What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-30 · 129 added, 149 removed, 618 unchanged (31% of the section changed)

14 unchanged sentences

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Lisata Therapeutics, Inc., (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

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

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, equity, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”).

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

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Determination of accounting acquirer and assessment of the accounting treatment

As described further in note 1 to the financial statements, the Company executed a Merger Agreement and acquired Cend Therapeutics, Inc.

("Cend") on September 15, 2022.

We identified the determination of the accounting acquirer and assessment of the accounting treatment in the merger with Cend as a critical audit matter.

The principal considerations for our determination identified the determination of the accounting acquirer and assessment of the accounting treatment in the merger with Cend is a critical audit matter are that the merger was accounted for as an asset acquisition, with the Company being identified as the accounting acquirer.

Evaluating the Company's accounting treatment of the merger required especially subjective auditor judgment.

Specifically, a high degree of auditor judgment was required to evaluate the Company's determination of the accounting acquirer and assessment of the transaction as an asset acquisition.

Our audit procedures related to the determination of the accounting acquirer and assessment of the accounting treatment included the following, among others.

• review of management's accounting memorandum that documented the factors the Company considered in determining the accounting acquirer, including voting interests held by the former shareholder groups and the composition of the board of directors and senior management of the combined Company.

In addition, we inspected the

Company's Merger Agreement and assessed the terms in the agreement and compared them to the Company's accounting memorandum.

• We tested and consulted with our national office regarding the Company's determination of the accounting acquiror including the assessment of the voting interests of the various shareholder groups held in the Company post transaction and the composition of the board of directors and senior management of the combined entities.

• Additionally, we evaluated the composition and amounts of the assets acquired in the transaction and whether Cend contained processes in place to generate outputs in the assessment of the transaction as an asset acquisition.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

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New York, New York

March 30, 2023

February 29, 2024

LISATA THERAPEUTICS, INC.

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Total assets $ 54,694 $ 73,034

LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY

LIABILITIES, NON-CONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY

Accounts payable $ 2,421 $ 2,655

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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 December 31, 2022 and December 31, 2021, respectively

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

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Total equity 47,894 66,324

Total liabilities, non-controlling interests and equity $ 73,034 $ 97,008

Total liabilities, non-controlling interests and stockholders' equity $ 54,694 $ 73,034

See accompanying notes to consolidated financial statements.

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Other comprehensive income (loss):

Available for sale securities - net unrealized gain (loss) 52 ( 57 )

Available for sale securities - net unrealized gain 12 52

Cumulative translation adjustment arising during the period ( 25 ) ( 11 )

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Comprehensive

Income (Loss) Accumulated

Loss Accumulated

Deficit Treasury

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Share-based compensation 97 — 2,367 — — — 2,367 — 2,367

Net proceeds from issuance of common stock and warrants 2,659 3 85,497 — — — 85,500 — 85,500

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

Unrealized loss on marketable securities — — — ( 57 ) — — ( 57 ) — ( 57 )

Net proceeds from issuance of common stock 11 — 43 — — — 43 — 43

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

Unrealized gain on marketable securities — — — 52 — — 52 — 52

Foreign currency translation adjustment — — — ( 11 ) — — ( 11 ) — ( 11 )

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

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Net proceeds from issuance of common stock 87 — 321 — — — 321 — 321

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

Proceeds from option exercises 83 — 155 — — 155 — 155

Unrealized gain on marketable securities — — — 12 — — 12 — 12

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Depreciation and amortization 189 69

Loss on disposal of fixed assets 3 —

In-process research and development expenses — 30,393

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Purchases of property and equipment — ( 285 )

Net cash provided by (used in) investing activities 28,911 ( 54,896 )

Net cash provided by investing activities 10,102 28,911

Cash flows from financing activities:

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Net proceeds from issuance of capital stock 321 43

Net cash (used in) provided by financing activities ( 224 ) 85,276

Net cash provided by (used in) financing activities 385 ( 224 )

Effect of exchange rate changes on cash ( 16 ) ( 10 )

Net increase in cash and cash equivalents 7,507 8,135

Net (decrease) increase in cash and cash equivalents ( 9,561 ) 7,507

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

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(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 (formerly known as CEND-1), is designed to activate a novel uptake pathway that allows co-administered or tethered 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”), 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.

