What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 184 added, 143 removed, 468 unchanged (41% of the section changed)

Financial Statements (unaudited)

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2022 and 2021

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and six months ended June 30, 2022 and 2021

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

Notes to Condensed Consolidated Financial Statements

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Cash and cash equivalents

Marketable debt securities

Prepaid expenses and other current assets

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5,000,000 shares authorized

as of March 31, 2022 and December 31, 2021;

as of June 30, 2022 and December 31, 2021;

no shares issued and

outstanding as of March 31, 2022 and December 31, 2021

outstanding as of June 30, 2022 and December 31, 2021

Common stock, $ 0.001 par value per share;

115,000,000 shares

authorized as of March 31, 2022 and December 31, 2021;

authorized as of June 30, 2022 and December 31, 2021;

17,710,450 shares issued and outstanding as of

March 31, 2022 and December 31, 2021

June 30, 2022 and December 31, 2021

Additional paid-in capital

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(In thousands, except share and per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating expenses:

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Other income (expense), net

Net loss and Total comprehensive loss

Net loss per share, basic and diluted

Weighted average common shares outstanding, basic and diluted

Comprehensive loss:

Other comprehensive loss:

Unrealized loss on marketable debt securities

Total other comprehensive loss

Total comprehensive loss

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

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Balances as of March 31, 2022

Stock-based compensation expense

Unrealized loss on marketable debt securities

Balances as of June 30, 2022

Comprehensive

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Balances as of March 31, 2021

Stock-based compensation expense

Balances as of June 30, 2021

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

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(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

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Stock-based compensation expense

Loss on disposal of fixed asset

Depreciation expense

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Cash flows from investing activities:

Purchase of property and equipment

Purchase of marketable debt securities

Maturities and sales of marketable debt securities

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities:

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NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS

Organization, Clinical Development, Nature of the Business, COVID-19, Clinical Hold and Basis of Presentation

Description of Business and Basis of Presentation

Larimar Therapeutics, Inc., together with its subsidiary (the “Company”

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In May 2021, Larimar reported positive topline data from its Phase 1 Friedreich’s ataxia, ("FA") program after completing dosing of the single ascending dose, ("SAD"), trial in December 2020 and of the multiple ascending dose, ("MAD"), trial in March 2021.

Data from these trials demonstrate proof-of-concept by showing that daily subcutaneous injections of CTI-1601 for up to 13 days resulted in dose-dependent increases in FXN levels from baseline compared to placebo in all evaluated tissues (buccal cells, skin, and platelets).

FXN levels achieved in peripheral tissues (buccal cells) following daily 50 mg and 100 mg subcutaneous injections of CTI-1601 were at or in excess of FXN levels that would be expected in phenotypically normal heterozygous carriers.

There were no serious adverse events, ("SAEs"), associated with either the MAD or SAD trials.

In May 2021, the FDA placed a clinical hold on the Company's CTI-1601 clinical program after the Company notified the agency of mortalities at the highest dose levels of the 26-week non-human primate toxicology study that was designed to support extended dosing of patients with CTI-1601.

Also in May 2021, the FDA placed a clinical hold on the Company's CTI-1601 clinical program after the Company notified the agency of mortalities at the highest dose levels of the 26-week non-human primate toxicology study that was designed to support extended dosing of patients with CTI-1601.

At the time the hold was placed, Larimar had no interventional clinical trials with patients enrolling or enrolled.

In February 2022, in response to the Company submitting a complete response to the FDA, the Agency stated that it was maintaining the clinical hold and that additional data are needed to resolve the clinical hold.

In February 2022, in response to the Company's complete response to the clinical hold discussed above, the Agency stated that it was maintaining the clinical hold and that additional data are needed to resolve the clinical hold.

Larimar subsequently submitted a request for an FDA Type C meeting.

This meeting request has been granted and is scheduled for early in the third quarter of 2022.

Throughout the course of the interactions associated with the Type C meeting, Larimar intends to work with the Agency to enable resolution of the clinical hold and to agree on the study design and timing of the next proposed clinical trial.

In the third quarter of 2022, the Company and the FDA had a Type-C meeting.

The purpose of the Type C Meeting was to obtain FDA feedback on the information needed to resolve CTI-1601's current clinical hold in full or in part, as well as to discuss a proposed change in CTI-1601’s clinical development plan to introduce a Phase 2 dose exploration study to precede initiation of an open label extension study.

The Company plans to submit a complete response to the CTI-1601 clinical hold later in the third quarter of 2022.

In conjunction with the complete response, Larimar is proposing as CTI-1601’s next clinical trial a Phase 2, four-week dose exploration study in FA patients starting at the lower dose levels tested in the Company’s Phase 1 multiple-ascending dose clinical trial.

This study will provide data on extended dosing of lower doses of CTI-1601, providing insights into safety and tolerability as well as whether lower doses for longer periods of time can increase frataxin levels, while still maintaining acceptable exposures.

Throughout the course of the interactions with the FDA, Larimar intends to continue to work with the Agency to enable resolution of the clinical hold and to agree on the study design and timing of the next proposed clinical trial.

Larimar does not know when, or if the clinical hold will be lifted.

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Even if our drug development efforts are successful, it is uncertain when, if ever, we will realize significant revenue from product sales.

