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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Quarterly Period Ended September 30, 2022
 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from __________________   to _________________________
 
Commission File Number 001-33650
 
LISATA THERAPEUTICS, INC.
(Exact name of registrant as specified in its charter)


Delaware22-2343568
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
  
110 Allen Road, 2nd Floor, Basking Ridge, New Jersey
07920
(Address of principal executive offices)(zip code)
 
Registrant’s telephone number, including area code: 908-842-0100

Caladrius Biosciences, Inc.
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareLSTA
The Nasdaq Capital Market
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐     No 

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
ClassOutstanding as of November 10, 2022
Common stock, $0.001 par value per share7,859,684 shares




Index
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report (this “Quarterly Report”) contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995, as well as historical information. When used in this Quarterly Report, statements that are not statements of current or historical fact may be deemed to be forward-looking statements, including, without limitation, all statements related to any expectations of revenues, expenses, cash flows, earnings or losses from operations, cash required to maintain current and planned operations, capital or other financial items; any statements of the plans, strategies and objectives of management for future operations; any plans or expectations with respect to product research, development and commercialization, including regulatory approvals; any other statements of expectations, plans, intentions or beliefs; and any statements of assumptions underlying any of the foregoing. Without limiting the foregoing, the words “plan,” “project,” “forecast,” “outlook,” “intend,” “may,” “will,” “expect,” “anticipate,” “likely,” “believe,” “could,” “anticipate,” “estimate,” “continue,” “target” or similar expressions or other variations or comparable terminology are intended to identify such forward-looking statements, although some forward-looking statements are expressed differently. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity or our achievements or industry results, to be materially different from any future results, performance, levels of activity or our achievements or industry results expressed or implied by such forward-looking statements. Factors that could cause our actual results to differ materially from anticipated results expressed or implied by forward-looking statements include, among others:
our ability to obtain sufficient capital or strategic business arrangements to fund our operations and expansion plans, including meeting our financial obligations under various licensing and other strategic arrangements, the funding of our clinical trials for product candidates, and the commercialization of the relevant technology;
our ability to build and maintain the management and human resources infrastructure necessary to support the growth of our business;
whether a relevant market is established for our products and services and our ability to capture a meaningful share of this market;
scientific, regulatory and medical developments beyond our control;
our ability to obtain and maintain, as applicable, appropriate governmental licenses, accreditations or certifications or to comply with healthcare laws and regulations or any other adverse effect or limitations caused by government regulation of our business;
whether any of our current or future patent applications result in issued patents, the scope of those patents and our ability to obtain and maintain other rights to technology required or desirable for the conduct of our business, and our ability to commercialize products without infringing upon the claims of third-party patents;
whether any potential strategic or financial benefits of various licensing agreements will be realized;
the long-term success of our recently completed merger with Cend Therapeutics, Inc. (“Cend”), including the ongoing integration of Cend’s operations and the advancement of their development programs;
the results of our development activities;
our ability to complete our other planned clinical trials (or initiate other trials) in accordance with our estimated timelines due to delays associated with enrolling patients due to the novelty of the treatment, the size of the patient population, competition with other clinical trials for similar subjects and the need of patients to meet the inclusion criteria of the trial or otherwise;
the extent to which the COVID-19 pandemic and/or its long-term effects may impact, directly or indirectly, our business, including our clinical trials and financial condition;
our ability to maintain the listing of our common stock on The Nasdaq Capital Market; and
other factors discussed in “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 22, 2022 (our “2021 Form 10-K”), in our Quarterly Reports on Form 10-Q for the periods ended March 31, 2022 and June 30, 2022 and in Exhibit 99.2 to our Amendment No. 1 to Current Report on Form 8-K/A filed on October 4, 2022.

2

Index
The factors discussed herein, including those risks described in “Item 1A. Risk Factors” and elsewhere in our 2021 Form 10-K and in our other periodic filings with the SEC, which are available for review at www.sec.gov, could cause actual results and developments to be materially different from those expressed or implied by such statements. All forward-looking statements attributable to us are expressly qualified in their entirety by these and other factors. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they were made. Except as required by law, we undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

3

Index
TABLE OF CONTENTS
PART I- FINANCIAL INFORMATION
Page No.
Item 1.
 
 
 
 
 
Notes to Unaudited Consolidated Financial Statements
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II- OTHER INFORMATION
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.
Defaults Upon Senior Securities
Item 4.
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
 
Signatures
4

Index
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



LISATA THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
September 30,
2022
December 31,
2021
ASSETS(Unaudited)
Cash and cash equivalents$31,478 $24,647 
Marketable securities
44,052 70,323 
Prepaid and other current assets1,760 1,212 
Total current assets77,290 96,182 
Property and equipment, net299 62 
Acquired license - intangible352  
Other assets588 764 
Total assets$78,529 $97,008 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Liabilities  
Accounts payable$974 $1,934 
Accrued liabilities5,417 2,589 
Total current liabilities6,391 4,523 
Other long-term liabilities367 485 
Total liabilities6,758 5,008 
Commitments and Contingencies (Note 13)
Stockholders' Equity 
Preferred stock, authorized, 20,000,000 shares Series B convertible redeemable preferred stock
liquidation value, 0.000067 share of common stock, $0.01 par value; 825,000 shares designated;
issued and outstanding, 10,000 shares at September 30, 2022 and December 31, 2021, respectively
  
