10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 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: 001-39273

 

Lyra Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

84-1700838

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

480 Arsenal Way

Watertown, MA

02472

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 393-4600

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

LYRA

 

The Nasdaq Global 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 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 the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller 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

As of November 1, 2022, the registrant had 31,827,008 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report on Form 10-Q are forward-looking statements, including but not limited to statements regarding:

our plans to develop and commercialize our product candidates;
the timing of our ongoing or planned clinical trials for LYR-210, LYR-220, and any future product candidates;
the timing of and our ability to obtain and maintain regulatory approvals for LYR-210, LYR-220, and any future product candidates;
the clinical utility of our product candidates;
our commercialization, marketing, and manufacturing capabilities and strategy;
our expectations about the willingness of healthcare professionals to use LYR-210, LYR-220, and any future product candidates;
our expectations regarding the development and commercialization of LYR-210 pursuant to the terms of the LianBio License Agreement (as defined below);
our intellectual property position;
our competitive position and developments and projections relating to our competitors or our industry;
our ability to identify, recruit, and retain key personnel;
the impact of laws and regulations;
risks associated with the evolving COVID-19 pandemic and related macroeconomic factors, which may adversely impact our business and clinical trials;
our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or the JOBS Act;
our plans to identify additional product candidates with significant commercial potential that are consistent with our commercial objectives;
our estimates and statements regarding our future revenue, future results of operations, and financial position;
the sufficiency of our cash and cash equivalents to fund our operations;
our remediation of a material weakness;
our business strategy;
our research and development costs; and
the plans and objectives of management for future operations.

These statements are neither promises nor guarantees, but involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

 


 

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” “would” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words or expressions. The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions and are based largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition, and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of known and unknown risks, uncertainties, and assumptions, including those described under the sections in this Quarterly Report on Form 10-Q entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements.

Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. While we may elect to update such forward-looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause our views to change.

Unless the context requires otherwise, we use the terms “Lyra,” “the Company,” “we,” “us,” “our” and similar designations in this Quarterly Report on Form 10-Q to refer to Lyra Therapeutics, Inc. and its wholly owned subsidiary, Lyra Therapeutics Securities Corporation.

 


 

Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

we identified a material weakness in our internal control over financial reporting that resulted in a restatement of our unaudited interim condensed consolidated financial statements as of and for the three months ended March 31, 2022 and as of and for the three and six months ended June 30, 2022. This material weakness, if not remediated, could adversely affect our business, our stock price and our ability to report our results of operations and financial condition accurately and in a timely manner;
we have a limited operating history and a history of escalating operating losses, which may make it difficult to evaluate the prospects for our future viability;
we have incurred significant losses since inception and expect to incur significant additional losses for the foreseeable future. We may never achieve profitability;
we will need significant additional funding in order to complete development of and obtain regulatory approval for our product candidates and commercialize our products, if approved. If we are unable to raise capital when needed, we could be forced to delay, reduce, or eliminate our product development programs or commercialization efforts;
our business is highly dependent on the success of our most advanced product candidate, LYR-210, which will require significant additional clinical testing before we can seek regulatory approval and potentially launch our product. If LYR-210 does not receive regulatory approval or is not successfully commercialized, or is significantly delayed in doing so, our business will be harmed;
managing our obligations under our license and other strategic agreements may divert management time and attention, causing delays or disruptions to our business;
our operating activities may be restricted by certain covenants in our license and strategic agreements, which could limit our development and commercial opportunities;
failure to obtain marketing approval in international jurisdictions would prevent our products from being marketed in such jurisdictions;
we have entered into a collaboration, and may enter into collaborations, that place the development and commercialization of our product candidates outside our control, require us to relinquish important rights or may otherwise be on terms unfavorable to us, and if our collaborations are not successful, our product candidates may not reach their full market potential;
clinical trials required for our product candidates are expensive and time-consuming, their outcome is uncertain, and if our clinical trials do not meet safety or efficacy endpoints in these evaluations, or if we experience significant delays in these trials, our ability to commercialize our product candidates and our financial position will be impaired;
developments by competitors may render our products or technologies obsolete or non-competitive or may reduce the size of our markets;
the successful commercialization of our product candidates will depend in part on the extent to which governmental authorities and health insurers establish coverage, adequate reimbursement levels and pricing policies. Failure to obtain or maintain coverage and adequate reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue;
even if either LYR-210 or LYR-220 receives marketing approval, it may fail to achieve market acceptance by physicians, patients, third-party payors or others in the medical community necessary for commercial success;
we currently intend to manufacture clinical materials in-house, but we may rely on third parties for the manufacture of materials for our research programs, pre-clinical studies and clinical trials and we do not have long-term contracts

 


