-average common shares outstanding,

basic and diluted

Weighted-average common shares outstanding, basic and diluted

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands, except share data)

Series X 1 Non-Voting Convertible

Preferred Stock

Series X 1 Non-Voting Convertible Preferred Stock

Series X Preferred Stock

Series X Non-Voting Convertible Preferred Stock

Balance as of December 31, 2021

Cancellation of common stock in connection

with exchange for preferred stock

Cancellation of common stock in connection

with exchange for warrants

Stock-based compensation

Stock options exercised

Net loss and other comprehensive loss

Balance as of September 30, 2021

Balance as of June 30, 2021

with exchange for X 1 non-voting convertible preferred stock

Stock-based compensation

Stock options exercised

Net loss and other comprehensive loss

Balance as of September 30, 2021

Balance as of March 31, 2022

Balance as of December 31, 2020

Issuance of common stock in connection with

exercise of warrants, net of issuance costs

Issuance of common stock in connection with

conversion of preferred stock

Issuance of common stock in connection with

vesting of restricted stock units

Issuance of common stock in connection with acquisition

Cancellation of common stock in connection

with exchange for preferred stock

Issuance of preferred stock in connection with acquisition

Issuance of preferred stock in connection with PIPE

transaction, net of issuance costs

Fair value of options assumed in acquisition

Fair value of warrants assumed in acquisition

Warrant inducement expense

Stock-based compensation

Net loss and other comprehensive loss

Balance as of September 30, 2020

Balance as of June 30, 2020

Issuance of common stock in connection with

cashless exercise of warrants

Issuance of common stock in connection with

vesting of restricted stock units

Issuance of common stock in connection with acquisition

Issuance of preferred stock in connection with acquisition

Issuance of preferred stock in connection with PIPE

transaction, net of issuance costs

Fair value of options assumed in acquisition

Fair value of warrants assumed in acquisition

Cancellation of common stock in connection

with exchange for warrants

Stock-based compensation

Net loss and other comprehensive loss

Balance as of September 30, 2020

Balance as of March 31, 2021

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(In thousands)

For the Nine Months

Ended September 30,

For the Three Months

Ended March 31,

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Amortization of operating lease asset

Warrant inducement expense

Stock-based compensation

5 unchanged sentences

Net cash used in operating activities

Investing activities

Cash and cash equivalents received from acquisition

Net cash provided by investing activities

Financing activities

Proceeds from issuances of non-voting preferred stock, net

Proceeds from exercise of warrants, net

Proceeds from exercise of stock options

Offering costs in connection with PIPE transaction

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net change in cash and cash equivalents

2 unchanged sentences

Supplemental disclosure of non-cash investing and financing activities

Common stock exchanged for X 1 preferred stock

Common stock exchanged for warrants

Increase in operating lease asset and liability due to lease modification

Issuance of common stock in acquisition

Issuance of non-voting convertible preferred stock in acquisition

Fair value of options assumed in acquisition

Fair value of warrants assumed in acquisition

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

Eledon Pharmaceuticals, Inc.

(formerly Novus Therapeutics, Inc.) is a clinical stage biopharmaceutical company focused on discovering or acquiring, and then developing life-changing, targeted medicines for persons requiring an organ or cell-based transplant, living with autoimmune disease, or living with amyotrophic lateral sclerosis (“ALS”).

We believe that this approach has the potential to allow us to:

develop more precise therapies with a resulting potential for both increased efficacy and safety;

identify patients and indications more likely to respond to our treatment approaches;

and pursue multiple indications for product candidates.

The Company’s lead compound in development is AT-1501, an IgG1, anti-CD40L antibody with high affinity for CD40 ligand (CD40L, also called CD154), a well-validated biological target with broad therapeutic potential.

AT-1501 is engineered to potentially both improve safety and provide pharmacokinetic, pharmacodynamic, and dosing advantages compared to other anti-CD40 approaches.

The central role of CD40/CD40L signaling in generating pro-inflammatory responses makes it an attractive candidate for therapeutic intervention in autoimmune disease, induction and maintenance of transplant tolerance, and neuroinflammation.

Blocking the activation of the CD40L pathway prevents acute and long-term allograft transplant rejection in multiple animal species and ameliorates disease progression and pathology in preclinical models of autoimmunity and ALS.

(formerly Novus Therapeutics, Inc.) is a clinical stage biopharmaceutical company focused on developing life-changing, targeted medicines for persons living with an autoimmune disease, requiring an organ or cell-based transplant, or living with amyotrophic lateral sclerosis (“ALS”).

Unless otherwise indicated, references to the terms “Eledon,” “our,” “us,” “we”, or the “Company” refer to Eledon Pharmaceuticals, Inc.

and its wholly owned subsidiaries, on a consolidated basis.