Common stock, $0.001 par value, authorized 33,333,333 shares; issued 7,863,340
and 3,986,719 shares at September 30, 2022 and December 31, 2021, respectively; and
outstanding, 7,862,602 and 3,985,981 shares at September 30, 2022 and December 31, 2021,
respectively
8 4 
Additional paid-in capital574,066 546,044 
Treasury stock, at cost; 738 shares at September 30, 2022 and December 31, 2021
(708)(708)
Accumulated deficit(501,251)(453,016)
Accumulated other comprehensive loss(90)(70)
Total Lisata Therapeutics, Inc. stockholders' equity72,025 92,254 
Non-controlling interests(254)(254)
Total stockholders' equity71,771 92,000 
Total liabilities, non-controlling interests and stockholders' equity$78,529 $97,008 
See accompanying notes to consolidated financial statements.
5

Index

LISATA THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)
(In thousands, except per share data)
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Operating Expenses:
Research and development$3,380 $4,125 $9,898 $13,530 
In-process research and development30,393  30,393  
General and administrative3,947 2,843 10,770 8,671 
Total operating expenses37,720 6,968 51,061 22,201 
Operating loss(37,720)(6,968)(51,061)(22,201)
Other income (expense):
Investment income, net337 41 496 111 
Other expense, net  (149)(90)
Total other income (expense)337 41 347 21 
     Net loss before benefit from income taxes and noncontrolling interests(37,383)(6,927)(50,714)(22,180)
Benefit from income taxes  (2,479)(1,508)
Net loss attributable to Lisata Therapeutics, Inc. common stockholders$(37,383)$(6,927)$(48,235)$(20,672)
Basic and diluted loss per share
Lisata Therapeutics, Inc. common stockholders$(7.88)$(1.74)$(11.28)$(5.76)
Weighted average common shares outstanding
Basic and diluted shares
4,747 3,974 4,276 3,587 

See accompanying notes to consolidated financial statements.
6

Index
LISATA THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited) 
(In thousands)
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net loss$(37,383)$(6,927)$(48,235)$(20,672)
Other comprehensive loss:
Available for sale securities - net unrealized gain (loss)5 (47)5 (51)
Cumulative translation adjustment arising during the period(25) (25) 
Total other comprehensive loss(20)(47)(20)(51)
Comprehensive loss attributable to Lisata Therapeutics, Inc. common
stockholders
$(37,403)$(6,974)$(48,255)$(20,723)
 
See accompanying notes to consolidated financial statements.
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Index
LISATA THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited) 
(In thousands)
 Series B Convertible
Preferred Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Treasury
Stock
Total
Lisata Therapeutics,
Inc.
Stockholders'
Equity
Non-
Controlling
Interest in
Subsidiary
Total
Equity
 SharesAmountSharesAmount
Balance at June 30, 2022 $ 4,038 $4 $547,032 $(70)$(463,868)$(708)$82,391 $(254)$82,137 
Net loss— — — — — — (37,383)— (37,383)— (37,383)
Share-based compensation— — 52 — 940 — — — 939 — 939 
Issuance of common stock in connection with merger— — 3,773 426,094 — — — 26,098 — 26,098 
Unrealized gain on marketable securities— — — — — 5 — — 5 — 5 
Foreign currency translation adjustment— — — — — (25)— — (25)— (25)
Balance at September 30, 2022 $ 7,863 $8 $574,066 $(90)$(501,251)$(708)$72,025 $(254)$71,771 
 Series B Convertible
Preferred Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Treasury
Stock
Total
Lisata Therapeutics,
Inc.
Stockholders'
Equity
Non-
Controlling
Interest in
Subsidiary
Total
Equity
 SharesAmountSharesAmount
Balance at December 31, 2021 $ 3,986 $4 $546,044 $(70)$(453,016)$(708)$92,254 $(254)$92,000 
Net loss— — — — — — (48,235)— (48,235)— (48,235)
Share-based compensation— — 100  1,899 — — — 1,899 — 1,899 
Net proceeds from issuances of common stock— — 4 — 29 — — — 29 — 29 
Issuance of common stock in connection with merger— — 3,773 426,094 — — — 26,098 — 26,098 
Unrealized gain on marketable securities— — — — — 5 — — 5 — 5 
Foreign currency translation adjustment— — — — — (25)— — (25)— (25)
Balance at September 30, 2022 $ 7,863 $8 $574,066 $(90)$(501,251)$(708)$72,025 $(254)$71,771 
8

