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Item 9A. Controls and Procedures

2024-03-14 compared with 2023-03-14 · 275 added, 229 removed, 472 unchanged (52% of the section changed)

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Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,”

as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and our principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and our principal financial officers, as appropriate, to allow timely decisions regarding required disclosure.

With respect to the year ended December 31, 2023, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures.

Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2023 to provide reasonable assurance that the information required to be disclosed by us in this Annual Report was (a) reported within the time periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

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Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on our evaluation under that framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2023.

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OTHER INFORMATION

(b) During the fourth quarter of the fiscal year ended December 31, 2023, no director or “officer” as defined in Rule 16a-1(f) under the Exchange Act adopted or terminated any Rule 10b5-1 trading plan or arrangements or any non-Rule 10b5-1 trading plan or arrangements, in both cases as defined in Item 408(a) of Regulation S-K.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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** Furnished herewith.

This certification will not be deemed “filed”

for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section.

Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, except to the extent specifically incorporated by reference into such filing.

Agreement and Plan of Merger, dated as of December 17, 2019, by and among Zafgen, Inc., Chondrial Therapeutics, Inc., Chondrial Therapeutics Holdings, LLC, and Zordich Merger Sub, Inc.

(incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on December 18, 2019).

Amendment No.

1 to Agreement and Plan of Merger, dated as of March 6, 2020, by and among Zafgen, Inc., Chondrial Therapeutics, Inc., Chondrial Therapeutics Holdings, LLC, and Zordich Merger Sub, Inc.

(incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed on March 6, 2020).

Ninth Amend ed and Restated Certificate of Incorporation of Larimar Therapeutics, Inc.

(formerly known as Zafgen, Inc.) (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 24, 2014).

Certificate of Amendment of Ninth Amended and Restated Certificate of Incorporation of Zafgen, Inc.

related to the Reverse Stock Split, dated May 28, 2020 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 2, 2020).

Certificate of Amendment of Ninth Amended and Restated Certificate of Incorporation of Zafgen, Inc.

related to the Name Change, dated May 28, 2020 (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed on June 2, 2020).

Amended and Restated By-laws of Larimar Therapeutics, Inc.

(formerly known as Zafgen, Inc.) (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on June 24, 2014) .

Form of Company Pre-funded Warrant to Purchase Common Stock by and among the Company and certain investors (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed on June 2, 2020).

Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.2 of the Company’s Annual Report on Form 10-K filed March 4, 2021).

(formerly known as Zafgen, Inc.) (incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on June 24, 2014) .

Larimar Therapeutics, Inc.

2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on September 29, 2020).

Larimar Therapeutics, Inc.

Form of Stock Option Grant Notice and Award Agreement under its 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on September 29, 2020).

Restricted Stock Award Agreement for Company Employees under the Larimar Therapeutics, Inc.

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Non-Qualified Stock Option Grant Notice and Award Agreement.

Registration Rights Agreement, dated as of June 1, 2020, by and among the Company and certain Investors (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed on June 2, 2020).

Registration Rights Agreement, dated as of June 8, 2020, by and among the Company and certain Investors (incorporated by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-3 filed on June 26, 2020).

Form of Indemnification Agreement between the Company and its directors (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on June 2, 2020).

Employment Agreement, dated July 31, 2020, by and between the Company and Carole Ben-Maimon (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed on August 6, 2020).

Employment Agreement, dated June 1, 2020, by and between the Company and Michael Celano (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed on June 2, 2020).

Employment Agreement, dated February 7, 2023, by and between the Company and Gopi Shankar.

Form of Indemnification Agreement between the Company and its directors (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed on June 2, 2020).

Employment Agreement, dated February 7, 2023, by and between the Company and Gopi Shankar (incorporated by reference to Exhibit 10.10 of the Company’s Annual Report on Form 10-K filed on March 14, 2023).

Employment Agreement dated May 23, 2023, by and between the Company and Russell Clayton (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed on August 10, 2023).

License Agreement, by and between the Company and Wake Forest University Health Sciences, effective as of November 30, 2016.

(incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q filed on August 14, 2020).

Amendment 1 to License Agreement, by and between the Company and Wake Forest University Health Sciences, effective as of November 28, 2017 (incorporated by reference to Exhibit 10.7 of the Company’s Quarterly Report on Form 10-Q filed on August 14, 2020).

Amendment 2 to License Agreement, by and between the Company and Wake Forest University Health Sciences, effective as of March 29, 2019 (incorporated by reference to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q filed on August 14, 2020).

License Agreement, by and between the Company and Indiana University Research and Technology Corporation, effective as of November 30, 2016 (incorporated by reference to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q filed on August 14, 2020).

First Amendment to License Agreement, by and between the Company, the Trustee of Indiana University and Indiana University Research and Technology Corporation, effective as of August 16, 2019 (incorporated by reference to Exhibit 10.10 of the Company’s Quarterly Report on Form 10-Q filed on August 14, 2020).

Second Amendment to License Agreement, by and between the Company and The Trustees of Indiana University, effective as of May 28, 2020 (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on August 11, 2022).

Third Amendment to License Agreement, by and between the Company and The Trustees of Indiana University, effective as of June 9, 2022 (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 11, 2022).

Notice of Substitute Option Grant between the Company and a certain Optionee (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-8 filed on June 26, 2020).

Commercial Lease by and between the Company and Shigo Center Plaza Owner, LLC dated as of February 12, 2019 (incorporated herein by reference to Exhibit 10.4 of the Registrant’s Form 10-Q filed on May 9, 2019) .

(incorporated by reference to Exhibit 10.6 of the Company’s Quarterly Report on Form 10-Q filed on August 14, 2020).

Notice of Substitute Option Grant between the Company and a certain Optionee (incorporated by reference to Exhibit 4.5 of the Company’s Registration Statement on Form S-8 filed on June 26, 2020).

Lease, dated as of August 8, 2019, by and between Larimar Therapeutics, Inc.

and Bala Plaza Property, Inc.

