Company Overview - Gyre Therapeutics is a clinical-stage biotechnology company focused on developing anti-fibrotic therapeutics for chronic organ diseases [1][4] - The company is headquartered in San Diego, CA, and is advancing its lead product F351 (Hydronidone) for the treatment of NASH-associated fibrosis in the U.S. [4] Recent Developments - Gyre Therapeutics is expected to be added to the small-cap Russell 2000® and all-cap Russell 3000® Indexes effective after U.S. market close on June 28, 2024 [1][2] - The addition to the Russell Indexes is seen as a significant milestone for the company, enhancing its visibility as it advances its product F351 in both the PRC and the United States [2] Market Context - The Russell Indexes capture the 4,000 largest U.S. stocks as of April 30, 2024, ranked by total market capitalization [2] - Approximately $12.1 trillion in assets are benchmarked against the Russell U.S. Indexes, indicating the importance of these indexes for investment managers and institutional investors [3]

SAN DIEGO, May 28, 2024 (GLOBE NEWSWIRE) -- Gyre Therapeutics ("Gyre") (Nasdaq: GYRE), a clinical-stage, self-sustainable biotechnology company developing anti-fibrotic therapeutics for a variety of chronic organ diseases, today announced that it expects to be added to the small-cap Russell 2000® and all-cap Russell 3000® Indexes at the conclusion of the 2024 Russell Indexes annual reconstitution, effective after U.S. market close on June 28, 2024, according to a preliminary list of additions posted on May ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) For the first quarter ended March 31, 2024, Gyre Therapeutics reported total revenues of $27.2 million, a 9% increase year-over-year, and a net income of $9.9 million, up from $4.2 million in the prior year period, with total assets growing to $122.0 million from $116.5 million at year-end 2023, primarily driven by an increase in total equity following the conversion of preferred stock, and cash and cash equivalents standing at $29.8 million [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, the company's total assets were $122.0 million, an increase from $116.5 million at December 31, 2023, accompanied by a significant shift in equity to $88.8 million from $13.9 million, largely due to preferred stock conversion Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 (Unaudited) | December 31, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $29,785 | $33,509 | | Total current assets | $62,723 | $57,221 | | Total assets | $122,010 | $116,539 | | **Liabilities & Equity** | | | | Total current liabilities | $19,486 | $20,047 | | Total liabilities | $33,239 | $38,065 | | Convertible Preferred Stock | $0 | $64,525 | | Total Gyre stockholders' equity (deficit) | $56,640 | $(15,828) | | Total equity | $88,771 | $13,949 | | Total liabilities, convertible preferred stock, and equity | $122,010 | $116,539 | - All **13,151 shares of Convertible Preferred Stock** outstanding at year-end 2023 were converted into **8,767,333 shares of common stock** during the first quarter of 2024, resulting in the elimination of the **$64.5 million preferred stock liability** on the balance sheet[13](index=13&type=chunk)[67](index=67&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Income](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) In Q1 2024, revenues increased to $27.2 million from $24.9 million in Q1 2023, with net income attributable to common stockholders surging to $7.5 million ($0.09 per basic share) from $2.2 million ($0.04 per basic share) year-over-year, largely due to a $4.3 million non-cash gain from the change in fair value of warrant liability Condensed Consolidated Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Revenues | $27,172 | $24,931 | | Income from operations | $8,071 | $6,664 | | Change in fair value of warrant liability | $4,288 | $0 | | Net income | $9,935 | $4,217 | | Net income attributable to common stockholders | $7,532 | $2,244 | | Basic EPS | $0.09 | $0.04 | | Diluted EPS | $0.03 | $0.03 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 31, 2024, net cash provided by operating activities was $2.9 million, a decrease from $10.4 million in the same period of 2023, with net cash used in investing activities at $7.2 million, primarily for the purchase of certificates of deposit, resulting in a $3.7 million decrease in cash and cash equivalents, ending at $29.8 million Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,884 | $10,417 | | Net cash used in investing activities | $(7,220) | $(7,648) | | Net cash provided by financing activities | $658 | $0 | | Net (decrease) increase in cash and cash equivalents | $(3,724) | $2,969 | | Cash and cash equivalents at end of period | $29,785 | $28,144 | - A significant non-cash financing activity during the quarter was the conversion of **$64.5 million of convertible preferred stock** into common stock[16](index=16&type=chunk) [Notes to the Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's business structure following the reverse asset acquisition in October 2023, key accounting policies, and financial instrument valuations, highlighting revenue concentration from three main PRC customers, the valuation of warrant and CVR liabilities, and segment reporting which shows the Gyre Pharmaceuticals segment as the sole revenue generator, alongside various commitments for R&D and IP transfers - The company operates as a financially-sustainable pharmaceutical firm focused on anti-inflammatory and anti-fibrotic drugs, holding a **65.2% indirect interest** in its primary operating subsidiary, Gyre Pharmaceuticals in the PRC[19](index=19&type=chunk)[20](index=20&type=chunk) - Management believes existing cash, cash flows from operations, and access to capital markets are sufficient to fund operations for at least the **next 12 months**[21](index=21&type=chunk) - For Q1 2024, three customers (Sinopharm, China Resources Pharmaceutical, and Shanghai Pharmaceuticals) accounted for **47.3%, 17.2%, and 11.1% of total revenue**, respectively, indicating significant customer concentration[28](index=28&type=chunk) - Product revenues, mainly from the sale of ETUARY, accounted for **99.2% of total revenue** for the three months ended March 31, 2024, with all sales generated in the PRC[49](index=49&type=chunk)[51](index=51&type=chunk) - The company's operations are divided into two reportable segments: Gyre Pharmaceuticals (operating in mainland China and generating all revenue) and Gyre (operating in the U.S. with no revenue)[93](index=93&type=chunk)[94](index=94&type=chunk)[95](index=95&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategy centered on its commercial drug ETUARY® (Pirfenidone) and its lead development candidate, F351, highlighting a 9% revenue increase to $27.2 million in Q1 2024, driven by enhanced marketing in the PRC, and a net income rise to $9.9 million, significantly boosted by a $4.3 million gain on warrant liability remeasurement, while maintaining a strong liquidity position with $29.8 million in cash and cash equivalents, sufficient for at least the next year [Overview](index=29&type=section&id=Overview) The company is a commercial-stage pharmaceutical firm focused on anti-fibrotic