Index
 Series B Convertible
Preferred Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Treasury
Stock
Total
Lisata Therapeutics,
Inc.
Stockholders'
Equity
Non-
Controlling
Interest in
Subsidiary
Total
Equity
 SharesAmountSharesAmount
Balance at June 30, 2021 $ 3,967 $4 $544,949 $(17)$(439,295)$(708)$104,933 $(254)$104,679 
Net loss— — — — — — (6,927)— (6,927)— (6,927)
Share-based compensation— — 19 — 708 — — — 708 — 708 
Unrealized loss on marketable securities— — — — — (47)— — (47)— (47)
Balance at September 30, 2021 $ 3,986 $4 $545,657 $(64)$(446,222)$(708)$98,667 $(254)$98,413 
 Series B Convertible
Preferred Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Treasury
Stock
Total
Lisata Therapeutics,
Inc.
Stockholders'
Equity
Non-
Controlling
Interest in
Subsidiary
Total
Equity
 SharesAmountSharesAmount
Balance at December 31, 2020 $ 1,292 $1 $458,766 $(13)$(425,550)$(708)$32,496 $(254)$32,242 
Net loss— — — — — — (20,672)— (20,672)— (20,672)
Share-based compensation— — 36 — 1,391 — — — 1,391 — 1,391 
Net proceeds from issuances of common stock and warrants— — 2,658 3 85,476 — — — 85,479 — 85,479 
Proceeds from option exercises— — — — 24 — — — 24 — 24 
Unrealized loss on marketable securities— — — — — (51)— — (51)— (51)
Balance at September 30, 2021 $ 3,986 $4 $545,657 $(64)$(446,222)$(708)$98,667 $(254)$98,413 
 

See accompanying notes to consolidated financial statements.
 
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LISATA THERAPEUTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
 Nine Months Ended September 30,
 20222021
Cash flows from operating activities:  
Net loss$(48,235)$(20,672)
Adjustments to reconcile net loss to net cash used in operating activities:  
Share-based compensation
2,168 1,639 
Depreciation and amortization22 47 
In process research and development expenses30,393  
Accretion on marketable securities893 1,925 
Changes in operating assets and liabilities:  
Prepaid and other current assets29 (1,199)
Other assets178 252 
Accounts payable, accrued liabilities and other liabilities(150)367 
Net cash used in operating activities(14,702)(17,641)
Cash flows from investing activities:  
Purchase of marketable securities(68,481)(137,329)
Sale of marketable securities93,865 66,035 
Asset acquisition costs, net of cash acquired related to merger with Cend(3,320) 
Purchase of property and equipment(259)(60)
Net cash provided by (used in) investing activities21,805 (71,354)
Cash flows from financing activities:  
Proceeds from exercise of options 24 
Tax withholding payments on net share settlement equity awards(267)(248)
Net proceeds from issuance of common stock29 85,479 
Net cash (used in) provided by financing activities(238)85,255 
           Effect of exchange rate changes on cash(34) 
Net increase (decrease) in cash and cash equivalents6,831 (3,740)
Cash and cash equivalents at beginning of period24,647 16,512 
Cash and cash equivalents at end of period$31,478 $12,772 
Supplemental disclosure of noncash investing activities:
Issuance of common stock in connection with merger$23,580 $ 
Incremental fair value of Cend's fully vested stock options assumed$2,136 $ 
See accompanying notes to consolidated financial statements.
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LISATA THERAPEUTICS, INC. AND SUBSIDIARIES
 
