Larimar Therapeutics, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q (“Quarterly Report”), and the audited consolidated financial statements and notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2024 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 24, 2025 (the “2024 Annual Report”) . Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, uncertainties, and assumptions. These statements are based on our beliefs and expectations about future outcomes and are subject to risks and uncertainties that could cause our actual results to differ materially from anticipated results. We undertake no obligation to publicly update these forward-looking statements, whether as a result of new information, future events or otherwise. You should read the “Risk Factors” section included in our 2024 Annual Report, in addition to the (“Risk Factors”) and “Cautionary Note Regarding Forward-Looking Statements” sections of this Quarterly Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Overview We are a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using our novel cell penetrating peptide (“CPP”) technology platform. Our lead product candidate, nomlabofusp (nomlabofusp is the International Nonproprietary Name and the United States Adopted Name for CTI-1601), is a subcutaneously administered, recombinant fusion protein intended to deliver tissue 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. Currently, there are no treatment options that address the core deficit of FA, low levels of FXN. Nomlabofusp represents the first potential therapy designed to systemically increase FXN levels in patients with FA. We believe that our CPP platform, which enables a therapeutic molecule to cross a cell membrane in order to reach intracellular targets, has the potential to enable the treatment of other rare and orphan diseases. We intend to use our proprietary platform to target additional orphan indications characterized by deficiencies in or alterations of intracellular content or activity. Since our inception, we have devoted substantially all of our resources to developing nomlabofusp, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, raising capital, developing sales and marketing capacities, and providing general and administrative support for such operations. Nomlabofusp Program Update We initiated human clinical studies of nomlabofusp in 2019. Since then, we have completed four clinical studies: (i) two Phase 1 clinical studies, (ii) a Phase 2 dose exploration study and (iii) a PK run-in study in adolescents (12-17 years old). In 2024, we initiated our open label extension study in patients with FA. The open label extension study's eligibility criteria only allowed patients who previously participated in our prior nomlabofusp Phase 1 or Phase 2 studies. In 2025, we changed the name of the open label extension study to the open label study, due to the inclusion of patients who had not participated in prior nomlabofusp clinical studies. We have engaged in multiple discussions and interactions with the U.S. Food and Drug Administration (“FDA”) in connection with our clinical development of nomlabofusp. Communications remain ongoing. We currently participate in the FDA’s Center for Drug Evaluation and Research (“CDER”) Support for Clinical Trials Advancing Rare Disease Therapeutics (“START”) pilot program. The objective of this program is to accelerate the development of drugs for rare diseases that lead to significant disability or death by facilitating frequent advice and regular communication with the FDA staff to expedite the review process. We have also had numerous interactions with the European Medicines Agency (“EMA”) and the United Kingdom’s Medicines and Healthcare Regulatory Agency (“MHRA”) regarding the clinical development of nomlabofusp. We have received Orphan Drug Designation and Fast Track Designation from the FDA. We have been granted orphan drug designation in the European Union (the “EU”) and access to the EU’s Priority Medicines 25 Program (“PRIME”) Scheme. We have also received access to the EMA’s Innovative Licensing and Access Pathway (“ILAP”). All these programs are designed to facilitate drug development of therapeutics for rare and/or orphan indications. Recent significant developments are as follows: • In December 2024, we reported positive initial data from our ongoing open label study. This data included safety, FXN levels, clinical and pharmacokinetic data. Also in December 2024, we announced that we were increasing the dose in the open label study to 50 mg of nomlabofusp daily for then currently enrolled participants. All newly enrolled participants will start dosing at 50 mg of nomlabofusp daily. In March 2025, we announced that our Safety Monitoring Team had identified anaphylaxis as an adverse drug reaction likely associated with nomlabofusp. • In January 2025, we initiated dosing of adolescents (12-17 years old) in our PK run-in study for patients with FA. Study participants were randomized 2:1 to receive either nomlabofusp at a weight-base dose expected to match the PK of adults receiving the 50 mg dose, or placebo, daily for seven days. We completed dosing of 14 adolescents in March 2025. • In February 2025, the FDA accepted the data supporting the comparability of the lyophilized drug product to the frozen solution and agreed with our plans to introduce the lyophilized product into our clinical development program. The frozen solution is the dosage form currently being used in the open label study. In July 2025, we began to introduce the lyophilized product formulation, which is intended for commercialization, into the open label study with new study participants. • In March 2025, we announced that FDA stated as part of a START pilot program that it is open to considering the use of FXN concentration as a reasonably