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Item 5. Market for Registrant’s Common Equity

2023-03-14 compared with 2022-03-25 · 105 added, 140 removed, 101 unchanged (71% of the section changed)

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Our common stock is publicly traded on the Nasdaq Global Market under the symbol “LRMR.”

As of March 23, 2022, we had approximately 17,710,450 record holders of its common stock.

We have not declared or paid any dividends since our inception nor does we expect to pay dividends in the foreseeable future.

As of March 14, 2023, we had approximately 24 record holders of our common stock.

We have not declared or paid any dividends since our inception nor do we expect to pay dividends in the foreseeable future.

Recent Sales of Unregistered Securities

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and in other parts of this Annual Report on Form 10-K.

We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide technology platform.

Our lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver human frataxin ("FXN") an essential protein, to the mitochondria of patients with Friedreich’s ataxia ("FA").

We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel CPP technology platform.

Our lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver FXN, an essential protein, to the mitochondria of patients with FA.

FA is a rare, progressive, and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality.

There is currently no effective therapy for FA.

Currently, there are no treatment options that address the core deficit of FA, low levels of FXN.

CTI-1601 represents the first potential therapy designed to increase FXN levels in patients with FA.

We have completed two Phase 1 clinical trials in patients with FA.

We have received orphan drug status, fast track designation and rare pediatric disease designation, from the U.S.

Food and Drug Administration ("the FDA") for CTI‑1601.

In addition, we received orphan drug and a Priority Medicines ("PRIME") designation for CTI-1601 from the European Commission and a Priority Medicines ("PRIME") designation from the European Medicines Agency ("EMA").

We have also received an orphan drug designation, fast track designation and rare pediatric disease designation, from the FDA for CTI‑1601.

In addition, we received orphan designation for CTI-1601 from the European Commission and a PRIME designation from the EMA.

The receipt of such designations or positive opinions may not result in a faster development process, review or approval compared to products considered for approval under conventional FDA or EMA procedures and does not assure ultimate approval by the FDA or EMA.

We believe that our cell penetrating peptide ("CPP") technology platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases.

We believe that our CPP platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases.

We intend to use our proprietary platform to target additional orphan indications characterized by deficiencies in or alterations of intracellular content or activity.

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Through PRIME, the EMA offers early and proactive support to medicine developers to optimize the generation of robust data on a medicine’s benefits and risks and enable accelerated assessment of medicines applications so that these medicines can reach patients earlier.

The PRIME designation was based on both non-clinical data as well as tolerability data from the CTI-1601 Phase 1 program in patients with FA.

In May 2021, we reported positive topline data from our Phase 1 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.

The PRIME designation was based on both pre-clinical data as well as tolerability data from the CTI-1601 Phase 1 program in patients with FA.

In May 2021, we reported positive top-line data from our Phase 1 FA program after completing dosing of the SAD trial in December 2020 and of the 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.

To support extended dosing of patients with CTI-1601, we conducted a 26-week NHP toxicology study in 2021.

In May 2021 we notified the FDA of certain mortalities which occurred at the highest dose levels in the then-ongoing study.

On May 25, 2021 the FDA placed a clinical hold on the CTI-1601 clinical program.

In the clinical hold letter, the FDA stated that it needed to review a full study report from the then-ongoing NHP study and that we may not initiate additional interventional clinical trials until we have submitted such report and received notification from the FDA that additional clinical trials may commence.

At the time of the FDA clinical hold, we had no interventional clinical trials with patients enrolled or enrolling and as of the date of this report, do not have interventional clinical trials with patients enrolled or enrolling.

We have completed two Phase 1 clinical trials in patients with FA but the clinical development of CTI-1601 is currently subject to a clinical hold.

We submitted a complete response to the clinical hold in January 2022.

In February 2022, we received feedback from the FDA following our submission of the complete response.

The FDA stated that it was maintaining its clinical hold at this time and requested additional information.

We are evaluating how best to respond to their request.

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

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 SAEs associated with either the MAD or SAD trials.

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 NHP 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 FDA stated that it was maintaining the clinical hold and that additional data were needed to resolve the clinical hold.

We subsequently submitted a request to the FDA for a Type C meeting, which was granted and was held in July 2022.

We submitted a complete response incorporating additional information requested by the FDA at the meeting as well as information on the proposed study in August 2022.

In September 2022, following the Type C meeting and the submission of the Company's complete response, the FDA allowed the 25 mg cohort of a Phase 2, four-week, placebo-controlled, dose exploration trial of CTI-1601 in FA patients to proceed.