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – The Business
Overview
Lisata Therapeutics, Inc. (together with its subsidiaries, “we,” “us,” “our,” “Lisata” or the “Company”) is a clinical-stage pharmaceutical company dedicated to the discovery, development and commercialization of innovative therapies for the treatment of solid tumors and other major diseases. Lisata’s lead investigational product candidate, LSTA1 (formerly known as CEND-1), is designed to activate a novel uptake pathway that allows anti-cancer drugs to penetrate solid tumors more effectively. LSTA1 actuates this active transport system in a tumor-specific manner, resulting in systemically co-administered anti-cancer drugs more efficiently penetrating and accumulating in the tumor, while normal tissues are not affected. LSTA1 also has the potential to modify the tumor microenvironment (“TME”), making tumors more susceptible to immunotherapies. LSTA1 has demonstrated favorable safety, tolerability, and activity to date in completed and ongoing clinical trials to enhance delivery of standard-of-care chemotherapy for pancreatic cancer. Lisata and its collaborators have also amassed significant non-clinical data demonstrating enhanced delivery of a range of emerging anti-cancer therapies, including immunotherapies and RNA-based therapeutics. Lisata is exploring the potential of LSTA1 to enable a variety of treatment modalities to treat a range of solid tumors more effectively. In addition, Lisata also has clinical development programs based on its autologous CD34+ cell therapy technology platform.
The Company's leadership team has decades of collective biopharmaceutical and pharmaceutical product development experience across a variety of therapeutic categories and at all stages of development from preclinical through to product registration and launch. Its goal is to develop and commercialize products that address important unmet medical needs based on a broad and versatile portfolio of candidates. The Company’s current product candidates include:
LSTA1, the subject of phase 1b/2a and 2b clinical studies being conducted globally in a variety of solid tumor types, including metastatic pancreatic ductal adenocarcinoma (mPDAC), in combination with a variety of anti-cancer regimens;
XOWNA® (LSTA16 formerly CLBS16), the subject of both a completed positive Phase 2a study (ESCaPE-CMD) and follow on Phase 2b study (FREEDOM Trial) in the United States for the treatment of coronary microvascular dysfunction (“CMD”);
HONEDRA® (LSTA12 formerly CLBS12), recipient of SAKIGAKE designation, pursuant to which early conditional approval in Japan for the treatment of critical limb ischemia (“CLI”) and Buerger’s disease is being sought based on the current results of a clinical trial executed in Japan. HONEDRA® was the recipient of orphan drug designation in March 2021 from the U.S. Food and Drug Administration (“FDA”) for Buerger's disease; and
LSTA201 (formerly CLBS201), the subject of a study designed to assess the safety and efficacy of CD34+ cell therapy as a regenerative treatment for patients with chronic kidney disease related to type 2 diabetes (diabetic kidney disease or “DKD”).
Merger with Cend Therapeutics, Inc. and Name Change
On September 15, 2022, the Company, then operating as Caladrius Biosciences, Inc. (“Caladrius"), completed its acquisition of Cend Therapeutics, Inc. (“Cend”), a Delaware corporation (the “Merger”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated as of April 26, 2022, by and among Caladrius, Cend and CS Cedar Merger Sub, Inc. (“Merger Sub”).
Pursuant to the terms set forth in the Merger Agreement and effective September 15, 2022 (the “Effective Time”): (i) Merger Sub merged with and into Cend, with Cend surviving as a wholly owned subsidiary of Caladrius, (ii) Caladrius changed its name to Lisata Therapeutics, Inc. in connection with and immediately following to the Effective Time, and (iii) Caladrius effected a 1:15 reverse stock split of its common stock (“Reverse Stock Split”) prior to the Effective Time. At the Effective Time, each share of Cend's common stock outstanding immediately prior to the Effective Time was converted into the right to receive shares of Lisata’s common stock based on an exchange ratio of 0.5338 (the “Exchange Ratio”), after taking into account the Reverse Stock Split. In connection with the Merger close, the Company issued an aggregate of 3,772,768 shares of common stock, based on the Exchange Ratio, to holders of Cend, in exchange for all of the Cend capital stock outstanding immediately prior to the closing of the Merger.
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Pursuant to the Merger Agreement, Lisata assumed all of the outstanding and unexercised options to purchase shares of Cend capital stock under the 2016 Equity Incentive Plan (the “Cend Plan”), and, in connection with the Merger, such options were converted into options to purchase shares of Lisata’s common stock based on the Exchange Ratio. At the closing of the Merger at the Effective Time, the Company assumed Cend's stock options to purchase an aggregate of 1,227,776 shares of the Company's common stock.
Caladrius was considered to be the accounting acquirer based on the terms of the Merger Agreement and certain factors including: (i) Caladrius owned approximately 52% of the Company's outstanding shares of common stock immediately following the close of the Merger; (ii) although both entities contributed to the new management team of Lisata, the Caladrius team has more individuals on the management team and will hold the CEO, CMO and other senior management roles; (iii) Caladrius paid a premium to acquire Cend’s assets; and (iv) Caladrius was significantly larger than Cend regarding total assets, operations, and research and development activities. The Merger was accounted for as an asset acquisition as substantially all of the fair value is concentrated in in-process research and development (“IPR&D”). Cend’s assets (except for cash and working capital) were measured and recognized as an allocation of the transaction price based on their relative fair values as of the transaction date with any value associated with IPR&D with no alternative future use being expensed as reported in the consolidated statement of operations. The prior reported operating results prior to the Merger close are those of Caladrius alone.
Coronavirus Considerations