On September 14, 2020 , we acquired Anelixis Therapeutics, Inc.

(“Anelixis”), a privately held clinical stage biotechnology company developing a next generation anti-CD40L antibody as a potential treatment for organ and cellular transplantation, autoimmune diseases, and neurodegenerative diseases (see Note 7).

Following the acquisition of Anelixis, we changed our name to Eledon Pharmaceuticals, Inc.

The Company has continued to maintain its corporate headquarters in Irvine, California and has research and development facilities in the Boston, Massachusetts area.

The Company’s lead compound in development is tegoprubart, an anti-CD40L antibody with high affinity for CD40 ligand, a well-validated biological target with broad therapeutic potential.

On September 14, 2020 , Eledon acquired Anelixis Therapeutics, Inc.

The Company has continued to maintain its corporate headquarters in Southern California and has research and development facilities in the Boston, Massachusetts area.

Summary of Significant Accounting Policies

3 unchanged sentences

The accompanying unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited financial statements and accompanying notes of Eledon for the year ended December 31, 2021 included in the Annual Report on Form 10-K filed by the Company with the SEC on March 24, 2022.

The results of operations and comprehensive loss for the three and nine months ended September 30, 2021 are not necessarily indicative of results expected for the full fiscal year or any other future period.

The results of operations and comprehensive loss for the three months ended March 31, 2022 are not necessarily indicative of results expected for the full fiscal year or any other future period.

Principles of Consolidation

10 unchanged sentences

The Company has experienced recurring net losses and negative cash flows from operating activities since its inception.

The Company recorded a net loss of $ 9.8 million and $ 25.7 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2021, the Company had cash and cash equivalents of $ 94.0 million, working capital of $ 91.5 million and an accumulated deficit of $ 106.1 million.

The Company recorded a net loss of $ 9.9 million for the three months ended March 31, 2022.

As of March 31, 2022, the Company had cash and cash equivalents of $ 76.7 million, working capital of $ 76.4 million and an accumulated deficit of $ 124.8 million.

Due to continuing research and development activities, the Company expects to continue to incur net losses into the foreseeable future.

3 unchanged sentences

If the Company issues debt securities to raise additional funding, it would incur additional debt service obligations, it could become subject to additional restrictions limiting its ability to operate its business, and it may be required to further encumber its assets.

At the time of issuance of the condensed consolidated financial statements for the three and nine months ended September 30, 2021, the Company’s management performed an analysis and concluded that the Company had sufficient cash resources to meet its anticipated cash needs through at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements.

At the time of issuance of the condensed consolidated financial statements for the three months ended March 31, 2022, the Company’s management performed an analysis and concluded that the Company had sufficient cash resources to meet its anticipated cash needs through at least the next 12 months from the date of issuance of the accompanying condensed consolidated financial statements .

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make informed estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s unaudited condensed consolidated financial statements and accompanying notes.

The most significant estimates in the Company’s consolidated financial statements relate to stock-based transactions, accruals for liabilities, fair value of assets acquired and liabilities assumed in a business combination, impairment of long lived assets, including goodwill, and other matters that affect the condensed consolidated financial statements and related disclosures.

Actual results could differ materially from those estimates under different assumptions or conditions and the differences may be material to the condensed consolidated financial statements.

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make informed estimates and assumptions that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes.

The most significant estimates in the Company’s consolidated financial statements relate to stock-based compensation, accruals for liabilities , impairment of long-lived assets, including goodwill, and other matters that affect the consolidated financial statements and related disclosures.

Actual results could differ materially from those estimates under different assumptions or conditions and the differences may be material to the consolidated financial statements.

Cash and Cash Equivalents

1 unchanged sentence

The Company considers all liquid investments purchased with an original maturity of three months or less and that can be liquidated without prior notice or penalty to be cash equivalents.

The carrying value of cash equivalents approximates their fair value due to the short-term maturities of these instruments.

Cash equivalents are held for the purpose of meeting short-term liquidity requirements, rather than for investment purposes.

The Company had $ 9.2 million of cash equivalents at September 30, 2021 and December 31, 2020.

The Company had $ 9.2 million of cash equivalents at March 31, 2022 and December 31, 2021.

Concentration of Credit Risk and Other Risks and Uncertainties

As of September 30, 2021 and December 31, 2020, all of the Company’s long-lived assets were located in the United States.

As of March 31, 2022 and December 31, 2021, all of the Company’s long-lived assets were located in the United States.

Financial instruments that are subject to concentration of credit risk consist primarily of cash equivalents.

3 unchanged sentences

Food and Drug Administration (“FDA”) and foreign regulatory agencies before commercial sales can commence.

There can be no assurance that the Company’s products will receive any of these required approvals.

There can be no assurance that its products will receive any of these required approvals.

