Clene(CLNN) - 2024 Q1 - Quarterly Report

PART I Item 1. Financial Statements (Unaudited) Clene Inc.'s unaudited condensed consolidated financial statements detail financial position, performance, cash flows, and going concern issues Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :------------------ | | Total Current Assets | $32,111 | $38,852 | | Total Assets | $45,069 | $52,341 | | Total Current Liabilities | $26,185 | $25,330 | | Total Liabilities | $40,805 | $38,951 | | Total Stockholders' Equity | $4,264 | $13,390 | Condensed Consolidated Statements of Operations and Comprehensive Loss Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Total Revenue | $73 | $107 | | Total Operating Expenses | $9,305 | $10,839 | | Loss from Operations | $(9,232) | $(10,732) | | Total Other Income (Expense), Net | $(1,848) | $(1,038) | | Net Loss | $(11,080) | $(11,770) | | Comprehensive Loss | $(11,139) | $(11,752) | | Net Loss Per Share – Basic and Diluted | $(0.09) | $(0.15) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) Condensed Consolidated Statements of Stockholders' Equity (Deficit) (in thousands) | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :------------------ | | Common Shares Outstanding | 128,433,721 | 128,422,851 | | Additional Paid-In Capital | $257,914 | $255,901 | | Accumulated Deficit | $(253,803) | $(242,723) | | Total Stockholders' Equity | $4,264 | $13,390 | - Stock-based compensation expense for the three months ended March 31, 2024, was $2,013 thousand[10] - Net loss for the three months ended March 31, 2024, was $(11,080) thousand[10] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net Cash Used in Operating Activities | $(7,082) | $(9,218) | | Net Cash Provided by Investing Activities | $71 | $4,722 | | Net Cash Provided by (Used in) Financing Activities | $(19) | $4,588 | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $(7,089) | $110 | | Cash, Cash Equivalents and Restricted Cash – End of Period | $21,790 | $18,500 | Notes to Condensed Consolidated Financial Statements Note 1. Nature of the Business Clene Inc. is a clinical-stage pharmaceutical company developing CNS nanotechnology therapeutics, facing significant losses and going concern doubts - Clene Inc. is a clinical-stage pharmaceutical company pioneering the discovery, development, and commercialization of novel clean-surfaced nanotechnology therapeutics for central nervous system disorders including amyotrophic lateral sclerosis (ALS), multiple sclerosis (MS), and Parkinson's disease (PD)[15] - The company incurred a loss from operations of $9.2 million and an accumulated deficit of $253.8 million as of March 31, 2024, with net cash used in operating activities of $7.1 million[17] - These conditions raise substantial doubt about the Company's ability to continue as a going concern, necessitating additional funding through equity, debt, or collaboration arrangements[18][19] Note 2. Summary of Significant Accounting Policies This note outlines Clene Inc.'s accounting policies for consolidated financial statements, including segment reporting revised to a single operating segment - The condensed consolidated financial statements include Clene Inc. and its wholly-owned subsidiaries, prepared in accordance with U.S. GAAP for interim financial reporting[21] - Key accounting policies cover marketable securities (available-for-sale), inventory (historic cost, FIFO), property and equipment (straight-line depreciation), debt (amortized discounts/premiums), convertible debt (single liability at amortized cost if not derivative), leases (operating/finance, ROU assets), contingent earn-out liabilities (fair value remeasurement), common stock warrants (equity/liability classification), and grant funding (other income or R&D expense reduction)[28][29][30][31][34][35][38][40][41] - Effective in the fourth quarter of 2023, the Company determined it is a single operating and reportable segment due to the immateriality of its dietary supplement operations[45] Note 3. Cash, Cash Equivalents, and Marketable Securities Cash, cash equivalents, and marketable securities, primarily U.S. Treasury securities, totaled $27.9 million as of March 31, 2024, classified as available-for-sale Cash, Cash Equivalents, and Marketable Securities (in thousands) | Category | March 31, 2024 | December 31, 2023 | | :------------------------------------------ | :------------- | :------------------ | | Cash and Cash Equivalents | $21,732 | $28,821 | | Marketable Securities | $6,178 | $6,179 | | Total Cash, Cash Equivalents, and Marketable Securities | $27,910 | $35,000 | - Marketable debt securities are considered available-for-sale and are recorded at fair value, with unrealized gains and losses included as a component of accumulated other comprehensive income[28] Note 4. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets increased to $4.1 million as of March 31, 2024, driven by higher R&D tax credits receivable Prepaid Expenses and Other Current Assets (in thousands) | Category | March 31, 2024 | December 31, 2023 | | :------------------------------------------ | :------------- | :------------------ | | Metals to be used in research and development | $1,826 | $1,909 | | Research and development tax credits receivable | $1,442 | $1,195 | | Other | $832 | $568 | | Total Prepaid Expenses and Other Current Assets | $4,100 | $3,672 | Note 5. Property and Equipment, Net Net property and equipment decreased to $8.9 million as of March 31, 2024, with $0.42 million depreciation, as depreciation exceeded new construction Property and Equipment, Net (in thousands) | Category | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :------------------ | | Lab equipment | $4,065 | $4,092 | | Office equipment | $177 | $178 | | Computer software | $459 | $459 | | Leasehold improvements | $9,983 | $9,983 | | Construction in progress | $1,449 | $1,438 | | Less accumulated depreciation | $(7,279) | $(6,887) | | Total Property and Equipment, Net | $8,854 | $9,263 | Total Depreciation Expense (in thousands) | Period | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Total Depreciation Expense | $420 | $402 | Note 6. Accrued Liabilities Accrued liabilities increased to $3.9 million as of March 31, 2024, due to higher compensation, benefits, CRO, and clinical fees Accrued Liabilities (in thousands) | Category | March 31, 2024 | December 31, 2023 | | :-------------------------------- | :------------- | :------------------ | | Accrued compensation and benefits | $2,628 | $2,120 | | Accrued CRO and clinical fees | $746 | $481 | | Other | $531 | $1,119 | | Total Accrued Liabilities | $3,905 | $3,720 | Note 7. Leases The company leases laboratory and office space, with operating lease obligations having a 6.1-year weighted-average term and 9.6% discount rate - As of March 31, 2024, operating lease obligations had a weighted-average discount rate of 9.6% and a weighted-average remaining term of 6.1 years[66] - As of March 31, 2024, finance lease obligations had a weighted-average interest rate of 11.0% and a weighted-average remaining term of 0.1 years[68] Maturity Analysis of Lease Obligations as of March 31, 2024 (in thousands) | Year | Finance Leases | Operating Leases | | :-------------------------------- | :------------- | :--------------- | | 2024 (remainder) | $7 | $789 | | 2025 | — | $1,208 | | 2026 | — | $1,236 | | 2027 | — | $1,132 | | 2028 | — | $1,093 | | 2029 | — | $649 | | Thereafter | — | $1,045 | | Total Minimum Lease Payments | $7 | $7,152 | | Present Value of Minimum Lease Payments | $7 | $5,319 | Note 8. Notes Payable and Convertible Notes Payable The company holds various notes payable and convertible notes, accounted for at amortized cost, and complies with covenants requiring $5.0 million in unrestricted cash Notes Payable and Convertible Notes Payable (in thousands) | Category | March 31, 2024 | December 31, 2023 | | :------------------------------------------ | :------------- | :------------------ | | Notes Payable (Gross) | $16,927 | $16,915 | | Convertible Notes Payable (Gross) | $10,388 | $10,308 | | Less Unamortized Discount and Debt Issuance Costs | $(201) | $(568) | | Less Current Portion (Net) | $(20,029) | $(19,503) | | Total Net of Current Portion | $7,085 | $7,152 | - The 2021 Avenue Loan and 2022 DHCD Loan contain conversion features that did not meet the requirements for derivative accounting and are accounted for as single liabilities measured at amortized cost[78][79][81] - The company is required to maintain unrestricted cash and cash equivalents of at least $5.0 million under the 2021 Avenue Loan covenant and is not in violation of any covenants[82] Note 9. Commitments and Contingencies The company has $0.2 million in capital expenditure commitments and contingent repayment obligations for NMSS grants, with potential repayments up to 450%, but no liability is recognized - As of March 31, 2024, the company had commitments under various agreements for capital expenditures totaling $0.2 million related to the construction of its manufacturing facilities[86] - Contingent repayment obligations for NMSS grants (2019 Grant: $0.3 million; 2023 Grant: $0.7 million) are tied to future commercial sales of CNM-Au8 for MS treatment or specific corporate events, with maximum repayment up to 450% of the grants[89] - Management has assessed the likelihood of each contingent event as less than probable, and therefore no contingent liability is recognized, with a possible range of loss between $0.2 million and $1.5 million for the 2019 Grant, and $0.3 million and $3.0 million for the 2023 Grant[89] Note 10. Income Taxes The company incurred a net loss before income taxes of $11.1 million for Q1 2024, with a full valuation allowance against deferred tax assets due to cumulative losses Components of Loss Before Income Taxes (in thousands) | Region | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | United States | $(11,039) | $(11,546) | | Foreign | $(41) | $(224) | | Net Loss Before Income Taxes | $(11,080) | $(11,770) | - A full valuation allowance is recorded against net deferred tax assets due to the uncertainty of realizing such assets from future taxable income, resulting from the company's three-year cumulative loss position[91] Note 11. Benefit Plans The company offers a 401(k) plan with 100% match up to 3%. Stock-based compensation expense was $2.0 million for Q1 2024, with 21.99 million outstanding options and $11.7 million unrecognized costs - The company matches 100% of a participating employee's deferral contributions up to 3% of annual compensation, limited to $4,500 of matching contributions[92] Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | General and administrative | $1,136 | $1,250 | | Research and development | $877 | $973 | | Total Stock-Based Compensation Expense | $2,013 | $2,223 | Outstanding Stock Options Activity (in thousands, except share, per share, and term data) | Category | Number of Options | Weighted Average Exercise Price Per Share | Weighted Average Remaining Term (Years) | Intrinsic Value | | :------------------------------------------ | :---------------- | :---------------------------------------- | :-------------------------------------- | :-------------- | | Outstanding – December 31, 2023 | 21,846,388 | $2.26 | 7.28 | $302 | | Granted | 280,070 | $0.44 | 9.95 | — | | Forfeited | (141,124) | $5.33 | — | — | | Outstanding – March 31, 2024 | 21,985,334 | $2.22 | 7.07 | $568 | - As of March 31, 2024, the company had approximately $11.7 million of unrecognized stock-based compensation costs related to non-vested stock options, expected to be recognized over a weighted-average period of 1.92 years[99] Note 12. Fair Value The company measures financial instruments at fair value, including warrant and earn-out liabilities. Warrant liabilities increased to $2.79 million as of March 31, 2024, due to fair value changes using unobservable inputs Fair Value Hierarchy for Financial Instruments Measured at Fair Value on a Recurring Basis as of March 31, 2024 (in thousands) | Category | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------------ | :------ | :------ | :------ | :---- | | Cash equivalents | $5,660 | $12,191 | — | $17,851 | | Marketable securities | — | $6,178 | — | $6,178 | | Common stock warrant liabilities | — | — | $2,790 | $2,790 | | Clene Nanomedicine contingent earn-out liability | — | — | $22 | $22 | | Initial Stockholders contingent earn-out liability | — | — | $3 | $3 | - The change in fair value of common stock warrant liabilities resulted in a loss of $1.309 million for the three months ended March 31, 2024, primarily due to the change in the price of the company's Common Stock and updates in valuation model assumptions[109][112] - The change in fair value of Clene Nanomedicine contingent earn-out liability resulted in a gain of $53,000, and Initial Stockholders contingent earn-out liability resulted in a gain of $7,000 for the three months ended March 31, 2024, primarily due to the decrease in the price of the company's Common Stock and updates in valuation model assumptions[109][116] Note 13. Capital Stock As of March 31, 2024, the company had 128.4 million shares of common stock outstanding and various warrants, with an ATM Agreement for up to $12.3 million in future sales and a Purchase Agreement in effect - As of March 31, 2024, the company had 128,433,721 shares of Common Stock issued and outstanding[117] Outstanding Common Stock Warrants as of March 31, 2024 | Classification | Number of Shares Issuable | Exercise Price | Expiration | | :------------- | :------------------------ | :------------- | :--------- | | Equity | 2,407,500 | $11.50 | December 2025 | | Equity | 24,583 | $11.50 | December 2025 | | Liability (New Avenue Warrant) | 3,000,000 | $0.80 | June 2028 | | Liability (Tranche A Warrants) | 50,000,000 | $1.10 | June 2026 | | Equity (Tranche B Warrants) | 50,000,000 | $1.50 | June 2030 | | Total | 105,432,083 | | | - The company has an Equity Distribution Agreement (ATM Agreement) to offer and sell shares of Common Stock with an aggregate offering price of up to $12.3 million, with no sales made during Q1 2024[123][124] - The Purchase Agreement with Lincoln Park Capital Fund, LLC, for up to $25.0 million in common stock purchases, remains in full force and effect despite the suspension of its prospectus supplement for future sales in June 2023[125][127][129] Note 14. Net Loss Per Share Basic and diluted net loss per share for Q1 2024 was $(0.09), an improvement from $(0.15) in Q1 2023, with weighted average common shares increasing to 128.4 million Net Loss Per Share (in thousands, except share and per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net Loss Attributable to Common Stockholders | $(11,080) | $(11,770) | | Weighted Average Common Shares Outstanding | 128,427,231 | 76,049,665 | | Net Loss Per Share – Basic and Diluted | $(0.09) | $(0.15) | Potentially Dilutive Securities Not Included in Diluted EPS (in thousands) | Security Type | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Convertible notes payable | 1,732,703 | 1,732,703 | | Common stock warrants | 105,432,083 | 4,477,045 | | Options to purchase common stock | 21,985,334 | 16,205,404 | | Unvested restricted stock awards | 767,945 | 812,170 | | Contingent earn-out shares | 6,592,334 | 6,592,334 | | Total | 136,510,399 | 29,819,656 | Note 15. Related Party Transactions The company has exclusive license and supply agreements with 4Life Research LLC. Total related party revenue for Q1 2024 was $72,000, a decrease from $106,000 in Q1 2023, due to timing of purchases - The company has exclusive license and supply agreements with 4Life Research LLC, a stockholder and related party, for dietary supplement products (Zinc Factor™ and Gold Factor™)[15][132][135] - The supply agreement grants 4Life an exclusive right to purchase Licensed Products at the company's cost plus 20%, with Minimum Sales Commitments[132] Total Revenue from Related Parties (in thousands) | Revenue Type | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----------- | :-------------------------------- | :-------------------------------- | | Product revenue | $43 | $63 | | Royalty revenue | $29 | $43 | | Total revenue | $72 | $106 | Note 16. Subsequent Events On April 9, 2024, the company announced a subaward under an NIH Grant for a four-year Expanded Access Program for CNM-Au8 ALS treatment, potentially totaling up to $30.9 million - On April 9, 2024, the company announced a subaward under an NIH Grant, in collaboration with Columbia University and Synapticure, to support a four-year Expanded Access Program (NIH EAP) for CNM-Au8 treatment of ALS[137] - The NIH Grant may total up to $45.1 million, with subawards to the company potentially reaching $30.9 million in aggregate, extending to August 31, 2027[137] - The first subaward represents up to $7.3 million of grant funds for expenses incurred from September 25, 2023, to August 31, 2024, with $3.1 million of qualifying expenses already incurred[137] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes the company's financial condition, operations, and outlook, detailing clinical programs, competitive landscape, revenue, expenses, liquidity, and ongoing going concern issues Business Overview Clene Inc. is a clinical-stage pharmaceutical company developing CSN® therapeutics for CNS disorders, generating minor supplement revenue, with no approved drugs and significant operating losses - Clene Inc. is a clinical-stage pharmaceutical company pioneering the discovery, development, and commercialization of novel clean-surfaced nanotechnology (CSN®) therapeutics for central nervous system disorders including ALS, MS, and PD[140][142] - The company's patented electro-crystal-chemistry drug development platform enables the production of concentrated, stable, highly active, clean-surfaced nanocrystal suspensions[141] - The company has never been profitable and has incurred operating losses in each year since inception, generating revenue primarily from sales of dietary supplements[142] Recent Developments of Our Clinical Programs The company is advancing