FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2021 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission file number: 001-36199 PULMATRIX, INC. (Exact name of registrant as specified in its charter) Delaware 46-1821392 (St ...

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for the periods ended June 30, 2021, and December 31, 2020 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets | Metric | June 30, 2021 (unaudited, $ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | 56,903 | 31,657 | | Total current assets | 60,469 | 32,538 | | Total assets | 65,433 | 38,169 | | **Liabilities** | | | | Total current liabilities | 6,917 | 8,254 | | Total liabilities | 12,340 | 15,030 | | **Stockholders' Equity** | | | | Total stockholders' equity | 53,093 | 23,139 | - Total assets increased by **$27.26 million (71.4%)** from December 31, 2020, to June 30, 2021, primarily driven by a significant increase in cash and cash equivalents[10](index=10&type=chunk) - Total stockholders' equity increased by **$29.95 million (129.4%)** from December 31, 2020, to June 30, 2021, indicating substantial capital infusion[10](index=10&type=chunk) [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations | Metric | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 2,254 | 3,500 | 3,644 | 6,262 | | Research and development expenses | 4,541 | 3,184 | 8,397 | 8,471 | | General and administrative expenses | 1,562 | 1,490 | 3,181 | 3,702 | | Total operating expenses | 6,103 | 4,674 | 11,578 | 12,173 | | Loss from operations | (3,849) | (1,174) | (7,934) | (5,911) | | Net loss | (3,852) | (1,170) | (7,956) | (5,856) | | Net loss per share (basic and diluted) | (0.07) | (0.05) | (0.16) | (0.26) | - Revenues decreased by **$1.246 million (35.6%)** for the three months ended June 30, 2021, and by **$2.618 million (41.8%)** for the six months ended June 30, 2021, compared to the respective prior-year periods[13](index=13&type=chunk) - Net loss increased significantly to **$(3.852) million** for the three months ended June 30, 2021, from $(1.170) million in the prior year, and to **$(7.956) million** for the six months ended June 30, 2021, from $(5.856) million in the prior year[13](index=13&type=chunk) [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) Condensed Consolidated Statements of Stockholders' Equity | Metric | January 1, 2021 | June 30, 2021 | January 1, 2020 | June 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Common Stock Shares | 36,105,097 | 56,249,062 | 19,994,560 | 25,749,356 | | Common Stock Amount ($ in thousands) | 4 | 6 | 2 | 3 | | Additional Paid-In Capital ($ in thousands) | 257,604 | 295,512 | 226,178 | 234,899 | | Accumulated Deficit ($ in thousands) | (234,469) | (242,425) | (215,161) | (221,017) | | Total Stockholders' Equity ($ in thousands) | 23,139 | 53,093 | 11,019 | 13,885 | - Common stock shares outstanding increased significantly from **36,105,097** at January 1, 2021, to **56,249,062** at June 30, 2021, primarily due to the issuance of common stock, net of issuance costs[15](index=15&type=chunk) - Additional paid-in capital increased by **$37.908 million** during the six months ended June 30, 2021, reflecting new equity issuances and share-based compensation[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | (12,019) | (4,200) | | Net cash used in investing activities | (18) | (98) | | Net cash provided by financing activities | 37,283 | 8,113 | | Net increase in cash, cash equivalents and restricted cash | 25,246 | 3,815 | | Cash, cash equivalents and restricted cash — end of period | 57,107 | 27,459 | - Net cash used in operating activities increased to **$(12.019) million** for the six months ended June 30, 2021, from $(4.200) million in the prior year, primarily due to a higher net loss and changes in operating assets and liabilities[18](index=18&type=chunk) - Net cash provided by financing activities significantly increased to **$37.283 million** for the six months ended June 30, 2021, from $8.113 million in the prior year, driven by proceeds from common stock issuance[18](index=18&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) - The condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain information condensed or omitted as permitted for interim reports[22](index=22&type=chunk) - Management makes estimates and assumptions affecting reported amounts, including valuing equity securities, future expected costs for revenue recognition, useful lives of assets, and goodwill impairment[23](index=23&type=chunk) - Revenue is recognized using a five-step model for contracts when collectability is probable, primarily from collaborative arrangements and license agreements related to Pulmazole and PUR1800, and reimbursement of clinical study costs[28](index=28&type=chunk)[30](index=30&type=chunk) [1. Organization](index=8&type=section&id=1.%20Organization) A clinical-stage biotechnology company developing inhaled therapeutics using its proprietary iSPERSE™ delivery platform - Pulmatrix, Inc. is a clinical stage biotechnology company focused on novel inhaled therapeutic products[21](index=21&type=chunk) - The company utilizes its proprietary iSPERSE™ dry powder delivery platform for efficient drug delivery to airways[21](index=21&type=chunk) - The iSPERSE platform is designed for small, dense particles with high dispersibility, compatible with various dry powder inhaler technologies and drug substances[21](index=21&type=chunk) [2. Summary of Significant Accounting Policies and Recent Accounting Standards](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies%20and%20Recent%20Accounting%20Standards) This section outlines significant accounting policies, including basis of presentation, use of estimates, credit risk, and revenue recognition - The condensed consolidated financial statements are prepared in accordance with SEC rules and GAAP, with certain information condensed or omitted as permitted for interim reports[22](index=22&type=chunk) - Management makes estimates and assumptions affecting reported amounts, including valuing equity securities, future expected costs for revenue recognition, useful lives of assets, and goodwill impairment[23](index=23&type=chunk) - Revenue is recognized using a five-step model for contracts when collectability is probable, primarily from collaborative arrangements and license agreements related to Pulmazole and PUR1800, and reimbursement of clinical study costs[28](index=28&type=chunk)[30](index=30&type=chunk) [Basis of Presentation](index=8&type=section&id=Basis%20of%20Presentation) - Financial statements are prepared under SEC rules and GAAP, with condensed disclosures for interim reporting[22](index=22&type=chunk) - Interim operating results are not necessarily indicative of full fiscal year results[22](index=22&type=chunk) [Use of Estimates](index=8&type=section&id=Use%20of%20Estimates) - Management's estimates include valuing equity securities, future expected costs for revenue recognition, useful lives of assets, interest borrowing rates, valuation allowance against deferred tax assets, goodwill impairment, and fair value of long-lived assets[23](index=23&type=chunk) - Actual results may differ from these estimates due to inherent uncertainties[23](index=23&type=chunk) [Concentrations of Credit Risk and Off-Balance Sheet Arrangements](index=8&type=section&id=Concentrations%20of%20Credit%20Risk%20and%20Off-Balance%20Sheet%20Arrangements) - Substantially all cash is deposited in a single financial institution, exposing the Company to credit risk for amounts exceeding FDIC insured limits[24](index=24&type=chunk) - The Company has no material off-balance sheet arrangements[25](index=25&type=chunk) [Cash, Cash Equivalents and Restricted Cash](index=9&type=section&id=Cash%2C%20Cash%20Equivalents%20and%20Restricted%20Cash) - Cash and cash equivalents include cash, checking accounts, and money market accounts[26](index=26&type=chunk) - Restricted cash consists of security deposits[26](index=26&type=chunk) Cash, Cash Equivalents and Restricted Cash | Metric | Six months ended June 30, 2021 ($ in thousands) | Six months ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 56,903 | 27,255 | | Restricted cash | 204 | 204 | | Total cash, cash equivalents and restricted cash | 57,107 | 27,459 | [Revenue Recognition](index=9&type=section&id=Revenue%20Recognition) - Revenue is recognized using a five-step model when collectability is probable and performance obligations are satisfied[28](index=28&type=chunk) - Principal revenue sources are collaborative arrangements and license agreements (Cipla, JJEI, Sensory Cloud) and reimbursement of clinical study costs[30](index=30&type=chunk)[31](index=31&type=chunk) - Amounts received prior to revenue recognition are recorded as deferred revenue, classified as current or non-current based on expected recognition timing[29](index=29&type=chunk) [Milestone Payments](index=9&type=section&id=Milestone%20Payments) - Milestone payments are included in the transaction price if probable of being achieved and a significant revenue reversal would not occur[32](index=32&type=chunk) - Milestones not controlled by the Company or licensee (e.g., regulatory approvals) are not considered probable until approvals are received[32](index=32&type=chunk) [Royalties](index=10&type=section&id=Royalties) - Sales-based royalties are recognized at the later of when related sales occur or when the performance obligation is satisfied[33](index=33&type=chunk) - To date, only immaterial royalty revenue from the Sensory Cloud licensing arrangement has been recognized[33](index=33&type=chunk) [Research and Development Costs](index=10&type=section&id=Research%20and%20Development%20Costs) - Research and development costs are expensed as incurred, including salaries, benefits, share-based compensation, license fees, milestone payments, and costs for third-party contractors (CROs, CMOs)[34](index=34&type=chunk) - Clinical trial costs are accrued based on estimates of services rendered by third-party contractors[34](index=34&type=chunk) [Goodwill](index=10&type=section&id=Goodwill) - Goodwill is not amortized but is evaluated for impairment annually or more frequently if circumstances indicate impairment[35](index=35&type=chunk) - The impact of COVID-19 was considered in the qualitative assessment, with no significant impact on carrying value to date[35](index=35&type=chunk) [Recently Issued Accounting Pronouncements](index=10&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) - No new or recently issued accounting pronouncements have a significant impact on the Company's condensed consolidated financial statements[36](index=36&type=chunk) [3. Prepaid Expenses and Other Current Assets](index=10&type=section&id=3.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) This note details the composition of prepaid expenses and other current assets, showing a significant increase from 2020 to 2021 Prepaid Expenses and Other Current Assets | Prepaid Expense Category | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Prepaid insurance | 632 | 276 | | Prepaid clinical trials | 531 | 317 | | Deferred operating costs | 283 | 74 | | Prepaid other | 150 | 130 | | Total prepaid and other current assets | 1,596 | 797 | - Total prepaid expenses and other current assets increased by **$799 thousand (100.2%)** from December 31, 2020, to June 30, 2021[37](index=37&type=chunk) [4. Property and Equipment, Net](index=11&type=section&id=4.%20Property%20and%20Equipment%2C%20Net) This note provides a breakdown of property and equipment, net of accumulated depreciation and amortization Property and Equipment, Net | Property and Equipment Category | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Laboratory equipment | 1,741 | 1,702 | | Computer equipment | 304 | 302 | | Office furniture and equipment | 216 | 217 | | Leasehold improvements | 600 | 596 | | Capital in progress | 87 | 25 | | Total property and equipment | 2,948 | 2,842 | | Less accumulated depreciation and amortization | (2,569) | (2,481) | | Property and equipment, net | 379 | 361 | - Net property and equipment increased by **$18 thousand (5.0%)** from December 31, 2020, to June 30, 2021[38](index=38&type=chunk) [5. Accrued Expenses and Other Current Liabilities](index=11&type=section&id=5.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) This note details the components of accrued expenses, showing a decrease from 2020 to 2021 Accrued Expenses and Other Current Liabilities | Accrued Expense Category | June 30, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Accrued vacation | 117 | 56 | | Accrued wages and incentive | 409 | 813 | | Accrued clinical & consulting | 449 | 1,010 | | Accrued legal & patent | 164 | 129 | | Accrued other expenses | 52 | 20 | | Total accrued expenses | 1,191 | 2,028 | - Total accrued expenses decreased by **$837 thousand (41.3%)** from December 31, 2020, to June 30, 2021[39](index=39&type=chunk) [6. Significant Agreements](index=11&type=section&id=6.%20Significant%20Agreements) This note describes key collaboration and license agreements, including the termination of the JJEI agreement and a dispute with Cipla [License, Development and Commercialization Agreement with Johnson & Johnson Enterprise Innovation, Inc. ("JJEI")](index=11&type=section&id=License%2C%20Development%20and%20Commercialization%20Agreement%20with%20Johnson%20%26%20Johnson%20Enterprise%20Innovation%2C%20Inc.