UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DCD.C. 20549

 

 

 

FORM 10-Q

 

 

 

(Mark One)

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

 

For the quarterly period ended March 31, 20212023

 

OR

 

☐ 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: 001-38295File Number: 001-40060

 

 

 

Longeveron Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 001-40060 47-2174146

(State or Other Jurisdiction

of Incorporation)

 (Commission File Number) 

(IRS Employer

Identification No.)

 

1951 NW 7th Avenue, Suite 520, Miami, Florida 33136

(Address of Principal Executive Offices)

1951 NW 7th Avenue, Suite 520, Miami, Florida

33136

(Address of principal executive offices)

(Zip Code)

 

Registrant’s Telephone Number, Including Area 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
Common Stock, par value $0.001 per share LGVN The NASDAQNasdaq 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 filerAccelerated filer
Non-accelerated filerSmaller 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 May 12, 2021,10, 2023, the registrant had 3,280,7436,226,225 shares of Class A common stock, $0.001 par value per shares, and 15,702,83414,855,539 shares of Class B common stock, $0.001 par value per share, outstanding.

 

 

 

 

 

 

LONGEVERON INC.

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION
ITEM 1.Condensed Financial Statements1
 Condensed Balance Sheets as of March 31, 20212023 (unaudited) and December 31, 202020221
 Condensed Statements of Operations for the three months ended March 31, 20212023 and 20202022 (unaudited)2
 Condensed Statements of Members’ EquityComprehensive Loss for the three months ended March 31, 2023 and 2022 (unaudited)3
Condensed Statements of Stockholders’ Equity for the three months ended March 31, 20212023 and year ended December 31, 20202022 (unaudited)34
 Condensed Statements of Cash Flows for the three months ended March 31, 20212023 and 20202022 (unaudited)46
 Notes to Unaudited Condensed Financial Statements (unaudited)57
ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1522
ITEM 3.Quantitative and Qualitative Disclosures About Market Risk2435
ITEM 4.Controls and Procedures2435
PART II. OTHER INFORMATION
ITEM 1A.1.Risk FactorsLegal Proceedings2536
ITEM 1A.Risk Factors36
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds2637
ITEM 6.Exhibits2637
SIGNATURES2738

 

i

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Condensed Financial Statements.

 

Longeveron Inc.

Condensed Balance Sheets

(In thousands, except share and per share data)

 

  March 31,
2021
  December 31,
2020
 
  (Unaudited)    
Assets      
Current assets:      
Cash and cash equivalents $24,461  $816 
Prepaid expenses and other current assets  836   52 
Deferred offering costs  -   561 
Accounts and grants receivable  -   420 
Total current assets  25,297   1,849 
Property and equipment, net  3,417   3,597 
Intangible assets, net  1,533   1,547 
Right-of-use (ROU) asset  2,008   2,070 
Other assets  177   177 
Total assets $32,432  $9,240 
Liabilities, members’ equity and stockholders’ equity        
Current liabilities:        
Accounts payable $895  $1,590 
Accounts expenses  961   1,542 
Current portion of lease liability  517   511 
Short-term note payable  19   38 
Current portion of loans  4   139 
Deferred revenue  385   10 
Total current liabilities  2,781   3,830 
Long-term liabilities:        
Long-term loans  146   311 
Lease liability  3,010   3,142 
Total long-term liabilities  3,156   3,453 
Total liabilities  5,937   7,283 
Commitments and contingencies (Note 8)        
Members’ equity and stockholders’ equity:        
Members’ equity  -   1,957 
Preferred stock, $0.001 par value per share, 5,000,000 shares authorized, no shares issued and outstanding at March 31, 2021; no shares authorized, issued and outstanding, at December 31, 2020  -   - 
Class A common stock, $0.001 par value per share, 84,295,000 shares authorized, 3,280,743 shares issued and outstanding at March 31, 2021; no shares authorized, issued and outstanding, at December 31, 2020  3   - 
Class B common stock, $0.001 par value per share, 15,705,000 shares authorized, 15,702,834 shares issued and outstanding at March 31, 2021; no shares authorized, issued and outstanding, at December 31, 2020  16   - 
Additional paid-in capital  56,580   - 
Stock subscription receivable  (100)  - 
Accumulated deficit  (30,004)  - 
Total members’ equity and stockholders’ equity  26,495   1,957 
Total liabilities, members’ equity and stockholders’ equity $32,432  $9,240 
  March 31,
2023
  December 31,
2022
 
  (Unaudited)    
Assets      
Current assets:        
Cash and cash equivalents $4,984  $10,503 
Marketable securities  8,693   9,155 
Prepaid expenses and other current assets  1,097   404 
Accounts and grants receivable  96   218 
Total current assets  14,870   20,280 
Property and equipment, net  2,810   2,949 
Intangible assets, net  2,425   2,409 
Right-of-use (ROU) asset  1,456   1,531 
Other assets  247   244 
Total assets $21,808  $27,413 
Liabilities and stockholders’ equity        
Current liabilities:        
Accounts payable $457  $1,751 
Accrued expenses  613   650 
Current portion of lease liability  571   564 
Estimated lawsuit liability  1,398   1,398 
Deferred revenue  556   506 
Total current liabilities  3,595   4,869 
Long-term liabilities:        
Lease liability  1,895   2,041 
Total long-term liabilities  1,895   2,041 
Total liabilities  5,490   6,910 
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 March 31, 2023, and December 31, 2022.  -   - 
Class A Common Stock, $0.001 par value per share, 84,295,000 shares authorized, 6,163,050 shares issued and outstanding at March 31, 2023: 6,127,320 issued and outstanding, at December 31, 2022  6   6 
Class B Common Stock, $0.001 par value per share, 15,705,000 shares authorized, 14,871,085 shares issued and outstanding at March 31, 2023: 14,891,085 issued and outstanding, at December 31, 2022  15   15 
Additional paid-in capital  84,116   83,712 
Stock subscription receivable  (100)  (100)
Accumulated deficit  (67,420)  (62,773)
Accumulated other comprehensive loss  (299)  (357)
Total stockholders’ equity  16,318   20,503 
Total liabilities and stockholders’ equity $21,808  $27,413 

 

See accompanying notes to unaudited condensed financial statements.


Longeveron Inc.

Condensed Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

  Three months ended
March 31,
 
  2021  2020 
Revenues      
Grant revenue $211  $946 
Clinical trial revenue  165   762 
Total revenues  376   1,708 
Cost of revenues  227   896 
Gross profit  149   812 
         
Operating expenses        
General and administrative  2,201   686 
Research and development  1,350   289 
Selling and marketing  56   50 
Total operating expenses  3,607   1,025 
Loss from operations  (3,458)  (213)
Other income and (expenses)        
Forgiveness of Paycheck Protection Program loan  300   - 
Other income, net  47   - 
Total other income and (expenses), net  347   - 
Net loss $(3,111) $(213)
Basic and diluted net loss per share $(0.18) $- 
Basic and diluted weighted average common shares outstanding  17,491,066   - 
  Three months ended
March 31,
 
  2023  2022 
Revenues      
Clinical trial revenue $238  $310 
Grant revenue  41   60 
Total revenues  279   370 
Cost of revenues  203   205 
Gross profit  76   165 
         
Operating expenses        
General and administrative  1,855   1,980 
Research and development  2,780   1,292 
Selling and marketing  157   287 
Total operating expenses  4,792   3,559 
Loss from operations  (4,716)  (3,394)
Other income and (expenses)        
Other income (expenses), net  69   (116)
Total other income and (expenses), net  69   (116)
Net loss $(4,647) $(3,510)
Basic and diluted net loss per share $(0.22) $(0.17)
Basic and diluted weighted average common shares outstanding  21,033,610   20,911,203 

 

See accompanying notes to unaudited condensed financial statements.


Longeveron Inc.

Condensed Statements of Members’ Equity andComprehensive Loss

(In thousands, except per share data)

(Unaudited)

  Three months ended
March 31,
 
  2023  2022 
Net loss $(4,647) $(3,510)
Other comprehensive loss:        
Net unrealized gains on available-for-sale securities $58  $- 
Total comprehensive loss $(4,589) $(3,510)

See notes to unaudited condensed financial statements.


Longeveron Inc.

Condensed Statements of Stockholders’ Equity

(In Thousands, Except Share Amounts)thousands, except share amounts)

(Unaudited)

 

  Series A Units  Series B Units  Series C Units  Class A Common Stock  Class B Common Stock     Additional       
  Number of Units  Amount  Number of Units  Amount  Number of Units  Amount  Number  Amount  Number  Amount  Subscription
Receivable
  Paid-In
Capital
  Accumulated
Deficit
  Total
Equity
 
Balance at December 31, 2019  1,000,000  $250   1,000,000  $1,832   43,695  $2,513   -   -   -   -   (150)  -   -   4.445 
Series C units issued for cash  -   -   -   -   18,335   1,100   -   -   -   -   -   -   -   1,100 
Issuance of Series C units as payment for amounts accrued  -   -   -   -   734   44   -   -   -   -   -   -   -   44 
Equity-based compensation  -   -   -   -   -   39   -   -   -   -   -   -   -   39 
Cash received pursuant to subscription receivable  -   -   -   -   -   -   -   -   -   -   50   -   -   50 
Net loss  -   -   -   (3,609)  -   (112)  -   -   -   -   -   -   -   (3721)
                                                         
Balance at December 31, 2020  1,000,000  $250   1,000,000  $(1,777)  62,764  $3,584   -  $-   -  $-  $(100)  -   -  $1,957 
Conversion of Units into Class A and B common stock  (1,000,000)  (250)  (1,000,000)  1,777   (62,764)  (3,584)  338,030   -   15,702,834   16   -   28,934   (26,893)  - 
Initial public offering and overallotment of Class A common stock, net of $2,969 in issuance costs  -   -   -   -   -   -   2,910,000   3   -   -   -   26,131   -   26,134 
Class A common stock, issued for consulting  -   -   -   -   -   -   32,713   -   -   -   -   250   -   250 
Equity based compensation  -   -   -   -   -   -   -   -   -   -   -   1,265   -   1,265 
Net loss  -   -   -   -   -   -   -   -   -   -   -   -   (3,111)  (3,111)
Balance at March 31, 2021  -   -   -   -   -   -   3,280,743   3   15,702,834   16   (100)  56,580   (30,004)  26,495 
  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   Loss  Equity 
Balance at December 31, 2022  6,127,320  $6   14,891,085  $15  $(100) $83,712  $(62,773) $(357) $20,503 
Conversion of Class B common stock for Class A common stock  20,000   -   (20,000)  -   -   -   -   -   - 
Class A Common Stock, issued for RSUs vested  20,161   -   -   -   -   -   -   -   - 
Class A Common Stock, held for taxes on RSUs vested  (4,431)  -   -   -   -   (17)  -   -   (17)
Equity-based compensation  -   -   -   -   -   421   -   -   421 
Unrealized loss attributable to change in market value of available for sale investments  -   -   -   -   -   -   -   58   58 
Net loss  -   -   -   -   -   -   (4,647)  -   (4,647)
Balance at March 31, 2023  6,163,050  $      6   14,871,085  $15  $(100) $84,116  $(67,420) $(299) $16,318 

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   Loss  Equity 
Balance at December 31, 2021  5,175,361  $5   15,702,834  $16  $(100) $81,470  $(43,938) $-  $37,453 
Conversion of Units into Class A and B common stock  117,772   -   (117,772)  -   -   -   -   -   - 
Class A Common Stock, issued for RSUs vested  44,006   -   -   -   -   -   -   -   - 
Class A Common Stock, held for taxes on RSUs vested  (10,626)  -   -   -   -   (128)  -   -   (128)
Equity-based compensation  -   -   -   -   -   491   -   -   491 
Net loss  -   -   -   -   -   -   (3,510)  -   (3,510)
Balance at March 31, 2022  5,326,512  $5   15,585,062  $16  $(100) $81,833  $(47,448) $        -  $34,306 

See notes to unaudited condensed financial statements.


Longeveron Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

  Three months ended
March 31,
 
  2023  2022 
Cash flows from operating activities      
Net loss $(4,647) $(3,510)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  238   188 
Interest earned on marketable securities  72   54 
Equity-based compensation  421   491 
Changes in operating assets and liabilities:        
Accounts and grants receivable  122   (41)
Prepaid expenses and other current assets  (694)  (908)
Other assets  (2)  (57)
Accounts payable  (1,294)  (7)
Deferred revenue  50   306 
Accrued expenses  (38)  (604)
ROU asset and lease liability  (76)  (64)
Net cash used in operating activities  (5,848)  (4,152)
Cash flows from investing activities        
Proceeds from the sale of Marketable securities  461   885 
Acquisition of property and equipment  (42)  (47)
Acquisition of intangible assets  (73)  (71)
Net cash provided by investing activities  346   767 
Cash flows from financing activities        
Payments for taxes on RSUs vested  (17)  (141)
Net cash used in financing activities  (17)  (141)
Change in cash and cash equivalents  (5,519)  (3,526)
Cash and cash equivalents at beginning of the period  10,503   25,658 
Cash and cash equivalents at end of the period $4,984  $22,132 
Supplement Disclosure of Non-cash Investing and Financing Activities:        
Vesting of RSUs into Class A Common Stock $(68) $(379)

See accompanying notes to unaudited condensed financial statements.

3


 

 

Longeveron Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

  Three months ended
March 31,
 
  2021  2020 
Cash flows from operating activities      
Net loss $(3,111) $(213)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization  195   195 
Forgiveness of Paycheck Protection Program loan  (300)  - 
Equity issued for consulting services  119   44 
Equity based compensation  1,265   13 
Changes in operating assets and liabilities:        
Accounts and grants receivable  420   (210)
Prepaid expenses and other current assets  (785)  (45)
Other assets  -   24 
Accounts payable  (644)  15 
Deferred revenue  375   (163)
Accrued expenses  (503)  7 
ROU asset and lease liability  (63)  (65)
Net cash used in operating activities  (3,032)  (398)
Cash flows from investing activities        
Acquisition of property and equipment  -   (130)
Acquisition of intangible assets  -   (10)
Net cash used in investing activities  -   (140)
Cash flows from financing activities        
Proceeds from initial public offering of common stock, net of commissions and expenses  26,696   - 
Proceeds from issuance of Series C units  -   1,100 
Repayments of short-term note payable  (19)  - 
Proceeds from subscription agreement  -   50 
Net cash provided by financing activities  26,677   1,150 
Increase in cash and cash equivalents  23,645   612 
Cash and cash equivalents at beginning of the period  816   1,866 
Cash and cash equivalents at end of the period $24,461  $2,478 
Supplement Disclosure of Non-cash Investing and Financing Activities:        
Conversion of Series A, B and C units into Class A and B common stock $(2,057) $- 

See accompanying notes to unaudited condensed financial statements.


Longeveron Inc.

Notes to theUnaudited Condensed Financial Statements (Unaudited)

Three Month Periods Ended March 31, 20212023 and 20202022

 

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

 

Nature of business:

 

Longeveron, LLC 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”). Longeveron LLC was formed as a Delaware limited liability company on October 9, 2014 and authorized to transact business in Florida on December 15, 2014. 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 is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on licenses, protection of proprietary technology, dependence on key personnel, compliance with government regulations and the need to obtain additional financing to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical studies and clinical trials and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance and reporting capabilities.