drugs, with its primary commercial product, ETUARY (Pirfenidone), approved in the PRC for Idiopathic Pulmonary Fibrosis (IPF) and generating $112.1 million in sales in 2023, while its lead development candidate, F351, is in a Phase 3 trial in the PRC for liver fibrosis, with results expected by early 2025, and an IND submission planned in the U.S. in late 2024 for a Phase 2a trial in NASH-associated liver fibrosis - The company's strategy is to leverage the success of ETUARY® (Pirfenidone) to expand into new indications and develop similar drug candidates[108](index=108&type=chunk) - The lead development candidate, F351, is in a confirmatory Phase 3 trial in the PRC for CHB-associated liver fibrosis, with clinical results expected by **early 2025**[111](index=111&type=chunk) - An Investigational New Drug (IND) application for F351 is expected to be submitted in the U.S. in **late 2024** to initiate a Phase 2a trial for non-alcoholic steatohepatitis-associated liver fibrosis in **2025**[112](index=112&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) For Q1 2024 compared to Q1 2023, revenues grew 9% to $27.2 million due to increased pharmaceutical sales in the PRC, with gross profit increasing by 10%, operating income rising 21% to $8.1 million despite a 95% increase in G&A expenses from higher payroll, and net income surging 136% to $9.9 million, primarily due to a $4.3 million gain from the change in fair value of warrant liability Results of Operations Comparison (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $27,172 | $24,931 | $2,241 | 9% | | Gross profit | $26,193 | $23,806 | $2,387 | 10% | | Income from operations | $8,071 | $6,664 | $1,407 | 21% | | Net income | $9,935 | $4,217 | $5,718 | 136% | - The revenue increase was primarily due to enhanced marketing and sales initiatives for pharmaceutical products in regions of the PRC[140](index=140&type=chunk) - General and administrative expenses increased by **95%**, or **$1.7 million**, mainly driven by a **$1.2 million increase in payroll expenses** due to increased staff headcount[144](index=144&type=chunk) - Research and development expenses decreased by **17%**, or **$0.5 million**, primarily due to a decrease in clinical trial and pre-clinical research expenses as projects advanced[143](index=143&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2024, the company had $29.8 million in cash and cash equivalents, $7.6 million in short-term bank deposits, and $23.1 million in long-term certificates of deposit, with management asserting that existing cash, operational cash flow, and capital market access are sufficient to fund operations for at least the next 12 months, noting that $64.3 million of its net assets in the PRC are restricted from distribution due to local regulations - The company holds cash and cash equivalents of **$29.8 million**, short-term bank deposits of **$7.6 million**, and long-term certificates of deposit of **$23.1 million** as of March 31, 2024[149](index=149&type=chunk) - Net cash provided by operating activities was **$2.9 million** for Q1 2024, a decrease from **$10.4 million** in Q1 2023[151](index=151&type=chunk)[152](index=152&type=chunk) - Under PRC regulations, **$64.3 million** in capital and statutory reserves of its subsidiary Gyre Pharmaceuticals are restricted and not available for distribution[157](index=157&type=chunk) - As of March 31, 2024, the company has committed to allocate **$25.8 million** toward future research and development activities for various programs[163](index=163&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, Gyre Therapeutics is not required to provide the information for this item - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[168](index=168&type=chunk) [Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024, with no material changes in internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2024, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[170](index=170&type=chunk) - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[171](index=171&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[173](index=173&type=chunk) [Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's Annual Report on Form 10-K - The company states there have been no material changes from the risk factors disclosed in its Annual Report[174](index=174&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[175](index=175&type=chunk) [Other Information](index=40&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter - No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter[178](index=178&type=chunk) [Exhibits](index=41&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Quarterly Report, including agreements, corporate governance documents, and officer certifications

Phase 3 clinical trial evaluating F351 for the treatment of CHB-associated liver fibrosis in the PRC remains on track with data anticipated by early 2025 U.S. IND submission to evaluate F351 for the treatment of NASH-associated liver fibrosis expected in late 2024; Phase 2a trial expected to initiate in 2025 Acquired the rights to complementary assets relating to nintedanib through Gyre Pharmaceuticals to improve competitiveness in the PRC Cash and cash equivalents totaled $29.8 million as of March 31, 2024 ...

Gyre Therapeutics Reports First Quarter 2024 Financial Results and Provides Business Update Phase 3 clinical trial evaluating F351 for the treatment of CHB-associated liver fibrosis in the PRC remains on track with data anticipated by early 2025 U.S. IND submission to evaluate F351 for the treatment of NASH-associated liver fibrosis expected in late 2024; Phase 2a trial expected to initiate in 2025 Exhibit 99.1 SAN DIEGO, May 9, 2024 (GLOBE NEWSWIRE) – Gyre Therapeutics ("Gyre") (Nasdaq: GYRE), a clinical- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2023 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: 000-51173 Gyre Therapeutics, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 56-2020050 (State or Other Jurisdiction of In ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The financial statements for the period ended September 30, 2023, reflect a significant transformation, including asset sales, a pending business combination, and a shift to net loss, raising going concern doubts [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of September 30, 2023, shows a significant reduction in total assets and liabilities, alongside a major reclassification of preferred stock to permanent equity, resulting in positive stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (Unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $2,228 | $21,666 | | Total current assets | $5,132 | $28,206 | | Total assets | $9,964 | $28,444 | | **Liabilities & Equity** | | | | Total current liabilities | $1,783 | $16,824 | | Total liabilities | $6,447 | $16,824 | | Redeemable convertible preferred stock | $0 | $33,309 | | Total stockholders' equity (deficit) | $3,517 | $(21,689) | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) For the nine months ended September 30, 2023, the company reported a net loss of $3.8 million, a significant shift from the prior year's net income driven by asset disposal