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

LSTA1 also has the potential to modify the tumor microenvironment (“TME”), thereby making tumors more susceptible to immunotherapies and inhibiting the metastasis cascade (i.e., the spread of cancer to other parts of the body).

The Company and its collaborators have amassed significant non-clinical data demonstrating enhanced delivery of a range of existing and emerging anti-cancer therapies, including chemotherapeutics, 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 clinical development programs based on its autologous CD34+ cell therapy technology platform that are advancing toward their next development milestone while incurring no capital outlay.

Currently, LSTA1, is the subject of Phase 2a and 2b clinical studies being conducted globally in a variety of solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), cholangiocarcinoma, head and neck cancer, appendiceal cancer, colon cancer and glioblastoma multiforme in combination with a variety of anti-cancer regimens.

The Company's legacy CD34+ cell therapy technology was the subject of several clinical trials targeting an array of diseases, among them, critical limb ischemia, coronary microvascular dysfunction, and diabetic kidney disease.

Further development of such programs would require significantly larger studies and capital investment and thus, development by Lisata would only be continued if a strategic partner that can contribute the necessary capital for future development is identified.

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 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;

• 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 recently completed 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”).

The Company's goal is to develop and commercialize products that address important unmet medical needs.

Merger with Cend Therapeutics, Inc.

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

15 reverse stock split of its common stock (“Reverse Stock Split”) prior to 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., 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”).

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(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 had more individuals on the management team and holds the chief executive officer (“CEO”), chief medical officer (“CMO”) and other senior management roles;

(ii) although both entities contributed to the new management team of Lisata, the Caladrius team provided a vast majority of the 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;

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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 would continue to negatively impact 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.

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

also 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 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.

There can be no assurance that we will be able to identify such a partner and enter into an agreement with such partner on acceptable terms or at all.

Reverse Stock Split

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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 the Company's 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.

Accordingly, the consolidated

statements of equity reflect the impact of the Reverse Stock Split by reclassifying from “common stock” to “additional paid-in capital” in an amount equal to the par value of the decreased shares resulting from the Reverse Stock Split.

Accordingly, the consolidated statements of equity reflect the impact of the Reverse Stock Split by reclassifying from “common stock” to “additional paid-in capital” in an amount equal to the par value of the decreased shares resulting from the Reverse Stock Split.

Basis of Presentation

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The Company's review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that it will be required to sell the securities before the recovery of their amortized cost basis.

Company determines that the decline in fair value of an investment is below its accounting basis and this decline is other-than-temporary, it reduces the carrying value of the security it holds and records a loss for the amount of such decline.

When the Company determines that the decline in fair value of an investment is below its accounting basis and this decline is other-than-temporary, it reduces the carrying value of the security it holds and records a loss for the amount of such decline.

Property and Equipment

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The Company determines the fair value of option awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value.

This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants.

This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or

Stock based compensation expense also includes an estimate, which is made at the time of the grant, of the number of awards that are expected to be forfeited.

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The Company expenses the costs associated with research and development activities when incurred.

To further drive the Company’s cell therapy initiatives, the Company will continue targeting key governmental agencies, congressional committees and not-for-profit organizations to contribute funds for the Company’s research and development programs.

To further drive the Company’s product candidate initiatives, the Company will continue targeting key governmental agencies, congressional committees and not-for-profit organizations to contribute funds for the Company’s research and development programs.

The Company accounts for such grants as a deduction to the related expense in research and development operating expenses when earned.

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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 $ 18 thousand and $ 21 thousand for the three and twelve months ended December 31, 2022.

Amortization expense was $ 71 thousand and $ 21 thousand for the years ended December 31, 2023 and December 31, 2022, respectively.

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

The projected amortization expense is $ 71 thousand per year for the next five years.

The projected amortization expense is $ 71 thousand per year for the next four years.

Revenue Recognition

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At contract inception, the Company assesses the goods or services promised within each contract and assesses whether each promised good or service is distinct and determines those that are performance obligations.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance

obligation is satisfied.

Taxes imposed by governmental authorities on the Company's revenue, such as sales taxes and withholding taxes, are excluded from net revenue.

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Note 4 – Available-for-Sale-Securities

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

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

December 31, 2023 December 31, 2022

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

Cash equivalents $ 16,715 $ — $ — $ 16,715 $ 27,668 $ — $ — $ 27,668

Marketable securities - available for sale — 27,942 — 27,942 — 37,072 — 37,072

6 unchanged sentences

Clinical and R&D related liabilities 1,046 785

Accounting and consulting 57 66

Other 233 111

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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 o ffices with terms that expire in 2023 and 2025, respectively.