In December 2019, a novel strain of coronavirus (SARS-CoV-2), which causes COVID-19, was reported to have surfaced in China. In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic, and the world's economies began to experience pronounced effects. Despite the FDA approval of multiple COVID-19 vaccines in late 2020, there remains uncertainty around the extent and duration of disruption and any future related financial impact cannot reasonably be estimated at this time. In response to the COVID-19 pandemic, the Company implemented a universal work from home policy as well as stringent social distancing and other hygiene policies for employees when they must be in the office. The Company's clinical study of HONEDRA® in Japan experienced significant delays in enrollment due to the States of Emergency in effect in Japan for most of 2020, 2021, and 2022 covering Tokyo and other regions in response to an increased number of COVID-19 infections. With the Company's expectation that COVID-19 in Japan will continue to impact negatively clinical site operations and enrollment of patients in the HONEDRA® clinical trial, it elected to suspend trial enrollment, seek a development partner and consult with the Japanese regulatory authorities regarding the submission of patient data already accrued. Caladrius' phase 2b FREEDOM Trial of XOWNA® in the U.S. has also experienced delays in enrolling patients as a result of COVID-19. While early enrollment proceeded to plan with the first patient treated in January 2021, the impact of the COVID-19 pandemic contributed to a general slowing of enrollment, including supply chain disruptions affecting the availability of qualified catheters used in the diagnosis of CMD and/or administration of XOWNA® as well as with a contrast agent typically used in many catheter laboratories. In May 2022, the Company announced that enrollment in the FREEDOM Trial had been suspended and that it intended to conduct an interim analysis of the data from not less than the first 20 patients enrolled using the 6-month follow-up data to evaluate the efficacy and safety of XOWNA® in subjects with CMD. Following the analysis of results of the FREEDOM Trial subjects completing 6-month follow-up along with Key Opinion Leaders’ input, the Company’s board of directors determined that execution of a redesigned FREEDOM-like trial would be the appropriate next step, but the cost of such a trial would be prohibitively expensive to undergo without a strategic partner. Accordingly, the Company’s board of directors concluded that XOWNA® development will only be continued if a strategic partner that can contribute the necessary capital for a redesigned trial is identified and secured. There can be no assurance that we will be able to identify such a partner and enter into an agreement with such partner on acceptable terms or at all.
Reverse Stock Split
On September 14, 2022, in connection with the Merger, the Company implemented the Reverse Stock Split, as authorized at the annual meeting of stockholders on September 13, 2022. The Reverse Stock Split became effective on September 14, 2022 at 5:00 pm and the Company's common stock began trading on The Nasdaq Capital Market on a post-split basis at the open of business on September 15, 2022. As of September 14, 2022, every fifteen shares of the Company’s issued and outstanding common stock (and such shares held in treasury) were automatically converted into one share of common stock, without any change in the par value per share. In addition, proportionate adjustments were made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options, stock appreciation rights, convertible notes and warrants to purchase shares of common stock, the number of shares issuable upon the vesting of all restricted stock awards, and the number of shares of common stock reserved for issuance pursuant to the Company’s equity incentive compensation plans. Any stockholder who would otherwise be entitled to a fractional share of common stock created as a result of the Reverse Stock Split received a cash payment equal to the product of such resulting fractional interest in one share of common stock multiplied by the closing trading price of the common stock on September 15, 2022. The Reverse Stock Split was effectuated in order to
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increase the per share trading price of our common stock to satisfy the $1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market.
All share and per share amounts of common stock, options and warrants in the accompanying financial statements have been restated for all periods presented to give retroactive effect to the Reverse Stock Split. Accordingly, the consolidated statements of equity reflect the impact of the Reverse Stock Split by reclassifying from “common stock” to “additional paid-in capital” in an amount equal to the par value of the decreased shares resulting from the Reverse Stock Split.
Basis of Presentation
The accompanying unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the accompanying Consolidated Financial Statements of the Company and its subsidiaries, which are unaudited, include all normal and recurring adjustments considered necessary to present fairly the Company’s financial position as of September 30, 2022, and the results of its operations and its cash flows for the periods presented. The unaudited consolidated financial statements herein should be read together with the historical consolidated financial statements of the Company for the years ended December 31, 2021 and 2020 included in our 2021 Form 10-K. Operating results for the three and nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of expenses during the reporting period. The Company bases its estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company makes critical estimates and assumptions in determining stock-based awards values and the valuation of the Merger which was accounted for as an asset acquisition as substantially all of the fair value is concentrated in in-process research and development (“IPR&D”). Accordingly, actual results could differ from those estimates and assumptions.
Principles of Consolidation
The Consolidated Financial Statements include the accounts of Lisata and its wholly owned and majority owned subsidiaries and affiliates. All intercompany activities have been eliminated in consolidation.
Foreign Currency Remeasurement
The Company’s reporting currency is the U.S. Dollar. The functional currency of DrugCendR Australia PTY Ltd. which is a foreign subsidiary of the Company is the Australian Dollar. The assets and liabilities of DrugCendR Australia PTY Ltd. are translated into U.S. Dollars at the exchange rates in effect at each balance sheet date, and the results of operations are translated using the average exchange rates prevailing throughout the reporting period. Adjustments resulting from translating foreign functional currency financial statements into U.S. Dollars are included in the foreign currency translation adjustment, a component of accumulated other comprehensive income (loss) in stockholders' equity.

