LISATA THERAPEUTICS, INC. 10-Q

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements” herein and under “Risk Factors” in our 2021 Form 10-K. The following discussion should be read in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report and in our 2021 Form 10-K. Overview We are a clinical-stage biopharmaceutical company dedicated to the development and commercialization of cellular therapies designed to reverse disease and/or promote the regeneration of damaged tissue. We are developing first-in-class therapeutics based on the characteristics of naturally occurring CD34+ cells and their ability to stimulate the growth of new microvasculature. Our technology leverages these cells to enable the body's natural repair mechanisms using formulations unique to each medical indication. Our leadership team has decades of collective biopharmaceutical product development experience in a variety of therapeutic categories, including cardiovascular and oncology. Our goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates. Our current product candidates include: • XOWNA ® (CLBS16), the subject of both a completed positive Phase 2a study (ESCaPE-CMD) and an ongoing follow on Phase 2b study (FREEDOM Trial) in the United States for the treatment of coronary microvascular dysfunction (“CMD”); • HONEDRA ® (CLBS12), recipient of SAKIGAKE designation and eligible for early conditional approval in Japan for the treatment of critical limb ischemia (“CLI”) and Buerger’s disease is being sought based on the current results of a clinical trial executed in Japan. CLBS12 was the recipient of orphan drug designation in March 2021 from the U.S. Food and Drug Administration (“FDA”) for Buerger's disease; and • CLBS201, the subject of a study designed to assess the safety and efficacy of CD34+ cell therapy as a treatment for patients with chronic kidney disease related to type 2 diabetes (diabetic kidney disease or “DKD”). Cend Merger On April 26, 2022, we, CS Cedar Merger Sub, Inc., a Delaware corporation and our wholly owned subsidiary (“Merger Sub”), and Cend Therapeutics, Inc., a Delaware corporation (“Cend”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Cend, with Cend continuing as our wholly owned subsidiary and the surviving corporation of the merger (the “Merger”). The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended. Subject to the terms and conditions of the Merger Agreement, at the closing of the Merger, (a) each outstanding share of Cend common stock and Cend preferred stock will be converted into the right to receive a number of shares of our common stock (“Caladrius Common Stock”) equal to an exchange ratio calculated pursuant to the terms of the Merger Agreement; and (b) each outstanding Cend stock option that has not previously been exercised prior to the closing of the Merger will be assumed by us. Under the exchange ratio formula, as of immediately after the Merger, the former Cend stockholders are expected to own approximately 50% of the outstanding shares of Caladrius Common Stock and our stockholders as of immediately prior to the Merger are expected to own approximately 50% of the outstanding shares of Caladrius Common Stock. The actual allocation will be subject to adjustment based on our net cash balance at the time of closing and the amount of any transaction expenses of Cend in excess of $250 thousand at the time of closing. Consummation of the Merger is subject to certain closing conditions, including, among other things, approval by the stockholders of Caladrius and Cend, and Caladrius’ satisfaction of a minimum net cash threshold at closing, expected to be approximately $64.9 million assuming a closing at the end of the third quarter of 2022, and as described further in the Merger Agreement. In accordance with the terms of the Merger Agreement, (i) certain executive officers, directors and stockholders of Cend (solely in their respective capacities as Cend stockholders) holding approximately 77.5% of the outstanding Cend capital stock have entered into support agreements with Caladrius to vote all of their shares of Cend capital stock in favor of adoption of the Merger Agreement (the “Cend Support Agreements”) and (ii) certain executive officers and directors of Caladrius (solely 22 Index in their respective capacities as Caladrius stockholders) holding approximately 1.8% of the outstanding Caladrius common stock have entered into support agreements with Cend to vote all of their shares of Caladrius common stock in favor of approval of the Merger Agreement (the “Caladrius Support Agreements,” together with the Cend Support Agreements, the “Support Agreements”). The Support Agreements include covenants with respect to the voting of such shares in favor of approving the transactions contemplated by the Merger Agreement and against any competing acquisition proposals and place certain restrictions on the transfer of the shares of Caladrius and Cend held by the respective signatories thereto. Concurrently with the execution of the Merger Agreement, certain officers and directors of Caladrius holding