What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-09 compared with 2022-11-10 · 188 added, 209 removed, 445 unchanged (47% of the section changed)

4 unchanged sentences

(In thousands, except share data)

September 30,

2023 December 31,

17 unchanged sentences

Stockholders' Equity

Preferred stock, authorized, 20,000,000 shares Series B convertible redeemable preferred stock

liquidation value, 0.000067 share of common stock, $ 0.01 par value;

825,000 shares designated;

issued and outstanding, 10,000 shares at September 30, 2022 and December 31, 2021, respectively

Common stock, $ 0.001 par value, authorized 33,333,333 shares;

issued 7,999,080

and 3,986,719 shares at September 30, 2022 and December 31, 2021, respectively;

outstanding, 7,862,602 and 3,985,981 shares at September 30, 2022 and December 31, 2021,

and 7,866,799 shares at March 31, 2023 and December 31, 2022, respectively;

outstanding, 7,998,342 and 7,866,061 shares at March 31, 2023 and December 31, 2022,

Additional paid-in capital 575,137 574,548

Treasury stock, at cost;

738 shares at September 30, 2022 and December 31, 2021

738 shares at March 31, 2023 and December 31, 2022

( 708 ) ( 708 )

11 unchanged sentences

(In thousands, except per share data)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Operating Expenses:

Research and development $ 3,179 $ 3,283

In-process research and development 30,393 — 30,393 —

General and administrative 3,665 3,337

7 unchanged sentences

Benefit from income taxes — ( 2,479 )

Net loss $ ( 6,187 ) $ ( 4,226 )

Less - net income attributable to noncontrolling interests

Net loss attributable to Lisata Therapeutics, Inc.

5 unchanged sentences

Basic and diluted shares

4,747 3,974 4,276 3,587

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(In thousands)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net loss $ ( 6,187 ) $ ( 4,226 )

Other comprehensive loss:

Available for sale securities - net unrealized gain (loss) 5 ( 47 ) 5 ( 51 )

Available for sale securities - net unrealized loss ( 11 ) ( 126 )

Cumulative translation adjustment arising during the period ( 12 ) —

8 unchanged sentences

(In thousands)

Series B Convertible

Preferred Stock Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Treasury

Lisata Therapeutics,

Stockholders'

Subsidiary Total

Shares Amount Shares Amount

Balance at June 30, 2022 — $ — 4,038 $ 4 $ 547,032 $ ( 70 ) $ ( 463,868 ) $ ( 708 ) $ 82,391 $ ( 254 ) $ 82,137

Net loss — — — — — — ( 37,383 ) — ( 37,383 ) — ( 37,383 )

Share-based compensation — — 52 — 940 — — — 939 — 939

Issuance of common stock in connection with merger — — 3,773 4 26,094 — — — 26,098 — 26,098

Unrealized gain on marketable securities — — — — — 5 — — 5 — 5

Foreign currency translation adjustment — — — — — ( 25 ) — — ( 25 ) — ( 25 )

Balance at September 30, 2022 — $ — 7,863 $ 8 $ 574,066 $ ( 90 ) $ ( 501,251 ) $ ( 708 ) $ 72,025 $ ( 254 ) $ 71,771

Series B Convertible

Preferred Stock Common Stock Additional

Common Stock Additional

Capital Accumulated

5 unchanged sentences

Subsidiary Total

Shares Amount Shares Amount

Shares Amount

Balance at December 31, 2021 3,986 $ 4 $ 546,044 $ ( 70 ) $ ( 453,016 ) $ ( 708 ) $ 92,254 $ ( 254 ) $ 92,000

1 unchanged sentence

Share-based compensation 49 — 593 — — — 593 — 593

Net proceeds from issuances of common stock — — 4 — 29 — — — 29 — 29

Issuance of common stock in connection with merger — — 3,773 4 26,094 — — — 26,098 — 26,098

Unrealized gain on marketable securities — — — — — 5 — — 5 — 5

Foreign currency translation adjustment — — — — — ( 25 ) — — ( 25 ) — ( 25 )

Balance at September 30, 2022 — $ — 7,863 $ 8 $ 574,066 $ ( 90 ) $ ( 501,251 ) $ ( 708 ) $ 72,025 $ ( 254 ) $ 71,771

Series B Convertible

Preferred Stock Common Stock Additional

Capital Accumulated

Comprehensive

Loss Accumulated

Deficit Treasury

Lisata Therapeutics,

Stockholders'

Subsidiary Total

Shares Amount Shares Amount

Balance at June 30, 2021 — $ — 3,967 $ 4 $ 544,949 $ ( 17 ) $ ( 439,295 ) $ ( 708 ) $ 104,933 $ ( 254 ) $ 104,679

Net loss — — — — — — ( 6,927 ) — ( 6,927 ) — ( 6,927 )

Share-based compensation — — 19 — 708 — — — 708 — 708

Unrealized loss on marketable securities — — — ( 126 ) — — ( 126 ) — ( 126 )

Balance at September 30, 2021 — $ — 3,986 $ 4 $ 545,657 $ ( 64 ) $ ( 446,222 ) $ ( 708 ) $ 98,667 $ ( 254 ) $ 98,413

Series B Convertible

Preferred Stock Common Stock Additional

Balance at March 31, 2022 4,035 $ 4 $ 546,637 $ ( 196 ) $ ( 457,242 ) $ ( 708 ) $ 88,495 $ ( 254 ) $ 88,241

Common Stock Additional

Capital Accumulated

Comprehensive

Income (Loss) Accumulated

Comprehensive Loss Accumulated

Deficit Treasury

2 unchanged sentences

Subsidiary Total

Shares Amount Shares Amount

Shares Amount

Balance at December 31, 2022 7,867 $ 8 $ 574,548 $ ( 29 ) $ ( 507,241 ) $ ( 708 ) $ 66,578 $ ( 254 ) $ 66,324

1 unchanged sentence

Share-based compensation 132 — 589 — — — 589 — 589

Net proceeds from issuances of common stock and warrants — — 2,658 3 85,476 — — — 85,479 — 85,479

Proceeds from option exercises — — — — 24 — — — 24 — 24

Foreign currency translation adjustment — — — ( 12 ) — — ( 12 ) — ( 12 )

Unrealized loss on marketable securities — — — ( 11 ) — — ( 11 ) — ( 11 )

Balance at September 30, 2021 — $ — 3,986 $ 4 $ 545,657 $ ( 64 ) $ ( 446,222 ) $ ( 708 ) $ 98,667 $ ( 254 ) $ 98,413

Balance at March 31, 2023 7,999 $ 8 $ 575,137 $ ( 52 ) $ ( 513,428 ) $ ( 708 ) $ 60,957 $ ( 254 ) $ 60,703

See accompanying notes to consolidated financial statements.

