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Item 7. Management’s Discussion and Analysis

2025-02-27 compared with 2024-02-29 · 32 added, 37 removed, 75 unchanged (48% of the section changed)

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We are 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.

Our 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 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 unlikely to be affected.

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).

Our investigational product, certepetide (formerly known as LSTA1 or CEND-1), 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.

Certepetide 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 expected to remain unaffected.

Certepetide has also been shown to modify the tumor microenvironment (“TME”) by reducing T-regulatory cells and augmenting cytotoxic T cells, thereby making tumors more susceptible to immunotherapies while also inhibiting the metastatic cascade (i.e., the spread of cancer to other parts of the body).

We and our 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.

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

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.

Our 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.

To date, certepetide 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.

We are exploring certepetide as a means to enable a variety of treatment modalities to treat a range of solid tumors more effectively.

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

Our 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.

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2024 2023 Change

Revenue $ 1,000 $ — $ 1,000

Operating Expenses:

Research and development 11,334 12,734 (1,400)

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

General and administrative 12,075 12,974 (899)

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Overall, net losses were $20.0 million and $20.8 million for the years ended December 31, 2024 and 2023, respectively.

For the year ended December 31, 2024, revenue totaled $1.0 million in connection with an upfront license fee related to the Exclusive License and Collaboration Agreement with Kuva Labs, Inc.

We did not have any revenue for the year ended December 31, 2023.

Operating Expenses

For the year ended December 31, 2024, operating expenses totaled $23.4 million compared to $25.7 million for the year ended December 31, 2023, representing a decrease of $2.3 million or 8.9%.

Excluding the in-process research and development expense of $30.4 million associated with the Merger, operating expenses decreased by $1.5 million or 5.5% compared to the year ended December 31, 2022.

Operating expenses comprise the following:

• Research and development expenses were approximately $11.3 million for the year ended December 31, 2024, compared to $12.7 million for the year ended December 31, 2023, representing a decrease of approximately $1.4 million, or 11.0%.

This decrease was primarily due to lower costs associated with our LSTA1 programs in the current year versus our legacy CD34+ cell therapy technology programs in the prior year.

Current year expenses were associated with study activities for LSTA1 Phase 2a proof-of-concept Bolster trial in various solid tumors in combination with the corresponding standards of care, enrollment activities for the LSTA1 Phase 2b ASCEND study, chemistry, manufacturing and control (“CMC”) activities for LSTA1 and study start up activities for the LSTA1 Phase 2a study for the treatment of glioblastoma multiforme.

• General and administrative expenses were approximately $13.0 million for the year ended December 31, 2023, compared to $14.1 million for the year ended December 31, 2022, representing a decrease of approximately $1.2 million or 8.3%.

This decrease was primarily due to non-recurring Merger related costs in the prior year, a decrease in equity expense due to prior year performance stock unit vesting, Merger option assumption expense and departing board member restricted stock unit vesting, lower annual stockholder meeting expenses and a decrease in directors and officers insurance premiums, partially offset by severance costs associated with the elimination of the Chief Business Officer position on May 1, 2023.

This was primarily due to a reduction in expenses associated with the Phase 2b ASCEND trial which completed enrollment in the prior year, lower spend on chemistry, manufacturing and controls (“CMC”) and lower equity expense.

• General and administrative expenses were approximately $12.1 million for the year ended December 31, 2024, compared to $13.0 for the year ended December 31, 2023, representing a decrease of approximately $0.9 million or 6.9%.

This was primarily due to one-off related severance costs in the prior year associated with the elimination of the Chief Business Officer position on May 1, 2023, a reduction in equity expense, a decrease in directors and officers insurance premiums, and a reduction in spend on legal fees partially offset by one-off settlement related costs and an increase in consulting expenses.

Historically, to minimize our use of cash, we have used a variety of equity instruments as compensation to employees, consultants, directors and other service providers.

The use of these equity instruments has resulted in non-cash charges to the results of operations, which has been significant in the past.

Total other income is comprised primarily of investment income on cash, cash equivalents and marketable securities and a loss on sale related to the sale of our New Jersey net operating losses (“NJ NOLs”).

Total other income was $1.6 million for the year ended December 31, 2024, compared to $2.5 million for the year ended December 31, 2023, representing a decrease of approximately $0.9 million or 35.9%.

This was primarily due to a reduction in investment income from cash, cash equivalents and marketable securities in the current year as a result of lower investment balances, partially offset by higher investment returns.

Income Tax Benefit

In April 2023, we received final approval from the New Jersey Economic Development Authority (“NJEDA”) under the Technology Business Tax Certificate Transfer Program (“Program”) to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.2 million.

The $2.3 million of our NJ NOL Tax Benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense).

In February 2022, we received final approval from the NJEDA under the Program to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.3 million.

In March 2024, we received final approval from the New Jersey Economic Development Authority (“NJEDA”) under the Technology Business Tax Certificate Transfer Program (the “Program”) to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $0.7 million.

The $0.8 million of our NJ NOL tax benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense).

In April 2023, we received final approval from the NJEDA under the Program to sell a percentage of our NJ NOLs, which were subsequently sold to a qualifying and approved buyer pursuant to the Program for net proceeds of $2.2 million.

The $2.3 million of NJ NOLs related tax benefits have been recorded as a benefit from income taxes and the loss on sale of $0.1 million recorded in other income (expense).