The denial or delay of such approvals may impact the Company’s business in the future.

In addition, after approval by the FDA, there is still an ongoing risk of adverse events that did not appear during the product approval process.

In addition, after the approval by the FDA, there is still an ongoing risk of adverse events that did not appear during the product approval process.

The Company is subject to risks common to companies in the pharmaceutical industry, including, but not limited to, new technological innovations, clinical development risk, establishment of appropriate commercial partnerships, protection of proprietary technology, compliance with government and environmental regulations, uncertainty of market acceptance of products, product liability, the volatility of its stock price and the need to obtain additional financing.

18 unchanged sentences

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 September 30, 2021.

There have been no material adjustments to the Company’s prior‑period accrued estimates for clinical trial activities during the three months ended March 31, 2022.

Net Loss Per Share

1 unchanged sentence

Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods.

For purposes of the diluted net loss per share calculation, preferred stock, convertible notes and accrued interest, stock options, warrants and restricted stock units are considered to be potentially dilutive securities and are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

For purposes of the diluted net loss per share calculation, preferred stock, convertible notes and accrued interest, stock options, warrants and restricted stock units (“RSUs”) are considered to be potentially dilutive securities and are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

Therefore, basic and diluted net loss per share was the same for the periods presented due to the Company’s net loss position.

Basic weighted average shares outstanding for the three and nine months ended September 30, 2021, include 509,117 shares underlying warrants to purchase common shares.

As the shares underlying these warrants can be issued for

little consideration (an exercise price per share equal to $ 0.001 per share), these shares are deemed to be issued for purposes of basic earnings per share.

Basic weighted average shares outstanding for the three months ended March 31, 2022 include 509,117 shares

underlying warrant s to purchase common shares.

As the shares underlying th ese warrant s can be issued for little consideration (an exercise price per share equal to $ 0.001 per share), these shares are deemed to be issued for purposes of basic earnings per share.

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

Ended March 31,

(In thousands, except share and per share data)

3 unchanged sentences

Weighted-average number of common shares, basic

The computation of diluted earnings per share excludes stock options, warrants, and restricted stock units that are anti-dilutive.

As of September 30, 2021 and 2020, common share equivalents of 674,295 shares and 1,828,531 shares were anti-dilutive, respectively.

The computation of diluted earnings per share excludes stock options, warrants, and RSUs that are anti-dilutive.

As of March 31, 2022 and 2021, common share equivalents of 8,316,473 shares and 119,541 shares were anti-dilutive, respectively.

Stock-based Compensation

5 unchanged sentences

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, it determined the expected life assumption using the simplified method for options granted to employees, which is an average of the options ordinary vesting period and the contractual term.

For stock options granted to the board of directors, the Company determined the expected life assumption using the simplified method as the starting point with an average period of twelve (12) months added to take into account for the extended range of time of 12 to 18 months vested stock options granted to board of directors may be exercised upon termination.

Because the Company does not have historical exercise behavior, it 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.

For stock options granted to the members of the Company’s board of directors (the ”Board”), the Company determined the expected life assumption using the simplified method as the starting point with an average period of twelve (12) months added to take into account for the extended range of time of 12 to 18 months vested stock options granted to Board members may be exercised upon termination.

The expected dividend assumption was based on the Company’s history and expectation of dividend payouts.

1 unchanged sentence

The Company recognizes forfeitures on an actual basis and as such did not estimate forfeitures to calculate stock-based compensation.

Restricted Stock Units (“RSU”) and Performance-Based Restricted Stock Units (“PRSU”) are measured and recognized based on the quoted market price of our common stock on the date of grant.

In March 2020, the Board of Directors approved an increase of 28,816 shares issuable under the 2014 Stock Incentive Plan (the “2014 Plan”) and 7,204 shares issuable under the 2014 Employee Stock Purchase Plan (the “ESPP”).

On December 18, 2020, the Company held the Special Meeting, whereby the Company’s stockholders approved the 2020 Long Term Incentive Plan (the “2020 Plan”).

The aggregate number of shares of stock available for issuance under the 2020 Plan will initially be 4,860,000 shares of Common Stock, which represents approximately 15 % of the total issued and outstanding shares of the Company’s common stock as of the record date of the Special Meeting (calculated on an as-converted basis and without regard to the potential application of beneficial ownership conversion limitations on the Preferred Stock) and may be increased by the number of shares under the 2014 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company .

Based on projected utilization rates, the Board of Directors currently intends that the initial shares under the 2020 Plan will be sufficient to fund the Company’s equity compensation needs for approximately 3 years.

The 2014 Plan was closed to new grants following the approval of the 2020 plan, and therefore, there were no longer any shares reserved for issuance under the 2014 Plan as of December 31, 2020.