Note 2 – Summary of Significant Accounting Policies
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid, investments with maturities of ninety days or less when purchased.
Concentration of Risks
The Company is subject to credit risk from its portfolio of cash, cash equivalents and marketable securities. Under its investment policy, the Company limits amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. Cash is held at major banks in the United States and Australia. Therefore, the Company is not exposed to any significant concentrations of credit risk from these financial instruments. The goals of the Company's investment policy, in order of priority, are as follows: safety and preservation
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of principal and diversification of risk, liquidity of investments sufficient to meet cash flow requirements, and a competitive after-tax rate of return.
Marketable Securities
The Company determines the appropriate classification of its marketable securities at the time of purchase and reevaluates such designation at each balance sheet date. All of the Company's marketable securities are considered as available-for-sale and carried at estimated fair values and reported in cash equivalents and marketable securities. Unrealized gains and losses on available-for-sale securities are excluded from net income and reported in accumulated other comprehensive income (loss) as a separate component of stockholders' equity. Other income (expense), net includes interest, dividends, amortization of purchase premiums and discounts, realized gains and losses on sales of securities and other-than-temporary declines in the fair value of securities, if any. The cost of securities sold is based on the specific identification method. The Company regularly reviews all of its investments for other-than-temporary declines in fair value. The Company's review includes the consideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, the severity and duration of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that it will be required to sell the securities before the recovery of their amortized cost basis. When the Company determines that the decline in fair value of an investment is below its accounting basis and this decline is other-than-temporary, it reduces the carrying value of the security it holds and records a loss for the amount of such decline.
Property and Equipment
The cost of property and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed on the straight-line method. Repairs and maintenance expenditures that do not extend original asset lives are charged to expense as incurred. The estimated useful lives of property and equipment are as follows:
Furniture and fixtures10 years
Computer equipment3 years
Software3 years
Leasehold improvementsLife of lease
Long-lived Assets
Long-lived assets consist of property and equipment and intangibles. The assets are amortized on a straight line basis over their respective useful lives. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds the fair value of the asset. If other events or changes in circumstances indicate that the carrying amount of an asset that the Company expects to hold and use may not be recoverable, the Company will estimate the undiscounted future cash flows expected to result from the use of the asset and/or its eventual disposition, and recognize an impairment loss, if any. The impairment loss, if determined to be necessary, would be measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.
Share-Based Compensation  
The Company expenses all share-based payment awards to employees, directors, and consultants, including grants of stock options, warrants, and restricted stock, over the requisite service period based on the grant date fair value of the awards. Consultant awards are remeasured each reporting period through vesting. For awards with performance-based vesting criteria, the Company estimates the probability of achievement of the performance criteria and recognizes compensation expense related to those awards expected to vest. The Company determines the fair value of option awards using the Black-Scholes option-pricing model which uses both historical and current market data to estimate the fair value. This method incorporates various assumptions such as the risk-free interest rate, expected volatility, expected dividend yield and expected life of the options or warrants. Stock based compensation expense also includes an estimate, which is made at the time of the grant, of the number of awards that are expected to be forfeited. The fair value of the Company’s restricted stock and restricted stock units is based on the closing market price of the Company’s common stock on the date of grant.
Loss Per Share
Basic loss per share is based on the weighted effect of all common shares issued and outstanding and is calculated by dividing net loss attributable to common stockholders by the weighted average shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of common shares used in the basic loss per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive securities outstanding. Diluted loss per share is not presented as such potentially dilutive securities are anti-dilutive to losses incurred in all periods presented.
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Treasury Stock
Treasury stock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as treasury stock. Gains or losses on the subsequent reissuance of shares are credited or charged to additional paid in capital.
Research and Development Costs 
Research and development (“R&D”) expenses include salaries, benefits, and other headcount related costs, clinical trial and related clinical manufacturing costs, contract and other outside service fees including sponsored research agreements, and facilities and overhead costs. The Company expenses the costs associated with research and development activities when incurred.
To further drive the Company’s initiatives, the Company will continue targeting key governmental agencies, congressional committees and not-for-profit organizations to contribute funds for the Company’s research and development programs. The Company accounts for such grants as a deduction to the related expense in research and development operating expenses when earned.
In-process Research and Development Expense
Upfront payments that relate to the acquisition of a new drug compound, as well as pre-commercial milestone payments, are immediately expensed as IPR&D in the period in which they are incurred, provided that the new drug compound did not also include processes or activities that would constitute a “business” as defined under GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future use. The Company accounts for contingent consideration payable upon achievement of certain regulatory, development or sales milestones in such asset acquisitions when the underlying contingency is probable and estimable. Milestone payments made to third parties subsequent to regulatory approval will be capitalized as intangible assets and amortized over the estimated remaining useful life of the related product.
Intangible Asset
The Company’s intangible asset consists of a single asset, Cend’s license agreement with Qilu Pharmaceutical, Co., Ltd. (“Qilu”) acquired in the Merger, with a value of $0.4 million. The intangible asset is stated at fair value and is amortized using the straight-line method over its estimated useful life of 5 years. Amortization expense was $3 thousand for the three and nine months ended September 30, 2022. The intangible asset is reviewed for potential impairment when events or circumstances indicate that carrying amounts may not be recoverable. The projected amortization expense is $71 thousand per year for the next five years.
Revenue Recognition
The Company evaluates license and collaboration arrangements to determine whether units of account within the arrangement exhibit the characteristics of a vendor and customer relationship. For arrangements and units of account where a customer relationship exists, the Company applies the revenue recognition guidance. The Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the performance obligations. At contract inception, the Company assesses the goods or services promised within each contract and assesses whether each promised good or service is distinct and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Taxes imposed by governmental authorities on the Company's revenue, such as sales taxes and withholding taxes, are excluded from net revenue.
If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. If licenses are bundled with other performance obligations, the Company would utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. There was no revenue recognized for the three and nine months ended September 30, 2022.