In March 2020, the World Health Organization ("WHO"), declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic.

The pandemic resulted in the temporary stoppage of the Company’s CTI-1601 Phase 1 clinical trials in patients with Friedreich’s ataxia in March 2020.

In July 2020, the Company resumed these clinical trials, and has since completed both of the Company's SAD and MAD clinical trials.

Since being discovered, new variants of COVID-19 have emerged.

In November 2021, the Omicron variant was identified in South Africa, and has been deemed a variant of concern by the WHO.

In addition to the Omicron variant, the WHO has deemed four other variants to be variants of concern:

the Alpha variant, the Beta variant, the Gamma variant, and the Delta variant.

All of the aforementioned variants have at least one of the following characteristics resulting in the WHO deeming them variants of concern:

an increase in transmissibility or detrimental change in COVID-19 epidemiology, an increase in virulence or change in clinical disease presentation, or a decrease in effectiveness of public health and social measures or available diagnostics, vaccines, or therapeutics.

Vaccines manufactured by Moderna, Pfizer and Johnson & Johnson were introduced late in the fourth quarter of 2020 and became widely available by the end of the first quarter of 2021.

While the vaccines have proven effective in reducing the severity and mortality of COVID-19, including the variants that have evolved to date, the overall vaccination rate has not reached the level required for herd immunity in some areas of the country.

Further, additional doses of vaccines have been and may continue to be required and individuals may refuse or fail to receive one or more such doses.

The incidence of variants of COVID-19 has been increasing, particularly among unvaccinated individuals, and the Omicron variant has proven to be more easily spread than earlier variants.

The low vaccination rate, the spread of the variants and the evolution of additional mutations against which the current vaccines may prove ineffective could again result in major disruptions to businesses and markets worldwide.

Furthermore, the incidence of "breakthrough" infections even among vaccinated individuals have been increasing, resulting in the need for booster doses which could make COVID-19 a long-term infectious disease concern.

In late 2019, an outbreak of a novel strain of the Coronavirus 2019 Disease (COVID-19) was identified and infections have been found in a number of countries around the world, including the United States.

The Company’s business, results of operations, financial condition and cash flows could be materially and adversely affected.

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Basis of Presentation

The condensed consolidated financial statements include the accounts of Larimar and its wholly owned subsidiaries.

The condensed consolidated financial statements include the accounts of Larimar and its wholly owned subsidiary.

All intercompany balances and transactions have been eliminated.

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Since its inception, the Company has incurred significant recurring operating losses and negative cash flows from operations.

The Company has incurred net losses of $ 8.9 million and $ 12.1 million for the three months ended March 31, 2022 and 2021, respectively.

In addition, as of March 31, 2022, the Company had an accumulated deficit of $ 125.2 million .

The Company has incurred net losses of $ 17.6 million and $ 24.7 million for the six months ended June 30, 2022 and 2021, respectively.

In addition, as of June 30, 2022, the Company had an accumulated deficit of $ 133.9 million .

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

As of March 31, 2022, the Company had approximately $ 62.6 million of cash and cash equivalents available for use to fund its operations and capital requirements.

As of June 30, 2022, the Company had approximately $ 54.9 million of cash, cash equivalents and marketable debt securities available for use to fund its operations and capital requirements.

In August 2020, the Company entered into an Equity Distribution Agreement (the “ATM Agreement”) with an investment bank in connection with the establishment of an “at-the-market”

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In 2021, the Company sold 2,342,720 shares pursuant to the ATM Agreement for gross proceeds of $ 20.5 million.

As of May 10, 2022, $ 29.2 million of additional shares of common stock remained available for sale by the Company under the ATM Agreement.

As of June 30, 2022, $ 29.2 million of additional shares of common stock remained available for sale by the Company under the ATM Agreement.

See Note 7 for a further discussion of the ATM Agreement.

In accordance with Accounting Standards Update (“ASU”) No.

2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

As of the issuance date of these condensed consolidated financial statements, the Company expects its cash and cash equivalents will be sufficient to fund its forecasted operating expenses and capital expenditure requirements, for at least the next twelve months from the issuance of these financial statements.

As of the issuance date of these condensed consolidated financial statements, the Company expects its cash, cash equivalents and marketable debt securities will be sufficient to fund its forecasted operating expenses and capital expenditure requirements, for at least twelve months from the issuance of these financial statements.

If the timing of our clinical assumptions were delayed or if there were other forecasted assumption changes that negatively impact our operating plan, the Company could reduce expenditures in order to further extend cash resources.

The Company has not yet commercialized any products and does not expect to generate revenue from the commercial sale of any products for several years, if at all.

The Company expects that its research and development and general and administrative expenses will continue to increase and, as a result, will need additional capital to fund its future operating and capital requirements.

Management is currently evaluating different strategies to obtain the required funding for future operations.

Until the Company can generate substantial revenue, if ever, the Company expects to seek additional funding through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources.

The incurrence of indebtedness would result in increased fixed payment obligations and the Company may be required to agree to certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact the Company's ability to conduct our business.

The Company expects that its research and development and general and administrative expenses will continue to increase and, as a result, it will need additional capital to fund its future operating and capital requirements.

Until the Company can generate substantial revenue, if ever, management continuously evaluates different strategies to obtain the required funding for future operations.