approximately 1.8% of the outstanding Caladrius common stock and certain officers, directors and stockholders of Cend holding approximately 77.5% of the Cend capital stock have entered into lock-up agreements (the “Lock-Up Agreements”) pursuant to which they accepted certain restrictions on transfers of shares of Caladrius Common Stock for the 120-day period following the closing of the Merger. The Merger Agreement contains certain termination rights for both us and Cend, and further provides that, upon termination of the Merger Agreement under specified circumstances, we may be required to pay Cend a termination fee of $1.0 million, Cend may be required to pay us a termination fee of $4.0 million, or in some circumstances reimburse the other party’s expenses up to a maximum of $1.0 million. At the effective time of the Merger, our Board of Directors is expected to consist of nine members, four of whom will be designated by us, four of whom will be designated by Cend and one member who will be mutually agreed between us and Cend. Cend Investment and Collaboration Agreement In order to provide Cend with capital for its development programs prior to the closing of the Merger, we and Cend entered into a Series D Preferred Stock Purchase Agreement (the “Purchase Agreement”), pursuant to which we purchased from Cend 1,135,628 shares of Series D Preferred Stock, $0.00001 par value per share (the “Series D Preferred Stock”), of Cend at a purchase price per share equal to $8.8057 per share (the “Series D Original Issue Price”), or approximately $10 million in the aggregate. The Purchase Agreement contains customary representations, warranties and agreements by us and Cend and customary conditions to closing. The Series D Preferred Stock ranks senior to Cend’s common stock and the other series of preferred stock with respect to rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of Cend. The Series D Preferred Stock has a liquidation preference equal to the Series D Original Issue Price plus an amount equal to any accrued and unpaid dividends to the date of payment and will participate with Cend’s common stockholders and other preferred stockholders thereafter on an as-converted basis. The Series D Preferred Stock shall vote with the common stock on an as-converted basis on any matters presented to the stockholders of Cend. Each share of Series D Preferred Stock is convertible, at the option of the holder thereof, into such number of shares of Cend common stock as is determined by dividing the Original Issue Price by the conversion price in effect at the time of conversion, which conversion price shall be the Original Issue Price as appropriately adjusted for stock splits, stock dividends, combinations, and subdivisions of Cend common stock, and as adjusted pursuant to a weighted-average antidilution adjustment. The Series D Preferred Stock will automatically convert into shares of Cend common stock upon the closing of a firm-commitment underwritten initial public offering implying a pre-equity offering value of at least $250 million, resulting in at least $50 million of gross proceeds to Cend. In connection with the Purchase Agreement, we and Cend entered into a Collaboration Agreement (the “Collaboration Agreement”), pursuant to which we agreed to collaborate with Cend on certain developmental and clinical activities prior to the closing of the Merger. Pursuant to the Collaboration Agreement, we and Cend have formed a joint steering committee (the “Committee”) comprised of individuals from both entities. The Committee meets regularly and is responsible for monitoring ongoing studies and making recommendations for development activity and trial planning. Cend has agreed to pay each member of the Committee from Caladrius an hourly consulting fee for such service. Ischemic Repair (CD34+ Cell Technology) The CD34+ cell was discovered as a result of the deliberate search for a cell capable of stimulating the development and/or repair of blood vessels. All tissues in the body maintain their function by replacing cells over time. In addition to the maintenance function, the body must also be capable of building new blood vessels after injury. A CD34+ cell is an endothelial progenitor cell that has the ability to stimulate new blood vessel formation at the level of the microvasculature. No other native cell discovered to date has demonstrated this same capability. Our proprietary cell technology using autologous (a patient’s own naturally occurring) CD34+ cells has led to the development of therapeutic product candidates designed to address diseases and conditions caused by ischemia. Ischemia occurs when the supply of oxygenated blood to healthy tissue is restricted or reduced. Through the administration of CD34+ cells, we seek to promote the development and formation of new microvasculature and thereby increase blood flow to the 23 Index impacted area. We believe that a number of conditions caused by underlying ischemic injury can be improved through our CD34+ cell technology including, but not limited to, Buerger's disease, CLI, CMD, and DKD. XOWNA ® for Treatment of Coronary Microvascular Dysfunction In 2017, with the assistance of a $1.9 million grant from the National Institutes of Health (Award Number R44HL135889), we initiated our program for XOWNA ® for the treatment of CMD, a disease that afflicts as many as 1.6 million patients in the United States alone, with no current targeted treatment options. That study, the ESCaPE-CMD Trial, was a Phase 2a proof-of-concept, open label study that enrolled patients at the Mayo Clinic in Rochester, MN and Cedars-Sinai Medical Center in Los Angeles, CA. Those data showed a positive therapeutic effect with a statistically significant improvement in angina frequency, coronary flow reserve, Canadian Cardiovascular Society Angina Class and Seattle Angina Questionnaire scores, as well as an acceptable safety profile. The full data set from that study was presented at the SCAI 2020 Scientific Sessions Virtual Conference on May 14, 2020 by Dr. Timothy Henry, FACC, of the Christ Hospital in Cincinnati, Ohio. In December 2020, we commenced enrollment in our Phase 2b FREEDOM Trial of XOWNA ® , a double-blind, randomized, placebo-controlled clinical trial designed to further evaluate the efficacy and safety of intracoronary artery delivery of autologous CD34+ cells in subjects with CMD and without obstructive coronary artery disease and was expected to complete enrollment in approximately 12 months. While early enrollment proceeded to plan with the first patient treated in January 2021, the impact of the COVID-19 pandemic contributed to a general slowing of enrollment, including supply chain disruptions affecting the availability of qualified catheters used in the diagnosis of CMD and/or administration of XOWNA ® as well as with a contrast agent typically used in many catheter laboratories. Protocol amendments to the initial FREEDOM Trial protocol, as agreed to by the FDA, were implemented with the goal of enhancing breadth and speed of subject enrollment. In May 2022, we announced that enrollment in the FREEDOM Trial had been suspended and that we intend to conduct an interim analysis of the data from not less than the first 20 patients enrolled using the 6-month follow-up data to evaluate the efficacy and safety of XOWNA ® in subjects with CMD and corroborate the ESCaPE-CMD study results. The interim analysis is expected to be completed in the third quarter of 2022 and the next steps in development of XOWNA ® will subsequently be determined after appropriate regulatory and business review, expected to be announced prior to year-end 2022. HONEDRA ® for Treatment of Critical Limb Ischemia Our randomized, open-label, registration-eligible study of HONEDRA ® in Japan for the treatment of CLI and Buerger's disease has, to date, demonstrated positive trends in both safety and efficacy. The HONEDRA ® study's enrollment, however, has been significantly curtailed by the COVID-19 pandemic's impact in Japan, including the States of Emergency in Japan that have persisted for much of 2020, 2021, and 2022. Due to the significant and continued operational and financial burden incurred as a result of these COVID-19 delays, coupled with the unpredictability of the timing of site enrollment re-initiation, we suspended further enrollment in the fourth quarter of 2021. Following study suspension, we completed all protocol-defined patient observations and are preparing the clinical study report. HONEDRA ® is now in the pre-consultation phase of the registration process with the Pharmaceuticals and Medical Devices Agency (“PMDA”) in Japan. Data from the follow-up of all patients completed in the registration-eligible clinical trial in Japan has been compiled and is expected to be reviewed by PMDA during the third quarter of 2022 after which the PMDA is expected to provide important perspective to be considered in preparation for the formal consultation meetings which precede the Japanese new drug application. We are focusing our efforts on consummating a partnership for the product in Japan. Such a partnership may become the basis for the completion of development and registration of HONEDRA ® in Japan. This may include the completion of enrollment of the four-remaining no-option CLI subjects stipulated in the original protocol, if necessary, and/or exploration of submitting the existing data to Japan's PMDA under Japan's regenerative medicine regulations, which allow for conditional approval of innovative regenerative medicine products. Despite receipt of orphan designation from FDA in March 2021 in the United States for CLBS12 as a potential treatment for Buerger's disease, based on a response from the FDA in October 2021 regarding a development plan for U.S. registration, we have decided not to pursue U.S. development in Buerger's disease at this time. CLBS201 for Treatment of Diabetic Kidney Disease Progressive kidney failure is associated with attrition of the microcirculation of the kidney. Pre-clinical studies in kidney disease and injury models have demonstrated that protection or replenishment of the microcirculation results in improved kidney function. Based