%20%28%22JJEI%22%29) - JJEI exercised its option to terminate the license agreement in April 2021, with all rights to the kinase inhibitor portfolio (including PUR1800 and PUR5700) reverting to Pulmatrix on July 6, 2021[41](index=41&type=chunk) - Pulmatrix intends to continue the development of PUR1800 for AECOPD and other chronic airway diseases[41](index=41&type=chunk) - During the six months ended June 30, 2021, the Company recognized **$2.688 million in revenue** related to the JJEI license agreement and reimbursed expenses[42](index=42&type=chunk) [Collaborations - Development and Commercialization Agreement with Cipla Technologies LLC ("Cipla")](index=12&type=section&id=Collaborations%20-%20Development%20and%20Commercialization%20Agreement%20with%20Cipla%20Technologies%20LLC%20%28%22Cipla%22%29) - The Company received a non-refundable upfront payment of **$22.0 million** under the Cipla Agreement, assigning certain assets related to Pulmazole for Pulmonary Indications[43](index=43&type=chunk) - Pulmatrix notified Cipla of a **material breach** in May 2021 due to Cipla's refusal to fund 50% of Pulmazole's Phase 2b clinical study development costs[46](index=46&type=chunk) - Dispute resolution procedures are ongoing, and the agreement remains in effect, but the Company intends to pursue remedies if Cipla does not reaffirm its obligations[47](index=47&type=chunk) - During the six months ended June 30, 2021, the Company recognized **$0.755 million in R&D services revenue** and **$0.189 million for the irrevocable license** to Assigned Assets under the Cipla Agreement[50](index=50&type=chunk) [7. Common Stock](index=13&type=section&id=7.%20Common%20Stock) This note details common stock activities, including offerings and warrant/stock option exercises that increased outstanding shares and capital [2021 At-the-Market Offering](index=13&type=section&id=2021%20At-the-Market%20Offering) - On May 26, 2021, the Company entered into an At-The-Market Sales Agreement to sell up to **$20.0 million** of common stock[51](index=51&type=chunk) - No sales of common stock occurred under this agreement during the three months ended June 30, 2021[52](index=52&type=chunk) [2021 Registered Direct Offering](index=14&type=section&id=2021%20Registered%20Direct%20Offering) - On February 16, 2021, the Company closed a registered direct offering of **20,000,000 shares** of common stock for gross proceeds of **$40.0 million**[53](index=53&type=chunk) - Net proceeds after fees and expenses were approximately **$37.079 million**[53](index=53&type=chunk) - **1,300,000 warrants** with a five-year expiry and an exercise price of $2.50 per share were issued to placement agent designees[53](index=53&type=chunk) [2020 Common Stock Sale](index=14&type=section&id=2020%20Common%20Stock%20Sale) - In April 2020, the Company sold **4,787,553 shares** at $1.671 per share, generating gross proceeds of approximately **$8.0 million**[54](index=54&type=chunk) - Concurrent private placement issued warrants to purchase **4,787,553 shares** at $1.55 per share and **311,191 shares** to placement agent designees at $2.0888 per share, both expiring April 20, 2022[54](index=54&type=chunk) [Exercise of Warrants](index=14&type=section&id=Exercise%20of%20Warrants) - During the six months ended June 30, 2021, warrants to purchase **143,965 shares** were exercised for cash, yielding **$0.204 million** in proceeds[55](index=55&type=chunk) - During the six months ended June 30, 2020, warrants to purchase **944,746 shares** were exercised for cash, yielding **$0.775 million** in proceeds[56](index=56&type=chunk) [Exercise of Stock Options](index=14&type=section&id=Exercise%20of%20Stock%20Options) - No stock options were exercised during the three and six months ended June 30, 2021[57](index=57&type=chunk) - During the six months ended June 30, 2020, stock options to buy **22,497 shares** were exercised, generating **$0.024 million** in proceeds[57](index=57&type=chunk) [8. Warrants](index=15&type=section&id=8.%20Warrants) This note provides a rollforward of common stock warrants outstanding, detailing changes from exercises and issuances Warrant Activity | Metric | Outstanding January 1, 2021 | Warrants exercised | Warrants issued | Outstanding June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Number of Warrants | 23,284,813 | (143,965) | 1,300,000 | 24,440,848 | | Weighted Average Exercise Price ($) | 3.41 | 1.42 | 2.50 | 3.37 | | Weighted Average Remaining Contractual Term (Years) | 3.3 | | | 2.9 | - The number of outstanding warrants increased by **1,156,035** from January 1, 2021, to June 30, 2021, primarily due to the issuance of 1,300,000 warrants[60](index=60&type=chunk) - The weighted average exercise price decreased slightly from **$3.41 to $3.37**, and the remaining contractual term shortened from **3.3 to 2.9 years**[60](index=60&type=chunk) [9. Share-Based Compensation](index=16&type=section&id=9.%20Share-Based%20Compensation) This note outlines the Company's equity incentive plans, stock option activity, and associated share-based compensation expense - As of June 30, 2021, **1,859,348 shares** remain available for future grant under the 2013 Employee, Director and Consultant Equity Incentive Plan[62](index=62&type=chunk) - As of June 30, 2021, **$2.687 million** of unrecognized stock-based compensation expense remains, expected to be recognized over approximately **2.8 years**[67](index=67&type=chunk) Stock Option Activity | Stock Option Activity | Outstanding January 1, 2021 | Granted | Forfeited or expired | Outstanding June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Number of Options | 2,899,837 | 1,057,587 | (22,284) | 3,935,140 | | Weighted Average Exercise Price ($) | 3.22 | 1.44 | 2.39 | 2.75 | | Weighted Average Remaining Contractual Term (Years) | 8.75 | | | 8.58 | | Aggregate Intrinsic Value ($ in thousands) | 60 | | | 1 | Share-Based Compensation Expense | Share-Based Compensation Expense | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Research and development | 55 | 49 | 111 | 96 | | General and administrative | 244 | 217 | 516 | 513 | | Total share-based compensation expense | 299 | 266 | 627 | 609 | [10. Commitments and Contingencies](index=18&type=section&id=10.%20Commitments%20and%20Contingencies) This note details contractual commitments for R&D activities and operating lease obligations for its corporate headquarters [Research and Development Activities](index=18&type=section&id=Research%20and%20Development%20Activities) - As of June 30, 2021, the Company had aggregate commitments of approximately **$0.933 million** remaining on research and development contracts[68](index=68&type=chunk) - These contracts are generally cancellable by the Company upon written notice, subject to certain conditions[68](index=68&type=chunk) [Operating Leases](index=18&type=section&id=Operating%20Leases) - The Company leases approximately **22,000 square feet** of office and lab space for its corporate headquarters, with the lease expiring on June 30, 2022[69](index=69&type=chunk) Lease Cost | Lease Cost | Three Months Ended June 30, 2021 ($ in thousands) | Three Months Ended June 30, 2020 ($ in thousands) | Six Months Ended June 30, 2021 ($ in thousands) | Six Months Ended June 30, 2020 ($ in thousands) | | :--- | :--- | :--- | :--- | :--- | | Fixed lease cost | 259 | 228 | 518 | 391 | | Variable lease cost | 96 | 99 | 222 | 218 | | Total lease cost | 355 | 327 | 740 | 609 | Maturity of Lease Liabilities | Maturity of Lease Liabilities | Operating Leases ($ in thousands) | | :--- | :--- | | 2021 | 597 | | 2022 (half year) | 615 | | Total lease payments | 1,212 | | Less: interest | (28) | | Total lease liabilities | 1,184 | [11. Net Loss Per Share](index=19&type=section&id=11.%20Net%20Loss%20Per%20Share) This note explains the calculation of basic and diluted net loss per share, excluding potentially dilutive securities - Basic and diluted net loss per share are computed using the two-class method[71](index=71&type=chunk) - Potentially dilutive securities (options and warrants) are excluded from diluted net loss per share calculation because their inclusion would be anti-dilutive due to net losses[71](index=71&type=chunk) Potentially Dilutive Securities | Potentially Dilutive Securities | As of June 30, 2021 | As of June 30, 2020 | | :--- | :--- | :--- | | Options to purchase common stock | 3,935,140 | 2,980,432 | | Warrants to purchase common stock | 22,440,848 | 22,902,240 | | Total | 26,375,988 | 25,882,672 | [12. Subsequent Events](index=19&type=section&id=12.%20Subsequent%20Events) This note discloses the granting of additional stock options to employees and a director in July 2021 - In July 2021, the Company granted **34,900 stock options** to employees and **30,000 stock options** to a director[73](index=73&type=chunk) - No other subsequent events requiring disclosure were identified up to the date of financial statement issuance[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition, results of operations, product pipeline developments, and liquidity [Forward-Looking Statements](index=20&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements regarding business plans, strategies, anticipated benefits, revenues, and operating results[76](index=76&type=chunk) - These statements are subject to risks and uncertainties, including the impact of COVID-19, recurring losses, inability to carry out development plans, manufacturing issues, and difficulties in obtaining financing or regulatory approval[77](index=77&type=chunk) - The Company undertakes no obligation to publicly update or revise forward-looking statements, except as required by law[78](index=78&type=chunk) [Overview](index=21&type=section&id=Overview) [Business](index=21&type=section&id=Business) - Pulmatrix is a clinical-stage biotechnology company developing novel inhaled therapeutic products using its iSPERSE dry powder delivery technology[79](index=79&type=chunk)[80](index=80&type=chunk) - The iSPERSE technology aims for enhanced drug loading, delivery efficiency, reduced costs, and improved efficacy/safety profiles[81](index=81&type=chunk) - Current pipeline includes **Pulmazole** (ABPA in asthma/CF), **PUR1800** (AECOPD), and **PUR3100** (acute migraine)[82](index=82&type=chunk) [Future Expenses and Capital Requirements](index=21&type=section&id=Future%20Expenses%20and%20Capital%20Requirements) - The Company expects to incur significant expenses and increasing operating losses for several years due to drug development plans[84](index=84&type=chunk) - Expenses will increase for continuing clinical trials (Pulmazole, PUR1800), initiating non-clinical studies (PUR3100), seeking regulatory approval, expanding IP, and hiring personnel[84](index=84&type=chunk) - Funding will be sought through equity/debt financings, licensing, collaborations, and grants, as the Company has no approved products or product sales revenue[85](index=85&type=chunk) [Recent Developments](index=22&type=section&id=Recent%20Developments) [Pulmazole](index=22&type=section&id=Pulmazole) - The Phase 2 study for Pulmazole was terminated in July 2020 due to COVID-19 impact on enrollment[88](index=88&type=chunk) - A Phase 2b clinical study is planned to commence when COVID-19 risks are reduced, with a longer 16-week dosing regimen[89](index=89&type=chunk) - The Company notified Cipla of a **material breach** in May 2021 due to Cipla's refusal to fund 50% of development costs for the Phase 2b study, leading to ongoing dispute resolution[90](index=90&type=chunk)[91](index=91&type=chunk) [PUR1800](index=23&type=section&id=PUR1800) - JJEI terminated its license agreement for PUR1800 in April 2021, with all rights reverting to Pulmatrix on July 6, 2021[92](index=92&type=chunk) - Pulmatrix is continuing PUR1800 development, with **18 patients dosed** in a Phase 1b safety, tolerability, and biomarker study for COPD[92](index=92&type=chunk)[93](index=93&type=chunk) - Phase 1b top-line data is expected in **Q1 2022**, with toxicology studies demonstrating safety for chronic dosing, potentially expanding indications[94](index=94&type=chunk)[95](index=95&type=chunk) [PUR3100](index=23&type=section&id=PUR3100) - Nonclinical pharmacokinetic (PK) and GLP toxicology studies are underway for PUR3100 to support a planned Phase 1/Phase 2 study[96](index=96&type=chunk) - The Company intends to dose the first patients in a Phase 1/Phase 2 study in **Q1 2022**, with data anticipated in **Q4 2022**[96](index=96&type=chunk) [Financial Overview](index=23&type=section&id=Financial%20Overview) [Revenues](index=23&type=section&id=Revenues) - The Company has not generated any product sales to date[97](index=97&type=chunk) - 2021 revenue was primarily from collaboration and license agreements with Cipla (Pulmazole) and JJEI (PUR1800), and immaterial royalties from Sensory Cloud[97](index=97&type=chunk) - No further revenue is expected from the Cipla Agreement's upfront payment until the contractual dispute is resolved[97](index=97&type=chunk) [Research and Development Expenses](index=23&type=section&id=Research%20and%20Development%20Expenses) - R&D expenses are expensed as incurred and include employee costs, CRO/CMO expenses, license fees, and facility costs[99](index=99&type=chunk)[105](index=105&type=chunk) - A large portion of staff (approximately **81%**) are R&D employees, supporting internal and external development efforts[101](index=101&type=chunk) - The duration and costs of preclinical and clinical trials are uncertain due to various factors, including enrollment rates and regulatory changes[102](index=102&type=chunk) [General and Administrative Expenses](index=24&type=section&id=General%20and%20Administrative%20Expenses) - G&A expenses include salaries, share-based compensation, facility costs, patent filing fees, and professional legal fees[103](index=103&type=chunk) - Future G&A expenses are expected to increase due to public company compliance costs and preparation for commercial operations if product candidates receive regulatory approval[104](index=104&type=chunk) [Critical Accounting Policies](index=24&type=section&id=Critical%20Accounting%20Policies) - The Company's financial statements are prepared in accordance with U.S. GAAP, requiring management to make estimates and judgments[105](index=105&type=chunk) - Key estimates include accrued expenses and share-based compensation, based on historical experience and known trends[105](index=105&type=chunk) - No material changes to critical accounting policies and estimates have occurred since the 2020 Form 10-K filing[106](index=106&type=chunk) [Results of Operations](index=25&type=section&id=Results%20of%20Operations) [Three Months Ended June 30, 2021 Compared with Three Months Ended June 30, 