gains Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $0 | $0 | $0 | $794 | | Research and development | $415 | $803 | $1,321 | $12,377 | | General and administrative | $2,408 | $4,363 | $8,603 | $13,201 | | GNI cost-sharing reimbursement | $(1,200) | $0 | $(1,200) | $0 | | Gain on disposal of assets, net | $0 | $0 | $(4,736) | $(57,245) | | **Net Income (Loss)** | **$(1,576)** | **$(4,884)** | **$(3,788)** | **$32,212** | | Net Income (Loss) per share, basic | $(0.04) | $(0.16) | $(0.10) | $1.02 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2023, the company experienced a net decrease in cash of $19.4 million, driven by operating and financing outflows, resulting in a period-end balance of $2.2 million Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,904) | $(31,621) | | Net cash provided by investing activities | $5,206 | $55,375 | | Net cash used in financing activities | $(12,740) | $(45,011) | | **Net decrease in cash and cash equivalents** | **$(19,438)** | **$(21,257)** | | **Cash and cash equivalents at end of period** | **$2,228** | **$23,090** | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20%28Unaudited%29) The notes detail significant corporate events, including asset acquisitions, a pending business combination, asset sales, and the reclassification of preferred stock, alongside a going concern disclosure - The company has **ceased its prior biopharmaceutical research** and has **pivoted its strategy** through an **asset purchase agreement for F351 assets** with GNI Group and a concurrent **business combination agreement** to acquire an indirect controlling interest in Beijing Continent Pharmaceutical Co., Ltd[16](index=16&type=chunk)[17](index=17&type=chunk)[24](index=24&type=chunk) - Management has identified **substantial doubt about the company's ability to continue as a going concern** for at least 12 months, citing a **net loss of $3.8 million** for the nine months ended Sep 30, 2023, a **low cash balance of $2.2 million**, and uncertainties surrounding the pending Business Combination Agreement[29](index=29&type=chunk) - The company **sold its complement portfolio to Vertex for $60.0 million** and its **legacy rare bleeding disorder program to GC Biopharma for $6.0 million**. Net **proceeds from these sales are being distributed to holders of Contingent Value Rights (CVRs)**[18](index=18&type=chunk)[19](index=19&type=chunk)[82](index=82&type=chunk) - Following stockholder approval on August 29, 2023, the **cash redemption feature of the Series X Redeemable Convertible Preferred Stock was eliminated**, and the stock was **reclassified from a liability to permanent stockholders' equity**[22](index=22&type=chunk)[23](index=23&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategic shift, significant expense reductions, critical liquidity position, and reliance on a cost-sharing agreement, highlighting substantial doubt about its going concern ability Comparison of Results of Operations (in thousands) | Line Item | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1,321 | $12,377 | $(11,056) | (89)% | | General and administrative | $8,603 | $13,201 | $(4,598) | (35)% | | GNI cost-sharing reimbursement | $(1,200) | $0 | $(1,200) | 100% | | Gain on disposal of assets, net | $(4,736) | $(57,245) | $52,509 | (92)% | | **Net Income (Loss)** | **$(3,788)** | **$32,212** | **$(36,000)** | * | - The company's **operations have fundamentally changed**, **ceasing old R&D activities** in March 2022 and **acquiring F351 assets** from GNI in December 2022. A **pending business combination** with GNI is expected to close by the Outside Date[91](index=91&type=chunk)[93](index=93&type=chunk)[104](index=104&type=chunk) - The **significant decrease in R&D and G&A expenses** for the nine months ended Sep 30, 2023, compared to 2022, is primarily due to the **cessation of development programs** and a **reduction-in-force**[116](index=116&type=chunk)[118](index=118&type=chunk) - The company's **cash position has dwindled to $2.2 million**. Management states there is **substantial doubt about the ability to continue as a going concern**, with **future operations dependent on the closing of the Business Combination Agreement and cost-sharing support from GNI**[126](index=126&type=chunk)[127](index=127&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company has determined that quantitative and qualitative disclosures about market risk are not applicable for this reporting period - The company has determined that quantitative and qualitative disclosures about market risk are **not applicable** for this reporting period[137](index=137&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and Interim CFO concluded that the company's disclosure controls and procedures were **effective** as of September 30, 2023[139](index=139&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that materially affected, or are reasonably likely to materially affect, such controls[140](index=140&type=chunk) [PART II. OTHER INFORMATION](index=26&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company reports that it is not a party to any material legal proceedings - As of the filing date, Catalyst is **not involved in any material legal proceedings**[142](index=142&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant delisting risk from Nasdaq due to non-compliance with minimum bid price and stockholders' equity requirements, which could jeopardize stock value and the pending business combination - The company is **not in compliance** with Nasdaq's **Minimum Bid Price Requirement (below $1.00)** and the **minimum stockholders' equity requirement ($2.5 million)**[144](index=144&type=chunk)[145](index=145&type=chunk) - Nasdaq has granted the company an **extension until October 30, 2023**, to **regain compliance**, pending the **completion of the Business Combination Agreement and a reverse stock split**[145](index=145&type=chunk) - Failure to regain compliance could **result in delisting**, which would **adversely affect the stock's price and liquidity**, and could **jeopardize the closing of the Business Combination Agreement**[146](index=146&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company states that this item is not applicable - There were **no unregistered sales of equity securities** during the reporting period[147](index=147&type=chunk) [Item 5. Other Information](index=27&type=section&id=Item%205.