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.

 

Initial Public Offering (“IPO”):

As part of the Company’s IPO, on February 12, 2021 our Class A common stock began to trade on NASDAQ under the stock symbol “LGVN”. Pursuant to the IPO, the Company sold 2,660,000 shares of Class A common stock at a public offering price of $10.00 per share for aggregate gross proceeds of $26.6 million prior to deducting underwriting discounts, commissions, and other offering expenses. In addition, the Company granted the underwriters a 30-day option to purchase up to an additional 399,000 shares at the public offering price less the underwriting discounts and commissions.

On March 15, 2021, the Company’s underwriters partially exercised its over-allotment option, resulting in the Company selling 250,000 shares of Class A common stock at a public offering price of $10.00 per share for aggregate gross proceeds of $2.5 million prior to deducting underwriting discounts, commissions, and other offering expenses.

Basis of presentation:

The accompanying interim condensed balance sheet as of March 31, 2023, and the condensed statements of operations, statement of comprehensive loss, stockholders’ equity, and cash flows for the three months ended March 31, 2023 and 2022, are unaudited. The unaudited Condensed Financial Statementscondensed financial statements have been prepared in accordance withaccording to the requirementsrules and regulations of Article 8 of Regulation S-X promulgated under the Securities and Exchange ActCommission (“SEC”) and, therefore, do not include allcertain information and footnotes necessary for a fair presentation ofdisclosures normally included in financial position, results of operations, and cash flowsstatements prepared in conformityaccordance with accounting principles generally accepted in the United States of America. These unaudited Condensed Financial Statements should be read in conjunction with our Financial Statements and related notes, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC. Unless otherwise stated, references to particular years or quarters refer to our fiscal years ended December 31 and the associated quarters of those fiscal years.

These Condensed Financial Statements are unaudited, but include all adjustments, including normal recurring adjustments, which, inAmerica (“US 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 present fairly ourstate the financial position, results of operations, and cash flows forof the interim periods presented. The Condensed Balance Sheet as of December 31, 2020 has been derived fromCompany. These unaudited condensed financial statements and notes should be read in conjunction with the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. Results of operations for interim periods are not necessarily indicative ofthereto in the results that may be expected forCompany’s 2022 Annual Report on Form 10-K filed with the year as a whole.Securities & Exchange Commission (SEC) on March 14, 2023.

 

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 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 products.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 $3.1$4.6 million and $0.2$3.5 million for the three months ended March 31, 20212023 and 2020,2022, respectively. In addition, as of March 31, 2021,2023, the Company had an accumulated deficit of $30.0$67.4 million. The Company expects to continue to generate operating losses for the foreseeable future.

 


As of March 31, 2021,2023, the Company had cash, and cash equivalents of $24.5$5.0 million and marketable securities of $8.7 million. The Company believeshas prepared a cash flow forecast which indicates that it does not have sufficient cash to meet its cash and cash equivalents as of March 31, 2021 will enable it to fund its operating expenses and capitalminimum expenditure requirements through at least the next 12 monthscommitments for one year from the date of issuance of these condensed financial statements.statements are available to be issued and therefore needs to raise additional funds to continue as a going concern. As a result, there is substantial doubt about the Company’s ability to continue as a going concern. To address the future funding requirements, management has undertaken the following initiatives:

 

the Company may seek additional capital in the private and/or public equity markets, to continue its operations, respond to competitive pressures, develop new products and services, and to support new strategic partnerships. The Company is evaluating additional equity/debt financing opportunities on an ongoing basis and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction or consummate a transaction at favorable pricing;

the Company will attempt to use equity instruments to provide a portion of the compensation due to vendors and collaboration partners;

the Company plans to pursue potential partnerships for pipeline programs, however, there can be no assurances that it can consummate such transactions;

the Company will continue to support its Bahamas Registry to generate revenue; and

since 2016 our clinical programs have received over $16.0 million in competitive extramural grant awards ($11.5 million which has been directly awarded to us and which are recognized as revenue when the performance obligations are met) from the National Institutes of Health (NIH), Alzheimer’s Association, and Maryland Stem Cell Research Fund (MSCRF), and the Company plans to submit additional contract and grant applications for further support of its programs with various funding agencies.

The Company’s condensed financial statements do not include any adjustments to the assets’ carrying amount, to the expenses presented and to the reclassification of the condensed balance sheets items that could be necessary should the Company be unable to continue its operations.

2. Summary of Significant Accounting Policies

 

Basis of presentation:

The condensed financial statements of the Company were prepared in accordance with accounting principles generally accepted in the U.S. (“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, shareholders’ equity or cash flows as previously reported.

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

 

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740)”. The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and by clarifying and amending other areas of Topic 740. The amendments in this ASU are effective for annual and interim periods beginning after December 15, 2020. We adopted this ASU on January 1, 2021 with no material impact on our consolidated financial statements.

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 June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The standard requires that credit losses be reported using an expected losses model rather than the incurred losses model that is currently used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, these standards now require allowances to be recorded instead of reducing the amortized cost of the investment. These standards limit the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The adoption of the standard as of January 1, 2023 did not have a material impact on the Company’s condensed financial statements; however, the Company did record a net unrealized loss in the statement of comprehensive loss for the three month period ended March 31, 2023.


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.

 

Inventory:Marketable securities:

 

The Company will begin carrying inventoryMarketable securities at March 31, 2023 and December 31, 2022 consisted of its biological products on its balance sheets following commercial launch of such products. Inventory will consist of raw materials, biological products in process,marketable fixed income securities, primarily corporate bonds, as well as U.S. Government and finished goodsagency obligations which are categorized as available for sale.sale securities and are thus marked to market and stated at fair value in accordance with ASC 820 FairValue Measurement. These investments are considered Level 1 and Level 2 investments within the ASC 820 fair value hierarchy. The Company will determine its inventoryfair value of Level 1 investments, including cash equivalents, money funds and U.S. government securities, are substantially based on quoted market prices. 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 usingare based on available market information and judgments about financial instruments categorized within Level 1 and Level 2 of the average cost method. Inventory will be valued atfair 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 lowercondensed statement of cost oroperations. Changes in net realizableunrealized 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 $0.3 million and will exclude units that$0 for the Company anticipates distributing for clinical evaluation. As of each ofthree months ended March 31, 20212023 and 2020, all of the Company’s biological products were anticipated to be distributed for clinical evaluation.2022, respectively.

 

The Company does not currently carry any inventory for its biological products, as it has yet to launch a product for commercial distribution. Historically the Company’s operations have focused on clinical trials and discovery efforts, and accordingly, costs of manufactured clinical doses of biological product candidates were expensed as incurred, consistent with the accounting for all other research and development costs. Once the Company begins commercial distribution, costs of all newly manufactured biological products will be allocated either for use in commercial distribution, which will be carried as inventory and not expensed, or for research and development efforts, which will continue to be expensed as incurred.

Accounts and grants receivable:

 

Accounts and grants receivable include amounts due from customers, granting institutions and others. The amounts as of March 31, 20212023, and 2020December 31, 2022 are certain to be collected, and no amount has been recognized for doubtful accounts. Maryland-TEDCO generally advance grant funds and therefore a receivable is not usually recognized. 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.

 

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

 

  March 31,
2021
  December 31,
2020
 
Alzheimer’s Association – Grant $      -  $339 
National Institutes of Health – Grant  -   66 
Clinical Trial receivable  -   15 
Total $-  $420 
  March 31,
2023
  December 31,
2022
 
National Institutes of Health – Grant $96  $218 
Total $96  $218 

 

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 will beare recorded in stockholders’ equity as a reduction of proceeds generated as a result of the offering. At March 31, 2021 the deferred offering costs as of December 31, 2020 of $0.6 million were recorded to stockholder’s equity.

 

6

Property and equipment:

 

Property and equipment, including improvements that extend useful lives of related assets, are valuedrecorded 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 Statementcondensed statements of Operationsoperations 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 8)9) and legal costs incurred related to patents and trademarks. License agreements have been recorded at the value of cash consideration, and/orcommon stock and membership units transferred to the respective parties when acquired.

 

Payments onfor license agreements are amortized using the straight-line method over the estimated useful lifeterm of 20the 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 Statementcondensed statements of Operationsoperations 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 on the condensed statements of operations. Upon evaluation, management determined that there was no impairment of long-lived assets as ofduring the three months ended March 31, 20212023 and December 31, 2020.2022.

 

Deferred revenue:

 

The unearned portion of advanced grant funds and prepayments for Clinical trial revenue, 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 three months ended March 31, 20212023 and 2020,2022, the Company recognized nil$0 and $0.2 million, respectively,$19,000 of funds that were previously classified as deferred revenue.revenue ($0.1 million and $0 million, respectively for the three months ended March 31, 2023 and 2022, respectively). Due to the MSCRF – Technology Development Corporation (TEDCO) – grant Accute Respiratory Distress Syndrome (ARDS) program being discontinued, the $0.4 million recorded as deferred revenue will be reversed when the funds are returned to MSCRF – TEDCO.

 

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 receivedreceives the treatment. For Contract Manufacturing Revenue,manufacturing revenue, the Company considers the performance obligation met when the contractual obligation and / 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
March 31,
 
  2021  2020 
National Institutes of Health – Grant $-  $714 
Clinical trial revenue  165   762 
Alzheimer’s Association – Grant  170   197 
Maryland – TEDCO – Grant  41   35 
Total $376  $1,708 
  Three months ended
March 31,
 
  2023  2022 
NIH - grant $41  $41 
Clinical trial revenue  238   310 
MSCRF – TEDCO - grant  -   19 
Total $279  $370 

 

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 allocated and expensed as incurred. These expenses are similar to those described under “Research and development expense” below.

 

7


 

 

Research and development expense:

 

Research and development costs are charged to expense when incurred in accordance with ASC 730.730 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 United StatesU.S. financial institutions. At times, the Company may maintain balances in excess of the federally insured amounts.

 

Income taxes:

 

Prior to its Corporate Conversion, the Company was treated as a partnership for U.S. federal and state income tax purposes. Consequently, the Company passed its earnings and losses through to its members based on the terms of the Company’s Operating Agreement. Accordingly, no provision for income taxes is recorded in the accompanyingcondensed financial statements for periods prior periods.to the conversion.

 

Following the Corporate Conversion, the Company'sCompany’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'sCompany’s tax provision was nil$0 for the three months ended March 31, 20212023 and 2022 due to net operating losses. The Company has not recorded any tax benefit for the net operating losses incurred due to the uncertainty of realizing a benefit inoffset created by the future.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 March 31, 20212023 and December 31, 2020,2022, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to thea 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 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 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 options.

 

TheNeither the Company’s stock options ornor its restricted stock units (“RSU”RSUs”) do not 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 option was granted. The expected life is the period of time that the options granted are expected to remain outstanding. Options granted have a maximum term of ten years. The Company hadhas insufficient historical data to utilize in determining its expected life assumptions and, therefore, uses the simplified method for determining expected life.

 


Comprehensive Loss3. Marketable securities

 

Comprehensive loss was equal to net loss forThe following is summary of Marketable securities that the three months endedCompany measures at fair value:

  Fair Value at March 31, 2023 
  Level 1  Level 2  Level 3  Total 
             
U.S. Treasury obligations $98,133  $-  $-  $98,133 
U.S. government agencies  -   1,064,992   -   1,064,992 
Corporate and foreign bonds  -   7,530,053   -   7,530,053 
Money market funds(1)  1,190,450   -   -   1,190,450 
Accrued income  66,862   -   -   66,862 
Total Marketable securities $1,355,445  $8,595,045  $    -  $9,950,490 

(1)Money market funds are included in cash and cash equivalents in the condensed balance sheet.

 

 Fair Value at December 31, 2022 
   Level 1   Level 2   Level 3   Total 
                 
U.S. Treasury obligations $96,981  $-  $-  $96,981 
U.S. government agencies  -   1,250,003   -   1,250,003 
Corporate and foreign bonds  -   7,807,655   -   7,807,655 
Money market funds(1)  607,263   -   -   607,263 
Accrued income  64,815   -   -   64,815 
Total Marketable securities $769,059  $9,057,658  $-  $9,826,717 

(2)Money market funds are included in cash and cash equivalents in the condensed balance sheet.

As of March 31, 20212023, and 2020.December 31, 2022, the Company reported accrued interest receivable related to Marketable securities of $66,862 and $64,815, respectively. These amounts are recorded in other assets on the condensed balance sheets and are not included in the carrying value of the Marketable securities.

 

3.


4. Property and equipment, net

Major components of property and equipment are as follows (in thousands):

 

  Useful Lives March 31, 2021  December 31, 2020 
Leasehold improvements       10 years $4,310  $4,310 
Furniture/Lab equipment 7 years  2,059   2,059 
Computer equipment 5 years  14   14 
Software/Website 3 years  38   38 
Total property and equipment    6,421   6,421 
Less accumulated depreciation and amortization    3,004   2,824 
Property and equipment, net   $3,417  $3,597 
  Useful Lives March 31,
2023
  December 31,
2022
 
Leasehold improvements 10 years $4,328  $4,328 
Furniture/Lab equipment 7 years  2,303   2,264 
Computer equipment 5 years  49   46 
Software/Website 3 years  38   38 
Total property and equipment    6,718   6,676 
    Less accumulated depreciation and amortization    3,908   3,727 
Property and equipment, net   $     2,810  $         2,949 

 

Depreciation and amortization expense amounted to approximately $0.2 million and $0.1 million for each of the three monthsthree-month periods ended March 31, 20212023 and 2020.2022.

4. 5. Intangible assets, net

Major components of intangible assets as of March 31, 20212023, are as follows (in thousands):

 

  Useful Lives Cost  Accumulated Amortization  Total 
License agreements 20 years $1,233  $(293) $940 
Patent Costs    466   -   466 
Trademark costs    127   -   127 
Total   $1,826  $(293) $1,533 
  Useful Lives Cost  Accumulated
Amortization
  Total 
License agreements 20 years $2,044  $(742) $1,302 
Patent Costs    951   -   951 
Trademark costs    172   -   172 
Total   $3,167  $   (742) $2,425 

 

Major components of intangible assets as of December 31, 20202022, are as follows:

 

  Useful Lives Cost  Accumulated Amortization  Total 
License agreements 20 years $1,233  $(279) $954 
Patent Costs    466   -   466 
Trademark costs    127   -   127 
Total   $1,826  $(279) $1,547 
  Useful Lives Cost  Accumulated
Amortization
  Total 
License agreements 20 years $2,043  $(685) $1,358 
Patent Costs    887   -   887 
Trademark costs    164   -   164 
Total   $3,094  $    (685) $2,409 

 

Amortization expense related to intangible assets totaled less thanamounted to approximately $0.1 million for each of the three monthsthree-month periods ended March 31, 20212023 and 2020.2022.