2020](index=25&type=section&id=Three%20Months%20Ended%20June%2030%2C%202021%20Compared%20with%20Three%20Months%20Ended%20June%2030%2C%202020) Results of Operations (Three Months Ended June 30) | Metric | June 30, 2021 ($ in thousands) | June 30, 2020 ($ in thousands) | Change ($ in thousands) | | :--- | :--- | :--- | :--- | | Revenues | 2,254 | 3,500 | (1,246) | | Research and development | 4,541 | 3,184 | 1,357 | | General and administrative | 1,562 | 1,490 | 72 | | Total operating expenses | 6,103 | 4,674 | 1,429 | | Loss from operations | (3,849) | (1,174) | (2,675) | | Net loss | (3,852) | (1,170) | (2,682) | - Revenue decreased by **$1.246 million**, primarily due to lower contributions from Cipla and JJEI agreements[107](index=107&type=chunk) - Research and development expenses increased by **$1.357 million**, mainly due to a **$1.6 million** increase in PUR3100 project spend, partially offset by a **$0.3 million** decrease in Pulmazole clinical trial spend[108](index=108&type=chunk) - General and administrative expenses increased by **$0.072 million**, driven by higher legal, patent, and public company costs, partially offset by decreased employment costs[109](index=109&type=chunk) [Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020](index=26&type=section&id=Six%20Months%20Ended%20June%2030%2C%202021%20Compared%20with%20Six%20Months%20Ended%20June%2030%2C%202020) Results of Operations (Six Months Ended June 30) | Metric | June 30, 2021 ($ in thousands) | June 30, 2020 ($ in thousands) | Change ($ in thousands) | | :--- | :--- | :--- | :--- | | Revenues | 3,644 | 6,262 | (2,618) | | Research and development | 8,397 | 8,471 | (74) | | General and administrative | 3,181 | 3,702 | (521) | | Total operating expenses | 11,578 | 12,173 | (595) | | Loss from operations | (7,934) | (5,911) | (2,023) | | Net loss | (7,956) | (5,856) | (2,100) | - Revenue decreased by **$2.618 million**, primarily due to lower contributions from Cipla and JJEI agreements[111](index=111&type=chunk) - Research and development expenses decreased by **$0.074 million**, reflecting a **$1.2 million** decrease in PUR1800 and Pulmazole spend, largely offset by a **$2.3 million** increase in PUR3100 pre-clinical and manufacturing costs[112](index=112&type=chunk) - General and administrative expenses decreased by **$0.521 million**, mainly due to reduced employment and consulting costs[113](index=113&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) [Financings (2021 & 2020)](index=29&type=section&id=Financings%20%282021%20%26%202020%29) - In February 2021, the Company completed a registered direct offering, raising **$37.1 million net proceeds** from the sale of 20,000,000 common shares[130](index=130&type=chunk) - In May 2021, an At-The-Market Sales Agreement was established to sell up to **$20.0 million** of common stock, with no sales occurring by June 30, 2021[129](index=129&type=chunk) - During the six months ended June 30, 2021, warrant exercises generated **$0.2 million**[131](index=131&type=chunk) - In April 2020, a registered direct offering raised approximately **$7.3 million net proceeds**, along with warrants issued[132](index=132&type=chunk) - During the six months ended June 30, 2020, warrant exercises generated **$0.775 million**[133](index=133&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) - The Company has no material off-balance sheet arrangements that would significantly affect its financial condition or results of operations[134](index=134&type=chunk) [Impact of COVID-19 on the Company's Operations, Financial Condition and Liquidity](index=28&type=section&id=Impact%20of%20COVID-19%20on%20the%20Company's%20Operations%2C%20Financial%20Condition%20and%20Liquidity) - The ultimate impact of COVID-19 on operations is unknown and depends on future developments, including the duration of the outbreak and new variants[120](index=120&type=chunk) - COVID-19 has created significant economic uncertainty and volatility, potentially affecting the Company's ability to raise additional capital[121](index=121&type=chunk) - Future funding requirements are dependent on factors such as clinical trial progress, regulatory approvals, intellectual property costs, and commercialization efforts[124](index=124&type=chunk) [Cash Flows from Operating Activities](index=29&type=section&id=Cash%20Flows%20from%20Operating%20Activities) - Net cash used in operating activities for the six months ended June 30, 2021, was **$12.0 million**, primarily due to a net loss of **$8.0 million** and **$5.2 million** in cash outflows from changes in operating assets and liabilities[125](index=125&type=chunk) - Non-cash adjustments included **$0.6 million** in share-based compensation and **$0.5 million** in operating lease right-of-use asset amortization[125](index=125&type=chunk) - Net cash used in operating activities for the six months ended June 30, 2020, was **$4.2 million**, driven by a net loss of **$5.9 million**, partially offset by non-cash adjustments and cash inflows from changes in operating assets and liabilities[126](index=126&type=chunk) [Cash Flows from Investing Activities](index=29&type=section&id=Cash%20Flows%20from%20Investing%20Activities) - Net cash used in investing activities for both six-month periods ended June 30, 2021, and 2020, was entirely due to purchases of property and equipment[127](index=127&type=chunk) [Cash Flows from Financing Activities](index=29&type=section&id=Cash%20Flows%20from%20Financing%20Activities) - Net cash provided by financing activities for the six months ended June 30, 2021, was **$37.3 million**, primarily from the issuance of common stock (**$37.1 million**) and warrant exercises (**$0.2 million**)[128](index=128&type=chunk) - Net cash provided by financing activities for the six months ended June 30, 2020, was **$8.1 million**, from common stock issuance (**$7.3 million**) and warrant/stock option exercises (**$0.8 million**)[128](index=128&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company has no material quantitative or qualitative disclosures about market risk to report for the period - The Company has no material quantitative and qualitative disclosures about market risk[135](index=135&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control - The principal executive officer and principal financial officer concluded that disclosure controls and procedures were **effective** as of June 30, 2021[136](index=136&type=chunk) - No changes in internal control over financial reporting materially affected or are reasonably likely to materially affect internal control during the quarter ended June 30, 2021[138](index=138&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) The Company is not currently aware of any material legal proceedings, threatened litigation, or governmental proceedings - The Company is not aware of any material legal proceedings to which it or its subsidiaries are a party[141](index=141&type=chunk) - No threatened or pending litigation or proceedings contemplated by governmental authorities are known[141](index=141&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This section updates key risks related to the business, including a contractual dispute with Cipla and the impact of COVID-19 [Risk Related to Our Business](index=31&type=section&id=Risk%20Related%20to%20Our%20Business) - The Company is in a **contractual dispute with Cipla** regarding funding for Pulmazole's Phase 2b clinical study, which could lead to delays, loss of rights, or financial losses[145](index=145&type=chunk)[150](index=150&type=chunk) - The **COVID-19 pandemic** has caused interruptions and delays in clinical studies (e.g., Pulmazole Phase 2 termination, PUR1800 Phase 1b enrollment slowdown) and may continue to adversely affect business operations and financial condition[151](index=151&type=chunk)[152](index=152&type=chunk)[154](index=154&type=chunk) - Uncertainty remains regarding the full extent of potential delays or impacts on clinical trials, business partners, and the global economy due to COVID-19[156](index=156&type=chunk) [Risks Related to Our Common Stock](index=33&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) - The price of the Company's common stock is subject to **significant fluctuation and volatility**, often unrelated to operating performance[157](index=157&type=chunk) - Factors influencing stock price include announcements of new products, financial results, strategic relationships, industry trends, market conditions, and the impact of global events like COVID-19[158](index=158&type=chunk)[160](index=160&type=chunk) - Stock price declines could lead to costly lawsuits and management distraction[159](index=159&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no unregistered sales or repurchases of equity securities occurred during the quarter - No unregistered sales of equity securities occurred during the period[161](index=161&type=chunk) - The Company did not repurchase any of its equity securities during the quarter ended June 30, 2021[162](index=162&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company has no defaults upon senior securities to report - There are no defaults upon senior securities[163](index=163&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable - Mine safety disclosures are not applicable to the Company[164](index=164&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - No other information is reported in this section[165](index=165&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section refers to the Exhibit Index for a list of documents filed as exhibits - The Exhibit Index provides a list of documents filed as exhibits[166](index=166&type=chunk) [SIGNATURES](index=35&type=section&id=SIGNATURES) This section contains the required signatures of the Company's principal executive and financial officers - The report is signed by Teofilo Raad, President and Chief Executive Officer, and Michelle S. Siegert, Vice President, Finance, on August 10, 2021[169](index=169&type=chunk) [EXHIBIT INDEX](index=36&type=section&id=EXHIBIT%20INDEX) This section lists all exhibits filed with the Form 10-Q, including agreements, corporate documents, and certifications - The index lists various exhibits, including the At The Market Offering Agreement, Amended and Restated Certificate of Incorporation, Restated Bylaws, Forms of Common and Placement Agent Warrants, Securities Purchase Agreements, and certifications (302 and 906)[171](index=171&type=chunk) - Exhibits are either filed herewith or incorporated by reference from previous SEC filings[171](index=171&type=chunk)

PART I — FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements, management's analysis, market risk, and internal controls [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $63,445 | $31,657 | | Total current assets | $64,494 | $32,538 | | Total assets | $69,850 | $38,169 | | Total current liabilities | $7,088 | $8,254 | | Total liabilities | $13,204 | $15,030 | | Total stockholders' equity | $56,646 | $23,139 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the company's revenues, expenses, and net loss over specific reporting periods Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Revenues | $1,390 | $2,762 | | Research and development | $3,856 | $5,287 | | General and administrative | $1,619 | $2,212 | | Total operating expenses | $5,475 | $7,499 | | Loss from operations | $(4,085) | $(4,737) | | Net loss | $(4,104) | $(4,686) | | Net loss per share, basic and diluted | $(0.09) | $(0.23) | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) This section details changes in the company's equity, including stock issuance and net loss, over the reporting period Condensed Consolidated Statements of Stockholders' Equity (in thousands) | Metric | January 1, 2021 | March 31, 2021 | | :----------------------------------- | :-------------- | :------------- | | Balance — Total Stockholders' Equity | $23,139 | $56,646 | | Issuance of common stock, net | — | $37,079 | | Net loss | $(4,104) | $(4,104) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in)/provided by operating activities | $(5,495) | $798 | | Net cash used in investing activities | $0 | $(96) | | Net cash provided by financing activities | $37,283 | $260 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $31,788 | $962 | | Cash, cash equivalents and restricted cash — end of period | $63,649 | $24,606 | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information supporting the condensed consolidated financial statements - Pulmatrix, Inc. is a clinical-stage biotechnology company focused on inhaled therapeutic products using its proprietary iSPERSE™ dry powder delivery platform[21](index=21&type=chunk) - Principal sources of revenue are collaborative arrangements and license agreements (Cipla, JJEI, Sensory Cloud), recognized as services are provided or when sales-based royalties occur[30](index=30&type=chunk)[31](index=31&type=chunk)[33](index=33&type=chunk) - Johnson & Johnson Enterprise Innovation, Inc. (JJEI) exercised its option to terminate the license agreement in April 2021, effective July 6, 2021, reverting all rights to PUR1800 and PUR5700 back to Pulmatrix[44](index=44&type=chunk)[74](index=74&type=chunk) - Pulmatrix notified Cipla Technologies LLC of a material breach on May 10, 2021, due to Cipla's refusal to fund **50% of Pulmazole development costs**, demanding reaffirmation within 30 days or termination and reacquisition of Pulmazole rights for **25% of fair market value**[49](index=49&type=chunk)[76](index=76&type=chunk) - On February 16, 2021, the company closed a registered direct offering of **20,000,000 shares of common stock**, generating net proceeds of **$37,079 thousand**[53](index=53&type=chunk) Share-Based Compensation Expense (in thousands) | Expense Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Research and development | $56 | $47 | | General and administrative | $272 | $296 | | Total share-based compensation expense | $328 | $343 | - As of March 31, 2021, the company had aggregate commitments of approximately **$1,460 thousand** remaining on research and development contracts[69](index=69&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, operational