%20Other%20Information) The company reports that no directors or officers adopted or terminated a Rule 10b5-1 trading arrangement during the quarter ended September 30, 2023 - **No directors or officers adopted or terminated a Rule 10b5-1 trading plan** during the third quarter of 2023[150](index=150&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index at the end of the report, which lists all documents filed as part of the Form 10-Q - The report **incorporates by reference an index of all exhibits** filed with this Form 10-Q[151](index=151&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements and notes, detailing financial performance for Q2 2023 and FY2022 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202023%20%28unaudited%29%20and%20December%2031%2C%202022) Total assets decreased from **$28.4 million** to **$12.4 million**, primarily due to reduced cash and CVR reclassification | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Change | | :-------------------------- | :----------------------------- | :------------------------------- | :----- | | Cash and cash equivalents | $6,923 | $21,666 | -$14,743 | | Total current assets | $7,620 | $28,206 | -$20,586 | | Long-term receivable from GCBP | $4,606 | $0 | +$4,606 | | Total assets | $12,394 | $28,444 | -$16,050 | | Total current liabilities | $2,793 | $16,824 | -$14,031 | | CVR derivative liability, noncurrent | $4,606 | $0 | +$4,606 | | Total liabilities | $7,399 | $16,824 | -$9,425 | | Total stockholders' deficit | $(28,314) | $(21,689) | -$6,625 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022%20%28unaudited%29) Q2 2023 reported a **$2.5 million net loss**, a sharp decline from **$51.6 million net income** in Q2 2022, due to lower asset disposal gains | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | Change ($) | Change (%) | | :------------------------------------------ | :--------------------- | :--------------------- | :--------- | :--------- | | Revenue: Collaboration | $0 | $0 | $0 | 0% | | Research and development expenses | $318 | $1,871 | -$1,553 | -83% | | General and administrative expenses | $2,225 | $3,844 | -$1,619 | -42% | | Gain on disposal of assets, net | $0 | $(57,245) | +$57,245 | -100% | | Net income (loss) | $(2,472) | $51,632 | -$54,104 | * | | Net income (loss) per share, basic | $(0.07) | $1.64 | -$1.71 | * | | Cash dividends paid per common share | $0 | $0 | $0 | 0% | | CVR cash dividends paid per common share | $0.11 | $0 | +$0.11 | * | | Metric | YTD June 30, 2023 (in thousands) | YTD June 30, 2022 (in thousands) | Change ($) | Change (%) | | :------------------------------------------ | :------------------------------- | :------------------------------- | :--------- | :--------- | | Revenue: Collaboration | $0 | $794 | -$794 | -100% | | Research and development expenses | $906 | $11,574 | -$10,668 | -92% | | General and administrative expenses | $6,195 | $8,838 | -$2,643 | -30% | | Gain on disposal of assets, net | $(4,736) | $(57,245) | +$52,509 | -92% | | Net income (loss) | $(2,212) | $37,096 | -$39,308 | * | | Net income (loss) per share, basic | $(0.06) | $1.18 | -$1.24 | * | | Cash dividends paid per common share | $0.24 | $0 | +$0.24 | * | | CVR cash dividends paid per common share | $0.12 | $0 | +$0.12 | * | [Condensed Consolidated Statements of Redeemable Convertible and Redeemable Preferred Stock and Stockholders' Equity (Deficit)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Redeemable%20Convertible%20and%20Redeemable%20Preferred%20Stock%20and%20Stockholders%27%20Equity%20%28Deficit%29%20for%20the%20three%20and%20six%20months%20ended%20June%2030%2C%202023%20and%202022%20%28unaudited%29) Stockholders' deficit increased from **$21.7 million** to **$28.3 million**, due to net loss, CVR adjustments, and Series Y preferred stock issuance | Metric | December 31, 2022 (in thousands) | June 30, 2023 (in thousands) | Change | | :------------------------------------ | :----------------------------- | :--------------------------- | :------- | | Redeemable Convertible Preferred Stock | $33,309 | $33,309 | $0 | | Redeemable Preferred Stock | $0 | $0 | $0 | | Common Stock (shares) | 37,756,574 | 37,974,892 | +218,318 | | Additional Paid-In Capital | $389,210 | $384,797 | -$4,413 | | Accumulated Deficit | $(410,936) | $(413,148) | -$2,212 | | Total Stockholders' Deficit | $(21,689) | $(28,314) | -$6,625 | - Issuance of **37,975 shares** of Series Y redeemable preferred stock for stock dividends in June 2023[14](index=14&type=chunk) - CVR cash dividends paid related to GCBP Agreement: **$(206) thousand**[14](index=14&type=chunk) - CVR derivative liability adjustment: **$(4,530) thousand**[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20six%20months%20ended%20June%2030%2C%202023%20and%202022%20%28unaudited%29) Net cash decreased by **$14.7 million** for YTD June 30, 2023, from operating, investing, and financing activities | Cash Flow Activity | Six Months Ended June 30, 2023 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Change | | :------------------------------------ | :------------------------------------------ | :------------------------------------------ | :------- | | Net cash flows used in operating activities | $(8,687) | $(24,344) | +$15,657 | | Net cash flows provided by investing activities | $5,206 | $55,375 | -$50,169 | | Net cash flows (used in) provided by financing activities | $(11,262) | $16 | -$11,278 | | Net (decrease) increase in cash and cash equivalents | $(14,743) | $31,047 | -$45,790 | | Cash and cash equivalents at end of period | $6,923 | $75,394 | -$68,471 | - Investing activities in 2023 included **$5.0 million** from Vertex hold-back and **$1.0 million** from GCBP asset sale, offset by **$0.8 million** in transaction costs[118](index=118&type=chunk) - Financing activities in 2023 included **$11.3 million** in dividend payments and CVR distributions[120](index=120&type=chunk) [Notes to the Unaudited Interim Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) Notes detail strategic shift, liquidity, accounting policies, asset acquisitions, fair value, stock compensation, and going concern risk [Note 1. Nature of Operations and Liquidity](index=7&type=section&id=1.%20Nature%20of%20Operations%20and%20Liquidity) Catalyst transitioned to F351 asset acquisition and BC business combination, facing substantial going concern doubt due to a potential **$43.2 million** preferred stock redemption - Company ceased R&D activities in March 2022, sold complement portfolio to Vertex in May 2022, and rare bleeding disorder program to GCBP in February 2023[19](index=19&type=chunk) - Acquired F351 Assets (Hydronidone compound for NASH) from GNI Group Ltd. in December 2022 for **$35.0 million** in common and preferred stock[20](index=20&type=chunk) - Signed Business Combination Agreement to acquire indirect controlling interest in Beijing Continent Pharmaceutical Co Ltd. (BC), subject to stockholder approval on August 29, 2023[21](index=21&type=chunk) - Issued Contingent Value Rights (CVRs) to common stockholders (excluding GNI) for future cash payments from asset dispositions[22](index=22&type=chunk) - Paid a one-time cash dividend of **$0.24 per share** (**$7.6 million** total) on January 12, 2023[23](index=23&type=chunk) - Distributed **$0.01 per share** from GCBP asset sale (March 2023) and **$0.11 per share** from Vertex hold-back (June 2023) to CVR Holders[24](index=24&type=chunk)[25](index=25&type=chunk) - Net loss of **$2.2 million** for six months ended June 30, 2023, with an accumulated deficit of **$413.1 million** and cash of **$6.9 million**[26](index=26&type=chunk) - Substantial doubt about going concern due to potential **$43.2 million** cash payment for Catalyst Convertible Preferred Stock if stockholder approval for conversion is not received by September 30, 2023[26](index=26&type=chunk)[38](index=38&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements adhere to GAAP, reflecting management estimates; ASU 2016-13 adoption had no material impact, and fair value option elected for GCBP receivable - Financial statements prepared under GAAP for interim reporting, with normal recurring adjustments[27](index=27&type=chunk) - Management makes estimates for revenue recognition, CVR derivative liabilities, accrued expenses, etc[29](index=29&type=chunk) - Adopted ASU 2016-13 (Credit Losses) on January 1, 2023, with no material impact[30](index=30&type=chunk) - Long-term receivable from GCBP accounted for under the fair value option, with changes in fair value recorded in interest and other income[31](index=31&type=chunk) [Note 3. F351 Asset Acquisition](index=9&type=section&id=3.