likely surrogate endpoint (“RLSE”) and the acceptability of FXN concentration as an RLSE to support accelerated approval will be a matter of review in a future marketing application. The FDA recommended focusing on assessments of skin FXN concentrations rather than buccal FXN concentrations due to more consistent sampling and less variability. FDA acknowledged that data we recently submitted appear to support a relationship between increased FXN concentrations in skin cells and relevant tissues such as the heart, dorsal root ganglion and skeletal muscle. FDA also acknowledged that the nonclinical studies we submitted were performed at relevant human doses. FDA also suggested that we consider exploring the relationship between increases in FXN in skin and changes in pharmacodynamic (“PD”) markers such as lipid profiles and/or clinical measures to provide additional support for the use of FXN as an RLSE. We continue to interact with the FDA under the START pilot program. • In June 2025, the FDA provided safety database recommendations for a Biologics License Application, (“BLA”) seeking accelerated approval, which included evaluating safety in at least 30 participants with continuous study drug exposure for six months and a subset of at least 10 of those participants with continuous study drug exposure for one year, with the large majority of data coming from participants receiving the 50 mg dose. • In July 2025, we announced the publication of nonclinical data evaluating the mechanism of action, pharmacodynamics and pharmacology of nomlabofusp as a novel FXN protein replacement therapy designed to address the underlying cause of FA in two peer-reviewed articles. These data were included in the briefing package reviewed by the U.S. FDA in support of using skin FXN concentrations as a RLSE for our registrational program seeking accelerated approval for nomlabofusp. • In September 2025, we announced positive data from our ongoing long-term open label study: o In four completed studies and the ongoing open label study, 65 participants received at least one dose of nomlabofusp, including 39 in the open label study, with 14 on treatment for at least six months and eight for over one year in the open label study. o Consistent directional improvements across four key clinical outcomes observed in the open label study relative to a Friedreich’s Ataxia Clinical Outcomes Measure Study (FACOMS) reference population and the observed increase in skin FXN levels. We believe these new data, as well as the improvement in abnormal lipid profiles observed in prior completed studies, provide support that nomlabofusp increases FXN in patients with FA and that the strategy of FXN replacement has the potential to result in a clinical benefit. 26 o Changes observed in skin FXN levels, and clinical outcomes after nomlabofusp administration across diverse participants with FA, including individuals with advanced disease are all directionally consistent and suggest a potential treatment effect. o Of the 39 participants in the open label study (and of 65 total participants who received at least 1 dose in all nomlabofusp studies), 7 experienced anaphylaxis in the first 6 weeks of dosing and returned to their usual state of health after standard treatment. Anaphylaxis is more common upon re-exposure to a drug after a gap in dosing; in the open label study, of the 10 participants who had not had prior exposure to nomlabofusp only 1 experienced anaphylaxis (this reaction was one of the 7 events discussed above). Excluding these events, long term dosing of nomlabofusp was generally well tolerated including 14 on treatment for at least 6 months and 8 on treatment for over 1 year. Our nomlabofusp plans and milestones include the following: • We amended the open label study protocol to include adolescent and adult patients who have not previously participated in a prior nomlabofusp study. After the anaphylaxis events discussed above, we introduced a new dosing regimen that the FDA accepted. Participants will initially receive a 5 mg test dose followed by a 25 mg dose one hour later under observation. Nomlabofusp 25 mg will then be administered once daily through Day 30 and then the dose will be increased to 50 mg once daily. • We plan to provide an update on regulatory discussions and an open label study update in the first quarter of 2026. • We plan to submit a BLA seeking accelerated approval in the second quarter of 2026. • The modified starting dose regimen is also being incorporated into the global phase 3 protocol. We continue to qualify sites globally and prepare for study initiation and patient enrollment. Financing Activities, including Recent Material Financings We have funded our operations to date primarily with proceeds from sales of common stock, proceeds from the sale of prefunded warrants for the purchase of common stock, the acquisition in 2020 of cash, cash equivalents, marketable securities, and restricted cash upon the merger with Zafgen, Inc. (“Zafgen”) and, prior to the 2020 merger with Zafgen, capital contributions from Chondrial Holdings, LLC. In February 2024, we completed an underwritten public offering in which we issued and sold 19,736,842 shares of our common stock at a public offering price of $8.74 per share. We received net proceeds of approximately $161.8 million after deducting underwriting discounts, commissions and other offering expenses. In May 2024, we entered into a Sales Agreement (“2024 ATM Agreement”) with Guggenheim Securities, LLC in connection with the establishment of an “at-the-market” offering program providing for the sale of up to an aggregate of $100 million of shares of our common stock from time to time. To date, we have made no sales under the 2024 ATM agreement. In July 2025, we completed an underwritten public offering in which