results, liquidity, capital resources, and critical accounting policies [Forward-Looking Statements](index=19&type=section&id=Forward-Looking%20Statements) This section identifies statements about future expectations and outlines inherent risks and uncertainties - The report contains forward-looking statements identified by terms such as 'anticipates,' 'expects,' 'plans,' and 'would,' which are subject to risks and uncertainties[80](index=80&type=chunk) - Key risks include the impact of COVID-19 on clinical trials, recurring losses, inability to execute R&D plans, manufacturing challenges, termination of license agreements, and intense industry competition[81](index=81&type=chunk) [Overview](index=20&type=section&id=Overview) This section introduces the company's core business, proprietary technology, product pipeline, and funding strategy - Pulmatrix is a clinical-stage biotechnology company focused on developing novel inhaled therapeutic products using its proprietary iSPERSE™ dry powder delivery technology for respiratory and other diseases[83](index=83&type=chunk)[84](index=84&type=chunk) - The current pipeline includes Pulmazole (for ABPA in asthma/CF), PUR1800 (for AECOPD), and PUR3100 (for acute migraine)[86](index=86&type=chunk) - The company expects to incur significant expenses and increasing operating losses, aiming to fund operations through equity/debt financings, licensing agreements, and collaborations[88](index=88&type=chunk)[89](index=89&type=chunk)[90](index=90&type=chunk) [Recent Developments](index=21&type=section&id=Recent%20Developments) This section highlights significant events impacting the company, including clinical study updates, partnership changes, and financing activities - The COVID-19 pandemic led to the termination of the Phase 2 Pulmazole clinical study in July 2020 and could delay enrollment for the PUR1800 Phase 1b study[96](index=96&type=chunk)[100](index=100&type=chunk) - Pulmatrix notified Cipla of a material breach regarding the Pulmazole agreement due to Cipla's refusal to fund **50% of development costs** for the planned Phase 2b study, potentially leading to termination and reacquisition of rights[98](index=98&type=chunk) - JJEI terminated its license agreement for PUR1800 in April 2021, effective July 6, 2021, with Pulmatrix intending to continue PUR1800 development[101](index=101&type=chunk) - A registered direct offering closed on February 16, 2021, raising **$37.1 million** in net proceeds from the sale of **20,000,000 common shares**[102](index=102&type=chunk) [Financial Overview](index=23&type=section&id=Financial%20Overview) This section summarizes the company's revenue sources, key expense categories, and accounting policies - Revenues are generated from collaboration and license agreements (Cipla, JJEI, Sensory Cloud); no product sales to date[103](index=103&type=chunk) Research and Development Expenses (YoY Change, in thousands) | Metric | Q1 2021 | Q1 2020 | Change | | :-------------------------------- | :------ | :------ | :----- | | Total R&D Expense | $3,856 | $5,287 | $(1,431) | | Decrease in PUR1800 project spend | | | $(1,200) | | Decrease in Pulmazole Phase 2 spend | | | $(1,000) | | Increase in PUR3100 pre-clinical/manufacturing | | | $700 | | Increase in general operating expenses | | | $100 | General and Administrative Expenses (YoY Change, in thousands) | Metric | Q1 2021 | Q1 2020 | Change | | :-------------------------------- | :------ | :------ | :----- | | Total G&A Expense | $1,619 | $2,212 | $(593) | | Decrease in employment costs | | | $(400) | | Decrease in consulting costs | | | $(100) | | Decrease in patent costs | | | $(100) | - There have been no material changes to the company's critical accounting policies and estimates since the 2020 Form 10-K[111](index=111&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) This section details the company's financial performance, including revenues, operating expenses, and net loss for the period Results of Operations (in thousands) | Metric | Q1 2021 | Q1 2020 | Change | | :-------------------- | :------ | :------ | :----- | | Revenues | $1,390 | $2,762 | $(1,372) | | Total operating expenses | $5,475 | $7,499 | $(2,024) | | Loss from operations | $(4,085) | $(4,737) | $652 | | Net loss | $(4,104) | $(4,686) | $582 | [Liquidity and Capital Resources](index=25&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's cash position, funding needs, and ability to meet short-term and long-term obligations - As of March 31, 2021, the company had an accumulated deficit of **$238.6 million** and cash and cash equivalents of **$63.4 million**[116](index=116&type=chunk) - Existing cash and cash equivalents are expected to fund operating expenses and capital expenditure requirements for at least the next **12 months**, but additional capital will be needed for ongoing development[117](index=117&type=chunk)[118](index=118&type=chunk) - The COVID-19 pandemic introduces significant economic uncertainty and volatility, potentially impacting the company's ability to raise sufficient additional capital[119](index=119&type=chunk)[120](index=120&type=chunk) Major Sources and Uses of Cash (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash (used in)/provided by operating activities | $(5,495) | $798 | | Net cash used in investing activities | $0 | $(96) | | Net cash provided by financing activities | $37,283 | $260 | | Net increase/(decrease) in cash and cash equivalents | $31,788 | $962 | - Net cash provided by financing activities for Q1 2021 was **$37.3 million**, primarily from the issuance of common stock (**$37.1 million**) and warrant exercises (**$0.2 million**)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk) - The company has no off-balance sheet arrangements that are material to investors[131](index=131&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there are no material quantitative or qualitative disclosures about market risk applicable to the company for the reporting period - Not applicable[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's principal executive and financial officers concluded that disclosure controls and procedures were effective as of March 31, 2021. No material changes in internal control over financial reporting were identified during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[133](index=133&type=chunk) - No material changes in internal control over financial reporting were identified during the quarter ended March 31, 2020 (as stated in the original text)[135](index=135&type=chunk) PART II — OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=29&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings, nor is it aware of any threatened or pending litigation - The company is not aware of any material legal proceedings, threatened or pending litigation, or proceedings contemplated by governmental authorities[138](index=138&type=chunk) [Item 1A. Risk Factors](index=29&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factor disclosures, highlighting contractual disputes, COVID-19 impact on studies, and stock price volatility - The company is in a contractual dispute with Cipla regarding the Pulmazole development agreement, which may result in delays, legal costs, or the loss of rights to Pulmazole[142](index=142&type=chunk)[144](index=144&type=chunk)[146](index=146&type=chunk) - The COVID-19 pandemic has caused interruptions and delays in clinical studies, including the termination of the Phase 2 Pulmazole study and potential delays for the PUR1800 Phase 1b study, and continues to pose indeterminable adverse effects on business and the global economy[147](index=147&type=chunk)[148](index=148&type=chunk)[149](index=149&type=chunk)[150](index=150&type=chunk) - The price of the company's common stock is subject to significant fluctuation and volatility due to various factors, including industry conditions, financial performance, strategic announcements, and general market conditions (including COVID-19)[152](index=152&type=chunk)[153](index=153&type=chunk)[155](index=155&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities and no repurchases of its own equity securities during the quarter ended March 31, 2021 - No unregistered sales of equity securities occurred during the quarter[156](index=156&type=chunk) - The company did not repurchase any of its equity securities during the quarter ended March 31, 2021[157](index=157&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the reporting period - None[158](index=158&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[159](index=159&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) The company reported no other information to disclose under this item - None[160](index=160&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, such as corporate governance documents, warrants, and certifications - Exhibits include Amended and Restated Certificate of Incorporation, Restated Bylaws, Forms of Common and Placement Agent Warrants, Securities Purchase Agreements, and Certifications (302 and 906)[166](index=166&type=chunk) SIGNATURES This section contains the official signatures of the company's executive officers, certifying the report - The report was signed by Teofilo Raad, President and Chief Executive Officer, and Michelle S. Siegert, Vice President, Finance, on May 11, 2021[164](index=164&type=chunk)

[FORM 10-K](index=1&type=section&id=FORM%2010-K) This annual report comprehensively details Pulmatrix, Inc.'s financial performance, operations, and risks for FY2020 [Registrant Information](index=1&type=section&id=Registrant%20Information) Pulmatrix, Inc. is a Delaware corporation that filed its 10-K annual report for the fiscal year ended December 31, 2020, identified as a non-accelerated and smaller reporting company - Pulmatrix, Inc. is a Delaware corporation that filed its 10-K annual report for the fiscal year ended December 31, 2020[2](index=2&type=chunk) Registrant Status | Indicator | Status | | :---------------------- | :--- | | Large Accelerated Filer | [ ] | | Accelerated Filer | [ ] | | Non-Accelerated Filer | [X] | | Smaller Reporting Company | [X] | | Emerging Growth Company | [ ] | | Shell Company | [ ] | | Aggregate Market Value of Common Stock Held by Non-Affiliates (as of June 30, 2020) | $43,642,977 | | Number of Shares of Common Stock Outstanding (as of March 19, 2021) | 56,249,062 | [TABLE OF CONTENTS](index=3&type=section&id=TABLE%20OF%20CONTENTS) This section provides an organized listing of all report chapters for easy navigation [PART I](index=4&type=section&id=PART%20I) This part details the company's business operations, risk factors, and legal proceedings [Forward-Looking Statements](index=4&type=section&id=Forward-Looking%20Statements) This annual report contains numerous forward-looking statements regarding business plans, strategies, anticipated revenues, and operating results, subject to risks and uncertainties that may cause actual results to differ materially - This annual report contains forward-looking statements regarding business plans, strategies, anticipated revenues, and operating results, based on management's good faith beliefs about future events[12](index=12&type=chunk) - Forward-looking statements are subject to various risks and uncertainties that may cause actual performance or results to differ materially from expectations[12](index=12&type=chunk) - The company undertakes no obligation to update any forward-looking statements unless required by law[13](index=13&type=chunk) - Major risk factors include: * Impact of the COVID-19 pandemic on clinical trials * Risks of sustained losses, negative operating cash flow, and insufficient liquidity * Inability to conduct R&D and commercialization as planned * Inability to manufacture product candidates at commercial scale * Inability to complete preclinical testing and clinical trials as expected * Failure of collaborators to fulfill contractual obligations * Termination of certain license agreements * Difficulties in intellectual property protection and enforcement * Challenges in obtaining reasonable financing * Intense industry competition * Entry of new competitors and products, potentially rendering technology obsolete * Unfavorable market and economic conditions * Loss of key executives or scientists * Difficulties in obtaining regulatory approval for product candidates [Business](index=6&type=section&id=Item%201.