The Company has an operating lease for one office which 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.

The Company recognizes lease expense on a straight-line basis over the lease term.

For lease agreements entered into or reassessed after the adoption of Topic 842, the Company elected to account for non-lease components associated with its leases and lease components as a single lease component.

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 as follows (in thousands):

For lease agreements entered into or reassessed after the adoption of Topic 842, the Company elected to account for non-lease components associated with its leases and lease

components as a single lease component.

The Company's lease includes an option 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 the Company's balance sheet as follows (in thousands):

December 31, 2023 December 31, 2022

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Total Operating Lease Liabilities $ 305 $ 485

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 %.

As of December 31, 2023, the weighted average remaining lease term for the Company's operating leases was 1.75 years, and the weighted average discount rate for its operating leases was 9.625 %.

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

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On September 14, 2022, in connection with the Merger, the Company implemented the Reverse Stock Split, as described in Note 1.

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.

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The Participants may receive awards as determined by a committee of independent members of the Company's board of directors or, to the extent authorized by such committee with respect to certain Participants, a duly authorized employee (collectively, the “Committee”).

The incentive plan currently used by the Company is the 2018 Equity Incentive Compensation Plan (the “2018 Plan”), as adopted by the stockholders of the Company in June 2018, and subsequently increased by the stockholders of the Company in September 2022 with 333,333 shares authorized for issuance thereunder and in June 2021 with 400,000 shares authorized for issuance thereunder and in June of 2020 with 166,667 shares authorized for issuance thereunder, plus any shares awarded under the 2015 Equity Compensation Plan (the “2015 Plan”) or the Amended and Restated 2009 Equity Compensation Plan (the “2009 Plan”) that are not issued due to their subsequent forfeiture, cancellation, or other settlement thereof.

The incentive plan currently used by the Company is the 2018 Equity Incentive Compensation Plan (the “2018 Plan”), as adopted by the stockholders of the Company in June 2018, and subsequently increased by the stockholders of the Company in June 2023 with 400,000 shares authorized for issuance thereunder and in September 2022 with 333,333 shares authorized for issuance thereunder and in June 2021 with 400,000 shares authorized for issuance thereunder and in June of 2020 with 166,667 shares authorized for issuance thereunder, plus any shares awarded under the 2015 Equity Compensation Plan (the “2015 Plan”) or the Amended and Restated 2009 Equity Compensation Plan (the “2009 Plan”) that are not issued due to their subsequent forfeiture, cancellation, or other settlement thereof.

Concurrent with the adoption of the 2018 Plan, no future awards will occur under the 2015 Plan or the 2009 Plan.

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All stock options under the 2015 Plan and 2009 Plan were granted and the 2018 Plan are granted at the fair market value of the common stock at the grant date.

Stock options vest either on the date of grant, ratably over a period determined at time of grant, or upon the accomplishment of specified business milestones, and generally expire 2 , 3 , or 10 years from the grant date depending on the status of the recipient as a nonemployee, employee or director of the Company.

Stock options vest either on the date of grant, ratably over a period determined at time of grant (typically over 3 years) or upon the accomplishment of specified business milestones, and generally expire 2 , 3 , or 10 years from the grant date depending on the

status of the recipient as a nonemployee, employee or director of the Company.

As of December 31, 2023 and 2022 there were 593,141 shares and 578,097 shares, respectively available for future grants under the 2018 Plan.

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In June 2018, the Company's stockholders approved an amendment to the 2017 ESPP (the “Amended 2017 ESPP”) in order to effect an increase of authorized shares from 6,667 to 33,333 .

In June 2023, the Company's stockholders approved an amendment to the Amended 2017 ESPP in order to effect an increase of authorized shares from 33,333 to 68,333 .

During the year ended December 31, 2023, 22,441 shares were issued under the Amended 2017 ESPP.

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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 12,101 shares of common stock as commitment shares.

Pursuant to the Purchase Agreement, upon commencement Lincoln Park purchased 16,667 shares of common stock, at a price of $ 60.00 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 6,667 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 (each, an "Accelerated Purchase").

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 December 31, 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.