ALS and MS clinical programs, securing a $30.9 million NIH grant for ALS EAP and planning a Phase 3 trial, with MS Phase 2 data showing sustained benefits and repair evidence Amyotrophic Lateral Sclerosis (ALS) Clene secured a subaward under an NIH Grant for up to $30.9 million for a four-year Expanded Access Program for CNM-Au8 ALS treatment, planning a Phase 3 trial in H2 2024, and supplemental FDA data by mid-2024 - The company entered into a subaward under an NIH Grant, potentially totaling up to $30.9 million, to support a four-year Expanded Access Program (NIH EAP) for CNM-Au8 treatment of ALS[145] - Planning the design of an international Phase 3 trial of CNM-Au8 30 mg, RESTORE-ALS, with an expected initiation in the second half of 2024, contingent upon funding[146] - Planning to provide supplemental data to the FDA by mid-2024, including additional long-term clinical evidence and biomarker results, to support potential New Drug Application (NDA) filing for CNM-Au8 in ALS[147] Multiple Sclerosis (MS) Latest Phase 2 VISIONARY-MS LTE data showed sustained improvements in vision and cognition for CNM-Au8 treated participants, with MRI evidence supporting repair and remyelination, and REPAIR-MS topline results expected by year-end - Latest data from the open-label long-term extension (LTE) of the Phase 2 VISIONARY-MS clinical trial demonstrated continued significant improvement in vision (LCLA) and cognition (SDMT) for participants treated with CNM-Au8[148] - Physiologic functional evidence (multi-focal visual evoked potentials) and structural evidence (MRI measures of axial diffusivity, myelin water fraction, and magnetization transfer ratio) supported repair and remyelinating effects of CNM-Au8 treatment[148][150] - A second dosing cohort of REPAIR-MS, a Phase 2 clinical trial in non-active progressive MS patients, has been initiated, with enrollment anticipated to conclude in the first half of 2024 and topline results available by the end of 2024[151] Recent Competition Update Biogen's Qalsody received accelerated FDA approval for SOD1-ALS, while Amylyx Pharmaceuticals withdrew its ALS drug from the U.S. and Canadian markets after a Phase 3 trial failed - Biogen Inc.'s tofersen (Qalsody) received accelerated FDA approval for SOD1-ALS and EMA Committee for Medicinal Products for Human Use recommended its marketing authorization[153] - Amylyx Pharmaceuticals, Inc. voluntarily withdrew its ALS drug, sodium phenylbutyrate and taurursodiol, from the U.S. and Canadian markets after a Phase 3 trial did not demonstrate a statistically significant treatment benefit[153] Financial Overview Financial results are driven by R&D investments, with expenses expected to increase as assets advance to Phase 3. G&A expenses depend on FDA discussions, and other income/expense includes interest, warrant liabilities, and earn-out changes Research and Development Expense R&D expenses, primarily for CNM-Au8, are expected to increase as drug candidates advance to Phase 3 and regulatory activities intensify, covering payroll, supplies, CRO fees, and preclinical activities - Substantially all research and development expenses relate to CNM-Au8, the lead asset, with the remainder spent on the CNM-ZnAg asset[155] - Research and development expenses are anticipated to increase throughout 2024 and into future years as assets advance into Phase 3 and regulatory activities for potential NDA filing increase[156] - Research and development costs primarily consist of payroll and personnel expenses, supplies and materials, payments to CROs, preclinical activities, consulting costs, and allocated overhead[157] General and Administrative Expense G&A expenses, mainly payroll, legal, and investor relations, are contingent on FDA discussions, expected to increase with NDA filing or decrease with cost-saving initiatives - General and administrative expenses primarily consist of payroll and personnel expenses, fees for legal, accounting, tax, and information technology services, directors' and officers' insurance, business development, investor and public relations, rent, utilities, facility costs, travel, and consulting fees[159] - Future general and administrative expenses are contingent upon FDA discussions; they are expected to increase to support commercial capabilities if an NDA is filed, or decrease with cost-saving initiatives if an NDA is not filed[160] Total Other Income (Expense), Net Total other income (expense), net, includes interest, commitment share expense, changes in fair value of common stock warrant liabilities, contingent earn-outs, and R&D tax credits - Total other income (expense), net, consists primarily of interest income and expense, commitment share expense, changes in the fair value of common stock warrant liabilities and Contingent Earn-outs, research and development tax credits and unconditional grants, and realized gains and losses on foreign currency transactions[161] Results of Operations For Q1 2024, total revenue decreased by 32% to $73,000, loss from operations improved by 14% to $(9.2) million, and net loss improved by 6% to $(11.1) million, with R&D expenses decreasing by 21% Results of Operations (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (%) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Total Revenue | $73 | $107 | (32)% | | Total Operating Expenses | $9,305 | $10,839 | (14)% | | Loss from Operations | $(9,232) | $(10,732) | (14)% | | Total Other Income (Expense), Net | $(1,848) | $(1,038) | 78% | | Net Loss | $(11,080) | $(11,770) | (6)% | Revenue Total revenue for Q1 2024 decreased by 32% to $73,000 from $107,000 in Q1 2023, primarily due to timing of dietary supplement purchases Revenue (in thousands) | Revenue Type | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (%) | | :----------- | :-------------------------------- | :-------------------------------- | :--------- | | Product revenue | $44 | $64 | (31)% | | Royalty revenue | $29 | $43 | (33)% | | Total revenue | $73 | $107 | (32)% | - The decrease in product and royalty revenues