Matinas BioPharma Holdings, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Disclosure Controls and Procedures: As of December 31, 2021, under the supervision and with the participation of our principal executive officer and principal financial officer we have evaluated, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2021. Our disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that we filed or submitted under the Exchange Act is recorded, processed, summarized and reported within time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. 69 Management’s Report on Internal Control over Financial Reporting: Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive officer and principal financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, any projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting based on criteria established in “Internal Control—Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded as of December 31, 2021, our internal control over financial reporting was effective, as management did not identify any deficiencies in internal control over financial reporting that was determined to be a material weakness. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim consolidated financial statements will not be prevented or detected on a timely basis. Changes in Internal Control Over Financial Reporting: There was no change in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that occurred during the period ended December 31, 2021 covered by this report that has materially affected or is reasonably likely to materially affect our internal control over financial reporting. Item 9B. Other Information None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections None PART III Item 10. Directors, Executive Officers And Corporate Governance All directors hold office for one-year terms until the election and qualification of their successors. Officers are appointed by our board of directors and serve at the discretion of the board, subject to applicable employment agreements. The following table sets forth information regarding our executive officers and the members of our board of directors. Name Age Position(s) Herbert Conrad 89 Chairman of the Board, Director Jerome D. Jabbour 47 Chief Executive Officer and President, Director James J. Ferguson 68 Chief Medical Officer Thomas J. Hoover 52 Chief Business Officer Keith A. Kucinski 52 Chief Financial Officer Hui Liu 54 Chief Technology Officer Raphael J. Mannino 74 Chief Scientific Officer Theresa Matkovits 54 Chief Development Officer Kathryn Corzo 61 Director Eric Ende 53 Director Natasha Giordano 60 Director James S. Scibetta 57 Director Matthew Wikler 72 Director 70 Management Jerome D. Jabbour, JD was appointed Chief Executive Officer in March 2018. He has served as our President since March 2016. Prior to that he served as our Executive Vice President, Chief Business Officer, General Counsel and Secretary since October 2013 and as one of our directors from April 2012 until November 2013. Mr. Jabbour is also a Co-founder of Matinas BioPharma. Prior to joining our management team, he was the Executive Vice President and General Counsel of MediMedia USA, or MediMedia, from 2012 to October 2013, a privately held diversified health care services company. Prior to MediMedia, he was the Senior Vice President, Head of Global Legal Affairs of Wockhardt Limited (2008-2012), a global pharmaceutical and biotechnology company, and Senior Counsel and Assistant Secretary at Reliant (2004-2008). Earlier in his career, he held positions as Commercial Counsel at Alpharma, Inc. (2003-2004) and as a Corporate Associate at Lowenstein Sandler LLP (1999-2003). Mr. Jabbour earned his J.D. from Seton Hall University School of Law in New Jersey and a B.A. in Psychology from Loyola University in Baltimore. James J. Ferguson, MD was appointed Chief Medical Officer in February 2019. Prior to joining the Company he served as the Cardiovascular and Bone Therapeutic Area Head for U.S. Medical Affairs, at Amgen (NASDAQ: AMGN), multinational biopharmaceutical company, from 2016 to 2019. Prior to Amgen Dr. Ferguson held a number of senior positions at AstraZeneca, a multinational pharmaceutical and biopharmaceutical company, including Vice President of US Cardiovascular Medical and Scientific External Relations, Therapeutic Area Vice President of Cardiovascular Global Medical Affairs, U.S. Development Brand Leader for BRILINTA ® , and Senior Director, Clinical Research. Before joining AstraZeneca he was Vice President of Surgical and Critical Care for The Medicines Company. In addition, Dr. Ferguson had more than 20 years of academic experience as the Associate Director of Clinical Cardiology Research at the Texas Heart Institute, Co-Director of the Cardiology Fellowship Training Program at St. Luke’s Episcopal Hospital in Houston, where he was an Associate Professor of Medicine at Baylor College of Medicine, and a Clinical Assistant Professor at the University of Texas Health Science Center at Houston. Dr. Ferguson has served on the Editorial Board of numerous peer-reviewed journals and has over 400 publications and book chapters. Dr. Ferguson received his B.A. (cum laude) in Biology from Harvard University, his M.D. from the University of Pennsylvania School of Medicine and completed his post-graduate training at the University of Michigan Medical Center, Ann Arbor, Michigan and Beth Israel Hospital, Boston, Massachusetts. Thomas J. Hoover, MBA has served as Chief Business Officer since December 2021. Prior to joining the Company, Mr. Hoover was the Chief Business Officer at Millendo Therapeutics, (now Tempest Therapeutics, Inc.) a clinical stage biotech, from 2016 to 2021. Prior to joining Millendo, Mr. Hoover was Vice President of New Product Planning and Corporate Development and Licensing at Sunovion Pharmaceuticals Inc., a global biopharmaceutical company. Mr. Hoover started his pharmaceutical career at GSK in 2001 working in the Global Commercial Strategy group. Earlier in his career, Mr. Hoover worked for The Boston Consulting Group. Mr. Hoover holds a M.B.A. from the University of North Carolina and a B.A. from Harvard College. Keith A. Kucinski, MBA, CPA was appointed Chief Financial Officer in January 2019. He most recently served as Chief Financial Officer at RemedyOne, a privately held healthcare consulting organization, during 2018. Prior to that, he served as Vice President & Treasurer at Par Pharmaceutical Companies, Inc., an operating company of Endo International plc, a leading generics and specialty-branded pharmaceutical company, from 2009 to 2015. In addition, Mr. Kucinski held various roles at Barr Pharmaceuticals, Inc., including Senior Director, Finance & Corporate Development and Assistant Treasurer & Senior Director, Finance. Mr. Kucinski is a Certified Public Accountant. He received his Bachelor of Business Administration in Accounting from the University of Notre Dame and an M.B.A. in Finance & Management from the Leonard N. Stern School of Business at New York University. 71 Hui Liu, PhD, MBA has serves as Chief Technology Officer since December 2020. Prior to joining the Company, Dr. Liu was Director of Formulation and Delivery at Seqirus USA Inc., a privately held global leader in influenza and pandemic response, from 2017 to 2020. Prior to joining Seqirus, Dr. Liu was Director of CMC at Cellics Therapeutics, Inc., a privately held development stage biopharmaceutical company, in 2017, and Senior Technical Lead at Alcon Inc. (SIX/NYSE: ALC), a global leader in eye care, from 2015 to 2017. Earlier in his career, Dr. Liu held positions at Cellics Therapeutics, Inc., a privately held biotech company, and Allergan. Dr. Liu holds a Ph.D. in polymer chemistry from the University of Michigan, an M.B.A. from the University of Massachusetts, Amherst, and a B.S. from The University of Science and Technology of China. Raphael J. Mannino has served as our Chief Scientific Officer since September 2015. From 1990 until August 2015, Dr. Mannino was an Associate Professor of Pathology and Laboratory Medicine at Rutgers University, New Jersey Medical School. Dr. Mannino founded BioDelivery Sciences, Inc., and served as its President, Chief Executive Officer and Chief Scientific Officer and a member of its Board of Directors from 1995 to 2000, when it was acquired by BioDelivery Sciences International, Inc. (NASDAQ: BDSI). Dr. Mannino served as BDSI’s Executive Vice President and Chief Scientific Officer from 2001 to 2009 and a member of its Board of Directors from 2000 to 2007. Dr. Mannino’s previous experience includes positions as Assistant, then Associate Professor, Albany Medical College (1980 to 1990), and Instructor then Assistant Professor, Rutgers Medical School (1977 to 1980). His postdoctoral training was from 1973 to 1976 at the Biocenter in Basel, Switzerland. Dr. Mannino received his Ph.D. in Biological Chemistry in 1973 from the Johns Hopkins University, School of Medicine. Theresa Matkovits, PhD has served as Chief Development officer since October 2018. She joined the Company after having most recently served as the Chief Operating Officer of ContraVir Pharmaceuticals (NASDAQ: CTRV) (now Hepion Pharmaceuticals), a clinical stage biopharmaceutical company, from 2015 to 2018. From 2013 to 2015, Dr. Matkovits served as Global Program Leader at NPS Pharmaceuticals, a specialty pharmaceutical company that was purchased by Shire in 2015. Prior to her time at NPS, Dr. Matkovits was Vice President, Innovation Leader at The Medicines Company. Earlier in her career, Dr. Matkovits held a number of global leadership positions at Novartis across Global Development and the U.S. Commercial Organization, including as Head, Strategic Planning and Operations, U.S. Medical and Drug Regulatory Affairs. Dr. Matkovits began her career at the Roche Institute of Molecular Biology and Organon where she held positions in clinical development in women’s health and research in the area of infertility. Dr. Matkovits serves on the Board of Directors of Appili Therapeutics (TSX: APLI; OTCQX: APLIF) and GoodCap Pharmaceuticals, a privately held pharmaceutical company . Dr. Matkovits earned her Ph.D. in Biochemistry and Molecular Biology from the University of Medicine and Dentistry of NJ. Directors Herbert Conrad has served as our Chairman of the Board since July 2013 and as Chairman of the Board of Matinas BioPharma, Inc. since October 2012. He also serves on the board of directors of Celldex Therapeutics, Inc. (NASDAQ: CLDX), biopharmaceutical company focused on the development and commercialization of immunotherapies and other targeted biologics, and as an Advisor to the Seaver Autism Center at Mount Sinai Hospital. Mr. Conrad was the President of the U.S. Pharmaceuticals Division of Hoffmann-La Roche, Inc. from 1982 until his retirement in 1993. Prior to that, he held many positions of increasing responsibility at Roche Pharmaceuticals in the United States. Mr. Conrad previously served on the board of directors of Arbutus Biopharma Corporation (NASDAQ: ABUS), Pharmasset, Inc. (chairman), Savient Pharmaceuticals, Inc. (NASDAQ: SVNT), Dura Pharmaceuticals, Inc., UroCor, Inc., GenVec, Inc. (NASDAQ: GNVC) (chairman), Sicor, Inc., Bone Care International, Inc. (chairman), Sapphire Therapeutics, Inc. (chairman), the medical advisory board of Henry Schein Inc. (NASDAQ: HSIC), and he was a Director and Co-Founder of Reliant Pharmaceuticals. Pharmasset was acquired by Gilead Sciences, Inc. for $11 billion in 2011 and Reliant was acquired by GlaxoSmithKline for $1.65 billion in 2007. He received B.S. and M.S. degrees from the Brooklyn College of Pharmacy and an honorary Doctorate in Humane Letters from Long Island University. We believe Mr. Conrad is qualified to serve on our board of directors due to his extensive expertise and experience in the life sciences industry and his extensive board experience. 72 Jerome D. Jabbour. See description under “Management.” Kathryn Corzo, RPh, MBA has served on our board of directors since November 2021. Ms. Corzo is currently the Chief Operating Officer of bit.bio Ltd, a privately funded company coding human cells to precision engineer the next generation of medicines, a position she has held since 2021. Prior to bit.bio, Ms. Corzo was partner at Takeda Ventures, Inc., the corporate investment arm of Takeda Pharmaceutical Company Limited, and also served as Head, Oncology Cell Therapy Development at Takeda Pharmaceutical Company Limited (TSE: 4502/NYSE: TAK), a global biopharmaceutical company, a position she held since 2020. Before Takeda, Ms. Corzo was Vice President, R&D Myeloma Program Leader at Sanofi Genzyme, a specialty care global business unit of Sanofi, from 2010 to 2019. From 1989-2010, Ms. Corzo worked at Hoffman – La Roche, Roche Molecular Systems, Eli Lilly and Syndax, during which time she held roles of increasing seniority in operations, global clinical development, medical affairs, business development, market access and brand management across multiple therapeutic products and indications. Ms. Corzo holds an MBA from Massachusetts Institute of Technology Sloan School of Management and a Bachelor of Science in Pharmacy from Massachusetts College of Pharmacy. We believe Ms. Corzo is qualified to serve on our Board of Directors due to her broad experience in the life sciences industry. Eric Ende has served on our board of directors since April 2017. Dr. Ende is president of Ende BioMedical Consulting Group, a privately-held consulting company which is focused on helping life sciences companies raise capital, identify licensing partners, and optimize corporate structure as well as analyzing both private and public investment opportunities for clients within the life sciences industry, a position he has held since 2009. In addition, Dr. Ende consulted with Icahn Enterprises in their efforts to appoint board members at Forest Labs, Genzyme, Biogen IDEC, and Amylin. Dr. Ende served on the board of directors and as a member of the Audit and Risk Management Committee of Genzyme Corp. (NASDAQ: GENZ) from 2010 until it was acquired by Sanofi (NSYE: SNY) in 2011. Through another activist campaign, Dr. Ende served on the board of directors of Progenics Pharmaceuticals, Inc., an oncology company, from 2019 until it was acquired by Lantheus Holdings, Inc. in 2020, as Chair of the Compensation Committee and a member of the Audit and Science Committees. Dr. Ende also serves on the board of directors of Avadel Pharmaceuticals plc, a biopharmaceutical company, as Chair of the Nomination & Corporate Governance Committee and a member of the Audit and Compensation Committees and since January 2022 also serves on the board of NeuBase Therapeutics. Dr. Ende is currently serving on the Technology Transfer Committee of Mount Sinai Innovation Partners and served as the Chairman of the Unsecured Creditor’s Committee overseeing the bankruptcy of Egenix, Inc. From 2002 through 2008, Dr. Ende was the senior biotechnology analyst at Merrill Lynch. From 2000 through 2002, Dr. Ende was the senior biotechnology analyst at Banc of America Securities and, from 1997 to 2000, he was a biotechnology analyst at Lehman Brothers. Dr. Ende received an MBA in Finance & Accounting from NYU – Stern Business School in 1997, an MD from Mount Sinai School of Medicine in 1994, and a BS in Biology and Psychology from Emory University in 1990. We believe Dr. Ende is qualified to serve on our board of directors due to his industry experience, including as president of Ende BioMedical Consulting Group and as a biotechnology analyst, and his prior public company board experience. Natasha Giordano . Ms. Giordano has served as a member of our board of directors since September 2020. Ms. Giordano has been President, Chief Executive Officer and director of PLx Pharma Inc. (NASDAQ: PLXP), a late-stage specialty pharmaceutical company, since January 2016. Previously, Ms. Giordano served as Chief Executive Officer of ClearPoint Learning, Inc., a privately held learning and training platform company, from May 2015 through November 2015. She also served on the ClearPoint board of directors from December 2009 through November 2015. Previously, Ms. Giordano served as the Chief Executive Officer of Healthcare Corporation of America (NYSE: HCA), a leading healthcare provider, from January 2014 through August 2014. From June 2009 to August 2012, Ms. Giordano served as Chief Operating Officer and then as Chief Executive Officer, President and a member of the board of directors of Xanodyne Pharmaceuticals, Inc., a privately-held branded specialty pharmaceutical company with development and commercial capabilities focused on pain management and women’s health. Prior to that, she served as President, Americas, for Cegedim Dendrite (formerly Dendrite International Inc.), a global technology services company, from 2007 to 2008 and as Senior Vice President of the Global Customer Business Unit of Cegedim Dendrite from 2004 to 2007. Ms. Giordano holds a Bachelor of Science degree in nursing from Wagner College. We believe Ms. Giordano is qualified to serve as a director due to her extensive experience in commercialization, general management and knowledge of the pharmaceutical and health care industries. 