on these observations, we have elected to move forward with a Phase 1b, open-label, proof-of-concept trial evaluating CLBS201 dosed via intra-renal artery injections in subjects with DKD. This protocol includes six subjects in total with the first two subjects sequentially dosed and followed for a two-week safety observation period. Clearance by an independent Data Safety Monitoring Board (“DSMB”) overseeing the study then permitted the treatment of the next four patients, with all patients being followed for safety and therapeutic effect. A read-out of data will occur after the six-month follow-up visit for all patients. A key criterion for continued development of CLBS201 will be our ability to demonstrate a therapeutic effect that will make it competitive in the field of DKD treatment, i.e., kidney function regeneration, as indicated by increased glomerular filtration rate. The Company treated the first patient in the CLBS201 proof-of-concept study in April 2022 24 Index and completed treatment for all six subjects during the third quarter of 2022. Top-line data is anticipated from all subjects by the first quarter of 2023. Additional Out-licensing Opportunities Our broad intellectual property portfolio of cell therapy assets includes notable programs available for out-licensing in order to continue their clinical development. Our current long-term strategy focuses on advancing our therapies through development with the ultimate objective of obtaining market authorizations and entering commercialization, either alone or with partners, to provide treatment options to patients suffering from life-threatening medical conditions. We believe that we are well-positioned to realize potentially meaningful value increases within our own proprietary pipeline if we are successful in advancing our product candidates to their next significant development milestones. Impact of the COVID-19 Pandemic The COVID-19 pandemic continues to present substantial public health and economic challenges around the world, and to date has led to the implementation of various responses, including government-imposed quarantines, stay-at-home orders, travel restrictions, mandated business closures and other public health safety measures. We continue to closely monitor the impact of the COVID-19 pandemic on all aspects of our business, including how it has and will continue to impact our operations and the operations of our suppliers, vendors and business partners, and may take further precautionary and preemptive actions as may be required by federal, state or local authorities. In addition, we have taken steps to minimize the current environment’s impact on our business and strategy, including devising contingency plans and securing additional resources from third party service providers. For the safety of our employees and families, we implemented a universal work from home policy as well as stringent social distancing and other hygiene policies for employees when they must be in the office. Our clinical study of HONEDRA ® in Japan experienced significant delays in enrollment due to the States of Emergency in effect in Japan for most of 2020, 2021, and 2022 covering Tokyo and other regions in response to an increased number of COVID-19 infections. With our expectation that COVID-19 in Japan would continue to impact negatively enrollment of patients in the HONEDRA ® clinical trial, we elected to suspend trial enrollment, seek a development partner and consult with the Japanese regulatory authorities regarding the submission of patient data already accrued. In addition, our phase 2b trial of XOWNA ® in the United States has also experienced delays in enrolling patients as a result of COVID-19, as described above. In May 2022, we announced that enrollment in the FREEDOM Trial had been suspended and that we intend to conduct an interim analysis of the data from not less than the first 20 patients enrolled using the 6-month follow-up data to evaluate the efficacy and safety of XOWNA ® in subjects with CMD and corroborate the ESCaPE-CMD study results. Beyond its impact on our development pipeline described above, the extent to which COVID-19 ultimately impacts our business, results of operations and financial condition will depend on future developments, which remain highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the emergence of new variants, new information that may emerge concerning the severity of COVID-19 or the effectiveness of actions taken to contain COVID-19 or treat its impact, including vaccination campaigns, among others. If we or any of the third parties with whom we engage, however, were to experience any additional shutdowns or other prolonged business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially or negatively affected, which could have a material adverse impact on our business, financial condition and results of operations. It is possible that our clinical development timelines could continue to be negatively affected by COVID-19, which could materially and adversely affect our business, financial condition and results of operations. See “Risk Factors” in our 2021 Form 10-K for additional discussion of the potential adverse impact of the COVID-19 pandemic on our business, financial condition and results of operations. 