3 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

3 unchanged sentences

Depreciation and amortization 48 7

In process research and development expenses 30,393 —

(Gain) loss on disposal of fixed assets 3 —

Accretion on marketable securities ( 167 ) 515

7 unchanged sentences

Sale of marketable securities 34,410 20,456

Asset acquisition costs, net of cash acquired related to merger with Cend ( 3,320 ) —

Purchase of property and equipment ( 259 ) ( 60 )

Net cash provided by (used in) investing activities 4,289 ( 6,090 )

Cash flows from financing activities:

Proceeds from exercise of options — 24

Tax withholding payments on net share settlement equity awards ( 85 ) ( 168 )

Net proceeds from issuance of common stock 29 85,479

Net cash (used in) provided by financing activities ( 238 ) 85,255

Net cash used in financing activities ( 85 ) ( 168 )

Effect of exchange rate changes on cash ( 7 ) —

Net increase (decrease) in cash and cash equivalents 6,831 ( 3,740 )

Net decrease in cash and cash equivalents ( 3,999 ) ( 11,900 )

Cash and cash equivalents at beginning of period 32,154 24,647

Cash and cash equivalents at end of period $ 28,155 $ 12,747

Supplemental disclosure of noncash investing activities:

Issuance of common stock in connection with merger $ 23,580 $ —

Incremental fair value of Cend's fully vested stock options assumed $ 2,136 $ —

See accompanying notes to consolidated financial statements.

4 unchanged sentences

Lisata Therapeutics, Inc.

(together with its subsidiaries, “we,” “us,” “our,” “Lisata” or the “Company”) is a clinical-stage pharmaceutical company dedicated to the discovery, development and commercialization of innovative therapies for the treatment of solid tumors and other major diseases.

Lisata’s lead investigational product candidate, LSTA1 (formerly known as CEND-1), is designed to activate a novel uptake pathway that allows anti-cancer drugs to penetrate solid tumors more effectively.

LSTA1 actuates this active transport system in a tumor-specific manner, resulting in systemically co-administered anti-cancer drugs more efficiently penetrating and accumulating in the tumor, while normal tissues are not affected.

LSTA1 also has the potential to modify the tumor microenvironment (“TME”), making tumors more susceptible to immunotherapies.

LSTA1 has demonstrated favorable safety, tolerability, and activity to date in completed and ongoing clinical trials to enhance delivery of standard-of-care chemotherapy for pancreatic cancer.

Lisata and its collaborators have also amassed significant non-clinical data demonstrating enhanced delivery of a range of emerging anti-cancer therapies, including immunotherapies and RNA-based therapeutics.

Lisata is exploring the potential of LSTA1 to enable a variety of treatment modalities to treat a range of solid tumors more effectively.

In addition, Lisata also has clinical development programs based on its autologous CD34+ cell therapy technology platform.

(together with its subsidiaries, the “Company”) is a clinical-stage pharmaceutical company dedicated to the discovery, development and commercialization of innovative therapies for the treatment of solid tumors and other major diseases.

The Company's lead investigational product candidate, LSTA1, is designed to activate a novel uptake pathway that allows co-administered or tethered anti-cancer drugs to penetrate solid tumors more effectively.

LSTA1 also has the potential to modify the tumor microenvironment (“TME”), with the objective of making tumors more susceptible to immunotherapies.

The Company and its collaborators have amassed significant non-clinical data demonstrating enhanced delivery of a range of emerging anti-cancer therapies, including immunotherapies and RNA-based therapeutics.

To date, LSTA1 has also demonstrated favorable safety, tolerability, and activity in completed and ongoing clinical trials designed to enhance delivery of standard-of-care chemotherapy for pancreatic cancer.

The Company is exploring the potential of LSTA1 to enable a variety of treatment modalities to treat a range of solid tumors more effectively.

In addition, the Company has development programs based on its autologous CD34+ cell therapy technology platform that it will look to partner while incurring no additional capital outlay.

The Company's leadership team has decades of collective biopharmaceutical and pharmaceutical product development experience across a variety of therapeutic categories and at all stages of development from preclinical through to product registration and launch.

Its goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates.

The Company’s current product candidates include:

Its goal is to develop and commercialize products that address important unmet medical needs.

The Company’s current development pipeline includes:

• LSTA1, the subject of Phase 1b/2a and 2b clinical studies being conducted globally in a variety of solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), in combination with a variety of anti-cancer regimens.

• XOWNA ® (LSTA16 formerly CLBS16), the subject of both a completed positive Phase 2a study (ESCaPE-CMD) and follow on Phase 2b study (FREEDOM Trial) in the United States for the treatment of coronary microvascular dysfunction (“CMD”);

• HONEDRA ® (LSTA12 formerly CLBS12), recipient of SAKIGAKE designation, pursuant to which 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.

HONEDRA ® was the recipient of orphan drug designation in March 2021 from the U.S.

Food and Drug Administration (“FDA”) for Buerger's disease;

• LSTA201 (formerly CLBS201), the subject of a study designed to assess the safety and efficacy of CD34+ cell therapy as a regenerative treatment for patients with chronic kidney disease related to type 2 diabetes (diabetic kidney disease or “DKD”).