First Amendment to Lease, dated as of March 9, 2023, by and between the Company and Bala Plaza Property, Inc.

Sublease, dated October 27, 2020 by and between the Company and Massachusetts Municipal Association, Inc.

(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 30, 2020).

Master Services Agreement, dated as of September 20, 2017, by and between the Company and KBI Biopharma, Inc.

(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).

First Amendment to Master Services Agreement, dated as of November 9, 2018, by and between the Company and KBI Biopharma, Inc.

(incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 10, 2021).

Second Amendment to Master Services Agreement, dated as of September 20, 2022, by and between the Company and KBI Biopharma, Inc.

(incorporated by reference to Exhibit 10.23 to the Company’s Form 10-K filed on March 14, 2023)

Subsidiaries of Larimar Therapeutics, Inc.

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Section 1350 certification of the Principal Executive Officer and Principal Financial Officer, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

Larimar Therapeutics.

Inc.’s Compensation Recovery Policy

Inline XBRL Instance Document

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LARIMAR THERAPEUTICS, INC.

/s/ Carole Ben-Maimon

Carole Ben-Maimon

/s/ Carole S.

Ben-Maimon, M.D.

President and Chief Executive Officer

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

/s/ Carole Ben-Maimon

/s/ Carole S.

Ben-Maimon, M.D.

President, Chief Executive Officer and Director (principal executive officer)

March 14, 2024

Carole Ben-Maimon

Ben-Maimon, M.D.

/s/ Michael Celano

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Joseph Truitt

/s/ Peter Barrett

March 14, 2023

Peter Barrett

/s/ Thomas E.

March 14, 2024

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Jonathan Leff

/s/ Thomas E.

/s/ Jeffrey W.

Sherman, M.D., FACP

March 14, 2024

Sherman, M.D., FACP

March 14, 2024

Report of Independent Registered Public Accounting Firm (PCAOB ID 238 )

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

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

and its subsidiary (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders' equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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Within accrued expenses, total accrued research and development expenses amounted to $4.6 million as of December 31, 2023.

As disclosed, management’s process involves reviewing open contracts and purchase orders, communicating with personnel and outside vendors to identify services that have been performed, and estimating the

level of service performed and the associated costs incurred for the services when invoices or other notification of actual costs have not been received.

The principal considerations for our determination that performing procedures relating to accrued research and development expenses is a critical audit matter are the significant judgment by management in developing the estimates of accrued research and development expenses, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s estimates of the level of service performed and the associated costs incurred for the services when invoices or other notification of actual costs have not yet been received.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included, among others, testing management’s process for developing the estimates of accrued research and development expenses, which included (i) evaluating the reasonableness of management’s estimates of the level of service performed and the associated costs incurred for the services when invoices or other notification of actual costs have not yet been received;

and (ii) testing the completeness and accuracy of data used by management in accrued research and development expenses calculations by comparing amounts, on a test basis, to contracts and invoices.

Evaluating the reasonableness of management’s estimate of the level of service performed and the associated costs incurred involved assessing management’s ability to reasonably estimate the level of service and associated costs by comparing such estimates to invoices received, provisions in the contracts and other evidence including communications the company received from third-party vendors.

Management’s process involves reviewing open contracts and purchase orders, communicating with personnel and outside vendors to identify services that have been performed, and estimating the level of service performed and the associated costs incurred for the services when invoices or other notification of actual costs have not been received.

The principal considerations for our determination that performing procedures relating to accrued research and development expenses is a critical audit matter are (i) the significant judgment by management in developing the estimates of accrued research and development expenses and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence for these accrued research and development expenses

related to management’s estimates of the level of service performed and the associated costs incurred for the services when invoices or other notification of actual costs have not yet been received.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures also included, among others;

(i) testing management’s process for estimating accrued research and development expenses;

(ii) evaluating the appropriateness of the method used by management to develop the estimate;

(iii) testing the completeness and accuracy of the data used by management to develop the estimates related to the level of service performed and the associated costs incurred for the services when invoices or other notification of actual costs have not yet been received;

(iv) evaluating the reasonableness of the estimated costs incurred for the services which have not been invoiced or other notification of actual costs have not yet been received, on a sample basis, by tracing to underlying supporting documentation, such as underlying contracts, invoices and information received from certain third party service vendors, where applicable, and;

(v) testing a selection of invoices received by the Company subsequent to December 31, 2023.

/s/ PricewaterhouseCoopers LLP

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March 14, 2024

We have served as the Company’s auditor since 2020.

LARIMAR THERAPEUTICS, INC.

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Restricted cash

Liabilities and Stockholders’

Liabilities and Stockholders’ Equity

Current liabilities:

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Commitments and contingencies (See Note 8)

Stockholders’

Stockholders’ equity:

Preferred stock;

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Accumulated deficit

Accumulated other comprehensive loss

Total stockholders’

Total liabilities and stockholders’

Accumulated other comprehensive gain (loss)

Total stockholders’ equity

Total liabilities and stockholders’ equity

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

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Other comprehensive loss:

Unrealized loss on marketable securities

Total other comprehensive loss

Unrealized gain (loss) on marketable securities

Total other comprehensive gain (loss)

Total comprehensive loss

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CONSOLIDATED STATEMENTS O F CHANGES IN

STOCKHOLDERS’

STOCKHOLDERS’ EQUITY

(In thousands, except share data)

Comprehensive

Stockholders’

Balances as of December 31, 2022

Issuance of Common Stock, net

Stock-based compensation expense

Unrealized loss on marketable securities

Exercise of stock options

Exercise of warrants

Unrealized gain on marketable securities

Balances as of December 31, 2023

Comprehensive

Stockholders’

Balances as of December 31, 2021

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Stock-based compensation expense

Gain on disposal of fixed asset

Non-cash lease expense

Lease expense

Depreciation expense

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Proceeds from sale of common stock, net of issuance costs

Proceeds from exercise of stock options and warrants

Net cash provided by financing activities

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

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplemental disclosure of non-cash investing and financing activities:

Leased assets obtained in exchange for new operating lease liabilities

Proceeds from exercise of stock options included in other current assets

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

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Description of Business and Basis of Presentation

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

or “Larimar”), is a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using its novel cell penetrating peptide technology platform.