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 years ended December 31, 2022 and 2021, the Company had no t issued any shares under the ATM Agreement.

Subsequent to the filing of the Company's Form 10-K on March 22, 2022, the aggregate market value of its 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 the Company's 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 the Company is permitted to offer and sell was reduced to $ 17,698,943 , which was equal to one-third of the aggregate market value of the Company's common stock held by non-affiliates as of September 21, 2022.

During the twelve months ended December 31, 2023, the Company issued 64,394 shares of common stock under the ATM Agreement for net proceeds of $ 270,774 .

Since inception, the Company has issued 64,394 shares of common stock under the ATM Agreement for net proceeds of $ 270,774 .

In connection with the Merger closing on September 15, 2022, 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 of Cend's outstanding options.

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.

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Granted 182,846 $ 3.45 — —

Assumed through merger 1,227,776 $ 3.77 — —

Exercised ( 82,500 ) $ 1.88 — —

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The vesting terms of restricted stock issuances are generally between one to four years .

The following is a summary of the changes in non-vested restricted stock for the year ended December 31, 2023:

Restricted Stock Shares Weighted Average Grant-Date Fair Value

Non-vested at December 31, 2022 56,209 $ 16.55

Changes during the Year:

Granted 159,950 $ 3.00

Vested ( 65,511 ) $ 9.03

Forfeited ( 24,873 ) $ 3.28

Non-vested at December 31, 2023 125,775 $ 5.86

Restricted Stock Units

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The vesting terms of restricted stock unit issuances are generally one year , or upon the achievement of performance-based milestones.

The following is a summary of the changes in non-vested restricted stock units for the year ended December 31, 2023:

Restricted Stock Units Weighted Average Grant-Date Fair Value

Non-vested at December 31, 2022 32,286 $ 9.29

Changes during the Year:

Granted 188,850 $ 3.00

Vested ( 29,486 ) $ 8.48

Forfeited ( 78,850 ) $ 3.00

Non-vested at December 31, 2023 112,800 $ 3.37

Note 11 – Share-Based Compensation

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Total share-based compensation expense $ 2,038 $ 2,636

The Company modified the exercise period of approximately 186,600 shares of one terminated employee's vested stock options and immediately recognized approximately $ 258 thousand incremental stock-based compensation during the year ended December 31, 2023.

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

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Federal benefit at statutory rate $ ( 4,865 ) $ ( 11,908 )

Permanent non deductible expenses for U.S.

Permanent nondeductible expenses for U.S.

taxes 875 7,238

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Section 382 NOL Limitation

18,553 35,438

Sale of New Jersey State NOLs ( 2,330 ) ( 2,479 )

Valuation allowance for deferred tax assets 2,526 ( 22,602 )

Tax provision (benefit) $ ( 2,479 ) $ ( 1,508 )

Tax benefit $ ( 2,330 ) $ ( 2,479 )

Deferred income taxes at December 31, 2023 and 2022 consist of the following ($ in thousands):

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Accumulated net operating losses (tax effected) $ 12,736 $ 13,132

Right of use liability 136 201

Lease liability 86 136

Share-based compensation 2,370 3,027

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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, 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 $ 112.3 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.

As of December 31, 2022, the Company had approximately $ 34 million of Federal NOLs available to offset future taxable income expiring from 2030 through 2036.

As of December 31, 2023 and 2022, the Company had approximately $ 43.7 million and $ 33.7 million, respectively, 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 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.

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 as of December 31, 2022.

The write-off of the deferred tax asset and the corresponding reduction in valuation allowance has no impact to the consolidated 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.

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The Federal NOL of $ 459 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.

As of December 31, 2023 and 2022, Cend’s wholly owned Australian subsidiary had approximately $ 2.4 million and $ 1.8 million, respectively, of NOLs which will be carried forward and do not expire.

There is a full valuation allowance against the NOLs.

As of December 31, 2023, the Company had federal research and development credit carryforwards of $ 0.5 million expiring from 2027 through 2034 if unutilized, and state research and development credit carryforwards of $ 0.1 million, which carryforward indefinitely.

Utilization of these credits may be subject to an annual limitation based on changes in ownership.

As of December 31, 2023 and 2022, the Company had State NOLs available in New Jersey of $ 19.4 million and $ 35.5 million, respectively, California of $ 9.2 million and $ 9.2 million, respectively, and New York City of $ 1.9 million and $ 1.9 million, respectively, to offset future taxable income expiring from 2032 through 2043.