was due to the timing of purchases of Zinc Factor and Gold Factor by 4Life under the supply and license agreements[164] Cost of Revenue Cost of revenue increased by 220% to $16,000 in Q1 2024 from $5,000 in Q1 2023, related to dietary supplement production Cost of Revenue (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (%) | | :----- | :-------------------------------- | :-------------------------------- | :--------- | | Cost of revenue | $16 | $5 | 220% | Research and Development Expense R&D expense decreased by 21% to $5.9 million in Q1 2024, mainly due to decreased CNM-Au8 clinical trial expenses, partially offset by increased ALS EAPs and non-clinical activities Research and Development Expense (in thousands) | Category | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (%) | | :-------------------------- | :-------------------------------- | :-------------------------------- | :--------- | | CNM-Au8 | $1,051 | $2,133 | (51)% | | CNM-ZnAg | $13 | $813 | (98)% | | Unallocated | $1,264 | $1,159 | 9% | | Personnel | $2,664 | $2,317 | 15% | | Stock-based compensation | $877 | $973 | (10)% | | Total Research and Development | $5,869 | $7,395 | (21)% | - The decrease in CNM-Au8 expenses was primarily due to a decrease in expenses in the HEALEY ALS Platform Trial and other clinical trials due to the previous completion of their blinded periods, partially offset by increased expenses related to ALS EAPs, non-clinical, and regulatory activities[168] - The decrease in CNM-ZnAg expenses was primarily due to the completion of the clinical trial for treatment of COVID-19 in late 2022[168] General and Administrative Expense G&A expense remained stable, decreasing by 1% to $3.42 million in Q1 2024, with decreases in insurance and legal fees offset by increases in public relations and personnel General and Administrative Expense (in thousands) | Category | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (%) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Directors' and officers' insurance | $186 | $398 | (53)% | | Legal | $75 | $108 | (31)% | | Finance and accounting | $249 | $259 | (4)% | | Public and investor relations | $234 | $144 | 63% | | Personnel | $1,096 | $989 | 11% | | Stock-based compensation | $1,136 | $1,250 | (9)% | | Other | $444 | $291 | 53% | | Total General and Administrative | $3,420 | $3,439 | (1)% | - Decreases in directors' and officers' insurance fees, legal fees, and finance and accounting fees were partially offset by increases in public and investor relations efforts, personnel expenses, and other expenses (information technology, office and professional expenses, and lobbying activities)[170][171] Total Other Income (Expense), Net Total other income (expense), net, increased significantly to an expense of $(1.85) million in Q1 2024, a 78% increase, primarily due to a $1.31 million loss from common stock warrant liabilities Total Other Income (Expense), Net (in thousands) | Category | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change (%) | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Interest income | $359 | $172 | 109% | | Interest expense | $(1,244) | $(1,066) | 17% | | Commitment share expense | — | $(399) | * | | Change in fair value of common stock warrant liabilities | $(1,309) | — | * | | Change in fair value of Clene Nanomedicine contingent earn-out liability | $53 | $(55) | * | | Change in fair value of Initial Stockholders contingent earn-out liability | $7 | $(7) | * | | Research and development tax credits and unrestricted grants | $286 | $314 | (9)% | | Other income, net | — | $3 | * | | Total Other Income (Expense), Net | $(1,848) | $(1,038) | 78% | - The increase in total other expense was primarily due to a $1.309 million loss from a change in fair value of common stock warrant liabilities in Q1 2024[173] - Interest income increased by 109% primarily due to increased balances of cash and cash equivalents and increasing interest rates[173] Taxation The company operates in the U.S., Australia, and Netherlands, incurring net losses before income taxes, with a full valuation allowance against U.S. deferred tax assets United States The company is subject to U.S. federal (21%) and state income taxes, with a full valuation allowance against net deferred tax assets due to cumulative losses and uncertain future taxable income - The company is subject to statutory U.S. federal corporate income tax at a rate of 21.00% and state income taxes in Maryland (8.25%) and Utah (4.65% for 2024, 4.85% for 2023)[175] - A full valuation allowance is recorded against net deferred tax assets due to the uncertainty of their realization, resulting from the company's three-year cumulative loss position and uncertainty of generating pre-tax income in the foreseeable future[175] Australia Clene Australia is subject to a 30% corporate income tax rate, reported no taxable income, but received $14,000 in R&D tax credits in Q1 2024 - Clene Australia is subject to corporate income tax at a rate of 30.00%[176] - Clene Australia had no taxable income for the three months ended March 31, 2024 and 2023, but recorded other income of $14,000 for research and development tax credits in Q1 2024 (compared to $0.3 million in Q1 2023)[176] Netherlands Clene Netherlands is subject to corporate income tax rates of 19% and 25.80%, reporting no taxable income for Q1 2024 or Q1 2023 - Clene Netherlands is subject to corporate income tax at a rate of 19.00% up to €200,000 of taxable income and 25.80% for taxable income in excess of €200,000[177] - Clene Netherlands had no taxable income or provision for income taxes for the three months ended March 31, 2024 and 2023[177] Liquidity and Capital Resources The company has historically financed operations through equity, debt, and grants, incurring significant losses and negative cash flows, raising substantial doubt about its going concern ability, with detailed short-term and long-term cash requirements Sources of Capital Since inception, the company financed operations primarily through $175.1 million