 

with any of these parties. Any inability to scale up our internal capabilities, or our reliance on third parties increases the risk that we will not have sufficient quantities of such materials, product candidates, or any therapies that we may develop and commercialize, or that such supply will not be available to us at an acceptable cost, which could delay, prevent, or impair our development or commercialization efforts;
we rely on third parties to conduct our pre-clinical studies and clinical trials. Any failure by a third party to conduct the clinical trials according to GCPs and in a timely manner may delay or prevent our ability to seek or obtain regulatory approval for or commercialize our product candidates;
if we are unable to obtain, maintain, or adequately protect our intellectual property rights, we may not be able to compete effectively in our markets;
if we lose key management or scientific personnel, cannot recruit qualified employees, directors, officers, or other significant personnel, or experience increases in our compensation costs, our business may materially suffer; and
the global pandemic caused by COVID-19 has disrupted and may continue to adversely impact our business and operations, including our clinical trials.

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

2

Item 1.

Condensed Consolidated Financial Statements (unaudited)

2

 

Condensed Consolidated Balance Sheets

2

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

3

 

Condensed Consolidated Statements of Stockholders’ Equity

4

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

PART II.

OTHER INFORMATION

32

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

86

Item 3.

Defaults Upon Senior Securities

86

Item 4.

Mine Safety Disclosures

87

Item 5.

Other Information

87

Item 6.

Exhibits

88

Signatures

89

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

LYRA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

109,558

 

 

$

45,747

 

Restricted cash

 

 

329

 

 

 

 

Prepaid expenses and other current assets

 

 

2,343

 

 

 

2,171

 

Total current assets

 

 

112,230

 

 

 

47,918

 

Property and equipment, net

 

 

3,753

 

 

 

4,503

 

Operating lease right-of-use assets

 

 

608

 

 

 

1,355

 

Restricted cash

 

 

1,089

 

 

 

329

 

Other assets

 

 

1,783

 

 

 

762

 

Total assets

 

$

119,463

 

 

$

54,867

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,900

 

 

$

3,125

 

Accrued expenses and other current liabilities

 

 

7,321

 

 

 

4,258

 

Operating lease liabilities

 

 

654

 

 

 

1,074

 

Deferred revenue

 

 

2,730

 

 

 

9,789

 

Total current liabilities

 

 

13,605

 

 

 

18,246

 

Operating lease liabilities, net of current portion

 

 

3

 

 

 

379

 

Deferred revenue, net of current portion

 

 

12,633

 

 

 

1,926

 

Total liabilities

 

 

26,241

 

 

 

20,551

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value, 10,000,000 shares authorized at September 30, 2022
   and December 31, 2021;
no shares issued and outstanding at September 30, 2022 and
   December 31, 2021

 

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized at
   September 30, 2022 and December 31, 2021;
31,827,008 and 13,007,178 shares issued
   and outstanding at September 30, 2022 and December 31, 2021, respectively

 

 

32

 

 

 

13

 

Additional paid-in capital

 

 

327,630

 

 

 

227,700

 

Accumulated deficit

 

 

(234,440

)

 

 

(193,397

)

Total stockholders’ equity

 

 

93,222

 

 

 

34,316

 

Total liabilities and stockholders’ equity

 

$

119,463

 

 

$

54,867

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

2


 

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Collaboration revenue

 

$

359

 

 

$

14

 

 

$

1,352

 

 

$

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

10,048

 

 

 

7,077

 

 

 

29,346

 

 

 

19,352

 

General and administrative

 

 

5,137

 

 

 

4,018

 

 

 

13,157

 

 

 

10,639

 

Total operating expenses

 

 

15,185

 

 

 

11,095

 

 

 

42,503

 

 

 

29,991

 

Loss from operations

 

 

(14,826

)

 

 

(11,081

)

 

 

(41,151

)

 

 

(29,977

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

60

 

 

 

26

 

 

 

108

 

 

 

81

 

Total other income

 

 

60

 

 

 

26

 

 

 

108

 

 

 

81

 

Net loss

 

$

(14,766

)

 

$

(11,055

)

 

$

(41,043

)

 

$

(29,896

)

Comprehensive loss

 

$

(14,766

)

 

$

(11,055

)

 

$

(41,043

)

 

$

(29,896

)

Net loss per share attributable to common stockholders—
  basic and diluted

 

$

(0.40

)

 

$

(0.85

)

 

$

(1.47

)

 

$

(2.30

)

Weighted-average common shares outstanding—
  basic and diluted

 

 

36,826,364

 

 

 

13,001,514

 

 

 

28,014,434

 

 

 

12,979,837

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

3


 

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share amounts)

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

12,932,377

 

 

$

13

 

 

$

224,363

 

 

$

(149,884

)

 

$

74,492

 