 

Future amortization expense for intangible assets as of March 31, 20212023, is approximately as follows (in thousands):

 

Year Ending December 31, Amount 
2021 $46 
2022  62 
2023  62 
2024  62 
2025  62 
Thereafter  646 
Total $940 
Year Ending December 31, Amount 
2023 (remaining nine months) $168 
2024  224 
2025  224 
2026  224 
2027  224 
Thereafter  238 
Total $1,302 

 

9


 

5. 6. Leases

 

In accordance with Accounting Standards Update 2016-02, “Leases (Topic 842)”, theThe Company records a Right-of-use (ROU) asset and a lease liability related to its operating leases (there are no finance leases). The Company’s corporate office lease expires in March 2027. As of March 31, 2021,2023, the ROU asset and lease liability were approximately $2.0$1.5 million and $3.5$2.5 million, respectively. As of December 31, 2020,2022, the ROU asset and lease liability were approximately $2.1$1.5 million and $3.7$2.6 million, respectively.

 

Future minimum payments under the operating leases as of March 31, 20212023, are as follows (in thousands):

 

Year Ending December 31, Amount 
2021 (remaining nine months) $495 
2022  671 
2023  687 
2024  702 
2025  718 
Thereafter  920 
Total  4,193 
Less: Interest  666 
Present Value of Lease Liability $3,527 
Year Ending December 31, Amount 
2023 (remaining nine months) $518 
2024  702 
2025  718 
2026  735 
2027  185 
Total  2,858 
Less: Interest  392 
Present Value of Lease Liability $2,466 

 

During each of the three months ended March 31, 20212023 and 2020,2022, the Company incurred approximately $0.2 million and $0.3 million of total lease costs, respectively that are included in the general and administrative expenses in the condensed statements of operations.

 

On July 1, 2020, the Company entered into a sublease agreement for a portion of its leased space for a one-year period ending June 30, 2021, with three optional one-year renewal periods, and $10,000 in monthly payments. The sublease was terminated in the second quarter of 2022. For the three months ended March 31, 2021, $30,0002023, $0 was recognized as sublease income as compared to $30,000 for the same period in 2022. For the year ended December 31, 2022, $27,000 was recognized as sublease income, due to the Company receiving $17,000 of equipment and is included in other income in the accompanying statements$10,000 of operations.security deposit forfeited.

7. Stockholders’ Equity 

 

6. Members’ Equity and Stockholders’ Equity Class A Common Stock

 

IPO

On February 12, 2021, as partJanuary 3, 2023, a total of 20,161 RSUs granted in connection with the Company’s IPO our Class A common stock beganvested, of which 18,005 were held by Company employees. The Company is required to trademake mandatory tax withholding for the payment and satisfaction of income tax, social security tax, payroll tax, or payment on NASDAQ underaccount of other tax related to withholding obligations that arise by reason of vesting of an RSU. The taxable income is calculated by multiplying the stock symbol “LGVN”. Pursuant to our IPO,number of vested RSUs for each individual by the closing share price as of the vesting date ($3.37 on January 3, 2023) and a tax liability is calculated based on each individual’s tax bracket. As a result, on January 3, 2023, the Company sold 2,660,000recorded a tax liability of $15,000 for the employees and a corresponding tax liability for the Company of $2,000. In total, the Company paid $17,000 for employee and employer taxes that resulted from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 4,431 shares of Class A common stock at a public offering price of $10.00 per shareCommon Stock owned by the employees upon vesting. The shares withheld are available for aggregate gross proceeds of $26,600,000 priorreissuance pursuant to deducting underwriting discounts, commissions, and other offering expenses.the 2021 Incentive Plan.

 

Immediately prior to the IPO,On November 16, 2022, the Company converted its corporate form from a Delaware limited liability companyaccounted for but had not issued 48,140 RSUs convertible to a Delaware corporation with the name change to Longeveron Inc. The conversion caused all existing Series A and B units to convert into Class B common stock and all existing Series C units to convert into Class A common stock. The purpose of the Corporate Conversion was to reorganize the Company structure so that the entity that offered the Company’s Class A common stock to the public is a Delaware corporation rather than a Delaware limited liability company, and so that the Company’s existing investors own the Company’s Class A common stock or Class B common stock rather than equity interests in a limited liability company.

On March 15, 2021, the Company sold 250,000unregistered shares of Class A common stock at a public offering price of $10.00 per share for aggregate gross proceeds of $2,500,000 prior to deducting underwriting discounts, commissions, and other offering expenses, pursuant to a partial exercise of the over-allotment option held by the underwriters.

Class A Common Stock,

During the three months ended March 31, 2021 and prior to the Corporate Conversion, the Company issued 1,130 Series C Common Membership Units (“Series C Units”), as payment for existing consulting agreements, with an aggregate value of $0.1 million. As part$207,000 as payment for accrued expenses under a consulting agreement with Dr. Hare.

On October 3, 2022, a total of 20,157 RSUs granted in connection with the Corporate Conversion, 63,893 outstanding Series C units (which includesCompany’s IPO vested, of which 18,001 were held by Company employees. Based on the units referenced inclosing price of $3.75 on October 3, 2022, the prior sentence) were converted into 344,077Company recorded a tax liability of $16,000 for the employees and a corresponding tax liability for the Company of $2,000. In total, the Company paid $18,000 for employee and employer taxes that resulted from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 4,204 shares of Class A common stock.Common Stock owned by the Company’s employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

 

Also during


On July 1, 2022, a total of 20,158 RSUs granted in connection with the three months ended March 31, 2021,Company’s IPO vested, of which 18,002 were held by Company employees. Based on the closing price of $5.94 on July 1, 2022, the Company issued 26,666 unregisteredrecorded a tax liability of $26,000 for the employees and a corresponding tax liability for the Company of $2,000. In total, the Company paid $28,000 for employee and employer taxes that resulted from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 4,726 shares of Class A common stockCommon Stock owned by the Company’s employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

On June 22, 2022, a total of 27,854 RSUs were granted to the Company’s former Chief Executive Officer, Geoff Green, in exchange for $170,000 of compensation, as agreed upon in connection with an aggregatehis separation.

On June 3, 2022, a total of 26,666 RSUs that previously had been granted to our Chief Financial Officer and General Counsel vested. RSUs are taxable upon vesting based on the market value on the date of $0.2 million, as payment under consulting agreements.


During the year ended December 31, 2020,vesting. Based on a closing price of $8.73 on June 3, 2022, the Company issued 18,335 Series C Unitsrecorded a tax liability of $55,000 for $1.1 million in cash.the employees and a corresponding tax liability for the Company of $2,000. In total, the Company paid $57,000 for employee and employer taxes resulting from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 6,254 shares of Class A Common Stock owned by the employees upon vesting. The Company also issued 734 Series C Units with an aggregate value of $0.1 million as payment under consulting agreements.shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

 

On April 4, 2022, a total of 1,167 RSUs that previously had been granted to our Chief Medical Officer vested. Based on the closing price of $12.85 on April 3, 2022, the Company recorded a tax liability of $5,000 for the employee and a corresponding tax liability for the Company of $1,000. In total, the Company paid $6,000 for employee and employer taxes that resulted from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 357 shares of Class A Common Stock owned by the Chief Medical Officer upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

On April 1, 2022, a total of 31,016 RSUs granted in connection with the Company’s IPO vested, of which 26,360 were held by Company employees. Based on the closing price of $15.61 on April 1, 2022, the Company recorded a tax liability of $105,000 for the employees and a corresponding tax liability for the Company of $14,000. In total, the Company paid $119,000 for employee and employer taxes that resulted from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 6,222 shares of Class A Common Stock owned by the Company’s employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

On April 1, 2022, a total of 2,500 RSUs that were previously granted to a member of the Company’s Board of Directors vested.

On February 12, 2022, a total of 8,750 RSUs that were previously granted to members of the Company’s Board of Directors upon the completion of the IPO vested.

On January 3, 2022, a total of 35,246 RSUs granted in connection with the Company’s IPO vested, of which 29,614 were held by Company employees. Based on the closing price of $12.09 on January 3, 2022, the Company recorded a tax liability of $92,000 for the employees and a corresponding tax liability for the Company of $14,000. In total, the Company paid $106,000 for employee and employer taxes that resulted from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 10,627 shares of Class A Common Stock owned by the Company’s employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

Class B Common Stock

 

As part ofIn connection with the Corporate Conversion, 2,000,000 outstanding Series A and B units were converted into 15,702,834 shares of our unregistered Class B common stock.Common Stock.

 

TheHolders of Class A Common Stock generally have rights identical to holders of Class B common stock may convert one share of Class B common stock into one shareCommon Stock, except that holders of Class A common stock. TheCommon Stock are entitled to one vote per share and holders of Class B common stockCommon Stock are entitled to five (5) votes per share, andshare. The holders of Class B Common Stock may convert each share of Class B Common Stock into one share of Class A common stock are entitled to one (1) vote per share.Common Stock at any time at the holder’s option. Class B Common Stock is not publicly tradable.

 

During the three months ended March 31, 2023, shareholders exchanged 20,000 shares of Class B Common Stock for 20,000 shares of Class A Common Stock. During the year ended December 31, 2022, shareholders exchanged 811,749 shares of Class B Common Stock for 811,749 shares of Class A Common Stock.


Warrants

 

As a resultpart of the IPO, the underwriter received warrants to purchase 106,400 shares of Class A common stock.Common Stock. The warrants are exercisable at any time and from time to time, in whole or in part, during the four and a half-year period commencing six months from FebruaryAugust 12, 2021, at a price of $12.00 per Class A common stock share. Total grant dateshare and the fair value of warrants estimated using the Black-Scholes pricing model was approximately $0.5 million. During 2021, the underwriters assigned 95,760 of the warrants to its employees. As of December 31, 2021, 51,061 warrants have been exercised for Class A Common Stock shares at an exercise price of $12.00 for $612,732.

 

7.As part of the 2021 PIPE Offering, the Company issued 1,169,288 warrants to investors to purchase up to a number of shares of Class A Common Stock equal to the number of shares of Class A Common Stock purchased by such investor in the offering, at an exercise price of $17.50 per share. The purchaser warrants are immediately exercisable, expire five years from the date of issuance and have certain downward pricing adjustment mechanisms, subject to a floor, as set forth in greater detail in the purchase warrants. In addition, the Company granted the underwriters warrants, under similar terms, to purchase 46,722 shares of Class A Common Stock, at an exercise price of $17.50 per share.

8. Equity Incentive Plan

 

As part of the Company’s IPO, on January 29, 2021, the Company adopted and approved the 2021 Incentive Award Plan (“2021 Incentive Plan”). Under the 2021 Incentive Plan, the Company may grant cash and equity incentive awards to eligible service providers in order to attract, motivate and retain the talent for which the Company competes. The material

On March 1, 2023, the company granted Mr. Hashad a signing bonus of 50,000 Restricted Stock Units, which shall vest in quarterly installments on each of April 1, 2023, July 1, 2023, September 1, 2023, and December 31, 2023. Mr. Hashad will also be eligible to receive annual long-term equity incentive awards through 2026 consisting of 50,000 shares of time-based vesting stock options and up to 125,000 of performance share units, in accordance with the terms of the Longeveron 2021 Incentive Plan are summarized below.Award Plan.

 

On November 16, 2022, the Company accounted for but had not issued 48,140 RSUs convertible to unregistered shares of Class A Common Stock, with an aggregate value of $207,000 as payment for accrued expenses under a consulting agreement with Dr. Hare.

On January 29, 2021,September 6, 2022, the Board approvedCompany granted Mr. Bailey received an equity incentive award of 20,000 RSUs. The RSUs will vest 25% upon the grantingfirst-year anniversary of 159,817 Series Chis first day of employment with Longeveron, with 25% vesting thereafter on the second, third and fourth anniversaries of his employment. In each case, the vesting of the equity awards will be subject to Mr. Bailey’s continued service through the applicable vesting dates. RSUs undershall be expensed on a quarterly basis at the rate of $5,838 for the quarterly vesting amount of 1,250 RSUs, with a price per share of $4.67 (the closing price of the Company’s existing 2017 Longeveron LLC Incentive Plan (the “2017 Incentive Plan”)stock on September 6, 2022).

On June 22, 2022, the Company granted $170,000 of separation compensation to Mr. Green (Mr. Green resigned as CEO effective June 1, 2022), which thereafterwere converted into 27,854 RSUs. The RSU were issued based on the three-day average of the fair market value prior to the time of grant, June 22, 2022, of $6.10.

On June 3, 2022, the Company granted a bonus to Mr. Clavijo and Mr. Lehr in the form of RSUs. Mr. Clavijo and Mr. Lehr were granted 40,000 RSUs each that vested one-third at the grant date, with the remaining two thirds vesting on each anniversary of the grant date. The RSU were issued based on a fair market value at the time of grant, June 3, 2022, of $8.73.

On April 4, 2022, the Company appointed K. Chris Min, M.D., Ph.D. as its Chief Medical Officer. Dr. Min’s employment agreement provides annual base salary of $350,000, and he will be eligible to receive a performance bonus equal to 30% of his base salary, prorated for his first year of employment. Dr. Min received a $60,000 signing bonus, with 50% of this amount paid in RSUs and 50% in stock options. Dr. Min also received two equity incentive awards: 150,000 RSUs and a stock option award exercisable for Class A common stock as part50,000 shares. Each award will vest 25% upon the first-year anniversary of his first day of employment with Longeveron, with 25% vesting thereafter on the second, third and fourth anniversaries of his employment. In each case, the vesting of the Corporate Conversion inequity awards will be subject to Dr. Min’s continued service through the IPO. More specifically, 159,817applicable vesting dates. RSUs were converted to 855,247shall be expensed on a quarterly basis at the rate of $0.1 million for the quarterly vesting amount of 9,375 RSUs, exercisable for Class A common stock. During February 2021, one employee resigned from the Company thereby forfeiting 16,113 RSUs, and 5,000 RSUs each were granted to sixwith a price per share of $12.85 (the closing price of the Directors. Company’s stock on April 4, 2022). Stock options shall be expensed based upon a Black-Scholes calculation, the price per share to be expensed was $11.34 and a total cost of $0.6 million would be expensed ratably over 48 months.


As of March 31, 2021,2023, and December 31, 2022, the Company had 869,134356,297 and 329,746, respectively RSUs granted and outstanding. RSUs have no exercise price and are convertible into Class A common stock shares upon meeting the vesting requirements. The RSUs shall vest, subject to the Participant’s continued Service to the Company, only upon satisfaction of both of the following criteria:outstanding (unvested).

 

Time-Based Vesting: Subject to the attainment of a time vesting event, the RSUs shall vest in 25% increments per year, on each of the first, second, third and fourth anniversary of the date of grant. Such yearly vesting will vest pro-rata per quarter at the end of each quarter. However, vesting of certain RSUs have been accelerated as having been vested due to being earned for prior years of service, and hence are treated as earned “catch-up” awards; and
IPO Settlement Date: The IPO settlement date is a date on the third quarterly settlement date following the Company’s IPO. (This date will effectively be October 1, 2021).

The fair value of each RSU grant made during 2021 will be recognized as stock-based compensation ratably over the related vesting periods, which approximates the service period. As noted in the paragraph above, in order for RSUs to vest they must be held as of the IPO Settlement Date, which has been determined to be October 1, 2021. However, some RSUs with accelerated vesting as described above will be ratably vested over the seven and half month period ending on September 30, 2021.

Based upon a third party valuation, the calculated fair value of each RSU was $9.00. RSU activity for the three months ended March 31, 20212023, was as follows:

 

  Number of

RSUs
 
Outstanding (unvested) at December 31, 20202022 -329,746 
RSU granted  885,24750,000 
RSU exercisedRSUs vested  -(23,149)
RSU expired/forfeited  16,113- 
Outstanding (unvested) at March 31, 20212023  869,134356,597 

 

Stock Options

Stock options may be granted under the 2021 Incentive Plan. The exercise price of options is equal to the fair market value of the Company’s Class A Common Stock as of the grant date. Options historically granted have generally become exercisable over four years and expire ten years from the date of grant. The 2021 Incentive Plan provides for equity grants to be granted up to 5% of the outstanding common stock shares.

The fair value of the options issued are estimated using the Black-Scholes option-pricing model and have the following assumptions: a dividend yield of 0%; an expected life of 10 years; volatility of 95%; and risk-free interest rate based on the grant date ranging from of 1.23% to 3.68%. Each option grant made during 2023 and 2022, will be expensed ratably over the option vesting periods, which approximates the service period.

As of March 31, 2023 and December 31, 2022, the Company has recorded issued and outstanding options to purchase a total of 470,191 shares of Class A Common Stock pursuant to the 2021 Incentive Plan, at a weighted average exercise price of $7.07 per share.

For the three months ended March 31, 20212023:

Number of
Stock Options
Stock options vested (based on ratable vesting)194,120
Stock options unvested276,071
Total stock options outstanding at March 31, 2023470,191

For the year ended December 31, 2022:

Number of
Stock Options
Stock options vested (based on ratable vesting)151,258
Stock options unvested318,933
Total stock options outstanding at December 31, 2022470,191

Stock Option activity for the three months ended March 31, 2023, was as follows:

  

Number of
Stock Options

  Weighted
Average
Exercise Price
 
Outstanding at December 31, 2022  470,191  $7.07 
Options granted  -   - 
Options exercised  -   - 
Options expired/forfeited  -   - 
Outstanding at March 31, 2023  470,191  $      7.07 


On December 21, 2022, the Company granted an award of 5,000 Class A Common Stock options to each of its directors (a total of 45,000). The stock option award has a four-year vesting period, vesting 25% per year, and 2020,has an exercise price of $3.00. Based upon a Black-Scholes calculation, the price per share to be expensed was $2.67 and a total cost of $135,000 that would be expensed ratably over 48 months.

On November 16, 2022, the Company granted an award of 22,843 Class A Common Stock options to Mr. Lehr. The stock option award has a four-year vesting period, vesting 25% per year, and has an exercise price of $4.30. Based upon a Black-Scholes calculation, the price per share to be expensed was $2.94 and a total cost of less than $0.1 million would be expensed ratably over 48 months.

On September 6, 2022, the Company granted an award of 10,000 Class A Common Stock options to an employee. The stock option award has a four-year vesting period, vesting 25% per year, and has an exercise price of $4.67. Based upon a Black-Scholes calculation, the price per share to be expensed was $4.15 and a total cost of less than $0.1 million would be expensed ratably over 48 months.

On June 3, 2022, the Company granted an award of 5,000 Class A Common Stock options to Mr. Lehr. The stock option award vested upon the grant date and has an exercise price of $8.73. Based upon a Black-Scholes calculation, the price per share to be expensed was $7.73 and a total cost of less than $0.1 million was expensed on the grant date.

On March 14, 2022, the Company granted an award of 22,000 Class A Common Stock options to employees. The stock option award has a four-year vesting period, vesting 25% per year, and has an exercise price of $5.94. Based upon a Black-Scholes calculation, the price per share to be expensed was $5.23 and a total cost of less than $0.1 million would be expensed ratably over 48 months.

On January 6, 2022, the Company granted awards of 84,825 Class A Common Stock options to employees. The stock option awards have four-year vesting periods, vesting 25% per year, and have an exercise price of $10.00. Based upon a Black-Scholes calculation, the price per share to be expensed was $8.78 and a total cost of $0.7 million would be expensed ratably over 48 months.

For the three months ended March 31, 2023 and 2022, the equity-based compensation expense amounted to approximately $1,265,000$0.4 million and $13,000,$0.5 million, respectively, which is included in the research and development and general and administrative expenses in the accompanyingcondensed statements of operations for the three months ended March 31, 20212023 and 2020. 2022, respectively.

As of March 31, 2021,2023, the remaining unrecognized equity basedequity-based compensation (which includes RSUs and stock options) of approximately $6.6$3.2 million will be recognized over approximately 2.753.9 years.


8. 9. Commitments and Contingencies

 

Master Services Agreements:

 

As of March 31, 2021,2023, the Company had three active master services agreements with third parties to conduct its clinical trials and manage clinical research programs and clinical development services. The Company expects these agreements or amended current agreements to have total expenditures of approximately $3.5 million over the next two years.

As of December 31, 2022, the Company had two active master services agreements with third parties to conduct its clinical trials and manage clinical research programs and clinical development services on behalf of the Company. The Company expects these agreements or amended current agreements to have total expenditures of less than $1.0.approximately $2.9 million over the next two years. On March 10, 2022, the Company entered into a clinical studies agreement with a third party in conjunction with an upcoming clinical trial in Japan. The agreement provides for 2021.payments totaling $1.0 million over the course of two years.

 


Consulting Services Agreement:

 

On November 20, 2014, the Company entered into a ten-year consulting services agreement with Dr. Joshua Hare, its CSO. Under the agreement, the Company has agreed to pay the CSO $270,000$265,000 annually. The compensation payments are for scientific knowledge, medical research, technical knowledge, skills, and abilities to be provided by the CSO to further develop the intellectual property rights assigned by the CSO to the Company. This agreement requires the CSO to also assign to the Company the exclusive right, title, and interest in any work product developed from his efforts during the term of this agreement. On November 16, 2022, the Company accounted for but had not issued 48,140 RSUs convertible to unregistered shares of Class A Common Stock, with an aggregate value of $0.2 million as payment for accrued expenses under the consulting agreement with the CSO. As of March 31, 2021,2023 and December 31, 2022, the Company had an accrued balance due to the CSO of $0.3 million and a balance due of $0.3 million as of December 31, 2020.less than $0.1 million.

 

Technology Services Agreement:

 

On March 27, 2015, the Company entered into a technology services agreement with Optimal Networks, Inc. (a related company owned by a board member’sDr. Joshua Hare’s brother-in-law) for use of information technology services. The Company agreed to issue the related party equity incentive units in the amount equal to 50% of the charges for invoiced services, with such equity to be issued annually on or about the anniversary date of the agreement. During 2017, the Company issued 1,901 Series C Units, and on November 22, 2019, and January 29, 2021, the Company issued 820 and 410 Series C Units, respectively, as payment for an aggregate of $0.2 million of accrued technology services. The Series C units were converted to 16,755 Class A common stock shares. As of March 31, 2021,2023 and December 31, 2020,2022, the Company owed less than $0.1 million, pursuant to this agreement, which is included in accounts payable in the accompanying March 31, 20212023 and December 31, 20202022 condensed balance sheets.

 

Exclusive Licensing Agreements:

UM Agreement

 

On November 20, 2014, the Company entered into an exclusive license agreementExclusive License Agreement with UM for the use of certain stem cell aging-related frailtyAging-related frailty-related MSC technology rights developed by the CSO while employedour Chief Science Officer at UM. The Company recordedUM License is a worldwide, exclusive license, with right to sublicense, with respect to any and all know-how specifically related to the valuedevelopment of the membership units issuedculture-expanded MSCs for aging-related frailty used at the IMSCs, all SOPs used to obtain this license agreement as an intangible asset.create the IMSCs, and all data supporting isolation, culture, expansion, processing, cryopreservation and management of the IMSCs. The Company is required to pay UM up(i) a license issue fee of $5,000, (ii) a running royalty in an amount equal to 3%three percent of annual net sales on products or services developed from the technology.technology, payable on a country-by-country basis beginning on the date of first commercial sale through termination of the UM License Agreement, and which may be reduced to the extent we are required to pay royalties to a third party for the same product or process, (iii) escalating annual cash payments of up to fifty thousand dollars, subject to offset. The agreement extends for up to 20 years from the last date a product or process is commercialized from the technology. Under the agreement, the Company is required to pay an annual fee to UM. On December 11, 2017, the November 20, 2014 agreement with UM was amended. The amendment provided that for a $5,000 fee the dates of the milestone completions were amendedtechnology and replaced as follows: (a) by December 31, 2021, to have completed Phase II clinical trials for the products; and (b) by September 1, 2025, to have completed Phase III clinical trials for products. In addition, one-year extensions may be granted on these milestone dates by making a payment of $5,000. Upon completion of the Phase II clinical trials, a milestone payment of $250,000 is due. Upon completion of the Phase III clinical trials, a milestone payment of $750,000 is due. As of March 31, 2020, the Company had accrued $50,000 based on the terms of the agreement. In addition, on November 14, 2014, as required by the license agreement the Company issued 20,000 series C membership units valued at $0.5 million to UM. The Company recorded this $500,000 as an intangible asset that is amortized over the life of the license agreement which was defined as 20 years. As of March 31, 2021, the Company had accrued $162,500 in milestone fees payable to UM based on the estimated progress to date.

The UM agreement was amended on March 3,in 2017 to modify certain milestone completion dates as detailed below In 2021 to increase the license fee due to UM. The Company agreed to pay UMwas increased by an additional fee, which will be recorded as legal costs, of $0.1 million,$100,000, to defray patent costs, with $70,000 due within thirty (30) days ofcosts. In addition, the effective date of the amendment, and the remainder to be paid in equal installments of $7,500 on the 2nd, 3rd, and 5th year anniversaries of the effective date. The Company also agreed to issue an additionalissued 110,387 unregistered shares of Class A common stock sharesCommon Stock to UM.


The Company and UM agreedmilestone payment amendments shifted the triggering payments to the following modificationthree payments of the milestone payments: (a) No payment will$500,000, to be due upon the completion of Phase 2 clinical trials for the product; (b) a one-time payment of $0.5 million, payablepaid within six months ofof: (a) the completion of the first Phase 3 clinical trial of the products (based upon the final data unblinding); (c) a one-time payment of $0.5 million payable within six months of(b) the receipt by the Company of approval for the first new drug application (“NDA”), biologics application (“BLA”), or other marketing or licensing application for the product; and (d) a one-time payment of $0.5 million payable within six months of(c) the first sale following product approval. “Approval” refers to Product approval, licensure, or other marketing authorization by the U.S. Food and Drug Administration, or any successor agency. The amendmentamendments also provided for the Company’s license of additional technology, to the extent not previously included in the UM License and granted the Company an exclusive option to obtain an exclusive license for (a) the HLHS IND with ckit+ cells; and (b) UMP-438 titled “Method of Determining Responsiveness to Cell Therapy in Dilated Cardiomyopathy.”

 


CD271The Company has the right to terminate the UM License upon 60 days’ prior written notice, and either party has the right to terminate upon a breach of the UM License. To date, the Company has made payments totaling $140,000 to UM, and as of March 31, 2023 and December 31, 2022, we had accrued $92,000 and $50,000 in milestone fees payable to UM, respectively and $100,000 for patent related reimbursements based on the estimated progress to date.

 

CD271

On December 22, 2016, the Company entered into an exclusive license agreement with an affiliated entity of the CSODr. Joshua Hare, JMH MD Holdings, LLC (“JMHMD”), for the use of CD271 cellular therapy technology. The Company recorded the value of the cash consideration and membership units issued to obtain this license agreement as an intangible asset. The Company is required to pay as royalty, 1% of the annual net sales of the licensed product(s) used, leased, or sold by or for licensee or its sub-licensees. If the Company sublicenses the technology, it is also required to pay an amount equal to 10% of the net sales of the sub-licensees. In addition, on December 23, 2016, as required by the license agreement, the Company paid an initial fee of $250,000 to JMHMD, and issued to it 10,000 Series C Units, valued at $250,000. The $0.5 million of value provided to JMHMD for the license agreement, along with professional fees of approximately $27,000, were recorded as an intangible asset that is amortized over the life of the license agreement which was defined as 20 years. Further, expenses related to the furtherance of the CD271+ technology is being capitalized and amortized as incurred over 20 years. There were no license fees due during the three months endedfor March 31, 2021 or year ended2023 and December 31, 20202022 pertaining to this agreement.

 

Other Royalty

 

Under the grant award agreement with the Alzheimer’s Association, the Company may be required to make revenue sharing or distribution of revenue payments for products or inventions generated or resulting from this clinical trial program. The potential payments, although not currently defined, could result in a maximum payment of five times (5x) the award amount.

 

Contingencies – COVID-19 PandemicLegal

 

The COVID-19 outbreak could adversely impactOn September 13, 2021, the Company’s ability to conduct businessCompany and certain of our directors and officers were named as defendants in a securities lawsuit filed in the future. In December 2019, it was first reported that there had been an outbreakU.S. District Court for the Southern District of Florida and brought on behalf of a novel strainpurported class. The suit alleges there were materially false and misleading statements made (or omissions of coronavirus, SARS-CoV-2, COVID-19, in China. As COVID-19 continues to spread globally, including throughout the United States, the Company may experience disruptions that could severely impact its business, including:

impact to the financial markets;
disruption in the ability to provide product in foreign markets;
disruption on the ability to source materials;
disruption in the ability to manufacture our product;
delays or difficulties in completing the Company’s regulatory work;
limitations on the Company’s employee resources ability to work, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people; and
additional repercussions on the Company’s ability to operate its business.

The global outbreak of COVID-19 continues to rapidly evolve. The extent to which COVID-19 impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19, the ultimate geographic spread of COVID-19, the duration of the outbreak, travel restrictions imposed by countries in which the Company conducts business, business closures or business disruption in the world, a reduction in time spent out of home and the actions taken throughout the world, includingrequired information) in the Company’s markets, to contain COVID-19 or treat its impact. The future impactinitial public offering materials and in other disclosures during the period from our initial public offering on February 12, 2021, through August 12, 2021, in violation of the outbreak is highly uncertain and cannot be predicted, andfederal securities laws. The action seeks damages on behalf of a proposed class of purchasers of our Common Stock during said period. On July 12, 2022, all parties preliminarily agreed to settle the Company cannot provide any assurance that the outbreak will not have a material adverse impact on the Company’s operations or future results or filings with regulatory health authorities. The extent of the impact to the Company, if any, will depend on future developments, including actions taken to contain COVID-19.

The Company continues to monitor how the COVID-19 pandemic is affecting the Company’s employees, business, and clinical trials. In response to the spread of COVID-19, the Company has instructed all employees who can perform their essential employment duties from home to do so. The Company’s laboratory scientists, cell processing scientists and other manufacturing personnel continue to work from the Company GMP facility on a day-to-day basis, and as such cell production has been minimally impacted. When the pandemic began to emerge in the U.S., most of the Company’s ongoing clinical trials had completed enrollment, however a few subjects that were currently on study and in follow-up experienced some difficulties in adhering to the protocol schedule. Because the Company primarily enrolls elderly subjects in the trials, who are at particular risk for poor outcomes related to COVID-19 infection, the Company has experienced some disruption in executing the follow-up visits in Company protocols. While the Company believes the number of instances where a visit was missed completely is small, the Company cannot predict whether this will have a material impact on the Company clinical results in the future. If too many subjects drop-out or the protocol is no longer effective, the Company may have to restart the clinical trial entirely.