in equity, $32.3 million from convertible notes, $27.3 million from other notes, and $12.0 million from tax credits and grants - Since inception, the company has financed operations primarily through $175.1 million from equity financing, $32.3 million from convertible promissory notes, $27.3 million from notes payable and convertible notes payable, $9.4 million from the Reverse Recapitalization, and $9.1 million from refundable R&D tax credits and $2.9 million from grants[179] - The company also received indirect financial support for the HEALEY ALS Platform Trial, which conducted a platform trial for ALS treatment at significantly lower costs[180] Going Concern The company incurred a $9.2 million operating loss and $7.1 million net cash used in operations for Q1 2024, with $27.9 million in cash, raising substantial doubt about its ability to continue as a going concern Key Financial Metrics (in thousands) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Loss from Operations | $(9,232) | $(10,732) | | Net Cash Used in Operating Activities | $(7,082) | $(9,218) | | Cash, Cash Equivalents, and Marketable Securities (as of period end) | $27,910 | $35,000 | | Accumulated Deficit (as of period end) | $253,803 | $242,723 (Dec 31, 2023) | - The company expects that within the next twelve months, it will not have sufficient cash and other resources to sustain current operations or meet obligations without obtaining additional financing, raising substantial doubt about its ability to continue as a going concern[183] - Plans to mitigate funding needs include exploring equity and debt financing, licensing, and utilizing existing facilities, but these plans do not alleviate the substantial doubt about continuing as a going concern beyond one year[184] Short-Term Material Cash Requirements Short-term capital requirements fund operations, R&D, personnel, regulatory, and clinical trials, with firm commitments including $7,000 for finance leases, $1.1 million for operating leases, $21.9 million for notes payable, and $0.2 million for capital expenditures - Primary capital requirements for the next twelve months are to fund operations, including research and development, personnel, regulatory, and other clinical trial costs related to CNM-Au8, and general and administrative costs[186] Short-Term Firm Commitments (next twelve months, in thousands) | Commitment Type | Amount | | :------------------------------------------ | :----- | | Finance lease obligations | $7 | | Operating lease obligations | $1,100 | | Notes payable (principal and interest) | $21,900 | | Capital expenditures | $200 | Long-Term Material Cash Requirements Long-term capital requirements fund operations, R&D, personnel, regulatory, and clinical trials, with known obligations including $6.1 million for operating leases and $8.9 million for notes payable - Beyond the next twelve months, primary capital requirements are to fund operations, including research and development, personnel, regulatory, and other clinical trial costs related to CNM-Au8, with additional funds potentially spent to initiate new clinical trials[188] Long-Term Known Obligations (beyond twelve months, in thousands) | Obligation Type | Amount | | :------------------------------------------ | :----- | | Operating lease obligations | $6,100 | | Notes payable (interest and principal repayment) | $8,900 | Use of Funds Primary cash use in all periods was to fund research and development, regulatory and clinical trial costs, and general corporate expenditures - The primary use of cash in all periods presented was to fund research and development, regulatory and other clinical trial costs, and general corporate expenditures[191] Cash Flows (in thousands) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(7,082) | $(9,218) | | Net cash provided by investing activities | $71 | $4,722 | | Net cash provided by (used in) financing activities | $(19) | $4,588 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(7,089) | $110 | Operating Activities Net cash used in operating activities decreased to $7.1 million in Q1 2024 from $9.2 million in Q1 2023, driven by a lower net loss and a $1.3 million non-cash loss from warrant liabilities - Net cash used in operating activities decreased to $7.1 million for the three months ended March 31, 2024, from $9.2 million for the same period in 2023[192][193] - The decrease in cash used was due to a lower net loss and a net change in operating assets and liabilities, including a $1.3 million non-cash loss from a change in fair value of common stock warrant liabilities in Q1 2024[192] Investing Activities Net cash provided by investing activities decreased to $71,000 in Q1 2024 from $4.7 million in Q1 2023, primarily due to increased marketable securities purchases offset by maturities - Net cash provided by investing activities decreased to $71,000 for the three months ended March 31, 2024, compared to $4.7 million for the same period in 2023[194] - The change was primarily due to purchases of marketable securities of $6.2 million in Q1 2024, largely offset by $6.3 million in proceeds from maturities, whereas Q1 2023 had $5.0 million in proceeds from maturities with minimal purchases[194] Financing Activities Net cash used in financing activities was $19,000 in Q1 2024, primarily for finance lease payments, contrasting with $4.6 million provided in Q1 2023 from common stock issuance and notes payable - Net cash used in financing activities was $19,000 for the three months ended March 31, 2024, consisting of payments of finance lease obligations[196] - Net cash provided by financing activities was $4.6 million for the three months ended March 31, 2023, primarily from proceeds from issuance of common stock ($4.3 million) and notes payable ($0.4 million)[196] Public Offering In June 2023, the company completed a public offering of 50 million units at $0.80 per unit, generating $40.0 million in gross proceeds, each unit including one common stock share and two warrants - In June 2023, the company sold 50,000,000 