Larimar's 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").

Larimar Therapeutics, Inc., together with its subsidiary (the “Company” or “Larimar”), is a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using its novel cell penetrating peptide technology platform.

Larimar's lead product candidate, nomlabofusp (nomlabofusp is the International Nonproprietary Name ("INN") and the United States Adopted Name ("USAN") for 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").

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

In May 2021, Larimar reported positive top-line data from its 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.

Also in May 2021, the United States Food and Drug Administration ("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 complete response the Company submitted, the FDA stated that it was maintaining the clinical hold and that additional data were needed to resolve the clinical hold.

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

The Company submitted a complete response to the FDA incorporating additional information requested by the FDA at the meeting as well as information on a proposed dose exploration 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.

The Company has 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.

The Company anticipates that it will provide an update that will outline the next steps for the clinical trial in the second quarter of 2023 and anticipates reporting top-line data in the second half of 2023.

The Company is subject to risks and uncertainties common to pre-commercial companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with governmental regulations, failure to secure regulatory approval for its drug candidates or any other product candidates and the ability to secure additional capital to fund its operations.

Drug candidates currently under development will require extensive non-clinical and clinical testing and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities.

The Company has completed two phase 1 studies of nomlabofusp and a Phase 2 dose exploration study in patients with FA.

In May 2021, after reporting positive top-line data from the Company’s Phase 1 FA program, the U.S.

Food and Drug Administration (“FDA”) placed a clinical hold on the Company’s nomlabofusp clinical program after the Company notified the FDA of mortalities at the highest dose levels of a 26-week non-human primate toxicology study that was designed to support extended dosing of patients with nomlabofusp.

In August 2022, the Company submitted a complete response to the clinical hold following a Type C Meeting with the FDA, and proposed as nomlabofusp'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.

In September 2022, the FDA lifted its full clinical hold on the nomlabofusp program and imposed a partial clinical hold.

In May 2023, the Company announced top-line data from its completed 25 mg cohort of a Phase 2, four-week, dose exploration trial of nomlabofusp in patients with FA and provided a complete response to the FDA in June 2023, which included unblinded safety, pharmacokinetic ("PK"), and pharmacodynamic ("PD") data from the Phase 2 trial’s completed 25 mg cohort.

Data from the completed 25 mg cohort (n = 13) indicated that nomlabofusp was generally well tolerated and showed increases in FXN levels from baseline compared to placebo in all evaluated tissues (skin and buccal cells) at day 14 (the final day of daily dosing in the trial).

In June 2023, the Company met with the FDA.

Following that meeting, the Company submitted a complete response to the FDA’s partial clinical hold that included unblinded safety, PK and frataxin data from the Phase 2 trial’s completed 25 mg cohort.

In July 2023, following the FDA’s review of the Company's complete response to the partial clinical hold, the FDA cleared initiation of a second cohort at 50 mg of our four-week, placebo-controlled, Phase 2 dose exploration trial and initiation of the OLE trial with daily dosing of 25 mg.

In February 2024, the Company reported positive top-line data and successful completion of their four-week, placebo-controlled Phase 2 dose exploration study of nomlabofusp in participants with FA.

Nomlabofusp was generally well tolerated and demonstrated dose dependent increases in FXN levels in all evaluated tissues (skin and buccal cells) after daily dosing of 14 days followed by every other day dosing until day 28 in the 25 mg and 50 mg cohorts.

Participants in the 25 mg (n=13) and 50 mg (n=15) cohorts were randomized 2:1 to receive subcutaneous injections of nomlabofusp or placebo.

The initiation of additional U.S.

clinical trials evaluating nomlabofusp are contingent on FDA review of data under the partial clinical hold.

In January 2024, the Company initiated an OLE trial evaluating daily subcutaneous injections of 25 mg of nomlabofusp self-administered or administered by a caregiver, with the first patient dosed in March 2024.

Participants who complete treatment in the Phase 2 dose exploration trial, or who previously completed a prior clinical trial of nomlabofusp are potentially eligible to screen for the OLE.

The OLE will evaluate the safety, tolerability and PK and measures of frataxin levels in peripheral tissues as well as other exploratory PD (lipid profiles and gene expression data) following long-term subcutaneous administration of nomlabofusp.

Clinical measures collected during the trial will be compared to data from a synthetic control arm derived from participants in the Friedreich’s Ataxia Clinical Outcome Measures Study (FACOMS) database.

Dose escalation in the OLE trial will be considered based on safety, tolerability, PK, and tissue FXN levels from the Phase 2 trial’s 50 mg cohort as well as available data from the 25 mg dose of nomlabofusp in the OLE trial and is contingent on FDA review as part of the partial clinical hold.

Initial data from the OLE trial is expected in the fourth quarter of 2024.

The Company is subject to risks and uncertainties common to pre-commercial companies in the biotechnology industry, including, but not limited to, development and commercialization by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with governmental

regulations, failure to secure regulatory approval for its drug candidates or any other product candidates and the ability to secure additional capital to fund its operations.

Product candidates under development will require extensive non-clinical and clinical testing and regulatory approval prior to commercialization.

These efforts require significant amounts of additional capital, adequate personnel, infrastructure and extensive compliance-reporting capabilities.

Even if the Company's drug development efforts are successful, it is uncertain when, if ever, it will realize significant revenue from product sales.

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

Both of the Company’s SAD and MAD clinical trials were subsequently completed in 2021.

While COVID-19 has had no significant impact to date on the Company’s 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 the Company, including possible delays in our clinical and regulatory activities.