%20F351%20Asset%20Acquisition) Catalyst acquired F351 Assets from GNI for **$35.0 million** in equity, facing a **$43.2 million** cash redemption risk if preferred stock conversion lacks stockholder approval - Acquired F351 Assets from GNI on December 26, 2022, for **$35.0 million** in equity (**6,266,521** common shares and **12,340** Catalyst Convertible Preferred Stock shares)[35](index=35&type=chunk) - Acquisition classified as an asset acquisition, not a business[36](index=36&type=chunk) - Each Catalyst Convertible Preferred Stock share is convertible into **10,000** common shares, subject to stockholder approval by September 30, 2023[37](index=37&type=chunk)[38](index=38&type=chunk) - Failure to obtain approval by September 30, 2023, could trigger a **$43.2 million** cash redemption obligation for the preferred stock, exceeding current liquidity[38](index=38&type=chunk) [Note 4. Fair Value Measurements](index=9&type=section&id=4.%20Fair%20Value%20Measurements) Assets and liabilities are measured at fair value, including money market funds (Level 1) and GCBP receivable/CVR derivative liability (Level 3), with Vertex CVR settled | Financial Instrument | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | Fair Value Level | | :-------------------------- | :----------------------------- | :------------------------------- | :--------------- | | Money market funds | $6,923 | $21,666 | Level 1 | | Long-term receivable from GCBP | $4,606 | $0 | Level 3 | | CVR derivative liability, noncurrent | $4,606 | $0 | Level 3 | | CVR derivative liability (current) | $0 | $5,000 | Level 3 | - CVR derivative liability for Vertex was initially **$5.0 million** and settled in May 2023 with a **$5.0 million** hold-back payment distribution[42](index=42&type=chunk) - Long-term receivable and CVR derivative liability from GCBP are **$4.6 million**, based on a **$5.0 million** hold-back payment expected in Q1 2025, discounted at **5.05%**[43](index=43&type=chunk) [Note 5. Lease](index=12&type=section&id=5.%20Lease) Corporate headquarters lease expired, now month-to-month, with sublease income and significantly decreased operating lease expenses - Corporate headquarters lease expired April 30, 2023; now month-to-month[45](index=45&type=chunk) - Sublease income: **$13,000** (Q2 2023), **$0.1 million** (YTD 2023), **$38,000** (Q2 2022)[46](index=46&type=chunk) - Operating lease expense: **$17,000** (Q2 2023), **$0.1 million** (YTD 2023), compared to **$0.6 million** (Q2 2022) and **$1.1 million** (YTD 2022)[47](index=47&type=chunk) [Note 6. Stock Based Compensation](index=12&type=section&id=6.%20Stock%20Based%20Compensation) 2018 Omnibus Incentive Plan shares increased; January 2023 cash dividend modified stock options without incremental cost, decreasing stock-based compensation - 2018 Omnibus Incentive Plan shares increased to **31,456,403**, with **25,521,867** shares available for future grant as of June 30, 2023[48](index=48&type=chunk) - Special cash dividend in January 2023 resulted in stock option modification (decreased exercise price, increased shares) to preserve value, with no incremental compensation cost[50](index=50&type=chunk) - Outstanding options at June 30, 2023: **8,246,945** shares with a weighted-average exercise price of **$1.32**[51](index=51&type=chunk) | Stock-Based Compensation Expense (in thousands) | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Research and development | $1 | $83 | $67 | $211 | | General and administrative | $88 | $263 | $232 | $650 | | Total | $89 | $346 | $299 | $861 | [Note 7. Net Income (Loss) per Share Attributable to Common Stockholders](index=14&type=section&id=7.%20Net%20Income%20%28Loss%29%20per%20Share%20Attributable%20to%20Common%20Stockholders) EPS is calculated using the two-class method; potentially dilutive securities excluded from diluted EPS for YTD June 30, 2023, due to anti-dilutive effects or unmet conversion - Uses two-class method for EPS calculation[32](index=32&type=chunk) - Catalyst Convertible Preferred Stock excluded from basic EPS (not participating until merger closes) and diluted EPS (conversion contingent)[32](index=32&type=chunk)[34](index=34&type=chunk)[55](index=55&type=chunk) - Potentially dilutive securities excluded from diluted EPS due to anti-dilutive effect: **8,246,945** options (YTD 2023) vs. **2,512,078** options (YTD 2022)[55](index=55&type=chunk) | EPS Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :------------------------------------ | :------ | :------ | :------- | :------- | | Net income (loss) (in thousands) | $(2,472) | $51,632 | $(2,212) | $37,096 | | Basic EPS | $(0.07) | $1.64 | $(0.06) | $1.18 | | Diluted EPS | $(0.07) | $1.64 | $(0.06) | $1.18 | [Note 8. Commitments and Contingencies](index=14&type=section&id=8.%20Commitments%20and%20Contingencies) The company faces financial market risks and significant commitments from the GNI Business Combination Agreement, including potential **$2.0 million** termination fees, CVR cash payments, and **$0.5 million** in F351 manufacturing agreements - Exposure to financial market uncertainties, particularly regarding bank liquidity[57](index=57&type=chunk) - Business Combination Agreement with GNI to acquire BC is subject to stockholder approval on August 29, 2023; up to **1,110,776,224** common shares to be issued[58](index=58&type=chunk) - Termination of Business Combination Agreement could incur a **$2.0 million** fee and up to **$2.0 million** in expense reimbursements[59](index=59&type=chunk) - CVR Agreement entitles holders to cash payments from legacy asset dispositions (GCBP, Vertex) and excess cash[60](index=60&type=chunk) - Distributed **$3.5 million** (net of expenses) from Vertex hold-back (June 2023) and **$0.2 million** from GCBP asset sale (March 2023) to CVR Holders[61](index=61&type=chunk)[62](index=62&type=chunk) - Entered into manufacturing agreements for F351 Assets totaling up to **$0.5 million**, terminable with 90 days' notice[63](index=63&type=chunk) [Note 9. Income Taxes](index=15&type=section&id=9.%20Income%20Taxes) Minimal income tax expense in 2023, no NOL benefits recognized due to uncertainty, despite significant federal (**$193.8 million**) and state (**$3.6 million**) NOL carryforwards subject to Section 382 limitations - Income tax expense: **$2,000** (Q2 2023), **$16,000** (YTD 2023) No expense in 2022[64](index=64&type=chunk) - No income tax benefits recognized for NOLs or R&D tax credits due to uncertainty[64](index=64&type=chunk) - Federal NOL carryforwards: **$193.8 million** (indefinite carryforward)[65](index=65&type=chunk) - State NOL carryforwards: **$3.6 million** (expire starting 2034)[65](index=65&type=chunk) - NOL utilization subject to Section 382 limitations due to ownership changes (latest on December 26, 2022)[67](index=67&type=chunk) [Note 10. Stockholders' Equity (Deficit)](index=16&type=section&id=10.