These strategies include seeking additional funding through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources.

The incurrence of indebtedness would result in increased fixed payment obligations and the Company may be required to agree to certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations on its ability to acquire, sell or license intellectual property rights, minimum required cash balances and other operating restrictions that could adversely impact the Company's ability to conduct its business.

Any additional fundraising efforts may divert the Company's management from their day-to-day activities, which may adversely affect its ability to develop and commercialize our product candidates.

There can be no assurance that the Company will be able to raise sufficient additional capital on acceptable terms or at all.

If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or the Company does not have sufficient authorized shares, the Company may be required to delay, limit, or eliminate the development of business opportunities and its ability to achieve its business objectives, its competitiveness, and its business, financial condition, and results of operations will be materially adversely affected.

There can be no assurance that the Company will be able to raise sufficient additional capital on acceptable terms, if at all.

If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or if the Company does not have sufficient authorized shares, the Company may be required to delay, limit, or eliminate the development of business opportunities and its ability to achieve its business objectives, its competitiveness, and its business, financial condition, and results of operations will be materially adversely affected.

The Company could also be required to seek funds through arrangements with collaborative partners or otherwise at an earlier stage than otherwise would be desirable and it may be required to relinquish rights to some of its technologies or product candidates or otherwise agree to terms unfavorable to it, any of which may have a material adverse effect on the Company's business, operating results and prospects.

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The condensed consolidated balance sheet as of December 31, 2021 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP.

The accompanying unaudited condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for interim financial statements.

The accompanying unaudited condensed consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for interim financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations.

However, the Company believes that the disclosures are adequate to make the information presented not misleading.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed on March 25, 2022.

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of March 31, 2022 and condensed consolidated results of operations and cash flows for the three months ended March 31, 2022 and 2021 have been made.

The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022 .

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2022, condensed consolidated results of operations for the three and six months ended June 30, 2022 and condensed consolidated statement of cash flows for the six months ended June 30, 2022 have been made.

The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022 .

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.

Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expense, valuation of stock-based awards and valuation of leases.

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Stock-Based Compensation

The Company measures all stock-based awards granted to employees, non-employee consultants and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model.

The Company measures all stock-based awards granted to employees, directors and non-employee consultants based on the fair value on the date of grant using the Black-Scholes option-pricing model.

Compensation expense of those awards is recognized over the requisite service period, which is the vesting period of the respective award.

Typically, the Company issues awards with only service-based and market-based vesting conditions and records the expense for these awards using the straight-line method.

Typically, the Company issues awards with only service-based vesting conditions and records the expense for these awards using the straight-line method.

The Company accounts for forfeitures as they occur.

The Company classifies stock-based compensation expense in its condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified or in which the award recipient's service payments are classified.

Prior to May 28, 2020, the Company had been a private company and lacked company-specific historical and implied volatility information for its common stock.

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Basic shares outstanding includes the weighted average effect of the Company’s prefunded warrants issued in June 2020, the exercise of which requires little or no consideration for the delivery of shares of common stock.

Basic and diluted weighted average shares of common stock outstanding for the three months ended March 31, 2022 and 2021 includes the weighted average effect of 628,403 prefunded warrants for the purchase of shares of common stock, for which the remaining unfunded exercise price is $ 0.01 per share.

Basic and diluted weighted average shares of common stock outstanding for the three and six months ended June 30, 2022 and 2021 includes the weighted average effect of 628,403 prefunded warrants for the purchase of shares of common stock, for which the remaining unfunded exercise price is $ 0.01 per share.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares, including potentially dilutive common shares assuming the dilutive effect of outstanding stock options and unvested restricted common shares, as determined using the treasury stock method.

For periods in which the Company has reported net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is antidilutive.

The Company excluded 3,078,511 and 2,397,152 common stock equivalents outstanding as of March 31, 2022 and 2021, respectively, from the computation of diluted net loss per share for the three months ended March 31, 2022 and 2021 because they had an anti-dilutive impact due to the net loss incurred for the periods presented.

The Company excluded 3,130,370 and 2,546,962 common stock equivalents outstanding as of June 30, 2022 and 2021, respectively, from the computation of diluted net loss per share for the three and six months ended June 30, 2022 and 2021 because they had an anti-dilutive impact due to the net loss incurred for the periods presented.

Recently Issued and Adopted Accounting Pronouncements

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Fair Value Measurements

The Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 are measured in accordance with the standards of ASC 820, Fair Value Measurements and Disclosures , which establishes a three-level valuation hierarchy for measuring fair value and expands financial statement disclosures about fair value measurements.

The Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 are measured in accordance with the standards of ASC 820, Fair Value Measurements and Disclosures , which establishes a three-level valuation hierarchy for measuring fair value and expands financial statement disclosures about fair value measurements.

The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date.

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The Company’s financial instruments consist primarily of cash, cash equivalents, marketable debt securities, accounts payable and accrued liabilities.

For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of March 31, 2022 and December 31, 2021 were considered representative of their fair values due to their short term to maturity.

The following tables summarize the Company’s cash equivalents as of March 31, 2022 and December 31, 2021:

For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of June 30, 2022 and December 31, 2021 were considered representative of their fair values due to their short term to maturity.