The number of shares reserved for issuance under the 2020 Plan and ESPP was 4,082,708 and 24,077 shares, respectively, as of September 30, 2021.

Reclassifications

Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

RSUs and performance-based RSUs (“PRSUs”) are measured and recognized based on the quoted market price of our common stock on the date of grant.

In March 2020, the Board approved an increase of 28,816 shares issuable under the 2014 Stock Incentive Plan (the ”2014 Plan” and 7,204 shares issuable under the 2014 Employee Stock Purchase Plan (the “ESPP”).

On December 18, 2020, the Company held a special meeting of its stockholders (the “Special Meeting”), whereby the Company’s stockholders approved the 2020 Long Term Incentive Plan (the “2020 Plan”).

The aggregate number of shares of stock initially available for issuance under the 2020 Plan was 4,860,000 shares of Common Stock, which represented approximately 15 % of the total issued and outstanding shares of the Company’s common stock as of the record date of the Special Meeting (calculated on an as-converted basis and without regard to the potential application of beneficial ownership conversion limitations on the Preferred Stock) and may be increased by the number of shares under the 2014 Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company .

Based on projected utilization rates, the Board currently intends that the initial shares under the 2020 Plan will be sufficient to fund the Company’s equity compensation needs for approximately three years from the date of the Special Meeting.

The 2014 Plan was closed to new grants following the approval of the 2020 Plan, and therefore, there were no shares reserved for issuance under the 2014 Plan as of March 31, 2022.

The number of shares reserved for issuance under the 2020 Plan and ESPP was 3,012,584 and 24,077 shares, respectively, as of March 31, 2022.

Recently Adopted Accounting Pronouncements

2 unchanged sentences

Prepaid expenses and other current assets consisted of the following (in thousands):

September 30,

Prepaid insurance

1 unchanged sentence

Prepaid other

Insurance receivable

Other current assets

2 unchanged sentences

Accrued expenses and other liabilities consisted of the following (in thousands):

September 30,

Accrued compensation and related expenses

2 unchanged sentences

Accrued professional services

Accrued vacation

Accrued costs associated with PIPE financing

Accrued other

3 unchanged sentences

The Company leases office space under various operating leases.

Total rental expense for all operating leases in the accompanying condensed consolidated statements of operations and comprehensive loss was $ 63,000 and $ 50,000 for the three months ended September 30, 2021 and 2020, respectively, and $ 189,000 and $ 143,000 for the nine months ended September 30, 2021 and 2020, respectively.

The Company has an operating lease for 5,197 square feet of office space in Irvine, California, which was set to expire on September 30, 2021 .

On May 3, 2021, the Company extended the term of the lease through December 31, 2022 , by amending the office lease effective October 1, 2021 .

Additionally, the Company had operating leases for four serviced office spaces in Burlington, Massachusetts that expired on June 30, 2021 , which have been converted to monthly leases .

The Burlington, Massachusetts office leases are considered short-term leases and are not recorded on the condensed consolidated balance sheet.

Total rental expense for all operating leases in the accompanying condensed consolidated statements of operations and comprehensive loss was $ 0.1 million for the three months ended March 31, 2022 and 2021.

The Company has an operating lease for 5,197 square feet of office space in Irvine, California, which expires on December 31, 2022 .

On November 4, 2021, the Company entered into an operating lease for approximately 6,138 square feet of office space in Burlington, Massachusetts, that expires on November 20, 2024 .

The Company determines if a contract contains a lease at inception.

Our office leases have a remaining term ranging from one month to eighteen months and do not include options to extend the leases for additional periods.

Our office leases have a remaining term ranging from nine months to less than three years and do not include options to extend the leases for additional periods.

Operating lease assets and liabilities are recognized at the lease commencement date.

2 unchanged sentences

To determine the present value of lease payments not yet paid, we estimate incremental secured borrowing rates corresponding to the maturities of the leases.

As we have no outstanding debt nor committed credit facilities, secured or otherwise, we estimate this rate based on prevailing financial market conditions, comparable company and credit analysis, and management ’s judgment.

Our Irvine lease contains rent escalations over the lease term.

As we have no

outstanding debt nor committed credit facilities, secured or otherwise, we estimate this rate based on prevailing financial market conditions, comparable company and credit analysis, and management ’s judgment.

Our leases contain rent escalations over the lease term.

We recognize expense for these leases on a straight-line basis over the lease term.

1 unchanged sentence

These are amortized through the right-of-use asset as reductions of expense over the lease term.

Our lease agreement does not contain any material residual value guarantees or material restrictive covenants.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

While we do not currently have any lease agreement with lease and non-lease components, we elected to account for lease and non-lease components as separate components.