%20Stockholders%27%20Equity%20%28Deficit%29) Authorized preferred stock, designating shares for Catalyst Convertible and Series Y redeemable preferred stock, with Series Y issued as a dividend for a reverse stock split proposal and classified as temporary equity - Authorized **5,000,000** shares of preferred stock; **123,418** designated as Catalyst Convertible Preferred Stock and **161,160** as Series Y redeemable preferred stock[68](index=68&type=chunk) - Series Y Preferred Stock issued as a dividend on June 20, 2023, granting **250,000** votes per share for a reverse stock split proposal[69](index=69&type=chunk) - Series Y Preferred Stock is redeemable at **$0.001 per share** and classified as temporary equity due to redemption features not solely within company control[69](index=69&type=chunk)[70](index=70&type=chunk) [Note 11. Restructuring](index=16&type=section&id=11.%20Restructuring) Catalyst underwent significant restructuring, including workforce reductions and the sale of its complement portfolio to Vertex for **$60.0 million** and rare bleeding disorder program to GCBP for **$6.0 million**, generating substantial gains and CVR distributions - Workforce reductions in November 2021 (**35%** of employees) and March 2022 (**22** full-time employees)[71](index=71&type=chunk)[72](index=72&type=chunk) - Sold lab equipment, consumables, and furniture for **$0.4 million** in Q2 2022, resulting in a **$0.2 million** loss on disposal[73](index=73&type=chunk) - Sold complement portfolio to Vertex in May 2022 for **$60.0 million** cash (**$55.0 million** upfront, **$5.0 million** hold-back received May 2023) Recorded a **$57.4 million** gain[74](index=74&type=chunk)[75](index=75&type=chunk) - Distributed **$3.5 million** (net of expenses) from Vertex hold-back to CVR Holders in June 2023[75](index=75&type=chunk) - Sold rare bleeding disorder program to GCBP in February 2023 for **$6.0 million** cash (**$1.0 million** upfront, **$5.0 million** hold-back due in 2 years) Recorded a **$4.7 million** gain[76](index=76&type=chunk) - Distributed **$0.2 million** (net of expenses) from GCBP upfront payment to CVR Holders in March 2023[76](index=76&type=chunk) [Note 12. Related Parties](index=17&type=section&id=12.%20Related%20Parties) GNI Group Ltd. is a related party, owning 100% of Catalyst Convertible Preferred Stock and 80.4% of common stock (as-converted), with **$0.3 million** in F351 development costs receivable from GNI USA, Inc - GNI Group Ltd. is a related party, owning **100%** of Catalyst Convertible Preferred Stock and **80.4%** of outstanding capital stock (as-converted) as of June 30, 2023[77](index=77&type=chunk) - Entered into a Cost Sharing and Agency Agreement with GNI USA, Inc. for F351 Asset development costs[78](index=78&type=chunk) - **$0.3 million** in F351 development costs incurred and receivable from GNI as of June 30, 2023[78](index=78&type=chunk) [Note 13. Condensed Consolidated Financial Statements Detail](index=17&type=section&id=13.%20Condensed%20Consolidated%20Financial%20Statements%20Detail) Details other accrued liabilities, primarily consisting of **$1.5 million** in tax liability and **$0.2 million** in professional and consulting services as of June 30, 2023 | Other Accrued Liabilities (in thousands) | June 30, 2023 | December 31, 2022 | | :------------------------------------ | :------------ | :---------------- | | Tax liability | $1,500 | $0 | | Professional and consulting services | $210 | $1,417 | | Manufacturing | $87 | $22 | | Other | $271 | $13 | | Total other accrued liabilities | $2,068 | $1,452 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strategic shift to asset acquisition and business combination, financial impacts, and critical liquidity challenges, including going concern risk [Overview](index=18&type=section&id=Overview) Catalyst underwent a strategic transformation, acquiring F351 Assets and entering a business combination with BC, following prior R&D cessation and legacy portfolio divestiture - Acquired F351 Assets (**15** patents/applications outside China, expiring by August 2037) from GNI for **$35.0 million** in common and Catalyst Convertible Preferred Stock[82](index=82&type=chunk) - Catalyst Convertible Preferred Stock is convertible into **10,000** common shares per preferred share, subject to stockholder approval (expected August 29, 2023)[83](index=83&type=chunk) - Entered Business Combination Agreement with GNI to acquire indirect controlling interest in BC, a China-based pharmaceutical company, subject to stockholder approval (expected August 29, 2023) Up to **1,110,776,224** common shares to be issued[84](index=84&type=chunk)[58](index=58&type=chunk) - CVR Agreement grants holders rights to cash payments from legacy asset dispositions (Vertex, GCBP) and excess cash, with distributions already made[87](index=87&type=chunk)[88](index=88&type=chunk) - Company ceased all previous R&D activities by June 2022 and began supporting F351 Assets development in April 2023[94](index=94&type=chunk) [Financial Operations Overview](index=20&type=section&id=Financial%20Operations%20Overview) Catalyst incurred significant operating losses, with a **net loss of $2.5 million** in Q2 2023, as collaboration revenue ceased, R&D and G&A expenses decreased, and asset disposal gains were a major income source - No drug product sales revenue; collaboration revenue ceased after Biogen Agreement termination in May 2022[89](index=89&type=chunk)[91](index=91&type=chunk) - Net loss of **$2.5 million** (Q2 2023) and **$2.2 million** (YTD 2023), compared to net income of **$51.6 million** (Q2 2022) and **$37.1 million** (YTD 2022)[90](index=90&type=chunk) - Accumulated deficit of **$413.1 million** and cash of **$6.9 million** as of June 30, 2023[90](index=90&type=chunk) - R&D expenses decreased significantly due to cessation of prior activities, with new F351 development costs covered by GNI until business combination closes[94](index=94&type=chunk)[97](index=97&type=chunk) - Gains on disposal of assets: **$4.7 million** (YTD 2023) from GCBP sale; **$57.2 million** (YTD 2022) from Vertex sale[99](index=99&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Financial performance shifted from significant net income in 2022 (due to asset disposals) to net losses in 2023, driven by the absence of large disposal gains and reduced R&D and G&A expenses | Metric | Q2 2023 (in thousands) | Q2 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------- | :--------- | | R&D Expenses | $318 | $1,871 | $(1,553) | (83)% | | G&A Expenses | $2,225 | $3,844 | $(1,619) | (42)% | | Gain on Disposal of Assets, Net | $0 | $(57,245) | $57,245 | (100)% | | Net Income (Loss) | $(2,472) | $51,632 | $(54,104) | * | | Metric | YTD June 30, 2023 (in thousands) | YTD June 30, 2022 (in thousands) | Change ($) | Change (%) | | :-------------------------- | :------------------------------- | :------------------------------- | :--------- | :--------- | | Collaboration Revenue | $0 | $794 | $(794) | (100)% | | Cost