25 Index Results of Operations Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021 The following table summarizes our results of operations for the three months ended June 30, 2022 and June 30, 2021: Three Months Ended June 30, 2022 2021 Change Operating Expenses: Research and development $ 3,239 $ 4,329 $ (1,090) General and administrative 3,481 2,818 663 Total operating expenses 6,720 7,147 (427) Loss from operations (6,720) (7,147) 427 Total other income (expense) 94 (43) 137 Benefit from income taxes — (1,508) (1,508) Net loss $ (6,626) $ (5,682) $ (944) Overall, net losses were $6.6 million for the three months ended June 30, 2022, compared to $5.7 million for the three months ended June 30, 2021. Operating Expenses For the three months ended June 30, 2022, operating expenses totaled $6.7 million compared to $7.1 million for the three months ended June 30, 2021, representing a decrease of 6%. Operating expenses comprised the following: • Research and development expenses were approximately $3.2 million for the three months ended June 30, 2022, compared to $4.3 million for the three months ended June 30, 2021, representing a decrease of $1.1 million or 25%. This decrease was primarily due to a decrease in expenses associated with HONEDRA ® in Japan, revenue received from the Collaboration Agreement and one off recruiting expenses in the prior year. Research and development in both periods focused on the advancement of our ischemic repair platform and related to: ◦ expenses associated with our XOWNA ® Phase 2b study (the FREEDOM Trial) which commenced in the fourth quarter of 2020 with the first patient in the study treated in January 2021; ◦ ongoing registration-eligible study expenses for HONEDRA ® in critical limb ischemia in Japan which focused on patient enrollment completion. The study's enrollment has been significantly curtailed by the COVID-19 pandemic's impact in Japan, including the States of Emergency that have persisted there for most of 2020, 2021 and 2022. Due to the significant and continued operational and financial burden incurred as a result of these COVID-19 delays, coupled with the complete unpredictability of the timing of site enrollment re-initiation, we will focus our efforts on consummating a partnership with a Japanese company in order to complete the study enrollment as well as to explore the possibility of submitting the existing data to PMDA under the SAKIGAKE designation; ◦ expenses associated with the preparation of our filing of an IND and study start-up expenses for the clinical study of CLBS201 for treatment of diabetic kidney disease. A Phase 1b, open-label, proof-of-concept trial which includes six subjects in total. The trial commenced in the first quarter of 2022 with the first patient in the study treated in April 2022 and completed treatment for all six subjects during the third quarter of 2022. Top-line data is anticipated from all subjects by the first quarter of 2023. • General and administrative expenses were approximately $3.5 million for the three months ended June 30, 2022, compared to $2.8 million for the three months ended June 30, 2021, representing an increase of 24%. This increase was primarily due to an increase in fees associated with the proposed merger with Cend Therapeutics, Inc. Our general and administrative expenses focus on general corporate-related activities. 26 Index Historically, to minimize our use of cash, we have used a variety of equity and equity-linked instruments to compensate employees, consultants and other service providers. The use of these instruments has resulted in charges to the results of operations, which have been significant in the past. Other Income (Expense) Total other income (expense) is comprised of investment income on cash, cash equivalents and marketable securities and a loss on sale related to the sale of our NJ NOLs. Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021 The following table summarizes our results of operations for the six months ended June 30, 2022 and June 30, 2021: Six Months Ended June 30, 2022 2021 Change Operating Expenses: Research and development $ 6,517 $ 9,405 $ (2,888) General and administrative 6,823 5,828 995 Total operating expenses 13,340 15,233 (1,893) Loss from operations (13,340) (15,233) 1,893 Total other income (expense) 9 (20) 29 Benefit from income taxes (2,479) (1,508) 971 Net loss $ (10,852) $ (13,745) $ 2,893 Overall, net losses were $10.9 million for the six months ended June 30, 2022, compared to $13.7 million for the six months ended June 30, 2021. For the six months ended June 30, 2022, operating expenses totaled $13.3 million compared to $15.2 million for the six months ended June 30, 2021, representing a decrease of 12%. Operating expenses comprised the following: • Research and development expenses were approximately $6.5 million for the six months ended June 30, 2022, compared to $9.4 million for the six months ended June 30, 2021, representing a decrease of $2.9 million or 31%. This decrease was primarily due to a decrease in expenses associated with manufacturing start-up costs and process development expenses for our XOWNA ® Phase 2b study (the FREEDOM Trial), a decrease in expenses associated with HONEDRA ® in Japan, revenue received from the Collaboration Agreement and one off recruiting expenses in the prior year. Research and development in both periods focused on the advancement of our ischemic repair platform and related to: ◦ expenses associated with our XOWNA ® Phase 2b study (the FREEDOM Trial) which commenced in the fourth quarter of 2020 with the first patient in the study treated in January 2021; ◦ ongoing registration-eligible study expenses for HONEDRA ® in critical limb ischemia in Japan which focused on patient enrollment completion. The study's enrollment has been significantly curtailed by the COVID-19 pandemic's impact in Japan, including the States of Emergency that have persisted there for most of 2020, 2021 and 2022. Due to the significant and continued operational and financial burden incurred as a result of these COVID-19 delays, coupled with the complete unpredictability of the timing of site enrollment re-initiation, we will focus our efforts on consummating a partnership with a Japanese company in order to complete the study enrollment as well as to explore the possibility of submitting the existing data to PMDA under the SAKIGAKE designation; and ◦ expenses associated with the preparation of our filing of an IND and study start-up expenses for the clinical study of CLBS201 for treatment of diabetic kidney disease. A Phase 1b, open-label, proof-of-concept trial which includes six subjects in total. The trial commenced in the first quarter of 2022 with the first patient in the study treated in April 2022 and completed treatment for all six subjects during the third quarter of 2022. Top-line data is anticipated from all subjects by the first quarter of 2023. • General and administrative expenses were approximately $6.8 million for the six months ended June 30, 2022, compared to $5.8 million for the six months ended June 30, 2021, representing an increase of 17%. This increase was primarily due to an increase in fees associated with the review of potential strategic transactions and an increase in fees 27 Index associated with the proposed merger with Cend Therapeutics, Inc. Our general and administrative expenses focus on general corporate-related activities. Historically, to minimize our use of cash, we have used a variety of equity and equity-linked instruments to compensate employees, consultants and other service providers. The use of these instruments has resulted in charges to the results of operations, which have been significant in the past. Other Income (Expense) Total other income (expense) is comprised of investment income on cash, cash equivalents and marketable securities and a loss on sale related to the sale of our NJ NOLs. Income Tax Benefit In February 2022, we received final approval from the New Jersey Economic Development Authority (“NJEDA”) under the Technology Business Tax Certificate Transfer Program (“Program”) to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.3 million. The $2.5 million of our NJ NOL Tax Benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense). 28 Index Analysis of Liquidity and Capital Resources As of June 30, 2022, we had cash, cash equivalents and marketable securities of approximately $73.0 million, working capital of approximately $71.6 million, and stockholders’ equity of approximately $82.4 million. During the six months ended June 30, 2022, we met our immediate cash requirements through existing cash balances. Additionally, we used equity and equity-linked instruments to pay for services and compensation. Net cash used in or provided by, operating, investing and financing activities were as follows (in thousands): Six Months Ended June 30, 2022 2021 Net cash used in operating activities $ (10,704) $ (12,602) Net cash provided by (used in) investing activities 19,544 (76,294) Net cash (used in) provided by financing activities (139) 85,319 Operating Activities Our cash used in operating activities during the six months ended June 30, 2022 was $10.7 million, which is comprised of (i) our net loss of $10.9 million, adjusted for non-cash expenses totaling $2.0 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities using approximately $1.9 million. Our cash used in operating activities during the six months ended June 30, 2021 was $12.6 million, which is comprised of (i) our net loss of $13.7 million, adjusted for non-cash expenses totaling $2.0 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities) and (ii) changes in operating assets and liabilities using approximately $0.9 million. Investing Activities Our cash provided by investing activities during the six months ended June 30, 2022 totaled $19.5 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities). Our cash used in investing activities during the six months