The following tables summarize the Company’s cash equivalents and marketable debt securities as of June 30, 2022 and cash equivalents as of December 31, 2021:

(in thousands)

March 31, 2022

June 30, 2022

Cash equivalents:

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Total cash equivalents

Marketable debt securities:

Government securities

Total marketable debt securities

Total cash equivalents and marketable debt securities

December 31, 2021

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Total cash equivalents

The accrued interest receivable related to the Company’s investments was $ 0.1 million as of June 30, 2022 and is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.

accrued interest receivable and December 31, 2021.

The Company classifies its money market funds which are valued based on quoted market prices in active markets with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

The Company classifies its investments in U.S.

treasury securities corporate commercial paper, and corporate debt securities as Level 2 assets within the fair value hierarchy.

The fair values of these investments are estimated by taking into consideration valuations obtained from third-party pricing services.

The pricing services utilize industry standard valuation models, including both income- and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value.

These inputs include reported trades of and broker/dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities, prepayment/default projections based on historical data and other observable inputs

As of June 30, 2022 and December 31, 2021, the unrealized losses for available-for-sale investments were non-credit related, and the Company does not intend to sell the investments that were in an unrealized loss position, nor will it be required to sell those investments before recovery of their amortized cost basis, which may be maturity.

As of June 30, 2022 and December 31, 2021, no allowances for credit losses for the Company’s investments were recorded.

During the three and six months ended June 30, 2022 and 2021, the Company did no t recognize any impairment losses related to investments.

Marketable Debt Securities

The following table summarizes the Company's marketable debt securities as of June 30, 2022 .

The Company held no marketable debt securities as of December 31, 2021.

(in thousands)

June 30, 2022

Government securities

Prepaid Expenses and Other Current Assets

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Accumulated depreciation

Depreciation expense during the three months ended March 31, 2022 and 2021 was $ 0.1 million, respectively.

Depreciation expense during the three and six months ended June 30, 2022 was $ 0.1 million, respectively.

Depreciation expense during the three and six months ended June 30, 2021 was $ 0.1 million and $ 0.2 million, respectively.

Accrued Expenses

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Common Stock and Prefunded Warrants

As of March 31, 2022 , the Company’s Certificate of Incorporation, as amended and restated, authorized the Company to issue up to 115,000,000 shares of $ 0.001 par value common stock, of which 17,710,450 shares were issued and outstanding, and up to 5,000,000 shares of $ 0.001 par value undesignated preferred stock, of which no shares were issued or outstanding.

As of June 30, 2022 , the Company’s Certificate of Incorporation, as amended and restated, authorized the Company to issue up to 115,000,000 shares of $ 0.001 par value common stock, of which 17,710,450 shares were issued and outstanding, and up to 5,000,000 shares of $ 0.001 par value undesignated preferred stock, of which no shares were issued or outstanding.

The voting, dividend, and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers, and preferences of the holders of the preferred stock.

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No cash dividends have been declared or paid to date.

On May 28, 2020, the Company entered into a securities purchase agreement with certain accredited investors (the “Purchasers”) for the sale by the Company in a private placement of 6,105,359 shares of the Company’s common stock and prefunded warrants to purchase an aggregate of 628,403 shares of the Company’s common stock, for a price of $ 11.88 per share of the common stock and $ 11.87 per prefunded warrant.

The prefunded warrants are exercisable at an exercise price of $ 0.01 and are exercisable indefinitely.

The Purchasers may exercise the prefunded warrants on a cashless basis in the event that there is no effective registration statement covering the resale of the shares of common stock underlying the prefunded warrants on the date in which the Company is required to deliver the shares.

The private placement closed on June 1, 2020.

The aggregate gross proceeds for the issuance and sale of the common stock and prefunded warrants were $ 80.0 million;

transaction costs totaled $ 4.6 million and resulted in net proceeds of $ 75.4 million.

The Company’s Registration Statement on Form S-3, filed with the SEC on June 26, 2020, registered the resale of 6,105,359 shares of common stock sold and the 628,403 shares of common stock underlying the prefunded warrants.

MTS Health Partners served as placement agent to the Company in connection with the private placement.

As partial compensation for these services, the Company issued MTS Health Partners 35,260 shares of common stock.

Equity Distribution Agreement

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In 2021, the Company sold 2,342,720 shares under the ATM Agreement for net proceeds of $ 19.9 million.

As of March 31, 2022 , 2,354,244 shares of Common Stock have been sold under the ATM Agreement for net proceeds of $ 20.1 million.

As of May 10, 2022, approximately $ 29.2 million shares of common stock still remained available for sale by the Company under the ATM Agreement.

As of June 30, 2022 , 2,354,244 shares of Common Stock have been sold under the ATM Agreement for net proceeds of $ 20.1 million.

As of June 30, 2022, approximately $ 29.2 million shares of common stock still remained available for sale by the Company under the ATM Agreement.

2020 Equity Incentive Plan

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The maximum number of shares that may be issued in respect of any awards under the 2020 Plan is the sum of:

(i) 1,700,000 shares plus (ii) an annual increase on January 1, 2021 and each anniversary of such date thereafter through January 1, 2030, equal to the lesser of (A) 4 % of the shares issued and outstanding on the last day of the immediately preceding fiscal year, and (B) such smaller number of shares as determined by the Board (collectively, the “Plan Limit”).