of Collaboration | $0 | $798 | $(798) | (100)% | | R&D Expenses | $906 | $11,574 | $(10,668) | (92)% | | G&A Expenses | $6,195 | $8,838 | $(2,643) | (30)% | | Gain on Disposal of Assets, Net | $(4,736) | $(57,245) | $52,509 | (92)% | | Net Income (Loss) | $(2,212) | $37,096 | $(39,308) | * | - R&D decrease primarily due to **$4.4 million** in personnel-related costs, **$4.1 million** in complement-related costs, and **$2.1 million** in hemophilia-related costs (YTD 2023 vs 2022)[104](index=104&type=chunk) - G&A decrease primarily due to **$1.7 million** in professional services and **$0.9 million** in personnel-related costs (YTD 2023 vs 2022)[106](index=106&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2023, Catalyst had **$6.9 million** cash and **$413.1 million** accumulated deficit, facing going concern doubt if preferred stock conversion is not approved, necessitating future financing - Cash and cash equivalents: **$6.9 million** as of June 30, 2023[112](index=112&type=chunk) - Accumulated deficit: **$413.1 million** as of June 30, 2023[112](index=112&type=chunk) - Net cash used in operating activities: **$8.7 million** for YTD June 30, 2023[115](index=115&type=chunk) - Substantial doubt about going concern if stockholder approval for Catalyst Convertible Preferred Stock conversion is not obtained by August 29, 2023, potentially requiring a cash redemption payment exceeding current liquidity[113](index=113&type=chunk) - Future cash needs to be financed through divestitures, equity/debt offerings, collaborations, strategic alliances, and licensing arrangements[114](index=114&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable to the company - Not applicable[122](index=122&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2023, with no material changes in internal control over financial reporting - Disclosure controls and procedures evaluated as effective at a reasonable assurance level as of June 30, 2023[123](index=123&type=chunk)[124](index=124&type=chunk) - No material changes in internal control over financial reporting identified during Q2 2023[125](index=125&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is not a party to any material legal proceedings - Not a party to any material legal proceedings[127](index=127&type=chunk) [Item 1A. Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) Significant Nasdaq delisting risk due to non-compliance with minimum bid price and stockholders' equity, potentially impacting stock liquidity, value, and business operations - Received Nasdaq delisting notice for failing Minimum Bid Price Requirement (**$1.00** for 30 consecutive trading days) and **$2.5 million** minimum stockholders' equity requirement[129](index=129&type=chunk)[130](index=130&type=chunk) - Granted until October 30, 2023, to regain compliance with initial listing requirements[130](index=130&type=chunk) - Delisting could adversely impact stock liquidity, value, ability to sell equity, and closing of Business Combination Agreement[131](index=131&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section is not applicable to the company - Not applicable[132](index=132&type=chunk) [Item 3. Defaults Upon Senior Securities](index=27&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There are no defaults upon senior securities - None[133](index=133&type=chunk) [Item 4. Mine Safety Disclosures](index=27&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company - Not applicable[134](index=134&type=chunk) [Item 5. Other Information](index=28&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2023 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements adopted or terminated by directors or officers in Q2 2023[135](index=135&type=chunk) [Item 6. Exhibits](index=28&type=section&id=Item%206.%20Exhibits) Lists filed exhibits, including agreement amendments, waiver agreements, certifications, and XBRL data - Includes amendments to Business Combination Agreement and Asset Purchase Agreement[139](index=139&type=chunk) - Includes Contingent Value Rights Agreement and its amendment[139](index=139&type=chunk) - Includes certifications of CEO and Interim CFO (Sections 302 and 906 of Sarbanes-Oxley Act)[139](index=139&type=chunk)[141](index=141&type=chunk) - Includes Inline XBRL data for financial statements[141](index=141&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section details the company's financial statements, management's analysis, market risk disclosures, and internal controls [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q1 2023 financial statements reflect a net income of $0.3 million, cash decreased to $8.1 million, and going concern doubts are noted [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, highlighting changes in assets, liabilities, and stockholders' deficit Condensed Consolidated Balance Sheet Highlights (in thousands USD) | Account | March 31, 2023 (Unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $8,099 | $21,666 | | Total current assets | $14,014 | $28,206 | | Total assets | $18,750 | $28,444 | | **Liabilities & Stockholders' Deficit** | | | | Total current liabilities | $6,844 | $16,824 | | Total liabilities | $11,394 | $16,824 | | Redeemable convertible preferred stock | $33,309 | $33,309 | | Total stockholders' deficit | $(25,953) | $(21,689) | - Cash and cash equivalents decreased significantly from **$21.7 million** to **$8.1 million**, primarily due to dividend payments. Total liabilities also decreased from **$16.8 million** to **$11.4 million**, mainly from the settlement of dividends payable[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net income or loss for the reporting periods Condensed Consolidated Statements of Operations Highlights (in thousands USD, except per share data) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Collaboration Revenue | $0 | $794 | | Research and development | $588 | $9,703 | | General and administrative | $3,970 | $4,994 | | Gain on disposal of assets, net | $(4,736) | $0 | | **Net income (loss)** | **$260** | **$(14,536)** | | Net income (loss) per share, basic | $0.01 | $(0.46) | - The company shifted from a **net loss of $14.5 million** in Q1 2022 to a **net income of $0.3 million** in Q1 2023, primarily due to a **$4.7 million gain** on asset disposal and a significant reduction in **R&D expenses from $9.7 million to $0.6 million** after ceasing R&D activities[11](index=11&type=chunk) - The company paid a cash dividend of **$0.24 per common share** and a CVR cash dividend of **$0.01 per common share** during the first quarter of 2023[11](index=11&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights (in thousands USD) | Cash Flow Category | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(6,216) | $(12,050) | | Net cash provided by investing activities | $411 | $2,504 | | Net cash (used in) provided by financing activities | $(7,762) | $16 | | **Net decrease in cash and cash equivalents** | **$(13,567)** | **$(9,530)** | - Cash used in operating activities decreased to **$6.2 million** from **$12.1 million** year-over-year due to the cessation of R&D activities[17](index=17&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - Financing activities used **$7.8 million** in