In connection with this decision, the FDA lifted its full clinical hold on the CTI-1601 clinical development program and imposed a partial hold.

The dose exploration trial is designed to further characterize CTI-1601’s safety, PD and PK profiles to provide information about the preferred long-term dose and dose regimen.

We have since initiated the 25 mg cohort of the Phase 2 dose exploration trial.

Initiation of the second cohort and/or other clinical trials is contingent on the FDA’s agreement based on its review of the trial's 25 mg cohort data and on review by the trial’s independent data monitoring committee.

We anticipate that we will provide an update that will outline the next steps for the clinical trial in the second quarter of 2023 and anticipate reporting top-line data in the second half of 2023.

Recent Financing Activities

We have funded our operating and capital requirements to date primarily with proceeds from sales of common stock, prefunded warrants for the purchase of common stock and, prior to the merger with Zafgen described below (see "Merger with Zafgen"), with capital contributions from Chondrial Holdings, LLC ("Holdings").

In June 2020, we completed the Merger, as defined below, and acquired $42.9 million of cash, cash equivalents, restricted cash and marketable debt securities that were held by Zafgen immediately prior to the Merger.

We also raised $75.4 million, net of offering costs, through a private offering of common stock and prefunded warrants to purchase shares of our common stock in connection with, and immediately after, the closing of the Merger in June 2020.

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

offering program under which we could sell up to an aggregate of $50,000,000 of shares of our common stock from time to time through this investment bank as sales agent.

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 March 23, 2022, $29.2 million of additional shares of common stock remained available for sale by us under the ATM Agreement.

Merger with Zafgen

On December 17, 2019, we entered into an Agreement and Plan of Merger ("the Merger Agreement") with Zordich Merger Sub, Inc.

("the Merger Sub") our wholly owned subsidiary, Chondrial Therapeutics Inc.

("Chondrial") and Chondrial Holding, LLC ("Holdings") pursuant to which the Merger Sub merged with and into Chondrial, with Chondrial surviving the merger as our wholly owned subsidiary ("the Merger").

The Merger was completed on May 28, 2020 pursuant to the terms of the Merger Agreement.

Pursuant to the terms of the Merger Agreement, upon closing of the Merger, all of Chondrial’s outstanding common stock was exchanged for our common stock and all outstanding options exercisable for units of Holdings were exchanged for options to purchase our common stock.

In addition, immediately prior to the closing of the Merger, we effected a 1 for 12 reverse stock split and changed our name from Zafgen, Inc.

to Larimar Therapeutics, Inc.

Following the Merger, the business conducted by Chondrial became our primary business.

The business combination was accounted for as a reverse acquisition in accordance with U.S.

generally accepted accounting principles ("GAAP").

Under this method of accounting, Chondrial was deemed to be the accounting acquirer for financial reporting purposes.

This determination was primarily based on the facts that, immediately following the merger:

(i) Chondrial's stockholders owned a substantial majority of the voting rights in the combined

company, (ii) the majority of the board of directors of the combined company was composed of directors designated by Chondrial under the terms of the Merger Agreement and (iii) existing members of Chondrial management became the management of the combined company.

Accordingly, for accounting purposes, the business combination was treated as the equivalent of Chondrial issuing stock to acquire Zafgen’s net assets.

As a result, as of the closing date of the Merger, Zafgen’s net assets were recorded at their acquisition-date fair values, which were then adjusted for the difference between the purchase price and the fair value of the assets acquired, in the financial statements of Chondrial and the reported operating results prior to the business combination are those of Chondrial.

As the Merger has been accounted for as an asset acquisition, goodwill has not been recorded within the consolidated balance sheet.

We have funded our operations to date primarily with proceeds from sales of common stock, proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, marketable securities and restricted cash upon the merger with Zafgen, Inc.

and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC.

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

offering program providing for the sale of up to an aggregate of $50.0 million of shares of our common stock from time to time through the investment bank as sales agent.

In July 2021, we sold 2,342,720 shares under the Prior ATM agreement for net proceeds of $19.9 million, after issuance costs.

In September 2022, we sold 25,558,750 shares of common stock in an underwritten offering for net proceeds of $75.2 million, after issuance costs.

In November 2022, the Prior ATM Agreement was terminated and we entered into a new Sales Agreement (the "ATM Agreement") with another investment bank in connection with the establishment of an “at-the-market”

offering program providing for the sale of up to an aggregate of $50.0 million of shares of our common stock from time to time through this investment bank as sales agent.

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 may be required, 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.

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.

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.

The COVID-19 pandemic that began late in 2019 caused a four-month temporary stoppage of our trials with patients with FA in early 2020.