Merger with Cend Therapeutics, Inc.

5 unchanged sentences

Pursuant to the terms set forth in the Merger Agreement and effective September 15, 2022 (the “Effective Time”):

(i) Merger Sub merged with and into Cend, with Cend surviving as a wholly owned subsidiary of Caladrius, (ii) Caladrius changed its name to Lisata Therapeutics, Inc.

in connection with and immediately following to the Effective Time, and (iii) Caladrius effected a 1:15 reverse stock split of its common stock (“Reverse Stock Split”) prior to the Effective Time.

At the Effective Time, each share of Cend's common stock outstanding immediately prior to the Effective Time was converted into the right to receive shares of Lisata’s common stock based on an exchange ratio of 0.5338 (the “Exchange Ratio”), after taking into account the Reverse Stock Split.

(i) Merger Sub merged with and into Cend, with Cend surviving as a wholly owned subsidiary of Caladrius, (ii) Caladrius changed its name to Lisata Therapeutics, Inc., and (iii) Caladrius effected a 1:15 reverse stock split of its common stock (“Reverse Stock Split”) prior to the Effective Time.

At the Effective Time, each share of Cend's common stock outstanding immediately prior to the Effective Time was converted into the right to receive shares of Lisata’s common stock based on an exchange ratio of 0.5338 , after taking into account the Reverse Stock Split (the “Exchange Ratio”).

In connection with the Merger close, the Company issued an aggregate of 3,772,768 shares of common stock, based on the Exchange Ratio, to holders of Cend, in exchange for all of the Cend capital stock outstanding immediately prior to the closing of the Merger.

3 unchanged sentences

(i) Caladrius owned approximately 52 % of the Company's outstanding shares of common stock immediately following the close of the Merger;

(ii) although both entities contributed to the new management team of Lisata, the Caladrius team has more individuals on the management team and will hold the CEO, CMO and other senior management roles;

(ii) although both entities contributed to the new management team of Lisata, the Caladrius team had more individuals on the management team and holds the chief executive officer (“CEO”), chief medical officer (“CMO”) and other senior management roles;

(iii) Caladrius paid a premium to acquire Cend’s assets;

1 unchanged sentence

The Merger was accounted for as an asset acquisition as substantially all of the fair value is concentrated in in-process research and development (“IPR&D”).

Cend’s assets (except for cash and working capital) were measured and recognized as an allocation of the transaction price based on their relative fair values as of the transaction date with any value associated with IPR&D with no alternative future use being expensed as reported in the consolidated statement of operations.

The prior reported operating results prior to the Merger close are those of Caladrius alone.

alternative future use being expensed as reported in the consolidated statement of operations.

Operating results presented in the consolidated statements of operations and comprehensive loss prior to the Merger are solely related to Caladrius Biosciences, Inc.

and subsidiaries.

Coronavirus Considerations

In December 2019, a novel strain of coronavirus (SARS-CoV-2), which causes COVID-19, was reported to have surfaced in China.

In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, and the world's economies began to experience pronounced effects.

Despite the FDA approval of multiple COVID-19 vaccines in late 2020, there remains uncertainty around the extent and duration of disruption and any future related financial impact cannot reasonably be estimated at this time.

In response to the COVID-19 pandemic, the Company 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.

The Company's 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 the Company's expectation that COVID-19 in Japan will continue to impact negatively clinical site operations and enrollment of patients in the HONEDRA ® clinical trial, it elected to suspend trial enrollment, seek a development partner and consult with the Japanese regulatory authorities regarding the submission of patient data already accrued.

Caladrius' phase 2b FREEDOM Trial of XOWNA ® in the U.S.

has also experienced delays in enrolling patients as a result of COVID-19.

Lisata's Phase 2b FREEDOM Trial of XOWNA ® in the U.S.

experienced delays in enrolling patients as a result of COVID-19.

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.

In May 2022, the Company announced that enrollment in the FREEDOM Trial had been suspended and that it intended 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.

Following the analysis of results of the FREEDOM Trial subjects completing 6-month follow-up along with Key Opinion Leaders’ input, the Company’s board of directors determined that execution of a redesigned FREEDOM-like trial would be the appropriate next step, but the cost of such a trial would be prohibitively expensive to undergo without a strategic partner.

In May 2022, the Company announced that enrollment in the FREEDOM Trial was suspended and that it intended 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.

Following this analysis along with Key Opinion Leaders’ input, the Company determined that execution of a redesigned FREEDOM-like trial would be the appropriate next step, but the cost of such a trial would be prohibitively expensive to undergo without a strategic partner.

Accordingly, the Company’s board of directors concluded that XOWNA ® development will only be continued if a strategic partner that can contribute the necessary capital for a redesigned trial is identified and secured.

6 unchanged sentences

Any stockholder who would otherwise be entitled to a fractional share of common stock created as a result of the Reverse Stock Split received a cash payment equal to the product of such resulting fractional interest in one share of common stock multiplied by the closing trading price of the common stock on September 15, 2022.

The Reverse Stock Split was effectuated in order to

increase the per share trading price of our common stock to satisfy the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market.

The Reverse Stock Split was effectuated in order to increase the per share trading price of our common stock to satisfy the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market.

All share and per share amounts of common stock, options and warrants in the accompanying financial statements have been restated for all periods presented to give retroactive effect to the Reverse Stock Split.

3 unchanged sentences

Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, the accompanying Consolidated Financial Statements of the Company and its subsidiaries, which are unaudited, include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of September 30, 2022, and the results of its operations and its cash flows for the periods presented.

In the opinion of management, the accompanying Consolidated Financial Statements of the Company and its subsidiaries, which are unaudited, include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of March 31, 2023, and the results of its operations and its cash flows for the periods presented.

The unaudited consolidated financial statements herein should be read together with the historical consolidated financial statements of the Company for the years ended December 31, 2022 and 2021 included in our 2022 Form 10-K.

Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Use of Estimates

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

The preparation of financial statements in conformity with U.S.

