LENZ Therapeutics, Inc.(LENZ) - 2025 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section presents the company's unaudited condensed consolidated financial statements and related explanatory notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $23,042 | $20,158 | | Marketable securities | $170,934 | $188,872 | | Total current assets | $197,859 | $211,917 | | Total assets | $201,252 | $215,304 | | Total current liabilities | $8,569 | $10,406 | | Total liabilities | $9,242 | $11,220 | | Total stockholders' equity | $192,010 | $204,084 | Condensed Consolidated Statements of Operations And Comprehensive Loss This section details the company's financial performance over specific periods, including revenues, expenses, and net loss Condensed Consolidated Statements of Operations And Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :------------------------------------- | :------------------------------------- | :-------------------- | :------- | | Research and development | $5,818 | $10,537 | $(4,719) | (45)% | | Selling, general and administrative | $11,113 | $5,551 | $5,562 | 100% | | Total operating expenses | $16,931 | $16,088 | $843 | 5% | | Loss from operations | $(16,931) | $(16,088) | $(843) | 5% | | Total other income (expense), net | $2,312 | $(560) | $2,872 | (513)% | | Net loss | $(14,619) | $(16,648) | $2,029 | (12)% | | Net loss per share, basic and diluted | $(0.53) | $(3.53) | $3.00 | (85)% | Condensed Consolidated Statements of Convertible Preferred and Common Stock and Stockholders' Equity (Deficit) This section outlines changes in the company's equity structure, including preferred and common stock, and the impact on stockholders' equity - Stockholders' equity decreased from $204.084 million at December 31, 2024, to $192.010 million at March 31, 2025, primarily due to the net loss incurred during the quarter, partially offset by share-based compensation and exercise of stock options[23] Condensed Consolidated Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :----------------------------- | :------------------------------------- | :------------------------------------- | | Net cash used in operating activities | $(16,049) | $(23,937) | | Net cash provided by investing activities | $18,889 | $18,000 | | Net cash provided by financing activities | $44 | $171,268 | | Net increase in cash and cash equivalents | $2,884 | $165,331 | | Cash, cash equivalents, and restricted cash, end of period | $23,156 | $200,471 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Organization and Liquidity LENZ Therapeutics, Inc. (formerly Graphite Bio, Inc.) is a pre-commercial biopharmaceutical company focused on vision therapies, particularly for presbyopia. The company completed a reverse merger with LENZ OpCo on March 21, 2024, with LENZ OpCo as the accounting acquirer. The company has incurred significant net losses since inception, with an accumulated deficit of $159.6 million as of March 31, 2025, but believes its $194.1 million in cash, cash equivalents, and marketable securities will fund operations for at least the next 12 months and to positive operating cash flow post-LNZ100 commercial launch, if approved - LENZ Therapeutics, Inc. (formerly Graphite Bio, Inc.) is a pre-commercial biopharmaceutical company focused on developing innovative therapies to improve vision[32] - Completed a reverse merger with LENZ OpCo on March 21, 2024, with LENZ OpCo treated as the accounting acquirer[33] - Accumulated deficit as of March 31, 2025: $159.6 million[34] - Cash, cash equivalents, and marketable securities as of March 31, 2025: $194.1 million, believed sufficient to fund operations for at least the next 12 months and to positive operating cash flow post-commercial launch of LNZ100, if approved[35][120] Note 2. Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, including the accrual method of accounting under GAAP, the basis of presentation following the reverse recapitalization (LENZ OpCo as acquirer), and key estimates such as R&D accruals and share-based compensation. It also details policies for cash, marketable securities (available-for-sale), long-term investments, credit losses, leases, and income taxes - Financial statements prepared using the accrual method in accordance with U.S. GAAP[36] - Merger accounted for as a reverse recapitalization, with LENZ OpCo as the accounting acquirer[37][38] - Marketable securities are classified as available-for-sale and carried at fair value, with unrealized gains/losses included in other comprehensive income[42] - Research and development costs are expensed as incurred[51] Note 3. Merger and Related Transactions The Merger on March 21, 2024, was accounted for as a reverse recapitalization, with LENZ OpCo as the accounting acquirer. Former LENZ OpCo stockholders gained a majority of voting rights and board seats. The transaction involved Graphite issuing 15.4 million shares, options, and warrants to LENZ OpCo holders, and a concurrent $53.5 million PIPE financing. LENZ OpCo received $112.6 million cash (net of costs) and incurred $5.2 million in transaction costs - Merger completed on March 21, 2024, accounted for as a reverse recapitalization with LENZ OpCo as the accounting acquirer[33][74] - Former LENZ OpCo stockholders owned a substantial majority of voting rights and designated a majority of board members[74] - LENZ OpCo received $112.6 million in cash and cash equivalents (net of transaction costs) and incurred $5.2 million in