Both of our SAD and MAD clinical trials were subsequently completed in 2021.

While COVID-19 has had no significant impact to date on our 25 mg cohort of its dose exploration study, the risk of a resurgence of future vaccine resistant variants of COVID-19 and or other infectious diseases remains.

In the future, the COVID-19 pandemic and responsive measures thereto may result in negative impacts on us, including possible delays in our clinical and regulatory activities.

We cannot be certain what the overall impact of a resurgence of the COVID-19 pandemic or other health crisis would be on our business and it has the potential to materially adversely affect our business, financial condition, results of operations, and prospects.

Critical Accounting Policies and Significant Judgments and Estimates

Our audited consolidated financial statements are prepared in accordance with GAAP.

The preparation of our audited consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and expenses, and related disclosures.

We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our audited consolidated financial statements and, therefore, consider these to be our critical accounting policies.

We evaluate these estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different assumptions and conditions.

Research and Development Expense

Costs for certain research and development activities, such as manufacturing, non-clinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators, and accordingly are considered an area of significant judgement and management's review of manufacturing, nonclinical and clinical expenses.

This process involves reviewing open contracts and purchase orders, communicating with our personnel and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs.

We work with vendors and suppliers to ensure that our estimates of our research and development expenses are reasonable.

Research and development activities are central to our business.

We expect to increase our investment in research and development in order to advance CTI-1601 through additional clinical trials.

As a result, we expect that our research and development expenses will increase in the foreseeable future as we pursue clinical development of CTI-1601 and/or any other product candidates we develop.

Stock Compensation Expense

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.

The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards.

The assumptions used in our option-pricing model represent management’s best estimates.

These estimates are complex, involve a number of variables, uncertainties and assumptions and the application of management’s judgment, so that they are inherently subjective.

If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future.

Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock.

Therefore, we estimate our expected common stock price volatility based on the historical volatility of publicly traded peer companies within the life sciences/biotechnology sector with comparable characteristics including enterprise value, risk profiles and position within the industry.

We regularly evaluate our peer group to assess changes in circumstances where identified companies may no longer be similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation.

We expect to continue to do so until we have adequate historical data regarding the volatility of our own traded stock price.

The expected term of our stock options has been determined utilizing the “simplified”

method for awards that qualify as “plain-vanilla”

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.

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

Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method.

We account for forfeitures as they occur.

We classify stock-based compensation expense in our 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.

Financial Operations Overview

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allocated facility-related costs.

Costs for certain activities, such as manufacturing, non-clinical studies and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators.

Research and development activities are central to our business.

We expect to increase our investment in research and development in order to advance CTI-1601 through additional clinical trials.

As a result, we expect that our research and development expenses will increase in the foreseeable future as we pursue clinical development of CTI-1601 and/or any other product candidates we develop.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical and commercial development of CTI-1601, if clinical development is allowed to continue, or any other product candidates we develop.

We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates.

The duration, costs, and timing of clinical trials and development of CTI-1601 or any other product candidates we develop will depend on a variety of factors, including:

the scope, rate of progress and expense of clinical trials and other research and development activities, including the ongoing impact of COVID-19 on these activities;

the scope, rate of progress and expense of clinical trials and other research and development activities;

clinical trial results;

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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 possible impact of COVID-19 including the mutations 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;

our ability to recruit and retain key research and development personnel.

A change in the outcome of any of these variables with respect to the development of a product candidate could significantly change the costs, timing and viability associated with the development of that product candidate.

A change in the outcome of one or more of these variables with respect to the development of a product candidate could significantly change the costs, timing and viability associated with the development of that product candidate.

For example, if the FDA or another regulatory authority were to require us to conduct additional non-clinical or clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

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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.

We expect that our general and administrative expenses will increase in the foreseeable future as we hire additional employees to implement, improve and scale our operational, financial, commercial and management systems.

Critical Accounting Policies and Significant Judgments and Estimates

Our audited consolidated financial statements are prepared in accordance with GAAP.

We evaluate these estimates and assumptions on an ongoing basis.

Our actual results may differ from these estimates under different assumptions and conditions.

Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses and evaluate payments made to vendors in advance of actual work activities being performed.

The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met.

We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time.

Examples of estimated accrued research and development expenses include fees paid to:

CROs, in connection with clinical trials;

vendors in connection with non-clinical development activities;

contract manufacturing organizations in connection with the production of non-clinical and clinical trial materials;

vendors related to product candidate manufacturing, development and distribution of clinical supplies.

