lsta-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from __________________ to _________________________

Commission File Number 001-33650

LISATA THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)


Delaware			22-2343568
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

110 Allen Road, 2nd Floor, Basking Ridge, New Jersey			07920
(Address of principal executive offices)			(zip code)

Registrant’s telephone number, including area code: 908-842-0100


Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	LSTA	The Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


Class	Outstanding as of August 12, 2024
Common stock, $0.001 par value per share	8,319,600	shares

Index

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report (this “Quarterly Report”) contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as well as historical information. When used in this Quarterly Report, statements that are not statements of current or historical fact may be deemed to be forward-looking statements, including, without limitation, all statements related to any expectations of revenues, expenses, cash flows, earnings or losses from operations, cash required to maintain current and planned operations, capital or other financial items; any statements of the plans, strategies and objectives of management for future operations; any plans or expectations with respect to product research, development and commercialization, including regulatory approvals; any other statements of expectations, plans, intentions or beliefs; and any statements of assumptions underlying any of the foregoing. Without limiting the foregoing, the words “plan,” “project,” “forecast,” “outlook,” “intend,” “may,” “will,” “expect,” “anticipate,” “likely,” “believe,” “could,” “anticipate,” “estimate,” “continue,” “target” or similar expressions or other variations or comparable terminology are intended to identify such forward-looking statements, although some forward-looking statements are expressed differently. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity or our achievements or industry results, to be materially different from any future results, performance, levels of activity or our achievements or industry results expressed or implied by such forward-looking statements. Factors that could cause our actual results to differ materially from anticipated results expressed or implied by forward-looking statements include, among others:

•our ability to obtain sufficient capital or strategic business arrangements to fund our operations and expansion plans, including collecting amounts owed to us under various licensing and other strategic arrangements, meeting our financial obligations under various licensing and other strategic arrangements, the funding of our clinical trials for product candidates, and the commercialization of the relevant technology;

•our ability to build and maintain the management and human resources infrastructure necessary to support the operation and/or growth of our business;

•whether a market is established for our products and our ability to capture a meaningful share of this market;

•scientific, regulatory and medical developments beyond our control;

•our ability to obtain and maintain, as applicable, appropriate governmental licenses, accreditations or certifications or to comply with healthcare laws and regulations or any other adverse effect or limitations caused by government regulation of our business;

•whether any of our current or future patent applications result in issued patents, the scope of those patents and our ability to obtain and maintain other rights to technology required or desirable for the conduct of our business, and our ability to commercialize products without infringing upon the claims of third-party patents;

•whether any potential strategic or financial benefits of various licensing agreements will be realized;

•our ability to diversify our pipeline of development product candidates, which could include an acquisition, merger, business combination, in-license or other strategic transaction, and whether any of such efforts will result in us entering into or completing any transaction or that any such transaction, if completed, will add to shareholder value;

•the results of our development activities;

•our ability to complete our other planned clinical trials (or initiate other trials) in accordance with our estimated timelines due to delays associated with enrolling patients due to the novelty of the treatment, the size of the patient population, competition with other clinical trials for similar subjects, patient and/or investigator site availability and accessibility due to external macroenvironmental factors and the need of patients to meet the inclusion criteria of the trial or otherwise;

•the extent to which any future public health crisis and their long-term effects may impact, directly or indirectly, our business, including our clinical trials and financial condition; and

•other factors discussed in “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 29, 2024 (our “2023 Form 10-K”).

The factors discussed herein, including those risks described in “Item 1A. Risk Factors” and elsewhere in our 2023 Form 10-K and in our other periodic filings with the SEC, which are available for review at www.sec.gov, could cause actual results and developments to be materially different from those expressed or implied by such statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these and other factors. Readers are cautioned not to place undue

Index

reliance on these forward-looking statements, which speak only as of the date they were made. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Index

TABLE OF CONTENTS


	PART I- FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements:	5
	Consolidated Balance Sheets at June , 30 2024 (unaudited) and December 31, 2023	5
	Consolidated Statements of Operations for the three and six months ended June 30 , 2024 and 2023 (unaudited)	6
	Consolidated Statements of Comprehensive Loss for the three and si x months ended June 30 , 2024 and 2023 (unaudited)	7
	Consolidated Statements of Equity for the three and six months ended June 30 , 2024 and 2023 (unaudited)	8
	Consolidated Statements of Cash Flows for the six months ended June 3 0 , 2024 and 2023 (unaudited)	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
	PART II- OTHER INFORMATION
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	33
	Signatures	34

Index

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

LISATA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)


	June 30, 2024		December 31, 2023
ASSETS	(Unaudited)
Cash and cash equivalents	$	28,293	$	22,593
Marketable securities	9,969		27,942
Prepaid and other current assets	3,716		3,389
Total current assets	41,978		53,924
Property and equipment, net	119		175
Acquired license - intangible, net	228		263
Other assets	246		332
Total assets	$	42,571	$	54,694

LIABILITIES, NON-CONTROLLING INTERESTS AND STOCKHOLDERS' EQUITY
Liabilities
Accounts payable	$	728	$	2,421
Accrued liabilities	3,729		4,169

Total current liabilities	4,457		6,590
Other long-term liabilities	119		210
Total liabilities	4,576		6,800
Commitments and Contingencies (Note 13)

Stockholders' Equity

Common stock, $0.001 par value, authorized 500,000,000 shares; issued 8,321,799 and 8,150,635 shares at June 30, 2024 and December 31, 2023, respectively; and outstanding, 8,321,061 and 8,149,897 shares at June 30, 2024 and December 31, 2023, respectively	8		8
Additional paid-in capital	577,552		576,971
Treasury stock, at cost; 738 shares at June 30, 2024 and December 31, 2023	(708)		(708)
Accumulated deficit	(538,526)		(528,081)
Accumulated other comprehensive loss	(77)		(42)
Total Lisata Therapeutics, Inc. stockholders' equity	38,249		48,148
Non-controlling interests	(254)		(254)
Total equity	37,995		47,894
Total liabilities, non-controlling interests and stockholders' equity	$	42,571	$	54,694

See accompanying notes to consolidated financial statements.

Index

LISATA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Operating Expenses:
Research and development	$	2,601	$	3,162	$	5,842	$	6,341

General and administrative	2,922		3,713		6,282		7,378
Total operating expenses	5,523		6,875		12,124		13,719

Operating loss	(5,523)		(6,875)		(12,124)		(13,719)

Other income (expense):
Investment income, net	493		668		1,082		1,338
Other expense, net	(14)		(150)		(201)		(163)
Total other income	479		518		881		1,175

Net loss before benefit from income taxes and noncontrolling interests	(5,044)		(6,357)		(11,243)		(12,544)
Benefit from income taxes	—		(2,330)		(798)		(2,330)
Net loss	$	(5,044)	$	(4,027)	$	(10,445)	$	(10,214)
Less - net income (loss) attributable to noncontrolling interests	—		—		—		—
Net loss attributable to Lisata Therapeutics, Inc. common stockholders	$	(5,044)	$	(4,027)	$	(10,445)	$	(10,214)


Basic and diluted loss per share
Lisata Therapeutics, Inc. common stockholders	$	(0.61)	$	(0.50)	$	(1.26)	$	(1.28)

Weighted average common shares outstanding
Basic and diluted shares	8,308		8,021		8,301		8,004

See accompanying notes to consolidated financial statements.

Index

LISATA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net loss	$	(5,044)	$	(4,027)	$	(10,445)	$	(10,214)

Other comprehensive gain (loss):
Available for sale securities - net unrealized gain (loss)	4		12		(9)		1
Cumulative translation adjustment arising during the period	23		(10)		(26)		(22)
Total other comprehensive gain (loss)	27		2		(35)		(21)





Comprehensive loss attributable to Lisata Therapeutics, Inc. common stockholders	$	(5,017)	$	(4,025)	$	(10,480)	$	(10,235)

See accompanying notes to consolidated financial statements.

Index

LISATA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Lisata Therapeutics, Inc. Stockholders' Equity		Non- Controlling Interest in Subsidiary		Total Equity
	Shares	Amount
Balance at March 31, 2023	7,999	$	8	$	575,137	$	(52)	$	(513,428)	$	(708)	$	60,957	$	(254)	$	60,703
Net loss	—	—		—		—		(4,027)		—		(4,027)		—		(4,027)
Share-based compensation	(25)	—		584		—		—		—		584		—		584
Net proceeds from issuance of common stock	76	—		297		—		—		—		297		—		297
Proceeds from option exercises	83	—		155		—		—		—		155		—		155
Unrealized gain on marketable securities	—	—		—		12		—		—		12		—		12
Foreign currency translation adjustment	—	—		—		(10)		—		—		(10)		—		(10)
Balance at June 30, 2023	8,133	$	8	$	576,173	$	(50)	$	(517,455)	$	(708)	$	57,968	$	(254)	$	57,714


	Common Stock		Additional Paid-in Capital			Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Lisata Therapeutics, Inc. Stockholders' Equity		Non- Controlling Interest in Subsidiary		Total Equity
		Shares			Amount
Balance at December 31, 2022		7,867	$	8		$	574,548	$	(29)	$	(507,241)	$	(708)	$	66,578	$	(254)	$	66,324
Net loss		—	—			—		—		(10,214)		—		(10,214)		—		(10,214)
Share-based compensation		107	—			1,173		—		—		—		1,173		—		1,173

Net proceeds from issuances of common stock		76	—			297		—		—		—		297		—		297
Proceeds from option exercises		83	—			155		—		—		—		155		—		155
Unrealized gain on marketable securities		—	—			—		1		—		—		1		—		1
Foreign currency translation adjustment		—	—			—		(22)		—		—		(22)		—		(22)
Balance at June 30, 2023		8,133	$	8		$	576,173	$	(50)	$	(517,455)	$	(708)	$	57,968	$	(254)	$	57,714

See accompanying notes to consolidated financial statements.

Index


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Lisata Therapeutics, Inc. Stockholders' Equity		Non- Controlling Interest in Subsidiary		Total Equity
	Shares	Amount
Balance at March 31, 2024	8,308	$	8	$	577,283	$	(104)	$	(533,482)	$	(708)	$	42,997	$	(254)	$	42,743
Net loss	—	—		—		—		(5,044)		—		(5,044)		—		(5,044)
Share-based compensation	—	—		237		—		—		—		237		—		237
Net proceeds from issuances of common stock	14	—		32		—		—		—		32		—		32
Unrealized gain on marketable securities	—	—		—		4		—		—		4		—		4
Foreign currency translation adjustment	—	—		—		23		—		—		23		—		23
Balance at June 30, 2024	8,322	$	8	$	577,552	$	(77)	$	(538,526)	$	(708)	$	38,249	$	(254)	$	37,995


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Treasury Stock		Total Lisata Therapeutics, Inc. Stockholders' Equity		Non- Controlling Interest in Subsidiary		Total Equity
	Shares	Amount
Balance at December 31, 2023	8,151	$	8	$	576,971	$	(42)	$	(528,081)	$	(708)	$	48,148	$	(254)	$	47,894
Net loss	—	—		—		—		(10,445)		—		(10,445)		—		(10,445)
Share-based compensation	157	—		549		—		—		—		549		—		549
Net proceeds from issuances of common stock	14	—		32		—		—		—		32		—		32
Unrealized loss on marketable securities	—	—		—		(9)		—		—		(9)		—		(9)
Foreign currency translation adjustment	—	—		—		(26)		—		—		(26)		—		(26)
Balance at June 30, 2024	8,322	$	8	$	577,552	$	(77)	$	(538,526)	$	(708)	$	38,249	$	(254)	$	37,995

Index

LISATA THERAPEUTICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(10,445)	$	(10,214)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation	691		1,258
Depreciation and amortization	91		95
Loss on disposal of fixed assets	—		3


Loss from equity method investment	100		—
Amortization/accretion on marketable securities	(285)		(426)
Changes in operating assets and liabilities:
Prepaid and other current assets	(352)		(1,161)
Other assets	83		117
Accounts payable, accrued liabilities and other liabilities	(2,193)		(2,052)
Net cash used in operating activities	(12,310)		(12,380)
Cash flows from investing activities:
Purchase of marketable securities	(28,515)		(60,836)
Sale of marketable securities	46,764		64,400
Investment in Impilo Therapeutics	(100)		—



Net cash provided by investing activities	18,149		3,564
Cash flows from financing activities:
Proceeds from exercise of options	—		155
Tax withholding payments on net share settlement equity awards	(142)		(85)
Net proceeds from issuance of common stock	32		297

Net cash (used in) provided by financing activities	(110)		367
Effect of exchange rate changes on cash	(29)		(15)
Net increase (decrease) in cash and cash equivalents	5,700		(8,464)
Cash and cash equivalents at beginning of period	22,593		32,154
Cash and cash equivalents at end of period	$	28,293	$	23,690

See accompanying notes to consolidated financial statements.

Index

LISATA THERAPEUTICS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – The Business

Overview

Lisata Therapeutics, Inc. (together with its subsidiaries, the “Company”) is a clinical-stage pharmaceutical company dedicated to the discovery, development, and commercialization of innovative therapies for the treatment of solid tumors and other major diseases. The Company's investigational product, certepetide (LSTA1), is designed to activate a novel uptake pathway that allows co-administered or tethered (i.e., molecularly bound) anti-cancer drugs to target and penetrate solid tumors more effectively. Certepetide actuates this active transport system in a tumor-specific manner, resulting in systemically co-administered anti-cancer drugs more efficiently penetrating and accumulating in the tumor, while normal tissues are expected to be unaffected. Certepetide has also been shown to modify the tumor microenvironment (“TME”) by reducing T-regulatory cells and augmenting cytotoxic T cells, thereby making tumors more susceptible to immunotherapies and inhibiting the metastatic cascade (i.e., the spread of cancer to other parts of the body). The Company and its collaborators have amassed significant non-clinical data demonstrating enhanced delivery of a range of existing and emerging anti-cancer therapies, including chemotherapeutics, immunotherapies, and RNA-based therapeutics. To date, certepetide has also demonstrated favorable safety, tolerability and activity in completed and ongoing clinical trials designed to enhance delivery of standard-of-care chemotherapy for pancreatic cancer. The Company is exploring certepetide as a means to enable a variety of treatment modalities to treat a range of solid tumors more effectively. Currently, certepetide is the subject of several Phase 2 clinical studies being conducted globally in a variety of solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), cholangiocarcinoma, appendiceal cancer, colon cancer and glioblastoma multiforme in combination with a variety of anti-cancer regimens.

The Company's leadership team has decades of collective biopharmaceutical and pharmaceutical product development experience across a variety of therapeutic categories and at all stages of development from preclinical through to product registration and launch. The Company's goal is to develop and commercialize products that address important unmet medical needs.

Basis of Presentation

The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying Consolidated Financial Statements of the Company and its subsidiaries, which are unaudited, include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of June 30, 2024, and the results of its operations and its cash flows for the periods presented. The unaudited consolidated financial statements herein should be read together with the historical consolidated financial statements of the Company for the years ended December 31, 2023 and 2022 included in our 2023 Form 10-K. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of expenses during the reporting period. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company makes critical estimates and assumptions in determining stock-based awards values. Accordingly, actual results could differ from those estimates and assumptions.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of Lisata Therapeutics, Inc. and its wholly owned and majority owned subsidiaries and affiliates. All intercompany activities have been eliminated in consolidation.

Index

Foreign Currency Remeasurement

The Company’s reporting currency is the U.S. Dollar. The functional currency of Lisata Therapeutics Australia Pty Ltd., which is a foreign subsidiary of the Company, is the Australian Dollar. The assets and liabilities of Lisata Therapeutics Australia Pty Ltd. are translated into U.S. Dollars at the exchange rates in effect at each balance sheet date, and the results of operations are translated using the average exchange rates prevailing throughout the reporting period. Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of accumulated other comprehensive income (loss) in stockholders' equity.

Note 2 – Summary of Significant Accounting Policies

Cash and Cash Equivalents

Cash and cash equivalents include short-term, highly liquid, investments with maturities of ninety days or less when purchased.

Concentration of Risks

The Company is subject to credit risk from its portfolio of cash, cash equivalents and marketable securities. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. Cash is held at major banks in the United States and may exceed federally insured limits. The goals of the Company's investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements, and a competitive after-tax rate of return.

Marketable Securities

The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. All of the Company's marketable securities are considered as available-for-sale and carried at estimated fair values and reported in cash equivalents and marketable securities. Unrealized gains and losses on available-for-sale securities are excluded from net income and reported in accumulated other comprehensive income (loss) as a separate component of stockholders' equity. Other income (expense), net, includes interest, dividends, amortization of purchase premiums and discounts, realized gains and losses on sales of securities and other-than-temporary declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method. The Company regularly reviews all of its investments for other-than-temporary declines in fair value. The Company's review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that it will be required to sell the securities before the recovery of their amortized cost basis. When the Company determines that the decline in fair value of an investment is below its accounting basis and this decline is other-than-temporary, it reduces the carrying value of the security it holds and records a loss for the amount of such decline.

Property and Equipment

The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line method. Repairs and maintenance expenditures that do not extend original asset lives are charged to expense as incurred. The estimated useful lives of property and equipment are as follows:


Furniture and fixtures			10 years
Computer equipment			3 years
Software			3 years
Leasehold improvements			Life of lease

Long-lived Assets

Long-lived assets consist of property and equipment. The assets are amortized on a straight-line basis over their respective useful lives. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds the fair value of the asset. If other events or changes in circumstances indicate that the carrying amount of an asset that the Company expects to hold and use may not be recoverable, the Company will estimate the undiscounted future cash flows expected to result from the use of the asset and/or its eventual disposition, and recognize an

Index

impairment loss, if any. The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Share-Based Compensation

The Company expenses all share-based payment awards to employees, directors, and consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards. For awards with performance-based vesting criteria, the Company estimates the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. The Company determines the fair value of option awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants. Share-based compensation expense also includes an estimate, which is made at the time of the grant, of the number of awards that are expected to be forfeited. The fair value of the Company’s restricted stock and restricted stock units is based on the closing market price of the Company’s common stock on the date of grant.

Loss Per Share

Basic loss per share is based on the weighted effect of all common shares issued and outstanding and is calculated by dividing net loss attributable to common stockholders by the weighted average shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares used in the basic loss per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding. Diluted loss per share is not presented as such potentially dilutive securities are anti-dilutive to losses incurred in all periods presented.

Treasury Stock

Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Gains or losses on the subsequent reissuance of shares are credited or charged to additional paid in capital.

Research and Development Costs

Research and development (“R&D”) expenses include salaries, benefits, and other headcount related costs, clinical trial and related clinical manufacturing costs, contract and other outside service fees including sponsored research agreements, and facilities and overhead costs. The Company expenses the costs associated with research and development activities when incurred.

To further drive the Company’s initiatives, the Company will continue targeting key governmental agencies and not-for-profit organizations to contribute funds for the Company’s research and development programs. The Company accounts for such grants as a deduction to the related expense in research and development operating expenses when earned.

In-process Research and Development Expense

Upfront payments that relate to the acquisition of a new drug compound, as well as pre-commercial milestone payments, are immediately expensed as IPR&D in the period in which they are incurred, provided that the new drug compound did not also include processes or activities that would constitute a “business” as defined under U.S. GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. The Company accounts for contingent consideration payable upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying contingency is probable and estimable. Milestone payments made to third parties subsequent to regulatory approval will be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product.

Intangible Asset

The Company’s intangible asset consists of a single asset, a license agreement with Qilu Pharmaceutical, Co., Ltd. (“Qilu”) acquired in the Company's acquisition of Cend Therapeutics, Inc (the “Cend Merger”), with a value of $0.4 million. The intangible asset is stated at fair value and is amortized using the straight-line method over its estimated useful life of 5 years. Amortization expense was $18 thousand and $35 thousand for the three and six months ended June 30, 2024, respectively, and $18 thousand and $35 thousand for the three and six months ended June 30, 2023, respectively. The intangible asset is reviewed for potential impairment when events or circumstances indicate that carrying amounts may not be recoverable. The projected amortization expense is $71 thousand per year for the next 3.25 years.

Index

Revenue Recognition

The Company evaluates license and collaboration arrangements to determine whether units of account within the arrangement exhibit the characteristics of a vendor and customer relationship. For arrangements and units of account where a customer relationship exists, the Company applies the revenue recognition guidance. The Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the performance obligations. At contract inception, the Company assesses the goods or services promised within each contract and assesses whether each promised good or service is distinct and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Taxes imposed by governmental authorities on the Company's revenue, such as sales taxes and withholding taxes, are excluded from net revenue.

If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, upfront 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. If licenses are bundled with other performance obligations, the Company would utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. There was no revenue recognized for the three and six months ended June 30, 2024 and 2023.

Milestones

At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. 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 or the Company’s collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes 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 achievement of such milestones and any related constraint, and if necessary, adjusts the Company’s estimate of the overall transaction price. Any such adjustments are allocated on a cumulative catch-up basis to satisfied and partially satisfied performance obligations, with the consideration allocated to an ongoing performance obligation being recognized over the period of performance. For the three and six months ended June 30, 2024 and June 30, 2023, the Company has not recognized revenue related to milestones.

Royalties

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

SEC Form 10-Q filed by Lisata Therapeutics Inc.