73 James S. Scibetta has served as a member of our board of directors since November 2013. Mr. Scibetta is currently the Chief Executive Officer of ImmuneID, a privately held precision immunology company. Prior to ImmuneID, Mr. Scibetta was Chief Executive Officer of Maverick Therapeutics, a development stage immune-oncology company, from 2017 until 2021 when it was acquired by Takeda Pharmaceutical Company Limited. Prior to Maverick, he was President and Chief Financial Officer of Pacira Pharmaceuticals, Inc. (NASDAQ: PCRX), a specialty pharmaceutical company, a position he held since October 2015. Prior to that, Mr. Scibetta was the Chief Financial Officer of Pacira Biosciences, Inc. (NASDAQ: PCRX), a non-opioid pain management and regenerative health solutions company, since 2008. Prior to joining Pacira in August 2008, he served as a consultant to Genzyme Corporation following the sale of Bioenvision Inc. (NASDAQ: BIVN) to Genzyme in 2007. From 2006 to 2007 Mr. Scibetta was CFO of Bioenvision. From 2001 to 2006, he was Executive Vice President and Chief Financial Officer of Merrimack Pharmaceuticals Inc. (NASDAQ: MACK). Mr. Scibetta has previously served on the board of directors at the following life sciences companies: Nephros Inc. (NASDAQ: NEPH), Merrimack Pharmaceuticals and Labopharm Inc. Prior to his executive management experience, Mr. Scibetta spent over a decade in investment banking where he was responsible for sourcing and executing transactions for a broad base of public and private healthcare and life sciences companies. Mr. Scibetta received his Bachelor of Science in Physics from Wake Forest University and an MBA from the University of Michigan. We believe Mr. Scibetta is qualified to serve on our board of directors because of his extensive management experience in the pharmaceutical industry, his investment banking experience and his experience as a chief financial officer and audit committee member of several publicly traded companies. Matthew A. Wikler has served as a member of our board of directors since January 2018. Dr. Wikler currently serves as the Principal of Infectious Disease Technology Development Consulting (IDTD Consulting), a privately-held consulting firm, where he provides clinical, medical and regulatory strategic insight to companies developing new technologies for the treatment and prevention of infectious diseases, a position he has held since 2015. Prior to that from 2012 to 2015, Dr. Wikler served at The Medicines Company (NASDAQ: MDCO), a biopharmaceutical company, as VP, New Business Ventures and VP and Medical Director, Infectious Disease Care. Over the course of his career Dr. Wikler held senior leaderships positions for a number of pharmaceutical companies, including as Chief Development Officer of Rib-X Pharmaceuticals, Inc., a privately-held biopharmaceutical company developing new antibiotics to provide expanded coverage, safety and convenience for the treatment of serious and life-threatening infections, President and Chief Executive Officer of IASO Pharma Inc., a privately-held clinical stage biotechnology company focused on the development of antibacterial and antifungal therapeutics, the Institute for One World Health, a 501(c)(3) nonprofit drug development organization, Mpex Pharmaceuticals, Inc., a privately-held company focused on developing and manufacturing therapies for antibiotic resistance with focus on gram-negative organisms, Peninsula Pharmaceuticals, Inc., a privately held biopharmaceutical company focused on developing and commercializing antibiotics to treat life-threatening infections (acquired by Johnson & Johnson (NYSE: JNJ)), ViroPharma Incorporated (NASDAQ: VPHM), Bristol-Myers Squibb Company (NYSE:BMY), and Ortho-McNeil Pharmaceutical (a division of Johnson & Johnson). Dr. Wikler began his career at Smith Kline & French/Smith Kline Beecham where he held positions of increasing responsibilities over ten years. Dr. Wikler held a variety of positions at the FDA, including the Deputy Director of the Division of Anti-Infective Drug Products. Dr. Wikler earned a B.A. in Chemistry from Franklin and Marshall College, an M.D. degree from Temple University School of Medicine, and his M.B.A. from the University of Pennsylvania Wharton School of Business. He completed his Infectious Diseases Fellowship at the Hospital of the University of Pennsylvania and is a Fellow of the Infectious Diseases Society of America. We believe Dr. Wikler is qualified to serve on our board of directors because of his extensive management experience in the pharmaceutical industry and his clinical, drug development and regulatory experience. There are no family relationships among any of our directors or executive officers. Scientific Advisory Board We believe in seeking and attracting scientific and clinical leaders in the field of cardiovascular medicine as well as infectious diseases to provide counsel and support our growth. We have established two separate Scientific Advisory Boards for MAT2203 and MAT2501, respectively, which consist of individuals who are experts in their chosen fields and recipients of many academic honors and awards. Board Committees Our board of directors has four standing committees — an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee and a Scientific Advisory Committee. 74 Audit Committee . The Audit Committee oversees and monitors our financial reporting process and internal control system, reviews and evaluates the audit performed by our registered independent public accountants and reports to the Board any substantive issues found during the audit. The Audit Committee is directly responsible for the appointment, compensation and oversight of the work of our registered independent public accountants. The Audit Committee reviews and approves all transactions with affiliated parties. James Scibetta, Herbert Conrad, Eric Ende and Natasha Giordano currently serve as members of the Audit Committee, with James Scibetta, serving as its chairman. All members of the Audit Committee have been determined to be financially literate and are considered independent directors as defined under the NYSE MKT’s listing standards and applicable SEC rules and regulations. Mr. Scibetta qualifies as an audit committee “financial expert” as that term is defined by SEC regulations. The Audit Committee met four times during 2021. Our Board has adopted an Audit Committee Charter, which is available for viewing at www.matinasbiopharma.com . Compensation Committee . The Compensation Committee provides advice and makes recommendations to the Board in the areas of employee salaries, benefit programs and director compensation. The Compensation Committee also reviews the compensation of our executive officers, including our chief executive officer, and makes recommendations in that regard to the Board as a whole. Eric Ende, Kathryn Corzo, James Scibetta and Matthew Wikler currently serve as members of the Compensation Committee, with Eric Ende serving as its chairman. All members of the Compensation Committee are considered independent directors as defined under the NYSE MKT’s listing standards. The Compensation Committee met four times during 2021. Our Board has adopted a Compensation Committee Charter, which is available for viewing at www.matinasbiopharma.com . Nominating and Corporate Governance Committee . The Nominating and Corporate Governance Committee nominates individuals to be elected to the full Board by our stockholders. The Nominating and Corporate Governance Committee considers recommendations from stockholders if submitted in a timely manner in accordance with the procedures set forth in our Bylaws and applies the same criteria to all persons being considered. Herbert Conrad, Eric Ende, and James Scibetta currently serve as members of the Nominating and Corporate Governance Committee, with Herbert Conrad serving as its chairman. All members of the Nominating and Corporate Governance Committee are considered independent directors as defined under the NYSE MKT’s listing standards. The Nominating and Corporate Governance Committee met four times during 2021. Our Board has adopted a Nominating and Corporate Governance Charter, which is available for viewing at www.matinasbiopharma.com . Scientific Advisory Committee . The Board of Directors has established a Scientific Advisory Committee consisting of Dr. Matthew Wikler, Chair, and Jerome D. Jabbour. The primary function of the Scientific Advisory Committee is to assist the Board in undertaking periodic reviews of our research and development efforts, and clinical trials, and reporting to the Board about developments and strategy, at such times as the Committee determines to be appropriate. Code of Business Conduct and Ethics We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial and accounting officer, or persons performing similar functions. A copy of the code is posted on the corporate governance section of our website, which is located at www.matinasbiopharma.com. If we make any substantive amendments to, or grant waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website. 75 Item 11. Executive Compensation Summary Compensation Table – 2021 The following table presents information regarding the total compensation awarded to, earned by, or paid to our chief executive officer and the two most highly-compensated executive officers who were serving as executive officers as of December 31, 2021 for services rendered in all capacities to us for the years ended December 31, 2021 and December 31, 2020. These individuals are our named executive officers for 2021. Name and Principal Position Year Salary ($) Bonus ($) Option Awards ($) (1) All Other Compensation ($) Total ($) Jerome D. Jabbour 2021 545,000 250,000 2,898,314 - 3,693,314 Chief Executive Officer 2020 500,000 250,000 2,180,085 - 2,930,085 James J. Ferguson 2021 422,300 164,000 1,035,637 1,621,937 Chief Medical Officer 2020 410,000 150,000 1,090,043 - 1,650,043 Theresa Matkovits 2021 378,525 147,000 812,636 - 1,338,161 Chief Development Officer 2020 367,500 122,500 763,030 - 1,253,030 (1) Amounts reflect the grant date fair value of option awards granted in 2021 and 2020 in accordance with Accounting Standards Codification Topic 718. These amounts do not correspond to the actual value that will be recognized by the named executive officers. Narrative Disclosure to Summary Compensation Table Employment Agreements with Our Named Executive Officers Jabbour On March 22, 2018, we entered into an employment agreement with Mr. Jabbour. Under the terms of Mr. Jabbour’s employment agreement, Mr. Jabbour received a signing bonus of $84,000 and a base salary of $350,000 per year. In addition, Mr. Jabbour is eligible to receive an annual bonus, which is targeted at 50% of his base salary but which may be adjusted by our Compensation Committee based on his individual performance and our performance as a whole. Mr. Jabbour is also eligible to receive option grants at the discretion of our Compensation Committee. Mr. Jabbour received an option grant to purchase 1,000,000 shares on March 22, 2018 and is also eligible to receive additional option grants and equity grants at the discretion of our Compensation Committee. If we terminate Mr. Jabbour’s employment without cause or Mr. Jabbour resigns with good reason (absent a change of control), we are required to pay him severance of up to twelve months of his base salary plus COBRA benefits for twelve months. In addition, the vesting of 50% of his outstanding options will be accelerated in full upon such termination and Mr. Jabbour will be provided with an extension through two years after the separation date of the exercise period for his vested stock options. If we terminate Mr. Jabbour’s employment without cause during the 24-month period immediately following a change of control or Mr. Jabbour resigns with good reason during the 24-month period immediately following a change of control, we are required to pay him severance of up to 24 months of his base salary and his target annual bonus plus 18 months of COBRA benefits. In addition, his outstanding options will be vested in full and Mr. Jabbour will be provided with an extension through two years after the separation date of the exercise period for his vested stock options. Mr. Jabbour is also subject to a customary non-disclosure agreement, pursuant to which Mr. Jabbour has agreed to be subject to a non-compete during the term of his employment and for a period of eighteen months following termination of his employment. Ferguson On February 22, 2019, we entered into an employment agreement with Mr. Ferguson which was effective as of February 25, 2019. Under the terms of Mr. Ferguson’s employment agreement, Mr. Ferguson receives a base salary of $375,000 per year. In addition, Mr. Ferguson is eligible to receive an annual bonus, which is targeted at 35% of his base salary but which may be adjusted by our Compensation Committee based on his individual performance and our performance as a whole. Mr. Ferguson is also eligible to receive option grants at the discretion of our Compensation Committee. If we terminate Mr. Ferguson’s employment without cause or Mr. Ferguson resigns with good reason, we are required to pay him severance of up to twelve months of his base salary plus benefits. In addition, the vesting of 50% of his outstanding options will be accelerated in full upon such termination. Mr. Ferguson is also subject to a customary non-disclosure agreement, pursuant to which Mr. Ferguson has agreed to be subject to a non-compete during the term of his employment and for a period of eighteen months following termination of his employment. 76 Matkovits On September 25, 2018, we entered into an employment agreement with Ms. Matkovits which was effective as of October 15, 2018. Under the terms of Ms. Matkovits’ employment agreement, Ms. Matkovits receives a base salary of $350,000 per year. In addition, Ms. Matkovits is eligible to receive an annual bonus, which is targeted at 35% of her base salary but which may be adjusted by our Compensation Committee based on her individual performance and our performance as a whole. Ms. Matkovits is also eligible to receive option grants at the discretion of our Compensation Committee. If we terminate Ms. Matkovits’ employment without cause or Ms. Matkovits resigns with good reason, we are required to pay her severance of up to twelve months of his base salary plus benefits. In addition, the vesting of 50% of her outstanding options will be accelerated in full upon such termination. Ms. Matkovits is also subject to a customary non-disclosure agreement, pursuant to which Ms. Matkovits has agreed to be subject to a non-compete during the term of her employment and for a period of eighteen months following termination of his employment. Outstanding Equity Awards at Fiscal Year-End Table – 2021 The following table summarizes, for each of the named executive officers, the number of shares of common stock underlying outstanding stock options held as of December 31, 2021. Option Awards Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Option exercise price ($) Option expiration date Jerome D. Jabbour - 1,658,100 $ 0.92 Dec 13, 2031 - 1,600,000 $ 1.36 Dec 31, 2030 479,167 520,833 $ 2.27 Dec 31, 2029 531,250 218,750 $ 1.08 Feb 10, 2029 937,500 62,500 $ 0.98 Mar 21, 2028 400,000 - $ 3.32 Feb 20, 2027 350,000 - $ 0.43 Feb 4, 2026 175,000 - $ 0.41 Jan 27, 2025 350,000 - $ 1.28 July 20, 2024 350,000 - $ 0.94 Oct 3, 2023 James J. Ferguson - 587,600 $ 0.92 Dec 13, 2031 - 575,000 $ 1.36 Dec 31, 2030 239,584 260,416 $ 2.27 Dec 31, 2029 247,917 102,083 $ 1.09 Feb 24, 2029 Theresa Matkovits - 500,000 $ 0.92 Dec 13, 2031 - 425,000 $ 1.36 Dec 31, 2030 167,709 182,291 $ 2.27 Dec 31, 2029 247,917 102,083 $ 1.08 Feb 10, 2029 277,084 72,916 $ 0.79 Oct 14, 2028 77 2013 Equity Compensation Plan General On August 2, 2013, our Board of Directors adopted the 2013 Equity Compensation Plan pursuant to the terms described herein. The 2013 Equity Compensation Plan was approved by the stockholders on August 7, 2013. Effective May 8, 2014, upon the approval of our Board of Directors and our stockholders, we amended and restated our 2013 Equity Compensation Plan, primarily to include “evergreen” provisions, which provides that the number of shares of common stock available for issuance under the Plan is subject to an automatic annual increase on January 1 of each year beginning in 2015 equal to 4% of the number of shares of common stock outstanding on December 31 of the preceding calendar year or a lesser number of shares of common stock determined by the Board of Directors; to amend the definition of “fair market value”; and to increase the limits on awards under the Plan. The 2013 Equity Compensation Plan, as amended and restated, is referred to herein as the “2013 Plan.” The general purpose of the 2013 Plan is to provide an incentive to our employees, directors, consultants and advisors by enabling them to share in the future growth of our business. Our Board of Directors believes that the granting of stock options, restricted stock awards, unrestricted stock awards and similar kinds of equity-based compensation promotes continuity of management and increases incentive and personal interest in the welfare of our Company by those who are primarily responsible for shaping and carrying out our long range plans and securing our growth and financial success. Our Board of Directors believes that the 2013 Plan will advance our interests by enhancing our ability to (a) attract and retain employees, consultants, directors and advisors who are in a position to make significant contributions to our success; (b) reward our employees, consultants, directors and advisors for these contributions; and (c) encourage employees, consultants, directors and advisors to take into account our long-term interests through ownership of our shares. Description of the 2013 Equity Compensation Plan The following description of the principal terms of the 2013 Plan is a summary and is qualified in its entirety by the full text of the 2013 Plan, which is attached as Exhibit 10.1 hereto. Administration . The 2013 Plan will be administered by the Compensation Committee of our Board of Directors, provided that the entire Board of Directors may act in lieu of the Compensation Committee on any matter, subject to certain requirements set forth in the 2013 Plan. The Compensation Committee may grant options to purchase shares of our common stock, stock appreciation rights, stock units, restricted shares of our common stock, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards. The Compensation Committee also has broad authority to determine the terms and conditions of each option or other kind of award, and adopt, amend and rescind rules and regulations for the administration of the 2013 Plan. Subject to applicable law, the Compensation Committee may authorize one or more reporting persons (as defined in the 2013 Plan) or other officers to make awards (other than awards to reporting persons, or other officers whom the Compensation Committee has specifically authorized to make awards). No awards may be granted under the 2013 Plan on or after the ten year anniversary of the adoption of the 2013 Plan by our Board of Directors, but awards granted prior to such tenth anniversary may extend beyond that date. Eligibility . Awards may be granted under the 2013 Plan to any person who is an employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary, or any person who is determined by the Compensation Committee to be a prospective employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary. Shares Subject to the 2013 Plan . As of February 25, 2022 the aggregate number of shares of common stock available for issuance in connection with awards granted under the 2013 Plan is 45,603,238 shares, subject to customary adjustments for stock splits, stock dividends or similar transactions (the “Initial Limit”). Incentive Stock Options may be granted under the 2013 Plan with respect to all of those shares. The number of shares of common stock available for issuance under the 2013 Plan will automatically increase on January 1st of each year for a period of ten years, commencing on January 1, 2015, in an amount equal to four percent (4%) of the total number of shares of common stock outstanding on December 31st of the preceding calendar year (the “Annual Increase”). Notwithstanding the foregoing, the Board of Directors may act prior to the first day of any calendar year, to provide that there shall be no increase in the share reserve for such calendar year or that the Annual Increase in the share reserve for such calendar year shall be a lesser number of shares of common stock than would otherwise occur pursuant to the preceding sentence. The number of shares of common stock which may be issued in respect of Incentive Stock Options is equal to the Current Limit, and will be increased on each January 1, by the Annual Increase for such calendar year. 78 To the extent that any award under the 2013 Plan payable in shares of common stock is forfeited, cancelled, returned to the Company for failure to satisfy vesting requirements or upon the occurrence of other forfeiture