we issued and sold 21,562,500 shares of our common stock, including the exercise in full of the underwriters' option to purchase additional shares, at a public offering price of $3.20 per share. We received net proceeds of approximately $65.0 million, after deducting underwriting discounts, commissions and other offering expenses . Critical Accounting Policies and Significant Judgments and Estimates Our condensed, consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles (“GAAP”). The preparation of our consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amount of assets, liabilities, costs and expenses, and related disclosures. We believe that the estimates and assumptions involved in the accounting policies described below may have the greatest potential impact on our consolidated financial statements and, therefore, consider these to be our critical accounting policies. We evaluate these estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. 27 Research and Development Expense Costs for certain research and development activities, such as manufacturing, non-clinical studies, and clinical trials are generally recognized based on the evaluation of the progress of completion of specific tasks using information and data provided by our vendors and collaborators, and accordingly, are considered an area of significant judgment and management’s review of manufacturing, non-clinical, and clinical expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel, and outside vendors to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. We work with vendors and suppliers to ensure that our estimates of our research and development expenses are reasonable. We expect to increase our investment in research and development in order to advance nomlabofusp through additional clinical trials. As a result, we expect that our research and development expenses will continue to increase in the foreseeable future as we pursue clinical development of nomlabofusp and/or any other product candidates we develop. Stock Compensation Expense We measure 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. The Black-Scholes option-pricing model requires the use of highly subjective assumptions which determine the fair value of stock-based awards. The assumptions used in our option-pricing model represent management’s best estimates. These estimates are complex, involve a number of variables, uncertainties, and assumptions and the application of management’s judgment, and thus are inherently subjective. If factors change and different assumptions are used, our stock-based compensation expense could be materially different in the future. Prior to May 28, 2020, we were a private company and lacked company-specific historical and implied volatility information for our common stock. Prior to January 1, 2023, we estimated our expected common stock price volatility solely based on the historical volatility of publicly traded peer companies with comparable characteristics including enterprise value, risk profiles, and position within the industry. Beginning on January 1, 2023, we began blending our historical data starting in June 2020 (following our merger with Zafgen in 2020) with its historical peer group. We regularly evaluate our peer group to assess changes in circumstances where identified companies may no longer be similar to us, in which case, more suitable companies whose share prices are publicly available would be utilized in the calculation. We expect to continue to do so until we have full historical data regarding the volatility of our own traded stock price. The expected term of our stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” 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. The expected dividend yield considers the fact that we have never paid cash dividends on common stock and do not expect to pay any cash dividends in the foreseeable future. Compensation expense of those awards is recognized over the requisite service period, which is generally the vesting period of the respective award. Typically, we issue awards with only service-based vesting conditions and record the expense for these awards using the straight-line method. We account for forfeitures as they occur. In January 2025, our Board of Directors (“Board”) approved the issuance of an aggregate of 200,000 performance-based restricted stock units (“RSUs”) to certain of our executive officers (the “January 2025 PSU Awards”). The Board established specified performance criteria and a corresponding performance period over which such performance criteria must be achieved, the satisfaction of which are conditions to earning the January 2025 PSU Awards, and vesting of the underlying RSUs. As of September 30, 2025, the underlying performance criteria of the January 2025 PSU Awards were determined to be not probable of achievement for accounting purposes and no stock-based compensation expense was recognized for the three months ended September 30, 2025. We classify stock-based compensation expense in our consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified. 28 Financial Operations Overview Revenue To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts result in clinical success and regulatory approval or collaboration agreements with third parties for our product candidates, we may generate revenue from those product candidates or collaborations. Operating Expenses The majority of our operating expenses since inception have consisted primarily of research and development activities, and general and administrative costs. Research and Development Expenses Research and development expenses, which consist primarily of costs associated with our product research and development efforts, are expensed as incurred. Research and development expenses consist primarily of: • third-party contract costs relating to research, formulation, manufacturing, non-clinical studies and clinical trial activities; • employee related costs, including salaries, benefits and stock-based compensation expenses for employees engaged in scientific research and development functions; • external costs of outside consultants and vendors; • payments made under our third-party licensing agreements; • laboratory consumables; and • allocated facility-related costs. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the clinical and commercial development of nomlabofusp, or any other product candidates we develop. We are also unable to predict when, if ever, material net cash inflows will commence from sales of our product candidates. The duration, costs, and timing of clinical trials and development of nomlabofusp or any other product candidates we develop will depend on a variety of factors, including: • the scope, rate of progress and expense of clinical trials and other research and development activities; • clinical trial results; • uncertainties in clinical trial enrollment rate or design; • significant and changing government regulation; • the timing and receipt of any regulatory approvals; • the influence of the FDA or other regulatory authorities on our clinical trial design and timing; • establishing manufacturing capabilities or making arrangements with third-party manufacturers and risk involved with development of manufacturing processes, FDA pre-approval inspection practices and successful completion of manufacturing batches for clinical development and other regulatory purposes; • our ability to obtain and maintain patent and trade secret protection and regulatory exclusivity for our product candidates; and • our ability to recruit and retain key research and development personnel. A change in the outcome of one or more of these variables with respect to the development of a product candidate could significantly change the costs, timing, and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct additional non-clinical or clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our clinical trials, 29 we could be required to expend significant additional financial resources and time on the completion of clinical development. General and Administrative Expenses General and administrative expenses consist primarily of personnel costs, consisting of salaries, related benefits and stock-based compensation, costs related to our executive, finance, commercial, information technology, and costs related to other administrative functions. General and administrative expenses also include insurance expenses and professional fees for auditing, commercial readiness costs, tax, and legal services, including legal expenses to pursue patent protection for our intellectual property as well as reimbursability and related costs. We expect that our general and administrative expenses will increase in the foreseeable future as we hire additional employees to implement, improve, and scale our operational, financial, commercial and management systems. Results of Operations Comparison of three months ended September 30, 2025 and 2024 The following table summarizes our results of operations for the three months ended September 30, 2025 and 2024: Three Months Ended September 30, Increase 2025 2024 (Decrease) (in thousands) Statement of Operations Data: Operating expenses: Research and development $ 44,931 $ 13,919 $ 31,012 General and administrative 4,568 4,345 223 Total operating expenses 49,499 18,264 31,235 Loss from operations (49,499 ) (18,264 ) (31,235 ) Other income (expense), net 1,787 2,765 (978 ) Net loss $ (47,712 ) $ (15,499 ) $ (32,213 ) Research and Development Expenses Research and development expenses for the three months ended September 30, 2025 increased $31.0 million compared to the three months ended September 30, 2024. The increase in research and development expenses was primarily attributable to an increase of $25.8 million in nomlabofusp manufacturing costs, an increase of $1.8 million in professional and consulting fees associated with ongoing clinical studies and increasing worldwide regulatory activities, an increase of $1.5 million in clinical costs primarily associated with the start of an anticipated confirmatory study that are required as part of an accelerated approval of our planned BLA submission expected in the second quarter of 2026, an increase of $1.0 million in personnel costs associated with increased headcount, and an increase of $0.9 million in non-clinical costs related to assay development. General and Administrative expenses General and administrative expenses for the three months ended September 30, 2025 increased $0.2 million compared to the three months ended September 30, 2024. The increase in general and administrative expenses was primarily due to an increase of $0.3 million of personnel costs associated with increased headcount and an increase of $0.2 million in professional fees primarily related to legal services performed. The increase was largely offset by a decrease of $0.2 million in stock compensation costs related to the full vesting of previously issued stock options granted at higher value stock options. Other Income (expense), net Other income (expense), net was $1.8 million income in the three months ended September 30, 2025 compared to $2.8 million income in the three months ended September 30, 2024. The decrease was primarily driven by lower interest and accretion income due to lower interest yields and lower average investable cash, cash equivalents, and marketable securities balances. 