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 consolidated financial statements.

Estimates also affect the reported amounts of expenses during the reporting period.

The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the

circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

The Company makes critical estimates and assumptions in determining stock-based awards values and the valuation of the Merger which was accounted for as an asset acquisition as substantially all of the fair value is concentrated in in-process research and development (“IPR&D”).

1 unchanged sentence

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Lisata and its wholly owned and majority owned subsidiaries and affiliates.

The Consolidated Financial Statements include the accounts of Lisata Therapeutics, Inc.

and its wholly owned and majority owned subsidiaries and affiliates.

All intercompany activities have been eliminated in consolidation .

1 unchanged sentence

The Company’s reporting currency is the U.S.

The functional currency of DrugCendR Australia PTY Ltd.

The functional currency of Lisata Therapeutics Australia Pty Ltd.

which is a foreign subsidiary of the Company is the Australian Dollar.

The assets and liabilities of DrugCendR Australia PTY Ltd.

The assets and liabilities of Lisata Therapeutics Australia Pty Ltd.

are translated into U.S.

8 unchanged sentences

Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S.

Cash is held at major banks in the United States and Australia.

Therefore, the Company is not exposed to any significant concentrations of credit risk from these financial instruments.

Cash is held at major banks in the United States and may exceed federally insured limits.

The goals of the Company's investment policy, in order of priority, are as follows:

safety and preservation

of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements, and a competitive after-tax rate of return.

safety and preservation of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements, and a competitive after-tax rate of return.

Marketable Securities

17 unchanged sentences

Long-lived Assets

Long-lived assets consist of property and equipment and intangibles.

Long-lived assets consist of property and equipment.

The assets are amortized on a straight line basis over their respective useful lives.

23 unchanged sentences

In-process Research and Development Expense

Upfront payments that relate to the acquisition of a new drug compound, as well as pre-commercial milestone payments, are immediately expensed as IPR&D in the period in which they are incurred, provided that the new drug compound did not also include processes or activities that would constitute a “business” as defined under GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use.

GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use.

The Company accounts for contingent consideration payable upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying contingency is probable and estimable.

Milestone payments made to third parties subsequent to regulatory approval will be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product.

Milestone payments made to third parties

subsequent to regulatory approval will be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product.

Intangible Asset

2 unchanged sentences

The intangible asset is stated at fair value and is amortized using the straight-line method over its estimated useful life of 5 years.

Amortization expense was $3 thousand for the three and nine months ended September 30, 2022.

Amortization expense was $18 thousand for the three months ended March 31, 2023.

The intangible asset is reviewed for potential impairment when events or circumstances indicate that carrying amounts may not be recoverable.

15 unchanged sentences

If licenses are bundled with other performance obligations, the Company would utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue.

There was no revenue recognized for the three and nine months ended September 30, 2022.

There was no revenue recognized for the three months ended March 31, 2023 and 2022.

At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method.

4 unchanged sentences

Any such adjustments are allocated on a cumulative catch-up basis to satisfied and partially satisfied performance obligations, with the consideration allocated to an ongoing performance obligation being recognized over the period of performance.

For the three months ended March 31, 2023 and March 31, 2022, the Company has not recognized revenue related to milestones.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

20 unchanged sentences

The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in our Consolidated Balance Sheets (in thousands):

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value

6 unchanged sentences

The following table summarizes the classification of the available-for-sale securities in our Consolidated Balance Sheets (in thousands):

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

Cash equivalents $ 22,641 $ 27,668

2 unchanged sentences

The following table summarizes our portfolio of available-for-sale securities by contractual maturity (in thousands):

September 30, 2022

March 31, 2023

Amortized Cost Estimated Fair Value

2 unchanged sentences

Total $ 55,610 $ 55,581

Note 5 – Property and Equipment

Property and equipment consisted of the following (in thousands):

March 31, 2023 December 31, 2022

Furniture and fixtures $ — $ 25

Computer equipment 589 589

Leasehold improvements 72 99

Property and equipment, gross 661 713

Accumulated depreciation ( 399 ) ( 417 )

Property and equipment, net $ 262 $ 296

The Company’s results included depreciation expense of approximately $ 30 thousand and $ 7 thousand for the three months ended March 31, 2023 and 2022, respectively.

Note 6 – Income (Loss) Per Share

For the nine months ended September 30, 2022 and 2021, the Company incurred net losses and therefore no common stock equivalents were utilized in the calculation of diluted loss per share as they are anti-dilutive.

At September 30, 2022 and 2021, the Company excluded the following potentially dilutive securities (in thousands):

September 30,

For the three months ended March 31, 2023 and 2022, the Company incurred net losses and therefore no common stock equivalents were utilized in the calculation of diluted loss per share as they are anti-dilutive.

At March 31, 2023 and 2022, the Company excluded the following potentially dilutive securities (in thousands):

Stock Options 1,493 176

9 unchanged sentences

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The following table sets forth by level within the fair value hierarchy the Company's financial assets that were accounted for at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 (in thousands).

September 30, 2022 December 31, 2021

The Company's financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):

March 31, 2023 December 31, 2022

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

1 unchanged sentence

$ — $ 32,940 $ — $ 32,940 $ — $ 37,072 $ — $ 37,072

The carrying values of cash, cash equivalents, accounts payable and accrued expenses approximate fair value as of March 31, 2023 and December 31, 2022, due to the short maturity nature of these items.

Note 8 – Accrued Liabilities

Accrued liabilities as of September 30, 2022 and December 31, 2021 were as follows (in thousands):

September 30, 2022 December 31, 2021

Accrued liabilities as of March 31, 2023 and December 31, 2022 were as follows (in thousands):

March 31, 2023 December 31, 2022

Salaries, employee benefits and related taxes $ 1,173 $ 2,586

Operating lease liabilities — current 156 180

D&O insurance liabilities 956 —

Clinical and R&D related liabilities 1,334 785

2 unchanged sentences

Note 9 – Operating Leases

The Company has operating leases for two offices with terms that expire in 2023 and 2025, respectively.