3 unchanged sentences

The components of lease expense were as follows:

Nine Months Ended September 30, 2021

For the Three Months

Ended March 31,

Operating lease cost (a)

1 unchanged sentence

Other information related to leases was as follows (in thousands, except lease term and discount rate):

Nine Months Ended September 30, 2021

For the Three Months

Ended March 31,

Supplemental Cash Flows Information

5 unchanged sentences

Operating lease

Future payments under noncancelable operating leases having initial or remaining terms of one year or more are as follows for the remaining fiscal year and thereafter (in thousands):

Future payments under noncancelable operating leases having initial or remaining terms of one year or more are as follows for the succeeding fiscal year and thereafter (in thousands):

2022 (remainder of)

8 unchanged sentences

In May 2015, Anelixis executed a License Agreement (the “Agreement”), which is an exclusive patent rights agreement with ALS Therapy Development Foundation, Inc.

(“ ALSTDI”) for certain patents and “know-how” of ALSTDI.

(“ ALS TDI”) for certain patents and “know-how” of ALS TDI.

This agreement continues until the licensee terminates the agreement with ninety days written notice.

The Agreement requires license fees payable to ALSTDI, subject to the achievement of certain milestones and other conditions.

The Agreement requires license fees payable to ALS TDI, subject to the achievement of certain milestones and other conditions.

The first and second milestones of the Agreement are the dosing of the first subjects in a first toxicity study in non-human primates and the dosing of the first patient in a Phase I Clinical Trial, respectively.

2 unchanged sentences

During 2018 and 2017, Anelixis issued $ 1.0 million worth of its common stock in lieu of making a cash payment.

There were no milestones achieved during the nine months ended September 30, 2021 and the year ended December 31, 2020.

No milestones were achieved during either the three months ended March 31, 2022 or the year ended December 31, 2021.

The Agreement was amended and restated in February 2020, and a first amendment to the restated license agreement was executed in September 2020.

1 unchanged sentence

In the event that the Company develops a second licensed product, the Company is obligated to pay up to $ 2.5 million in additional milestone payments.

In addition to the milestone payments, the Company is required to pay ALSTDI an amended annual license maintenance fee of $ 0.1 million beginning on the earlier of January 1, 2022, the Company’s first sublicense, or change in control, as defined in the Agreement.

Furthermore, the Company shall pay ALSTDI fees based on reaching certain levels of annual net sales of any product produced with the patent rights.

In addition to the milestone payments, the Company is required to pay ALS TDI an amended annual license maintenance fee of $ 0.1 million beginning on the earlier of January 1, 2022, the Company’s first sublicense, or change in control, as defined in the Agreement.

Furthermore, the Company shall pay ALS TDI fees based on reaching certain levels of annual net sales of any product produced with the patent rights.

A royalty in the low single digits will be due on aggregate net sales.

Upon the first calendar year of reaching $ 500.0 million in aggregate net sales, the Company shall pay ALS TDI a one-time milestone payment of $ 15.0 million.

Upon the first calendar year of reaching $ 1.0 billion in aggregate net sales, the Company is obligated to pay ALSTDI a one-time milestone payment of $ 30.0 million.

Upon the first calendar year of reaching $ 1.0 billion in aggregate net sales, the Company is obligated to pay ALS TDI a one-time milestone payment of $ 30.0 million.

Israeli Innovation Authority Grant

6 unchanged sentences

The Company has no obligation to repay these grants, if the research and development program fails, is unsuccessful or aborted or if no sales are generated.

The Company has not yet generated sales as of September 30, 2021;

The Company has not yet generated sales as of March 31, 2022;

therefore, no liability was recorded for the repayment in the accompanying condensed consolidated financial statements.

Legal Matters

The Company may be involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters.

The Company is involved in various lawsuits and claims arising in the ordinary course of business, including actions with respect to intellectual property, employment, and contractual matters.

In connection with these matters, the Company assesses, on a regular basis, the probability and range of possible loss based on the developments in these matters.

4 unchanged sentences

Each matter presents its own unique circumstances, and prior litigation does not necessarily provide a reliable basis on which to predict the outcome, or range of outcomes, in any individual proceeding.

Because of the uncertainties related to the occurrence, amount, and range of loss on any pending litigation or claim, the Company does not consider a liability probable and is currently unable to predict their ultimate outcome, and, with respect to any pending litigation or claim where no liability has been accrued, to make a meaningful estimate of the reasonably possible

loss or range of loss that could result from an unfavorable outcome.

In the event that opposing litigants in outstanding litigation proceedings or claims ultimately succeed at trial and any subsequent appeals on their claims, any potential loss or charges in excess of any established accruals, individually or in the aggregate, could have a material adverse effect on the Company’s business, financial condition, results of operations, and/or cash flows in the period in which the unfavorable outcome occurs or becomes probable, and potentially in future periods.