We base our expenses related to clinical trials on our estimates of the services received and efforts expended pursuant to contracts with multiple CROs or CMOs that conduct and manage clinical trials or manufacture clinical trial material on our behalf.

The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.

There may be instances in which payments made to our vendors

will exceed the level of services provided and result in a prepayment of the clinical expense, non-clinical expense or manufacturing activities.

Payments under some of these contracts depend on factors such as the completion of clinical trial milestones.

In accruing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period.

In accruing CMO costs, we estimate the time period that manufacturing will be completed, the achievement of milestones and the percentage completion of each specific CMO agreement.

If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid accordingly.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us recognizing adjustments in future periods as additional information becomes available.

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.

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

Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method.

We account for forfeitures as they occur.

Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock.

Therefore, we estimate our expected common stock price volatility based on the historical volatility of publicly traded peer companies and expect to continue to do so until we have adequate historical data regarding the volatility of our own traded stock price.

The expected term of our stock options has been determined utilizing the “simplified”

method for awards that qualify as “plain-vanilla”

The risk-free interest rate is determined by reference to the U.S.

Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future.

We expect that our general and administrative expenses will increase in the foreseeable future

as we hire additional employees to implement, improve and scale our operational, financial, commercial and management systems.

Results of Operations

The following commentary is a discussion and analysis of our financial condition as of December 31, 2022 and results of operations and cash flows for the year ended December 31, 2022 compared to the year ended December 31, 2021 and should be read in conjunction with the consolidated financial statements and accompanying notes.

The discussion and analysis of our financial condition as of December 31, 2021, and results of operations and cash flows for the year ended December 31, 2021, compared to the year ended December 31, 2020, is included in item 7, Management’s Discussion and Analysis of Financial and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021.

Comparison of the years ended December 31, 2022 and 2021

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Research and development expenses

Research and development expenses for the year ended December 31, 2021 were $38.4 million compared to $31.4 million for the same period in 2020.

The increase in research and development expenses compared to the prior year

period was primarily driven by higher non-clinical and internal laboratory costs of $3.2 million, an increase of $2.0 million in personnel related costs due to increased headcount in our research and development functions, an increase of $1.3 million in stock-based compensation expense associated with stock option grants made in the second half of 2020 and in 2021, higher clinical supply manufacturing costs of $0.4 million, and an increase of $0.4 million in professional fees primarily related to consulting services, partly offset by a decrease of $0.6 million in clinical trial costs.

Research and development expenses for the twelve months ended December 31, 2022 decreased $14.1 million compared to the twelve months ended December 31, 2021.

The decrease in research and development expenses was primarily driven by a decrease of $9.5 million in drug manufacturing costs, a decrease of $3.7 million in nonclinical development costs, a decrease of $1.6 million in clinical expense, a decrease of $0.9 million in consulting expenditures, and a decrease of $0.7 million in internal lab costs.

These decreases were partially offset by an increase of $1.2 million in personnel expense, an increase of $0.7 million in non-cash, stock-based compensation expense associated with stock option grants made in 2021 and 2022 and an increase of $0.3 million in royalty fees associated with the milestone achieved in 2022.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2021 were $12.1 million compared to $11.4 million for the same period in 2020.

The increase in general and administrative expenses as compared to the prior year period was primarily driven by an increase of $2.0 million in stock-based compensation expense associated with stock option grants made in the second half of 2020 and thus far in 2021, an increase of $1.1 million in other operating expenses including insurance, recruiting and information technology costs required to function as a public company, and an increase of $0.3 million in personnel related costs due to increased headcount, partially offset by a decrease of $2.1 million in professional fees primarily associated with accounting, legal, communication and consulting fees and a decrease of $0.6 million in facility costs associated with the sublease agreement entered into in late 2020.

General and administrative expenses for the twelve months ended December 31, 2022 increased $0.2 million compared to the twelve months ended December 31, 2021.

The increase in general and administrative expense was primarily driven by an increase of $0.5 million in stock-based compensation expense associated with stock option grants made in 2021 and 2022 and an increase of $0.5 million in personnel expense, partially offset by a decrease of $0.6 million in operational costs primarily related to technology and recruiting services and a decrease of $0.2 million in professional fees primarily associated with legal and consulting expense.

Liquidity and Capital Resources

Since our inception, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations.

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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

Net increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Net cash used in operating activities

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Our net loss was primarily attributed to operating expenses of $36.5 million.

The change in operating assets and liabilities was primarily due to a decrease in prepaid expenses due to the recognition of expense of amounts previously paid, an increase in accrued expenses due to the growth in our operating activities, and partially offset by a decrease in accounts payable due to the timing of invoice processing.