transaction costs[78] - Concurrent March 2024 PIPE Financing raised $53.5 million, with LENZ OpCo, Graphite stockholders, and PIPE investors owning approximately 56%, 31%, and 13% of the company, respectively, on a fully diluted basis[77] Note 4. Financial Instruments The company measures financial instruments like cash equivalents and marketable securities at fair value on a recurring basis, categorized into a three-tier hierarchy. As of March 31, 2025, total marketable securities were $170.9 million, primarily in commercial paper, U.S. treasury, and corporate debt securities. Preferred stock warrants liability was reclassified to equity upon the Merger and no longer exists as of March 31, 2025 - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[79][80] Financial Instruments (in thousands) | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | | Total cash equivalents measured at fair value | $22,620 | $19,689 | | Total marketable securities measured at fair value | $170,934 | $188,872 | - Marketable securities primarily consist of commercial paper ($51.9 million), U.S. treasury securities ($48.9 million), corporate debt securities ($44.9 million), and U.S. government agency securities ($25.2 million) as of March 31, 2025[83] - Preferred stock warrants liability was reclassified to stockholders' equity upon the Merger and no longer exists as of March 31, 2025[85][86] Note 5. Accrued Liabilities Accrued liabilities decreased from $6.1 million at December 31, 2024, to $4.9 million at March 31, 2025. The primary components include sales, general, and administrative accrued expenses, accrued payroll and related expenses, and research and development accrued expenses Accrued Liabilities (in thousands) | Accrued Liability Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Sales, general, and administrative accrued expenses | $1,920 | $1,109 | | Accrued payroll and related expenses | $1,653 | $3,564 | | Research and development accrued expenses | $582 | $808 | | Operating lease liability, current portion | $509 | $567 | | Other accrued liabilities | $244 | $101 | | Total accrued liabilities | $4,908 | $6,149 | Note 6. Commitments and Contingencies The company has operating lease liabilities for office spaces in Del Mar and Solana Beach, California, with a weighted average remaining lease term of 2.3 years as of March 31, 2025. Total undiscounted lease payments are $1.3 million. The company is not currently a party to any legal proceedings expected to have a material adverse effect - Weighted average remaining lease term as of March 31, 2025: 2.3 years[89] - Total undiscounted lease payments: $1.299 million[90] - Rent expense for the three months ended March 31, 2025, was $0.1 million[90] - No current legal proceedings are believed to have a material adverse effect on the business[91] Note 7. Stockholders' Equity Following the Merger, all LENZ OpCo preferred and common stock were exchanged for Graphite common stock. As of March 31, 2025, 27,535,663 shares of common stock were outstanding. The company also has common stock reserved for future issuance, including options, incentive plans, ESPP, and warrants, totaling approximately 6.6 million shares. In April 2025, the company sold 600,500 shares of common stock for $16.3 million net proceeds through an "at the market" offering - At Merger closing, 52,947,011 shares of LENZ OpCo preferred stock were exchanged for 10,705,829 shares of Graphite common stock[95] - As of March 31, 2025, 27,535,663 shares of common stock were outstanding[23] - Common stock reserved for future issuance as of March 31, 2025: 6,589,978 shares (including options, incentive plans, ESPP, and warrants)[99][100] - In April 2025, the company sold 600,500 shares of common stock for $16.3 million net proceeds via an "at the market" offering[98][143] Note 8. Net Loss Per Share Basic and diluted net loss per share were the same for the periods presented due to the anti-dilutive effect of potential common shares, given the net loss. As of March 31, 2025, approximately 3.9 million potential common shares were excluded from diluted EPS calculation - Basic and diluted net loss per share are identical due to the anti-dilutive effect of potential common shares[66][105] - Potential common shares excluded from diluted EPS calculation as of March 31, 2025: 3,916,783 (including stock options, warrants, restricted stock units, and ESPP shares)[105] Note 9. License Agreements In April 2022, LENZ entered into the CORXEL License, granting exclusive rights to its IP for presbyopia treatment in Greater China. The company received $15.0 million upfront and is eligible for up to $95.0 million in regulatory and sales milestones, plus tiered royalties. The upfront payment was recognized in 2022, and no contractual milestones were met in Q1 2025 or 2024. Positive Phase 3 data for LNZ100 in China was announced in October 2024 - Entered into CORXEL License in April 2022, granting exclusive IP rights for presbyopia treatment in Greater China[106] - Received $15.0 million in nonrefundable upfront payments, recognized in 2022[107][109] - Eligible for up to $95.0 million in regulatory and sales milestones, plus tiered royalties (5% to 15%) on net sales in Greater China[108][125] - Positive topline data from Phase 3 JX07001 clinical trial of LNZ100 in China announced on October 27, 2024, achieving primary and key secondary endpoints[127] Note 10. Related Party Transactions Through the March 2024 PIPE Financing, the