In the event that opposing litigants in outstanding litigation proceedings or claims ultimately succeed at trial and any subsequent appeals on their claims, any potential loss or charges in

excess of any established accruals, individually or in the aggregate, could have a material adverse effect on the Company’s business, financial condition, results of operations, and/or cash flows in the period in which the unfavorable outcome occurs or becomes probable, and potentially in future periods.

Legal Proceedings

1 unchanged sentence

We may, however, in the ordinary course of business face various claims brought by third parties or government regulators and we may, from time to time, make claims or take legal actions to assert our rights, including claims relating to our directors, officers, stockholders, intellectual property rights, employment matters and the safety or efficacy of our products.

Indemnification

Indemnifications

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification.

6 unchanged sentences

The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.

There have been no contingent liabilities requiring accrual at September 30, 2021.

There have been no contingent liabilities requiring accrual at March 31, 2022.

Stockholders’ Equity

Equity Distribution Agreement

On March 31, 2021, the Company filed a prospectus and prospectus supplement (the “2021 Prospectus”) under which the Company may offer and sell, from time to time, pursuant to an equity distribution agreement with Jeffries LLC, up to $ 75.0 million in shares of its common stock.

During the nine months ended September 30, 2021, no shares were sold under the 2021 Prospectus.

On March 31, 2021, the Company 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 million in shares of its common stock, from time to time, pursuant to an open market sale agreement with Jeffries 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 March 31, 2022, due to the SEC’s “baby shelf rules,” the Company was permitted to sell up to $ 16.4 million of shares of common stock pursuant to the ATM Program.

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 March 31, 2022, no shares of common stock have been sold under the ATM program.

Common Stock Warrants

As of September 30, 2021, a total of 1,145,631 warrants were exercisable into common stock.

The shares of common stock underlying the warrants are registered for offer and sale under the Securities Act of 1933, as amended (the “Securities Act”), pursuant to the Company’s effective registration statements on Form S-1.

On September 21, 2021, the Company 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 (“Series X 1 Preferred Stock”) previously issued as part of the Anelixis merger.

These Series X 1 Preferred Stock warrants were replaced by Eledon for the outstanding warrants issued by Anelixis that were not settled upon completion of the merger.

The following table shows the warrant activity:

Rollforward of Warrant Activity

As of March 31, 2022, there were 1,145,631 warrants exercisable into common stock (after rounding for fractional shares and subject to beneficial ownership blockers).

Roll Forward of Warrant Activity

Registered direct

3 unchanged sentences

Warrants exchanged for common stock

Warrants exchanged for preferred stock warrants

Warrants exchanged for Series X 1 preferred stock

Balance as of December 31, 2021

Cancelled/Expired

Balance as of September 30, 2021

Balance as of March 31, 2022

Exchange Agreements

On January 11, 2022, the Company 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 the Company’s common stock for 9,899.99 shares of Series X 1 Preferred Stock.

Preferred Stock Warrants

As of September 30, 2021, 50,207.419 warrants were exercisable into Series X 1 Preferred Stock.

Each share of Series X 1 Preferred Stock is convertible into approximately 55.5556 shares of common stock.

The following table shows the warrant activity:

Rollforward of Warrant Activity

Warrants assumed and

replaced in acquisition

As of March 31, 2022, there were 50,207.419 warrants exercisable into Series X 1 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).

Roll Forward of

Balance as of December 31, 2021

Assumed and replaced

Cancelled/Exchanged

Balance as of September 30, 2021

Exchange Agreements

On December 31, 2020, the Company entered into an exchange agreement (the “Series X 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”) and Cormorant Global Healthcare Master Fund, LP (together with the BVF Exchanging Stockholders, the “Series X Exchanging Stockholders”), pursuant to which the Series X Exchanging Stockholders exchanged (the “Series X Exchange”) 344,666 shares of the Company’s common stock for 6,203.98 shares of Series X Convertible Preferred Stock.

In addition, on December 31, 2020 the Company entered into an exchange agreement (the “Warrant Exchange Agreement,” and together with the Series X Exchange Agreement, the “Exchange Agreements”) with the BVF Exchanging Stockholders, pursuant to which the BVF Exchanging Stockholders exchanged (the “Warrant Exchange,” and together with the Series X Exchange, the “Exchanges”) 509,117 shares of the Common Stock for one or more pre-funded warrants to purchase an aggregate of 509,117 shares of the Common Stock at a nominal exercise price (the “Warrants”).

The Company recorded the shares of Series X Convertible Preferred Stock and Warrants issuable as preferred stock and warrant subscriptions at December 31, 2020 since the physical settlement of the Exchanges was made on January 5, 2021, whereby the transfer agent recorded the exchange of common stock for the issuance of preferred stock and warrants.

Following the Exchanges, the Company had 6,203.98 shares of Series X Preferred Stock outstanding, which are convertible into 344,663 shares of Common Stock (after rounding for fractional shares).