(i) 1,700,000 shares plus (ii) an annual increase on January 1, 2021 and each anniversary of such date thereafter through January 1, 2030, equal to the lesser of (A) 4 % of the shares issued and outstanding on the last day of the immediately preceding fiscal year, or (B) such smaller number of shares as determined by the Board (collectively, the “Plan Limit”).

The maximum aggregate number of shares that may be issued under the 2020 Plan is 8,000,000 over the ten-year term of the 2020 Plan.

In 2022 and 2021, respectively, options to purchase 450 and 56,966 shares issued under the Prior Plans were cancelled and became available for grant under the 2020 Plan.

As permitted by the 2020 Plan, the Company added 708,418 shares available for grant under the 2020 Plan on January 1, 2022.

As of March 31, 2022 , 1,114,743 shares of common stock were available for grant under the 2020 Plan.

During the six months ended June 30, 2022 and twelve months ended December 31, 2021, respectively, options to purchase 130,308 and 56,966 shares issued under the Prior Plans were cancelled and became available for grant under the 2020 Plan.

As permitted by the 2020 Plan, the Company added 614,709 and 708,418 shares available for grant to the 2020 Plan on January 1, 2021 and January 1, 2022, respectively.

As of June 30, 2022 , 998,301 shares of common stock were available for grant under the 2020 Plan.

Stock Valuation

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Stock Options

The following table summarizes the Company’s stock option activity for the three months ended March 31, 2022 (amounts in millions, except for share and per share data):

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2022 (amounts in millions, except for share and per share data):

Weighted Average

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Forfeited/Expired

Outstanding as of March 31, 2022

Exercisable as of March 31, 2022

Vested and expected to vest as of March 31, 2022

(a) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the fair value of the common stock for the options that were in the money at March 31, 2022 .

Outstanding as of June 30, 2022

Exercisable as of June 30, 2022

Vested and expected to vest as of June 30, 2022

At June 30, 2022, none of the Company's stock options were "in the money."

2022 Option Grants

During the three months ended March 31, 2022 , the Company granted options to purchase 600,950 shares of common stock to employees of the Company under the 2020 Plan.

The options have an exercise price equal to the closing stock price as of the grant date.

These options vest over four years with 25 % vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter.

The weighted-average grant date fair value of options granted during three months ended March 31, 2022 was $ 6.61 .

In May 2022, the Company granted options to purchase 251,500 shares of common stock to employees and directors of the Company under the 2020 Plan.

During the six months ended June 30, 2022 , the Company granted options to purchase 852,450 shares of common stock to employees and directors of the Company under the 2020 Plan.

The options have an exercise price equal to the closing stock price as of the grant date.

Of the 251,500 options granted in May 2022, 210,000 were granted to employees and vest over four years with 25 % vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter.

Of the 852,450 options granted in 2022, 810,950 were granted to employees and vest over four years with 25 % vesting on the first anniversary of the grant and the remainder vesting in equal monthly installments thereafter.

The remaining 41,500 options were annual grants to the Company's directors and vest one year from the grant date.

The weighted-average grant date fair value of options granted during the six months ended June 30, 2022 was $ 5.31 .

Stock-Based Compensation

Stock-based compensation expense was classified in the condensed consolidated statements of operations as follows:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development

General and administrative

As of March 31, 2022 , total unrecognized compensation expense related to unvested stock options and restricted stock units was $ 16.9 million, which is expected to be recognized over a weighted average period of 2.68 years.

As of June 30, 2022 , total unrecognized compensation expense related to unvested stock options was $ 15.7 million, which is expected to be recognized over a weighted average period of 2.47 years.

Commitments and Contingencies

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As additional consideration for these agreements, the Company is obligated to pay each of WFUHS and IU certain milestone payments of up to $ 2.6 million in the aggregate upon the achievement of certain developmental milestones, commencing on the enrollment of the first patient in a Phase 1 clinical trial.

The Company enrolled the first patient in its SAD trial on December 11, 2019 and paid WFUHS and IU less than $ 0.1 million.

The Company will also pay each of WFUHS and IU sublicensing fees ranging from a high-single digit to a low double-digit percentage of sublicense consideration depending on the Company’s achievement of certain regulatory milestones as of the time of receipt of the sublicense consideration.

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In the event that the Company is required to pay WFUHS consideration, then the Company may deduct 60 % of such WFUHS consideration on a dollar-for-dollar basis from the consideration due to IU.

During the three months ended March 31, 2022 , no milestones were achieved and no milestone expense was recognized.

During the three and six months ended June 30, 2022 , no milestones were achieved and no milestone expense was recognized.

Both agreements continue from their effective date through the last to expire of the licensed patents unless earlier terminated by either party in accordance with their terms.

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In connection with the Sublease, the Company evaluated the need for impairment under ASC 360 and determined there was no impairment.

The Sublease provides for an initial annual base rent of $ 0.8 million, which increases annually up to a maximum annual base rent of $ 1.0 million.

The Sublease provided for an initial annual base rent of $ 0.8 million, which increases annually up to a maximum annual base rent of $ 1.0 million.

The Subtenant also is responsible for paying to the Company future increases in operating costs (commencing on January 1, 2022), future increases in annual tax costs (commencing July 1, 2021) and all utility costs (commencing March 1, 2021) attributable to the Premises during the term of the Sublease.