%20Business.) Pulmatrix, Inc. is a clinical-stage biotechnology company developing inhaled therapeutics for respiratory and other diseases, leveraging its proprietary iSPERSE dry powder delivery technology - Pulmatrix, Inc. is a clinical-stage biotechnology company focused on discovering and developing novel inhaled therapeutic products to prevent and treat respiratory and other diseases with significant unmet medical needs[17](index=17&type=chunk) - The company utilizes its proprietary iSPERSE (inhaled Small Particles Easily Respirable and Emitted) dry powder delivery technology, which efficiently delivers small or large molecule drugs to the lungs for local or systemic application[18](index=18&type=chunk) - iSPERSE technology advantages include reduced total inhaled powder mass, improved delivery efficiency, lower cost of goods, and enhanced safety and tolerability[18](index=18&type=chunk) [Overview](index=6&type=section&id=Overview) The company is a clinical-stage biotechnology firm focused on developing novel inhaled therapeutics for respiratory and other diseases using its proprietary iSPERSE dry powder delivery technology - The company is a clinical-stage biotechnology company focused on discovering and developing novel inhaled therapeutic products to prevent and treat respiratory and other diseases with significant unmet medical needs[17](index=17&type=chunk) - The company designs and develops inhaled therapeutic products based on its proprietary iSPERSE dry powder delivery technology, which efficiently delivers small or large molecule drugs to the lungs[18](index=18&type=chunk) [Corporate History](index=6&type=section&id=Corporate%20History) The company was incorporated in Delaware in 2013, focusing on developing novel inhaled therapeutics for respiratory and other diseases suitable for inhaled administration - The company was incorporated in Delaware in 2013, focusing on developing novel inhaled therapeutic products to prevent and treat respiratory diseases and other conditions suitable for inhaled administration[19](index=19&type=chunk) [Business Strategy](index=6&type=section&id=Business%20Strategy) The company aims to develop breakthrough inhaled therapeutic products that are safer, more convenient, and more effective than existing therapies, particularly in areas where iSPERSE technology offers advantages - The company aims to develop breakthrough therapeutic products that are safer, more convenient, and more effective than existing therapies, especially in respiratory and other disease areas where iSPERSE technology offers advantages[20](index=20&type=chunk)[21](index=21&type=chunk) - The company expects to continue incurring significant expenses and operating losses in the coming years, primarily for: * Advancing the development of Pulmazole for ABPA in asthma and cystic fibrosis patients, with plans to initiate a Phase 2b efficacy study * Advancing the development of PUR1800 (inhaled kinase inhibitor) for lung cancer prevention and COPD treatment, with a Phase 1b study initiated in February 2021 * Advancing the development of PUR3100 (inhaled dihydroergotamine) for acute migraine treatment, with plans to initiate a Phase 1/Phase 2 study in Q1 2022 * Identifying new product candidates using the iSPERSE technology platform and expertise * Investing in protecting and expanding its intellectual property portfolio, which as of December 31, 2020, included approximately **112 granted patents** and **61 pending patent applications** related to iSPERSE[21](index=21&type=chunk)[22](index=22&type=chunk)[24](index=24&type=chunk) [iSPERSE Technology](index=8&type=section&id=iSPERSE%20Technology) iSPERSE is a proprietary dry powder delivery platform utilizing simple, safe excipients to encapsulate a wide range of drug loads in highly dispersible particles for efficient lung delivery - iSPERSE is a proprietary dry powder delivery platform technology that utilizes simple and safe excipients, including cationic salt formulations, to encapsulate a wide range of drug loads in highly dispersible particle form[25](index=25&type=chunk) - iSPERSE technology advantages include: * **Flexible Drug Loading**: Enables single-dose delivery from micrograms to tens of milligrams, with API content ranging from less than 1% to over 80% * **Superior Flow-Rate Independent Lung Delivery**: Delivers consistent emitted dose and particle size across various flow rates without lactose or other carriers * **Large Molecule and Biologic Delivery**: Compatible with various dry powder inhaler technologies and can formulate a wide range of therapeutic compounds from small molecules to proteins * **Homogeneous Combination of Multiple Drugs**: Capable of creating homogeneous particles containing excipients and APIs, enabling stable delivery of multiple APIs * **Robust Safety Profile**: Existing and planned iSPERSE products demonstrate robust preclinical safety, with excipients having inhalation precedents or being generally recognized as safe[26](index=26&type=chunk)[27](index=27&type=chunk) [Therapeutic Candidates](index=10&type=section&id=Therapeutic%20Candidates) The company is developing several inhaled therapeutic candidates, including Pulmazole, PUR1800, PUR5700, and PUR3100, leveraging its iSPERSE technology for various respiratory and other diseases [Pulmazole](index=10&type=section&id=Pulmazole) Pulmazole, an inhaled itraconazole formulation using iSPERSE technology, is being developed for pulmonary fungal infections and allergic reactions in asthma and cystic fibrosis patients, having received FDA Fast Track designation for ABPA - Pulmazole is an inhaled itraconazole formulation developed by the company based on iSPERSE technology, intended for the prevention and treatment of pulmonary fungal infections and allergic reactions in asthma and cystic fibrosis patients[28](index=28&type=chunk)[30](index=30&type=chunk) - On January 28, 2020, Pulmazole received **FDA Fast Track designation** for the treatment of ABPA[28](index=28&type=chunk) - Phase 1/1b clinical trials showed Pulmazole was safe and well-tolerated in healthy volunteers and asthma patients, with lung itraconazole concentrations approximately **70 times higher** and plasma exposure approximately **85% lower** after inhaling 20mg Pulmazole compared to oral 200mg Sporanox[30](index=30&type=chunk) - In July 2020, the Phase 2 study in collaboration with Cipla was terminated due to patient enrollment delays caused by the COVID-19 pandemic[31](index=31&type=chunk) - The company plans to initiate a 16-week Phase 2b efficacy study once COVID-19 risks subside, supported by FDA Type C meeting feedback and a 6-month canine inhalation toxicology study[32](index=32&type=chunk) [PUR1800](index=11&type=section&id=PUR1800) PUR1800, a kinase inhibitor licensed from RespiVert and reformulated with iSPERSE, is undergoing a Phase 1b study in COPD patients, with JJEI holding an option for its acquisition and global license - PUR1800 is a kinase inhibitor obtained by the company through an exclusive worldwide license agreement with RespiVert, successfully reformulated as an iSPERSE platform product, showing higher lung doses and improved physical/chemical stability in non-clinical toxicology results[39](index=39&type=chunk)[40](index=40&type=chunk) - The company entered into a license agreement with JJEI, granting JJEI an option to acquire the intellectual property and exclusive worldwide license for PUR1800[41](index=41&type=chunk) - In February 2021, a Phase 1b safety, tolerability, and biomarker study for PUR1800 was initiated in stable moderate-to-severe COPD patients, with data expected in Q4 2021[42](index=42&type=chunk) - The COVID-19 pandemic may cause patient enrollment delays, potentially impacting the study timeline[42](index=42&type=chunk)[44](index=44&type=chunk) [PUR5700](index=13&type=section&id=PUR5700) PUR5700 is the second novel kinase inhibitor candidate obtained through the RespiVert license agreement, with an option provided to JJEI to acquire all rights for its development and commercialization - PUR5700 is the second novel kinase inhibitor candidate obtained by the company through the RespiVert license agreement[45](index=45&type=chunk) - Under the JJEI license agreement, the company has provided JJEI with an option to transfer all its rights under the RespiVert license agreement for the development and commercialization of PUR1800, PUR5700, and other kinase inhibitors[45](index=45&type=chunk) [PUR3100](index=13&type=section&id=PUR3100) PUR3100, an iSPERSE dihydroergotamine (DHE) formulation developed in 2020 for acute migraine, aims to be the first orally inhaled DHE treatment, with IND submission planned for Q1 2022 - PUR3100 is an iSPERSE dihydroergotamine (DHE) formulation developed by Pulmatrix in 2020 for the treatment of acute migraine[46](index=46&type=chunk) - If approved, PUR3100 is expected to be the first orally inhaled DHE product for acute migraine, offering rapid onset and good tolerability[46](index=46&type=chunk) - The company plans to conduct a 14-day GLP toxicology study in 2021 and submit an IND application in Q1 2022, followed by the initiation of a Phase 1/Phase 2 study[51](index=51&type=chunk) [Business Development](index=13&type=section&id=Business%20Development) The company has strategic alliances with Cipla for Pulmazole co-development, JJEI for kinase inhibitor options, and Sensory Cloud for NasoCalm non-prescription products, advancing its therapeutic pipeline - The company entered into a development and commercialization agreement with Cipla Technologies LLC to co-develop and commercialize Pulmazole, with both parties sharing product development, commercialization costs, and future free cash flow from sales[53](index=53&type=chunk) - The company entered into a license, development, and commercialization agreement with Johnson & Johnson Enterprise Innovation, Inc. (JJEI), granting JJEI an option to acquire the kinase inhibitor intellectual property portfolio and an exclusive worldwide license for PUR1800[54](index=54&type=chunk) - The company entered into a collaboration and license agreement with Sensory Cloud, Inc., granting Sensory Cloud an exclusive worldwide license to develop and commercialize PUR003 and PUR006 (NasoCalm) as over-the-counter nasal delivery products for the prevention and treatment of upper and lower respiratory diseases[55](index=55&type=chunk) [Intellectual Property](index=14&type=section&id=Intellectual%20Property) The company protects its intellectual property through patents for its iSPERSE platform and licensed kinase inhibitors, including compositions and methods of use for Pulmazole, PUR1800, and PUR3100 projects - The company protects its intellectual property by filing and maintaining patents for its iSPERSE platform technology and licensed kinase inhibitors, including compositions and methods of use for Pulmazole, PUR1800, and PUR3100 projects[56](index=56&type=chunk) Intellectual Property Portfolio | Intellectual Property Type | Granted Patents (approx.) | US Granted Patents (approx.) | Pending Patent Applications (approx.) | Patent Expiration Dates | | :------------- | :-------------- | :------------------ | :------------------ | :------------- | | iSPERSE-related | 112 | 16 | 61 | 2024-2034 | | Kinase Inhibitor License | 241 | 31 | 42 | 2029-2035 | - The company also relies on trade secrets to protect its confidential and proprietary information, including iSPERSE technology, safeguarded through confidentiality agreements[61](index=61&type=chunk) [Manufacturing](index=15&type=section&id=Manufacturing) The company relies on contract manufacturing organizations (CMOs) and third-party contractors for producing drug formulations and products required for clinical studies, as it does not own or operate manufacturing facilities - The company currently does not own or operate manufacturing facilities to produce clinical or commercial quantities of product candidates, relying instead on contract manufacturing organizations (CMOs) and third-party contractors for drug formulations and drug products needed for clinical studies[62](index=62&type=chunk) - The company expects to continue relying on CMOs for drug manufacturing under cGMP conditions and contracts with CMOs for labeling, packaging, storage, and distribution of investigational drug products[62](index=62&type=chunk) [Suppliers](index=17&type=section&id=Suppliers) The company depends on third-party contract manufacturers for active pharmaceutical ingredients (APIs) used in its therapeutic candidates and on third-party suppliers for raw materials for APIs and drug products - The company relies on third-party contract manufacturers for active pharmaceutical ingredients (APIs) used to formulate therapeutic candidates and on third-party suppliers for raw materials for APIs and drug products[65](index=65&type=chunk) [Research and Development](index=17&type=section&id=Research%20and%20Development) The company's research and development expenditures increased in 2020, reflecting ongoing investment in its pipeline of inhaled therapeutic products R&D Expenditures | Fiscal Year | R&D Expenses (Millions USD) | | :----- | :------------------ | | 2020 | 15.6 | | 2019 | 12.8 | [Government Regulation](index=17&type=section&id=Government%20Regulation) Pharmaceutical companies are extensively regulated by national, state, and local agencies like the FDA and EMA, covering product manufacturing, distribution, marketing, and sales - Pharmaceutical companies are extensively regulated by national, state, and local agencies such as the FDA and EMA in countries like the United States and Europe, covering product manufacturing, distribution, marketing, and sales[67](index=67&type=chunk) - Steps for FDA approval of new drugs typically include: * Completion of preclinical laboratory and animal testing * Submission and approval of an Investigational New Drug (IND) application to the FDA * Conducting adequate and well-controlled human clinical trials to determine safety and efficacy * Submission and approval of a New Drug Application (NDA)[69](index=69&type=chunk)[70](index=70&type=chunk) - Clinical trials are generally divided into three phases: * **Phase 1**: Evaluates safety, dose tolerability, metabolism, and pharmacological effects in a small number of patients or healthy volunteers * **Phase 2**: Assesses the product candidate's efficacy for the target indication, optimal dosage, and potential adverse reactions in hundreds of participants * **Phase 3**: Expands the patient population across geographically dispersed trial sites to further evaluate clinical efficacy and safety, establishing the overall benefit-risk relationship[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) - The company may also seek approval through the Section 505(b)(2) NDA pathway, which allows reliance on some non-clinical or clinical study data from approved products[82](index=82&type=chunk) - Orphan Drug Designation provides tax credits, FDA assistance, funding eligibility, fee waivers, and a seven-year market exclusivity period for products treating rare diseases[85](index=85&type=chunk) - The success of product sales partly depends on the availability of reimbursement from third-party payers, including government payers, managed care providers, and private health insurance companies[88](index=88&type=chunk) [Compliance with Environmental Laws](index=23&type=section&id=Compliance%20with%20Environmental%20Laws) Compliance with applicable environmental requirements did not have a material impact on the company's capital expenditures, earnings, or competitive position as of December 31, 2020, and 2019 - As of December 31, 2020, and 2019, compliance with applicable environmental requirements did not have a material impact on the company's capital expenditures, earnings, or competitive position[93](index=93&type=chunk) [Employees](index=23&type=section&id=Employees) As of December 31, 2020, the company had 2 part-time and 20 full-time employees, with 17 engaged in full-time R&D activities, maintaining good employee relations - As of December 31, 2020, the company had **2 part-time** and **20 full-time employees**, with **17** engaged in full-time R&D activities, and maintains good employee relations[94](index=94&type=chunk) [Properties](index=23&type=section&id=Properties) The company's headquarters in Lexington, Massachusetts, leases approximately 22,119 square feet of office and laboratory space, with the lease extended until June 30, 2022 - The company's headquarters are located in Lexington, Massachusetts, leasing approximately **22,119 square feet** of office and laboratory space[95](index=95&type=chunk) [Available Information](index=23&type=section&id=Available%20Information) The company provides its annual reports (Form 10-K), quarterly reports (Form 10-Q), current reports (Form 8-K), and amendments free of charge on its website, www.pulmatrix.com - The company provides its annual reports (Form 10-K), quarterly reports (Form 10-Q), current reports (Form 8-K), and their amendments free of charge on its website, www.pulmatrix.com[96](index=96&type=chunk) [Risk Factors](index=24&type=section&id=Item%201A.