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.

The usage of the Company’s NOLs is limited given the change in ownership.

The Company applies the FASB’s provisions for uncertain tax positions.

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

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.

As of December 31, 2023 and 2022, the Company’s uncertain tax positions were $ 344 thousand and $ 344 thousand, respectively.

The uncertain tax positions are due to the acquisition of Cend related to Federal and state credits and certain state NOLs.

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

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

In September 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 February 22, 2022, the Company received final approval from NJEDA to sell $ 27.5 million of its NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $ 2.3 million.

On April 5, 2023, the Company received final approval from NJEDA to sell $ 25.9 million of its NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $ 2.2 million.

The gross proceeds from the sale of the $ 2.3 million NJ NOLs related tax benefits (“NJ NOL Tax Benefits”), have been recorded as a benefit from income taxes and the loss on sale of the NJ NOL Tax Benefits of $ 0.1 million recorded in other income (expense) in the consolidated financial statements.

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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, 2023.

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

The Company will continue to monitor the 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 48.5 % refundable tax incentive for qualified research and development activities.

As of December 31, 2022, $ 0.7 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 December 31, 2023 and 2022, the Company had $ 1.0 million and $ 0.7 million, respectively, recorded as an income tax incentive receivable in prepaid and other current assets 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.

On September 4, 2023 the Company's Australian subsidiary received a $ 0.6 million tax refund from the Australian Taxation Office related to the 2022 tax year.

Note 14 – Contingencies

From time to time, the Company is subject to legal proceedings and claims, either asserted or unasserted, that arise in the ordinary course of business.

While the outcome of pending claims cannot be predicted with certainty, the Company does not believe that the outcome of any pending claims will have a material adverse effect on the Company's financial condition or operating results.

While the outcome of pending claims cannot be predicted with certainty, the Company does not

believe that the outcome of any pending claims will have a material adverse effect on the Company's financial condition or operating results.

The Company has elected to recognize expense for legal fees as incurred when the legal services are provided.

In May 2021, Cend received a written threat of litigation on behalf of a Chinese entity called Lingmed Limited (“Lingmed”) claiming Lingmed was entitled to a success fee based on Cend’s Collaboration and License Agreement with Qilu Pharmaceuticals.

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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.

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

At a Case Management Conference held on August 4, 2023, the Court set a trial date in the matter for August 2, 2024.

The Company denies these allegations made by Lingmed and intends to vigorously defend itself.

Note 15 – Technology Transfer Agreement

Impilo Therapeutics

In July 2023, the Company entered into a technology transfer agreement with Impilo Therapeutics, Inc.

(“Impilo”) under which the Company transferred its rights to its tumor penetrating nanocomplex (TPN) platform to Impilo.

As consideration for the technology transfer, Impilo issued a total of 766,000 shares of its pre-seed preferred stock to the Company.

On October 3, 2023 in connection with the Sanford Burnham Prebys license agreement (Note 16), Impilo cancelled the original stock certificate for 766,000 shares and reissued 574,500 shares of its pre-seed preferred stock to the Company.

Note 16 – License Agreements

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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 LSTA1.

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

At the time the license agreement was entered into, Cend’s founding shareholder was an executive at SBP.

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

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The Company has also agreed to pay SBP royalties of 4 % of net sales of products sold by the Company, or through a sublicense, subject to certain reductions.

Additionally, the Company is obligated to pay SBP 25 % of any sublicensing income.

Additionally, the Company is obligated to pay SBP 25 % of any sublicensing income, which, pursuant to the technology transfer agreement with Impilo, resulted in SBP receiving 191,500 apportioned shares of the Company’s pre-seed preferred stock in Impilo on October 3, 2023.

The agreement will expire upon the later of (i) the final abandonment of all pending patent applications within the licensed patents or (ii) the expiration of the last to expire patent within the licensed patents.

The agreement may be terminated in its entirety by the Company at any time by giving SBP sixty days ’ prior written notice.

The agreement may be terminated in its entirety by SBP if the Company, at any time, defaults in the payment of any sum when due and fails to make such payment within thirty days after receipt of written notice.