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The Company has determined this lease extension qualifies as a short-term lease and have applied the accounting policy election to not record the related right-of-use asset and lease liabilities.

Expense arising from operating leases was $ 0.1 million during the three months ended March 31, 2022 and 2021, respectively.

For operating leases, the weighted-average remaining lease term for leases at March 31, 2022 and December 31, 2021 was 7.4 and 7.6 years, respectively.

For operating leases, the weighted average discount rate for leases at March 31, 2022 and December 31, 2021 was 11.0 %.

Expense arising from operating leases was $ 0.1 million and $ 0.2 million during the three and six months ended June 30, 2022 and $ 0.1 million during the three and six months ended June 30, 2021, respectively.

For operating leases, the weighted-average remaining lease term for leases at June 30, 2022 and December 31, 2021 was 7.2 and 7.6 years, respectively.

For operating leases, the weighted average discount rate for leases at June 30, 2022 and December 31, 2021 was 11.0 %.

The Company has not entered into any financing leases.

Maturities of lease liabilities due under these lease agreements as of March 31, 2022 are as follows:

Maturities of lease liabilities due under these lease agreements as of June 30, 2022 are as follows:

(in thousands)

Nine months ending December 31, 2022

Six months ending December 31, 2022

Year ended December 31, 2023

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Payne $ 0.1 million per year over the term of the agreement and granted Dr.

Payne 123,853 restricted Common Units in Holdings.

Payne 123,853 restricted Common Units in Chondrial Holdings, LLC, the sole investor in Chondrial Therapeutics which merged into the Company in May of 2020 ("Holdings") .

On November 30, 2016, 30 % immediately vested and was associated with Chondrial Therapeutics IP, LLC (“IP LLC”) becoming a subsidiary of Holdings, which was subsequently contributed to the Company on December 31, 2018.

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Payne which extended the term of the Consulting Engagement for a four-year term beginning on January 1, 2021.

During the three months ended March 31, 2022 and 2021 the Company recognized less than $ 0.1 million related to this consulting agreement, recorded as research and development expense in the Condensed Consolidated Statements of Operations.

During the three and six months ended June 30, 2022 and 2021 the Company recognized less than $ 0.1 million and $ 0.1 million, respectively, related to this consulting agreement, recorded as research and development expense in the Condensed Consolidated Statements of Operations.

During 2021, the Company purchased a piece of laboratory equipment and lab supplies for a cumulative $ 0.1 million from a supplier of which one of the Company's directors is also a current director.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”), and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 25, 2022.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties, and assumptions.

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You should read the “Risk Factors”

section included in our Annual Report on Form 10-K filed with the SEC on March 25, 2022, in addition to the "Risk Factors" and “Forward-Looking Statements”

section included in our 2021 Annual Report and our subsequently filed Quarterly Report on Form 10-Q for the period ended March 31, 2022, in addition to the "Risk Factors" and “Forward-Looking Statements”

sections of this Quarterly Report on Form 10-Q for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

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FXN levels achieved in peripheral tissues (buccal cells) following daily 50 mg and 100 mg subcutaneous injections of CTI-1601 were at or in excess of FXN levels that

would be expected in phenotypically normal heterozygous carriers.

There were no serious adverse events ("SAEs") associated with either the MAD or SAD trials.

In May 2021, the FDA placed a clinical hold on our CTI-1601 clinical program after we notified the agency of mortalities at the highest dose levels of the 26-week non-human primate toxicology study that was designed to support extended dosing of patients with CTI-1601.

Also in May 2021, the FDA placed a clinical hold on our CTI-1601 clinical program after we notified the agency of mortalities at the highest dose levels of the 26-week non-human primate toxicology study that was designed to support extended dosing of patients with CTI-1601.

At the time the hold was placed, we had no interventional clinical trials with patients enrolling or enrolled.

In February 2022, in response to the complete response we submitted to the FDA, the Agency stated that it was maintaining the clinical hold and that additional data are needed to resolve the clinical hold.

We subsequently submitted a request for an FDA Type C meeting.

This request was granted and is scheduled for early in the third quarter of 2022.

Throughout the course of the interactions associated with the Type C meeting, we intend to work with the Agency to enable resolution of the clinical hold and to agree on the study design and timing of the next proposed clinical trial.

We subsequently submitted a request to the FDA for a Type C meeting.

In the third quarter of 2022, we had a Type-C meeting with the FDA.

We plan to submit a complete response to the CTI-1601 clinical hold later in the third quarter of 2022.

In conjunction with the complete response, we are proposing as CTI-1601’s next clinical trial, a Phase 2, four-week dose exploration study in FA patients starting at the lower dose levels tested in the Company’s Phase 1 multiple-ascending dose clinical trial.

Throughout the course of the interactions with the FDA, we intend to continue to work with the Agency to enable resolution of the clinical hold and to agree on the study design and timing of the next proposed clinical trial.

We do not know when, or if the clinical hold will be lifted.

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In July 2021, we sold 2,342,720 shares pursuant to the ATM Agreement for net proceeds of $19.9 million, after issuance costs.

As of May 10, 2022, $29.2 million of additional shares of common stock remained available for sale by us under the ATM Agreement.