units at a sale price of $0.80 per unit, generating aggregate gross proceeds of $40.0 million[197] - Each unit consisted of one share of Common Stock, one Tranche A Warrant (exercise price $1.10), and one Tranche B Warrant (exercise price $1.50)[197] Common Stock Sales Agreement The company has an ATM Agreement to sell up to $12.3 million in common stock. No sales occurred in Q1 2024, contrasting with $4.5 million in gross proceeds from 2.9 million shares sold in Q1 2023 - The company has an Equity Distribution Agreement (ATM Agreement) to offer and sell shares of Common Stock with an aggregate offering price of up to $12.3 million[198] - No sales were made under the ATM Agreement during the three months ended March 31, 2024. During Q1 2023, the company sold 2,895,090 shares for gross proceeds of $4.5 million[198] Common Stock Purchase Agreement The company entered a Purchase Agreement with Lincoln Park Capital Fund, LLC for up to $25.0 million in common stock purchases, issuing 332,668 initial commitment shares. The agreement remains in effect, with no sales in Q1 2024 or Q1 2023 - On March 3, 2023, the company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC, committing Lincoln Park to purchase up to $25.0 million of common stock[199] - The company issued 332,668 shares of Common Stock to Lincoln Park as an initial fee for its commitment under the Purchase Agreement[199] - No sales were made under the Purchase Agreement during the three months ended March 31, 2024 and 2023, and the prospectus supplement for future sales was suspended in June 2023, though the agreement remains in effect[199] Critical Accounting Estimates Financial statements rely on critical accounting estimates for earn-out liabilities, convertible notes, warrant liabilities, income taxes, and stock-based compensation, using valuation models with unobservable inputs that can materially impact results - Critical accounting estimates involve significant estimation uncertainty and can materially impact financial condition and results of operations, including contingent earn-out liabilities, convertible notes, common stock warrant liabilities, income taxes, and stock-based compensation[201] Contingent Earn-Out Liabilities Contingent earn-out liabilities are measured at fair value using a Monte Carlo model, with changes recorded in other income (expense), net. Q1 2024 saw a $0.1 million gain, driven by stock price and valuation assumption changes - Contingent earn-out liabilities are classified as liabilities and remeasured to fair value at each reporting date using a Monte Carlo valuation model, with changes recorded in other income (expense), net[203] - The change in fair value resulted in a gain of $0.1 million for Q1 2024, compared to a loss of $0.1 million for Q1 2023, driven by changes in the company's common stock price and valuation model assumptions[203] Unobservable Inputs for Contingent Earn-Out Liabilities Valuation | Input | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :------------------ | | Expected stock price volatility | 97.50% | 115.00% | | Risk-free interest rate | 4.70% | 4.20% | | Expected dividend yield | 0.00% | 0.00% | | Expected term (in years) | 1.75 | 2.00 | Convertible Notes The 2021 Avenue Loan and 2022 DHCD Loan conversion features are accounted for as single liabilities at amortized cost, carried at $5.0 million and $5.3 million, respectively, as of March 31, 2024 - The conversion features of the 2021 Avenue Loan and 2022 DHCD Loan did not meet the requirements for derivative accounting and are accounted for as single liabilities measured at amortized cost[205][206] Convertible Notes Carrying Amounts (in thousands) | Loan | March 31, 2024 | December 31, 2023 | | :--- | :------------- | :---------------- | | 2021 Avenue Loan | $5,000 | $4,900 | | 2022 DHCD Loan | $5,300 | $5,300 | Common Stock Warrant Liabilities New Avenue and Tranche A Warrants are derivative liabilities measured at fair value using a Black-Scholes model. Q1 2024 saw a $0.1 million loss for New Avenue and a $1.2 million loss for Tranche A Warrants, driven by stock price and valuation changes - The New Avenue Warrant and Tranche A Warrants are classified as derivative liabilities and measured at fair value using a Black-Scholes option-pricing model[207][210] - Changes in fair value resulted in a loss of $0.1 million for the New Avenue Warrant and a loss of $1.2 million for the Tranche A Warrants for Q1 2024, primarily due to changes in the company's common stock price and valuation model assumptions[207][210] Unobservable Inputs for New Avenue Warrant Valuation | Input | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :------------------ | | Expected stock price volatility | 105.00% – 120.00% | 105.00% – 110.00% | | Risk-free interest rate | 4.28% – 5.38% | 3.88% – 5.03% | | Expected dividend yield | 0.00% | 0.00% | | Expected term (in years) | 0.50 – 4.25 | 0.75 – 4.50 | | Probability of change of control | 20.00% | 25.00% | | Probability of dissolution | 50.00% | 50.00% | | Probability of other outcome | 30.00% | 25.00% | Unobservable Inputs for Tranche A Warrants Valuation | Input | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :------------------ | | Expected stock price volatility | 100.00% – 105.00% | 100.00% – 110.00% | | Risk-free interest rate | 4.55% – 5.15% | 4.13% – 4.74% | | Expected dividend yield | 0.00% | 0.00% | | Expected term (in years) | 0.83 – 2.21 | 1.08 – 2.46 | | Probability of NDA acceptance | 20.00% | 20.00% | | Probability of fundamental transaction | 20.00% | 25.00% | | Probability of dissolution | 50.00% | 50.00% | | Probability of other outcome | 10.00% | 5.00% | Income Taxes The company applies a two-step process for income tax uncertainty and deferred tax asset recovery. Due to cumulative losses, a valuation allowance is maintained, and no income tax benefits are recorded for net operating losses or deferred tax assets - The company applies a two-step process to determine the amount of tax benefit to be recognized for income tax uncertainty and