30 Comparison of nine months ended September 30, 2025 and 2024 The following table summarizes our results of operations for the nine months ended September 30, 2025 and 2024: Nine Months Ended September 30, Increase 2025 2024 (Decrease) (in thousands) Statement of Operations Data: Operating expenses: Research and development $ 94,851 $ 46,540 $ 48,311 General and administrative 13,628 13,057 571 Total operating expenses 108,479 59,597 48,882 Loss from operations (108,479 ) (59,597 ) (48,882 ) Other income (expense), net 5,304 7,817 (2,513 ) Net loss $ (103,175 ) $ (51,780 ) $ (51,395 ) Research and Development Expenses Research and development expenses for the nine months ended September 30, 2025 increased $48.3 million compared to the nine months ended September 30, 2024. The increase in research and development expenses was primarily attributable to an increase of $32.9 million in nomlabofusp manufacturing costs, an increase of $5.4 million in professional consulting fees associated with ongoing clinical studies and worldwide regulatory activities, an increase of $4.8 million in clinical costs primarily associated with initiating the anticipated confirmatory study required as part of an accelerated approval of our planned BLA submission expected in the second quarter of 2026, an increase of $3.9 million in personnel costs associated with increased quality and regulatory headcount and an increase of $1.7 million in nonclinical costs related to assay development, and partially offset by a decrease of $0.8 million in costs incurred under the TRACK-FA program. General and Administrative expenses General and administrative expenses for the nine months ended September 30, 2025 increased $0.6 million compared to the nine months ended September 30, 2024. The increase in general and administrative expenses was primarily due to an increase of $1.1 million of personnel costs associated with increased headcount (primarily commercial) and an increase of $0.5 million in professional service expenses primarily related to commercial start-up activities, partially offset by a decrease of $0.8 million in stock compensation costs related to the full vesting of previously issued stock options granted at higher value stock options. Other Income (expense), net Other income (expense), net was $5.3 million income in the nine months ended September 30, 2025 compared to $7.8 million income in the nine months ended September 30, 2024. The decrease was primarily driven by lower interest and accretion income due to lower interest yields and lower average investable cash, cash equivalents, and marketable securities balances. Liquidity and Capital Resources Since our inception, we have not generated any revenue from any sources, including from product sales, and have incurred significant operating losses and negative cash flows from our operations. We have devoted substantially all of our resources to developing nomlabofusp, building our intellectual property portfolio, developing third-party manufacturing capabilities, business planning, capital raising, and providing general and administrative support for such operations. 31 Cash Flows The following table summarizes our sources and uses of cash for each of the periods presented below: Nine Months Ended September 30, 2025 2024 (in thousands) Net cash used in operating activities $ (74,674 ) $ (48,945 ) Net cash provided by (used in) investing activities 66,309 (104,584 ) Net cash provided by financing activities 65,287 161,847 Net increase in cash, cash equivalents and restricted cash $ 56,922 $ 8,318 Net cash used in operating activities During the nine months ended September 30, 2025, operating activities used $74.7 million of cash, resulting from our net loss of $103.2 million, adjusted for noncash expenses of $4.0 million and changes in our operating assets and liabilities resulting in a source of cash of $24.5 million. Our net loss was primarily attributed to research and development activities related to our nomlabofusp program and our general and administrative expenses as described above. Noncash expenses primarily relate to stock-based compensation expenses. The change in operating assets and liabilities was primarily due to a increases in prepaid expenses, accounts payable, and accrued expenses. During the nine months ended September 30, 2024, operating activities used $48.9 million of cash, resulting from our net loss of $51.8 million, adjusted for noncash expenses of $2.4 million and changes in our operating assets and liabilities resulting in a source of cash of $0.4 million. Our net loss was primarily attributed to research and development activities related to our nomlabofusp program and our general and administrative expenses as described above. Noncash expenses are primarily stock-based compensation expenses. The change in operating assets and liabilities was primarily due to an increase in accrued expenses and accounts payable, partially offset by a decrease in prepaid expense. Net cash provided by (used in) investing activities During the nine months ended September 30, 2025, investing activities provided $66.3 million. This source of cash resulted from the maturities of $150.0 million of marketable securities partially offset by purchases of $83.6 million of marketable securities. During the nine months ended September 30, 2024, investing activities used $104.6 million. This net use of cash was due to the purchase of $189.2 million of marketable securities, partially offset by $85.0 million of cash provided by maturities of marketable securities. Net cash provided by financing activities During the nine months ended September 30, 2025, financing activities provided $65.3 million of cash flows from an offering of common stock. During the nine months ended September 30, 2024, financing activities provided $161.8 million of cash flows primarily from an offering of common stock. Operating Capital Requirements We have not yet commercialized any products and do not expect to generate revenue from the commercial sale of any products for several years, if at all. We have incurred net losses of approximately $103.2 million and $51.8 million for the nine months ended September 30, 2025 and 2024, respectively. As of September 30, 2025, we had an accumulated deficit of $372.3 million and cash, cash equivalents, and marketable securities of $175.4 million, excluding restricted cash of $0.6 million. 