Analysis of Liquidity and Capital Resources

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Net cash provided by investing activities 13,233 10,102

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

Net cash (used in) provided by financing activities (206) 385

Operating Activities

Our cash used in operating activities during the year ended December 31, 2023 totaled approximately $20.0 million, comprising (i) our net loss of $20.8 million, as adjusted for non-cash income and expenses totaling $1.3 million (which includes adjustments for equity-based compensation, depreciation and amortization, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $0.5 million.

Our cash used in operating activities during the year ended December 31, 2022 totaled approximately $21.2 million, comprising (i) our net loss of $54.2 million, as adjusted for non-cash income and expenses totaling $33.9 million (which includes adjustments for equity-based compensation, depreciation and amortization, in process research and development expenses, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $0.8 million.

Our cash used in operating activities during the year ended December 31, 2024 totaled approximately $19.4 million, comprising (i) our net loss of $20.0 million, as adjusted for non-cash income and expenses totaling $1.5 million (which includes adjustments for equity-based compensation, depreciation and amortization, loss from equity method investment and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $0.9 million.

Our cash used in operating activities during the year ended December 31, 2023 totaled approximately $20.0 million, comprising (i) our net loss of $20.8 million, as adjusted for non-cash income and expenses totaling $1.3 million (which includes adjustments for equity-based compensation, depreciation and amortization, a loss on disposal of fixed assets, and amortization/accretion of marketable securities), and (ii) changes in operating assets and liabilities of approximately $0.5 million.

Investing Activities

Our cash provided by investing activities during the year ended December 31, 2024 totaled approximately $13.2 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities) partially offset by an investment of $0.1 million in Impilo.

Our cash provided by investing activities during the year ended December 31, 2023 totaled approximately $10.1 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities).

Our cash provided by investing activities during the year ended December 31, 2022 totaled approximately $28.9 million and was primarily due to net sales of marketable securities (net of purchases of marketable securities) and partially offset by asset acquisition costs, net of cash acquired related to the Merger of $3.3 million.

Financing Activities

Our cash provided by financing activities during the year ended December 31, 2023 totaled $0.4 million, consisting of proceeds from the issuance of shares through our ATM Agreement (as defined below) of $0.3 million, option exercise proceeds of $0.2 million partially offset by tax withholding-related payments of $0.1 million on net share settlement equity awards to employees.

Our cash used in financing activities during the year ended December 31, 2024 totaled $0.2 million, consisting primarily of tax withholding-related payments on net share settlement equity awards to employees.

Liquidity and Capital Requirements Outlook

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Our future capital requirements are difficult to forecast and will depend on many factors, including the timing and nature of any other strategic transactions that we undertake and our ability to establish and maintain collaboration partnerships, in-license/out-license or other similar arrangements and the financial terms of such agreements.

On June 4, 2021, we entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C.

On June 4, 2021, we entered into the ATM Agreement with H.C.

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

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.

As of December 31, 2023, we issued 64,394 shares of common stock under the ATM Agreement for net proceeds of $270,774 under the ATM Agreement.

As of the date of this filing and so long as our public float remains below $75.0 million, we are subject to limitations pursuant to General Instruction I.B.6 of Form S-3 (the “Baby Shelf Limitation”), which limits the amount we can offer to up to one-third of our public float during any trailing 12-month period.

Subsequent to the

filing of a prospectus supplement to our Registration Statement on Form S-3 (File No.

333-279034) relating to the at the market offering on August 21, 2024, the aggregate market value of our outstanding common stock held by non-affiliates was approximately $29.6 million.

Pursuant to the Baby Shelf Limitation, since the aggregate market value of our outstanding common stock held by non-affiliates was below $75.0 million at the time of such prospectus supplement filing, the aggregate amount of securities that we are permitted to offer and sell as of the date of this Annual Report on Form 10-K, is $9,855,890, which amount is equal to one-third of the aggregate market value of our common stock held by non-affiliates as of August 20, 2024.

If our public float exceeds $75.0 million on a future measurement date, the Company will no longer be subject to the Baby Shelf Limitation.

During the twelve months ended December 31, 2024, the Company issued 3,779 shares of common stock under the ATM Agreement for net proceeds of $10,074.

Since inception through December 31, 2024, the Company has issued 68,173 shares of common stock under the ATM Agreement for net proceeds of $280,848.

While we continue to seek capital through a number of means, there can be no assurance that additional financing will be available on acceptable terms, if at all, and our negotiating position in capital generating efforts may worsen as existing resources are used.

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If we are unable to access capital necessary to meet our long-term liquidity needs, we may have to delay the expansion of our business or raise funds on terms that we currently consider unfavorable.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

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For a summary of all of our significant accounting policies, see Note 2 to our Consolidated Financial Statements.

Merger with Cend Therapeutics

On September 15, 2022, we, then operating as Caladrius, completed the Merger in accordance with the terms of the Merger Agreement.

We concluded that the Merger was an asset acquisition, as substantially all of the fair value of the non-monetary assets acquired was concentrated in IPR&D.

We determined that the cost to acquire the Cend assets was $36.1 million, based on the fair value of the equity consideration issued, our initial investment, assumption of stock options and direct costs of the acquisition.

The net assets acquired in connection with the Merger were recorded at their estimated fair values as of September 15, 2022, which was the date Merger was completed.

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.

Share-Based Compensation

We expense all share-based payment awards to employees, directors, and consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards.

Consultant awards are remeasured each reporting period through vesting.

For awards with performance-based vesting criteria, we estimate the probability of achievement of the performance criteria and recognize compensation expense related to those awards expected to vest.

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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.

Share-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.

The fair value of our restricted stock and restricted stock units is based on the closing market price of our common stock on the date of grant.

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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 7. Management’s Discussion and Analysis