cash, primarily for dividend payments, while investing activities provided **$0.4 million** from the sale of the legacy rare bleeding disorder program to GCBP[17](index=17&type=chunk) [Notes to Financial Statements](index=7&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Condensed%20Consolidated%20Financial%20Statements) These notes provide additional details and context for the figures presented in the financial statements - The company has transitioned from a biopharmaceutical R&D company to a vehicle for a business combination, having ceased its own R&D in March 2022 and sold its legacy assets[19](index=19&type=chunk) - On February 27, 2023, Catalyst sold its legacy rare bleeding disorder program to GC Biopharma Corp (GCBP)[21](index=21&type=chunk) - The company acquired F351 assets from GNI Group in December 2022 and concurrently signed a definitive agreement to acquire a controlling interest in Beijing Continent Pharmaceutical Co Ltd (BC), subject to stockholder approval[22](index=22&type=chunk)[23](index=23&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern due to a potential cash redemption requirement for its Series X redeemable convertible preferred stock if stockholder approval for its conversion is not obtained by September 30, 2023[27](index=27&type=chunk)[40](index=40&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the strategic shift, Q1 2023 results, and critical liquidity risks, including going concern uncertainty [Overview](index=18&type=section&id=Overview) This section provides a high-level summary of the company's recent strategic transactions and business developments - On December 26, 2022, Catalyst acquired F351 assets from GNI Group Ltd in exchange for common stock and Series X convertible preferred stock[82](index=82&type=chunk) - The company has entered into a Business Combination Agreement to acquire an indirect controlling interest in Beijing Continent Pharmaceutical Co Ltd (BC), which is subject to stockholder approval expected in Q3 2023[84](index=84&type=chunk)[85](index=85&type=chunk) - A Contingent Value Rights (CVR) Agreement was established to distribute net proceeds from the disposition of legacy assets to stockholders of record as of January 5, 2023 (excluding GNI)[87](index=87&type=chunk) - The company sold its legacy rare bleeding disorders programs to GCBP for **$6.0 million** in February 2023, with net proceeds to be distributed to CVR Holders[88](index=88&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing changes in revenues and expenses Comparison of Results of Operations (in thousands USD) | Line Item | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $0 | $794 | $(794) | (100)% | | Research and development | $588 | $9,703 | $(9,115) | (94)% | | General and administrative | $3,970 | $4,994 | $(1,024) | (21)% | | Gain on disposal of assets, net | $(4,736) | $0 | $(4,736) | 100% | | **Net income (loss)** | **$260** | **$(14,536)** | **$14,796** | * | - Research and development expenses decreased by **94%** to **$0.6 million** from **$9.7 million** in the prior year, following the cessation of R&D activities in March 2022[103](index=103&type=chunk) - General and administrative expenses decreased by **21%** to **$4.0 million**, primarily due to lower professional services and personnel-related costs[104](index=104&type=chunk) - A gain of **$4.7 million** was recognized from the sale of the legacy rare bleeding disorder program to GCBP in February 2023[105](index=105&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's cash position, cash flow, and ability to meet its financial obligations - As of March 31, 2023, the company had **$8.1 million** in cash and cash equivalents[109](index=109&type=chunk) - The company paid a one-time cash dividend of approximately **$7.6 million** in January 2023 and distributed **$0.2 million** in net proceeds from the GCBP asset sale in March 2023[108](index=108&type=chunk) - A substantial doubt exists about the company's ability to continue as a going concern, as failure to obtain stockholder approval for the conversion of Catalyst Convertible Preferred Stock could require a cash redemption the company may not have sufficient liquidity to make[110](index=110&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not applicable as the company qualifies as a smaller reporting company - The company has indicated that quantitative and qualitative disclosures about market risk are not applicable[120](index=120&type=chunk) [Controls and Procedures](index=23&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2023, with no material changes to internal control - Management concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective at the reasonable assurance level[122](index=122&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, internal controls[123](index=123&type=chunk) [PART II. OTHER INFORMATION](index=24&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, and other required disclosures [Legal Proceedings](index=24&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - Catalyst is not currently involved in any material legal proceedings[125](index=125&type=chunk) [Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant Nasdaq delisting risk due to non-compliance with minimum bid price and stockholders' equity requirements - The company is not in compliance with Nasdaq's minimum bid price requirement (Rule 5550(a)(2)) and minimum stockholders' equity requirement (Rule 5550(b)(1))[127](index=127&type=chunk)[128](index=128&type=chunk) - Nasdaq has notified the company of its intent to delist the stock, and the company has requested a hearing, which stays the suspension pending a decision[128](index=128&type=chunk) - Delisting from Nasdaq could adversely impact the stock's liquidity, value, and the ability to close the pending Business Combination Agreement[129](index=129&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=24&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section is not applicable for the current reporting period - The company reports no unregistered sales of equity securities for the period[130](index=130&type=chunk) [Defaults Upon Senior Securities](index=24&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities during the period - There were no defaults upon senior securities during the period[131](index=131&type=chunk) [Mine Safety Disclosures](index=25&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the company's operations[132](index=132&type=chunk) [Other Information](index=25&type=section&id=Item%205.%20Other%20Information) The company reports no other material information for this period - There is no other information to report for the quarter[133](index=133&type=chunk) [Exhibits](index=25&type=section&id=Item%206.%20Exhibits) This section incorporates the Exhibit Index, listing all documents filed with the quarterly report - This section incorporates the Exhibit Index by reference, which lists all exhibits filed with the Form 10-Q[134](index=134&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2022 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: 000-51173 Catalyst Biosciences, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 56-2020050 (State or Other Jurisdiction of ...