32 Losses have resulted principally from costs incurred in connection with research and development activities, and general and administrative costs associated with the development of nomlabofusp and our operations. We expect to incur significant expenses and operating losses for the foreseeable future as we expect to continue to incur expenses in connection with our ongoing activities, if and as we: • continue to advance the development of nomlabofusp through additional clinical trials, including related manufacturing costs; • seek to identify and advance development of additional product candidates into clinical development and identify additional indications for our product candidates; • seek to obtain regulatory approvals for nomlabofusp and other potential product candidates; • identify, acquire or in-license other product candidates and technologies; • maintain, leverage and expand our intellectual property portfolio; and • expand our operational, financial, commercial and management systems and personnel, including personnel to support our clinical development and future commercialization efforts and our operations as a public company. We anticipate that current cash, cash equivalents, and marketable securities as of September 30, 2025 will fund operations into the fourth quarter of 2026. If we encounter unexpected delays in our clinical trials or if there are other unanticipated changes to our operating plan from our current assumptions that negatively impact our operations, we may reduce expenditures in order to further extend our existing cash resources. Until we can generate substantial revenue, if ever, we expect to seek additional funding through a combination of public or private equity offerings, debt/royalty financings, collaborations, strategic alliances, licensing arrangements or other sources. The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, minimum cash balances, limitations on our ability to acquire, sell or license intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. There can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, if at all. If such additional financing is not available on satisfactory terms, or is not available in sufficient amounts, or we do not have sufficient authorized shares, we may be required to delay, limit, or eliminate the development of business opportunities and our ability to achieve our business objectives, our competitiveness, and our business, financial condition, and results of operations will be materially adversely affected. We could also be required to seek funds through arrangements with collaborative partners, strategic alliances, or otherwise at an earlier stage than otherwise would be desirable and we may be required to relinquish rights to some of our technologies or product candidates or otherwise agree to terms unfavorable to us, any of which may have a material adverse effect on our business, operating results and prospects. In addition, geopolitical tensions including regional conflicts around the world, adverse macroeconomic events, including those due to inflationary pressures, rising interest rates, banking instability, monetary policy changes, changes in trade policies, including the current U.S. Government shutdown, tariffs (including tariffs and trade protection measures that have been or may in the future be imposed by the U.S. or other countries), new laws and regulations, including, but not limited to the recently enacted Public Law 119-21, economic slowdowns or recessions, health epidemics, unforeseen emergencies and other outbreaks of communicable diseases could disrupt our operations, the operations of third parties on which we rely, or the operations of regulatory agencies we interact with in the development of nomlabofusp and any other product candidates that we may develop which may reduce our ability to access capital, which could negatively affect our liquidity and ability to continue as a going concern. If we are unable to obtain sufficient funding when needed and/or on acceptable terms, we may be required to significantly curtail, delay or discontinue one or more of our research and development programs, the manufacture of clinical and commercial supplies, product portfolio expansion and/or commercialization efforts, which could adversely affect our business prospects, or we may be unable to continue operations. Certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell, or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our 33 business. Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our capability to develop and commercialize our product candidates. Off-Balance Sheet Arrangements During the periods presented, and through the date of this filing, we do not have any off-balance sheet arrangements, as defined under applicable SEC rules, such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities established for the purpose of facilitating financing transactions that are not required to be reflected on our balance sheets. Recently Issued Accounting Pronouncements Please read Note 2 to our condensed consolidated financial statements included in Part I of Item 1 of this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our business, if any. Other Company Information None. 34 Item 3. Quantitative and Qualitati ve Disclosures about Market Risk We are a "smaller reporting company" as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and are not required to provide the information under this item.