As of September 30, 2021, a total of 509,117 warrants were available for exercise.

The shares of common stock underlying the registered direct placement agent warrants are registered for offer and sale under the Securities Act, pursuant to the Company’s effective registration statements on Form S-1.

Cancelled/Expired

Balance as of March 31, 2022

Stock-Based Compensation

1 unchanged sentence

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

Ended March 31,

Research and development

1 unchanged sentence

Total stock-based compensation

Business Acquisition

On September 14, 2020 , the Company acquired Anelixis pursuant to that certain Agreement and Plan of Merger, dated September 14, 2020 (the “ Merger Agreement ”), by and among Eledon, Nautilus Merger Sub 1, Inc., a Delaware corporation and wholly owned subsidiary of Eledon (“ First Merger Sub ”), Nautilus Merger Sub 2, LLC, a Delaware limited liability company and wholly owned subsidiary of Eledon (“ Second Merger Sub ”), and Anelixis.

Pursuant to the Merger Agreement, First Merger Sub merged with and into Anelixis, pursuant to which Anelixis was the surviving entity and became a wholly owned subsidiary of Eledon (the “ First Merger ”).

Immediately following the First Merger, Anelixis merged with and into Second Merger Sub, pursuant to which Second Merger Sub was the surviving entity (the “ Second Merger, ” together with the First Merger, the “ Merger ”).

The Merger is intended to qualify as a tax-free reorganization for U.S.

federal income tax purposes .

Following the acquisition of Anelixis, the Company has continued to maintain its corporate headquarters in Southern California and maintain research and development facilities in the Boston area.

Under the terms of the Merger Agreement, at the closing of the Merger, Eledon issued to the stockholders of Anelixis 175,488 shares of the common stock of Eledon, par value $ 0.001 per share and 140,026 shares of newly designated Series X 1 Preferred Stock.

Subject to stockholder approval, each share of Series X 1 Preferred Stock is convertible into approximately 55.5556 shares of common stock.

The preferences, rights and limitations applicable to the Series X 1 Preferred Stock are set forth in the Certificate of Designation, as filed with the SEC.

In addition to the common stock and preferred stock issued, certain outstanding warrants issued and equity awards granted by Anelixis were not settled upon completion of the merger, and instead were assumed and then replaced with Eledon warrants and equity awards.

The amounts for the assumed and replaced warrants and equity awards attributed to pre-merger services are included in other consideration amounts transferred and added to goodwill.

The Company determined that FASB Accounting Standards Codification Topic 805 (“ASC 805”), Business Combinations , is the authoritative guidance in accounting for this transaction and for determining whether Anelixis was a dormant, non-operating entity that would not meet the definition of a business under ASC 805.

If Anelixis was not an operating entity, the acquisition would instead be considered a capital transaction and equivalent to the issuance of shares by Eledon for the net monetary assets of Anelixis accompanied by a recapitalization.

Conversely, if Anelixis was determined to be a business, the acquisition method of accounting would apply and the difference between the acquisition date fair value of the total consideration transferred and the aggregate values assigned to the assets acquired and liabilities assumed would be recorded as goodwill.

The Company evaluated the terms of the Merger Agreement and the transaction under the applicable accounting guidance and determined that Anelixis satisfied the definition of a business under ASC 805 and as further clarified by ASU 2017-01.

Based on this analysis, the Company accounted for the acquisition of Anelixis as a business combination under the acquisition method of accounting as it had determined that Anelixis’ assets acquired in the transaction included an input and a substantive process that together significantly contributed to the ability to create outputs.

Additionally, the Company was determined to be both the legal and accounting acquirer as it had issued equity interests to acquire all of Anelixis’ equity interests.

Goodwill generated from the acquisition was primarily attributable to the expected synergies from combining

operations and expanding market potential, together with certain intangible assets that do not qualify for separate recognition.

None of the approximately $ 48.6 million in goodwill is expected to be deductible for tax purposes.

Concurrently and in connection with the execution of the Merger Agreement, the Company entered into the Purchase Agreement with certain institutional and accredited investors.

Pursuant to the Stock Purchase Agreement, the Company agreed to sell an aggregate of approximately 199,112 shares of Series X 1 Preferred Stock for an aggregate purchase price of approximately $ 99.1 million in the Financing (collectively, the “Financing”).

Eledon had commitments for an additional $ 9.0 million in equity financing that was contingent upon the satisfaction of certain incremental closing conditions, including stockholders’ approval of the issuance of the Company’s common stock upon the conversion of the Company’s Series X 1 Preferred Stock and the effective registration of its common stock.

The merger was a pre-requisite in order for the Financing to transpire;

without the merger, those certain institutional and accredited investors would not have purchased the Company’s Series X 1 convertible preferred stock.