ended June 30, 2021 totaled $76.3 million and was primarily due to net purchases of marketable securities (net of sales of marketable securities). Financing Activities Our cash used in financing activities during the six months ended June 30, 2022 totaled $0.1 million, consisted primarily of tax withholding-related payments on net share settlement equity awards to employees. Our cash provided by financing activities during the six months ended June 30, 2021 totaled $85.3 million, primarily consisted of (i) net proceeds of $23.1 million through the issuance of common shares and warrants in our January 2021 private placement, (ii) net proceeds of $1.8 million in connection with warrant exercises, (iii) net proceeds of $60.6 million through the issuance of common shares and warrants in both of our February 2021 registered direct offerings, which was partially offset by tax withholding-related payments on net share settlement equity awards to employees. Liquidity and Capital Requirements Outlook To meet our short and long-term liquidity needs, we expect to use existing cash balances and a variety of other means. Other sources of liquidity could include additional potential issuances of debt or equity securities in public or private financings, partnerships and/or collaborations and/or sale of assets. Our history of operating losses and liquidity challenges may make it difficult for us to raise capital on acceptable terms or at all. The demand for the equity and debt of biopharmaceutical companies like ours is dependent upon many factors, including the general state of the financial markets. During times of extreme market volatility, capital may not be available on favorable terms, if at all. Our inability to obtain such additional capital could materially and adversely affect our business operations. We will also continue to seek, as appropriate, grants for scientific and clinical studies from various governmental agencies and foundations, and other sources of non-dilutive funding. We believe that our cash on hand will enable us to fund operating expenses for at least the next 12 months following the issuance of our financial statements, absent any impact from the Merger, if consummated. Our future capital requirements are difficult to forecast and will depend on many factors, including our ability to consummate the Merger; if the Merger is not completed, the timing and nature of any other strategic transactions that we undertake; and our ability to establish and maintain collaboration partnerships, in-license/out-license or other similar arrangements and the financial terms of such agreements. 29 Index In order to provide Cend with capital for its development programs prior to the closing of the Merger, pursuant to the Purchase Agreement, we purchased 1,135,628 shares of Series D Preferred Stock of Cend for an aggregate purchase price of approximately $10.0 million. On June 4, 2021, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“HCW”), as sales agent, in connection with an “at the market offering” under which we from time to time may offer and sell shares of our common stock, having an aggregate offering price of up to $50.0 million. On February 18, 2022, we received a deficiency notice from Nasdaq informing us that we are not in compliance with the Minimum Bid Price Requirement. As such, we will not be able to sell shares under the ATM Agreement until we regain compliance, if ever. As of June 30, 2022, we had not issued any shares under the ATM Agreement. HCW is only obligated to make sales when we are in compliance with all Nasdaq listing standards. In December 2021, we received preliminary approval from the NJEDA to participate in the NJ Technology Business Tax Certificate Transfer Program (the “Program”). The Program permits qualified companies to sell a percentage of their NJ NOLs to unrelated profitable corporations. On February 22, 2022, we received final approval from NJEDA to sell $2.5 million of our NJ NOL Tax Benefits, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.3 million. While we continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used. Additional equity financing may be dilutive to our stockholders; debt financing, if available, may involve significant cash payment obligations and covenants that restrict our ability to operate as a business; our stock price may not reach levels necessary to induce option or warrant exercises; and asset sales may not be possible on terms we consider acceptable. If we are unable to access capital necessary to meet our long-term liquidity needs, we may have to delay the expansion of our business or raise funds on terms that we currently consider unfavorable. Seasonality We do not believe that our operations are seasonal in nature. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Critical Accounting Policies and Estimates There have been no material changes in our critical accounting policies and estimates during the three and six months ended June 30, 2022, compared to those reported in our 2021 Form 10-K. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable.