Longeveron Inc.

(Exact name of registrant as specified in its charter)

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

(Address of Principal Executive Offices)

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:

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.

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,August 9, 2023, the registrant had 3,280,7436,311,725 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 Statements.

Longeveron Inc.

Condensed Balance Sheets

(In thousands, except share and per share data)

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Operations

(In thousands, except per share data)

(Unaudited)

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Members’ Equity andComprehensive Loss

(In thousands, except per share data)

(Unaudited)

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Stockholders’ Equity

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

(Unaudited)

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

See accompanying notes to unaudited condensed financial statements.

3

Longeveron Inc.

Condensed Statements of Cash Flows

(In thousands)

(Unaudited)

See accompanying notes to unaudited condensed financial statements.

Longeveron Inc.

Notes to the Condensed Financial Statements (Unaudited)

Three and Six Month Periods Ended March 31, 2021June 30, 2023 and 20202022

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

Nature of business:

Longeveron was formed as a Delaware limited liability company on October 9, 2014, and was authorized to transact business in Florida on December 15, 2014. On February 12, 2021, Longeveron, LLC converted its corporate form (the “Corporate Conversion”) from a Delaware limited liability company (Longeveron, LLC) to a Delaware corporation, Longeveron Inc. (the “Company,” “Longeveron” or “we,” “us,” or “our”). 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 Companyconditions and 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 June 30, 2023, and the condensed statements of operations, statement of comprehensive loss, stockholders’ equity, and cash flows for the three and six months ended June 30, 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.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 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$10.3 million and $0.2$9.1 million for the threesix months ended March 31, 2021June 30, 2023 and 2020,2022, respectively. In addition, as of March 31, 2021,June 30, 2023, the Company had an accumulated deficit of $30.0$73.1 million. The Company expects to continue to generate operating losses for the foreseeable future.

As of March 31, 2021,June 30, 2023, the Company had cash, and cash equivalents of $24.5$2.7 million and marketable securities of $5.9 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’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 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 financial statements to conform to classifications used in the current year. These reclassifications had no impact on net loss, stockholders’ equity or cash flows as previously reported.

Use of estimates:

The presentation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the 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 net unrealized gains and losses in the condensed statement of comprehensive loss for the three and six month periods ended June 30, 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:

Marketable securities at June 30, 2023 and December 31, 2022 consisted of marketable fixed income securities, primarily corporate bonds, as well as U.S. Government and agency obligations which are categorized as trading 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 begin carrying inventoryfair value of its biological productsLevel 1 investments, including cash equivalents, money funds and U.S. government securities, are substantially based on its balance sheets following commercial launchquoted market prices. The fair value of such products. Inventory will consist of raw materials, biological products in process, and finished goods available for sale.corporate bonds is determined using standard market valuation methodologies, including discounted cash flows, matrix pricing and/or other similar techniques. The Company will determine its inventory values using the average cost method. Inventory will be valued at the lower of cost or net realizable value and will exclude units that the Company anticipates distributing for clinical evaluation. As of each of March 31, 2021 and 2020, allinputs to these valuation techniques include but are not limited to market interest rates, credit rating of the Company’s biological productsissuer or counterparty, industry sector of the issuer, coupon rate, call provisions, maturity, estimated duration and assumptions regarding liquidity and estimated future cash flows. In addition to bond characteristics, the valuation methodologies incorporate market data, such as actual trades completed, bids and actual dealer quotes, where such information is available. Accordingly, the estimated fair values are based on available market information and judgments about financial instruments categorized within Level 1 and Level 2 of the fair value hierarchy. Interest and dividends are recorded when earned. Realized gains and losses on investments are determined by specific identification and are recognized as incurred in the statement of operations. Changes in net unrealized gains and losses are reported in other comprehensive loss and represent the change in the fair value of investment holdings during the reporting period. Changes in net unrealized gains and losses were anticipated to be distributedless than $0.1 million for clinical evaluation.the three and six months ended June 30, 2023 and 2022.

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 MarchJune 30, 2023 and December 31, 2021 and 20202022 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):

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.

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 of March 31, 2021during the three and December 31, 2020.six months ended June 30, 2023 and 2022.

Deferred revenue:

The unearned portion of advanced grant funds and prepayments for Clinicalclinical 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 threesix months ended March 31, 2021June 30, 2023 and 2020,2022, the Company recognized nilless than $0.1 million and $0.2$0.1 million, respectively of funds that were previously classified as deferred revenue.revenue ($0 and $0.1 million, respectively for the three months ended June 30, 2023 and 2022).

Revenue recognition:

The Company recognizes revenue when performance obligations related to respective revenue streams are met. For Grantgrant 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 Clinicalclinical 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,contract 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):

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.

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, short-term investments 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 accompanying 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 and six months ended March 31, 2021June 30, 2023 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 in the future.

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, 2021June 30, 2023 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 stock options is estimated at the date of the grant using the Black-Scholes option-pricing model.

The Black-Scholes option-pricing model requires the input of highly subjective assumptions, the most significant of which are the expected share price volatility, the expected life of the 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 ended March 31, 2021 and 2020.Company measures at fair value (in thousands):

3.

As of June 30, 2023 and December 31, 2022, the Company reported accrued interest receivable related to marketable securities of less than $0.1 million and $0.1 million, 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.

4. Property and equipment, net

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

Depreciation and amortization expense amounted to approximately $0.2 million for each of the threethree-month periods ended June 30, 2023 and 2022, and $0.4 million and $0.3 million for the six months ended March 31, 2021June 30, 2023 and 2020.2022, respectively.

4. 5. Intangible assets, net

Major components of intangible assets as of March 31, 2021June 30, 2023 are as follows (in thousands):

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

Amortization expense related to intangible assets totaled less thanamounted to approximately $0.1 million for each of the three monthsthree- and six-month periods ended March 31, 2021June 30, 2023 and 2020.2022.

Future amortization expense for intangible assets as of March 31, 2021June 30, 2023 is approximately as follows (in thousands):

5. 6. Leases

In accordance with Accounting Standards Update 2016-02, “Leases (Topic 842)”, theThe Company records a Right-of-use (ROU)an operating lease asset and aan operating 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,June 30, 2023, the ROUoperating lease asset and operating lease liability were approximately $2.0$1.4 million and $3.5$2.3 million, respectively. As of December 31, 2020,2022, the ROUoperating lease asset and operating 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, 2021June 30, 2023 are as follows (in thousands):

During each of the three monthsmonth periods ended March 31, 2021June 30, 2023 and 2020,2022, the Company incurred approximately $0.1 million of total lease costs and for the six month periods ended June 30, 2023 and 2022, the Company incurred approximately $0.2 million and $0.3$0.1 million of total lease costs, respectively, that are included in the general and administrative expenses in the statements of operations.

7. Stockholders’ Equity 

Class A Common Stock

On April 19, 2023, the Company finalized the Separation Agreement effective June 9, 2023, for James Clavijo, the Company’s former 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. Mr. Clavijo entered into a concurrent consulting agreement with the Company to continue as interim Chief Financial Officer until a permanent successor joined the Company.

On April 18, 2023, the Company finalized the Separation Agreement dated March 31, 2023, for Dr. Christopher Min, the Company’s former 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 allowed for the immediate acceleration and vesting of 40,000 RSUs that were previously granted.

RSUs are taxable upon vesting based on the market value on the date of vesting. The Company is required to make mandatory tax withholding for the payment and satisfaction of income tax, social security tax, payroll tax, or payment on account of other tax related to withholding obligations that arise by reason of vesting of an RSU. The taxable income is calculated by multiplying the number of vested RSUs for each individual by the closing share price as of the vesting date ($2.61 on April 3, 2023) and a tax liability is calculated based on each individual’s tax bracket.

On April 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 employees. Based on the closing price of $2.61 on April 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 Company’s 2021 Incentive Award Plan, as amended (the “2021 Incentive Plan”).

On April 3, 2023, a total of 12,500 RSUs vested that had been granted to Wa’el Hashad, the Company’s Chief Executive Officer. Based on the closing price of $2.61 on April 3, 2023, the Company recorded a tax liability of $10,000 for the employee and a corresponding tax liability for the Company of $2,000. In total, the Company paid $12,000 for employee and employer taxes that resulted from the vesting of RSUs. In order to cover the employee tax liability, the Company withheld 3,819 shares of Class A Common Stock shares owned by Mr. Hashad upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

On January 3, 2023, a total of 20,161 RSUs granted in connection with the Company’s IPO vested, of which 18,005 were held by Company employees. Based on the closing price of $3.37 on January 3, 2023, the Company recorded 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 owned by the employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

On November 16, 2022, the Company accounted for but had not issued 48,140 RSUs convertible to 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. These shares were issued to Dr. Hare on May 24, 2023.

On October 3, 2022, a total of 20,157 RSUs granted in connection with the Company’s IPO vested, of which 18,001 were held by Company employees. Based on the closing price of $3.75 on October 3, 2022, the Company 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 owned by the Company’s employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

On July 1, 2020,2022, a total of 20,158 RSUs granted in connection with the 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 entered intorecorded a sublease agreementtax liability of $26,000 for the employees and a portioncorresponding tax liability for the Company of its leased space$2,000. In total, the Company paid $28,000 for a one-year period ending June 30,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 Stock owned by the Company’s employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 with three optional one-year renewal periods, and $10,000 in monthly payments. For the three months ended March 31, 2021, $30,000 was recognized as sublease income, and is included in other income in the accompanying statements of operations.Incentive Plan.

6. Members’ Equity and Stockholders’ Equity 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 agreed upon in connection with his separation.

On June 3, 2022, a total of 26,666 RSUs vested that previously had been granted to our Chief Financial Officer and General Counsel. As a result, based on a closing price of $8.73 on June 3, 2022, the Company recorded a tax liability of $55,000 for 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 Company’s employees upon vesting. The shares withheld are available for reissuance pursuant to the 2021 Incentive Plan.

On April 4, 2022, a total of 1,167 RSUs vested that previously had been granted to our former Chief Medical Officer. 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 shares 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 vested that previously had been 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 vested that were previously granted to a member of the Company’s Board of Directors.

On February 12, 2021, as part2022, a total of 8,750 RSUs vested that were previously granted to members of the Company’s Board of Directors upon the completion of the IPO our Class A common stock began to tradevested.

On January 3, 2022, a total of 35,246 RSUs vested that previously had been granted in connection with the Company’s IPO vested, of which 29,614 were held by Company employees. Based on NASDAQ under the stock symbol “LGVN”. Pursuant to our IPO,closing price of $12.09 on January 3, 2022, the Company sold 2,660,000recorded 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 at a public offering price of $10.00 per shareCommon Stock owned by the Company’s 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

During the IPO, the Company converted its corporate form from a Delaware limited liability company 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 commonsix months ended June 30, 2022, 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 250,000 shares of Class A common stock at a public offering price of $10.00 per shareoptions were exercised 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 shares at an average exercise price of $5.73 for existing consulting agreements, with an aggregate valueproceeds of $0.1 million. As part of the Corporate Conversion, 63,893 outstanding Series C units (which includes the units referenced in the prior sentence) were converted into 344,077 shares of Class A common stock.

Also during the three months ended March 31, 2021, the Company issued 26,666 unregistered shares of Class A common stock shares, with an aggregate value of $0.2 million, as payment under consulting agreements.

During the year ended December 31, 2020, the Company issued 18,335 Series C Units for $1.1 million in cash. The Company also issued 734 Series C Units with an aggregate value of $0.1 million as payment under consulting agreements.$2,143.

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 tradeable.

During the six months ended June 30, 2023, stockholders exchanged 35,546 shares of Class B Common Stock for 35,546 shares of Class A Common Stock. During the year ended December 31, 2022, stockholders 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 the warrants estimated using the Black-Scholes pricing modelas of December 31, 2021 was approximately $0.5 million. During 2021, the underwriters assigned 95,760 of the warrants to its employees. As of December 31, 2022, 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”). 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 therein. 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,under which, 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 vests 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 “(PSUs”), 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. These shares were issued to Dr. Hare on May 24, 2023.

On January 29, 2021,June 22, 2022, the Board approvedCompany granted $170,000 of separation compensation to Mr. Green (Mr. Green resigned as CEO effective June 1, 2022), which were converted into 27,854 RSUs. The RSUs were issued based on the grantingthree-day average of 159,817 Series Cthe 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 undereach that vested one-third at the grant date, with the remaining two-thirds vesting on each anniversary of the grant date. The RSUs were issued based on a fair market value at the time of grant, June 3, 2022, of $8.73. Mr. Clavijo forfeited 13,334 unvested RSUs on June 9, 2023.