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Milestones
At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company or the Company’s collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the Company’s estimate of the overall transaction price. Any such adjustments are allocated on a cumulative catch-up basis to satisfied and partially satisfied performance obligations, with the consideration allocated to an ongoing performance obligation being recognized over the period of performance.
Royalties
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue from any collaborative arrangement.

Note 3 – Merger
The Merger was accounted for as an asset acquisition as substantially all of the fair value was concentrated in IPR&D. Cend’s assets (except for cash and working capital) were measured and recognized as an allocation of the transaction price based on their relative fair values as of the transaction date with any value associated with IPR&D being expensed. The fair value of total consideration was $36.1 million. The following table is a summary of the purchase price calculation (in thousands except per share data).
Number of common shares of the combined company owned by Cend stockholders3,772,768 
Multiplied by the fair value per share of Lisata common stock on September 15, 2022$6.25
Total$23,580
Carrying value of Lisata's cost method investment in Cend10,000 
Incremental fair value of Cend's fully vested stock options2,136 
Lisata transaction costs382 
Total purchase price$36,098
The allocation of the purchase price was as follows (amounts in thousands):

Cash and cash equivalents$7,062
Net working capital (excluding cash)(1,690)
Other liabilities(22)
Acquired in-process research and development 30,393 
License355 
Net assets acquired$36,098






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Note 4 – Available-for-Sale-Securities
The following table is a summary of available-for-sale securities recorded in cash and cash equivalents or marketable securities in our Consolidated Balance Sheets (in thousands):
September 30, 2022December 31, 2021
CostGross Unrealized GainsGross Unrealized LossesEstimated Fair ValueCostGross Unrealized GainsGross Unrealized LossesEstimated Fair Value
Corporate debt securities$39,311 $ $(65)$39,246 $53,135 $ $(65)$53,070 
Commercial paper14,459   14,459     
Money market funds13,457   13,457 18,124   18,124 
Municipal debt securities170   170 20,263  (5)20,258 
Total$67,397 $ $(65)$67,332 $91,522 $ $(70)$91,452 

Estimated fair values of available-for-sale securities are generally based on prices obtained from commercial pricing services. The following table summarizes the classification of the available-for-sale securities in our Consolidated Balance Sheets (in thousands):
September 30, 2022December 31, 2021
Cash equivalents$23,280 $21,129 
Marketable securities44,052 70,323 
Total$67,332 $91,452 

The following table summarizes our portfolio of available-for-sale securities by contractual maturity (in thousands):
September 30, 2022
Amortized CostEstimated Fair Value
Less than one year$67,397 $67,332 
Greater than one year  
Total$67,397 $67,332 


Note 5 – Income (Loss) Per Share
For the nine months ended September 30, 2022 and 2021, the Company incurred net losses and therefore no common stock equivalents were utilized in the calculation of diluted loss per share as they are anti-dilutive. At September 30, 2022 and 2021, the Company excluded the following potentially dilutive securities (in thousands):
 September 30,
 20222021
Stock Options1,399 142 
Warrants1,424 1,424 
Restricted Stock Units48 53 
 
Note 6 – Fair Value Measurements
The fair value of financial assets and liabilities that are being measured and reported are defined as the exchange price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market at the measurement date (exit price). The Company is required to classify fair value measurements in one of the following categories:
Level 1 inputs are defined as quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
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Level 2 inputs are defined as inputs other than quoted prices included within Level 1 that are observable for the assets or liabilities, either directly or indirectly.
Level 3 inputs are defined as unobservable inputs for the assets or liabilities. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.
The following table sets forth by level within the fair value hierarchy the Company's financial assets that were accounted for at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 (in thousands).
September 30, 2022December 31, 2021
Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Assets:
Marketable securities - available for sale$ $44,052 $ $44,052 $ $70,323 $ $70,323 
$ $44,052 $ $44,052 $ $70,323 $ $70,323 

Note 7 – Accrued Liabilities
Accrued liabilities as of September 30, 2022 and December 31, 2021 were as follows (in thousands):
September 30, 2022December 31, 2021
Salaries, employee benefits and related taxes$2,147 $2,034 
Operating lease liabilities — current203 229 
Clinical and R&D related liabilities2,338  
Other729 326 
Total$5,417 $2,589 

Note 8 – Operating Leases
The Company has operating leases for two offices with terms that expire in 2023 and 2025, respectively. The Company estimates its incremental borrowing rate at lease commencement to determine the present value of lease payments as most of the Company's leases do not provide an implicit rate of return. The Company recognizes lease expense on a straight-line basis over the lease term. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company elected to account for non-lease components associated with its leases and lease components as a single lease component. Each of the Company's leases includes options for the Company to extend the lease term and/or sub-lease space in whole or in part.

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Operating lease liabilities and right-of-use assets were recorded in the following captions of our balance sheet were as follows (in thousands):
September 30, 2022December 31, 2021
Right-of Use Assets:
Other assets$548 $724 
Total Right-of-Use Asset$548 $724 
Operating Lease Liabilities:
Accrued liabilities$203 $229 
Other long-term liabilities345 485 
Total Operating Lease Liabilities$548 $714 
    
As of September 30, 2022, the weighted average remaining lease term for our operating leases was 1.8 years, and the weighted average discount rate for our operating leases was 9.625%. Future minimum lease payments under the lease agreements as of September 30, 2022 were as follows (in thousands):
Years endedOperating Leases
202275 
2023217 
2024190 
2025143 
Total lease payments625 
Less: Amounts representing interest(77)
Present value of lease liabilities$548 

Note 9 – Stockholders' Equity
Reverse Stock Split
On September 14, 2022, in connection with the merger, we implemented the Reverse Stock Split, as described in Note 1. All share and per share amounts of common stock, options and warrants in the accompanying financial statements have been restated for all periods presented to give retroactive effect to the Reverse Stock Split. Accordingly, the consolidated statements of equity reflect the impact of the Reverse Stock Split by reclassifying from “common stock” to “additional paid-in capital” in an amount equal to the par value of the decreased shares resulting from the Reverse Stock Split.
Equity Issuances
Purchase Agreement
In March 2019, the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company has the right to sell to Lincoln Park shares of the Company’s common stock having an aggregate value of up to $26.0 million, subject to certain limitations and conditions set forth in the Purchase Agreement (the “Offering”). As consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park an additional 181,510 shares of common stock as commitment shares.
Pursuant to the Purchase Agreement, Lincoln Park purchased 250,000 shares of common stock, at a price of $4.00 per share, for a total gross purchase price of $1.0 million (the “Initial Purchase”) upon commencement. Thereafter, as often as every business day from and after one business day following the date of the Initial Purchase and over the 36-month term of the Purchase Agreement, the Company has the right, from time to time, at its sole discretion and subject to certain conditions, to direct Lincoln Park to purchase up to 100,000 shares of common stock, with such amount increasing as the closing sale price of the common stock increases; provided Lincoln Park’s obligation under any single such purchase will not exceed $2.5 million, unless the Company and Lincoln Park mutually agree to increase the maximum amount of such single purchase (each, a “Regular Purchase”). If the Company directs Lincoln Park to purchase the maximum number of shares of common stock it then may sell in a Regular Purchase, then in addition to such Regular Purchase, and subject to certain conditions and limitations in the Purchase Agreement, the Company may direct Lincoln Park in an “accelerated purchase” to purchase an additional amount
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of common stock that may not exceed the lesser of (i) 300% the number of shares purchased pursuant to the corresponding Regular Purchase or (ii) 30% of the total number of shares of the Company’s common stock traded during a specified period on the applicable purchase date as set forth in the Purchase Agreement. Under certain circumstances and in accordance with the Purchase Agreement, the Company may direct Lincoln Park to purchase shares in multiple accelerated purchases on the same trading day.
The Company controls the timing and amount of any sales of its common stock to Lincoln Park. There is no upper limit on the price per share that Lincoln Park must pay for its common stock under the Purchase Agreement, but in no event will shares be sold to Lincoln Park on a day the closing price is less than the floor price specified in the Purchase Agreement. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the purchase agreement if it would result in Lincoln Park beneficially owning more than 9.99% of its common stock.
The Purchase Agreement does not limit the Company’s ability to raise capital from other sources at the Company’s sole discretion, except that (subject to certain exceptions) the Company may not enter into any Variable Rate Transaction (as defined in the Purchase Agreement, including the issuance of any floating conversion rate or variable priced equity-like securities) during the 36 months after the date of the Purchase Agreement. The Company has the right to terminate the Purchase Agreement at any time, at no cost to the Company.
As of September 30, 2022, the Company had not made any sales of common stock to Lincoln Park under the Purchase Agreement other than the Initial Purchase. The agreement expired on April 1, 2022.
At The Market Offering Agreement
On June 4, 2021, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent, in connection with an “at the market offering” under which the Company from time to time may offer and sell shares of its common stock, having an aggregate offering price of up to $50.0 million. During the nine months ended September 30, 2022 and since inception, the Company has not issued any shares under the ATM Agreement.
Common Stock
In connection with the Merger close, the Company issued an aggregate of 3,772,768 shares of common stock, based on the Exchange Ratio, to holders of Cend, in exchange for all of the Cend capital stock outstanding immediately prior to the closing of the Merger.
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Stock Options and Warrants
In connection with the Merger and after giving effect to the Reverse Stock Split, the Company assumed 1,227,776 options outstanding from Cend. The options granted from the Cend Plan are exercisable at various dates as determined upon grant and will expire no more than ten years from their original date of grant. The Cend Plan stock options generally vest over a four-year term. The following table summarizes the activity for stock options and warrants for the nine months ended September 30, 2022:
Stock OptionsWarrants
SharesWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value (In Thousands)SharesWeighted Average Exercise PriceWeighted Average Remaining Contractual Term (Years)Aggregate Intrinsic Value (In Thousands)
Outstanding at December 31, 2021142,041 $84.60 7.97$ 1,423,774 $42.57 4.37$ 
Changes during the period:
Granted37,458 13.49   
Assumed through merger1,227,776 3.77 — — 
Exercised    
Forfeited(2,910)19.96   
Expired(5,388)352.31   
Outstanding at September 30, 20221,398,977 $10.83 7.30$ 1,423,774 $42.57 3.63$ 
Vested at September 30, 2022
 or expected to vest in the future
1,396,921 $10.83 7.30$ 1,423,774 $42.57 3.63$ 
Vested at September 30, 20221,110,635 $11.82 6.97$ 1,423,774 $42.57