%20Risk%20Factors.) The company faces significant risks including sustained losses, future financing needs, product development failures, intense competition, reliance on third-party collaborations and manufacturers, intellectual property protection challenges, the negative impact of the COVID-19 pandemic on clinical trials, and regulatory and market volatility risks as a public company - The company faces sustained losses, future financing needs, product development failures, intense market competition, reliance on third-party collaborations and manufacturers, intellectual property protection challenges, the negative impact of the COVID-19 pandemic on clinical trials, and regulatory and market volatility risks as a public company[99](index=99&type=chunk) [Risk Factor Summary](index=24&type=section&id=Risk%20Factor%20Summary) Key risks include potential for continued losses, need for additional financing, product development uncertainties, intense competition, reliance on third parties, intellectual property challenges, and the impact of the COVID-19 pandemic - Major risks include: * Potential for continued and future losses * Need for additional financing, potentially leading to equity dilution or difficulty in obtaining funds * Operating as a clinical-stage biotechnology company, not yet profitable * All product candidates are still in development, with no guarantee of commercial success * Drug development is a long, expensive, and uncertain process with a high risk of failure * Unsuccessful collaborations may impact the development and marketing of therapeutic candidates * Facing intense competition, with products potentially becoming obsolete due to rapid technological changes * Reliance on third parties for clinical trials and preclinical development, whose underperformance could lead to delays or failure to obtain approval * Failure to successfully acquire, develop, and market additional drug candidates may impair growth capabilities * Potential claims for improper use or disclosure of third-party confidential information by employees * The COVID-19 pandemic has caused disruptions or delays in clinical studies, potentially having a material adverse effect on business * Ability to offset future taxable income with net operating loss carryforwards may be limited * Product candidates must undergo rigorous non-clinical and clinical testing and obtain regulatory approval, a process that is expensive, time-consuming, and may delay or prevent product launch * No guarantee that any product candidate will receive regulatory approval * Limited experience in submitting and pursuing regulatory approval applications * The company and third-party manufacturers are subject to regulations by the FDA and other foreign regulatory agencies * Inability to adequately protect or enforce intellectual property, leading to loss of market share and anticipated profits * Intellectual property infringement claims may result in significant time and monetary expenditures and hinder product development or commercialization * High volatility in the company's common stock price * Financial reporting obligations as a U.S. public company are expensive and time-consuming * No intention to pay cash dividends, with investor returns limited to stock price appreciation * Potential risk of securities class action lawsuits * Failure to meet Nasdaq Capital Market listing requirements may lead to delisting * Future issuance of additional equity securities may result in dilution for existing investors[99](index=99&type=chunk)[102](index=102&type=chunk) [Risks Related to Our Business](index=25&type=section&id=Risks%20Related%20to%20Our%20Business) The company faces risks including persistent net losses, the need for additional capital, the inherent uncertainties and high failure rates of drug development, and the impact of the COVID-19 pandemic on clinical trials Financial Performance | Indicator | December 31, 2020 | December 31, 2019 | | :---------------- | :------------- | :------------- | | Net Loss (Millions USD) | 19.3 | 20.6 | | Accumulated Deficit (Millions USD) | 234.5 | 215.161 | - The company expects to continue incurring operating losses in the future and has not yet achieved profitability, with all product candidates remaining in preclinical or clinical development stages[100](index=100&type=chunk)[108](index=108&type=chunk)[109](index=109&type=chunk) - The company needs to raise additional capital to meet future business needs, otherwise it may be forced to cut development activities, sell assets, or face the risk of cessation of operations[103](index=103&type=chunk)[106](index=106&type=chunk) - Drug development is a long, expensive, and uncertain process with a high risk of failure, and early study results do not necessarily predict future trial outcomes[114](index=114&type=chunk)[117](index=117&type=chunk) - The COVID-19 pandemic has caused disruptions or delays in clinical studies, potentially having a material adverse effect on patient enrollment and study timelines[140](index=140&type=chunk)[141](index=141&type=chunk) [Risks Related to Regulatory Matters](index=34&type=section&id=Risks%20Related%20to%20Regulatory%20Matters) The company's product candidates require rigorous testing and regulatory approval, a process that is expensive, time-consuming, uncertain, and subject to ongoing compliance with cGMP regulations and potential for employee misconduct - The company's product candidates must undergo rigorous non-clinical and clinical testing and obtain regulatory approval, a process that is expensive, time-consuming, and uncertain, potentially preventing market entry[145](index=145&type=chunk)[147](index=147&type=chunk)[148](index=148&type=chunk) - The company has limited experience in submitting and pursuing regulatory approval applications, which may lead to delays or failure to obtain approval[151](index=151&type=chunk) - The company and third-party manufacturers must comply with cGMP regulations from the FDA and other foreign regulatory agencies, with any non-compliance potentially leading to fines, production halts, product recalls, or withdrawal of approvals[152](index=152&type=chunk)[156](index=156&type=chunk) - Even if regulatory approval is obtained, products will remain subject to ongoing regulatory review, which may result in product withdrawal, manufacturing disruptions, or marketing restrictions[157](index=157&type=chunk)[159](index=159&type=chunk) - The company faces risks of employee misconduct, including non-compliance with regulatory standards, providing inaccurate information, or violating healthcare fraud and abuse laws, potentially leading to regulatory sanctions and reputational damage[161](index=161&type=chunk)[162](index=162&type=chunk) [Risks Related to Our Financial Position and Need for Additional Capital](index=39&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) The company will require additional capital to fund operations and avoid cessation, with future funding needs dependent on various factors including clinical trial progress, regulatory actions, and commercialization success - The company will need to raise additional capital to fund operations, otherwise it may not be able to continue as a going concern; as of December 31, 2020, the company had an **accumulated deficit of $234.5 million**[166](index=166&type=chunk) - Future funding needs depend on various factors, including: * Progress, success, and costs of clinical trials and R&D activities * Success and timing of strategic business collaborations or asset sales * Actions taken by the FDA and other regulatory agencies regarding products and competing products * Degree of success in commercializing product candidates * Emergence of competing technologies and products * Costs of patent application, maintenance, and enforcement * Level of legal fees * Costs of establishing sales, marketing, and distribution capabilities[167](index=167&type=chunk)[169](index=169&type=chunk) - Failure to obtain sufficient additional funding in a timely manner may lead to project delays, reductions, or terminations, and increase the risk of bankruptcy[168](index=168&type=chunk) [Risks Related to Our Intellectual Property](index=40&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's success depends on its ability to obtain and enforce patent protection for its products and technologies, facing uncertainties regarding patent validity, enforceability, and potential infringement claims - The company's success and competitive position partly depend on its ability to obtain patent protection for its products, methods, processes, and other technologies, and to prevent third parties from infringing its proprietary rights[169](index=169&type=chunk) - The validity and enforceability of patents are uncertain, and granted patents may not provide a competitive advantage or may be challenged, circumvented, or declared invalid by third parties[171](index=171&type=chunk) - Patent rights are territorial, and laws in some countries offer less intellectual property protection than in the U.S. and EU[172](index=172&type=chunk) - The long time required for drug development and regulatory approval may lead to patent expiration early in the commercialization phase, reducing or eliminating market advantage[174](index=174&type=chunk) - Failure to protect trade secrets or proprietary technology may allow competitors to use this information to compete[176](index=176&type=chunk) - The company may face intellectual property infringement claims or other legal actions, which, even if successful, could incur significant costs and divert management's attention[178](index=178&type=chunk) [Risks Related to Company Common Stock](index=43&type=section&id=Risks%20Related%20to%20Company%20Common%20Stock) The company's common stock price is highly volatile, influenced by various factors including product announcements, financial performance, strategic relationships, and macroeconomic conditions, with no plans for cash dividends - The company's common stock price is highly volatile, influenced by various factors including new product announcements, financial performance, strategic relationships, industry trends, macroeconomic factors, and executive changes[182](index=182&type=chunk)[183](index=183&type=chunk) - As a public company, financial reporting obligations are expensive and time-consuming, requiring significant management time for compliance matters[184](index=184&type=chunk) - The company currently does not intend to pay cash dividends, and investor returns will be limited to stock price appreciation[185](index=185&type=chunk) - The company may face securities class action lawsuit risks, especially after binary events such as clinical trials and product approvals[186](index=186&type=chunk) - Failure to meet Nasdaq Capital Market listing requirements may lead to delisting, affecting stock price and liquidity[187](index=187&type=chunk) - The company may issue additional equity securities in the future, resulting in dilution for existing investors[188](index=188&type=chunk)[191](index=191&type=chunk) - Anti-takeover provisions in Delaware corporate law and the company's charter may make it difficult for shareholders to replace the board and could deter or delay third-party acquisitions[192](index=192&type=chunk)[193](index=193&type=chunk) [Unresolved Staff Comments](index=47&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments.) The company has no unresolved staff comments - The company has no unresolved staff comments[194](index=194&type=chunk) [Properties](index=47&type=section&id=Item%202.%20Properties.) The company's headquarters in Lexington, Massachusetts, leases approximately 22,119 square feet of office and laboratory space, with the lease extended until June 30, 2022, and total minimum future lease payments of $1.809 million - The company's headquarters are located in Lexington, Massachusetts, leasing approximately **22,119 square feet** of office and laboratory space[195](index=195&type=chunk) - The original lease, which expired on December 31, 2020, has been extended until June 30, 2022[195](index=195&type=chunk) Future Minimum Lease Payments | Year | Amount (Thousands USD) | | :--- | :------------ | | 2021 | 1,194 | | 2022 (Six Months) | 615 | | **Total** | **1,809** | [Legal Proceedings](index=47&type=section&id=Item%203.