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 an 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 50,000 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 equity awards was subject to Dr. Min’s continued service through the applicable vesting dates. RSUs were expensed on a quarterly basis at the rate of $0.1 million for the quarterly vesting amount of 9,375 RSUs, with a price per share of $12.85 (the closing price of the Company’s existing 2017 Longeveron LLC Incentive Plan (the “2017 Incentive Plan”), which thereafter convertedstock on April 4, 2022) through March 31, 2023. Stock options were expensed based upon a Black-Scholes calculation, the price per share to RSUs exercisable for Class A commonbe expensed was $11.34 and a total cost of $0.6 million was to be expensed ratably over 48 months. Dr. Min forfeited these stock as part of the Corporate Conversionoptions in the IPO. More specifically, 159,817 RSUs were converted to 855,247 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 six of the Directors. connection with his separation on March 31, 2023.

As of MarchJune 30, 2023 and December 31, 2021,2022, the Company had 869,13497,754 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:

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 threesix months ended March 31, 2021June 30, 2023 was as follows:

Stock Options

Stock options may be granted under the 2021 Incentive Plan. The exercise price of options is set to equal 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 is estimated using the Black-Scholes option-pricing model and using 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 4.01%. Each option grant made during 2023 and 2022 will be expensed ratably over the option vesting periods, which approximates the service period.

As of June 30, 2023 and December 31, 2022, the Company has recorded issued and outstanding options to purchase a total of 401,681, and 470,191 shares, respectively, of Class A Common Stock pursuant to the 2021 Incentive Plan, at a weighted average exercise price of $6.07, and $7.07 per share, respectively.

For the six months ended June 30, 2023:

For the year ended December 31, 2022:

Stock Option activity for the six months ended June 30, 2023 was as follows:

On March 1, 2023, the Company granted an award of 50,000 Class A Common Stock options to Mr. Hashad. The stock option award has a one-year vesting period, vesting on the first anniversary of the grant date, and has an exercise price of $3.62. Based upon a Black-Scholes calculation, the price per share to be expensed was $3.23 and a total cost of $0.2 million would be expensed ratably over 12 months.

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 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, 2021June 30, 2023 and 2020,2022, the equity-based compensation expense was $0.7 million and $.9 million, respectively, and for the six months ended June 30, 2023 and 2022, the equity-based compensation expense amounted to approximately $1,265,000$1.1 million and $13,000, respectively, which is$1.4 million, respectively. These amounts are included in the research and development and general and administrative expenses in the accompanyingcondensed statements of operations for the three and six months ended March 31, 2021June 30, 2023 and 2020. 2022.

As of March 31, 2021,June 30, 2023, the remaining unrecognized equity basedequity-based compensation (which includes RSUs, PSUs and stock options) of approximately $6.6$1.7 million will be recognized over approximately 2.753.5 years.

8. 9. Commitments and Contingencies

Master Services Agreements:

As of March 31, 2021,June 30, 2023, the Company had twothree 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 $3.4 million for 2021.over the next two years.

Consulting Services Agreement:Agreements:

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 with an aggregate value of $0.2 million as payment for accrued expenses under the consulting agreement with the CSO. These shares were issued on May 24, 2023. As of MarchJune 30, 2023 and December 31, 2021,2022, 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,June 30, 2023, and December 31, 2020,2022, the Company owed $0 and less than $0.1 million, respectively, pursuant to this agreement, which is included in accounts payable in the accompanying March 31, 2021June 30, 2023 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 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 $50,000, 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 2^nd, 3^rd, and 5^th 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 INDinvestigational new drug application (“IND”) with ckit+ cells; and (b) UMP-438 titled “Method of Determining Responsiveness to Cell Therapy in Dilated Cardiomyopathy.”

The 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 $190,000 to UM, and as of June 30, 2023 and December 31, 2022, we had accrued $40,000 and $50,000 in milestone fees payable to UM, respectively and $70,000 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+CD271 technology is being capitalized and amortized as incurred over 20 years. There were no license fees due during the threesix months ended March 31, 2021June 30, 2023 or year ended 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 Pandemic

The COVID-19 outbreak could adversely impact the Company’s ability to conduct business in the future. In December 2019, it was first reported that there had been an outbreak of a novel strain 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:

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, including in the Company’s markets, to contain COVID-19 or treat its impact. The future impact of the outbreak is highly uncertain and cannot be predicted, and 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 PayableLegal