The agreement may be terminated in its entirety by either SBP or the Company (i) in the event of an uncured material breach by the other party, or (ii) in the event the other party (a) files for, or is involuntarily petitioned with, bankruptcy (other than dissolution or winding up for the purposes of reconstruction or amalgamation), (b) makes an assignment of all or substantially all of its assets for the benefit of creditors, or (c) has a receiver or trustee is appointed and is unable to secure a dismissal, stay or other suspension of such proceedings within thirty days .

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

In October 2021, Cend entered into a license agreement with SBP under which Cend was granted an exclusive, royalty-bearing license to certain patent rights and know-how controlled by SBP.

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The Company is obligated to pay SBP royalties of 4 % of net sales of products sold by the Company or through a sublicense, subject to certain reductions.

Additionally, the Company is obligated to pay SBP varying sublicense fees, ranging from 10 % to 25 %, dependent on when the related milestones are reached.

The agreements will expire upon the later of (i) the final abandonment of all pending patent applications within the licensed patents or (ii) the expiration of the last to expire patent within the licensed patents.

The agreements may be terminated in their entirety by the Company at any time by giving SBP sixty days’ prior written notice.

The agreements may be terminated in their entirety by SBP if the Company, at any time, defaults in the payment of any sum when due and fails to make such payment within thirty days after receipt of written notice.

The agreements may be terminated in their entirety by SBP or the Company (i) in the event of an uncured material breach by the other party, or (ii) in the event the other party (a) files for, or is involuntarily petitioned with, bankruptcy (other than dissolution or winding up for the purposes of reconstruction or amalgamation), (b) makes an assignment of all or substantially all of its assets for the benefit of creditors, or (c) has a receiver or trustee is appointed and is unable to secure a dismissal, stay or other suspension of such proceedings within thirty days.

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 December 31, 2022 and is a related party.

Additionally, the Company is obligated to

pay SBP varying sublicense fees, ranging from 10 % to 25 %, dependent on when the related milestones are reached.

On September 14, 2023, pursuant to the technology transfer agreement with Impilo, the license was assigned in full to Impilo.

SBP did not own shares of the Company’s common stock as of December 31, 2023.

University of California at San Diego

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The Company could be required to make milestone payments to UCSD upon completion of certain regulatory and commercial milestones.

The aggregate potential milestone payments are approximately

$ 1.2 million.

The aggregate potential milestone payments are approximately $ 1.2 million.

The Company has also agreed to pay UCSD royalties of 1.5 % of net sales of products sold by the Company or through a sublicense, subject to certain reductions.

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

On August 2, 2023, pursuant to the technology transfer agreement with Impilo, the license was assigned in full to Impilo.

Massachusetts Institute of Technology

6 unchanged sentences

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.

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.

The agreement may be terminated in its entirety by the Company at any time by giving MIT six months prior written notice.

The agreement may be terminated in its entirety by MIT if the Company, at any time, (i) defaults in the payment of any sum when due and fails to make such payment within thirty days after receipt of written notice, or (ii) commits a material breach of its obligations under the agreement (aside from item (i)) and fails to cure that breach within sixty days after receipt of written notice.

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

The agreement may be earlier terminated in its entirety by the Company at any time by giving MIT six months prior written notice.

The agreement may also be terminated in its entirety by MIT if the Company, at any time, (i) defaults in the payment of any sum when due and fails to make such payment within thirty days after receipt of written notice, or (ii) commits a material breach of its obligations under the agreement (aside from item (i)) and fails to cure that breach within sixty days after receipt of written notice.

Upon termination of the agreement for any reason, the rights and licenses granted to the Company shall terminate and revert to MIT.

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.

On June 30, 2023, in accordance with the provisions of the license agreement, the Company provided notice to MIT that the license agreement would terminate effective December 30, 2023.

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

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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.

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 $ 10.0 million to Cend, which was recognized as revenue by Cend prior to the Merger.

In addition, Cend received and recognized as revenue a $ 5.0 million development milestone prior to the Merger.

We are eligible to receive additional developmental and commercial milestone payments up to $95 million and $ 125 million, respectively, tiered royalties on net sales ranging from 10 % to 15 %, and tiered sublicensing revenues ranging from 12 % to 35 %.

The Company is eligible to receive additional developmental and commercial milestone payments up to $ 96.0 million and $ 125.0 million, respectively, tiered royalties on net sales ranging from 10 % to 15 %, and tiered sublicensing revenues ranging from 12 % to 35 %.

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

1 unchanged sentence

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 simultaneously.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data