9. Short-term Note Payable

On September 27, 2020, the Company entered into a premium finance agreement to finance its insurance policiesaction for approximately $63,000. The note requires down payment of $6,334, ratable monthly payments of $6,499, including interest at 5.353% and matures in June 2021. As of March 31, 2021, the outstanding balance$1.4 million, which amount was $19,000.


10. Long-term Loan

On April 16, 2020, the Company received a loan from the Small Business Administration (SBA) pursuant to the Paycheck Protection Program (PPP) as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in the amount of $300,390. The loan had interest at a rate of 1.00%, and initial maturity in 24 months. It was anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. The Company also received $10,000 from the SBA for the Economic Relief Fund; this amount does not need to be repaid and was recorded as Other Income for the year ended December 31, 2020. As of December 31, 2020, the outstanding balance of the PPP loan was $300,390. On March 4, 2021, the full balance due for the PPP loan was forgiven by the SBA.

On May 12, 2020, the Company received a loan from the SBA pursuant to the Disaster Recovery Plan as part of the CARES Act in the amount of $150,000. This loan will require payments beginning on May 12, 2021 of $734 per month. The note will mature in 30 years and bears an interest rate of 3.75%. Due to part of the notes being due within one year, the Company recorded $4,009 and $138,879 in the current portion of loans line on the Balance Sheetaccrued as of March 31, 20212023, and December 31, 2020, respectively.

Future debt obligations atincluded in accrued expenses on the March 31, 2020 for Long-term loans2023 condensed balance sheet. The parties are as follows (in thousands):in the process of documenting the settlement and full release, which will be subject to Court approval. Legal expenses incurred in ordinary business activities are reported within general and administrative expenses.

 

Year Ending December 31, Amount 
2021 (remaining nine months) $4 
2022  3 
2023  3 
2024  3 
2025  3 
Thereafter  134 
Total $150 


 

11.

10. Employee Benefits Plan

The Company sponsors a defined contribution employee benefit plan (the “Plan”) under the provisions of Section 401(k) of the Internal Revenue Code. The Plan covers substantially all full-time employees of the Company who have completed one year of service. Contributions to the Plan by the Company are at the discretion of the Board of Directors.

 

The Company contributed approximately $16,000$38,000 and $11,000$32,000 to the Plan during the yearthree months ended March 31, 20212023 and 2020,2022, respectively.

 

12. 11. Loss Per Share

 

Basic and diluted net loss per share have been computed using the weighted-average number of shares of common stock outstanding during the period. We have outstanding stock-based awards that are not used in the calculation of diluted net loss per share because to do so would be anti-dilutive.

The following instruments (in thousands) were excluded from the calculation of diluted net loss per share because their effects would be antidilutive:

 

  Three months ended
March 31,
 
  2021  2020 
Equity awards  869       - 
Warrants  106   - 
Total  975   - 
  Three months ended
March 31,
 
  2023  2022 
RSUs  356   306 
Stock options  470   304 
Warrants  1,271   1,271 
Total  2,097   1,881 

 

14. 12. Subsequent Events

 

On April 22, 2021,3, 2023, a total of 10,648 RSUs granted in connection with the Company’s IPO vested, of which 9,570 were held by Company granted 64,125 Class A common stock options to its officers and employees. The stock options vest quarterly over four years at a rate of 25% per year. The stock options may not be exercised until after October 1, 2021. The stock options have an exercise price of $5.73,Based on the closing price of $2.61 on April 22, 2021.3, 2023, the Company recorded a tax liability of $7,000 for the employees and a corresponding tax liability for the Company of $2,000. In total, the Company paid $9,000 for employee and employer taxes that resulted from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 2,514 shares of Class A Common Stock owned by the Company’s employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.


On April 18, 2023, the Company finalized the Separation Agreement dated March 31, 2023, for Dr. Min (Company’s Chief Medical Officer). In part for his agreement to a general release the Company agreed to pay Dr. Min: $112,000 as severance compensation and the immediate acceleration and vesting of 40,000 RSUs that were previously granted.

On April 19, 2023, the Company finalized the Separation Agreement effective June 9, 2023, for Mr. Clavijo (Company’s Chief Financial Officer). In part for his agreement to a general release the Company agreed to pay Mr. Clavijo $275,000 as severance compensation, three months of payment for COBRA insurance coverage and the immediate acceleration and vesting of 6,690 RSUs that were previously granted.


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

In this document, the terms “Longeveron,” “Company,” “we,” “us,” and “our” refer to Longeveron Inc. We have no subsidiaries.

 

This Quarterly Report on Form 10-Q (this “10-Q”) contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current expectations about our future results, performance, prospects and opportunities. This 10-Q contains forward-looking statements that can involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this report,10-Q, including statements regarding our future results of operations and financial position, business strategy, prospective products, product approvals, research and development costs, future revenue, timing and likelihood of success, plans and objectives of management for future operations, future capital raising, future results of anticipated products and prospects, plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 

In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words. Forward-lookingFactors that could cause actual results to differ materially from those expressed or implied in any forward-looking statements contained in this report include, but are not limited to, statements about:

 

the ability of our clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
   
the timing and focus of our ongoing and future preclinical studies and clinical trials, and the reporting of data from those studies and trials;
   
the size of the market opportunity for our product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting;
   
the success of competing therapies that are or may become available;
   
the beneficial characteristics, safety, efficacy and therapeutic effects of our product candidates;
   
our ability to obtain and maintain regulatory approval of our product candidates;candidates in the U.S., Japan and other jurisdictions;
   
our plans relating to the further development of our product candidates, including additional disease states or indications we may pursue;
   
existing regulations and regulatory developments in the United States, Japan and other jurisdictions;
our plans and ability to obtain or protect intellectual property rights, including extensions of existing patent terms where available and our ability to avoid infringing the intellectual property rights of others;
   
the need to hire additional personnel and our ability to attract and retain such personnel;
   
our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
   
our need to raise additional capital, the effect that global pathogens coulddifficulties we may face in obtaining access to capital, and the dilutive impact it may have on financial markets, materials sourcing, patients, governments and population (e.g., COVID-19);our investors;
   
our financial performance; and
   
the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements.

 


The forward-looking statements contained in this 10-Q are made on the basis of the views and assumptions of management regarding future events and business performance as of the date this 10-Q is filed with the Securities and Exchange Commission (the “SEC”). In addition, we operate in a highly competitive and rapidly changing environment; therefore, new risk factors can arise, and it is not possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on our business or the extent to which any individual risk factor, or combination of risk factors, may cause results to differ materially from those contained in any forward-looking statement. We do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date this 10-Q is filed. In addition, this discussion and analysis should be read in conjunction with our unaudited condensed financial statements and notes thereto included in this 10-Q and the audited condensed financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020,2022, filed with the SEC on March 30, 202114, 2023 (“20202022 10-K”). Operating results are not necessarily indicative of results that may occur in future periods.

 

Overview and Recent Developments

 

Overview

 

Pursuant to our IPO in February of 2021, we sold 2,660,000 shares of Class A common stock at an IPO price of $10.00 per share for aggregate gross proceeds of $26,600,000 prior to deducting underwriting discounts, commissions, and other offering expenses. On February 12, 2021, our Class A common stock began to trade on NASDAQ under the stock symbol “LGVN”.


On March 15, 2021, the underwriters of our IPO partially exercised its overallotment option, pursuant to which we sold 250,000 shares of Class A common stock at a public offering price of $10.00 per share for aggregate gross proceeds of $2,500,000 prior to deducting underwriting discounts, commissions, and other offering expenses.

We are a clinical stage biotechnology company developing cellular therapies for aging-related and life-threatening conditions. Ourregenerative medicines to address unmet medical needs. The Company’s lead investigational product is Lomecel-B, which is derivedLomecel-B™ brand MSCs, an allogeneic medicinal signaling cell (MSC) therapy product isolated from culture-expanded MSCs that are sourced fromthe bone marrow of young, healthy adult donors. We believeLomecel-B™ has multiple modes of action that by using the same cells that promoteinclude pro-vascular, pro-regenerative, and anti-inflammatory mechanisms, promoting tissue repair organ maintenance, and immune system function, we can develop safe and effective therapies for somehealing with broad potential applications across a spectrum of the most difficult disorders associated with the aging process.disease areas.

 

We are currently sponsoring Phase 1pursuing three pipeline indications: Hypoplastic Left Heart Syndrome (HLHS), Aging-related Frailty, and 2 clinical trials in the following indications: Aging Frailty, AD, the Metabolic Syndrome, ARDS, and HLHS.Alzheimer’s disease (AD). Our mission is to advance Lomecel-BLomecel-B™ and other cell-based product candidates into pivotal Phase 3 (i.e. pivotal) trials, for multiple indications, with the goal of achieving regulatory approvals, subsequent commercialization, and broad use by the healthcare community.

 

AsWith respect to HLHS, we are exploring the possibility that Lomecel-B™, when administered directly to the myocardium of March 31, 2021,affected infants, can improve outcomes in this devastating rare pediatric disease. The standard of care in HLHS is a series of three reconstructive surgeries, typically at 10 days, 4 months, and approximately 4 years of life. Despite these life-saving surgical interventions, it is estimated that only 50 to 60 percent of affected individuals survive until adolescence. The pro-vascular, pro-regenerative and anti-inflammatory properties of Lomecel-B™ may improve the U.S. FDAfunction of the right ventricle in these infants. A previously published Longeveron Phase 1 open-label study (ELPIS I)1 indicated that such a benefit may exist when outcomes were compared to historical controls. Longeveron is currently conducting a controlled study to determine the actual benefit of Lomecel-B™ in these patients.

Our philosophy is that healthy aging can be improved through regenerative medicine approaches. Life expectancy has authorized us to conduct six clinical trials evaluating Lomecel-B. We have completed five outsubstantially increased over the past century as a result of six of these studies, with the remaining currently ongoing study for ARDS anticipated to continue into 2022. Japan’s Pharmaceuticalmedical and Medical Device Agency (PMDA) approved a Clinical Trial Notification (CTN) submittedpublic health advancements. However, this increase in longevity has not been paralleled by the National Center for Geriatricsnumber of years a person is expected to live in relatively good health, with limited chronic disease and Gerontology (NCGG) to conductdisabilities of aging – a Phase 2 study of Lomecel-B infusion in Japanese Aging Frailty subjects, andperiod known as healthspan. As we expect this study to initiate in 2021. Additionally,age, we sponsorexperience a registry in The Bahamas under the approval and authority of the National Stem Cell Ethics Committee. The Bahamas Registry Trial administers Lomecel-B to eligible participants at two private clinics in Nassau for a variety of indications. While Lomecel-B is considered an investigational product in The Bahamas, under the approval terms from the National Stem Cell Ethics Committee, we are permitted to charge a fee to participate in the Registry Trial.

Since our founding in 2014, we have focused the majority of our time and resources on the following: organizing and staffing our company, building, staffing and equipping a GMP manufacturing facility with research and development labs, business planning, raising capital, establishing our intellectual property portfolio, generating clinical safety and efficacy datadecline in our selected disease conditionsown stem cells; a decrease in immune system function, known as immunosenescence; diminished blood vessel functioning; chronic inflammation, known as “inflammaging”; and indications, and developing and expanding our manufacturing processes and capabilities.other aging-related declines. Our preliminary clinical data suggest that Lomecel-B™ can potentially address these problems through multiple mechanisms of action, or MOAs, that simultaneously target key aging-related processes.

 

We manufacture our own product candidatesImproving healthspan is an imperative for clinical trials. In 2017 we opened a manufacturing facility comprised of eight clean rooms, two research and development laboratories, and warehouse and storage space. We have supply contracts with two third party suppliers for fresh bone marrow, which we use to produce our product candidate for clinical testing and research and development. From time to time, we enter into contract development and manufacturing contracts or arrangements with third parties who seek to utilize our product development capabilities.

When appropriate funding opportunities arise, we routinely apply for grant funding to support our ongoing research and since 2016 we have received approximately $16.0 million in grant awards ($11.9 million of which has been directly awarded to us and is recognized as revenue when the performance obligations are met) from thegovernmental health agencies. The National Institute on Aging (NIA), an institute of the National Institutes of Health (NIH), National Heart Lunghas promoted the concept of geroscience – the idea that aging itself is the biggest risk factor for aging-related human diseases and Blood Institute (NHLBI)that aging can be approached as a treatable disease to improve healthspan. The geroscience hypothesis provides a strong rationale for the approach of the NIH, the Alzheimer’s Association,treating underlying biological processes contributing to aging as a way to reduce disease burden and the Maryland Stem Cell Research Fund (MSCRF) of the Maryland TEDCO.advance global human health. Our investments into developing and testing product candidates are aimed at reducing aging-related disease burden and improving healthspan.

 

Impact

1Sunjay Kaushal, MD, PhD, Joshua M Hare, MD, Jessica R Hoffman, PhD, Riley M Boyd, BA, Kevin N Ramdas, MD, MPH, Nicholas Pietris, MD, Shelby Kutty, MD, PhD, MS, James S Tweddell, MD, S Adil Husain, MD, Shaji C Menon, MBBS, MD, MS, Linda M Lambert, MSN-cFNP, David A Danford, MD, Seth J Kligerman, MD, Narutoshi Hibino, MD, PhD, Laxminarayana Korutla, PhD, Prashanth Vallabhajosyula, MD, MS, Michael J Campbell, MD, Aisha Khan, PhD, Eric Naioti, MSPH, Keyvan Yousefi, PharmD, PhD, Danial Mehranfard, PharmD, MBA, Lisa McClain-Moss, Anthony A Oliva, PhD, Michael E Davis, PhD, Intramyocardial cell-based therapy with Lomecel-B during bidirectional cavopulmonary anastomosis for hypoplastic left heart syndrome: The ELPIS phase I trial, European Heart Journal Open, 2023.


Summary of COVID-19 PandemicClinical Development Strategy

 

We continueOur core strategy is to monitor howbecome a world-leading regenerative medicine company through the COVID-19 pandemic is affecting our employees, business,development and clinical trials. In response to the spreadcommercialization of COVID-19, we have instructed all employees who can perform their essential employment duties from home to do so. Our laboratory scientists,novel cell processing scientists and other manufacturing personnel continue to work from our GMP facilitytherapy products for unmet medical needs, with a focus on a day-to-day basis, and as such cell production has been minimally impacted. When the pandemic began to emerge in the U.S., mostHLHS. Key elements of our ongoing clinical trials had completed enrollment. However, a few subjects that were currently on study and in follow-up experienced some difficulties in adhering to the protocol schedule. Because we primarily enroll elderly subjects in our trials, whocurrent business strategy are at particular risk for poor outcomes related to COVID-19 infection, we have experienced some disruption in executing the follow-up visits in our protocols. These disruptions were due to a number of reasons that include an unwillingness of the subject to leave their residence to visit the hospital or clinic, the inability to leave their residence due to regional “stay-at-home” orders, and temporary clinical site closures. We have attempted to mitigate this disruption by conducting remote visits where feasible (telemedicine), arranging for in-home visits for phlebotomy in order to collect blood samples and perform protocol-specific assessments if feasible, and amending protocols to increase the window of time for follow-up visits. In spite of these efforts, several subjects either missed their scheduled follow up visit, had their follow up visit outside of the protocol-defined window of time, or dropped out of the trial prior to completing. While we believe the number of instances where a visit was missed completely is small, we cannot predict whether this will have a material impact on our clinical results until the data from the trials are analyzed. If too many subjects drop-out or the protocol is no longer effective, we may have to restart the clinical trial entirely.