events, or otherwise terminates without payment being made thereunder, the shares of common stock covered thereby will be available for future grants under the 2013 Plan. Shares of common stock that otherwise would have been issued upon the exercise of a stock option or in payment with respect to any other form of award, that are surrendered in payment or partial payment of taxes required to be withheld with respect to the exercise of such stock option or the making of such payment, will also be available for future grants under the 2013 Plan. Terms and Conditions of Options . Options granted under the 2013 Plan may be either “incentive stock options” that are intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”) or “nonqualified stock options” that do not meet the requirements of Section 422 of the Code. The Compensation Committee will determine the exercise price of options granted under the 2013 Plan. The exercise price of stock options may not be less than the fair market value, on the date of grant, per share of our common stock issuable upon exercise of the option (or 110% of fair market value in the case of incentive options granted to a ten-percent stockholder). If on the date of grant the common stock is listed on a stock exchange or national market system, the fair market value shall generally be the closing sale price as of such date, or if there were no trades recorded on such date, then the most recent date preceding such date on which trades were recorded. If on the date of grant the common stock is traded in an over-the-counter market, the fair market will generally be the average of the closing bid and asked prices for the shares of common stock as of such date, or, if there are no closing bid and asked prices for the shares of common stock on such date, then the average of the bid and asked prices for the shares of common stock on the most recent date preceding such date on which such closing bid and asked prices are available. If the common stock is not listed on a national securities exchange or national market system or traded in an over-the-counter market, the fair market value shall be determined by the Compensation Committee in a manner consistent with Section 409A of the Internal Revenue Code of 1986, as amended. Notwithstanding the foregoing, if on the date of grant the common stock is listed on a stock exchange or is quoted on a national market system, or is traded in an over-the-counter market, then solely for purposes of determining the exercise price of any grant of a stock option or the base price of any grant of a stock appreciation right, the Compensation Committee may, in its discretion, base fair market value on the last sale before or the first sale after the grant, the closing price on the trading day before or the trading day of the grant, the arithmetic mean of the high and low prices on the trading day before or the trading day of the grant, or any other reasonable method using actual transactions of the common stock as reported by the exchange or market on which the common stock is traded. In addition, the determination of fair market value also may be made using any other method permitted under Treasury Regulation section 1.409A-1(b)(5)(iv). No option may be exercisable for more than ten years from the date of grant (five years in the case of an incentive stock option granted to a ten-percent stockholder). Options granted under the 2013 Plan will be exercisable at such time or times as the Compensation Committee prescribes at the time of grant. No employee may receive incentive stock options that first become exercisable in any calendar year in an amount exceeding $100,000. The Compensation Committee may, in its discretion, permit a holder of a nonqualified stock option to exercise the option before it has otherwise become exercisable, in which case the shares of our common stock issued to the recipient will continue to be subject to the vesting requirements that applied to the option before exercise. Generally, the option price may be paid in cash or by bank check, or such other means as the Compensation Committee may accept. As set forth in an award agreement or otherwise determined by the Compensation Committee, in its sole discretion, at or after grant, payment in full or part of the exercise price of an option may be made (a) in the form of shares of common stock that have been held by the participant for such period as the Compensation Committee may deem appropriate for accounting purposes or otherwise, valued at the fair market value of such shares on the date of exercise; (ii) by surrendering to the Company shares of common stock otherwise receivable on exercise of the option; (iii) by a cashless exercise program implemented by the Compensation Committee in connection with the 2013 Plan; and/or (iv) by such other method as may be approved by the Compensation Committee and set forth in an award agreement. 79 No option may be transferred other than by will or by the laws of descent and distribution, and during a recipient’s lifetime an option may be exercised only by the recipient or the recipient’s guardian or legal representative. However, the Compensation Committee may permit the transfer of a nonqualified stock option, share-settled stock appreciation right, restricted stock award, performance share or share-settled other stock-based award either (a) by instrument to the participant’s immediate family (as defined in the 2013 Plan), (b) by instrument to an inter vivos or testamentary trust (or other entity) in which the award is to be passed to the participant’s designated beneficiaries, or (c) by gift to charitable institutions. The Compensation Committee will determine the extent to which a holder of a stock option may exercise the option following termination of service. Stock Appreciation Rights . The Compensation Committee may grant stock appreciation rights independent of or in connection with an option. The Compensation Committee will determine the terms applicable to stock appreciation rights. The base price of a stock appreciation right will be determined by the Compensation Committee, but will not be less than 100% of the fair market value of a share of our common stock with respect to the date of grant of such stock appreciation right. The maximum term of any SAR granted under the 2013 Plan is ten years from the date of grant. Generally, each SAR stock appreciation right will entitle a participant upon exercise to an amount equal to: ● the excess of the fair market value of a share of common stock on the date of exercise of the stock appreciation right over the base price of such stock appreciation right, multiplied by ● the number of shares as to which such stock appreciation right is exercised. Payment may be made in shares of our common stock, in cash, or partly in common stock and partly in cash, all as determined by the Compensation Committee. Restricted Stock and Stock Units . The Compensation Committee may award restricted common stock and/or stock units under the 2013 Plan. Restricted stock awards consist of shares of stock that are transferred to a participant subject to restrictions that may result in forfeiture if specified conditions are not satisfied. Stock units confer the right to receive shares of our common stock, cash, or a combination of shares and cash, at a future date upon or following the attainment of certain conditions specified by the Compensation Committee. The Compensation Committee will determine the restrictions and conditions applicable to each award of restricted stock or stock units, which may include performance-based conditions. Dividends with respect to restricted stock may be paid to the holder of the shares as and when dividends are paid to stockholders or at the times of vesting or other payment of the restricted stock award. Stock unit awards may be granted with dividend equivalent rights, which may be accumulated and may be deemed reinvested in additional stock units, as determined by the Compensation Committee in its discretion. If any dividend equivalents are paid while a stock unit award is subject to restrictions, the dividend equivalents shall be subject to the same restrictions on transferability as the underlying stock units, unless otherwise set forth in an award agreement. Unless the Compensation Committee determines otherwise, holders of restricted stock will have the right to vote the shares. Performance Shares and Performance Units . The Compensation Committee may award performance shares and/or performance units under the 2013 Plan. Performance shares and performance units are awards which are earned during a specified performance period subject to the attainment of performance criteria, as established by the Compensation Committee. The Compensation Committee will determine the restrictions and conditions applicable to each award of performance shares and performance units. Incentive Bonus Awards . The Compensation Committee may award Incentive Bonus Awards under the 2013 Plan. Incentive Bonus Awards may be based upon the attainment of specified levels of Company or subsidiary performance as measured by pre-established, objective performance criteria determined at the discretion of the Compensation Committee. Incentive Bonus Awards will be paid in cash or common stock, as set forth in an award agreement Other Stock-Based and Cash-Based Awards . The Compensation Committee may award other types of equity-based or cash-based awards under the 2013 Plan, including the grant or offer for sale of unrestricted shares of our common stock and payment in cash or otherwise of amounts based on the value of shares of common stock. 80 Effect of Certain Corporate Transactions . The Compensation Committee may, at the time of the grant of an award, provide for the effect of a change in control (as defined in the 2013 Plan) on any award, including (i) accelerating or extending the time periods for exercising, vesting in, or realizing gain from any award, (ii) eliminating or modifying the performance or other conditions of an award, (iii) providing for the cash settlement of an award for an equivalent cash value, as determined by the Compensation Committee, or (iv) such other modification or adjustment to an award as the Compensation Committee deems appropriate to maintain and protect the rights and interests of participants upon or following a change in control. The Compensation Committee may, in its discretion and without the need for the consent of any recipient of an award, also take one or more of the following actions contingent upon the occurrence of a change in control: (a) cause any or all outstanding options and stock appreciation rights to become immediately exercisable, in whole or in part; (b) cause any other awards to become non-forfeitable, in whole or in part; (c) cancel any option or stock appreciation right in exchange for a substitute option; (d) cancel any award of restricted stock, stock units, performance shares or performance units in exchange for a similar award of the capital stock of any successor corporation; (e) redeem any restricted stock, stock unit, performance share or performance unit for cash and/or other substitute consideration with a value equal to the fair market value of an unrestricted share of our common stock on the date of the change in control; (f) cancel any option or stock appreciation right in exchange for cash and/or other substitute consideration based on the value of our common stock on the date of the change in control , and cancel any option or stock appreciation right without any payment if its exercise price exceeds the value of our common stock on the date of the change in control; (g) cancel any stock unit or performance unit held by a participant affected by the change in control in exchange for cash and/or other substitute consideration with a value equal to the fair market value per share of common stock on the date of the change in control, or (h) make such other modifications, adjustments or amendments to outstanding awards as the Compensation Committee deems necessary or appropriate. Amendment, Termination . The Compensation Committee may amend the terms of awards in any manner not inconsistent with the 2013 Plan, provided that no amendment shall adversely affect the rights of a participant with respect to an outstanding award without the participant’s consent. In addition, our board of directors may at any time amend, suspend, or terminate the 2013 Plan, provided that (i) no such amendment, suspension or termination shall materially and adversely affect the rights of any participant under any outstanding award without the consent of such participant and (ii) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange rule, the 2013 Plan requires us to obtain stockholder consent. Stockholder approval is required for any plan amendment that increases the number of shares of common stock available for issuance under the 2013 Plan or changes the persons or classes of persons eligible to receive awards. Tax Withholding The Company has the power and right to deduct or withhold, or require a participant to remit to the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or regulations to be withheld. Director Compensation We maintain a policy pursuant to which our non-employee directors receive annualized compensation. The policy provides for the following compensation amounts payable in cash, or upon election by such non-employee director, in shares of unrestricted common stock: (i) each non-employee director is entitled to receive an annual fee of $50,000; (ii) the chairman of the board is entitled to receive an additional annual fee of $25,000; (iii) the vice chair, if one is appointed, is entitled to receive an additional annual fee of $20,000; (iv) the chair of our audit committee is entitled to receive an annual fee of $15,000 and other members of our audit committee are entitled to receive $7,500; (v) the chair of our compensation committee is entitled to receive an annual fee of $10,000 and other members of our compensation committee are entitled to receive $6,000; (vi) the chair of our nominating and corporate governance committee is entitled to receive an annual fee of $7,500, increasing to $8,000 on January 1, 2022, and other members are entitled to receive $4,000; and (vii) the chair of our scientific advisory committee is entitled to receive an annual fee of $7,500, increasing to $8,000 on January 1, 2022. As of the date of each annual meeting of the shareholders, each non-employee director will receive an option grant to purchase shares of our common stock valued at $80,000 as determined by the Black Scholes method on the date of grant under our existing equity incentive plan, or any other equity incentive plan we may adopt in the future, which shall vest in twelve equal monthly installments. All fees under the director compensation policy are paid on a quarterly basis in arrears and no per meeting fees are paid. All fees may be paid in unrestricted shares of common stock at the election of the director. We also reimburse non-employee directors for reasonable expenses incurred in connection with attending board of director and committee meetings. 81 Director Compensation Table – 2021 The following table summarizes the annual compensation for our non-employee directors during 2021. Name Cash Compensation ($) Stock Awards ($) (1) Option Awards ($) (1) Total ($) Herbert Conrad 90,000 - 80,000 170,000 Kathryn Corzo 9,283 - 160,000 169,283 Eric Ende 71,500 - 80,000 151,500 Natasha Giordano 57,500 - 80,000 137,500 Patrick G. LePore 66,739 - - 66,739 James S. Scibetta 75,000 - 80,000 155,000 Matthew Wikler 31,750 31,750 80,000 143,500 (1) Amounts reflect the grant date fair value of stock awards and option awards granted in 2021 in accordance with Accounting Standards Codification Topic 718. These amounts do not correspond to the actual value that will be recognized by the directors. Compensation Committee Interlocks and Insider Participation The Compensation Committee of the Board of Directors is currently composed of the following four non-employee directors: Eric Ende, Chair, Kathryn Corzo, James Scibetta and Matthew Wikler, with Ms. Corzo replacing Mr. LePore on the committee following the Company’s last Annual Shareholder meeting. No member of the Compensation Committee is or was formerly an officer or an employee of the Company during the last fiscal year. In addition, no executive officer of the Company serves on the compensation committee or board of directors of a company for which any of the Company’s directors serve as an executive officer. Please see Item 13. Item 12. Security Ownership Of Certain Beneficial Owners And Management And Related Stockholder Matters. The following table sets forth the number of shares of common stock beneficially owned as of February 25, 2022 by: ● each of our stockholders who is known by us to beneficially own 5% or more of our common stock; ● each of our executive officers; ● each of our directors; and ● all of our directors and current executive officers as a group. Beneficial ownership is determined based on the rules and regulations of the SEC. A person has beneficial ownership of shares if such individual has the power to vote and/or dispose of shares. This power may be sole or shared and direct or indirect. Applicable percentage ownership in the following table is based on 216,864,526 shares outstanding as of February 25, 2022. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of common stock that are subject to options or warrants held by that person and exercisable as of, or within 60 days of, February 25, 2022 are counted as outstanding. These shares, however, are not counted as outstanding for the purposes of computing the percentage ownership of any other person(s). Except as may be indicated in the footnotes to this table and pursuant to applicable community property laws, each person named in the table has sole voting and dispositive power with respect to the shares of common stock set forth opposite that person’s name. Unless indicated below, the address of each individual listed below is c/o Matinas BioPharma Holdings, Inc., 1545 Route 206 South, Suite 302, Bedminster, NJ 07921. 82 Name of Beneficial Owner Number of Shares Beneficially Owned Percentage of Shares Beneficially Owned Directors and Executive Officers Jerome D. Jabbour (1) 4,129,074 1.9 % Herbert Conrad (2) 5,889,819 2.7 % Kathryn Corzo (3) 25,245 * % Eric Ende (4) 1,076,012 * % Natasha Giordano (5) 197,398 * % James Scibetta (6) 1,644,378 * % Matthew Wikler (7) 1,070,309 * % James J. Ferguson (8) 738,022 * % Thomas J. Hoover (9) - * % Keith A. Kucinski (10) 868,459 * % Hui Liu (11) 194,792 * % Raphael Mannino (12) 2,839,091 1.3 % Theresa Matkovits (13) 913,022 * % Directors and Executive Officers as a group (13 persons) (14) 19,585,621 8.6 % * Less than 1% (1) Includes 3,668,750 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 3,351,850 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (2) Includes 1,195,253 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 45,441 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (3) Includes 25,245 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 156,518 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (4) Includes 931,920 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 45,441 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (5) Includes 197,398 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 181,401 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (6) Includes 994,420 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 45,441 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (7) Includes 779,837 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 47,524 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (8) Includes 738,022 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 1,274,578 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (9) Does not include 850,000 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. 83 (10) Includes 773,959 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 1,101,041 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (11) Includes 194,792 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 680,208 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (12) Includes 919,376 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 490,624 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (13) Includes 913,022 shares of common stock issuable upon exercise of options that are exercisable within sixty days of February 25, 2022. Does not include 1,061,978 shares of common stock underlying options that are not exercisable within sixty days of February 25, 2022. (14) See notes (1) through (13). Securities Authorized for Issuance under Equity Compensation Plans The following table summarizes information about our equity compensation plans as of December 31, 2021. Plan Category Number of Shares of Common Stock to be Issued upon Exercise of Outstanding Options (a) Weighted-Average Exercise Price of Outstanding Options (b) Number of Options Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) (c)(2) Equity compensation plans approved by stockholders(1) 28,184,291 $ 1.21 4,282,530 Equity compensation plans not approved by stockholders — — — Total 28,184,291 $ 1.21 4,282,530 (1) The amounts shown in this row include securities under the Matinas BioPharma Holdings, Inc. Amended and Restated 2013 Equity Incentive Plan (the “2013 Plan”). (2) In accordance with the “evergreen” provision in our 2013 Plan, an additional 8,650,778 shares were automatically made available for issuance on the first trading day of 2022, which represents 4% of the number of shares outstanding on December 31, 2021; these shares are excluded from this calculation. Item 13. Certain Relationships, Related Transactions, And Director Independence Certain Relationships and Related Party Transactions Other than compensation arrangements for our named executive officers and directors, there has been no transaction or series of similar transactions, since January 1, 2021, to which we were a party or will be a party, in which: ● the amounts involved exceeded or will exceed the lesser of (i) $120,000 and (ii) one percent of the average of our total assets at year-end for the last two completed fiscal years; and ● any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. 84 Indemnification Agreements We entered into indemnification agreements with our directors and executive officers. The indemnification agreements provide for indemnification against expenses, judgments, fines and penalties actually and reasonably incurred by an indemnitee in connection with threatened, pending or completed actions, suits or other proceedings, subject to certain limitations. The indemnification agreements also provide for the advancement of expenses in connection with a proceeding prior to a final, non-appealable judgment or other adjudication, provided that the indemnitee provides an undertaking to repay to us any amounts advanced if the indemnitee is ultimately found not to be entitled to indemnification by us. The indemnification agreement set forth procedures for making and responding to a request for indemnification or advancement of expenses, as well as dispute resolution procedures that apply to any dispute between us and an indemnitee arising under the Indemnification Agreements. Policies and Procedures for Related Party Transactions We have adopted a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock, any members of the immediate family of any of the foregoing persons and any firms, corporations or other entities in which any of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest, which we refer to collectively as related parties, are not permitted to enter into a transaction with us without the prior consent of our board of directors acting through the audit committee or, in certain circumstances, the chairman of the audit committee. Any request for us to enter into a transaction with a related party, in which the amount involved exceeds $100,000 and such related party would have a direct or indirect interest must first be presented to our audit committee, or in certain circumstances the chairman of our audit committee, for review, consideration and approval. In approving or rejecting any such proposal, our audit committee, or the chairman of our audit committee, is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the benefits to us, the availability of other sources of comparable products or services and the extent of the related party’s interest in the transaction. Director Independence Based on information requested from and provided by each of our directors, our board of directors has determined that Messrs. Herbert Conrad, Eric Ende, James Scibetta, Matthew Wikler and Mses. Kathryn Corzo and Natasha Giordano are “independent directors” as such term is defined in the rules of the NYSE MKT’s corporate governance requirements and Rule 10A-3 promulgated under the Securities Exchange Act of 1934, as amended. Item 14. Principal Accounting Fees And Services The following table represents aggregate fees billed to the Company for the fiscal years ended December 31, 2021 and 2020, by EisnerAmper LLP, the Company’s independent registered public accounting firm. Years Ended December 31, 2021 2020 (in thousands) Audit Fees $ 249 $ 297 Audit-Related Fees - - Tax Fees - - Total Fees $ 249 $ 297 85 Audit Fees consist of fees billed for professional services rendered for the audit of our annual financial statements, audit of internal controls over financial reporting, review of our interim consolidated financial statements and comfort letters. Audit-Related Fees consist of fees billed for professional services rendered for assurance related services that are reasonably related to the performance of the audit or review of our financial services. Tax Fees are for tax-related services related primarily to tax consulting and tax planning. The Audit Committee pre-approves all auditing services and any non-audit services that the independent registered public accounting firm is permitted to render under Section 10A (h) of the Exchange Act. The Audit Committee may delegate the pre-approval to one of its members, provided that if such delegation is made, the full Audit Committee must be presented at its next regularly scheduled meeting with any pre-approval decision made by that member. Part IV Item 15. Exhibits And Financial Statement Schedules Exhibit No. Description 2.1 Merger Agreement, dated July 11, 2013, by and among the Company, Matinas Merger Sub, Inc., and Matinas BioPharma, Inc. (incorporated by reference to Exhibit 2.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 7, 2014). 2.2 Agreement and Plan of Merger (the “Merger Agreement”) with Aquarius Biotechnologies, Inc., a Delaware corporation (“Aquarius”), Saffron Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub”) and J. Carl Craft, as the stockholder representative (incorporated herein by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 30, 2015). 3.1 Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 7, 2014). 3.2 Bylaws (incorporated by reference to Exhibit 3.2 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 7, 2014). 3.3 Certificate of Amendment, dated October 29, 2015 to Certificate of Incorporation. (incorporated herein by reference to the Company’s Current Report on Form 8-K filed with the SEC on November 5, 2015). 3.4 Certificate of Designation of Series A Preferred Stock (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed August 1, 2016 with the Securities and Exchange Commission). 3.5 Certificate of Designation of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed June 19, 2018 with the Securities and Exchange Commission). 4.1 Common Stock Specimen (incorporated by reference to Exhibit 4.1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed March 31, 2017 with the Securities and Exchange Commission). 4.2 Form of Warrant (incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 7, 2014). 4.3 Form of 2015 Investor Warrant. (incorporated by reference to Exhibit 4.4 to the post-effective amendment No. 1 to Form S-1 filed with the SEC on April 17, 2015). 4.4 Form of 2015 Placement Agent Warrant. (incorporated by reference to Exhibit 4.5 to the post-effective amendment No. 1 to Form S-1 filed with the SEC on April 17, 2015). 4.5 Form of 2016 Placement Agent Warrant (incorporated by reference to Exhibit 4.7 to the Registration Statement on Form S-1 filed with the SEC on November 2, 2016). 4.6 Description of Securities* 10.1 Matinas BioPharma Holdings, Inc. Amended and Restated 2013 Equity Compensation Plan (incorporated herein by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K filed on March 31, 2015.) † 10.2 Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.7 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 7, 2014). † 86 10.3 Form of Non-Qualified Stock Option Agreement (incorporated by reference to Exhibit 10.8 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 7, 2014). † 10.4 Form of Indemnification Agreement (incorporated by reference to Exhibit 10.14 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 7, 2014). † 10.5 Lease, effective as of November 4, 2013, by and between the company and A-K Bedminster Associates, L.P. (incorporated by reference to Exhibit 10.17 to Amendment No. 1 to the Company’s Registration Statement on Form S-1 filed with the SEC on February 7, 2014). 10.6 Amended and Restated Exclusive License Agreement dated as of January 29, 2015, by and between Rutgers, the State University of New Jersey and Aquarius Biotechnologies, Inc. (incorporated herein by reference to Exhibit 10.18 to the Company’s Annual Report on Form 10-K filed on March 31, 2015). + 10.7 Employment Agreement, dated September 1, 2015, between Matinas Biopharma Holdings, Inc. and Raphael J. Mannino. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2015). † 10.8 Lease Agreement, dated as of December 15, 2016, by and between CIP II/AR Bridgewater Holdings LLC, and Matinas BioPharma Holdings, Inc. (incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 28, 2017). 10.9 Employment Agreement, dated March 22, 2018, between the Company and Jerome D. Jabbour (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed with the SEC on March 27, 2018). † 10.10 Employment Agreement, dated October 15, 2018, between Matinas Biopharma Holdings, Inc. and Theresa Matkovits (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 15, 2018). † 10.11 Employment Agreement, dated January 3, 2019, between Matinas Biopharma Holdings, Inc. and Keith Kucinski (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2019). † 10.12 Employment Agreement, dated February 25, 2019, between Matinas Biopharma Holdings, Inc. and James J. Ferguson III (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 25, 2019). † 10.13 At-The-Market Sales Agreement, dated July 2, 2020, between Matinas BioPharma Holdings, Inc. and BTIG, LLC (incorporated herein by reference to Exhibit 1.01 to the Company’s Current Report on Form 8-K filed with the SEC on July 2, 2020). 10.14 Therapeutic Development Award Agreement, dated November 19, 2020, between Matinas BioPharma Holdings, Inc. and the Cystic Fibrosis Foundation (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K filed on March 29, 2021). 10.15 Employment Agreement, dated December 1, 2020, between Matinas Biopharma Holdings, Inc. and Hui Liu. †* 10.16 Employment Agreement, dated December 6, 2021, between Matinas Biopharma Holdings, Inc. and Thomas Hoover. †* 21.1 Subsidiaries Index* 23.1 Consent of EisnerAmper LLP* 31.1 Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 31.2 Certification of Acting Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* 32.1 Section 1350 Certifications** 101 The following financial information from the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, formatted in XBRL (eXtensible Business Reporting Language), is filed electronically herewith: (i) Consolidated Balance Sheets as of December 31, 2021 and 2020; (ii) Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2021 and 2020; (iii) Consolidated Statement of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2021 and 2020; (iv) Consolidated Statements of Cash Flows for the Years Ended December 31, 2021 and 2020; and (v) Notes to Consolidated Financial Statements.* 104 The cover page from this Annual Report on Form 10-K, formatted as Inline XBRL. + Confidential treatment has been requested for certain provisions of this Exhibit pursuant to Rule 24b-2 promulgated under the Securities Exchange Act of 1934, as amended. † Indicates a management contract or compensation plan, contract or arrangement. * Filed herewith. ** Furnished herewith. Item 16. Form 10-K Summary. None. 87 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Bedminster, State of New Jersey on March 8, 2022. MATINAS BIOPHARMA HOLDINGS, INC. By: /s/ Jerome D. Jabbour Name: Jerome D. Jabbour Title: Chief Executive Officer By: /s/ Keith A. Kucinski Name: Keith A. Kucinski Title: Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Person Capacity Date /s/ Jerome D. Jabbour Chief Executive Officer and Director March 8, 2022 Jerome D. Jabbour (Principal Executive Officer) /s/ Keith A. Kucinski Chief Financial Officer March 8, 2022 Keith A. Kucinski (Principal Financial and Accounting Officer) /s/ Herbert Conrad Chairman of the Board March 8, 2022 Herbert Conrad /s/ Kathryn Corzo Director March 8, 2022 Kathryn Corzo /s/ Eric Ende Director March 8, 2022 Eric Ende /s/ Natasha Giordano Director March 8, 2022 Natasha Giordano /s/ James S. Scibetta Director March 8, 2022 James S. Scibetta /s/ Matthew A. Wikler Director March 8, 2022 Matthew A. Wikler 88 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Matinas BioPharma Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Matinas BioPharma Holdings, Inc. and Subsidiaries as of December 31, 2021 and 2020 and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2021, 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, 2021, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. 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) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter 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. Accruals for research and development expenses As disclosed in the consolidated statements of operations, for the year ended December 31, 2021, the Company incurred significant research and development (“R&D”) expenses, which amounted to approximately $14.6 million. At December 31, 2021, the Company had accrued $1.3 million for R&D expenses on the consolidated balance sheet. A large amount of the Company’s R&D expenses are service fees paid to contract research organizations (“CROs”) and contract manufacturing organizations (“CMOs”). The R&D activities with these CROs and CMOs are documented in contractual agreements and are typically performed over an extended period, and there may be several milestones of the services in one agreement. Therefore, the allocation of the service expenses based on the progress of the R&D projects and the milestones completed for the appropriate financial reporting period involved judgement and estimation. We identified management’s estimate of accruals for R&D expenses as a critical audit matter due to the significance of these expenses to the financial statements and the subjectivity involved in estimating the progress of the R&D projects and service fees accrued for the completion of milestones by the CROs and CMOs. As a result, auditor judgement and additional testing were required to perform procedures and evaluate audit evidence related to the accruals for R&D expenses. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. Our audit procedures related to the accruals for R&D expenses included the following, among others, (i) we obtained an understanding of management’s process and evaluated the design of controls related to the accrual process for R&D expenses; (ii) we read selected research agreements to evaluate whether the progress and the completion of milestones reported by the representatives of the CROs and CMOs and the corresponding service fees are based on the respective contractual terms, (iii) we sent confirmations to CROs and CMOs, on a sample basis, to confirm the amount of the total R&D service fees incurred for the year and the amounts of outstanding payables under the terms of the contracts, and (iv) we selected projects from the open contract list at year end and made inquiries of the Company research personnel regarding the project status, and we also inspected invoices received subsequent to year-end and additional documents and correspondence with the CROs and CMOs, supporting management’s estimate of R&D expenditures. /s/ EisnerAmper LLP We have served as the Company’s auditor since 2011. EISNERAMPER LLP Iselin, New Jersey March 8, 2022 F- 1 Matinas BioPharma Holdings, Inc. Consolidated Balance Sheets 2021 2020 December 31, 2021 2020 ASSETS: Current assets: Cash and cash equivalents $ 21,029,806 $ 12,432,481 Marketable securities 28,592,049 46,246,573 Restricted cash 50,000 136,000 Prepaid expenses and other current assets 1,321,466 2,739,791 Total current assets 50,993,321 61,554,845 Non-current assets: Leasehold improvements and equipment - net 1,537,728 1,523,950 Operating lease right-of-use assets - net 4,218,890 3,276,639 Finance lease right-of-use assets - net 22,270 58,007 In-process research and development 3,017,377 3,017,377 Goodwill 1,336,488 1,336,488 Restricted cash - security deposits 200,000 200,000 Total non-current assets 10,332,753 9,412,461 Total assets $ 61,326,074 $ 70,967,306 LIABILITIES AND STOCKHOLDERS’ EQUITY: Current liabilities: Accounts payable $ 938,270 $ 349,941 Accrued expenses and other liabilities 2,850,888 2,795,329 Operating lease liabilities - current 538,546 391,498 Financing lease liabilities - current 21,039 30,853 Total current liabilities 4,348,743 3,567,621 Non-current liabilities: Deferred tax liability 341,265 341,265 Operating lease liabilities - net of current portion 4,140,387 3,304,063 Financing lease liabilities - net of current portion 2,621 23,660 Total non-current liabilities 4,484,273 3,668,988 Total liabilities 8,833,016 7,236,609 Stockholders’ equity: Series B Convertible preferred stock, stated value $ 1,000 per share, 8,000 shares authorized as of December 31, 2021 and 2020, respectively; 0 and 4,361 shares issued and outstanding as of December 31, 2021 and 2020, respectively - 3,797,705 Common stock par value $ 0.0001 per share, 500,000,000 shares authorized at December 31, 2021 and 2020, respectively; 216,269,450 and 200,113,431 issued and outstanding as of December 31, 2021 and 2020, respectively 21,627 20,010 Additional paid-in capital 184,251,138 167,192,003 Accumulated deficit ( 131,634,208 ) ( 107,507,193 ) Accumulated other comprehensive (loss)/income ( 145,499 ) 228,172 Total stockholders’ equity 52,493,058 63,730,697 Total liabilities and stockholders’ equity $ 61,326,074 $ 70,967,306 The accompanying notes are an integral part of these consolidated financial statements. F- 2 Matinas BioPharma Holdings, Inc. Consolidated Statements of Operations and Comprehensive Loss 2021 2020 For the Year Ended December 31, 2021 2020 Revenue: Contract research revenue $ 33,333 $ 158,333 Costs and Expenses: Research and development 14,583,283 14,358,918 General and administrative 10,184,805 10,005,967 Total costs and expenses 24,768,088 24,364,885 Loss from operations ( 24,734,755 ) ( 24,206,552 ) Sale of New Jersey net operating loss 1,328,470 1,073,289 Other income, net 122,870 686,425 Net loss $ ( 23,283,415 ) $ ( 22,446,838 ) Preferred stock series B accumulated dividends ( 395,799 ) ( 793,442 ) Net loss attributable to common shareholders $ ( 23,679,214 ) $ ( 23,240,280 ) Net loss attributable to common shareholders per share – basic and diluted $ ( 0.11 ) $ ( 0.12 ) Weighted average common shares outstanding: Basic and diluted 210,178,332 196,894,628 Other comprehensive (loss)/income, net of tax Net unrealized (loss)/gain on securities available-for-sale ( 373,671 ) 237,537 Reclassification of realized gain on securities available-for-sale to net loss - ( 8,485 ) Other comprehensive (loss)/income, net of tax ( 373,671 ) 229,052 Comprehensive loss attributable to shareholders $ ( 23,657,086 ) $ ( 22,217,786 ) The accompanying notes are an integral part of these consolidated financial statements. F- 3 Matinas BioPharma Holdings, Inc. Consolidated Statements of Changes in Stockholders’ Equity Shares Amount Shares Amount Capital Deficit (Loss)/Income Equity Redeemable Convertible Preferred Stock B Common Stock Additional Paid - in Accumulated Accumulated Other Comprehensive Total Stockholders’ Shares Amount Shares Amount Capital Deficit (Loss)/Income Equity Balance, December 31, 2019 4,577 $ 3,985,805 163,156,984 $ 16,315 $ 113,427,897 $ ( 84,377,555 ) $ ( 880 ) $ 33,051,582 Stock-based compensation - - - - 4,184,141 - - 4,184,141 Issuance of common stock as compensation for services - - 379,385 38 390,604 - - 390,642 Issuance of common stock in exchange for preferred shares B ( 216 ) ( 188,100 ) 432,000 43 188,057 - - - Issuance of common stock in public offering, net of stock issuance costs ($ 3,308,790 ) - - 32,260,000 3,226 46,700,984 - - 46,704,210 Issuance of common stock in exchange for Options - - 782,073 79 820,248 - - 820,327 Issuance of common stock in exchange for Warrants - - 1,737,389 172 797,409 - - 797,581 Stock dividends - - 1,365,600 137 682,663 ( 682,800 ) - - Other comprehensive income - - - - - 229,052 229,052 Issuance of common stock pursuant to the Aquarius Merger - - Issuance of common stock pursuant to the Aquarius Merger, shares - - Net loss - - - - - ( 22,446,838 ) - ( 22,446,838 ) Balance, December 31, 2020 4,361 $ 3,797,705 200,113,431 $ 20,010 $ 167,192,003 $ ( 107,507,193 ) $ 228,172 $ 63,730,697 Stock-based compensation - - - - 4,192,082 - - 4,192,082 Issuance of common stock as compensation for services - - 31,769 4 31,748 - - 31,752 Issuance of common stock in exchange for preferred shares B ( 4,361 ) ( 3,797,705 ) 8,722,000 873 3,796,832 - - - Issuance of common stock in public offering, net of stock issuance costs ($ 172,592 ) - - 3,023,147 302 5,580,169 - - 5,580,471 Issuance of common stock in public offering, net of stock issuance costs - - 3,023,147 302 5,580,169 - - 5,580,471 Issuance of common stock in exchange for Options - - 1,076,946 107 1,415,035 - - 1,415,142 Issuance of common stock in exchange for Warrants - - 114,957 12 ( 12 ) - - - Issuance of common stock pursuant to the Aquarius Merger - - 1,500,000 150 1,199,850 - - 1,200,000 Stock dividends - - 1,687,200 169 843,431 ( 843,600 ) - - Other comprehensive (loss) - - - - - - ( 373,671 ) ( 373,671 ) Other comprehensive income loss - - - - - - ( 373,671 ) ( 373,671 ) Net loss - - - - - ( 23,283,415 ) - ( 23,283,415 ) Balance, December 31, 2021 - $ - 216,269,450 $ 21,627 $ 184,251,138 $ ( 131,634,208 ) $ ( 145,499 ) $ 52,493,058 The accompanying notes are an integral part of these consolidated financial statements. F- 4 Matinas BioPharma Holdings, Inc. Consolidated Statements of Cash Flows 2021 2020 For the Year Ended December 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 23,283,415 ) $ ( 22,446,838 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 244,395 231,058 Loss on disposal of equipment 2,207 - Stock-based compensation expense 4,292,355 4,564,787 Amortization of operating lease right-of-use assets 501,359 484,568 Amortization of finance lease right-of-use assets 35,737 58,961 Amortization of bond discount 250,453 239,831 Realized gain on sale of marketable securities - 8,485 Stock issued pursuant to the Aquarius Merger Agreement charged to Research and Development 1,200,000 - Changes in operating assets and liabilities: Operating lease liabilities ( 460,239 ) ( 423,741 ) Prepaid expenses and other current assets 1,349,804 ( 611,397 ) Accounts payable 588,329 ( 329,369 ) Accrued expenses and other liabilities 55,560 855,819 Net cash used in operating activities ( 15,223,455 ) ( 17,367,836 ) Cash flows from investing activities: Purchases of marketable securities ( 23,194,600 ) ( 72,106,359 ) Proceeds from sales of marketable securities 40,225,000 31,445,156 Purchases of leasehold improvements and equipment ( 260,380 ) ( 5,749 ) Net cash provided by/(used in) investing activities 16,770,020 ( 40,666,952 ) Cash flows from financing activities: Net proceeds from public offering of common stock 5,580,471 46,704,210 Proceeds from exercise of warrants - 797,581 Proceeds from exercise of options 1,415,142 599,713 Payments of capital lease liability – principal ( 30,853 ) ( 54,673 ) Net cash provided by financing activities 6,964,760 48,046,831 Net increase/(decrease) in cash, cash equivalents and restricted cash 8,511,325 ( 9,987,957 ) Cash, cash equivalents and restricted cash at beginning of period 12,768,481 22,756,438 Cash, cash equivalents and restricted cash at end of period $ 21,279,806 $ 12,768,481 Supplemental non-cash financing and investing activities: Unrealized (loss)/gain on marketable securities $ ( 373,671 ) $ 229,052 Cashless exercise of warrants $ 12 $ - Stock dividends issued $ 843,600 $ 682,800 Non-cash prepaid from exercise of options $ - $ 220,614 Preferred stock conversion into common stock - series B $ 3,797,705 $ 188,100 Unearned restricted stock grants $ - $ 68,521 Right-of-use asset in exchange from liabilities from operating lease $ 1,443,610 $ - The accompanying notes are an integral part of these consolidated financial statements. F- 5 Note 1 – Description of Business Matinas BioPharma Holdings Inc. (“Holdings”) is a Delaware corporation formed in 2013. Holdings is the parent company of Matinas BioPharma, Inc. (“BioPharma”), and Matinas BioPharma Nanotechnologies, Inc. (“Nanotechnologies,” formerly known as Aquarius Biotechnologies, Inc.), its operating subsidiaries (“Nanotechnologies”, and together with “Holdings” and “BioPharma” or “the Company”). The Company is a clinical-stage biopharmaceutical company with a focus on identifying and developing novel pharmaceutical products. Note 2 – Liquidity and Plan of Operations The Company has experienced net losses and negative cash flows from operations each period since its inception. Through December 31, 2021, the Company had an accumulated deficit of approximately $ 131.6 million. The Company’s net loss for the years ended December 31, 2021 and 2020 were approximately $ 23.3 million and $ 22.4 million, respectively. The Company has been engaged in developing LYPDISO (formerly MAT9001) as well as its lipid nanocrystal (“LNC”) platform delivery technology and a pipeline of associated product candidates, including MAT2203 and MAT2501, since 2011. To date, the Company has not obtained regulatory approval for any of its product candidates nor generated any revenue from product sales, and the Company expects to incur significant expenses to complete development of its product candidates. The Company may never be able to obtain regulatory approval for the marketing of any of its product candidates in any indication in the United States or internationally and there can be no assurance that the Company will generate revenues or ever achieve profitability. Assuming the Company obtains Food and Drug Administration (“FDA”) approval for one or more of its product candidates, the Company expects that its expenses will continue to increase once the Company reaches commercial launch. The Company also expects that its research and development expenses will continue to increase as it moves forward with additional clinical studies for its current product candidates and development of additional product candidates. As a result, the Company expects to continue to incur substantial losses for the foreseeable future, and that these losses will be increasing. To continue to fund operations, during January 2021, the Company sold 3,023,147 shares of common stock under its At-The-Market Sales Agreement with BTIG, LLC, generating gross proceeds of approximately $ 5.8 million and net proceeds of approximately $ 5.6 million. In addition, on January 14, 2020, the Company completed an underwritten public offering of 32,600,000 shares of common stock, generating gross cash proceeds of approximately $ 50.0 million and net proceeds of approximately $ 46.7 million. (See Note 12 – Stockholders’ Equity). As of December 31, 2021, the Company had cash and cash equivalents of approximately $ 21.0 million, marketable securities of approximately $ 28.6 million and restricted cash of approximately $ 0.3 million. The Company believes the cash and cash equivalents and marketable securities on hand are sufficient to fund planned operations through 2023. Note 3 – Summary of Significant Accounting Policies Basis of presentation and principles of consolidation The accompanying audited consolidated financial statements include the consolidated accounts of Holdings and its wholly owned subsidiaries, BioPharma, and Nanotechnologies. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and reflect the operations of the Company and its wholly owned subsidiaries. All intercompany transactions have been eliminated in consolidation. F- 6 COVID-19 In March 2020, the World Health Organization declared COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economics, and financial markets globally, potentially leading to an economic downturn. The Company has been actively monitoring the COVID-19 pandemic and its impact globally. The financial results for the year ended December 31, 2021 were not significantly impacted by COVID-19. However, the Company cannot predict the impact of the progression of the COVID-19 pandemic on future results or the Company’s ability to raise capital due to a variety of factors, including but not limited to the continued good health of Company employees, the ability of suppliers to continue to operate and deliver, the ability of the Company to maintain operations, any further government and/or public actions taken in response to the pandemic and ultimately the length of the pandemic. Use of estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, the Company’s research and development expenses, the assessment of the impairment of goodwill and intangible assets, level 3 fair value measurement of financial instruments, income tax valuations, the determination of stock-based compensation and contingent consideration. Segment and geographic information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating and reporting segment. Cash, cash equivalents and restricted cash The Company considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash and cash equivalents and all investments with maturities of greater than three months from date of purchase are classified as marketable securities. Cash and cash equivalents consisted of cash in bank checking and savings accounts, money market funds and short-term U.S. treasury bonds that mature within three months of settlement date. The Company presents restricted cash with cash and cash equivalents in the Consolidated Statements of Cash Flows. Restricted cash represents funds the Company is required to set aside to cover building operating leases and other purposes. For a complete disclosure of the Company’s cash, cash equivalents and restricted cash, see Note 4 – Cash, Cash Equivalents, Restricted Cash and Marketable Securities. Marketable Securities Marketable securities, all of which are available-for-sale, consist of U.S. treasury bonds, U.S. government notes, corporate debt securities and state and municipal bonds. Marketable securities are carried at fair value, with unrealized gains and losses reported as accumulated other comprehensive (loss)/income, except for losses from impairments which are determined to be other-than-temporary. Realized gains and losses and declines in value judged to be other-than-temporary are included in the determination of net loss and are included in other income, net. Fair values are based on quoted market prices at the reporting date. Interest and dividends on available-for-sale securities are included in other income, net. For a complete disclosure of the Company’s marketable securities, see Note 4 – Cash, Cash Equivalents, Restricted Cash and Marketable Securities. F- 7 Concentration of credit risk The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash and marketable securities. The Company’s investment policy is to invest only in institutions that meet high credit quality standards and establishes limits on the amount and time to maturity of investments with any individual counterparty. Balances are maintained at U.S. financial institutions and are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to regulatory limits. The Company has not experienced any credit losses associated with its balances in such accounts. Leasehold improvements and equipment Equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation on equipment is computed using the straight-line method over the estimated useful lives of the assets, which range from three to ten years . Capitalized costs associated with leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life of the asset or the remaining term of the lease. Goodwill and other intangible assets Goodwill is recorded when consideration paid for an acquired entity exceeds the fair value of the net assets acquired. Goodwill is not amortized but rather is assessed for impairment at least annually on a reporting unit basis, or more frequently when events and circumstances indicate the goodwill may be impaired. U.S. GAAP provides that the Company has the option to perform a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If the Company determine this is the case, the Company can perform further analysis to identify and measure the amount of goodwill impairment loss to be recognized, if any. A reporting unit is an operating segment, or one level below an operating segment. Historically, the Company has conducted its business in a single operating segment and reporting unit. For the years ended December 31, 2021 and 2020, the Company assessed goodwill impairment by performing a qualitative test for its reporting unit. As part of the qualitative review, the Company considered its cash position and its ability to obtain additional financing in the near term to meet its operational and strategic goals and substantiate the value of its business. Based on the results of the Company’s assessment, it was determined that it is more-likely-than-not that the fair value of the reporting unit is greater than its carrying amount. There were no impairments of goodwill during the years ended December 31, 2021 and 2020. If a nonrecurring fair value measurement for a goodwill impairment was required, sufficient information will be provided to permit reconciliation of the fair value of the asset categorized within the fair value hierarchy as level 3 to the amounts presented in the statement of financial position. Indefinite lived intangible assets are composed of in-process research and development (“IPR&D”) and represent projects acquired in a business combination that have not reached technological feasibility or that lack regulatory approval at the time of acquisition. These IPR&D assets are reviewed for impairment annually, or sooner if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable, and upon establishment of technological feasibility or regulatory approval. An impairment loss, if any, is calculated by comparing the fair value of the asset to its carrying value. If the asset’s carrying value exceeds its fair value, an impairment loss is recorded for the difference and its carrying value is reduced accordingly. Similar to the impairment test for goodwill, the Company may perform a qualitative approach for testing indefinite-lived intangible assets for impairment. The Company used the qualitative approach and concluded that it was more-likely-than-not that its indefinite-lived assets were not impaired during the years ended December 31, 2021 and 2020. Leases The Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) Topic 842, “Leases”, establishes a right-of-use (“ROU”) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. Lessor accounting under the new standard is substantially unchanged. Additional qualitative and quantitative disclosures are also required. F- 8 Preferred stock dividends S ubject to provisions detailed more fully in Note 12, Stockholders’ Equity, shares of Series B Preferred Stock earned dividends at rates of 10 % , 15 % and 20 % once per year on the first, second and third anniversary, respectively, of June 19, 2018. The dividends were paid when earned to the holders of the Series B Preferred Stock in the form of shares of the Company’s common stock. Income taxes Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates. The Company adopted the provisions of Accounting Standard Codification 740-10 and has analyzed its filing positions in 2021 and 2020 in jurisdictions where it may be obligated to file returns. The Company believes that its income tax filing position and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties as of December 31, 2021. Since the Company incurred net operating losses in every tax year since inception, the 2014 through 2020 income tax returns are subject to examination and adjustments by the IRS for at least three years following the year in which the tax attributes are utilized. Fair Value Measurements As defined in ASC 820 “Fair Value Measurement”, fair value measurements should be disclosed separately by three levels of the fair value hierarchy. For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs (quoted prices in active markets) and minimized the use of unobservable inputs (the Company’s assumptions) when developing fair value measurements, in accordance with the established fair value hierarchy. For a complete disclosure of the Company’s fair value measurements, see Note 5 – Fair Value Measurements. Stock-based compensation Stock-based compensation to employees consist of stock option grants and restricted shares that are recognized in the consolidated statement of operations based on their fair values at the date of grant. The Company accounts for equity instruments issued to non-employees in accordance with the provisions of ASC Topic 505, subtopic 50, Equity-Based Payments to Non-Employees based upon the fair-value of the underlying instrument. The equity instruments, consisting of stock options granted to consultants, are valued using the Black-Scholes valuation model. The Company calculates the fair value of option grants utilizing the Black-Scholes pricing model and estimates the fair value of restricted stock based upon the estimated fair value or the common stock. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. The Company accounts for forfeitures as they occur. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock option or warrant. The resulting stock-based compensation expense for both employee and non-employee awards is generally recognized on a straight-line basis over the requisite service period of the award. F- 9 Basic and diluted net loss per common share Net loss per share information is determined using the two-class method, which includes the weighted-average number of shares of common stock outstanding during the period and other securities that participate in dividends (a “participating security”). The Company considered its Preferred Stock to be participating securities because they included rights to participate in dividends with the common stock. Under the two-class method, basic net loss per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The net loss attributable to common stockholders is calculated by adjusting the net loss of the Company for the accretion on the Preferred Stock. Net losses are not allocated to preferred stockholders as they do not have an obligation to share in the Company’s net losses. In periods with net income attributable to common stockholders, the Company would allocate net income first to preferred stockholders based on dividend rights under the Company’s certificate of incorporation and then to preferred and common stockholders based on ownership interests. Diluted net loss per share attributable to common stockholders is computed using the more dilutive of (1) the two-class method or (2) the if-converted method. During the years ended December 31, 2021 and 2020, diluted earnings per common share is the same as basic earnings per common share because, as the Company incurred a net loss during each period presented, the potentially dilutive securities from the assumed exercise of all outstanding stock options, warrants and conversion of preferred stock, would have an anti-dilutive effect. The reconciliation of the diluted shares as of December 31, 2021 and 2020 are as follows (in thousands): Schedule of Anti-dilutive Securities As of December 31, 2021 2020 Stock options 28,184 22,551 Preferred Stock and accrued dividend upon conversion - 8,722 Warrants 988 1,328 Total 29,172 32,601 Revenue recognition Pursuant to Topic 606, the Company recognizes revenue to depict the transfer of promised goods or services to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, Topic 606 outlines a five-step process for recognizing revenue from customer contracts that includes i) identification of the contract with a customer, ii) identification of the performance obligations in the contract, iii) determining the transaction price, iv) allocating the transaction price to the separate performance obligations in the contract, and v) recognizing revenue associated with performance obligations as they are satisfied. At contract inception, the Company assesses the goods or services promised within each contract and assess whether each promised good or service is distinct and determine 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 the performance obligation is satisfied. For the years ended December 31, 2020, the Company’s revenues primarily consist of a research grant to provide research and development services to the Cystic Fibrosis Foundation (“CFF”). The grant contract has a single performance obligation that is recognized over time as the services are performed. There are no contract assets or liabilities associated with this grant. The Company had approximately $ 125 thousand of CFF research grant revenue for the year ended December 31, 2020. On December 12, 2019, the Company entered into a feasibility study agreement (the “Agreement”) with Genentech, Inc. (“Genentech”). This feasibility study will involve the development of oral formulations using the Company’s LNC platform delivery technology, which enables the development of a wide range of difficult-to-deliver molecules. Under the terms of the Agreement, Genentech paid the Company a total of $ 100 thousand for three molecules, or approximately $ 33 thousand per molecule, which will be recognized upon the Company fulfilling its obligations for each molecule under the Agreement. The Agreement has a single performance obligation that is recognized over time as the services are performed. There are no contract assets or liabilities associated with this Agreement. As certain Agreement performance obligations in this agreement were completed, disaggregation of revenue is not required. As of December 31, 2021, the Company completed the first and second of the three molecules and the Company recognized approximately $ 33 thousand of Genentech revenue for the years ended December 31, 2021 and 2020, respectively. The Company is scheduled to complete the remaining molecule during 2022. F- 10 Collaboration Agreements The Company assess whether its collaboration agreements are subject to ASC Topic 808, Collaborative Arrangements (Topic 808) based on whether they involve joint operating activities and whether both parties have active participation in the arrangement and are exposed to significant risks and rewards. To the extent that the arrangement falls within the scope of Topic 808, the Company will apply by analogy the unit of account guidance under Topic 606 to identify distinct performance obligations, and then determine whether a customer relationship exists for each distinct performance obligation. If the Company determines a performance obligation within the arrangement is with a customer, the Company applies the guidance in Topic 606. If a portion of a distinct bundle of goods or services within an arrangement is not with a customer, then the unit of account is not within the scope of Topic 606, and the recognition and measurement of that unit of account shall be based on analogy to authoritative accounting literature or, if there is no appropriate analogy, a reasonable, rational, and consistently applied accounting policy election. The terms of such arrangements typically include payments to the Company for one or more of the following: up-front fees; development and regulatory payments; product supply services; research and development cost reimbursements; profit-sharing arrangements; and royalties on certain products if they are successfully commercialized. As part of the accounting for these arrangements, the Company develops assumptions that require judgment to determine the standalone selling price for each performance obligation identified in the contract. These key assumptions may include forecasted revenues, clinical development timelines and costs, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. Up-front License Fees: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company would recognize revenues from nonrefundable up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license, which generally would occur at or near the inception of the contract. For licenses that are bundled with other promises, 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 revenues from nonrefundable up-front fees. The Company will evaluate the measure of progress at the end of each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. Research and Development Milestone Payments: At the inception of each arrangement that includes development milestone payments, the Company will evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until uncertainty associated with the approvals has been resolved. The transaction price is then allocated to each performance obligation, on a relative standalone selling price basis, for which the Company will recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achieving such development and regulatory milestones and any related variable consideration constraint, and if necessary, adjust the Company’s estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis. Research and Development Cost Reimbursements: The Company’s collaboration arrangements may include promises of future clinical development and drug safety services, as well as participation on certain joint committees. When such services are provided to a customer or partner, and they are distinct from the licenses provided to the Company’s collaboration partners, these promises are accounted for as a separate performance obligation which the Company estimates using internal development costs incurred and projections through the term of the arrangements. The Company records revenues for these services as the performance obligations are satisfied over time based on measure of progress. However, if the Company concludes that its collaboration partner is not a customer for those collaborative research and development activities, it presents such payments as a reduction of research and development expenses. F- 11 Research and Development Arrangement: Under the terms of our research and development agreement with the CFF Agreement, the Company did not account for this arrangement in accordance with Topic 606. However, the Company has determined that it is a partner under a collaboration agreement as it shares in the risks and rewards that would be received if the product is successful and commercialized. Therefore the funds received under the terms of this agreement will be recorded as reimbursements of research and development costs and reduce the research and development expenses in the Company’s Statements of Operations and Comprehensive Income/(Loss). The Company records the reimbursements for certain materials and other research and development costs associated with the agreement when it is probable that a significant reversal in the amount of cumulative costs have been recognized. As of December 31, 2021 and 2020, the Company recognized approximately $ 2.2 million and $ 0.1 million, respectively, of reimbursed research and development costs associated with the CFF Agreement. For a complete disclosure of the CFF Agreement, see Note 9 – Collaboration Agreements, License and other Research and Development Agreements. Research and development expenses Research and development expenses primarily consist of costs associated with the preclinical and clinical development of our product candidate portfolio, including the following: ● external research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”) and other vendors and contract manufacturing organizations (“CMOs”) for the production of drug substance and drug product; and ● employee-related expenses, including salaries, benefits and share-based compensation expense. Research and development expenses also include costs of acquired product licenses and related technology rights where there is no alternative future use, costs of prototypes used in research and development, consultant fees and amounts paid to certain of our collaborative partners. All research and development expenses are charged to operations as incurred in accordance with FASB ASC Topic 730, Research and Development. The Company accounts for non-refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made. Accrued Research and Development Expenses As part of the process of preparing the Company’s financial statements, the Company is required to estimate its accrued expenses. This process involves reviewing quotations and contracts, identifying services that have been performed on the Company’s behalf and estimating the level of service performed and the associated cost incurred for the service when the Company has not yet been invoiced or otherwise notified of the actual cost. Certain of the Company’s service providers invoice the Company monthly in arrears for services performed or when contractual milestones are met. The Company makes estimates of its accrued expenses as of each balance sheet date in its financial statements based on facts and circumstances known to the Company at that time. The Company periodically confirms the accuracy of its estimates with the service providers and adjust if necessary. The significant estimates in the Company’s accrued research and development expenses are related to expenses incurred with respect to CROs, CMOs and other vendors in connection with research and development and manufacturing activities. The Company bases its expense related to CROs and CMOs on its estimates of the services received and efforts expended pursuant to quotations and contracts with such vendors that conduct research and development and manufacturing activities on its behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to the Company’s vendors will exceed the level of services provided and result in a prepayment of the applicable research and development or manufacturing expense. In accruing service fees, the Company estimates the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from its estimate, the Company adjust the accrual or prepaid expense accordingly. Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any particular period. There have been no material changes in estimates for the periods presented. F- 12 Patent expenses Legal fees and other direct costs incurred in obtaining and protecting patents are also expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations. Other comprehensive income/(loss) Other comprehensive income/(loss) consists of net gains/(losses) and unrealized losses on marketable securities available-for-sale and is presented in the Consolidated Statements of Operations. Recently adopted accounting pronouncements In December 2019, the FASB Issued Accounting Standard Update 2019-12, “Income Taxes, (Topic 740): Simplifying the Accounting for Income Taxes”. This standard removes certain exceptions to the general principles and improves consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted the new standard effective January 1, 2021 with no material impact on the Company’s consolidated financial statements. Note 4 – Cash, Cash Equivalents, Restricted Cash and Marketable Securities The Company considers all highly liquid financial instruments with original maturities of three months or less when purchased to be cash and cash equivalents and all investments with maturities of greater than three months from date of purchase are classified as marketable securities. Cash and cash equivalents consisted of cash in bank checking and savings accounts, money market funds and short-term U.S. treasury bonds that mature within three months of settlement date. Cash, Cash Equivalents and Restricted Cash The Company presents restricted cash with cash and cash equivalents in the Consolidated Statements of Cash Flows. Restricted cash represents funds the Company is required to set aside to cover building operating leases and other purposes. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total of the amounts in the Consolidated Statements of Cash Flows as of December 31, 2021, December 31, 2020 and December 31, 2019 (in thousands): Schedule of Cash, Cash Equivalents and Restricted Cash December 31, 2021 December 31, 2020 December 31, 2019 Cash and cash equivalents $ 21,030 $ 12,432 $ 22,170 Restricted cash included in current/long term assets 250 336 586 Cash, cash equivalents and restricted cash in the statements of cash flows $ 21,280 $ 12,768 $ 22,756 Marketable Securities The Company has classified its investments in marketable securities as available-for-sale and as a current asset. The Company’s investments in marketable securities are carried at fair value, with unrealized gains and losses included as a separate component of stockholders’ equity. Unrealized gains and losses are classified as other comprehensive (loss)/income and costs are determined on a specific identification basis. Realized gains and losses from our marketable securities are recorded in other income, net. For the years ended December 31, 2021 and 2020, the Company recorded unrealized (losses)/gains of approximately ($ 374 ) thousand and $ 238 thousand, respectively, and reclassed approximately $ 0 and $ 9 thousand to net realized loss from operations from the sale of certain securities during 2021 and 2020, respectively. As of December 31, 2021 and 2020, the Company had net accumulated unrealized losses of approximately $ 145 thousand and net accumulated unrealized gains of approximately $ 228 thousand, respectively. F- 13 The following tables summarizes the Company’s marketable securities for the year ended December 31, 2021 consisted of the following (in thousands): Summary of Marketable Securities Amortized Cost Unrealized Gain Unrealized (Loss) Fair Value Amortized Cost Unrealized Gain Unrealized (Loss) Fair Value U.S. Government Notes $ 19,395 $ 2 $ ( 120 ) $ 19,277 Corporate Debt Securities 9,092 — ( 27 ) 9,065 State and Municipal Bonds 250 — — 250 Total marketable securities $ 28,737 $ 2 $ ( 147 ) $ 28,592 Maturities of debt securities classified as available-for-sale were as follows at December 31, 2021 (in thousands): Schedule of Maturities of Debt Securities Available-for-sale Fair Value Net Carrying Amount Due within one year $ 8,257 $ 8,310 Due after one year through five years 20,335 20,402 $ 28,592 $ 28,712 The following tables summarizes the Company’s marketable securities for the year ended December 31, 2020 consisted of the following (in thousands): Amortized Cost Unrealized Gain Unrealized (Loss) Fair Value Amortized Cost Unrealized Gain Unrealized (Loss) Fair Value U.S. Treasury Bonds $ 18,293 $ 136 $ — $ 18,429 U.S. Government Notes 22,148 82 — 22,230 Corporate Debt Securities 4,303 3 — 4,306 State and Municipal Bonds 1,275 7 — 1,282 Total marketable securities $ 46,019 $ 228 $ — $ 46,247 Maturities of debt securities classified as available-for-sale were as follows at December 31, 2020 (in thousands): Fair Value Net Carrying Amount Due within one year $ 31,438 $ 31,602 Due after one year through five years 14,809 14,845 $ 46,247 $ 46,447 The Company determined that the unrealized (losses) and gains are deemed to be temporary as of December 31, 2021 and 2020. Unrealized (losses) and gains generally are the result of increases in the risk premiums required by market participants rather than an adverse change in cash flows for a fundamental weakness in the credit quality of the issuer or underlying assets. The Company has the ability and intent to hold these investments until maturity. The Company does not consider the investment in marketable securities to be other-than-temporarily impaired at December 31, 2021 and 2020. F- 14 Note 5 - Fair Value Measurements The Company uses the fair value hierarchy to measure the value of its financial instruments. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The basis for fair value measurements for each level within the hierarchy is described below: ● Level 1 – Quoted prices for identical assets or liabilities in active markets. ● Level 2 – Quoted prices for identical or similar assets and liabilities in markets that are not active; or other model-derived valuations whose inputs are directly or indirectly observable or whose significant value drivers are observable. ● Level 3 – Valuations derived from valuation techniques in which one or more significant inputs to the valuation model are unobservable and for which assumptions are used based on management estimates. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. The carrying amounts of certain cash and cash equivalents, current portion of restricted cash, marketable securities, prepaid expenses and other current assets, accounts payable, current portion of lease liability and accrued expenses approximate fair value due to the short-term nature of these instruments. A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows (in thousands): Schedule of Fair Value Measurement of Assets and Liabilities Fair Value Hierarchy December 31, 2021 Total (Level 1) (Level 2) (Level 3) Assets Marketable Securities: U.S. Government Notes $ 19,277 $ — $ 19,277 $ — Corporate Debt Securities 9,065 — 9,065 — State and Municipal Bonds 250 — 250 — Total $ 28,592 $ — $ 28,592 $ — Fair Value Hierarchy December 31, 2020 Total (Level 1) (Level 2) (Level 3) Assets Marketable Securities: U.S. Treasury Bonds $ 18,429 $ 18,429 $ — $ — U.S. Government Notes 22,230 — 22,230 — Corporate Debt Securities 4,306 — 4,306 — State and Municipal Bonds 1,282 — 1,282 — Total $ 46,247 $ 18,429 $ 27,818 $ — U.S. treasury bonds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices for identical assets in active markets. Marketable securities consisting of U.S. government notes, corporate debt securities and state and municipal bonds are classified as Level 2 and are valued using quoted market prices in markets that are not active. F- 15 Note 6 – Leasehold Improvements and Equipment Leasehold improvements and equipment, summarized by major category, consist of the following for the years ended December 31, 2021 and 2020 (in thousands): Schedule of Leasehold Improvements and Equipment December 30, 2021 December 31, 2020 Equipment $ 1,640 $ 1,443 Leasehold improvements 935 878 Total 2,575 2,321 Less: accumulated depreciation and amortization 1,037 797 Leasehold improvements and equipment, net $ 1,538 $ 1,524 Depreciation and amortization expense for the years ended December 31, 2021 and 2020 was approximately $ 244 thousand and $ 231 thousand, respectively. During the years ended December 31, 2021 and 2020, the Company purchased equipment and leasehold improvements of approximately $ 260 thousand and $ 6 thousand, respectively. During the year ended December 31, 2021, the Company recorded an asset write-off of approximately $ 6 thousand, including $ 4 thousand of related accumulated depreciation. The Company had no asset write-offs during the year ended December 31, 2020. Note 7 – Accrued Expenses and Other Liabilities Accrued expenses and other liabilities, summarized by major category, consist of the following for years ended December 31, 2021 and 2020 (in thousands): Schedule of Accrued Expenses 2021 2020 As of December 31, 2021 2020 Payroll and incentives $ 1,343 $ 1,094 General and administrative expenses 195 280 Research and development expenses 381 778 Deferred revenue and other deferred liabilities * 932 643 Total $ 2,851 $ 2,795 * At December 31, 2021, the balance included approximately $ 899 thousand related to the CFF Agreement’s deferred liability and approximately $ 33 thousand is deferred revenue related to the Genentech feasibility study agreement. At December 31, 2020, the balance included approximately $ 577 thousand related to the CFF Agreement’s deferred liability and approximately $ 67 thousand of deferred revenue related to the Genentech feasibility study agreement. Note 8 – Leases The Company has various lease agreements with terms up to 10 years , including leases of office space, a laboratory and manufacturing facility, and various equipment. Some leases include purchase, termination or extension options for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised. Operating lease obligations On November 1, 2013, the Company entered into a 7 -year lease for office space in Bedminster, New Jersey which commenced in June 2014 at a monthly rent of approximately $ 13,000 , increasing to approximately $ 14,000 per month toward the end of the term. On September 23, 2020, the Company entered into an amendment to the Bedminster lease. Pursuant to the amendment, the Company leased an additional 3,034 rentable square feet (“Expansion Premises”). The amendment became effective upon delivery to the Company of the Expansion Premises, which occurred on August 1, 2021, and extends the term of the lease for seven years from such date. There is no renewal option, no security deposit, no residual value or significant restrictions or covenants other than those customary in such arrangements. Except as expressly provided, all other terms, covenants, conditions and agreements as set forth in the lease will remain unchanged and in full force and effect. F- 16 On December 15, 2016, the Company entered into a 10-year, 3-month lease to consolidate our locations while expanding our laboratory and manufacturing facilities. The lease began August 2017. The monthly rent will start at approximately $ 43,000 increasing to approximately $ 64,000 in the final year. To obtain the laboratory and facility site, the Company was obligated to provide an initial security deposit of $ 586,000 . This deposit was subsequently reduced and is currently $ 200,000 at December 31, 2021. The assets and liabilities from operating and finance leases are recognized at the lease commencement date based on the present value of remaining lease payments over the lease term using the Company’s incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet. The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, the Company uses a discount rate based on its incremental borrowing rate, which is determined using the average of borrowing rates explicitly stated in the Company’s finance leases. The Company incurred lease expense for its operating leases of approximately $ 852 thousand and $ 814 thousand for the years ended December 31, 2021 and 2020. The Company incurred amortization expense on its operating lease right-of-use assets of approximately $ 501 thousand and $ 485 thousand for the years ended December 31, 2021 and 2020, respectively. Finance Leases The Company incurred interest expense on its finance leases of approximately $ 3 thousand and $ 7 thousand for the years ended December 31, 2021 and 2020, respectively. The Company incurred amortization expense on its finance lease right-of-use assets of approximately $ 36 thousand and $ 59 thousand for the years ended December 31, 2021 and 2020, respectively. The following table presents information about the amount and timing of liabilities arising from the Company’s operating leases and finance leases as of December 31, 2021 (in thousands): Schedule of Maturity of Operating and Finance Leases Liabilities Maturity of Lease Liabilities Operating Lease Liabilities Finance Lease Liabilities 2022 $ 883 $ 22 2023 922 2 2024 962 - 2025 1,004 - 2026 1,046 - Thereafter 1,112 - Total undiscounted operating lease payments $ 5,929 $ 24 Less: Imputed interest 1,250 - Present value of operating lease liabilities $ 4,679 $ 24 Weighted average remaining lease term in years 6.1 0.9 Weighted average discount rate 7.8 % 7.8 % The following table presents information about the amount and timing of liabilities arising from the Company’s operating and finance leases as of December 31, 2020 (in thousands): Maturity of Lease Liabilities Operating Lease Liabilities Finance Lease Liabilities 2021 $ 685 $ 34 2022 645 19 2023 677 2 2024 710 - 2025 745 - Thereafter 1,458 - Total undiscounted operating lease payments $ 4,920 $ 55 Less: Imputed interest 1,224 - Present value of operating lease liabilities $ 3,696 $ 55 Weighted average remaining lease term in years 6.7 1.7 Weighted average discount rate 8.4 % 8.1 % F- 17 Note 9 - Collaboration Agreements, License and Other Research and Development Agreements Cystic Fibrosis Foundation Therapeutics Development Award On November 19, 2020, the Company entered into an award agreement (the “Agreement”) with CFF, pursuant to which it received a Therapeutics Development Award of up to $ 4.2 million (the “Award”) (of which $ 484,249 had been previously received) to support the preclinical development (the “Development Program”) of the Company’s MAT2501 product candidate (the “Product”), a LNC oral formulation of the broad-spectrum aminoglycoside amikacin, for the treatment of pulmonary non-tubercular mycobacteria infections and other pulmonary diseases (the “Field”). On November 19, 2021, the Company and CFF entered into an Amendment to the Agreement which added an additional milestone payment in the amount of $ 321 thousand. The milestone payment was invoiced and the payment was received in the fourth quarter of 2021. The first payment under the Agreement, in the amount of $ 650 thousand, became due upon execution of the Agreement. The Company invoiced the CFF in November 2020 and payment was subsequently received in February 2021. During 2021, the Company invoiced and received $ 2.5 million related to Agreement and the related deferred liability balance of $ 899 thousand is included in accrued expense and other current liabilities. The remainder of the Award will be paid to the Company upon the achievement of certain milestones related to the development program and progress of the Development Program, as set forth in the Agreement. If the Company ceases to use commercially reasonable efforts directed to the development of MAT2501 in the Field, (an “Interruption”) and fails to resume the development of the Product after receiving from CFF notice of an Interruption, then the Company must either repay the amount of the Award actually received by the Company, or grant to CFF (1) an exclusive (even as to the Company), worldwide, perpetual, sublicensable license under technology developed under the Agreement that covers the Product for use in treating infections in CF patients (the “CF Field”), and (2) a non-exclusive, worldwide license under certain background intellectual property covering the Product, to the extent necessary to commercialize the Product in the CF Field. Pursuant to the terms of the Agreement, the Company is obligated to make royalty payments to CFF contingent upon commercialization of the Product in the Field up to a maximum of five (5) times the Award or approximately $ 21.2 million (the “Royalty Cap”), payable in three equal annual installments following the first commercial sale of the Product, the first of which is due within 90 days following the first commercial sale of the Product. The Company may also be obligated to make a payment to CFF if the Company transfers, sells or licenses the Product in the CF Field, or if the Company enters into a change of control transaction which will be applied against the Royalty Cap. In addition, the Company is also obligated to make up the two royalty payments of CFF of the approximately $ 4.2 million each, due in the calendar years in which specific net sales milestones are achieved. The term of the Agreement commenced on November 19, 2020 and expires on the earlier of the date on which the Company has paid CFF all of the fixed royalty payments set forth therein, the effective date of any license granted to CFF following an Interruption, or upon earlier termination of the Agreement. Either CFF or the Company may terminate the agreement for cause, which includes the Company’s material failure to achieve certain development milestones. The Company’s payment obligations survive the termination of the Agreement. The Company concluded that the CFF award is in the scope of ASC 808. Accordingly, as discussed in Note 3, the award amounts received from CFF upon achievement of certain milestones are recognized as credits to research and development expenses in the period the Development Program’s expenses are incurred. During the years ended December 31, 2021 and 2020, the Company recognized $ 2.2 million and $ 0.1 million, respectively, as credits to research and development expenses related to the CFF award. In addition, the Company concluded under the guidance in ASC 730 that it does not have an obligation to repay funds received once related research and development expenses are incurred. F- 18 Genentech Feasibility Study Agreement On December 12, 2019, the Company entered into a feasibility study agreement (the “Agreement”) with Genentech, Inc. (“Genentech”). This feasibility study agreement will involve the development of oral formulations using the Company’s LNC platform delivery technology, which enables the development of a wide range of difficult-to-deliver molecules. Under the terms of the Agreement, Genentech shall pay to the Company a total of $100.0 thousand for three molecules, or approximately $33 thousand per molecule, which will be recognized upon the Company fulfilling its obligations for each molecule under the Agreement. On December 13, 2019, per Genentech’s request, the Company billed Genentech for the total $ 100 thousand and recorded the upfront consideration as deferred revenue, which is recorded in accrued expenses on the consolidated balance sheets, and will recognize it over the term of the contract performance obligation period. As of December 31, 2021, the Company completed the first and second of the three molecules and the Company recognized approximately $ 33 thousand of Genentech revenue for the years ended December 31, 2021 and 2020, respectively. The Company is scheduled to complete the remaining molecule during 2022. Other Research and development agreements The Company has financial obligations resulting from Cooperative Research and Development Agreements (“CRADAs”) entered into with the with the National Institute of Allergy and Infectious Diseases (“NIH”) as follows: ● On February 19, 2016, the Company agreed to provide funds in the amount of $ 200,000 per year under a CRADA to support NIH investigators in the conduct of clinical research to investigate the safety, efficacy, and pharmacokinetics of LNC platform drug products in patients with fungal, bacterial, or viral infections. The initial term of the CRADA was three years. On April 16, 2019, the Company renewed the CRADA for an additional three years with an annual funding commitment of $ 200,000 . ● On April 2, 2019, the Company agreed to provide funds in the amount of $ 157,405 per year under a CRADA to support NIH investigators in the conduct of clinical research to investigate the safety, efficacy, and pharmacokinetics of LNC platform drug products in patients with fungal, bacterial, or viral infections. The term of the CRADA is three years. License agreement Through the acquisition of Aquarius, the Company acquired a license from Rutgers University, The State University of New Jersey (successor in interest to the University of Medicine and Dentistry of New Jersey) for the LNC platform delivery technology. The Second Amended and Restated Exclusive License Agreement provides for, among other things, the payment of (1) royalties on a tiered basis between low single digits and the mid-single digits of net sales of products using such licensed technology, (2) a one-time sales milestone fee of $ 100,000 when and if sales of products using the licensed technology reach the specified sales threshold and (3) an annual license fee of $ 50,000 over the term of the license agreement. Note 10 – Commitments Royalty payment rights On September 12, 2016 the Company conducted a final closing of a private placement offering to accredited investors of shares of the Company’s Series A Preferred Stock. As part of this offer, the investors received royalty payment rights if and when the Company generates sales of its MAT2203 or MAT2501 product candidates. Pursuant to the terms of the Series A Certificate of Designation, the Company may be required to pay royalties of up to $ 35 million per year. If and when the Company obtains FDA or the European Medicines Agency (“EMA”) approval of MAT2203 and/or MAT2501, which the Company does not expect to occur before 2023, if ever, and/or if the Company generates sales of such products, or the Company receives any proceeds from the licensing or other disposition of MAT2203 or MAT2501, the Company is required to pay to the holders of the Series A Preferred Stock, subject to certain vesting requirements, in the aggregate, a royalty (the “Royalty Payment Rights”) equal to (i) 4.5% of Net Sales (as defined in the Series A Certificate of Designation), subject in all cases to a cap of $ 25 million per calendar year, and (ii) 7.5% of Licensing Proceeds (as defined in the Series A Certificate of Designation), subject in all cases to a cap of $ 10 million per calendar year. The Royalty Payment Rights will expire when the patents covering the applicable product expire, which is currently expected to be in 2033 . F- 19 Employment agreements The Company also has employment agreements with certain employees which require the funding of a specific level of payments, if certain events, such as a change in control, termination without cause or retirement, occur. Other normal business operating agreements In addition, in the course of normal business operations, the Company enters into agreements with contract service providers to assist in the performance of research & development and manufacturing activities. Expenditures to these third parties represent significant costs in clinical development and may require upfront payments and long-term commitments of cash. Subject to required notice periods and obligations under binding purchase orders, the Company can elect to discontinue the work under these agreements at any time. Note 11 – Income Taxes The Company utilizes the liability method of accounting for deferred income taxes. Under this method, deferred tax liabilities and assets are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. A valuation allowance is established against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of December 31, 2021 and 2020, the Company does not believe any material uncertain tax positions were present. Accordingly, interest and penalties have not been accrued due to an uncertain tax position. The components of the income tax provision are as follows (in thousands): Schedule of Income Tax Provision Year Ended December 31, 2021 2020 Current expense (benefit): Federal $ - $ - State - - Foreign - - Total current expense (benefit): $ - $ - Deferred expense (benefit): Federal $ - $ - State - - Foreign - - Total deferred expense (benefit): $ - $ - Total income tax expense (benefit): $ - $ - F- 20 Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows: Schedule of Effective Income Tax Rate Reconciliation Year Ended December 31, 2021 2020 Income at US Statutory Rate 21.00 % 21.00 % State Taxes, net of Federal benefit 1.97 % 2.95 % Permanent Differences ( 0.82 )% ( 1.28 )% Tax Credits 2.16 % 0.75 % Valuation Allowance ( 25.21 )% ( 24.53 )% Discrete items 0.91 % 1.11 % Effective income tax rate 0.00 % 0.00 % The Company has no current income taxes payable other than certain state minimum taxes which are included in general and administrative expenses. Significant components of the Company’s deferred tax assets (liabilities) for 2021 and 2020 consist of the following (in thousands): Schedule of Deferred Tax Assets and Liabilities Year Ended December 31, 2021 2020 Share-based Compensation $ 3,575 $ 3,220 Depreciation and Amortization 166 ( 119 ) Accrued Liability 377 307 Net Operating Loss Carry-forwards 24,076 19,927 R&D Credit Carryforwards 3,207 2,264 Other ( 1 ) ( 10 ) IPR&D ( 848 ) ( 848 ) ROU Asset ( 1,186 ) ( 921 ) ROU Liability 1,315 1,045 Total Deferred tax assets $ 30,681 $ 24,865 Valuation allowance ( 31,023 ) ( 25,206 ) Net deferred tax asset (liability) $ ( 341 ) $ ( 341 ) On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Internal Revenue Code. The changes include but are not limited to: allowing companies to carryback certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income. The tax law changes in the Act did not have a material impact on the Company’s income tax provision. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of taxable income during the periods in which the temporary differences representing net future deductible amounts become deductible, and is impacted by the Company’s ability to carryforward losses to years in which the Company has taxable income. Due to the Company’s history of losses and lack of other positive evidence to support taxable income, the Company has recorded a valuation allowance against those deferred tax assets that are not expected to be realized. The valuation allowances were approximately $ 31.0 million, $ 25.2 million and $ 19.7 million as of December 31, 2021, 2020 and 2019, respectively, representing increases of approximately $ 5.8 million and $ 5.5 million for the years ending December 31, 2021 and 2020, respectively. As of December 31, 2021, the Company had Federal net operating loss carryforwards of approximately $ 38.1 million which will begin to expire in 2032 . In addition, the Company has federal net operating loss carryforwards of approximately $ 63.3 million which have an indefinite carryforward period. The Company also had federal and state research and development tax credit carryforwards of approximately $ 3.2 million. The federal net operating loss and tax credit carryforwards will expire at various dates beginning in 2033, if not utilized. The difference between the statutory tax rate and the effective tax rate is primarily attributable to the valuation allowance offsetting deferred tax assets. F- 21 Utilization of the net operating losses and general business tax credits carryforwards may be subject to a substantial limitation under Sections 382 and 383 of the Internal Revenue Code of 1986 due to changes in ownership of the Company that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating losses and general business tax credits carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period. The Company has not completed a study to determine whether it had undergone an ownership change since the Company’s inception Sale of net operating losses (NOLs) The Company recognized approximately $ 1.3 million and $ 1.1 million for the years ended December 31, 2021 and 2020, respectively, in connection with the sale of certain State of New Jersey Net Operating Losses (“NOL”) and Research and Development (“R&D”) tax credits to a third party under the New Jersey Technology Business Tax Certificate Transfer Program. In addition, the Tax Cuts and Jobs Act, signed into law on December 22, 2017 imposes significant additional limitations on the deductibility of interest and limits NOL deductions to 80% of net taxable income for losses arising in taxable years beginning after December 31, 2017 . This NOL limitation was suspended for years 2018 through 2020 as a result of the CARES Act. Note 12 – Stockholders’ Equity At-The-Market Equity Offering On July 2, 2020, the Company entered into an At-The-Market (“ATM”) Sales Agreement (the “Sales Agreement”) with BTIG, LLC (“BTIG”), pursuant to which the Company may offer and sell, from time to time, through BTIG, as sales agent and/or principal, shares of its common stock having an aggregate offering price of up to $ 50,000,000 , subject to certain limitations on the amount of common stock that may be offered and sold by the Company set forth in the Sales Agreement. BTIG will be paid a 3 % commission on the gross proceeds from each sale. The Company may terminate the Sales Agreement at any time; BTIG may terminate the Sales Agreement in certain limited circumstances. During 2021, BTIG sold 3,023,147 shares of the Company’s common stock generating gross proceeds of approximately $ 5.8 million and net proceeds of approximately $ 5.6 million, after deducting BTIG’s commission on gross proceeds. During 2020, the Company did not sell any shares of its common stock under the ATM Sales Agreement. Common Stock On September 3, 2021, the Company issued 1,500,000 unregistered shares of its common stock pursuant to the Agreement and Plan of Merger by and among the Company, Saffron Merger Sub, Inc., Aquarius Biotechnologies Inc. (“Aquarius”), and J Carl Craft, as holder representative, dated January 19, 2015, as subsequently amended on September 3, 2021 (the “Aquarius Merger Agreement”), to the holders of Aquarius Biotechnologies Inc., as defined in the Aquarius Merger Agreement. The shares were issued in place of certain milestone payments previously included under the Aquarius Merger Agreement upon the achievement of specified development milestones. The Company recorded a $ 1.2 million research and development expense related to the issuance of the 1,500,000 shares based on the closing price of the Company’s common stock of $ 0.80 on the date of issuance. On January 14, 2020, the Company closed on an underwritten public offering of 32,260,000 shares of its common stock at a purchase price of $ 1.55 per share. The Company generated gross proceeds of approximately $ 50.0 million and net proceeds of approximately $ 46.7 million, after deducting underwriting discounts and commissions and other estimated offering expenses. In addition, the Company granted the underwriters a 30-day option to purchase up to approximately 4.8 million additional shares of its common stock on the same terms and conditions. No additional shares of the Company’s common stock were sold pursuant to this option. F- 22 Preferred Stock In accordance with the Certificate of Incorporation, the Company is authorized to issue 10,000,000 preferred shares at a par value of $ 0.001 . In connection with a private placement of Series A Preferred Stock, on July 26, 2016, the Company filed the Series A Certificate of Designation with the Secretary of the State of Delaware to designate the preferences, rights and limitations of the Series A Preferred Stock. Pursuant to the Series A Certificate of Designation, the Company designated 1,600,000 shares of the Company’s previously undesignated preferred shares as Series A Preferred Stock. In connection with a public offering of Series B Preferred Stock, on June 19, 2018, the Company filed the Series B Certificate of Designation with the Secretary of the State of Delaware to designate the preferences, rights and limitations of the Series B Preferred Stock. Pursuant to the Series B Certificate of Designation, the Company designated 8,000 shares of the Company’s previously undesignated preferred shares as Series B Preferred Stock. Series B Preferred Stock During 2021 and prior to June 19, 2021, 143 shares of Series B Preferred Stock were converted by shareholders resulting in the issuance of 286,000 shares of common stock. On June 19, 2021, all 4,218 remaining shares of Series B Preferred Stock were automatically converted into 2,000 shares of the Company’s common stock resulting in the issuance of 8,436,000 shares of common stock. As of December 31, 2021 and December 31, 2020, there were 0 and 4,361 shares of Series B Preferred stock outstanding, respectively. Conversion: Prior to the automatic conversion of Series B Preferred Stock on June 19, 2021, and subject to certain ownership limitations, each share of Series B Preferred Stock was convertible into shares of the Company’s common stock at any time at the option of the holder at an initial conversion price of $ 0.50 per share subject to adjustment for reverse splits, stock combinations and similar changes as provided in the Certificate of Designation. Based on the conversion price and number of shares outstanding on June 19, 2021, the Series B Preferred Stock were converted into 8,436,000 shares of common stock. Dividends: Subject to certain ownership limitations, holders of the Series B Preferred Stock received dividends paid in the Company’s common stock as follows: (i) a number of shares of common stock equal to 10% of the shares of common stock underlying the Series B Preferred Stock then held by such holder on June 19, 2019, (ii) a number of shares of common stock equal to 15% of the shares of common stock underlying the Series B Preferred Stock then held by such holder on June 19, 2020 and (iii) a number of shares of common stock equal to 20% of the shares of common stock underlying the Series B Preferred Stock then held by such holder on June 19, 2021. Based on an accounting of the holders of record of Series B Preferred Stock on June 19, 2021 and 2020, the Company made dividend payments totaling 1,687,200 and 1,365,600 shares of common stock, respectively . Warrants All warrants issued by the Company are exercisable immediately upon issuance and have a five-year term. The warrants may be exercised at any time in whole or in part upon payment of the applicable exercise price until expiration. No fractional shares will be issued upon the exercise of the warrants. The exercise price and the number of shares purchasable upon the exercise of the warrants are subject to adjustment upon the occurrence of certain events, which include stock dividends, stock splits, combinations and reclassifications of the Company’s capital stock or other similar changes to the equity structure of the Company. The warrants do not have a redemption feature. They may be exercised on a cashless basis at the holder’s option. The warrants are classified as equity instruments. F- 23 As of December 31, 2021, the Company had outstanding warrants to purchase an aggregate of 988,000 shares of common stock at exercise prices ranging from $ 0.50 to $ 0.75 per share, and with expiration dates between December 31, 2022 and June 21, 2023. A summary of warrants outstanding as of December 31, 2021 and 2020 is presented below, all of which are fully vested (in thousands): Summary of Shareholders Equity Warrants Outstanding Shares Outstanding at December 31, 2019 5,397 Issued - Exercised ( 2,549 ) Tendered - Expired ( 1,493 ) Outstanding at December 31, 2020 1,328 * Outstanding at January 01, 2021 Issued - Exercised ( 320 )** Tendered - Expired ( 20 ) Outstanding at December 31, 2021 988 *** * Weighted average exercise price for outstanding warrants is $ 0.55 . ** Converted into approximately 115 thousand shares of common stock. *** Weighted average exercise price for outstanding warrants is $ 0.56 . Note 13 – Accumulated Other Comprehensive (Loss)/Income The following table summarizes the changes in accumulated other comprehensive (loss)/income by components during the years ended December 31, 2021 and 2020 (in thousands): Schedule of Components of Accumulated Other Comprehensive (Loss)/Income Net Unrealized (Losses)/Gains on Available-for-Sale Securities Accumulated Other Comprehensive (Loss)/Gain Balance, December 31, 2019 $ ( 1 ) $ ( 1 ) Net unrealized gain on securities available-for-sale 237 237 Reclassification of realized gain on securities available-for-sale to net loss ( 8 ) ( 8 ) Net current period other comprehensive gain 229 229 Balance, December 31, 2020 $ 228 $ 228 Net unrealized loss on securities available-for-sale ( 373 ) ( 373 ) Net current period other comprehensive loss ( 374 ) ( 374 ) Balance, December 31, 2021 $ ( 146 ) $ ( 146 ) All components of accumulated other comprehensive (loss)/income are net of tax. Note 14 – Stock-based Compensation The Company’s Amended and Restated 2013 Equity Compensation Plan (the “Plan”) provides for the granting of incentive stock options, nonqualified stock options, restricted stock units, performance units, and stock purchase rights. Options under the Plan may be granted at prices not less than 100% of the fair value of the shares on the date of grant as determined by the Compensation Committee of the Board of Directors. The Compensation Committee determines the period over which the options become exercisable subject to certain restrictions as defined in the Plan, with the current outstanding options generally vesting over three or four years . The term of the options is no longer than ten years . As of December 31, 2021, the Company had 36,952,460 shares of common stock authorized for issuance under the Plan. With the approval of the Board of Directors and a majority of shareholders, effective May 8, 2014, the Plan was amended and restated. The amendment provides for an automatic increase in the number of shares of common stock available for issuance under the Plan each January (with Board approval), commencing January 1, 2015 in an amount up to four percent ( 4 % ) of the total number of shares of common stock outstanding on the preceding December 31st. F- 24 The Company recognized stock-based compensation expense (options and restricted share grants) in its consolidated statements of operations as follows (in thousands): Schedule of Recognized Stock-Based Compensation Year Ended December 31, 2021 2020 Research and Development $ 1,870 $ 1,897 General and Administrative 2,422 2,668 Total $ 4,292 $ 4,565 The following table contains information about the Company’s stock plan at December 31, 2020: Schedule of Equity Compensation Plan by Arrangements Awards Reserved for Issuance Awards Issued & Exercised Awards Available for Grant 2013 Equity Compensation Plan (in thousands) 36,952 * 32,669 ** 4,283 * Increased by 8,005 thousand on January 1, 2021, representing 4 % of the total number of shares of common stock outstanding on December 31, 2020. ** Includes both stock grants and option grants The following table summarizes the Company’ stock option activity and related information for the period from January 1, 2020 to December 31, 2021 (options in thousands): Schedule of Stock Option Activity Number of Options Weighted Average Exercise Price Weighted Average Contractual Term in Years Outstanding at December 31, 2019 17,529 $ 1.11 6.2 Granted 6,501 $ 1.59 Exercised ( 826 ) 0.74 Forfeited ( 72 ) $ 1.11 Cancelled - - Expired ( 581 ) $ 1.25 Outstanding at December 31, 2020 22,551 $ 1.26 6.9 Granted 10,976 $ 1.11 Exercised ( 1,077 ) $ 0.60 Forfeited ( 2,824 ) $ 1.08 Cancelled - - Expired ( 1,441 ) $ 1.98 Outstanding at December 31, 2021 28,184 $ 1.21 7.2 The following table summarizes outstanding options at December 31, 2021, by their exercise price (options in thousands): Summary of Outstanding Options Range of Exercise Prices Number Outstanding Weighted Average Exercise Price Per Share $ 0.41 - $ 0.69 1,935 $ 0.49 $ 0.74 - $ 1.12 15,940 $ 0.93 $ 1.24 - $ 1.61 6,525 $ 1.35 $ 2.27 - $ 3.32 3,784 $ 2.50 28,184 $ 1.21 As of December 31, 2021, the number of vested shares underlying outstanding options was 14,625,397 at a weighted average exercise price of $ 1.20 . The aggregate intrinsic value of in-the-money options outstanding as of December 31, 2021 was $ 2.5 million. The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price of $ 1.01 on December 31, 2021, and the exercise price of options, multiplied by the number of options. As of December 31, 2021, there was approximately $ 11.7 million of total unrecognized share-based compensation. Such costs are expected to be recognized over a weighted average period of approximately 2.9 years. F- 25 All outstanding options expire ten years from date of grant. Options granted to employees prior to 2018 vest in equal monthly installments over three years. Beginning in 2018, options granted to employees vest over four years, with 25 % of the shares vesting on the first annual anniversary of grant and the remaining shares vesting in 36 equal monthly installments over the following 3 years. A portion of options granted to consultants vests over four years, with the remaining vesting being based upon the achievement of certain performance milestones, which are tied to either financing or drug development initiatives . During the years ended December 31, 2021 and 2020, the Company granted restricted stock awards for 31,769 and 379,385 shares of common stock, respectively. These awards are typically granted to members of the Board of Directors as payment in lieu of cash fees or as payment to a vendor pursuant to a consulting agreement. The Company values restricted stock awards at the fair market value on the date of grant. The Company recorded the value of these restricted awards as general and administrative expense of approximately $ 100 thousand and $ 292 thousand in the consolidated statement of operations for the years ended December 31, 2021 and 2020, respectively. The Company recognizes compensation expense for stock option awards and restricted stock awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period, with the exception of awards granted subject to a vendor’s consulting agreement, whereby the award vesting period and the service period defined pursuant to the terms of the consulting agreement may be different. Beginning January 1, 2020, stock options issued to consultants are recorded at fair value on the date of grant and the award is recognized as an expense on a straight-line basis over the requisite service period. The following weighted-average assumptions were used to calculate share-based compensation for the comparative periods presented: Schedule of Stock Option Awards and Restricted Stock Awards For the Year Ended December 31, 2021 2020 Volatility 98.4 % - 101.6 % 100.5 % - 107.4 % Risk-free interest rate 0.47 % - 1.28 % 0.34 % - 1.74 % Dividend yield 0.0 % 0.0 % Expected life 6.0 years 6.0 years The Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. Hence, the Company uses the “simplified method” described in Staff Accounting Bulletin (SAB) 107 to estimated the expected term of share option grants. The expected stock price volatility assumption is based the Company’s historical stock price volatility. Note 15 – Subsequent Events None F- 26