%20Legal%20Proceedings.) As of the filing date of this report, the company is not involved in any material legal proceedings, nor is it aware of any known or threatened litigation - As of the filing date of this report, the company is not involved in any material legal proceedings, nor is it aware of any known or threatened litigation[196](index=196&type=chunk) [Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) Not applicable - Not applicable[198](index=198&type=chunk) [PART II](index=49&type=section&id=PART%20II) This part covers market information, selected financial data, and management's discussion and analysis [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=49&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities.) The company's common stock trades on the Nasdaq Capital Market under "PULM," with a closing price of $1.44 per share and approximately 192 shareholders as of March 19, 2021, and no dividends paid or planned - The company's common stock trades on the Nasdaq Capital Market under the symbol **"PULM"**[201](index=201&type=chunk) Common Stock Information | Indicator | Data | | :--------------------------------- | :----- | | Common Stock Closing Price (March 19, 2021) | $1.44/share | | Number of Shareholders (March 19, 2021) | Approx. 192 | - The company has not paid dividends since its inception and does not intend to pay cash dividends in the foreseeable future[204](index=204&type=chunk) - The company did not repurchase any equity securities during the fourth quarter of 2020[206](index=206&type=chunk) [Selected Financial Data](index=49&type=section&id=Item%206.%20Selected%20Financial%20Data.) Not applicable - Not applicable[207](index=207&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=49&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations.) This section discusses Pulmatrix, Inc.'s financial condition and operating results for the fiscal year ended December 31, 2020, highlighting significant revenue growth, ongoing losses, increased R&D, and continuous financing needs, along with key accounting policies and liquidity - The company is a clinical-stage biotechnology company focused on discovering and developing novel inhaled therapeutic products to prevent and treat respiratory diseases and infections with significant unmet medical needs[209](index=209&type=chunk) - The company funds its operations through common stock issuances, license agreements, third-party collaborations, and non-dilutive grants, having no products approved for sale or product sales revenue[212](index=212&type=chunk) - The company expects to continue incurring significant expenses and operating losses in the coming years, primarily for advancing the clinical development of product candidates like Pulmazole, PUR1800, and PUR3100, seeking regulatory approvals, hiring personnel, and expanding its intellectual property portfolio[213](index=213&type=chunk) [Overview](index=49&type=section&id=Overview) The company is a clinical-stage biotechnology firm focused on developing novel inhaled therapeutics for respiratory diseases using its iSPERSE technology, funding operations through equity, licenses, and collaborations - The company is a clinical-stage biotechnology company focused on discovering and developing novel inhaled therapeutic products to prevent and treat respiratory diseases and infections with significant unmet medical needs[209](index=209&type=chunk) - The company utilizes its proprietary iSPERSE dry powder delivery technology to develop product candidates such as Pulmazole, PUR3100, and PUR1800, aiming to provide breakthrough therapeutic products that are safer, more convenient, and more effective than existing therapies[210](index=210&type=chunk)[211](index=211&type=chunk) - The company funds its operations through common stock issuances, license agreements, third-party collaborations, and non-dilutive grants, having no products approved for sale or product sales revenue[212](index=212&type=chunk) [Recent Developments](index=51&type=section&id=Recent%20Developments) Recent developments include a licensing agreement with JJEI for kinase inhibitors, a co-development agreement with Cipla for Pulmazole, and a collaboration with Sensory Cloud for NasoCalm, all impacting revenue and clinical timelines - The company entered into a license, development, and commercialization agreement with JJEI, which paid a **$7.2 million upfront fee** and funded **$3.4 million** for toxicology studies; the company is also eligible for a **$2 million milestone payment** and up to **$91 million** in option exercise and commercial milestone payments, plus **1%-2% sales royalties**[215](index=215&type=chunk)[216](index=216&type=chunk) - In February 2021, a Phase 1b study for PUR1800 was initiated, but the COVID-19 pandemic may cause patient enrollment delays[218](index=218&type=chunk) - The company entered into a development and commercialization agreement with Cipla, which paid a **$22 million upfront fee** for the co-development and commercialization of Pulmazole, with both parties sharing development and commercialization costs and future free cash flow from sales[219](index=219&type=chunk)[220](index=220&type=chunk) - The Phase 2 clinical study for Pulmazole was terminated in July 2020 due to the COVID-19 pandemic, and the company plans to initiate a 16-week Phase 2b study once pandemic risks subside[221](index=221&type=chunk)[222](index=222&type=chunk) - The company entered into a collaboration and license agreement with Sensory Cloud, granting an exclusive worldwide license for PUR003 and PUR006 (NasoCalm) as over-the-counter products for upper and lower respiratory diseases; the company will receive **7%-17% royalties** on net sales and a **$1 million milestone payment** upon reaching **$20 million in total net sales**[224](index=224&type=chunk)[225](index=225&type=chunk) [Financial Overview](index=53&type=section&id=Financial%20Overview) The company's 2020 revenue primarily stemmed from JJEI and Cipla agreements, with minor royalties from Sensory Cloud, while anticipating continued significant expenses and operating losses for clinical development and regulatory approvals - The company's 2020 revenue primarily derived from revenue recognition from the JJEI and Cipla agreements, with a small amount of royalties from Sensory Cloud's FEND sales; 2019 revenue was mainly from the Cipla agreement[227](index=227&type=chunk) - The company expects to continue incurring significant expenses and operating losses in the coming years, primarily for advancing the clinical development and regulatory approval of product candidates[213](index=213&type=chunk) [Research and Development Expenses](index=53&type=section&id=Research%20and%20Development%20Expenses) R&D expenses primarily include employee-related costs, fees for CROs, CMOs, and consultants, manufacturing costs for clinical trial materials, facility expenses, and regulatory operational costs, recognized as incurred - R&D expenses primarily include: * Employee-related expenses (salaries, benefits, equity compensation) * Fees for agreements with CROs, CMOs, and consultants * Procurement, development, and manufacturing costs for clinical trial materials and laboratory supplies * Facility, depreciation, and other expenses * Costs related to preclinical activities and clinical regulatory operations * Consulting and professional fees associated with R&D activities[228](index=228&type=chunk)[231](index=231&type=chunk) - The company expenses R&D costs as incurred, recognizing expenses based on the progress of specific tasks such as patient enrollment and clinical site initiation[228](index=228&type=chunk) [General and Administrative Expenses](index=55&type=section&id=General%20and%20Administrative%20Expenses) General and administrative expenses primarily cover employee compensation, facility costs, patent application fees, and legal expenses, with an anticipated increase due to audit, legal, regulatory, tax services, and commercialization preparations - General and administrative expenses primarily include salary, benefits, and equity compensation-related costs for executives, finance, business development, corporate communications, and human resources personnel, as well as facility costs, patent application fees, and legal fees[233](index=233&type=chunk) - The company expects general and administrative expenses to increase in the future, primarily related to audit, legal, regulatory, and tax services, as well as commercialization preparations such as sales and marketing[234](index=234&type=chunk) [Impairment of Goodwill](index=55&type=section&id=Impairment%20of%20Goodwill) Goodwill is not amortized but assessed annually for potential impairment; no impairment occurred in 2020, contrasting with a $7.3 million impairment in 2019 - Goodwill is not amortized but assessed annually for potential impairment; no goodwill impairment occurred in 2020, while a **$7.3 million impairment** was recorded in 2019[235](index=235&type=chunk) [Critical Accounting Policies](index=55&type=section&id=Critical%20Accounting%20Policies) Key accounting policies include revenue recognition following ASC 606, expensing R&D costs as incurred, accounting for leases under ASC 842, annual goodwill impairment assessment, and deferred tax asset valuation allowances - Critical accounting policies include: * **Revenue Recognition**: Follows ASC 606, using a five-step model, with revenue recognized when the customer obtains control of goods or services; milestone payments and royalties have specific recognition conditions * **Research and Development Costs**: Expensed as incurred, including salaries, benefits, equity compensation, license fees, milestone payments, and third-party contractor fees * **Leases**: Follows ASC 842, recognizing leases as right-of-use assets and lease liabilities, without separating lease and non-lease components * **Goodwill**: Not amortized, assessed annually for impairment; no impairment in 2020, **$7.3 million impairment** in 2019 * **Basic and Diluted Net Loss Per Share**: Diluted net loss per share is the same as basic net loss per share during periods of net loss * **Income Taxes**: Uses the balance sheet method to recognize deferred tax assets and liabilities, with a full valuation allowance recorded against deferred tax assets[238](index=238&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk)[247](index=247&type=chunk)[249](index=249&type=chunk)[250](index=250&type=chunk) [Results of Operations](index=58&type=section&id=Results%20of%20Operations) In 2020, revenue increased to $12.634 million, and operating loss significantly narrowed to $9.862 million, but a $9.289 million warrant inducement expense resulted in a net loss of $19.308 million Consolidated Statements of Operations Summary | Indicator (Thousands USD) | Year Ended December 31, 2020 | Year Ended December 31, 2019 | Change | | :-------------------- | :------------------- | :------------------- | :----- | | Revenue | 12,634 | 7,910 | 4,724 | | Research and Development Expenses | 15,609 | 12,845 | 2,764 | | General and Administrative Expenses | 6,887 | 8,489 | (1,602) | | Impairment of Goodwill | — | 7,268 | (7,268) | | Operating Loss | (9,862) | (20,692) | 10,830 | | Warrant Inducement Expense | (9,289) | — | (9,289) | | Net Loss | (19,308) | (20,596) | 1,288 | - **Revenue**: **$12.6 million** in 2020, an increase of **$4.7 million** from **$7.9 million** in 2019, primarily due to a **$6.9 million** revenue increase from the JJEI license agreement, partially offset by a **$2.2 million** decrease from the Cipla agreement[252](index=252&type=chunk)[253](index=253&type=chunk) - **Research and Development Expenses**: **$15.6 million** in 2020, an increase of **$2.8 million** from **$12.8 million** in 2019, mainly due to increased manufacturing, clinical, and preclinical study costs for PUR1800 and PUR3100 projects, as well as higher employment costs and fixed expenses, partially offset by a **$3.6 million** reduction in Pulmazole Phase 2 clinical trial costs[252](index=252&type=chunk)[254](index=254&type=chunk) - **General and Administrative Expenses**: **$6.9 million** in 2020, a decrease of **$1.6 million** from **$8.5 million** in 2019, primarily due to a **$1.2 million** reduction in employment costs from lower equity compensation and salary costs, a **$0.1 million** decrease in patent and legal fees, and a **$0.3 million** reduction in milestone payments to CFFT in 2019[252](index=252&type=chunk)[255](index=255&type=chunk) - **Impairment of Goodwill**: No goodwill impairment occurred in 2020, while a **$7.3 million impairment expense** was recorded in 2019[252](index=252&type=chunk)[256](index=256&type=chunk) - **Warrant Inducement Expense**: A **$9.3 million expense** was incurred in 2020 due to warrant exercise inducement transactions[252](index=252&type=chunk)[256](index=256&type=chunk) [Liquidity and Capital Resources](index=60&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2020, the company had $31.7 million in unrestricted cash and an accumulated deficit of $234.5 million, with operating activities using $12.5 million cash, necessitating future capital raises - As of December 31, 2020, the company had **$31.7 million** in unrestricted cash and an **accumulated deficit of $234.5 million**; operating activities used **$12.5 million** cash in 2020[257](index=257&type=chunk) - The company expects existing cash and cash equivalents to support operations and capital expenditures for at least the next 12 months, but future capital needs depend on R&D progress, regulatory approvals, and commercialization success[260](index=260&type=chunk)[268](index=268&type=chunk) - The company will need to raise additional capital, potentially through equity or debt securities issuance, strategic collaborations, licensing arrangements, or asset sales; failure to obtain additional funding may lead to project delays, reductions, or terminations[258](index=258&type=chunk)[268](index=268&type=chunk) Cash Flow Summary | Cash Flow (Thousands USD) | Year Ended December 31, 2020 | Year Ended December 31, 2019 | | :-------------------------- | :------------------- | :------------------- | | Net Cash (Used In)/Provided By Operating Activities | (12,483) | 3,230 | | Net Cash Used In Investing Activities | (281) | (58) | | Net Cash Provided By Financing Activities | 20,981 | 17,705 | | Net Increase in Cash and Cash Equivalents | 8,217 | 20,877 | - **2020 operating activities** used **$12.5 million** cash, primarily due to a **$19.3 million net loss**, partially offset by non-cash adjustments such as **$9.3 million** in warrant inducement expense and **$1.2 million** in equity compensation expense[263](index=263&type=chunk) - **2019 operating activities** provided **$3.2 million** cash, primarily due to a **$20.6 million net loss**, partially offset by non-cash adjustments such as **$7.3 million** in goodwill impairment and **$2.0 million** in equity compensation expense, and a **$21.2 million** increase in deferred revenue[264](index=264&type=chunk) - **2020 financing activities** provided **$21.0 million** cash, mainly from common stock issuance and warrant exercises; **2019 financing activities** provided **$17.7 million** cash, mainly from common stock issuance and prepaid warrant exercises[267](index=267&type=chunk) - In February 2021, the company raised **$40.0 million** in gross proceeds through a registered direct offering and issued **1.3 million warrants** to placement agent designees[269](index=269&type=chunk) - As of December 31, 2020, the company had approximately **$1.1 million** in committed payments for R&D contracts[280](index=280&type=chunk) - The company has no off-balance sheet arrangements that have a material effect on its financial condition, revenues, or liquidity[281](index=281&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=64&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk.) Not applicable - Not applicable[282](index=282&type=chunk) [Financial Statements and Supplementary Data](index=65&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data.) The required information for this item is included in the financial statements and notes thereto, beginning on page F-1 of this annual report - The required information for this item is included in the financial statements and notes thereto, beginning on page F-1 of this annual report[283](index=283&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=65&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure.) Not applicable - Not applicable[284](index=284&type=chunk) [Controls and Procedures](index=65&type=section&id=Item%209A.