In July 2020 the Bahamian government halted travel from the U.S. into The Bahamas, which resulted in the temporary cessation of participation in The Bahamas Registry Trial. While this travel restriction has now been lifted, participation in the Registry Trial remains lower than anticipated, due in part to pandemic-related effects on international travel. We expect that the COVID-19 pandemic will continue to impact our business, results of operations, clinical development timelines and financial condition. At this time, there is significant uncertainty relating to the trajectory of the COVID-19 pandemic and impact of related responses. The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic concentration and continued spread of the disease, the duration of the pandemic, travel restrictions to and social distancing within the United States and other countries, business closures or business disruptions, the continued impact on financial markets and the global economy, and the effectiveness of the global response to contain and treat the disease.follows.

 


Recent Developments

In the first quarter of 2021 we announced successful completion of the following clinical trials:

Focus on the execution of ELPIS II, a Phase 2b2 randomized controlled trial set forth in greater detail below, to measure the efficacy of Lomecel-B™ in HLHS. This trial is ongoing and is being conducted in collaboration with the National Heart, Lung, and Blood Institute through grants from the NIH.

Continue to develop our existing international programs. We have selected Japan as our first non-U.S. territory for a randomized, double-blinded, placebo-controlled clinical trial to evaluate Lomecel-B™ for Aging-related frailty with the aim of receiving approval under the Act on the Safety of Regenerative Medicine (ASRM) based on previous clinical data from non-Japanese as well as this Phase 2 study in Japan. We may explore conditional or full approval in Japan of Lomecel-B infusionunder the Pharmaceuticals and Medical Devices Act (PMDA) for subjectsthe treatment of Aging-Related Frailty in the future. We may also explore other indications in Japan, and potentially pursue Aging-related frailty and other indications in additional international locations for further development and commercialization.

Continue to pursue the therapeutic potential of Lomecel-B™ in Alzheimer’s disease (AD). We have previously conducted a small Phase 1b study in which it appeared that a single dose of Lomecel-B™ may preserve cognition in patients with Aging Frailty. This 150-subject,mild AD as compared to those who received placebo treatment. We are now conducting a small multiple-dose Phase 2 randomized placebo-controlled multicenterstudy in mild AD patients to determine the safety of administering up to four doses of Lomecel-B™ in this aged population. In addition to establishing safety for further investigation, we will endeavor to measure any positive effects of Lomecel-B™ in mild AD patients through a combination of cognitive and imaging endpoints as well as to determine the extent of target engagement by Lomecel-B™ in this patient population.

Expand our manufacturing capabilities to commercial-scale production. We operate a current good manufacturing practice (cGMP)-compliant manufacturing facility and produce our own product candidates for testing. We continue to improve and expand our capabilities with the goal of achieving cost-effective manufacturing that may potentially satisfy future commercial demand should Lomecel-B™ achieve commercialization.

Collaborative arrangements and out-licensing opportunities. We will be opportunistic and consider entering into co-development, out-licensing, or other collaboration agreements for the purpose of eventually commercializing Lomecel-B™ and other products domestically and internationally if appropriate approvals are obtained.

Product candidate development pipeline through internal research and development, and in-licensing. Through our research and development program, and through strategic in-licensing agreements, or other business development arrangements, we intend to actively explore promising potential additions to our pipeline.

Continue to expand our intellectual property portfolio. Our intellectual property is vitally important to our business strategy, and we take significant steps to develop this property and protect its value. Results from our ongoing research and development efforts are intended to add to our existing intellectual property portfolio.


Clinical Development Pipeline in 2023

We are currently in clinical development of a single product, Lomecel-B™ for three potential indications (See Figure 1).

 

Figure 1: Lomecel-B™ clinical development pipeline

Hypoplastic Left Heart Syndrome (HLHS). Lomecel-B™ is being investigated in an ongoing Phase 2 clinical trial (ELPIS II) under FDA IND 017677. ELPIS II is a 38-subject, randomized, double-blind, controlled clinical trial designed to evaluate safety and efficacy of Lomecel-B™ in conjunction with reconstructive surgery compared to surgery alone. The trial is intendedfunded in part by the National Heart, Lung, and Blood Institute (NHLBI, part of the NIH). The trial is continuing to enroll patients in the study and is being conducted as an investigator-initiated study led by Dr. Sunjay Kaushal through the auspices of the NHLBI at seven academic sites. This year it is anticipated that an eighth site will be added to enhance the enrollment rate. We have not provided a projection for the date of completion of this study as enrollment to date has not been sufficient to provide such a projection.

Previously, we completed a Phase 1 study under FDA investigational new drug application (IND) 017677 to evaluate the safety, tolerability and tolerabilitypreliminary evidence of intravenousLomecel-B™ as a combinatorial therapy to surgery for this ultra-rare congenital heart defect. Babies born with this condition have an underdeveloped left ventricle and undergo a series of three surgeries to prevent certain death. Despite these life-saving surgeries, HLHS patients still have a high early mortality rate. We are investigating whether Lomecel-B™, directly injected into the heart during the second stage HLHS open-heart surgery, is safe and can improve short- and long-term outcomes in these vulnerable patients. These outcomes include heart function, and heart-transplant-free survival. The Phase 1 study met the primary safety endpoint: no major adverse cardiac events (MACE) nor any treatment-related infections during the first month post-treatment. In addition to the 12-month evaluation of outcomes from the original study, we have continued to follow these 10 patients. On May 9th we announced that all the children enrolled in ELPIS I remain alive without the need for a heart transplant for 3.5 to 5.0 years since the time of treatment with Lomecel-B. Of these patients, five have already undergone their stage III palliation surgery. Based on historical data, approximately 20% of patients who undergo stage II palliation surgery either require a heart transplant or die from HLHS within 12 months after their surgery. Lomecel-B has received Rare Pediatric Disease (RPD) Designation and Orphan Drug Designation (ODD) and on August 24, 2022, the FDA granted Fast Track Designation for the potential treatment of HLHS with Lomecel-B™.

Aging-related Frailty. Aging-related Frailty is a life-threatening geriatric condition that disproportionately increases some patients’ risk for poor clinical outcomes from disease and injury. It is believed by geriatricians to be treatable, although no approved pharmaceutical or biologic treatments currently exist for the condition. The definition of Aging-related Frailty lacks consensus and would be a new indication from a regulatory standpoint. As such, any approval of Lomecel-B™ for Aging-related Frailty will therefore require additional clinical data and continued discussion with the U.S. FDA and Japan’s PMDA.


We have previously completed two U.S. clinical trials under FDA IND 016644: (1) a multicenter, randomized, placebo-controlled Phase 2b trial (“Phase 2b Trial”), which showed that a single infusion of 4 different doses of Lomecel-B compared to placebo,Lomecel-B™ improved 6-Minute Walk Test (6MWT) distance 9 months after infusion and the effect on signsalso showed a dose-dependent increase in 6MWT distance 6 months after infusion; and symptoms of Aging Frailty, including exercise tolerance, mobility,(2) a multicenter, randomized, placebo-controlled Phase 1/2 trial (“HERA Trial”) that showed that Lomecel-B™ was generally safe and grip strength, and various other endpoints.well tolerated in this patient population. The top-line trial results are anticipatedshowed that hemagglutinin inhibition (HAI) responses in the third quarter of 2021.Lomecel-B™™ and placebo groups to influenza were not statistically different.
   
Japan Clinical Trial: The Japanese PMDA has approved a Clinical Trial Notification (CTN), which is equivalent to a U.S. IND, allowing an Investigator-sponsored Phase 12 clinical study for Aging-related frailty patients in Japan. This study is a 45-patient randomized placebo-controlled study with a primary objective of Lomecel-B injection in Hypoplastic Left Heart Syndrome (HLHS) subjects. This 10-subject open-label study evaluatedevaluating the safety of Lomecel-B™ in Japanese patients with Aging-related Frailty. The trial sites began screening patients at the end of 2022 and tolerability of intramyocardialthe first patient is expected to receive Lomecel-B injection during cardiac reconstructive surgery. Administration of Lomecel-B at doses of 2.5 × 106 cells/kg of body weight was shown to be well-tolerated, with no serious adverse events reported that were considered to be related to the investigational therapy. Full results expected in the secondfirst quarter of 2021,2023. The goal of this study is to enable ASRM approval when combined with previous clinical results in non-Japanese patients.
The Bahamas Registry Trial: We sponsor and Phase 2 trial expected to commenceoperate a Registry Trial in second half of 2021. Additionally, we were granted expanded access (“compassionate use”) approval byNassau, The Bahamas, where participants may receive Lomecel-B™ for Aging-related frailty and other indications, at the U.S. FDA for the administration of Lomecel-B to a child with HLHS. Lomecel-B was administered peri-operatively via intramyocardial injection, and the child was discharged from the hospital andparticipant’s own expense. Lomecel-B™ is currently being followed per protocol.designated as an investigational product in The Bahamas.

 

Impact of Macroeconomic Conditions

We also expanded enrollment criteria forhave not to date been directly adversely impacted by the current banking sector volatility, and specifically the volatility being experienced within the regional banking sector volatility.  However, we have maintained deposits and marketable securities with a regional bank, and have made the determination, in light of the ongoing volatility and uncertainty, to transfer our Phase 1 ARDS “RECOVER” trialdeposits and marketable securities to include mild ARDS, in additiona larger bank, so as to moderate and severe ARDS. This trial is currently enrolling subjects with ARDS related to COVID-19 infection and is partially funded bymitigate the likelihood of our experiencing a TEDCO grantdirect adverse impact from the Maryland Stem Cell Research Fund.ongoing volatility.

 

Additionally,In addition, although we entered into an expandedhave experienced some supply constraints and amended exclusive license agreement (ELA) relatedmarginal price increases, to Lomecel-B technology rights withdate current macroeconomic conditions have not materially impacted our programs or our operations. We continue to monitor economic conditions in the UniversityU.S. and globally and expect to act proactively where possible to minimize the impact of Miami (UM)continued inflation or supply constraints on materials and entered into a Cooperative Research and Development Agreement (CRADA) with UM.inventory needed for operations.

 

Components of Our Results of Operations

 

Revenue

 

We have historically generated revenue from three sources:

 

Grant awards.awards. Extramural grant award funding, which is non-dilutive, has been a core strategy for supporting our ongoing clinical research. Since 2016 weour clinical programs have received over $16.0 million in competitive extramural grant awards ($11.5 million which has been directly awarded approximately $11.9 million in grants, with details of these awards provided underto us and which are recognized as revenue when the heading “Grant Awards” below.performance obligations are met) from the NIH, Alzheimer’s Association, and Maryland Stem Cell Research Fund (MSCRF).

The Bahamas Registry Trial.Trial. Participants in The Bahamas Registry Trial pay us a fee to receive Lomecel-B, imported by us into The Bahamas, and administered at one of two private medical clinics in Nassau. While Lomecel-B is considered an investigational product in The Bahamas, under the approval terms received from the National Stem Cell Ethics Committee, we are permitted to charge a fee for participation in the Registry Trial. The fee is recognized as revenue and is used to pay for the costs associated with manufacturing and testing of Lomecel-B, administration, shipping and importation fees, data collection and management, biological sample collection and sample processing for biomarkers and other data, and overall management of the Registry, including personnel costs. Lomecel-B is considered an investigational treatment in The Bahamas and is not licensed for commercial sale.

Contract development and manufacturing services.services. From time to time, we enter into fee-for-service agreements with third parties for our product development and manufacturing capabilities.

 

Cost


Cost of revenuesRevenues

 

We record cost of revenues based on expenses directly related to revenue. For Grantsgrants we record allocated expenses for Research and development costs to a grant as a cost of revenues. For the Clinicalclinical trial revenue, directly related expenses for that program are allocated and accrued as incurred. These expenses are similar to those described under “Research and development expense” below.

Selling and Marketing Expenses

 

Selling and marketing expenses consist primarily of royalty and license fees associated with our agreements with the UM,University of Miami as well as attending and sponsoring industry, investment, organization and medical conferences and events.

 


Research and Development Expenses

 

Research and development costs are charged to expense when incurred in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 730 Research and Development,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,development; 2. The elements of costs that should be identified with research and development activities, and the accounting for these costs,costs; and 3. The financial statement disclosures related to them. Research and Development. Research and development 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. We accrue for costs incurred by external service providers, including CROs and clinical investigators, based on estimates of service performed and costs incurred. These estimates include the level of services performed by the third parties, subject 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, we 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.

 

We currently do not carry any inventory for our product candidates, as we have yet to launch a product for commercial distribution. Historically our operations have focused on conducting clinical trials, product research and development efforts, and improving and refining our manufacturing processes, and accordingly, manufactured clinical doses of product candidates were expensed as incurred, consistent with the accounting for all other research and development costs. Once we begin commercial distribution, all newly manufactured approved products will be allocated either for use in commercial distribution, which will be carried as inventory and not expensed, or for research and development efforts, which will continue to be expensed as incurred.

 

We expect that our research and development expenses will increase in the future as we increase our headcount to support increased research and development activities relating to our clinical programs, as well as incur additional expenses related to our clinical trials.

 

General and Administrative Expenses

 

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, business development and administrative functions. General and administrative expenses also include public company related expenses; legal fees relating to corporate matters; insurance costs; professional fees for accounting, auditing, tax and consulting services; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. We capitalized 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 will be recorded in shareholders’ equity as a reduction of proceeds generated as a result of the offering.

 

We expect that our general and administrative expenses will increase in the future as we increase our headcount to support increased administrative activities relating to our becoming a public company. We also expect to incur additional expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with Nasdaq and SEC requirements;requirements, director and officer insurance costs;costs, and investor and public relations costs.

 


Other Income and Expenses

 

Interest income consists of interest earned on cash equivalents.equivalents and Marketable securities. We expect our interest income to increase due to the $27.1 million in net proceeds from our IPO.current cash and Marketable securities balances. Other income consists of funds earned that are not part of our normal operations. In past years they have been primarily a result of tax refunds received for social security taxes as part of a research and development tax credit program.

 

Income Taxes

 

As of MarchDecember 31, 2021,2022, we wereare treated as a C corporation for federal and state income tax purposes. Prior to February 12, 2021, we were treated as a partnership for federal and state income tax purposes, whereby we passpassed our earnings and losses through to our members based on the terms of our Operating Agreement. No provision for income taxes has been recorded for the three months ended March 31, 2021 and 2020. As we converted from an LLC to a C corporation during the yearyears ended December 31, 2021, we2022, and 2021. We may incur income taxes in the future if we have earnings. At this time the Company has not evaluated the that impact of any future profits.