The Company cannot be certain what the overall impact of the COVID-19 pandemic will be on its business and it has the potential to materially adversely affect its business, financial condition, results of operations, and prospects.

Basis of Presentation

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Liquidity and Capital Resources

The Company’s consolidated financial statements have been presented on the basis that it will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

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

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As of December 31, 2023, the Company had approximately $ 86.8 million of cash, cash equivalents and marketable securities available for use to fund its operations and capital requirements.

The Company has funded its operations to date primarily with proceeds from sales of common stock and proceeds from the sale of prefunded warrants for the purchase of common stock.

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 consolidated financial statements, the Company expects its cash, cash equivalents and marketable 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 the Company's clinical assumptions are delayed or if there are other forecasted assumption changes that negatively impact its operating plan, the Company could reduce expenditures in order to further extend cash resources.

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

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

In February 2024, the Company sold 19,736,842 shares of its common stock in an underwritten public offering at a price of $ 8.74 per share and received net proceeds of approximately $ 161.6 million.

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 these consolidated financial statements are issued.

As of the issuance date of these consolidated financial statements, the Company expects its cash, cash equivalents and marketable securities, including its net proceeds from the February 2024 public offering, will be sufficient to fund its forecasted operating expenses and capital expenditure requirements into 2026.

If the timing of the Company's clinical assumptions are delayed or if there are other forecasted assumption changes that negatively impact its operating plan, the Company would 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, that 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.

Unless and until the Company can generate substantial revenue, 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 or royalty financings, collaborations and licensing arrangements, strategic partnerships with pharmaceutical and/or larger biotechnology companies, 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.

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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.

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.

In addition, geopolitical unrest, global uncertainty, the impact of another COVID-19 pandemic and/or the potential impact of other health crises on the global financial markets may reduce the Company's ability to access capital, which could negatively affect its liquidity and ability to continue as a going concern.

If the Company is unable to obtain sufficient funding when needed and/or on acceptable terms, the Company 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 its business prospects, or the Company may be unable to continue operations.

In addition, geopolitical tensions, volatility of capital markets, and other adverse macroeconomic events, including those due to inflationary pressures, rising interest rates, bank instability and the ability of the U.S.

government to manage federal debt limits as well as the potential impact of other health crises on the global financial markets may reduce the Company's ability to access capital, which could negatively affect its liquidity and ability to continue as a going concern.

If the Company is unable to obtain sufficient funding when needed and/or on acceptable terms, the Company 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, pre commercialization efforts and/or commercial operations, which could adversely affect its business prospects, or the Company may be unable to continue operations.

Summary of Significant Accounting Policies

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The preparation of 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.

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.

Significant estimates and assumptions reflected in these consolidated financial statements include, but are not limited to, the accrual of research and development expense, the recording as prepaid expense of payments made in advance of the actual provision of goods or services, valuation of stock-based awards and valuation of leases.

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Cash balances may be held in financial institutions which may exceed federally insured limits.

The Company has not experienced realized losses related to its cash, cash equivalents and marketable securities.

The Company has not experienced realized losses related to its cash, cash equivalents or marketable securities.

The Company is highly dependent on third-party manufacturers to supply products for research and development activities in its programs, to scale and optimize their manufacturing processes and, ultimately, to provide commercial supply.

The Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for drug substance and formulated drugs related to these programs.

The drug substance which is in frozen liquid form for CTI-1601 is currently manufactured for the Company by a third-party manufacturer, and the frozen liquid form of drug product is made at another manufacturer.

The drug substance which is in frozen liquid form for nomlabofusp is currently manufactured for the Company by a third-party manufacturer, and the frozen liquid form of drug product is made at another manufacturer.

The Company is undertaking a program with a third manufacturer to begin to produce a lyophilized version of the drug product from the same drug substance, that, once available, the Company intends to use in certain of its future planned clinical trials.

The Company’s research and development programs could be adversely affected by a significant interruption in these manufacturing services or in the supply of drug substance and formulated drugs.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.

Cash equivalents consisted of money market funds as of December 31, 2022 and commercial paper and corporate bonds as of December 31, 2021 .

Cash equivalents consisted of money market funds as of December 31, 2023 and 2022 .

Marketable securities

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The credit-related impairment amount, if any, would be recognized in net income;

the remaining impairment amount and unrealized gains are reported as a component of accumulated other comprehensive income in stockholders’

the remaining impairment amount and unrealized gains are reported as a component of accumulated other comprehensive income in stockholders’ equity.

Credit losses, if any, are recognized through the use of an allowance for credit losses account and subsequent improvements in expected credit losses are recognized as a reversal of the allowance account.

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Expenditures for repairs and maintenance of assets are charged to expense as incurred.

retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations.

Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations.

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment, net¸

and right-of-use assets.

Long-lived assets consist of property and equipment, net¸ and right-of-use assets.

Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

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The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions.

The Company’s focus is on the research, development and commercialization of novel therapeutics for the treatment of rare diseases.

Research and Development Costs

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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 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 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 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.

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.

Therefore, the Company estimates its expected common stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until it has adequate historical data regarding the volatility of its own traded stock price.

The expected term of the Company’s stock options has been determined utilizing the “simplified”

method for awards that qualify as

“plain-vanilla”

Prior to January 1, 2023, the Company estimated its expected common stock price volatility solely based on the historical volatility of publicly traded peer companies.

Beginning on January 1, 2023, based on the availability of sufficient historical trading data of the Company's own common stock on the Nasdaq Global Market to calculate accurately its volatility, the Company began blending its volatility starting from June 2020 (following its merger with Zafgen in 2020) to the date of each stock-based award, and weighing the volatility of its peer group for the amount of time from May 31, 2020 backwards so that the blended volatility equals the expected term of the related stock-based award.

The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options.

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 the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the consolidated financial statements or in the Company’s tax returns.

The expected dividend yield considers the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

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The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Comprehensive Loss

Comprehensive loss includes net loss as well as other changes in stockholders’

equity that result from transactions and economic events other than those with stockholders.