The Company adopted ASU No.

2016-02, Leases (Topic 842) on January 1, 2019 and recognized leases with duration greater than 12 months on the balance sheet using the modified retrospective approach.

The Company has operating leases for two offices, one of which expired on March 31, 2023 and the other expires in 2025.

The Company estimates its incremental borrowing rate at lease commencement to determine the present value of lease payments as most of the Company's leases do not provide an implicit rate of return.

2 unchanged sentences

Each of the Company's leases includes options for the Company to extend the lease term and/or sub-lease space in whole or in part.

Operating lease liabilities and right-of-use assets were recorded in the following captions of our balance sheet were as follows (in thousands):

September 30, 2022 December 31, 2021

Operating lease liabilities and right-of-use assets were recorded in the following captions of our balance sheet as follows (in thousands):

March 31, 2023 December 31, 2022

Right-of-Use Assets:

5 unchanged sentences

Total Operating Lease Liabilities $ 421 $ 485

As of September 30, 2022, the weighted average remaining lease term for our operating leases was 1.8 years, and the weighted average discount rate for our operating leases was 9.625 %.

Future minimum lease payments under the lease agreements as of September 30, 2022 were as follows (in thousands):

As of March 31, 2023, the weighted average remaining lease term for our operating lease was 2.5 years, and the weighted average discount rate for our operating lease was 9.625 %.

As of December 31, 2022, the weighted average remaining lease term for our operating leases was 1.50 years, and the weighted average discount rate for our operating leases was 9.625%.

Future minimum lease payments under the lease agreement as of March 31, 2023 were as follows (in thousands):

Years ended Operating Leases

8 unchanged sentences

Equity Issuances

Purchase Agreement

In March 2019, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company has the right to sell to Lincoln Park shares of the Company’s common stock having an aggregate value of up to $ 26.0 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”).

As consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park an additional 181,510 shares of common stock as commitment shares.

Pursuant to the Purchase Agreement, Lincoln Park purchased 250,000 shares of common stock, at a price of $ 4.00 per share, for a total gross purchase price of $ 1.0 million (the “Initial Purchase”) upon commencement.

Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36 -month term of the Purchase Agreement, the Company has the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing sale price of the common stock increases;

provided Lincoln Park’s obligation under any single such purchase will not exceed $ 2.5 million, unless the Company and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a “Regular Purchase”).

If the Company directs Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park in an “accelerated purchase” to purchase an additional amount

of common stock that may not exceed the lesser of (i) 300 % the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30 % of the total number of shares of the Company’s common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement.

Under certain circumstances and in accordance with the Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day.

The Company controls the timing and amount of any sales of its common stock to Lincoln Park.

There is no upper limit on the price per share that Lincoln Park must pay for its common stock under the Purchase Agreement, but in no event will shares be sold to Lincoln Park on a day the closing price is less than the floor price specified in the Purchase Agreement.

In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99 % of its common stock.

The Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the Company’s sole discretion, except that (subject to certain exceptions) the Company may not enter into any Variable Rate Transaction (as defined in the Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities) during the 36 months after the date of the Purchase Agreement.

The Company has the right to terminate the Purchase Agreement at any time, at no cost to the Company.

As of September 30, 2022, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase.

The agreement expired on April 1, 2022.

At The Market Offering Agreement

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Wainwright & Co., LLC, as sales agent, in connection with an “at the market offering” under which the Company from time to time may offer and sell shares of its common stock, having an aggregate offering price of up to $ 50.0 million.

During the nine months ended September 30, 2022 and since inception, the Company has no t issued any shares under the ATM Agreement.

Subsequent to the filing of our Form 10-K on March 22, 2022, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $ 43.6 million.

Pursuant to General Instruction I.B.6 of Form S-3, since the aggregate market value of our outstanding common stock held by non-affiliates was below $75.0 million at the time of such Form 10-K filing, the aggregate amount of securities that we are permitted to offer and sell was reduced to $ 17,698,943 , which was equal to one-third of the aggregate market value of our common stock held by non-affiliates as of September 21, 2022.

During the three months ended March 31, 2023 and since inception, the Company has no t issued any shares under the ATM Agreement.

In connection with the Merger closing, the Company issued an aggregate of 3,772,768 shares of common stock, based on the Exchange Ratio, to holders of Cend, in exchange for all of the Cend capital stock outstanding immediately prior to the closing of the Merger.

Stock Options and Warrants

In connection with the Merger and after giving effect to the Reverse Stock Split, the Company assumed 1,227,776 options outstanding from Cend.

The options granted from the Cend Plan are exercisable at various dates as determined upon grant and will expire no more than ten years from their original date of grant.

In connection with the Merger and after giving effect to the Reverse Stock Split, the Company assumed 1,227,776 options outstanding of Cend.

The options granted under the Cend Plan are exercisable at various dates as determined upon grant and will expire no more than ten years from their original date of grant.

The Cend Plan stock options generally vest over a four-year term.

The following table summarizes the activity for stock options and warrants for the nine months ended September 30, 2022:

The following table summarizes the activity for stock options and warrants for the three months ended March 31, 2023:

Stock Options Warrants

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Granted 103,850 3.11 — —

Assumed through merger 1,227,776 3.77 — —

Exercised — — — —

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Expired ( 2,520 ) 224.37 — —

Outstanding at September 30, 2022 1,398,977 $ 10.83 7.30 $ — 1,423,774 $ 42.57 3.63 $ —

Vested at September 30, 2022

Outstanding at March 31, 2023 1,492,682 $ 9.94 7.01 $ 359.4 1,423,774 $ 42.57 3.13 $ —

Vested at March 31, 2023

or expected to vest in the future 1,486,393 $ 9.96 7.00 $ 358.2 1,423,774 $ 42.57 3.13 $ —

Vested at September 30, 2022 1,110,635 $ 11.82 6.97 $ — 1,423,774 $ 42.57 3.63 $ —