18

 

RESULTS OF OPERATIONS

 

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 20212023 AND 20202022

 

The following table summarizes our results of operations for the three months ended March 31, 20212023 and 2020,2022, together with the changes in those items in dollars (in thousands):

 

  Three Months Ended
March 31,
  Increase 
  2021  2020  (Decrease) 
Revenues $376  $1,708  $(1,332)
Cost of revenues  227   896   (669)
Gross profit  149   812   (663)
Expenses            
General and administrative  2,201   686   1,515 
Research and development  1,350   289   1,061 
Selling and marketing  56   50   6 
Total operating expenses  3,607   1,025   2,582 
             
Loss from operations  (3,458)  (213)  (3,245)
Forgiveness of Paycheck Protection Program loan  300   -   300 
Other income  47   -   47 
Net loss $(3,111) $(213) $(2,898)
  Three Months Ended
March 31,
  Increase 
  2023  2022  (Decrease) 
Revenues $279  $370  $(91)
Cost of revenues  203   205   (2)
Gross profit  76   165   (89)
Expenses            
General and administrative  1,855   1,980   (125)
Research and development  2,780   1,292   1,488 
Selling and marketing  157   287   (130)
Total operating expenses  4,792   3,559   1,233 
             
Loss from operations  (4,716)  (3,394)  (1,322)
Other income (expenses)  69   (116)  185 
Net loss $(4,647) $(3,510) $(1,137)

 

Revenues, Cost of Revenues and Gross Profit: Revenues for the three months ended March 31, 20212023 and 2020 were approximately2022 was $0.3 million and $0.4 million, and $1.7 million, respectively. RevenuesGrant revenue for each of the three months ended March 31, 2021 were approximately $1.3 million, or 78%, lower when compared to the same period in 2020, primarily due to a decrease in clinical trial revenue year-over-year2023 and grant revenue compared to that recorded in 2020. Grant revenue for the three months ended March 31, 20212022 was $41,000 and 2020 was $0.2 million and $0.9 million,$60,000, respectively. Grant revenue for the three months ended March 31, 20212023, was approximately $0.7 million,$19,000, or 78%32% lower when compared to the same period in 2020,2022, primarily due to a reduction in grant funds available due in part to the completion of the grant-funded clinical trials. Clinical trial revenue, which comesderives from the Bahamas Registry Trial, for each of the three months ended March 31, 20212023 and 20202022 was $0.2 million$238,000 and $0.8,$310,000, respectively. Clinical trial revenue for the three months ended March 31, 20212023, was approximately $0.6 million,$72,000, or 78%23%, lower when compared to the same period in 2020.2022. During the first quarter of 2021, clinical trial2023, despite demand increasing from last year, the Company provided more discounts and one time price adjustments which reduced the overall revenue which is comprisedin the first quarter of The2023 for the Bahamas Registry Trial, was negatively impacted by COVID-19 travel restrictions, as participants continued to have concerns with respect to for international travel.Trial.

 

Related cost of revenues was approximately $0.2 million and $0.9 million for each of the three months ended March 31, 20212023 and 2020, respectively.2022. Cost of revenues for the three months ended March 31, 20212023, was approximately $0.7$0.1 million, or 75%1%, lower when compared to the same period in 2020,2022, primarily due to lowerincreased cost of revenues for grants incurred in 2021 and lower costs related to the Bahamas Registry Trial. This resulted in a gross profit of approximately $0.1 million and $0.2 million for the three months ended March 31, 2021, a decrease of approximately $0.72023 and 2022, respectively. Gross profit for the three months ended June 20, 2022, was less than $0.1 million, or 82%,54% lower when compared with a gross profit of approximately $0.8 million forto the same period in 2020.2022.

 


General and Administrative Expense: General and administrative expenses for the three months ended March 31, 2021 increased2023, decreased to approximately $2.2$1.9 million, compared to $0.7$2.0 million for the same period in 2020.2022. The increasedecrease of approximately $1.5$0.1 million, or 221%6%, was primarily related to an increase fora decrease of equity-based compensation insurance and professional expenses incurred during the current period; including $0.8 million of equity based compensation recorded for the RSUs granted. For 2021,allocated to general and administrative expenses consisted primarily of rent,and expenses related to professional fees, insurance, and paid and accrued compensation costs.fees.

 


Research and Development Expenses: Research and development expenses for the three months ended March 31, 2021,2023, increased to approximately $1.4$2.8 million, from approximately $0.3$1.3 million for the same period in 2020.2022. The increase of $1.1$1.5 million, or 367%115%, was primarily due to an increase of $1.2 million in research and development expenses that were not reimbursable by grants; including $0.4 millionrelated to the completion of equity based compensation recordedenrollment and clinical trial milestone payments being incurred for the RSUs granted.Alzheimer’s clinical trial and setup costs for the aging frailty clinical trial in Japan and an increase of $0.2 million in equity-based compensation expenses allocated to research and development expenses. Research and development expenses consisted primarily of the following items (less those expenses allocated to the cost of revenues for the grants) (in thousands):

  Three Months Ended
March 31,
 
  2021  2020 
Clinical trial expenses-statistics, monitoring, labs, sites, etc. $361  $15 
Supplies and costs to manufacture Lomecel-B  66   29 
Employee compensation and benefits  171   80 
Equity-based compensation  6   16 
Depreciation  180   179 
Amortization  15   17 
Travel  9   4 
Equity based compensation  437   - 
Other activities  105   (51
  $1,350  $289 

 

  

Three Months Ended

March 31,

 
  2023  2022 
Clinical trial expenses-statistics, monitoring, labs, sites, etc. $1,353  $306 
Supplies and costs to manufacture Lomecel-B  285   87 
Employee compensation and benefits  543   510 
Equity-based compensation  273   98 
Depreciation  182   143 
Amortization  56   44 
Travel  82   7 
Other activities  6   97 
  $2,780  $1,292 

Selling and Marketing Expenses: Selling and marketing expenses for the three months ended March 31, 20212023 and 2020 was approximately $0.1 million.2022 were $0.2 million and $0.3 million, respectively. Selling and marketing expenses consistsconsist primarily of marketing fees recorded for our clinical programs.investor and public relations expenses.

 

Forgiveness of Paycheck Protection Program loan: Forgiveness of Paycheck Protection Program loan for the three months ended March 31, 2021, increased to approximately $0.3 million, compared to $0 for the same period in 2020. The increase of $0.3 million, or 100% was due to the non-recurring nature of the forgiveness of the PPP loan.

Other Income:Income (Expense): Other income for the three months ended March 31, 20212023, was less than $0.1 million. Other incomeexpense consisted of an unrealized gain of less than $0.1 million from Marketable securities. Other expenses for the three months ended March 31, 2022, was primarily the$0.1 million as result of $30,000 received in rental payments recordedan unrealized loss from a sublease and $17,000 from a gain resulting from an equity exchange.Marketable securities.

 

Net Loss: Net loss increased to approximately $3.1$4.6 million for the three months ended March 31, 2021,2023, from a net loss of $0.2$3.5 million for the same period in 2020.2022. The increase in the net loss of $2.9$1.1 million, or 1,361%32%, was for reasons outlined above.

 


Cash Flows

 

The following table summarizes our sources and uses of cash for the period presented (in thousands):

  Three Months Ended
March 31,
 
  2021  2020 
Net cash used in operating activities $(3,032) $(398)
Net cash used in investing activities  -   (140)
Net cash provided by financing activities  26,677   1,150 
Net increase in cash and cash equivalents $23,645  $612 

20

 

  Three months
ended March 31,
 
  2023  2022 
Net cash used in operating activities $(5,848) $(4,152)
Net cash provided by investing activities  346   767 
Net cash used in provided by financing activities  (17)  (141)
Change in cash and cash equivalents $(5,519) $(3,526)

Operating Activities. We have incurred losses since inception. Net cash used in operating activities for the three months ended March 31, 20212023, was $3.0$5.8 million, consisting primarily of our net loss of $3.1$4.6 million, payments made to outstanding accounts payable of $1.2 million and $0.7 million in prepaid insurance expenses. Net cash used in operating activities for the three months ended March 31, 2022 was $4.2 million, consisting primarily of our net loss of $3.5 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrative expenses; including $1.3expenses and $0.9 million of equity based compensation recorded for the RSUs granted. Net cash used in operating activities for the three months ended March 31, 2020 was $0.4 million, consisting primarily of our net loss of $0.2 million as we incurred expenses associated with research activities for our lead product candidates and incurred general and administrativeprepaid insurance expenses.

 

Investing Activities. Net cash used inprovided by investing activities for the three months ended March 31, 20212023, was nil because there were no purchases$0.3 million consisting primarily of an increase in Marketable securities and purchase of property and equipment and capitalized intangible costs.equipment. Net cash used inprovided by investing activities for the three months ended March 31, 20202022 was $0.1$0.8 million consisting primarily of purchases of property and equipment and capitalized intangible costs.an increase in Marketable securities.

 

Financing Activities. Net cash provided byused in financing activities for the three months ended March 31, 20212023, was $26.7less than $0.1 million consisting of: $26.1 million in net proceeds received from our IPO.for the payment of taxes upon vesting of restricted stock units (“RSUs”). Net cash provided byused in financing activities for the three months ended March 31, 20202022 was $1.1$0.1 million consistingfor the payment of $1.1 million in net proceeds received from subscriptiontaxes upon vesting of our Series C membership units issued prior to our 2021 corporate conversion event.RSUs.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of March 31, 2023, the Company had cash, and cash equivalents of $5.0 million and marketable securities of $8.7 million. The Company has prepared a cash flow forecast which indicates that it does not have sufficient cash to meet its minimum expenditure commitments for one year from the date these condensed financial statements are available to be issued and therefore needs to raise additional funds to continue as a going concern. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.

Since our inception, we have incurred significant operating losses. We expect to incur significant expenses and operating losses as we advance the preclinical and clinical development of our programs. We expect that our sales, research and development and general and administrative costs will increase in connection with conducting additional preclinical studies and clinical trials for our current and future programs and product candidates, contracting with CROs to support preclinical studies and clinical trials, expanding our intellectual property portfolio, and providing general and administrative support for our operations. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements, or other sources.

 

To date, we have financed our operations primarily through our IPO, private placement equity financings, grant awards, and fees generated from the Bahamas Registry Trial and contract manufacturing services. Since we were formed, we have raised approximately $56.1$77.2 million in gross proceeds from the issuance of equity. As of March 31, 2021, we had $24.5 million in cash and cash equivalents and working capital of approximately $22.5 million. We have less than $0.1 million of indebtedness as of March 31, 2021 from loans provided by the Small Business Administration (SBA). Revenue from our Bahamas Registry Trial, after the Bahamas lifted its COVID-19 travel restrictions, has been slowed due to continued concerns with respect to international travel.

 


Capital in 2020Raising Efforts

 

During 2020,In our IPO, we received $1.1 million from investors in exchange for 18,335 Series C membership units. These units were subsequently converted intosold 2,910,000 shares of Class A Common Stock as part of our corporate conversion, as discussed below.

On September 15, 2020, we were awarded a $0.7 million grant from the Maryland Stem Cell Research Commission (TEDCO) for the use of our cell-based technology for ARDS due to COVID-19 and the Flu.

Capital in 2021

As part of our IPO, on February 12, 2021 our Class A common stock began to trade on NASDAQ under the stock symbol “LGVN”. Pursuant to the IPO, we sold 2,660,000 shares of Class A common stock at a public offering price of $10.00 per share for aggregate gross proceeds of $26.6$29.1 million, inclusive of the underwriter’s partial exercise of its over-allotment option, prior to deducting underwriting discounts, commissions, and other offering expenses. In addition, we granted the underwriters a 30-day option to purchase up to an additional 399,000 shares at the public offering price less the underwriting discounts and commissions.

 


On March 15, 2021, our underwriters partially exercised its over-allotment option, resulting in the sale of 250,000 shares of Class A common stock at a public offering price of $10.00 per share for aggregate gross proceeds of $2.5 million prior to deducting underwriting discounts, commissions, and other offering expenses.

The underwriter also received warrants to purchase 106,400 Class A common stockCommon Stock shares. The warrants are exercisable at any time and from time to time, in whole or in part, during the four and a half-year period commencing six months from FebruaryAugust 12, 2021, at a price of $12.00 per Class A common stockCommon Stock share. During 2021, the underwriters assigned 95,760 of the warrants to its employees. As of December 31, 2022, 51,061 warrants have been exercised, which provided net proceeds to the Company of $0.6 million.

 

On December 3, 2021, we closed our 2021 PIPE Offering, whereby we undertook a private purchase and sale to certain accredited investors of an aggregate of 1,169,288 shares of our Class A Common Stock and Purchase Warrants to purchase 1,169,288 shares of Class A Common Stock at an initial exercise price of $17.50 per share, resulting in aggregate gross proceeds of $20.5 million prior to deducting fees and offering expenses. We also issued Representative Warrants exercisable for 46,772 shares of Class A Common Stock to affiliates of Placement Agent with an initial exercise price of $17.50 per share.

Grant Awards

 

During the last several years we have been awarded several governmental and non-profit association grants. As of MarchFrom inception through December 31, 2021,2022, we have been awarded approximately $11.9 million in governmental and non-profit association grants, which ishave been used to fund our clinical trials, research and development, production and overhead. Grant awards are recognized as revenue, and depending on the funding mechanism, are deposited directly in our accounts as lump sums, which are staggered over a predetermined period or drawn down from a federal payment management system account for reimbursement of expenses incurred. Revenue recognition occurs when the grant related expenses are incurred or supplies and materials are received. As of March 31, 2021,2023, and December 31, 2020,2022, the amount of unused grant funds that were available for us to draw was approximately $1.2$0.1 million and $1.4$0.8 million, respectively. The following table summarizes the grants awarded (in thousands).

 

Longeveron ProjectFunding Agency(1)Total
Amount
($)
Status of Award
Aging Frailty Phase 2b TrialSBIR (DHHS) NIA3,957,813Ongoing
Aging Frailty Phase 2b TrialSBIR (DHHS) NIA283,040Complete
Alzheimer’s Disease Phase 1 Trial(2)Alzheimer’s Association3,000,000Ongoing
Alzheimer’s Disease Phase 1 TrialAlzheimer’s Association1,000,000Complete
The Metabolic Syndrome Sub-StudySTTR (DHHS) NIA150,000Complete
The Metabolic Syndrome Sub-StudySTTR (DHHS) NIA901,486Ongoing
Aging Frailty Influenza Vaccine Trial (“HERA”)Maryland TEDCO750,000Complete
HLHS Phase 1 TrialMaryland TEDCO750,000Complete
HLHS Phase 2 Trial(3)UG3 (DHHS) NHLBI477,566Ongoing
ARDS Phase 1(4)Maryland TEDCO650,000Ongoing
Total11,919,905

(1)SBIR=Small Business Innovation Research programs; STTR=Small Business Technology Transfer programs; DHHS=Department of Health and Human Services; NIA = National Institute on Aging; NHLBI=National Heart, Lung, and Blood Institute.
(2)Under the grant award agreement with the Alzheimer’s Association, we may be required to make revenue sharing or distribution of revenue payments for products or inventions generated or resulting from this clinical trial program. The potential payments, although not currently defined, could result in a maximum payment of five times (5x) the award amount.
(3)The HLHS Phase 2b clinical trial grant was awarded to the University of Maryland, and the trial will be conducted under our IND and will test Lomecel-B. The total award was $4.6 million, and we will receive approximately $0.5 million directly.