For the years ended December 31, 2022 and 2021 , the Company’s only element of other comprehensive loss was unrealized loss on marketable securities.

Comprehensive Gain (Loss)

Comprehensive gain (loss) includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders.

For the years ended December 31, 2023 and 2022 , the Company’s only element of other comprehensive loss was unrealized loss on marketable securities.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period.

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 twelve months ended December 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.

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.

Prior to August 11, 2023, 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.

These prefunded warrants were exercised on August 11, 2023 and the Company received cash proceeds of less than $ 0.1 million.

Accordingly, the 628,403 shares were issued upon the exercise of these warrants and are included in issued and outstanding common stock.

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 stock equivalents assuming the dilutive effect of outstanding stock options, outstanding restricted stock units, and unvested restricted common shares, as determined using the treasury stock method.

For periods in which the Company has reported net losses (all periods since inception), 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 stock equivalents are not assumed to have been issued if their effect is antidilutive.

The Company excluded 4,888,502 and 3,071,528 options to purchase common stock, outstanding as of December 31, 2023 and 2022 respectively, from the computation of diluted net loss per share for the twelve months ended December 31, 2023 and 2022 , respectively, because they had an anti-dilutive impact due to the net loss incurred for the periods.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation, the effect of which was not material on an annual or interim basis to the Company’s consolidated financial statements.

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 December 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 December 31, 2023 and December 31, 2022 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 upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

The three levels are defined as follows:

Level –

Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level –

Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level –

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

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

For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of December 31, 2023 and 2022 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 securities as of December 31, 2022 and 2021:

The following tables summarize the Company’s cash equivalents and marketable securities as of December 31, 2023 and 2022:

(in thousands)

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Marketable securities:

U.S Government and agency securities

Treasury Bills

Government securities

Corporate bonds

Total marketable securities

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Money market funds invested in government securities

Commercial paper

Corporate bonds

Total cash equivalents

The accrued interest receivable related to the Company’s investments was $ 0.1 million as of December 31, 2022 and is included in prepaid expenses and other current assets on the consolidated balance sheet.

There was no accrued interest receivable at 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.

Marketable securities:

Government securities

Total marketable securities

Total cash equivalents and marketable securities

The accrued interest receivable related to the Company’s investments was $ 0.3 million and $ 0.1 million as of December 31, 2023 and 2022, respectively, and is included in prepaid expenses and other current assets on the consolidated balance sheet.

The Company classifies its money market funds and U.S.

treasury bills, 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.

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

government and agency securities, corporate commercial paper, and corporate bonds, if any, 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.

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

As of December 31, 2023 and 2022 , no allowances for credit losses for the Company’s investments were recorded.

During the twelve months ended December 31, 2023 and 2022 , the Company did no t recognize any impairment losses related to investments.

As of December 31, 2023, the Company's cash equivalents and marketable securities consisted of a U.S.

government money market fund and U.S.

government agency securities, all held in our name in a separate custody account with U.S.

government money market fund, U.S.

Treasury Bills, U.S.

government and agency securities and corporate bonds, all held in our name in a separate custody account with U.S.

government money market fund has same-day liquidity access and the U.S.

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Marketable Securities

The following tables summarize the Company’s marketable securities as of December 31, 2022 .

There were no marketable securities as of December 31, 2021:

The following tables summarize the Company’s marketable securities as of December 31, 2023 and 2022:

(in thousands)

December 31, 2023

U.S Government and agency securities (due within 1 year)

Treasury Bills

Government securities (due within 1 year)

Commercial paper (due within 1 year)

Total marketable securities

December 31, 2022

Government securities (due within 1 year)

Prepaid Expenses and Other Current Assets

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Prepaid insurance

Payroll tax receivable

Other prepaid expenses and other assets

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Total accrued expenses and other current liabilities

Stockholders’

Equity and Stock Options

Stockholders’ Equity and Stock Options

Common Stock and Prefunded warrants

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

In August 2023, the 628,403 shares of prefunded warrants were exercised and the Company received cash proceeds of six thousand two hundred and eighty-four dollars .

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.

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.

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.

As of December 31, 2022 , the Company’s Amended and Restated Certificate of Incorporation, authorized the Company to issue up to 115,000,000 shares of $ 0.001 par value common stock, of which 43,269,200 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.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders .

Common stockholders are entitled to receive dividends, as may be declared by the board of directors of the Company (the “Board”), if any.

As of December 31, 2023 , the Company’s Amended and Restated Certificate of Incorporation, authorized the Company to issue up to 115,000,000 shares of $ 0.001 par value common stock, of which 43,909,069 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.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders .

Common stockholders are entitled to receive dividends, as may be declared by the board of directors of the Company (the “Board”), if any.

No cash dividends have been declared or paid to date.

In July 2021, the Company sold 2,342,720 shares under an “at-the-market”

equity distribution agreement (the "Prior ATM Agreement") with Piper Sandler & Co.

for net proceeds of $ 19.9 million.

The Prior ATM Agreement was terminated in November 2022 in connection with the establishment of a new "at-the-market" offering program (see 2022 ATM Agreement below).

An aggregate of 2,354,244 shares of common stock were sold pursuant to the Prior ATM Agreement for net proceeds of $ 20.1 million.

In September 2022, the Company sold 25,558,750 shares of common stock in an underwritten public offering price of $ 3.15 per share and received net proceeds, net of underwriting discounts and commissions and offering costs of $ 75.2 million.

In February 2024, the Company sold 19,736,842 shares of its common stock in an underwritten public offering price of $ 8.74 per share and received net proceeds of approximately $ 161.6 million.

2022 ATM Agreement

On November 10, 2022, the Company entered into a sales agreement (the "ATM Agreement") with a Guggenheim Securities, LLC in connection with the establishment of an “at-the-market”

offering program under which the Company may sell up to an aggregate of $ 50.0 million of shares of common stock (the “ATM Shares”) from time to time.

Under the ATM Agreement, the Company sets the parameters for the sale of ATM Shares, including the number of ATM Shares to be issued, the time period during which sales are requested to be made, limitations on the number of ATM Shares that may be sold in any one trading day and any minimum price below which sales may not be made.

Sales of the ATM Shares, if any, under the ATM Agreement may be made in transactions that are deemed

to be “at-the-market offerings”

as defined in Rule 415 under the Securities Act.

The Company pays its investment bank a commission equal to 3.0 % of the gross proceeds of any ATM Shares sold through its investment bank under the ATM Agreement and reimburses the investment bank for certain specified expenses.

The ATM Agreement contains customary representations, warranties and agreements by the Company, indemnification obligations of the Company and its investment bank, other customary obligations of the parties and termination provisions.

The Company has no obligation to sell any of the ATM Shares and may at any time suspend offers under the ATM Agreement.

The ATM Shares will be offered and sold pursuant to the Company’s Registration Statement on Form S-3, filed by the Company on November 10, 2022 and effective as of November 21, 2022 (the “Registration Statement”), and the sales agreement prospectus that forms a part of such Registration Statement.

As of the date of this Annual Report on Form 10-K, no ATM Shares have been sold pursuant to the ATM Agreement.

In November 2022, the Company entered into a sales agreement (the "ATM Agreement") with a Guggenheim Securities, LLC in connection with the establishment of an “at-the-market” offering program under which the Company could sell up to an aggregate of $ 50.0 million of shares of common stock (the “ATM Shares”) from time to time.

In February 2024, in connection with the underwritten public offering described above, the Company terminated the ATM Agreement.

No ATM Shares were ever sold pursuant to the ATM Agreement.

2020 Equity Incentive Plan

The Board adopted the 2020 Equity Incentive Plan (the "2020 Plan") on July 16, 2020 and the stockholders of the Company approved the 2020 Plan on September 29, 2020.

The 2020 Plan replaced the predecessor plans (the "Prior Plans") that the Company assumed following its merger with Zafgen in May 2020.

The 2020 Plan replaced the predecessor plans (the

"Prior Plans") that the Company assumed following its merger with Zafgen in May 2020.

Options outstanding under the Prior Plans will remain outstanding, unchanged, and subject to the terms of the Prior Plans and the respective award agreements, and no further awards will be made under the Prior Plans.

However, if any award previously granted under the Prior Plans, expires, terminates, is canceled, or is forfeited for any reason after the approval of the 2020 Plan, the shares subject to that award will be added to the 2020 Plan share pool so that they can be utilized for new grants under the 2020 Plan.

The 2020 Plan provides for the grant of incentive stock options (“ISOs”), nonstatutory stock options (“NSOs”), stock appreciation rights, restricted stock awards, restricted stock unit awards, and cash or other stock-based awards.

ISOs may be granted only to the Company’s employees, including the Company’s officers, and the employees of the Company’s affiliates.

All other awards may be granted to the Company’s employees, including the Company’s officers, the Company’s non-employee directors and consultants, and the employees and consultants of the Company’s affiliates.

ISOs may be granted only to the Company’s employees, including the Company’s officers, and the employees of the Company’s affiliates.

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, 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.

As permitted by the 2020 Plan, the Company added 1,756,363 and 1,730,768 shares available for grant to the 2020 Plan on January 1, 2024 and January 1, 2023, respectively, increasing the maximum number of shares of the Company’s common stock that may be issued under the 2020 Plan as of January 1, 2024 to 3,042,968 shares.

During the twelve months ended December 31, 2023 and 2022 , respectively, options to purchase 224,437 and 148,623 shares issued under the Prior Plans were canceled and became available for grant under the 2020 Plan.

As of December 31, 2022 , 1,054,277 shares of common stock were available for grant under the 2020 Plan.

As permitted by the 2020 Plan, the Company added 1,730,768 and 708,418 shares available for grant to the 2020 Plan on January 1, 2023 and January 1, 2022, respectively, increasing the maximum number of shares of the Company’s common stock that may be issued under the 2020 Plan as of January 1, 2023 to 2,785,045 shares.

In addition, as of December 31, 2023 , 1,286,605 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 twelve months ended December 31, 2022 (amounts in millions, except for share and per share data):

The following table summarizes the Company’s stock option activity for the twelve months ended December 31, 2023 (amounts in millions, except for share and per share data):

Weighted Average

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2023 Option Grants

During the twelve months ended December 31, 2022 , the Company granted options to purchase 878,450 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 878,450 options granted in 2022, 836,950 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 twelve months ended December 31, 2022 was $ 5.21 .

January 2023 Option Grants

On January 31, 2023, the Company granted options to purchase 1,031,000 shares of common stock and 650,000 shares of restricted stock to employees under the 2020 Plan.

During the twelve months ended December 31, 2023 , the Company granted options to purchase 1,388,200 shares of common stock to employees under the 2020 Plan.

The options have an exercise price equal to the closing stock price as of the grant date, 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 shares of restricted stock which will vest annually over four years .

The weighted-average grant date fair value of options granted under the 2020 Plan during the twelve months ended December 31, 2023 and 2022 was $ 3.70 and $ 5.21 , respectively.

As of December 31, 2023 , total unrecognized compensation expense related to unvested stock options granted under the 2020 Plan was $ 8.8 million, which is expected to be recognized over a weighted average period of 1.91 years.

Inducement Stock Option Grant

During the twelve months ended December 31, 2023, the Company granted options to purchase 360,000 shares of common stock granted outside of the 2020 Plan.

These grants were made pursuant to the Nasdaq inducement grant exception in accordance with Nasdaq listing rule 5635(c)(4).

The options issued under this inducement grant have an exercise price equal to the closing stock price as of the grant date, 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 weighted-average grant date fair value of options granted under this inducement grant during the twelve months ended December 31, 2023 was $ 3.59 .

There were no inducement grants in twelve months ended December 31, 2022.

As of December 31, 2023 , total unrecognized compensation expense related to unvested inducement options granted under the 2020 Plan was $ 1.1 million, which is expected to be recognized over a weighted average period of 3.28 years.

Restricted Stock Units

In January 2023, RSUs were granted under the 2020 Plan to the Company's employees in order to maintain retention of key employees.

The value of an RSU award is based on the Company's stock price on the date of the grant.

The shares underlying the RSUs are not issued until the RSUs vest.

Activity with respect to the Company's RSUs during the twelve months ended December 31, 2023 was as follows (in millions, except share, contractual term, and per share data):

Weighted Average

Term (in years)

(in millions)

Outstanding as of December 31, 2022

Restricted stock units granted

Restricted stock units forfeited

Outstanding as of December 31, 2023

Unvested and expected to vest as of December 31, 2023

Restricted Stock Unit Grants

The RSUs vest annually over four years and have a weighted-average grant date fair value of $ 4.94 per unit.

As of December 31, 2023 , total unrecognized compensation expense for RSUs was $ 2.3 million, which is expected to be recognized over a weighted-average period of 3.09 years.

January 2024 Option and Restricted Stock Unit Grants

On January 17, 2024, the Company granted options to purchase 1,472,175 shares of common stock and 245,363 shares of restricted stock to employees under the 2020 Plan.

The options have an exercise price equal to the closing stock price as of the grant date, 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 shares of restricted stock will vest annually over four years .

Stock-Based Compensation

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General and administrative

As of December 31, 2022 , total unrecognized compensation expense related to unvested stock options was $ 11.8 million, which is expected to be recognized over a weighted average period of 2.14 years.

Commitments and Contingencies

Intellectual Property Licenses

The Company is party to an exclusive License Agreement (the “WFUHS License”), dated November 30, 2016, as amended, with Wake Forest University Health Sciences (“WFUHS”) and an exclusive License Agreement (the “IU License”), dated November 30, 2016, as amended, with Indiana University (“IU”).

Such agreements provide for a transferable, worldwide license to certain patent rights regarding technology used by the Company with respect to the development of CTI-1601.

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

Such agreements provide for a transferable, worldwide license to certain patent rights regarding technology used by the Company with respect to the development of nomlabofusp.

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

In partial consideration for the right and license granted under these agreements, the Company will pay each of WFUHS and IU a royalty of a low single digit percentage of net sales of licensed products depending on whether there is a valid patent covering such products.

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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.

The Company is also obligated to reimburse WFUHS and IU for patent-related expenses.

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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.

In 2022, the Company initiated dosing of a phase 2 study.

In October 2022, the Company initiated dosing of a Phase 2 study.

Pursuant to the terms of both the WFUHS License and the IU License, the company recognized milestone expense of $ 0.3 million within research and development expenses.

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.

On May 28, 2020, the Company acquired a non-cancellable operating lease for approximately 17,705 square feet of office space (the “Premises”).

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

Bala Cynwyd Office Space

On August 8, 2019, the Company entered into an operating lease for office space in Bala Cynwyd, Pennsylvania, effective as of December 15, 2019, for a period of three years and six months with an option to extend the lease for three additional years.

Due to required tenant improvements to be completed by the landlord, the Company did not take immediate possession of the leased property and the lease term commenced on February 15, 2020 .

On March 9, 2023, the Company executed a lease extension agreement on its original 4,642 square footage of office space in Bala Cynwyd, Pennsylvania (which was set to expire in August 2023 ) and agreed to lease an additional 3,462 square feet of office space from the same landlord.

The lease extension on the original 4,642 square footage commenced on September 1, 2023 and the Company recorded a right of use asset and lease liability of $ 0.5 million as of that date.

The new lease on 3,462 additional square footage commenced on October 1, 2023 and the Company recorded a right of use asset and lease liability of $ 0.3 million as of that date.

The right of use assets and lease liabilities with both these leases are reflected in the financial statements for the year ended December 31, 2023 as are the right of use asset and lease liability of the Company's Boston office space discussed below.

Boston Office Lease

In connection with the Company's 2020 merger with Zafgen described in footnote 1, on May 28, 2020, the Company acquired a non-cancellable operating lease for approximately 17,705 square feet of office space (the “Premises”).

The lease expires on October 30, 2029 .

As part of the agreement, the Company is required to maintain a letter of credit, which upon signing was $ 1.3 million and is classified as restricted cash within the consolidated financial statements.

In addition to the base rent, the Company is also responsible for its share of operating expenses, electricity and real estate taxes, which costs are not included in the determination of the leases’

right-of-use assets or lease liabilities.

As part of the agreement, the Company is required to maintain a letter of credit, which upon signing was $ 1.3 million and is classified as restricted cash within the condensed consolidated financial statements.

The right-of-use asset is being amortized to other income/(expense) over the remaining lease term as a result of the sublease described below.

On October 27, 2020, the Company entered into a sublease agreement (the “Sublease”) with Massachusetts Municipal Association, Inc.

(the “Subtenant”), whereby the Company sublet the entire Premises to the Subtenant.

On October 27, 2020, the Company entered into a sublease agreement (the “Sublease”) with Massachusetts Municipal Association, Inc.

(the “Subtenant”), whereby the Company sublet the entire Premises to the Subtenant.

The initial term of the Sublease commenced on December 4, 2020 and continues until October 30, 2029 .

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

In connection with the Sublease, the Company evaluated the need for impairment under ASC 360 "Impairment Testing:

Long-Lived Assets Classified as Held and Used," and determined there was no impairment.

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.

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If there are no uncured events of default under the sublease, the amount of this security deposit decreases over time to $ 0.4 million on the sixth anniversary of the Sublease.

The Company records sublease income, lease expense and depreciation on the sublet assets on this sublease on a straight-line basis as a component of other income/(expense).

The Company records sublease income on this sublease on a straight-line basis as a component of other income/(expense).

