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: 001-40060

Longeveron Inc.

(Exact name of registrant as specified in its charter)

Delaware		47-2174146
(State or Other Jurisdiction of Incorporation)		(IRS Employer Identification No.)

1951 NW 7^thAvenue, Suite 520, Miami, Florida		33136
(Address of principal executive offices)		(Zip Code)

(305) 909-0840

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Class A common stock, par value $0.001 per share		LGVN		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 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 the definitions 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 ☒

As of August 14, 2024, the registrant had 12,875,473 shares of Class A common stock, $0.001 par value per shares, and 1,484,005 shares of Class B common stock, $0.001 par value per share, outstanding.

LONGEVERON INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		1
ITEM 1.	Condensed Financial Statements	1
	Condensed Balance Sheets as of June 30, 2024 (unaudited) and December 31, 2023	1
	Condensed Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited)	2
	Condensed Statements of Comprehensive Loss for the three and six months ended June 30, 2024 and 2023 (unaudited)	3
	Condensed Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 (unaudited)	4
	Condensed Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited)	8
	Notes to Unaudited Condensed Financial Statements	9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	38
ITEM 4.	Controls and Procedures	38

PART II. OTHER INFORMATION		39
ITEM 1.	Legal Proceedings	39
ITEM 1A.	Risk Factors	39
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
ITEM 3	Defaults Upon Senior Securities	39
ITEM 4	Mine Safety Disclosures	39
ITEM 5	Other Information	39
ITEM 6.	Exhibits	40

SIGNATURES		42

PART I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements.

Longeveron Inc.

Condensed Balance Sheets

(In thousands, except share and per share data)

	June 30, 2024			December 31, 2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	12,375		$	4,949
Marketable securities		-			412
Prepaid expenses and other current assets		817			376
Accounts and grants receivable		218			111
Total current assets		13,410			5,848
Property and equipment, net		2,371			2,529
Intangible assets, net		2,353			2,287
Operating lease asset		1,055			1,221
Other assets		204			193
Total assets	$	19,393		$	12,078
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	600		$	638
Accrued expenses		1,605			2,152
Current portion of lease liability		608			593
Deferred revenue		397			506
Total current liabilities		3,210			3,889
Long-term liabilities:
Lease liability		1,140			1,448
Other liabilities		132			-
Total long-term liabilities		1,272			1,448
Total liabilities		4,482			5,337
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.001 par value per share, 5,000,000 shares authorized, no shares issued and outstanding at June 30, 2024, and December 31, 2023		-			-
Class A common stock, $0.001 par value per share, 84,295,000 shares authorized, 8,116,909 shares issued and outstanding at June 30, 2024; 1,025,183 issued and outstanding at December 31, 2023		8			1
Class B common stock, $0.001 par value per share, 15,705,000 shares authorized, 1,484,005 shares issued and outstanding at June 30, 2024; 1,485,560 issued and outstanding at December 31, 2023		1			1
Additional paid-in capital		115,859			91,823
Stock subscription receivable		-			(100	)
Accumulated deficit		(100,956	)		(84,984	)
Accumulated other comprehensive loss		(1	)		-
Total stockholders’ equity		14,911			6,741
Total liabilities and stockholders’ equity	$	19,393		$	12,078

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2024			2023			2024			2023
Revenues
Clinical trial revenue	$	287		$	217		$	802		$	455
Contract manufacturing revenue		181			-			214			-
Grant revenue		-			-			-			41
Total revenues		468			217			1,016			496
Cost of revenues		124			124			343			327
Gross profit		344			93			673			169

Operating expenses
General and administrative		2,122			3,518			4,322			5,530
Research and development		1,722			2,287			3,941			5,067
Total operating expenses		3,844			5,805			8,263			10,597
Loss from operations		(3,500	)		(5,712	)		(7,590	)		(10,428	)
Other income and (expenses)
Other income, net		87			80			119			149
Total other income, net		87			80			119			149
Net loss	$	(3,413	)	$	(5,632	)	$	(7,471	)	$	(10,279	)
Deemed dividend – warrant inducement offers		(8,501	)		-			(8,501	)		-
Net loss attributable to common stockholders	$	(11,914	)	$	(5,632	)	$	(15,972	)	$	(10,279	)
Basic and diluted net loss per share	$	(1.83	)	$	(2.67	)	$	(3.54	)	$	(4.88	)
Basic and diluted weighted average common shares outstanding		6,509,881			2,110,544			4,511,734			2,106,973

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Comprehensive Loss

(In thousands)

(Unaudited)

	Three months ended June 30,						Six months ended June 30,
	2024			2023			2024			2023

Net loss	$	(3,413	)	$	(5,632	)	$	(7,471	)	$	(10,279	)
Other comprehensive loss:
Net unrealized (loss) gain on available-for-sale securities		(2	)		(36	)		(1	)		22
Total comprehensive loss	$	(3,415	)	$	(5,668	)	$	(7,472	)	$	(10,257	)

See notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

	Class A Common Stock					Class B Common Stock					Subscription			Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Number			Amount		Number			Amount		Receivable			Capital			Deficit			Gain (Loss)			Equity
Balance at December 31, 2023		1,025,183		$	1		1,485,560		$	1	$	(100	)	$	91,823		$	(84,984	)	$	-		$	6,741
Conversion of Class B common stock for Class A common stock		1,555			-		(1,555	)		-		-			-			-			-			-
Class A common stock, issued for RSUs vested		9,714			-		-			-		-			-			-			-			-
Class A common stock, held for taxes on RSUs vested		(3,501	)		-		-			-		-			(26	)		-			-			(26	)
Class A common stock, issued for PSUs vested		8,002			-		-			-		-			-			-			-			-
Class A common stock, held for taxes on PSUs vested		(3,268	)		-		-			-		-			(17	)		-			-			(17	)
Collection of stock subscription receivable		-			-		-			-		100			-			-			-			100
Equity-based compensation		-			-		-			-		-			525			-			-			525
Unrealized gain attributable to change in market value of available for sale investments		-			-		-			-		-			-			-			(1	)		(1	)
Class A common stock issued in public offering, net of issuance cost of $1,145		2,212,766			2		-			-		-			4,720			-			-			4,722
Class A common stock issue for warrants exercised, net of issuance cost of $1,359		4,799,488			5		-			-		-			10,333			-			-			10,338
Deemed dividend – warrant inducement offers		-			-		-			-		-			8,501			(8,501	)		-			-
Reverse stock split rounding adjustment		66,970			-		-			-		-			-			-			-			-
Net loss		-			-		-			-		-			-			(7,471	)		-			(7,471	)
Balance at June 30, 2024		8,116,909		$	8		1,484,005		$	1	$	-		$	115,859		$	(100,956	)	$	(1	)	$	14,911

See notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

	Class A Common Stock					Class B Common Stock					Subscription			Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Number			Amount		Number			Amount		Receivable			Capital			Deficit			Gain (Loss)			Equity
Balance at December 31, 2022		612,732		$	1		1,489,109		$	1	$	(100	)	$	83,731		$	(62,773	)	$	(357	)	$	20,503
Conversion of Class B common stock into Class A common stock		3,555			-		(3,555	)		-		-			-			-			-			-
Class A common stock, issued for RSUs vested		17,972			-		-			-		-			-			-			-			-
Class A common stock, held for taxes on RSUs vested		(2,836	)		-		-			-		-			(103	)		-			-			(103	)
Equity-based compensation		-			-		-			-		-			1,120			-			-			1,120
Unrealized gain attributable to change in market value of available for sale investments		-			-		-			-		-			-			-			22			22
Reverse stock split rounding adjustment		-			-		6			-		-			-			-			-			-
Net loss		-			-		-			-		-			-			(10,279	)		-			(10,279	)
Balance at June 30, 2023		631,423		$	1		1,485,560		$	1		(100	)		84,748			(73,052	)	$	(335	)	$	11,263

See notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

	Class A Common Stock					Class B Common Stock				Subscription		Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Stockholder’s
	Number			Amount		Number		Amount		Receivable		Capital			Deficit			Gain (Loss)			Equity
Balance at March 31, 2024		1,034,283		$	1		1,484,005	$	1	$	-	$	92,080		$	(89,042	)	$	1		$	3,041
Class A Common Stock, issued for RSUs vested		5,158			-		-		-		-		-			-			-			-
Class A Common Stock, held for taxes on RSUs vested		(1,756	)		-		-		-		-		(5	)		-			-			(5	)
Equity-based compensation		-			-		-		-		-		230			-			-			230
Unrealized loss attributable to change in market value of available for sale investments		-			-		-		-		-		-			-			(2	)		(2	)
Class A common stock issued in public offering, net of issuance costs of $1,145		2,212,766			2		-		-		-		4,720			-			-			4,722
Class A common stock issued for warrants exercised, net of issuance costs of $1,359		4,799,488			5		-		-		-		10,333			-			-			10,338
Deemed dividend – warrant inducement offers		-			-		-		-		-		8,501			(8,501	)		-			-
Reverse stock split rounding adjustment		66,970			-		-		-		-		-			-			-			-
Net loss		-			-		-		-		-		-			(3,413	)		-			(3,413	)
Balance at June 30, 2024		8,116,909		$	8		1,484,005	$	1	$	-	$	115,859		$	(100,956	)	$	(1	)	$	14,911

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

	Class A Common Stock					Class B Common Stock					Subscription			Additional Paid-In			Accumulated			Accumulated Other Comprehensive			Total Stockholder’s
	Number			Amount		Number			Amount		Receivable			Capital			Deficit			Gain (Loss)			Equity
Balance at March 31, 2023		616,305		$	1		1,487,109		$	1	$	(100	)	$	84,135		$	(67,420	)	$	(299	)	$	16,318
Conversion of Units into Class A and B common stock		1,555			-		(1,555	)		-		-			-			-			-			-
Class A Common Stock, issued for RSUs vested		15,955			-		-			-		-			-			-			-			-
Class A Common Stock, held for taxes on RSUs vested		(2,392	)		-		-			-		-			(86	)		-			-			(86	)
Equity-based compensation		-			-		-			-		-			699			-			-			699
Unrealized loss attributable to change in market value of available-for-sale securities		-			-		-			-		-			-			-			(36	)		(36	)
Reverse stock split rounding adjustment		-			-		6			-		-			-			-			-			-
Net loss		-			-		-			-		-			-			(5,632	)		-			(5,632	)
Balance at June 30, 2023		631,423		$	1		1,485,560		$	1	$	(100	)	$	84,748		$	(73,052	)	$	(335	)	$	11,263

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

	Six months ended June 30,
	2024			2023
Cash flows from operating activities
Net loss	$	(7,471	)	$	(10,279	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		481			478
Interest earned on marketable securities		60			151
Equity-based compensation		525			1,120
Changes in operating assets and liabilities:
Accounts and grants receivable		(107	)		122
Prepaid expenses and other current assets		(441	)		(1,136	)
Other assets		(11	)		23
Accounts payable		(38	)		(51	)
Deferred revenue		(109	)		(10	)
Nonoperating lawsuit liability		-			(1,398	)
Accrued expenses		(547	)		658
Operating lease asset and lease liability		(127	)		(127	)
Other liabilities		133			-
Net cash used in operating activities		(7,652	)		(10,449	)
Cash flows from investing activities
Proceeds from the sale of marketable securities		350			3,116
Acquisition of property and equipment		(212	)		(134	)
Acquisition of intangible assets		(177	)		(186	)
Net cash (used in) provided by investing activities		(39	)		2,796
Cash flows from financing activities
Proceeds from the issuance of common stock, net of issuance cost		4,722			-
Proceeds from warrants exercised, net of issuance cost		10,338			-
Proceeds from stock subscription receivable		100			-
Payments for taxes on RSUs vested		(43	)		(103	)
Net cash provided by (used in) financing activities		15,117			(103	)
Change in cash and cash equivalents		7,426			(7,756	)
Cash and cash equivalents at beginning of the period		4,949			10,503
Cash and cash equivalents at end of the period	$	12,375		$	2,747
Supplement Disclosure of Non-cash Investing and Financing Activities:
Vesting of RSUs and PSUs into Class A common stock	$	(108	)	$	(575	)
Deemed dividend – warrant inducement offers	$	8,501		$	-
Offering costs in accrued expenses	$	86		$	-

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Notes to Unaudited Condensed Financial Statements

Six Month Periods Ended June 30, 2024 and 2023

1. Nature of Business, Basis of Presentation, and Liquidity

Nature of business:

Longeveron was formed as a Delaware limited liability company on October 9, 2014, and was authorized to transact business in Florida on December 15, 2014. On February 12, 2021, Longeveron, LLC converted its corporate form (the “Corporate Conversion”) from a Delaware limited liability company (Longeveron, LLC) to a Delaware corporation, Longeveron Inc. (the “Company,” “Longeveron” or “we,” “us,” or “our”). The Company is a clinical stage biotechnology company developing cellular therapies for specific aging-related and life-threatening conditions. The Company operates out of its leased facilities in Miami, Florida.

The Company’s product candidates are currently in development. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid technological change and substantial competition from, among others, existing pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, partners and consultants.

The accompanying interim condensed balance sheet as of June 30, 2024, and the condensed statements of operations, statements of comprehensive loss, stockholders’ equity, and cash flows for the three and six months ended June 30, 2024 and 2023, are unaudited. The unaudited condensed financial statements have been prepared according to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, therefore, certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) have been omitted. In the opinion of management, the accompanying unaudited condensed financial statements for the periods presented reflect all adjustments which are normal and recurring, and necessary to fairly state the financial position, results of operations, and cash flows of the Company. These unaudited condensed financial statements and notes should be read in conjunction with the audited financial statements and notes thereto in the Company’s 2023 Annual Report on Form 10-K filed with the SEC on February 27, 2024.

Liquidity:

Since inception, the Company has primarily been engaged in organizational activities, including raising capital, and research and development activities. The Company does not yet have a product that has been approved by the U.S. Food and Drug Administration (“FDA”), and has only generated revenues from grants, clinical trials and contract manufacturing. The Company has not yet achieved profitable operations or generated positive cash flows from operations. The Company intends to continue its efforts to raise additional funds via equity financing, develop its intellectual property, and secure regulatory approvals to commercialize its products. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital, its research and commercialization efforts, regulatory approval, and, ultimately, the market acceptance of the Company’s approved products, if any. These condensed financial statements do not include adjustments that might result from the outcome of these uncertainties.

The Company has incurred recurring losses from operations since its inception, including a net loss of $7.5 million and $10.3 million for the six months ended June 30, 2024 and 2023, respectively. In addition, as of June 30, 2024, the Company had an accumulated deficit of $101.0 million. The Company expects to continue to generate operating losses in the foreseeable future.

As of June 30, 2024, the Company had cash and cash equivalents of $12.4 million. The Company believes that its cash and cash equivalents as of June 30, 2024, together with $15.3 million in gross cash proceeds from the July 2024 financing transactions (as described below), will enable it to fund its operating expenses and capital expenditure requirements through the fourth quarter of 2025.

2. Summary of Significant Accounting Policies

Basis of presentation:

The condensed financial statements of the Company were prepared in accordance with U.S. GAAP.

Certain reclassifications have been made to prior year condensed financial statements to conform to classifications used in the current year. These reclassifications had no impact on net loss, stockholders’ equity or cash flows as previously reported.

Reverse Stock Split:

On March 26, 2024, the Company effected a reverse stock split of the outstanding shares of its Class A common stock and Class B common stock on a one-for-10 (1:10) basis (the “Reverse Stock Split”). The Reverse Stock Split became effective at 11:59 p.m. Eastern Time on March 26, 2024 via a certificate of amendment to the Company’s Certificate of Incorporation filed with the Secretary of State of the State of Delaware. At the effective time of the Reverse Stock Split, every 10 shares of the Company’s Class A common stock and Class B common stock, whether issued and outstanding or held by the Company as treasury stock, were automatically combined and converted (without any further act) into one fully paid and nonassessable share of Class A common stock or Class B common stock, respectively, subject to rounding up of fractional shares to the nearest whole number of shares resulting from the Reverse Stock Split without any change in the par value per share. All share, per share, option, warrant, equity award, and other derivative security numbers and exercise prices appearing in this Quarterly Report on Form 10-Q and the accompanying condensed financial statements have been adjusted to give effect to the Reverse Stock Split for all prior periods presented. However, the Company’s annual, other periodic, and current reports, and all other information and documents incorporated by reference into this Quarterly Report on Form 10-Q that were filed prior to March 19, 2024, do not give effect to the Reverse Stock Split.

Use of estimates:

The presentation of condensed 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 condensed financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Accounting Standard Updates:

A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any, that the implementation of such proposed standards would have on the Company’s condensed financial statements.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-09, “Improvements to Income Tax Disclosures”. The amendments in this ASU change disclosure requirements for various items, including effective tax rate reconciliations and cash taxes paid. This ASU is effective for public companies for the financial reporting periods beginning on January 1, 2025, with early adoption permitted. We have not adopted ASU 2023-09 for our financial reporting period ending December 31, 2023, and will continue to evaluate early adoption for our financial reporting period ending December 31, 2024.

Cash and cash equivalents:

The Company considers cash to consist of cash on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.

Marketable securities:

Marketable securities at June 30, 2024 and December 31, 2023 consisted of marketable fixed income securities, primarily corporate bonds which are categorized as available for sale securities and are thus marked to market and stated at fair value in accordance with ASC 820 Fair Value Measurement. These investments are considered Level 1 and Level 2 investments within the ASC 820 fair value hierarchy. The fair value of Level 1 investments, including cash equivalents, money funds and U.S. government securities, are substantially based on quoted market prices in active markets. The fair value of corporate bonds is determined using standard market valuation methodologies, including discounted cash flows, matrix pricing and/or other similar techniques. The inputs to these valuation techniques include but are not limited to market interest rates, credit rating of the issuer or counterparty, industry sector of the issuer, coupon rate, call provisions, maturity, estimated duration and assumptions regarding liquidity and estimated future cash flows. In addition to bond characteristics, the valuation methodologies incorporate market data, such as actual trades completed, bids and actual dealer quotes, where such information is available. Accordingly, the estimated fair values are based on available market information and judgments about financial instruments categorized within Level 1 and Level 2 of the fair value hierarchy. Interest and dividends are recorded when earned. Realized gains and losses on investments are determined by specific identification and are recognized as incurred in the condensed statement of operations. Changes in net unrealized gains and losses are reported in other comprehensive loss and represent the change in the fair value of investment holdings during the reporting period. Changes in net unrealized losses were less than $0.1 million for the three and six months ended June 30, 2024 and 2023, respectively.

Accounts and grants receivable:

Accounts and grants receivable include amounts due from customers, granting institutions and others. The amounts as of June 30, 2024, and December 31, 2023 are certain to be collected, and no amount has been recognized for expected credit losses. In addition, for the clinical trial revenue, most participants pay in advance of treatment. Advanced grant funds and prepayments for the clinical trial revenue are recorded to deferred revenue. Advance contract manufacturing payments are recorded to deferred revenue.

Accounts and grants receivable by source, as of (in thousands):

	June 30, 2024		December 31, 2023
Accounts receivable from customers	$	159	$	15
National Institutes of Health – Grant		59		96
Total	$	218	$	111

Deferred offering costs:

The Company recorded certain legal, professional and other third-party fees that were directly associated with in-process equity financings as deferred offering costs until the applicable equity financing was consummated. After consummation of an equity financing, these costs are recorded in stockholders’ equity as a reduction of proceeds generated as a result of the offering.

Property and equipment:

Property and equipment, including improvements that extend the useful lives of related assets, are recorded at cost, while maintenance and repairs are charged to operations as incurred. Depreciation is calculated using the straight-line method based on the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful life of the asset or the original term of the lease. Depreciation expense is recorded in the research and development line of the condensed statements of operations as the assets are primarily related to the Company’s clinical programs.

Intangible assets:

Intangible assets include payments on license agreements with the Company’s co-founder and Chief Scientific Officer (“CSO”) and the University of Miami (“UM”) (see Note 9) and legal costs incurred related to patents and trademarks. License agreements have been recorded at the value of cash consideration, common stock and membership units transferred to the respective parties when acquired.

Payments for license agreements are amortized using the straight-line method over the estimated term of the agreements, which range from 5-20 years. Patents are amortized over their estimated useful life, once issued. The Company considers trademarks to have an indefinite useful life and evaluates them for impairment on an annual basis. Amortization expense is recorded in the research and development line of the condensed statements of operations as the assets are primarily related to the Company’s clinical programs.

Impairment of Long-Lived Assets:

The Company evaluates long-lived assets for impairment, including property and equipment and intangible assets, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated fair value. Any resulting impairment loss is reflected in the condensed statements of operations. Upon evaluation, management determined that there was no impairment of long-lived assets during the three and six months ended June 30, 2024 and 2023.

Deferred revenue:

The unearned portion of advanced grant funds and prepayments for clinical trial and contract manufacturing revenues, which will be recognized as revenue when the Company meets the respective performance obligations, has been presented as deferred revenue in the accompanying condensed balance sheets. For the six months ended June 30, 2024 and 2023, the Company recognized less than $0.1 million, respectively, of funds that were previously classified as deferred revenue. Due to the MSCRF – Technology Development Corporation (“TEDCO”) – grant Acute Respiratory Distress Syndrome (“ARDS”) program being discontinued, $0.4 million recorded as deferred revenue was reversed when the funds were returned to MSCRF – TEDCO. As of June 30, 2024 and December 31, 2023, the Company had $0.4 million and $0.5 million, respectively, recorded in deferred revenue on the condensed balance sheets.

Revenue recognition:

The Company recognizes revenue when performance obligations related to respective revenue streams are met. For grant revenue, the Company considers the performance obligation met when the grant related expenses are incurred or supplies and materials are received. The Company is paid in tranches pursuant to terms of the related grant agreements, and then applies payments based on regular expense reimbursement submissions to grantors. There are no remaining performance obligations or variable consideration once grant expense reporting to the grantor is complete. For clinical trial revenue, the Company considers the performance obligation met when the participant has received the treatment. The Company usually receives prepayment for these services or receives payment at the time the treatment is provided, and there are no remaining performance obligations or variable consideration once the participant receives the treatment. For contract manufacturing revenue, the Company considers the performance obligation met when the contractual obligation and/or statement of work has been satisfied. Payment terms may vary depending on specific contract terms. There are no significant judgments affecting the determination of the amount and timing of revenue recognition.

Revenue by source (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Clinical trial revenue	$	287	$	217	$	802	$	455
Contract manufacturing		181		-		214		-
NIH - grant		-		-		-		41
Total	$	468	$	217	$	1,016	$	496

The Company records cost of revenues based on expenses directly related to revenue. For grants, the Company records allocated expenses for research and development costs to a grant as a cost of revenues. For the clinical trial revenue, directly related expenses for that program are expensed as incurred. These expenses are similar to those described under “Research and development expense” below. For the contract manufacturing, the Company records costs incurred under the contract as cost of revenues.

Research and development expense:

Research and development costs are charged to expense when incurred in accordance with ASC 730 Research and Development. ASC 730 addresses the proper accounting and reporting for research and development costs. It identifies: 1) those activities that should be identified as research and development; 2) the elements of costs that should be identified with research and development activities, and the accounting for these costs; and 3) the financial statement disclosures related to them. Research and development costs include costs such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials, salaries, share-based compensation, employee benefits, property and equipment depreciation and allocation of various corporate costs. The Company accrues for costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by the third parties, patient enrollment in clinical trials, administrative costs incurred by the third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, the Company may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered.

Concentrations of credit risk:

Financial instruments which potentially subject the Company to credit risk consist principally of cash and cash equivalents, marketable securities and accounts and grants receivable. Cash and cash equivalents are held in U.S. financial institutions. At times, the Company may maintain balances in excess of the federally insured amounts.

Income taxes:

The Company’s tax provision consists of taxes currently payable or receivable, plus any change during the period in deferred tax assets and liabilities. The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not that some portion of the deferred tax asset will not be realized. The Company’s tax provision was $0 for the three and six months ended June 30, 2024 and 2023 due to net operating losses. The Company has not recorded any tax benefit for the net operating losses incurred due to the offset created by the Company’s valuation allowance.

The Company recognizes the tax benefits from uncertain tax positions that the Company has taken or expects to take on a tax return. In the unlikely event an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by a taxing authority. Reserves for uncertain tax positions would then be recorded if the Company determined it is probable that either a position would not be sustained upon examination, or a payment would have to be made to a taxing authority and the amount was reasonably estimable. As of June 30, 2024 and December 31, 2023, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to a taxing authority. It is the Company’s policy to expense any interest and penalties associated with its tax obligations when they are probable and estimable.

Equity-based compensation:

The Company accounts for equity-based compensation expense by the measurement and recognition of compensation expense for stock-based awards based on estimated fair values on the date of grant. The fair value of the stock options is estimated at the date of the grant using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires the input of highly subjective assumptions, the most significant of which are the expected share price volatility, the expected life of the stock option award, the risk-free rate of return, and dividends during the expected term. Because the option-pricing model is sensitive to changes in the input assumptions, different determinations of the required inputs may result in different fair value estimates of the stock options.

Neither the Company’s stock options nor its restricted stock units (“RSUs”) trade on an active market. Volatility is a measure of the amount by which a financial variable, such as a stock price, has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. Given the Company’s limited historical data, the Company utilizes the average historical volatility of similar publicly traded companies that are in the same industry. The risk-free interest rate is the average U.S. treasury rate (having a term that most closely approximates the expected life of the option) for the period in which the stock option was granted. The expected life is the period of time that the stock options granted are expected to remain outstanding. Stock options granted have a maximum term of ten years. The Company has insufficient historical data to utilize in determining its expected life assumptions and, therefore, uses the simplified method for determining expected life.

The Company accounts for the cost of services performed by vendors in exchange for an award of stock options based on the grant-date fair value of the award. The Company recognizes the expense consistent with the contractual vesting period and in the same manner as if the Company had paid cash for the services.

3. Marketable securities

The following is summary of marketable securities that the Company measures at fair value (in thousands):

	Fair Value at June 30, 2024
	Level 1		Level 2		Level 3		Total
Corporate bonds	$	-	$	-	$	-	$	-
Money market funds⁽¹⁾		6,716		-		-		6,716
Accrued income		28		-		-		28
Total ma

SEC Form 10-Q filed by Longeveron Inc.