company issued 3,343,330 shares to investors with board representation. The company also has a related party vendor for manufacturing services, with fees incurred of $0.3 million for Q1 2025 - Issued 3,343,330 shares to investors with board representation via the March 2024 PIPE Financing[110] - Incurred $0.3 million in fees for manufacturing services from a related party vendor for the three months ended March 31, 2025[111] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses LENZ's financial condition, operational results, liquidity, and capital resources, highlighting LNZ100 development and key accounting policies Overview This section provides an overview of the company's focus on presbyopia treatment with LNZ100, its market opportunity, and financial outlook - Pre-commercial biopharmaceutical company focused on innovative therapies to improve vision, initially targeting presbyopia[116] - Estimated U.S. addressable population for presbyopia is 128 million[116] - Lead product candidate, LNZ100, is a preservative-free, once-daily aceclidine eye drop, differentiated by rapid onset, duration, and broad age/refractive range, with patent protection until at least 2039 in the U.S[117] - NDA for LNZ100 submitted to FDA in August 2024, with a PDUFA target action date of August 8, 2025, and anticipated commercial launch in Q4 2025 if approved[119] - Company believes existing cash, cash equivalents, and marketable securities ($194.1 million as of March 31, 2025) are sufficient to fund operations to positive operating cash flow post-commercial launch, if LNZ100 is approved[120] CORXEL License and Collaboration Agreement This section details the exclusive licensing agreement for LNZ100/LNZ101 in Greater China, including payments and milestones - CORXEL License grants exclusive rights for LNZ100/LNZ101 in Greater China for presbyopia treatment[123][124] - Received $15.0 million upfront payment in 2022; eligible for up to $95.0 million in regulatory/sales milestones and tiered royalties (5-15%) on net sales[125] - Positive topline data from Phase 3 JX07001 clinical trial of LNZ100 in China announced October 27, 2024, achieving primary and key secondary endpoints[127] Key Trends and Factors Affecting Comparability Between Periods This section explains key trends impacting financial comparability, including changes in R&D, SG&A, and public company expenses - Research and development costs decreased in Q1 2025 (YoY) due to substantial completion of Phase 3 CLARITY trials in March 2024; expected to continue decreasing in 2025[131] - Selling, general and administrative expenses increased in Q1 2025 (YoY) and are expected to continue increasing in 2025 as the company builds its commercial team and infrastructure for LNZ100 launch[131] - Corporate general and administrative expenses increased in Q1 2025 (YoY) due to operating as a public company for the full quarter[131] Components of Statements of Operations and Comprehensive Loss This section describes the primary components of the company's statements of operations, including R&D, SG&A, and other income/expense - Research and development expenses include employee costs, third-party contract costs (CROs, CMOs), external consultants, and allocated facility costs[132] - Selling, general and administrative expenses cover executive, finance, business development, sales, marketing, HR salaries, benefits, share-based compensation, marketing/advertising, professional fees, and public company expenses[134] - Other income (expense), net, includes interest income and changes in fair value of long-term investments and preferred stock warrants liability (which was reclassified post-Merger)[135] Results of Operations This section analyzes the company's financial performance for the periods presented, focusing on changes in key expense categories Results of Operations (in thousands) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | % Change | | :---------------------------------- | :------------------------------------- | :------------------------------------- | :-------------------- | :------- | | Research and development | $5,818 | $10,537 | $(4,719) | (45)% | | Selling, general and administrative | $11,113 | $5,551 | $5,562 | 100% | | Other income (expense), net | $2,312 | $(560) | $2,872 | (513)% | - Decrease in R&D primarily due to $4.8 million decrease in contract research expense for clinical trials and $1.3 million decrease in nonclinical research expense, partially offset by $1.2 million increase in non-clinical regulatory and CMC employee salaries[138] - Increase in SG&A primarily due to $2.7 million in employee salaries and related expenses, $1.8 million in pre-commercial marketing, and $0.7 million in corporate general and administrative expenses as a public company[139] - Increase in Other Income, net, primarily due to $1.5 million additional interest income and a non-recurring $1.0 million charge related to the fair value of preferred stock warrants in the prior period[140] Liquidity and Capital Resources This section discusses the company's cash position, funding sources, and future capital requirements to support operations - Cash, cash equivalents, restricted cash, and marketable securities as of March 31, 2025: $194.1 million[141] - Net loss for Q1 2025: $14.6 million; accumulated deficit as of March 31, 2025: $159.6 million[141] - Significant funding sources include $117.8 million from the Merger, $53.5 million from March 2024 PIPE Financing, and $30.0 million from July 2024 PIPE Financing[142] - In April 2025, sold 600,500 shares for $16.3 million net proceeds through an "at the market" offering[143] - Believes current capital is sufficient to fund operations to positive operating cash flow post-LNZ100 commercial launch, if approved, but future capital requirements depend on many factors[144][145][146] Material Cash Requirements from Contractual Obligations This section outlines the company's significant contractual obligations, including operating leases and research and development contracts - Operating leases for office spaces in Del Mar and Solana Beach[154] - Contracts with organizations to conduct research and development activities, including clinical trials and drug manufacturing[155] - R&D contracts can be modified or cancelled, with liability for costs incurred to date and close-out costs[155] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements that could materially affect the company's financial position - The company has no off-balance sheet arrangements[156] Critical Accounting Policies and Estimates This section describes the company's critical accounting policies and estimates, particularly regarding stock-based compensation - Stock-based compensation expense is a critical accounting policy[159] - Fair value of equity awards is estimated using the Black-Scholes option pricing model[159] - Key assumptions for the Black-Scholes model include risk-free interest rate, expected stock price volatility, expected term, and expected dividend yield[160][161][162][163] Other Company Information This section provides information on the company's status as an emerging growth and smaller reporting company, and related disclosure exemptions - Company is an "emerging growth company" (EGC) under the JOBS Act, with EGC status expected until December 31, 2026[164][165][397] - Qualifies as a "smaller reporting company," providing reduced disclosure obligations[166][398] - Intends to use the extended transition period for complying with new or revised financial accounting standards applicable to private companies[165][399] Recent Accounting Pronouncements This section details the company's assessment of recent accounting pronouncements and their potential impact on financial reporting - Assessing impact of ASU 2023-09 (Income Taxes), effective for annual periods after December 15, 2024[71] - Assessing impact of ASU 2024-03 (Expense Disaggregation Disclosures), effective for annual periods after December 15, 2026[72] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, LENZ Therapeutics is not required to provide quantitative and qualitative disclosures about market risk - Company is a smaller reporting company and not required to provide market risk disclosures[169] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025. There were no material changes in internal control over financial reporting during the quarter. The company acknowledges inherent limitations in control systems - Disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025[170] - No material changes in internal control over financial reporting during Q1 2025[171] - Control systems provide reasonable, not absolute, assurance due to inherent limitations[172] PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, defaults, and other miscellaneous information Item 1. Legal Proceedings The company is not currently involved in any legal proceedings or claims that are expected to have a material adverse effect on its business, financial condition, or results of operations - No current legal proceedings or claims are expected to have a material adverse effect[175] Item 1A. Risk Factors Investment in LENZ common stock involves high risks, including pre-commercial status, LNZ100 dependence, regulatory uncertainties, and market volatility Summary Risk Factors This section summarizes the primary risks associated with the company's limited operating history, product development, and market factors - Pre-commercial biopharmaceutical company with limited operating history, significant losses, and negative cash flows[177][178] - Business depends entirely on the development and commercialization of LNZ100, with no other product candidates in the pipeline[177][182] - Clinical trials are expensive, time-consuming, difficult, and have uncertain outcomes; results may not satisfy regulatory requirements[177][192] - LNZ100 may fail to achieve market acceptance by eye care professionals (ECPs) and patients, and the market opportunity may be smaller than estimated[177][201] - Significant competition from major pharmaceutical, specialty pharmaceutical, and biotechnology companies[177][210][212] - Reliance on third parties for manufacturing product candidates for clinical trials and commercialization[177][355] - Market price of common stock is expected to be volatile[177][385] Risks Related to Our Limited Operating History, Development and Commercialization of Our Product Candidates This section details risks associated with the company's early stage, LNZ100 development, market acceptance, and competition - Limited operating history and pre-commercial status make future success unpredictable; significant losses expected as company seeks LNZ100 approval and commercialization[178][181] - Business success is entirely dependent on LNZ100; no other product candidates in the pipeline[182] - FDA approval for LNZ100 by the August 8, 2025 PDUFA date is not assured[119][182] - LNZ100's