%20Controls%20and%20Procedures.) As of December 31, 2020, the company's management assessed and determined its disclosure controls and procedures and internal control over financial reporting to be effective, with no significant changes in internal control during the quarter - As of December 31, 2020, the company's disclosure controls and procedures were deemed effective, ensuring timely recording, processing, summarizing, and reporting of information[285](index=285&type=chunk) - Management assessed and determined that, as of December 31, 2020, the company's internal control over financial reporting was effective[288](index=288&type=chunk) - No significant changes in internal control over financial reporting occurred during the most recent fiscal quarter ended December 31, 2020[289](index=289&type=chunk) [Other Information](index=65&type=section&id=Item%209B.%20Other%20Information.) None - None[290](index=290&type=chunk) [PART III](index=66&type=section&id=PART%20III) This part provides information on directors, executive officers, corporate governance, executive compensation, and security ownership [Directors, Executive Officers and Corporate Governance](index=66&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020 - The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020[292](index=292&type=chunk) [Executive Compensation](index=66&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020 - The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020[293](index=293&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=66&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020 - The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020[294](index=294&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=66&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020 - The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020[295](index=295&type=chunk) [Principal Accounting Fees and Services](index=66&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020 - The information required for this item is incorporated by reference from the company's definitive proxy statement on Schedule 14A, to be filed within 120 days after the fiscal year ended December 31, 2020[296](index=296&type=chunk) [PART IV](index=67&type=section&id=PART%20IV) This part includes exhibits, financial statement schedules, and a summary of the Form 10-K [Exhibits, Financial Statement Schedules](index=67&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules.) This item lists the financial statements and exhibits filed as part of the annual report, including the independent registered public accounting firm's report, consolidated financial statements, and an index of various agreements - This annual report contains the following documents: * Financial Statements: Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Operations, Consolidated Statements of Stockholders' Equity, Consolidated Statements of Cash Flows, Notes to Consolidated Financial Statements * Financial Statement Schedules: None * Exhibits: Including Articles of Incorporation, Warrant Agreements, License Agreements, Employment Agreements, etc[299](index=299&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[305](index=305&type=chunk)[307](index=307&type=chunk) [FORM 10-K Summary](index=67&type=section&id=Item%2016.%20FORM%2010-K%20Summary) Not applicable - Not applicable[300](index=300&type=chunk) [SIGNATURES](index=72&type=section&id=SIGNATURES) This section contains official signatures of officers and directors, affirming the report's accuracy [Signatures](index=72&type=section&id=Signatures) This report was signed by Teofilo Raad, CEO and President of Pulmatrix, Inc., on March 23, 2021, and by other directors and officers on the same date - This report was signed by Teofilo Raad, Chief Executive Officer and President of Pulmatrix, Inc., on March 23, 2021[311](index=311&type=chunk) Signatories | Signature | Title | Date | | :------------------ | :----------------------------------- | :----------- | | Teofilo Raad | Chief Executive Officer, President and Director (Principal Executive Officer) | March 23, 2021 | | Michelle S. Siegert | Vice President, Finance, Treasurer and Secretary (Principal Financial and Accounting Officer) | March 23, 2021 | | Michael J. Higgins | Chairman of the Board | March 23, 2021 | | Richard Batycky, Ph.D. | Director | March 23, 2021 | | Todd Bazemore | Director | March 23, 2021 | | Christopher Cabell, M.D. | Director | March 23, 2021 | | Mark Iwicki | Director | March 23, 2021 | | Amit D. Munshi | Director | March 23, 2021 | [INDEX TO CONSOLIDATED FINANCIAL STATEMENTS](index=73&type=section&id=INDEX%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This index lists all consolidated financial statements and their accompanying notes [Financial Statements Index](index=73&type=section&id=Financial%20Statements%20Index) This index lists the consolidated financial statements and their notes, including the report of independent registered public accounting firm, consolidated balance sheets, statements of operations, stockholders' equity, and cash flows - The index includes: * Report of Independent Registered Public Accounting Firm * Consolidated Balance Sheets * Consolidated Statements of Operations * Consolidated Statements of Stockholders' Equity * Consolidated Statements of Cash Flows * Notes to Consolidated Financial Statements[314](index=314&type=chunk) [REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM](index=74&type=section&id=REPORT%20OF%20INDEPENDENT%20REGISTERED%20PUBLIC%20ACCOUNTING%20FIRM) This report presents the independent auditor's opinion on the fairness of the company's consolidated financial statements and discusses critical audit matters [Opinion on the Financial Statements](index=74&type=section&id=Opinion%20on%20the%20Financial%20Statements) Marcum LLP issued an unqualified opinion on Pulmatrix, Inc.'s consolidated financial statements for the years ended December 31, 2020, and 2019, affirming fair presentation in all material respects according to U.S. GAAP - Marcum LLP issued an **unqualified opinion** on Pulmatrix, Inc.'s consolidated financial statements for the years ended December 31, 2020, and 2019[317](index=317&type=chunk) - The financial statements fairly present the company's financial position and operating results in all material respects in accordance with U.S. Generally Accepted Accounting Principles[317](index=317&type=chunk) [Basis for Opinion](index=74&type=section&id=Basis%20for%20Opinion) The auditor conducted the audit according to PCAOB standards to provide reasonable assurance that financial statements are free of material misstatement, and while not required to opine on internal control effectiveness, gained an understanding of it - The auditor conducted the audit in accordance with PCAOB standards, aiming to provide reasonable assurance that the financial statements are free of material misstatement[319](index=319&type=chunk) - The auditor was not required to express an opinion on the effectiveness of internal control but obtained an understanding of it[319](index=319&type=chunk) [Critical Audit Matters](index=74&type=section&id=Critical%20Audit%20Matters) A critical audit matter is the "estimated total contract costs" in revenue recognition, where management's significant assumptions and estimates required substantial auditor judgment, subjectivity, and effort in evaluation - A critical audit matter is the **"estimated total contract costs"** in revenue recognition, where management used significant assumptions and estimates in determining the estimated total costs to satisfy performance obligations[322](index=322&type=chunk)[323](index=323&type=chunk) - The auditor addressed this matter by understanding management's estimation process, discussing with company clinical and manufacturing personnel, evaluating the appropriateness of changes in estimates, performing retrospective reviews, and assessing the reasonableness of inputs, assumptions, and models[324](index=324&type=chunk)[325](index=325&type=chunk) [Consolidated Balance Sheets](index=76&type=section&id=Consolidated%20Balance%20Sheets) This statement presents the company's financial position, including assets, liabilities, and equity, as of specific dates [Balance Sheet Data](index=76&type=section&id=Balance%20Sheet%20Data) As of December 31, 2020, total assets increased to $38.169 million from $36.098 million in 2019, with cash and cash equivalents rising to $31.657 million, while total liabilities decreased to $15.030 million, and stockholders' equity grew to $23.139 million Consolidated Balance Sheet Summary | Indicator (Thousands USD) | December 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :------------- | | **Assets** | | | | Cash and Cash Equivalents | 31,657 | 23,440 | | Accounts Receivable | 84 | 7,200 | | Prepaid Expenses and Other Current Assets | 797 | 777 | | Total Current Assets | 32,538 | 31,417 | | Property and Equipment, Net | 361 | 270 | | Right-of-Use Assets | 1,489 | 630 | | Long-Term Restricted Cash | 204 | 204 | | Goodwill | 3,577 | 3,577 | | **Total Assets** | **38,169** | **36,098** | | **Liabilities and Stockholders' Equity** | | | | Accounts Payable | 925 | 600 | | Accrued Expenses | 2,028 | 2,514 | | Operating Lease Liabilities | 1,135 | 675 | | Deferred Revenue | 4,166 | 13,411 | | Total Current Liabilities | 8,254 | 17,200 | | Deferred Revenue, Net of Current Portion | 6,168 | 7,879 | | Operating Lease Liabilities, Net of Current Portion | 608 | — | | **Total Liabilities** | **15,030** | **25,079** | | **Stockholders' Equity** | | | | Common Stock | 4 | 2 | | Additional Paid-in Capital | 257,604 | 226,178 | | Accumulated Deficit | (234,469) | (215,161) | | **Total Stockholders' Equity** | **23,139** | **11,019** | | **Total Liabilities and Stockholders' Equity** | **38,169** | **36,098** | [Consolidated Statements of Operations](index=77&type=section&id=Consolidated%20Statements%20of%20Operations) This statement details the company's revenues, expenses, and net loss over specific periods [Operations Data](index=77&type=section&id=Operations%20Data) In 2020, revenue increased to $12.634 million, and operating loss significantly narrowed to $9.862 million from $20.692 million in 2019, but a $9.289 million warrant inducement expense resulted in a net loss of $19.308 million, with basic and diluted net loss per share at $0.67 Consolidated Statements of Operations Summary | Indicator (Thousands USD) | Year Ended December 31, 2020 | Year Ended December 31, 2019 | | :-------------------------- | :------------------- | :------------------- | | Revenue | 12,634 | 7,910 | | Research and Development Expenses | 15,609 | 12,845 | | General and Administrative Expenses | 6,887 | 8,489 | | Impairment of Goodwill | — | 7,268 | | Total Operating Expenses | 22,496 | 28,602 | | Operating Loss | (9,862) | (20,692) | | Interest Income | 82 | 301 | | Settlement Expense | — | (200) | | Warrant Inducement Expense | (9,289) | — | | Other Expense, Net | (239) | (5) | | Total Other Income/(Expense) | (9,446) | 96 | | Net Loss | (19,308) | (20,596) | | Basic and Diluted Net Loss Per Share | (0.67) | (1.23) | | Weighted Average Shares Used in Computing Basic and Diluted Net Loss Per Share | 28,753,310 | 16,733,909 | [Consolidated Statements of Stockholders' Equity](index=78&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) This statement outlines changes in the company's equity accounts over specific periods [Stockholders' Equity Data](index=78&type=section&id=Stockholders%27%20Equity%20Data) As of December 31, 2020, common stock increased to 36,105,097 shares, additional paid-in capital rose to $257.604 million, but the accumulated deficit expanded to $234.469 million, with total stockholders' equity growing to $23.139 million Consolidated Statements of Stockholders' Equity Summary | Indicator (Thousands USD, Shares) | December 31, 2020 | December 31, 2019 | | :-------------------------- | :------------- | :------------- | | **Common Stock** | | | | Number of Shares | 36,105,097