(4)Maryland TEDCO has sent the first tranche of $325,000.

Terms and Conditions of Grant Awards

Grant projects are typically divided into periods (e.g., a three-year grant may have three one-year periods), and the total amount awarded is divided according to the number of periods. At pre-specified time points, which are detailed in the grant award notifications, we are required to submit interim financial and scientific reports to the granting agency totaling funds spent, and in some cases, detailing use of proceeds and progress made during the reporting period. After funding the initial period, receipt of additional grant funds is contingent upon satisfactory submission of our interim reports to the granting agency.

 

Grant awards arise from submitting detailed research proposals to granting agencies, and winning a highly competitive and rigorous application review and process that is judged on the merits of the proposal. There are typically multiple applicants applying and competing for a finite amount of funds. As such we cannot be sure that we will be awarded grant funds in the future despite our past success in receiving such awards.

 


Funding Requirements

 

Our operating costs will continue to increase substantially for the foreseeable future in connection with our ongoing activities. In past years we have been able to fund a large portion of our clinical programs and our administrative overhead with the use of grant funding.

 


Specifically, our expenses will increase as we:

 

advance the clinical development of Lomecel-BLomecel-B™ for the treatment of several disease states and indications;
   
pursue the preclinical and clinical development of other current and future research programs and product candidates;
   
in-license or acquire the rights to other products, product candidates or technologies;
   
maintain, expand and protect our intellectual property portfolio;
   
hire additional personnel in research, manufacturing and regulatory and clinical development as well as management personnel;
   
seek regulatory approval for any product candidates that successfully complete clinical development; and
   
expand our operational, financial and management systems and increase personnel, including personnel to support our operations as a public company.

 

We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the secondfirst half of 2022.

2024. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

 

Because of the numerous risks and uncertainties associated with research, development and commercialization of our product candidates, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:

 

the progress, costs and results of our clinical trials for our programs for our cell-based therapies;
the progress, coststherapies, and results of additional research and preclinical studies in other research programs we initiate in the future;
   
the costs and timing of process development and manufacturing scale-up activities associated with our product candidates and other programs we advance through preclinical and clinical development;
   
our ability to establish and maintain strategic collaborations, licensing or other agreements and the financial terms of such agreements;
   
the extent to which we in-license or acquire rights to other products, product candidates or technologies; and
   
the costs and timing of preparing, filing and prosecuting patent applications, maintaining and protecting our intellectual property rights and defending against any intellectual property-related claims.

 


Further, our operating results may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination of equity offerings, debt financings, grant awards, collaboration agreements, other third-party funding, strategic alliances, licensing arrangements and marketing and distribution arrangements.

 

We currently have no credit facility or committed sources of capital. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our biologic drug development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

 

In order to meet our operational goals, we will need to obtain additional capital, which we will likely obtain through a variety of means, including through public or private equity, debt financings or other sources, including up-front payments and milestone payments from strategic collaborations. To the extent that we raise additional capital through the sale of convertible debt or equity securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. Such financing may result in dilution to stockholders, imposition of debt covenants, increased fixed payment obligations or other restrictions that may affect our business. If we raise additional funds through up-front payments or milestone payments pursuant to strategic collaborations with third parties, we may have to relinquish valuable rights to our product candidates, or grant licenses on terms that are not favorable to us. In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. 

Contractual Obligations and Commitments

 

As of March 31, 2021,2023, we have $4.2$2.5 million in operating lease obligations and $3.5 million in contract research organization obligations. We enter into contracts in the normal course of business with third-party contract organizations for clinical trials, preclinical studies, manufacturing and other services and products for operating purposes. These contracts generally provide for termination following a certain period after notice and therefore we believe that our non-cancelable obligations under these agreements are not material and they are not included in the table above.material.

 

We have not included milestone or royalty payments or other contractual payment obligations if the timing and amount of such obligations are unknown or uncertain.

 


Critical Accounting Policies and Use of Estimates

 

Our management’s discussion and analysis of financial condition, results of operations and liquidity are based on our condensed financial statements, which have been prepared in accordance with generally accepted accounting principles in the United StatesU.S. (“U.S. GAAP”). The preparation of our condensed financial statements and related disclosures requires us to make estimates, judgements and assumptions that affect the reported amounts of assets and liabilities and the 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. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may materially differ from these estimates under different assumptions or conditions. On an on-going basis, we review our estimates to ensure that they appropriately reflect changes in our business or new information as it becomes available.

 

We believe there have been no


While our significant changesaccounting policies are described in more detail in the notes to our condensed financial statements included in our critical2022 10-K, we believe that the following accounting policies and significantare those most critical due to the judgments and estimates as discussedused in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”the preparation of our 2020 10-K.condensed financial statements. 

 

Off-Balance Sheet ArrangementsImpairment of Long-Lived Assets. We evaluate 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 on the condensed statements of operations. Management determined that there was no impairment of long-lived assets during the three months ended March 31, 2023 and 2022.

  

Revenue recognition. Effective January 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers, which establishes a single and comprehensive framework on how much revenue is to be recognized, and when. The core principle is that a vendor should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue will be recognized by a vendor when control over the goods or services is transferred to the customer.

We recognize revenue when performance obligations related to respective revenue streams are met. For grant revenue, we consider the performance obligation met when the grant related expenses are incurred or supplies and materials are received. For clinical trial revenue, we consider the performance obligation met when the participant has received the therapy. For contract manufacturing revenue, we consider the performance obligation met when the contractual obligation and/or statement of work has been satisfied.

Research and development expense. Research and development costs are charged to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development 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. We accrue for costs incurred by external service providers, including contract research organizations and clinical investigators, based on estimates of service performed and costs incurred. These estimates include the level of services performed by the third parties, subject 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, we 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.

Emerging Growth Company Status

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, which is a law intended to encourage funding of small businesses in the U.S. by easing many of the country’s securities regulations, and we may take advantage of reduced reporting requirements that are otherwise applicable to public companies. Section 107 of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with those standards. We have no off-balance sheet arrangements.elected to take advantage of the extended transition period for complying with new or revised accounting standards; and as a result of this election, our condensed financial statements may not be comparable to companies that comply with public company effective dates. The JOBS Act also exempts us from having to provide an auditor attestation of internal control over financial reporting under Sarbanes-Oxley Act Section 404(b).


We will remain an “emerging growth company” until the earliest of (1) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more, (2) the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (3) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years or (4) the date on which we are deemed to be a large accelerated filer under the rules of the SEC, which generally is when a company has more than $700 million in market value of its reported class of stock held by non-affiliates and has been a public company for at least 12 months and have filed at least one Annual Report on Form 10-K.

Recent Accounting Pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our unaudited condensed financial statements included in Item 1 of this 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

There were no material changes in our exposure to market risk since the disclosure included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 20202022 10-K.

Item 4. Controls and Procedures.

 

Disclosure controls and procedures

 

Our management, under the supervision of and with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e)13a-15€ and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective.

 

Changes in internal control over financial reporting

 

In response to the COVID-19 pandemic, most of our corporate employees, including all those involved in the operation of our internal controls over financial report, have been working remotely since mid-March 2020.  Despite this change, thereThere were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended March 31, 20212023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are continuously monitoring and assessing the impact of COVID-19 on our internal controls to minimize any impact it may have on their design and operating effectiveness.

 


PART II. OTHER INFORMATION 

Item 1. Legal Proceedings

 

From time to time, the Company could become involved in disputes and various litigation matters that arise in the normal course of business. These may include disputes and lawsuits related to intellectual property, licensing, contract law and employee relations matters.

As previously disclosed in our 10-Q filed with the SEC on November 12, 2021, a securities class action lawsuit was filed on September 13, 2021, against the Company and certain of our directors and officers in the United States District Court for the Southern District of Florida. On April 26, 2022, plaintiff filed an amended complaint with related allegations. The complaint, as amended, alleges that there were materially false and misleading statements made (or omissions of material information) in the Company’s initial public offering documents and in other disclosures during the period from our initial public offering on February 12, 2021, through August 12, 2021, in violation of federal securities laws. The complaint seeks unspecified damages on behalf of a purported class of purchasers of our common stock during said period. On July 12, 2022, all parties preliminarily agreed to settle the action for approximately $1.4 million, which amount was accrued as of March 31, 2023, and included in accrued expenses on the accompanying unaudited March 31, 2023 condensed balance sheet. The parties are in the process of documenting the settlement and full release, which will be subject to Court approval.

Item 1A. Risk Factors.

 

The following disclosure supplementsAdverse developments affecting the discussion of certain risks and uncertainties previously disclosed in our 2020 10-K. These risks and uncertainties, along with those previously disclosed, could materially adversely affect our business, results of operations, financial positionservices industry, such as actual events or cash flows.

We face risks related to the current COVID-19 pandemic and other health epidemics and outbreaks.

The global outbreak of COVID-19 is currently impacting countries, communities, supply chains and markets. As of the date of this Quarterly Report on Form 10-Q, the COVID-19 pandemic has impacted our Bahamas Registry Trial business. It is also possible that the COVID-19 pandemicconcerns involving liquidity, defaults, or non-performance by financial institutions or transactional counterparties, could adversely affect our business,the Company’s financial condition and results of operations,operations.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial conditioninstitutions, transactional counterparties or liquidityother companies in the future.financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems. For example, it could impacton March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the timingCalifornia Department of Financial Protection and enrollmentInnovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. Further, on Monday, May 1, 2023, First Republic Bank (“FRB”) was closed by the California Department of Financial Protection and Innovation, the FDIC was appointed as receiver and JPMorgan Chase Bank, National Association (N.A.) acquired all of FRB’s deposit accounts and substantially all of its assets. Although we are not a borrower or party to any such instruments with SVB, FRB or any other financial institution currently in receivership, if any of our collaborators’ plannedbanking entities with which we do business were to be placed into receivership, we may be unable to access such funds. In addition, if any of our suppliers or ongoing clinical trials, delaying clinical site initiation, regulatory reviewother parties with whom we conduct business are unable to access funds pursuant to such instruments or lending arrangements with such a financial institution, such parties’ ability to satisfy their obligations to us or to enter into new commercial arrangements with us could be adversely affected. Uncertainty remains over liquidity concerns in the broader financial services industry, including financial institutions with which we do business, borrow money or have funds on deposit. The results of or concerns with events like this could include a variety of material and adverse impacts on the potential receipt of regulatory approvals, payment of milestones underCompany. In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding generally could, among other risks, adversely impact our license agreements and commercialization of oneability to meet our operating demands or more ofcontinue to develop our product candidates, if approved. The COVID-19 pandemic could also disrupt the production capabilitiesor result in breaches of our contract manufacturing facility. Further,financial and/or contractual obligations. Any of these impacts, or any other impacts resulting from the outbreak of COVID-19 has heightened the risk that a significant portion offactors described above or other related or similar factors not described above, could have material adverse impacts on our workforce will suffer illness liquidity and our current and/or otherwise be unable to work. The impact of the COVID-19 pandemic is fluidprojected business operations and continues to evolve,financial condition and therefore, we cannot currently predict the extent to which our business, clinical trials, results of operations, financial condition or liquidity will ultimately be impacted. In addition, COVID-19 could materially and adversely impact our operations due to, among other factors:operations.

a general decline in busines activity;
difficulty accessing the capital and credit markets on favorable terms, or at all, and a severe disruption and instability in the global financial markets, or deteriorations in credit and financing conditions which could affect our access to capital necessary to fund business operations;
the potential negative impact on the health of our employees, especially if a significant number of them or any of their family members are impacted or if any of our senior leaders are impacted for an extended period of time;
the potential negative impact on our ability to monitor the investigative sites participating in our clinical studies in person or even remotely, which could result in a deviation from pre-pandemic protocols and/or site monitoring and data management plans, and delays in our ability to perform data-related tasks dependent on communications with personnel at the investigative sites, such as resolution of open data queries, the cumulative effects of which could lead to delayed or missed identification of non-compliance with good clinical practice (GCP), and/or unrecognized data errors.
potential delays in the preparation and submission of applications for regulatory approval of our products, as well as potential delays in FDA’s ability to review applications in a timely manner consistent with past practices;
potential difficulty in adequately overseeing and/or evaluating the manufacturing process at the facilities that will manufacture future commercial;
a deterioration in our ability to ensure business continuity during a disruption.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in the “Risk Factors” section of our 2020 10-K, such as those relating to our significant operating losses, our need for substantial additional funding to develop our products and support our operations, delays or difficulties in developing and commercializing our product candidates, and delays in clinical trials and regulatory approvals relating to our products.

 


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Reference is made to Item 3.02 of that certain Current Report on Form 8-K of the Company filed with the SEC on March 9, 2021.

ISSUER PURCHASES OF EQUITY SECURITIES

Period Total Number
of Shares  
Purchased (a)
  Average Price Paid per Share (or Unit)  Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs  Dollar Value of Shares that May
Yet Be Purchased Under the Plans or Programs
 
January 1-31, 2023  4,431  $3.37          -            - 
February 1-28, 2023  -   -   -   - 
March 1-31, 2023  -   -   -   - 
Total  4,431  $3.37   -   - 

(a)Includes shares withheld from employees to satisfy minimum tax withholding obligations associated with the vesting of restricted stock units during the period.

Item 3. Defaults Upon Senior Securities

 

None.

Item 4. Mine Safety Disclosures

 

Not applicable.

Item 5. Other Information

 

None.

Item 6. Exhibits.

 

Exhibit No.Description
10.1

Second Amendment to the Exclusive License Agreement, with the University of Miami, dated March 3, 2021,February 22, 2023, incorporated by reference to Exhibit 10.1 toof the Company’s current reportRegistrant’s Current Report on Form 8-K filed March 9, 2021. February 28, 2023.

10.231.1

Collaborative Research and Development Agreement with the University of Miami, dated March 3, 2021, incorporated by reference to Exhibit 10.2 to the Company’s current report on Form 8-K filed March 9, 2021.

31.1Certification of principal executive officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2Certification of principal financial officer, pursuant to SEC Rules 13a-14(a) and 15d-14(a) adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1Certification of principal executive officer, and principal financial officer, pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Inline Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 


SIGNATURES

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 LONGEVERON INC.
  
Date: May 14, 202112, 2023/s/ Geoff GreenMohamed Wa’el Ahmed Hashad
 Geoff GreenMohamed Wa’el Ahmed Hashad
 Chief Executive Officer
 (principal executive officer)

 

Date: May 14, 202112, 2023/s/ James Clavijo
 James Clavijo
 Chief Financial Officer
 (principal financial and accounting officer)

2738

 

iso4217:USD xbrli:shares