API, aceclidine, previously marketed in Europe for glaucoma, exposes the company to risks of generic competition and adverse side effects from improper use[187][190] - Clinical trials are expensive, time-consuming, and inherently uncertain; prior results may not predict future success[192][193][195] - LNZ100 may fail to achieve market acceptance due to competition from existing treatments (glasses, contact lenses, other pharmacologic options like Vuity and Qlosi) and reluctance from ECPs or patients[201][202][203][204] - Delays in patient enrollment or retention in clinical trials could delay or prevent regulatory approvals[207][208] - Changes in manufacturing or formulation may incur additional costs or delays[209] - Significant competition from companies with greater resources and expertise; LNZ100 may not offer sufficient clinical benefits to justify a higher price[212][214][215] - Inability to establish sales and marketing capabilities or enter into third-party agreements could hinder commercialization; targeted direct-to-consumer strategy may be costly[217][218][221] - Need for additional financing if LNZ100 sales are insufficient, potentially leading to equity dilution or restrictive debt covenants[222] - Exposure to significant product liability risks, which could delay development, limit commercialization, or result in substantial liabilities[223] - International marketing faces risks including differing regulatory requirements, economic instability, and trade policy changes (e.g., U.S.-China tensions)[225][226] Risks Related to Our Intellectual Property This section outlines risks concerning patent protection, intellectual property enforcement, trade secrets, and licensing agreements - Success depends on obtaining and maintaining patent protection for LNZ100 and future product candidates, which is uncertain and costly[227][229][230] - Patent applications may not result in issued patents, or issued patents may be challenged, narrowed, invalidated, or circumvented[231][232][235][239] - Changes in patent laws or their interpretation (e.g., America Invents Act, U.S. Supreme Court decisions, European unitary patent system) could diminish patent value and enforcement ability[236][267] - Patent terms may be inadequate to protect competitive position due to lengthy development and regulatory review, leading to generic competition[242][243][245] - Risk of not identifying or incorrectly interpreting third-party patents, leading to infringement claims or inability to market products[250][252] - Involvement in intellectual property infringement lawsuits is expensive, time-consuming, and could delay or prevent commercialization[254][255][258] - Inability to protect trade secrets could harm competitive position, especially when sharing with third parties[276][277][278] - Claims from former employers or third parties regarding wrongful use of confidential information or ownership of IP could lead to litigation and loss of rights[281][282] - Inadequate protection of trademarks and trade names could hinder brand recognition[284] - Intellectual property rights may not address all threats to competitive advantage, as competitors can design around patents or develop similar technologies independently[286] - Future collaboration arrangements may not be successful, posing risks to development and commercialization[287] - Failure to comply with license agreements could lead to termination, damages, and loss of critical IP rights[288][289] - Difficulty in licensing or acquiring new or necessary intellectual property rights from third parties could impede business growth[297] Risks Related to Our Regulatory Approval and Other Legal Compliance Matters This section addresses risks related to regulatory approvals, ongoing compliance, healthcare laws, and data privacy regulations - Regulatory approval processes (FDA, foreign authorities) are lengthy, time-consuming, and unpredictable; no assurance of approval for LNZ100 or future candidates[299][300][302][303] - LNZ100 is expected to be regulated as a drug-device combination product, potentially causing development and approval delays[314] - Obtaining approval in one jurisdiction does not guarantee approval in others, and foreign procedures vary[315][316] - Post-approval, LNZ100 will be subject to ongoing regulatory obligations (manufacturing, labeling, promotion, safety surveillance), with potential for significant expense and penalties for non-compliance or adverse events[317][318][322] - Changes in healthcare legislation (e.g., Inflation Reduction Act) and judicial decisions (e.g., overturning Chevron doctrine) could impact drug pricing, reimbursement, and regulatory processes, potentially affecting profitability[328][330][333] - Subject to federal and state healthcare fraud and abuse laws (Anti-Kickback Statute, False Claims Act), HIPAA, and transparency laws, with potential for criminal sanctions, civil penalties, and reputational harm for violations[339][341][342][343][344] - Misconduct by employees or third parties could lead to regulatory sanctions and harm reputation[345] - Failure to comply with environmental, health, and safety laws could result in fines or penalties[346][347] - Subject to U.S. and foreign anti-corruption, anti-money laundering, export control, and sanctions laws, with serious consequences for violations[348] - Restrictive laws and regulations govern personal information (GDPR, UK GDPR, CCPA, CPRA), posing risks of fines, litigation, and