As of June 30, 2022, $29.2 million of additional shares of common stock remained available for sale by us under the ATM Agreement.

COVID-19 Update

In March 2020, the World Health Organization ("WHO") declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic.

The pandemic resulted in the temporary stoppage of our CTI-1601 Phase 1 clinical trials in patients with Friedreich’s ataxia in March 2020.

In July 2020, we resumed these clinical trials, and have since completed both the SAD and MAD clinical trials.

Since being discovered, new variants of COVID-19 have emerged, including the Omicron variant, the Alpha variant, the Beta variant, the Gamma variant, and the Delta variant.

Vaccines manufactured by Moderna, Pfizer and Johnson & Johnson were introduced late in the fourth quarter of 2020 and became widely available by the end of the first quarter of 2021.

While the vaccines have proven effective in reducing the severity and mortality of COVID-19, including the variants that have evolved to date, the overall vaccination rate in the United States has not reached the level required for herd immunity in some states, particularly in some regions of the country.

Further, additional doses of vaccines have been and may be required in the future, and individuals may refuse or fail to receive one or more of such doses.

The incidence of variants of COVID-19 has been increasing, particularly among unvaccinated individuals, and the Omicron variant has proven to be more easily spread than earlier variants.

Our business, results of operations, financial condition and cash flows could be materially and adversely affected.

Specifically, we could experience additional delays in future clinical trial timelines as a result of additional travel and hospital restrictions related to the COVID-19 pandemic and the efforts to mitigate it which may be imposed or could experience supply shortages or manufacturer shutdowns impacting the manufacture of drug

substance or drug product, which could also impact clinical trial timelines.

The financial statements do not reflect any adjustments as a result of the pandemic.

experience supply shortages or manufacturer shutdowns impacting the manufacture of drug substance or drug product, which could also impact clinical trial timelines.

Financial Operations Overview

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Operating Expenses

The majority of our operating expenses since inception have consisted primarily of research and development activities, and general and administrative costs.

The majority of our operating expenses since inception have consisted primarily of research and development and general and administrative costs.

Research and Development Expenses

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establishing manufacturing capabilities or making arrangements with third-party manufacturers and risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes;

the impact of the on-going COVID-19 pandemic including the mutations of the original virus that may prove more contagious and deadly;

the impact of the on-going COVID-19 pandemic including the variants of the original virus that may prove more contagious and deadly;

our ability to obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates;

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General and Administrative Expenses

General and administrative expenses consist primarily of personnel costs, consisting of salaries, related benefits and stock-based compensation, costs related to our executive, finance, information technology, and costs related to other administrative functions.

General and administrative expenses consist primarily of personnel costs, composed of salaries, related benefits and stock-based compensation, costs related to our executive, finance, information technology, and costs related to other administrative functions.

General and administrative expenses also include insurance expenses and professional fees for auditing, tax, and legal services, including legal expenses to pursue patent protection for our intellectual property.

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Stock-Based Compensation

We measure all stock-based awards granted to employees, non-employee consultants and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model.

We measure all stock-based awards granted to employees, directors and non-employee consultants based on the fair value on the date of grant using the Black-Scholes option-pricing model.

Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award.

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Results of Operations

Comparison of three months ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Comparison of three months ended June 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

(in thousands)

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Research and development expenses

Research and development expenses for the three months ended March 31, 2022 decreased $3.2 million compared to the three months ended March 31, 2021.

The decrease in research and development expenses as

compared to the prior year period was primarily driven by lower clinical supply manufacturing costs of $2.2 million and a decrease of $1.9 million in clinical trial costs, partially offset by an increase of $0.3 million in personnel related costs due to headcount additions in our research and development functions, higher non-clinical costs of $0.2 million, an increase of $0.2 million in professional fees primarily related to consulting services and an increase of $0.2 million in stock-based compensation expense associated with stock option grants made in 2021 and 2022.

Research and development expenses for the three months ended June 30, 2022 decreased $3.5 million compared to the three months ended June 30, 2021.

The decrease in research and development expenses was primarily driven by a decrease in nonclinical costs of $2.5 million and a decrease of $1.1 million in clinical trial costs, partially offset by an increase of $0.2 million in stock-based compensation expense associated with stock option grants made in 2021 and 2022.

General and administrative expenses

General and administrative expenses for the three months ended March 31, 2022 decreased $0.1 million compared to the three months ended March 31, 2021.

The decrease in general and administrative expenses as compared to the prior year period was primarily driven by a decrease of $0.3 million in professional fees primarily associated with reduced recruiting and consulting services performed in the three months ended March 31, 2022 compared to the three months ended March 31, 2021, partially offset by an increase of $0.2 million in stock-based compensation expense associated with stock option grants made in 2021 and 2022 and an increase of $0.1 million in personnel related costs due to salary adjustments made in the three months ended March 31, 2022.

General and administrative expenses for the three months ended June 30, 2022 decreased $0.4 million compared to the three months ended June 30, 2021.

The decrease was primarily driven by a decrease in professional fees associated with legal and accounting services of $0.5 million, partially offset by an increase of $0.1 million in stock-based compensation expense associated with stock option grants made in 2021 and 2022.