assesses the likelihood of deferred tax asset recovery[212] - A valuation allowance is established, and no income tax benefits are recorded for net operating losses or other deferred tax assets, due to uncertainty of realizing benefits from these items[212] Stock-Based Compensation Stock-based compensation is accounted for using a fair value-based method. Stock options are valued using a Black-Scholes model, and restricted stock awards use a Monte Carlo model, both relying on significant judgment and unobservable inputs - Stock-based compensation arrangements are accounted for using a fair value-based method, with the fair value recognized over the requisite service period[213] - The fair value of stock options is estimated using a Black-Scholes option-pricing model, and restricted stock awards with market conditions are valued using a Monte Carlo valuation model, both requiring significant judgment and unobservable inputs[213][215][216] Unobservable Inputs for Stock Options Valuation | Input | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Expected stock price volatility | 99.99% | 96.22% – 103.24% | | Risk-free interest rate | 4.04% | 3.38% – 3.98% | | Expected dividend yield | 0.00% | 0.00% | | Expected term of options (in years) | 5.00 | 5.00 – 6.08 | Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Clene Inc. is not required to provide specific quantitative and qualitative disclosures about market risk in this report - As a smaller reporting company, Clene Inc. is not required to provide information regarding quantitative and qualitative disclosures about market risk[217] Item 4. Controls and Procedures Disclosure controls and procedures were ineffective as of March 31, 2024, due to material weaknesses in internal control over financial reporting, including an ineffective control environment, inadequate reconciliations, and IT general control deficiencies, with management actively pursuing remediation Evaluation of Disclosure Controls and Procedures As of March 31, 2024, disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting, though financial statements are believed to be fairly represented - As of March 31, 2024, the company's disclosure controls and procedures were concluded to be not effective due to material weaknesses in internal control over financial reporting[218] - Notwithstanding the identified material weaknesses, management believes the condensed consolidated financial statements fairly represent the financial condition, results of operations, and cash flows[218] Material Weaknesses in Internal Control over Financial Reporting Material weaknesses include an ineffective control environment, inadequate controls over reconciliations and manual journal entries, and IT general control deficiencies, which could lead to material misstatements - Material weaknesses identified include an ineffective control environment, inadequate controls over the preparation and review of reconciliations, and insufficient segregation of duties over manual journal entries[220] - Deficiencies in IT general controls were identified, specifically regarding user access, program change management, computer operations, and testing and approval controls for program development[222] - These control deficiencies could result in a material misstatement of one or more account balances or disclosures in the annual or interim consolidated financial statements[223] Material Weakness Remediation Management is actively remediating material weaknesses by strengthening the internal accounting team, refining processes, and engaging external consultants, with additional technical accounting resources and enhanced corporate oversight planned - Management is actively engaged in remediating control deficiencies by strengthening the internal accounting team, refining processes, and engaging external consultants for support in complex GAAP applications[224][225] - The remediation plan includes adding more technical accounting resources and enhancing corporate oversight over process-level controls[225][226] Changes in Internal Control over Financial Reporting Aside from ongoing remediation for material weaknesses, no other material changes in internal control over financial reporting occurred during Q1 2024 - Other than changes described under 'Material Weakness Remediation,' there were no changes in internal control over financial reporting during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[227] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material pending legal proceedings, though it may be involved in ordinary course business legal matters from time to time - The company is not currently a party to any material pending legal proceedings[229] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - There have been no material changes to the risk factors since previously disclosed in the 2023 Annual Report on Form 10-K[230] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report during the period - There were no unregistered sales of equity securities or use of proceeds to report during the three months ended March 31, 2024[232] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report during the period - There were no defaults upon senior securities to report during the three months ended March 31, 2024[232] Item 4. Mine Safety Disclosures This item is not applicable to the company - Mine Safety Disclosures are not applicable to the company[232] Item 5. Other Information No officers or directors adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024 - During the three months ended March 31, 2024, none of the company's officers or directors adopted or terminated any 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement'[233] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, certifications, and XBRL interactive data files - The exhibits filed with the Form 10-Q include the Fourth Amended and Restated Certificate of Incorporation, Bylaws, CEO and CFO certifications (pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350), and Inline XBRL documents[234]