increased compliance costs[350][351][352][353] - Disruptions at regulatory agencies (FDA, SEC) due to funding shortages or global health concerns could delay approvals[325][326][327] Risks Related to Our Reliance on Third Parties This section covers risks arising from dependence on third-party manufacturers, clinical research organizations, and collaboration partners - Heavy reliance on third-party manufacturers for LNZ100 supply for clinical trials and commercialization, increasing risks of supply disruptions, quality issues, and cGMP non-compliance[355][356][357][358] - Manufacturing drugs is complex; production difficulties by third-party manufacturers could delay or prevent adequate supply[359] - Reliance on third-party CROs and independent clinical investigators for trials, with limited control over their resources and performance, risking delays or unreliable data[360][361][362] - Termination of CRO agreements could lead to substantial costs and delays in finding alternatives[364][365] - Dependence on CORXEL for LNZ100/LNZ101 development and commercialization in Greater China, with limited control over their efforts and potential for disputes or underperformance impacting future revenue[366][367][368] Risks Related to Our Business Operations This section discusses risks related to human capital, acquisitions, operational expansion, litigation, and cybersecurity vulnerabilities - Success is highly dependent on attracting and retaining skilled executive officers and employees, facing intense competition for talent[369][370] - Engaging in acquisitions or strategic partnerships may increase capital requirements, dilute stockholders, incur debt, or assume contingent liabilities[372][373] - Expected significant expansion of organization (sales, marketing, public company infrastructure) poses management challenges and potential operational disruptions[374] - Exposure to securities class action litigation, which is expensive and diverts management attention[375] - Internal computer systems and those of third parties are vulnerable to security breaches, leading to potential data loss, operational disruptions, liabilities, and reputational harm[376][378][379][380] - Insurance policies may not adequately cover losses from system disruptions or security breaches[382] Risks Related to Our Common Stock This section highlights risks concerning stock market volatility, dilution, corporate governance, and tax implications for investors - An active trading market for common stock may not develop or be sustained[383][384] - Market price of common stock is expected to be volatile due to factors like clinical trial results, regulatory approvals, competition, and general market conditions[385][386] - Sales of substantial numbers of common stock shares by existing holders could cause the price to decline[387][394] - Board of directors can issue preferred stock without stockholder approval, potentially diluting common stockholders[395] - As an emerging growth company and smaller reporting company, reduced reporting requirements may make common stock less attractive to investors[396][398] - Once exemptions expire, the company will face increased compliance costs and demands on management[401] - Failure to maintain proper and effective internal controls could impair ability to produce accurate financial statements[402][404] - Certificate of incorporation, bylaws, and Delaware law provisions could make an acquisition more difficult and prevent attempts to replace management[405][406] - Bylaws designate specific courts as exclusive forums for certain legal actions, potentially limiting stockholders' ability to litigate[407] - Indemnification claims by directors and officers may reduce available funds[409][411] - Subject to SEC requirements for reporting shell company business combinations, limiting Form S-3 use and making it an "ineligible issuer" for three years[412] - Lack of equity research coverage or unfavorable reports could cause stock price and trading volume to decline[413] - Adverse legislative or regulatory tax changes could negatively impact financial condition[415] - Ability to use net operating loss carryforwards (NOLs) and other tax attributes may be limited due to ownership changes (e.g., Merger)[416][417] - Unfavorable global economic conditions could adversely affect business[418] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities during the quarter ended March 31, 2025, that had not been previously reported in current reports on Form 8-K - No unregistered sales of equity securities during Q1 2025 not previously reported[419] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - No defaults upon senior securities[420] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[421] Item 5. Other Information During the last fiscal quarter, none of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the last fiscal quarter[422] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Amended and Restated Certificate of Incorporation, Bylaws, Form of Warrant, Sales Agreement with TD Securities, CEO/CFO certifications, and XBRL documents - Lists various exhibits filed, including corporate governance documents, warrant forms, sales agreements, and certifications[423] Signatures This section contains the official signatures of the company's principal executive and financial officers, certifying the report's accuracy - Report signed by Evert Schimmelpennink (CEO) and Daniel Chevallard (CFO) on May 7, 2025[427]