On December 18, 2020, the Company held the Special Meeting, whereby the Company’s stockholders approved the issuance of the Company’s common stock, upon conversion of the Company’s Series X 1 Preferred Stock, par value $ 0.001 per share, issued in September 2020.

As a result, approximately 231,068 shares of Series X 1 Preferred Stock were converted into 12,837,056 shares of the Company’s common stock.

As of September 30, 2021 and December 31, 2020, approximately 108,070 shares of Series X 1 Preferred Stock remain outstanding.

On December 23, 2020, the Company sold 1,004,111 shares of its common stock for gross proceeds of $ 9.0 million that was contingent upon the satisfaction of certain incremental closing conditions, as described above.

Acquisition Consideration

The following table summarizes the fair value of purchase price consideration to acquire Anelixis (in thousands):

Fair value of purchase consideration:

Common shares issued (1)

Preferred shares issued (2)

Options assumed (3)

Warrants assumed (3)

Total purchase consideration

The fair value of common shares issued in the merger is based on 175,488 shares issued on the September 14, 2020 acquisition date at the closing price of the Company's common stock of $ 6.80 per share.

The fair value of preferred shares issued in the merger is based on the amount per share of Series X 1 preferred stock in the September 2020 Purchase Agreement.

The fair value of the options and warrants assumed and replaced in the merger is based on applying the Black-Scholes valuation method using appropriate inputs of volatility rates ranging from 82 % to 83 %, expected terms of 5.0 to 5.9 years and risk-free rates of 0.27 % to 0.45 %.

Purchase Price Allocation

The following is an allocation of purchase price as of the September 14, 2020, acquisition closing date based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition (in thousands):

Cash and cash equivalents

Prepaid expenses and other current assets

Other non-current assets

Accounts payable

Accrued expenses and other liabilities

Deferred tax liability

Net identifiable assets acquired

Identifiable intangible assets

Net assets acquired

Acquisition costs of approximately $ 2.9 million were included in general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

Deferred Income Taxes

The net deferred tax liability was based upon the difference between the estimated book basis and tax basis of net assets acquired and an estimate for the final pre-acquisition net operating losses of Anelixis.

Identifiable Intangible Assets

Through its acquisition of Anelixis, the Company acquired intangible assets that consisted of in-process research and development (“IPR&D”) with an estimated fair value of $ 32.4 million, related to its clinical development program of AT-1501.

The estimated fair value of the IPR&D was determined by management based on external valuation specialists’ analysis of replacement costs to recreate AT-1501 in its current clinical stage.

The replacement cost method contemplates the cost to recreate the utility of AT-1501 but in a form that is not a replica of AT-1501.

In this method, the replacement cost is determined and reduced for depreciation of the asset.

In this context, depreciation has three components:

(i) physical deterioration, (ii) functional obsolescence, and (iii) economic obsolescence.

Under the acquisition method of accounting, goodwill of approximately $ 48.6 million would be generated after accounting for Anelixis’ assets acquired, liabilities assumed, and intangible assets identified and valued.

Pro Forma Information (Unaudited)

The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of the Merger based on the historical financial statements and accounting records of Eledon and Anelixis after giving effect to the Merger and the Merger-related pro forma adjustments.

September 30,

Net loss and other comprehensive loss

The unaudited pro forma combined statements of operations for the three and nine months ended September 30, 2020 combine the historical statements of operations of Eledon and Anelixis, giving effect to the Merger as if it had occurred on January 1, 2020, the first day of the fiscal year ended December 31, 2020.

The unaudited pro forma combined financial information has been presented for informational purposes only.

The unaudited pro forma combined financial information does not purport to represent the actual results of operations that Eledon and Anelixis would have achieved had the companies been combined during the periods presented in the unaudited pro forma combined financial statements and is not intended to project the future results of operations that the combined company may achieve after the Merger.

The unaudited pro forma combined financial information does not reflect any potential cost savings that may be realized as a result of the Merger and also does not reflect any restructuring or integration-related costs to achieve those potential cost savings.

Additionally, the unaudited pro forma combined financial information does not reflect any merger-related expenses , which totaled approximately $ 2.7 million during the three and nine months ended September 30, 2020 .

There were no merger related expenses during the periods ended September 30, 2021.

Anelixis has not recognized any revenue since its acquisition by the Company.

Subsequent Events

The Company has evaluated events subsequent to September 30, 2021 through the filing date of this Quarterly Report on Form 10-Q.

The Company has evaluated events subsequent to March 31, 2022 through the filing date of this Quarterly Report on Form 10-Q.

Any material subsequent events that occurred during this time have been properly recognized or disclosed in the condensed consolidated financial statements and accompanying notes.

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-Q

Item 1. Financial Statements