The change in operating assets and liabilities was primarily due to an increase in accrued expenses due to the growth in our operating activities following the partial release of the clinical hold in late 2022.

During the year ended December 31, 2021, operating activities used $42.1 million of cash, resulting from our net loss of $50.6 million, adjusted for noncash expenses of $5.8 million, and changes in our operating assets and liabilities resulting in a use of cash of $2.7 million.

Our net loss was primarily attributed to operating expenses of $50.5 million.

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

Net cash provided by investing activities

The change in operating assets and liabilities was primarily due to a decrease in prepaid expenses due to the recognition of expense of amounts previously paid, an increase in accrued expenses due to the growth in our operating activities, partially offset by a decrease in accounts payable due to the timing of invoice processing.

Net cash provided by (used in) investing activities

During the year ended December 31, 2022, investing activities used $91.0 million of net cash, resulting from purchases of $133.6 million in marketable securities, which was offset by $42.8 million of maturities and sales of marketable securities.

During the year ended December 31, 2021, investing activities provided $24.2 million of net cash, resulting from $32.8 million representing maturities and sales of marketable securities, which was offset by purchases of $8.2 million in marketable securities and $0.3 million used for the purchase of equipment.

During the year ended December 31, 2020, investing activities provided $17.1 million of net cash, resulting from $41.9 million of cash acquired from our merger with Zafgen and $1.0 million representing maturities and sales of marketable securities, which was offset by transaction costs associated with the Merger of $1.3 million, the purchase of $24.5 million in marketable securities and $0.1 million used for the purchase of equipment.

Net cash provided by financing activities

During the year ended December 31, 2021, financing activities provided $19.9 million of cash from the sale of common stock under the ATM Agreement (as defined below), after issuance costs.

During the year ended December 31, 2020, financing activities provided $93.6 million of cash that was the result of proceeds from the sale of common stock of $75.6 million and capital contributions from related parties prior to the merger with Zafgen of $18 million.

During the year ended December 31, 2022, financing activities provided $75.3 million of cash from sale of common stock in an underwritten public offering, net of issuance costs.

During the year ended December 31, 2021, financing activities provided $19.9 million of cash from the sale of common stock under the Prior ATM Agreement, net of issuance costs.

Operating Capital Requirements

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We have to date incurred net losses.

We incurred net losses of approximately $51.2 million and $42.5 million for the year ended December 31, 2021 and 2020, respectively.

We incurred net losses of approximately $35.4 million and $50.6 million for the twelve months ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, we had an accumulated deficit of $151.6 million and a cash and cash equivalents balance of $118.4 million, excluding restricted cash of $1.3 million.

These 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.

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.

We expect to incur significant expenses and operating losses for the foreseeable future as we expect to continue to incur expenses in connection with our ongoing activities, if and as we:

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maintain, leverage and expand our intellectual property portfolio;

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.

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.

expand our operational, financial, commercial and management information 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, cash equivalents and marketable 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.

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

In addition, geopolitical unrest including the potential impact of the Russian invasion of Ukraine and the possibility that the conflict could expand beyond eastern Europe, the impact of the COVID-19 pandemic and/or other health crises o n the global financial markets may reduce our ability to access capital, which could negatively affect our liquidity and ability to continue as a going concern.

If we are unable to obtain funding when needed and/or on acceptable terms, we may be required to significantly curtail, delay or discontinue one or more of its research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion or pre commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations.

Off-Balance Sheet Arrangements

In addition, geopolitical unrest, including a more widespread impact of the Russian invasion of Ukraine, the possibility that the conflict could expand beyond eastern Europe, the impact of a possible resurgence of vaccine resistant, more deadly or more contagious variants of COVID-19 and/or the potential impact of other health crises, recent liquidity constraints, failures and instability in U.S.

and international financial banking systems as well as the impact of inflation or the federal government's failure to raise the debt ceiling on the global financial markets may reduce our ability to access capital, which could negatively affect our liquidity and ability to continue as a going concern.

If we are unable to obtain sufficient funding when needed and/or on acceptable terms, we may be required to significantly curtail, delay or discontinue one or more of our research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion or pre commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations.

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.

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.

During the periods presented we did not have, and we currently do not have, any off-balance sheet arrangements, as defined under applicable SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2021 and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:

Payments due by Period

(in thousands)

Lease Obligations

Recently Issued Accounting Pronouncements

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not

required to provide the information required under this item.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

What changed 10-K

Item 5. Market for Registrant’s Common Equity