Vested at March 31, 2023 1,207,228 $ 10.90 6.64 $ 344.4 1,423,774 $ 42.57 3.13 $ —

Restricted Stock

During the nine months ended September 30, 2022 and 2021, the Company issued restricted stock for services as follows ($ in thousands):

Nine Months Ended September 30,

During the three months ended March 31, 2023 and 2022, the Company issued restricted stock for services as follows ($ in thousands):

Three Months Ended March 31,

Number of restricted stock issued 159,950 70,745

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Restricted Stock Units

During the nine months ended September 30, 2022 and 2021, the Company issued restricted stock units for services as follows ($ in thousands, except share data):

Nine Months Ended September 30,

During the three months ended March 31, 2023 and 2022, the Company issued restricted stock units for services as follows ($ in thousands, except share data):

Three Months Ended March 31,

Number of restricted stock units issued 188,850 91,990

Value of restricted stock units issued $ 567 $ 1,265

The weighted average estimated fair value of restricted stock issued for services in the nine months ended September 30, 2022 and 2021 was $ 12.46 and $ 23.85 per share, respectively.

The weighted average estimated fair value of restricted stock issued for services in the three months ended March 31, 2023 and 2022 was $ 3.00 and $ 13.76 per share, respectively.

The fair value of the restricted stock units was determined using the Company’s closing stock price on the date of issuance.

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We utilize share-based compensation in the form of stock options, restricted stock, and restricted stock units.

The following table summarizes the components of share-based compensation expense for the three and nine months ended September 30, 2022 and 2021 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

The following table summarizes the components of share-based compensation expense for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended March 31,

Research and development $ 187 $ 218

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Total share-based compensation expense $ 675 $ 760

Total compensation cost related to non-vested awards not yet recognized and the weighted-average periods over which the awards were expected to be recognized at September 30, 2022 were as follows (in thousands):

Total compensation cost related to unvested awards not yet recognized and the weighted-average periods over which the awards were expected to be recognized at March 31, 2023 were as follows (in thousands):

Stock Options Restricted Stock Units Restricted Stock

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Expected weighted-average period in years of compensation cost to be recognized 1.42 1.22 1.47

Total fair value of shares vested and the weighted average estimated fair values of shares granted for the nine months ended September 30, 2022 and 2021 were as follows (in thousands):

Total fair value of shares vested and the weighted average estimated fair values of shares granted for the three months ended March 31, 2023 and 2022 were as follows (in thousands):

Stock Options

Nine Months Ended September 30,

Three Months Ended March 31,

Total fair value of shares vested $ 324 $ 377

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Valuation Assumptions

The fair value of stock options and warrants at the date of grant was estimated using the Black-Scholes option pricing model.

The expected volatility is based upon historical volatility of the Company’s common stock.

The fair value of stock options at the date of grant was estimated using the Black-Scholes option pricing model.

The expected volatility is based upon historical volatility of the Company’s stock.

The expected term for the options is based upon observation of actual time elapsed between date of grant and exercise of options for all employees.

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Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time.

As of December 31, 2021 and 2020, the Company had approximately $ 281 million and $ 264 million, respectively, of federal NOLs available to offset future taxable income expiring from 2030 through 2036.

The Company performed an analysis and determined that it had an ownership change of greater than 50% over a 3-year testing period on January 25, 2021.

As of December 31, 2021, the Company had approximately $ 281 million of Federal NOLs available to offset future taxable income expiring from 2030 through 2036.

The Company performed an analysis and determined that they had an ownership change of greater than 50% over a 3-year testing period on January 25, 2021.

As a result, $ 168.8 million of the $ 281 million of Federal NOLs will expire unutilized.

The Company wrote off that portion of the deferred tax asset and reduced the corresponding valuation allowance resulting in $ 112 million of remaining federal NOL.

The Company wrote off that portion of the deferred tax asset and reduced the corresponding valuation allowance resulting in $112.3 million of remaining Federal NOLs.

The write off of the deferred tax asset and the corresponding reduction in valuation allowance has no impact to the balance sheet or income statement.

Losses incurred before the ownership change on January 25, 2021 will be subject to an annual limitation of $173 thousand under Internal Revenue Code Section 382, while losses incurred after January 25, 2021 will not be subject to limitations.

The Company may be able to utilize additional NOLs of approximately $ 1.1 million per year for the first five years after this ownership change as a result of the application of the Net Unrealized Built-in Gain rules.

Losses incurred before the ownership change on January 25, 2021 will be subject to an annual limitation of $173 thousand under Internal Revenue Code Section 382.

As of December 31, 2022, the Company had approximately $ 34.0 million of Federal NOLs available to offset future taxable income expiring from 2030 through 2036.

The Company performed an analysis and determined that they had an ownership change of greater than 50% on September 15, 2022.

As a result of the ownership change, $ 88.2 million of Federal

NOLs will expire unutilized.

The Company wrote off that portion of the deferred tax asset and reduced the corresponding valuation allowance resulting in $ 34.0 million of remaining Federal NOLs.

The write off of the deferred tax asset and the corresponding reduction in valuation allowance has no impact to the balance sheet or income statement.

Losses incurred before the ownership change on September 15, 2022 will be subject to an annual limitation of zero while losses incurred after September 15, 2022 will not be subject to limitations.

As of December 31, 2022, Cend Therapeutics had approximately $ 10.9 million of Federal NOLs available to offset future taxable income.

The Company performed an analysis and determined that there was an ownership change of greater than 50% on September 15, 2022.

As of September 15, 2022 Cend has approximately $ 10.7 million of Federal and $ 15.0 million of state NOLs.

The state NOLs will expire from the 2036 through 2042 tax years.

Using a fair market value of $ 36.1 million and applying an applicable federal rate of 2.54 % Cend will have an annual limitation of approximately $917 thousand each year.

The Federal NOL of $ 106 thousand incurred in the post-acquisition period September 15, 2022 to December 31, 2022 is not subject to limitation, and does not expire.