On November 5, 2018, the Company entered into an operating lease for office and lab space in Philadelphia, Pennsylvania, effective as of January 1, 2019 , and expiring on December 31, 2020 with an option to extend the lease for two additional years.

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On August 9, 2021, the Company executed the remaining option to extend the lease for an additional year, expiring on December 31, 2022 .

On January 3, 2023, the Company entered into a one-year extension of this lease.

In January 2023, the Company executed an extension of this lease for an additional year, expiring on December 31, 2023 .

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 $ 0.3 million during the twelve months ended December 31, 2022 and 2021, respectively.

On October 16, 2023, the Company entered into an operating lease for lab space in King of Prussia, Pennsylvania for a period of four years .

Due to required tenant improvements to be completed by the landlord, the Company did not take immediate possession of the leased property and the lease term is expected to commence in the second quarter of 2024, no right of use asset or lease liability will be recorded until the lease commencement date.

Lease Expense

Expense arising from operating leases was $ 0.4 million and $ 0.3 million during the twelve months ended December 31, 2023 and 2022, respectively.

For operating leases, the weighted-average remaining lease term for leases at December 31, 2023 and 2022 was 5.5 and 6.8 years, respectively.

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

For operating leases, the weighted

average discount rate for leases at December 31, 2023 and 2022 was 11.0 %.

The Company has not entered into any financing leases.

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Legal Proceedings

The Company is not currently a party to any litigation, nor is management aware of any pending or threatened litigation against the Company, that it believes would materially affect the Company’s business, operating results, financial condition or cash flows.

During the years ended December 31, 2023, and 2022 , the Company recorded no income tax benefits for the net operating losses incurred in each year due to its uncertainty of realizing a benefit from those items.

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A reconciliation of the U.S.

federal statutory income tax rate to the Company’s effective income tax rate is as follows:

Year Ended December 31,

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Nondeductible permanent differences

Stock compensation forfeitures - DTA Write Off

Change in deferred tax asset valuation allowance

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Other temporary differences

Accruals & reserves

Fixed assets & intangibles

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Net deferred tax assets / (liabilities)

Changes in the valuation allowance for deferred tax assets during the year ended December 31, 2022 and 2021 related primarily to the increase in net operating loss carryforwards and tax credit carryforwards and a decrease other deferred tax assets associated with a reduction in the Company’s effective state rate.

Changes in the valuation allowance for deferred tax assets during the year ended December 31, 2023 and 2022 related primarily to the increase in net operating loss carryforwards and tax credit carryforwards and a decrease other deferred tax assets associated with a reduction in the Company’s effective state rate.

Changes to the valuation allowance were as follows:

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Utilization of the pre-Merger net operating loss carryforwards attributable to Zafgen, of approximately $ 33.5 million, are subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes occurred during the tax year associated with the Merger.

In addition to the limitation of the pre-Merger NOL’s of Zafgen, the net capitalized R&D deferred tax assets in the amount of $ 66.9 million is subject to the built-in loss rules under Section 382 and may not be realized if the underlying asset associated with the R&D is disposed within five years of the Merger, or May 28, 2025 .

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a

corporation by more than 50% over a three-year period.

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

The ownership changes will limit the amount of pre-merger Zafgen carryforwards that can be utilized annually to offset future taxable income with an annual limitation of approximately $ 35 thousand per year.

The Company has reduced their NOL and R&D tax credit deferred tax assets associated with the pre-Merger Zafgen operations as a result of the 382 analysis.

The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception associated with the pre-Merger Chondrial tax attributes.

If the Company experienced a change of control, as defined by Section 382, at any time since inception, utilization of the pre-Merger Chondrial net operating loss carryforwards or tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

The Company believes that as a result of its merger with Zafgen, its ability to utilize NOLs acquired in the transaction and our other NOLs is expected to be severely limited by Section 382 of the Code.

Additionally, the Company’s July 2021, September 2022 and February 2023 equity transactions could also limit its ability to utilize NOLs in the future.

The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception.

If the Company experienced a change of control, as defined by Section 382, at any time since inception, utilization of its net operating loss carryforwards or tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

Additionally, our July 2021, September 2022 and February 2024 equity transactions could also limit our ability to utilize NOLs in the future.

Any limitation may result in expiration of a portion of the net operating loss carryforwards or tax credit carryforwards before utilization.

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The Tax Cuts and Jobs Act ("TCJA") requires taxpayers to capitalize and amortize research and experimental expenditures under IRC Section 174 for tax years beginning after December 31, 2021.

This rule became effective for the Company during the year ended December 31, 2022 and resulted in the capitalization of research and development costs of $ 20.2 million.

The Company will amortize these costs for tax purposes over five years if the research and development was performed in the U.S.

This rule became effective for the Company during the year ended December 31, 2022 and resulted in the capitalization of research and development costs in both 2023 and 2022.

The Company is amortizing these costs for tax purposes over five years if the research and development was performed in the U.S.

and over 15 years if the research and development was performed outside the U.S.

As of December 31, 2022 and 2021 , the Company’s net deferred tax asset balance before the valuation allowance was $ 130.8 million and $ 124.0 million, respectively, and was comprised principally of net operating loss carryforwards, capitalized research and development expenses and tax credit carryforwards.

As of December 31, 2023 and 2022 , the Company’s net deferred tax asset balance before the valuation allowance was $ 141.8 million and $ 130.8 million, respectively, and was comprised principally of net operating loss carryforwards, capitalized research and development expenses and tax credit carryforwards.

During the years ended December 31, 2023 and 2022, gross deferred tax assets increased due to deferred tax assets acquired as a result of additional net operating loss carryforwards and research and development tax credits generated.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets.

Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets.

Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2023 and 2022.

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There are currently no pending income tax examinations.

The Company’s tax years are still open under statute from 2016 to the present.

The Company’s tax years are still open under statute from 2019 to the present.

Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future periods.

The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

Related Party Transactions

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.

The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

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

What changed 10-K

Item 9A. Controls and Procedures