Results of Operations

Comparison of six months ended June 30, 2022 and 2021

The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

(in thousands)

Statement of Operations Data:

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense), net

Research and development expenses

Research and development expenses for the six months ended June 30, 2022 decreased $6.6 million compared to the six months ended June 30, 2021.

The decrease in research and development expenses compared to the prior year period was primarily driven by a decrease of $3.0 million in clinical trial costs, a decrease in clinical supply manufacturing costs of $2.3 million, a decrease in nonclinical costs of $2.3 million, partially offset by an increase of $0.4 million in personnel related costs due to annual compensation increases and an increase of $0.4 million in stock-based compensation expense associated with stock option grants made in 2021 and 2022.

General and administrative expenses

General and administrative expenses for the six months ended June 30, 2022 decreased $0.4 million compared to the six months ended June 30, 2021.

The decrease in general and administrative expenses was primarily driven by a decrease in professional fees associated with legal and accounting services of $0.6 million, a decrease in operational expenses of $0.3 million, partially offset by an increase of $0.4 million in stock-based compensation expense associated with stock option grants made in 2021 and 2022.

Liquidity and Capital Resources

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The following table summarizes our sources and uses of cash for each of the periods presented below:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

Net cash used in operating activities

Net cash provided by investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

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Net cash used in operating activities

During the three months ended March 31, 2022, operating activities used $7.5 million of cash, resulting from our net loss of $8.9 million, adjusted for noncash expenses of $1.7 million and changes in our operating assets and liabilities of $0.3 million.

Our net loss was primarily attributed to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above.

Noncash expenses primarily include stock-based compensation expense.

The change in operating assets and liabilities was primarily due to a decrease in accrued expenses and offset by an increase in accounts payable and prepaid expenses.

During the three months ended March 31, 2021, operating activities used $11.2 million of cash, resulting from our net loss of $12.1 million, adjusted for noncash expenses of $1.2 million and changes in our operating assets and liabilities of $0.4 million.

During the six months ended June 30, 2022, operating activities used $15.0 million of cash, resulting from our net loss of $17.6 million, adjusted for noncash expenses of $3.5 million and changes in our operating assets and liabilities of $0.9 million.

Our net loss was primarily attributed to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above.

Noncash expenses are primarily stock-based compensation expense.

The change in operating assets and liabilities was primarily due to decreases in prepaid expenses and accounts payable.

During the six months ended June 30, 2021, operating activities used $22.0 million of cash, resulting from our net loss of $24.7 million, adjusted for noncash expenses of $2.7 million.

Our net loss was primarily attributable to research and development activities related to our CTI-1601 program and our general and administrative expenses as described above.

Noncash expenses primarily include stock-based compensation expense.

The change in operating assets and liabilities was primarily due to a decrease in accrued expenses and offset by an increase in accounts payable and prepaid expenses due to the growth in our operating activities.

Net cash provided by investing activities

During the three months ended March 31, 2022, there were no investing activities.

During the three months ended March 31, 2021, investing activities provided $5.3 million of cash, resulting from a $7.0 million increase from maturities of marketable debt securities, which was partially offset by $1.7 million in purchases of new marketable debt securities.

The change in operating assets and liabilities was primarily due to decreases in prepaid expenses and accounts payable.

Net cash provided by (used in) investing activities

During the six months ended June 30, 2022, investing activities used $35.3 million of cash, including $35.2 million in purchases of new marketable debt securities and $0.1 million in purchases of property and equipment.

During the six months ended June 30, 2021, investing activities provided $24.5 million of cash, resulting from a $26.3 million increase from maturities of marketable debt securities, partially offset by $1.7 million in purchases of new marketable debt securities.

Net cash provided by financing activities

During the three months ended March 31, 2022 and 2021 there were no financing activities.

During the six months ended June 30, 2022 and 2021 there were no financing activities.

Operating Capital Requirements

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We have to date incurred net losses.

We incurred net losses of approximately $8.9 million and $12.1 million for the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, we had an accumulated deficit of $125.2 million and cash and cash equivalents of $62.6 million, excluding restricted cash of $1.3 million.

We incurred net losses of approximately $17.6 million and $24.7 million for the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $133.9 million and cash, cash equivalents and marketable debt securities of $54.9 million, excluding restricted cash of $1.3 million.

Losses have resulted principally from costs incurred in connection with research and development activities, and general and administrative costs associated with the development of CTI-1601 and our operations.

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expand our operational, financial, commercial and management systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company.

We believe that based on our current operating plan our cash and cash equivalents will be able fund operating expenses and capital expenditure requirements for at least the next twelve months.

We believe that based on our current operating plan our cash, cash equivalents and marketable debt securities will be able fund operating expenses and capital expenditure requirements for at least the next twelve months from the filing of these financial statements with the SEC.

If we encounter unexpected delays in our clinical trials or if there are other unanticipated changes to our operating plan from our current assumptions that negatively impact our operations, we may reduce expenditures in order to further extend our existing cash resources.

Until we can generate substantial revenue, if ever, we expect to seek additional funding through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements or other sources.

The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, minimum cash balances, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms or at all.

There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, if at all.

If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or we do not have sufficient authorized shares, we may be required to delay, limit, or eliminate the development of business opportunities and our ability to achieve our business objectives, our competitiveness, and our business, financial condition, and results of operations will be materially adversely affected.

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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-Q

Item 1. Financial Statements