Cend’s wholly owned Australian subsidiary has $ 1.8 million of NOLs which will be carried forward and do not expire.

There is a full valuation allowance against the NOLs.

As of December 31, 2022 and 2021, the Company had State NOLs available in New Jersey of $ 35.5 million and $ 97.0 million, respectively, California of $ 10.0 million and $ 69.5 million, respectively, and New York City of $ 1.9 million and $ 13.0 million, respectively, to offset future taxable income expiring from 2032 through 2042.

In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s NOLs would be limited given the change in ownership.

In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s NOLs is limited given the change in ownership.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible.

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The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense.

As of September 30, 2022, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements.

The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary.

The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.

As of December 31, 2022 and 2021, the Company’s uncertain tax positions were $ 344 thousand and $ 0 , respectively.

Due to the acquisition of Cend, the Company’s uncertain tax positions increased by $ 344 thousand related to Federal and state credits and certain state NOLs.

The Company will continue to evaluate its uncertain tax positions in future periods.

As of March 31, 2023, the Company does not believe there will be any material changes in its unrecognized tax positions over the next year.

For years prior to 2019, the federal statute of limitations is closed for assessing tax.

The Company’s state tax returns remain open to examination for a period of three to four years from date of filing.

In December 2021, the Company received preliminary approval from the New Jersey Economic Development Authority (“NJEDA”) to participate in the Technology Business Tax Certificate Transfer Program (the “Program”).

The Program permits qualified companies to sell a percentage of their New Jersey net operating losses (“NJ NOLs”) to unrelated profitable corporations.

On February 22, 2022, the Company received final approval from NJEDA to sell $ 2.5 million of its NJ NOLs related tax benefits (“NJ NOL Tax Benefits”), which was subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $ 2.3 million.

The gross proceeds of $ 2.5 million have been recorded as a benefit from income taxes and the loss on sale of NJ NOLs of $ 0.1 million recorded in other income (expense) in the consolidated financial statements.

As a result of the merger with Cend Therapeutics, Inc.

(“Cend”) on September 15, 2022, federal and state NOLs of Cend may be subject to certain annual limitations under the ownership change rules of Section 382 of the IRC.

As of December 31, 2021, Cend had state and foreign NOLs of approximately $4.3 million and $1.3 million, respectively.

The state NOLs will begin to expire in 2036 unless previously utilized.

The foreign NOLs will carry forward indefinitely.

As of December 31, 2021, Cend had state research credit carryforwards of approximately $48 thousand that will carry forward indefinitely.

The Company’s state tax returns remain open to examination for a period of three to four years from the date of filing.

On April 5, 2023, Lisata received final approval to sell a portion of their unused New Jersey net operating losses (“NJ NOLs”) through the State of New Jersey Economic Development Authority's 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.

When the NOL’s are sold it will be a discrete event.

The Company will record a deferred income tax benefit and reduce the deferred tax asset (NJ NOLs) when the transaction closes and cash is received.

On August 16, 2022, the Inflation Reduction Act was signed into law.

The Inflation Reduction Act includes various tax provisions, which are effective for tax years beginning on or after January 1, 2023.

For tax years beginning after December 31, 2021, the Tax Cuts & Jobs Act of 2017 eliminated the option to deduct research and development expenditures as incurred and instead required taxpayers to capitalize and amortize them over five or 15 years beginning in 2022.

Since the Company is in a net operating loss position, the capitalization of research and development costs did not have a material impact on the Company’s results of operations for the year ended December 31, 2022.

The Company will continue to monitor possible future impact of changes in tax legislation.

Note 13 – Australia Research and Development Tax Incentive

The Company’s Australian subsidiary, which conducts core research and development activities, is eligible to receive a 43.5 % refundable tax incentive for qualified research and development activities.

As of the nine months ended September 30, 2022, $ 0.4 million was recorded as an income tax incentive receivable in the consolidated balance sheets, as the Company determined that the expenses met the eligibility criteria and the amounts claimed are expected to be received shortly after the related tax returns are filed.

The Company’s Australian subsidiary, which conducts core research and development activities, is eligible to receive a refundable tax incentive between 43.5% to 48.5 % (depending upon the income tax rate) for qualified research and development activities.

As of the three months ended March 31, 2023, $ 1.0 million was recorded as an income tax incentive receivable in the consolidated balance sheets, as the Company determined that the expenses met the eligibility criteria and the amounts claimed are expected to be received shortly after the related tax returns are filed.

Note 14 – Contingencies

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Cend’s response to the complaint was filed on June 6, 2022.

Lingmed filed an

answer to Cend’s response on July 11, 2022.

Lingmed filed an answer to Cend’s response on July 11, 2022.

The court held a case management conference on October 7, 2022, which resulted in a continuance until December 16, 2022.

On December 16, 2022, the court continued the case management conference until April 7, 2023.

At the April 7, 2023 case management conference, based on Lingmed reporting that it had not yet been able to effect service on an individually-named defendant through the Hague Convention, the court continued the conference until August 4, 2023.

The Company denies these allegations and intends to vigorously defend against this claim.

Note 15 – License Agreements

Sanford Burnham Prebys

In December 2015, Cend entered into a license agreement with Sanford Burnham Prebys (“SBP”) under which Cend was granted an exclusive, worldwide, royalty-bearing license to certain patent rights and know-how controlled by SBP related to the development of CEND-1.

At the time the license agreement was entered into, Cend’s founding shareholder, now a Lisata board member, was an executive at SBP.

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Upon termination of the agreements for any reason, all rights and obligations of the Company with respect to the patents and patent applications shall terminate and revert to SBP.

SBP owned 382,030 shares of the Company’s common stock as of September 30, 2022 and is a related party.

SBP owned 382,030 shares of the Company’s common stock as of March 31, 2023 and is a related party.

University of California at San Diego

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The agreement may be terminated in its entirety by UCSD if the Company, at any time, (i) fails to perform or violates any term of the agreement and fails to cure the default within sixty days.

Upon termination of the agreement for any reason, UCSD may terminate a sublicensee but will allow

the Company to assign any sublicenses to UCSD provided a) that the sublicensee is in good standing upon termination of the agreement with the Company;

Upon termination of the agreement for any reason, UCSD may terminate a sublicensee but will allow the Company to assign any sublicenses to UCSD provided a) that the sublicensee is in good standing upon termination of the agreement with the Company;

and b) the sublicensee is not currently involved in litigation as an adverse party to UCSD.

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The agreement provides the Company with the rights to grant and authorize sublicenses to use, sell, and otherwise exploit the patent rights.

As consideration for the license, Cend issued a total of 43,236 shares of common stock, as adjusted for the Reverse Stock Split and Exchange Ratio.

The Company is required to pay an annual license maintenance fee of $ 20,000 , increasing to $ 25,000 for year two and three of the agreement, increasing to $ 50,000 on year four of the agreement and thereafter until the first commercial sale, and increasing to $ 150,000 each year of the agreement after the first sale.

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The Company has also agreed to pay MIT royalties of 2 % of net sales of products sold by the Company or through a sublicense, subject to certain reductions.

Additionally, the Company is obligated to pay MIT varying sublicense fees, ranging from 3 % to 20 %, dependent on when the related milestones are reached.

In connection with the close of the Merger,, the Company was required to pay MIT a change of control fee of $ 0.3 million, which is included in accrued liabilities within the condensed consolidated balance sheets as of September 30, 2022.

Additionally, the Company is obligated to pay MIT varying sublicense fees, ranging from 3 % to 20 %, depending on when the related milestones are reached.

In connection with the close of the Merger, the Company was required to pay MIT a change of control fee of $ 0.3 million.

The agreement will expire upon the expiration or abandonment of all valid claims.

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Upon termination of the agreement for any reason, MIT may terminate a sublicensee but will allow the Company to assign any sublicenses to MIT provided that the sublicensee is in good standing upon termination of the agreement with the Company.

MIT owned 43,236 shares of the Company’s common stock as of March 31, 2023

Note 16 – Research Collaboration and License Agreement

Exclusive License and Collaboration Agreement

In February 2021, Cend entered into an Exclusive License and Collaboration Agreement (the “Qilu Agreement”) in which Cend granted an exclusive license to Qilu for the development and commercialization of CEND-1 in the Territory (defined as the Greater Area of China including China, Macau, Hong Kong, and Taiwan).

Under the terms of the agreement, Qilu is solely responsible for the development of CEND-1 in its Territory.

In February 2021, Cend entered into an Exclusive License and Collaboration Agreement (the “Qilu Agreement”) in which Cend granted an exclusive license to Qilu for the development and commercialization of LSTA1 in the Territory (defined as the Greater Area of China including China, Macau, Hong Kong, and Taiwan).

Under the terms of the agreement, Qilu is solely responsible for the development of LSTA1 in its Territory.

In consideration for the license, Qilu made an upfront payment of $ 10 million to Cend, which was recognized as revenue by Cend prior to the Merger.

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Unless terminated early, the Qilu Agreement will continue in effect until the expiration of all Qilu payment obligations.

Either party may terminate the Qilu Agreement if an undisputed material breach by the other party is not cured within a defined period of time, or upon notice for insolvency-related events of the other party that are not discharged within a defined time period.

Qilu may terminate the Qilu Agreement in its entirety, at any time with at least sixty days written notice.

All right and obligations of Qilu with respect to such licensed patents and patent applications would terminate.

All rights and obligations of Qilu with respect to such licensed patents and patent applications would terminate.

Note 17 – Subsequent Events

Sale of New Jersey Net Operating Losses

On September 19, 2022, the Company received preliminary approval from the New Jersey Economic Development Authority ("NJEDA") to participate in the Technology Business Tax Certificate Transfer Program (the "Program").

The Program permits qualified companies to sell a percentage of their New Jersey net operating losses ("NJ NOLs") to unrelated profitable corporations.

On April 5, 2023, the Company received final approval from the NJEDA, and it subsequently sold a portion of its NJ NOLs to a qualifying and approved buyer pursuant to the Program for net proceeds of $ 2.2 million.

Elimination of President and Chief Business Officer Position

On May 1, 2023, the Company, after a careful review of capital utilization and prioritization, eliminated the position of President and Chief Business Officer, and terminated the employment of Mr.

David Slack, effective immediately.

Pursuant to the employment agreement, dated as of September 15, 2022, by and between the Company and Mr.

Slack (the “Slack Employment Agreement”), the termination of Mr.

Slack’s employment also constituted his resignation from any director, officer, employee or committee position he had with the Company or any of its affiliates and the Slack Employment Agreement served as written notice of resignation upon such termination.

Accordingly, Mr.

Slack effectively resigned from the Company’s Board of Directors as of May 1, 2023 pursuant to the terms of the Slack Employment Agreement.

In connection with Mr.

Slack’s resignation and in accordance with the terms and conditions of the Slack Employment Agreement, Mr.

Slack is entitled to receive the following items of compensation:

(i) a lump sum payment of $24,134, representing earned but unpaid base salary, earned and vested but unpaid bonus amounts, accrued and unused paid time off, unreimbursed business expenses and other payments and benefits owed to Mr.

Slack under the terms of his compensation arrangements with the Company;

(ii) severance payments in a total amount of $478,400, to be paid over a period of 12 months following termination (the “Slack Severance Period”);

(iii) COBRA assistance for the duration of the Slack Severance Period, not including the portion of the monthly premium which Mr.

Slack would otherwise have paid if he had not resigned and (iv) a bonus payment equal to $239,200, representing 50% of Mr.

Slack’s base salary at the time of termination, paid in equal installments for the duration of the Slack Severance Period.

Also in connection with his termination, the exercise period of each of Mr.

Slack’s vested options was extended to three years following termination or the remaining term of such awards, whichever period is shorter.

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

What changed 10-Q

Item 1. Financial Statements