Exercise of common stock options

 

 

30,391

 

 

 

 

 

 

262

 

 

 

 

 

 

262

 

Stock-based compensation

 

 

 

 

 

 

 

 

599

 

 

 

 

 

 

599

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,802

)

 

 

(7,802

)

Balance at March 31, 2021

 

 

12,962,768

 

 

 

13

 

 

 

225,224

 

 

 

(157,686

)

 

 

67,551

 

Exercise of common stock options

 

 

38,337

 

 

 

 

 

 

331

 

 

 

 

 

 

331

 

Stock-based compensation

 

 

 

 

 

 

 

 

656

 

 

 

 

 

 

656

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,039

)

 

 

(11,039

)

Balance at June 30, 2021

 

 

13,001,105

 

 

 

13

 

 

 

226,211

 

 

 

(168,725

)

 

 

57,499

 

Exercise of common stock options

 

 

3,473

 

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Stock-based compensation

 

 

 

 

 

 

 

 

733

 

 

 

 

 

 

733

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,055

)

 

 

(11,055

)

Balance at September 30, 2021

 

 

13,004,578

 

 

$

13

 

 

$

226,955

 

 

$

(179,780

)

 

$

47,188

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

13,007,178

 

 

$

13

 

 

$

227,700

 

 

$

(193,397

)

 

$

34,316

 

Exercise of common stock options

 

 

2,718

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Stock-based compensation

 

 

 

 

 

 

 

 

844

 

 

 

 

 

 

844

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,911

)

 

 

(11,911

)

Balance at March 31, 2022

 

 

13,009,896

 

 

 

13

 

 

 

228,552

 

 

 

(205,308

)

 

 

23,257

 

Issuance of common stock and pre-funded
  warrants, net of issuance costs of $
4,244

 

 

18,815,159

 

 

 

19

 

 

 

96,232

 

 

 

 

 

 

96,251

 

Issuance of common stock upon RSU
  vesting

 

 

1,302

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,107

 

 

 

 

 

 

1,107

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,366

)

 

 

(14,366

)

Balance at June 30, 2022

 

 

31,826,357

 

 

 

32

 

 

 

325,891

 

 

 

(219,674

)

 

 

106,249

 

Issuance of common stock upon RSU
  vesting

 

 

651

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,739

 

 

 

 

 

 

1,739

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(14,766

)

 

 

(14,766

)

Balance at September 30, 2022

 

 

31,827,008

 

 

$

32

 

 

$

327,630

 

 

$

(234,440

)

 

$

93,222

 

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

4


 

LYRA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(41,043

)

 

$

(29,896

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation

 

 

3,690

 

 

 

1,988

 

Depreciation expense

 

 

845

 

 

 

723

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(172

)

 

 

(1,431

)

Operating lease right-of-use assets

 

 

747

 

 

 

705

 

Other assets

 

 

(787

)

 

 

 

Accounts payable

 

 

(167

)

 

 

1,167

 

Accrued expenses and other current liabilities

 

 

2,814

 

 

 

966

 

Operating lease liabilities

 

 

(796

)

 

 

(731

)

Deferred revenue

 

 

3,648

 

 

 

11,986

 

Net cash used in operating activities

 

 

(31,221

)

 

 

(14,523

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(136

)

 

 

(2,302

)

Net cash used in investing activities

 

 

(136

)

 

 

(2,302

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from sale of common stock and pre-funded warrants

 

 

100,495

 

 

 

 

Payment of deferred offering expenses

 

 

(4,246

)

 

 

(241

)

Proceeds from exercise of stock options

 

 

8

 

 

 

604

 

Net cash provided by financing activities

 

 

96,257

 

 

 

363

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

64,900

 

 

 

(16,462

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

46,076

 

 

 

74,922

 

Cash, cash equivalents and restricted cash, end of period

 

$

110,976

 

 

$

58,460

 

Supplemental disclosure of non-cash financing and investing activities:

 

 

 

 

 

 

Other assets included in accrued expenses

 

$

249

 

 

$

 

Property and equipment purchases included in accounts payable

 

$

 

 

$

1,049

 

Deferred offering costs included in accounts payable and accrued expense

 

$

 

 

$

4

 

 

See accompanying notes to unaudited condensed consolidated financial statements.

5


LYRA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements

(unaudited)

 

1. Organization and Basis of Presentation

Lyra Therapeutics, Inc. (the “Company”) is a clinical-stage therapeutics company focused on the development and commercialization of novel integrated drug and delivery solutions for the localized treatment of patients with ear, nose and throat (“ENT”) diseases. The Company’s proprietary technology platform, XTreo, is designed to precisely and consistently deliver medicines directly to the affected tissue for sustained periods with a single administration. The Company’s initial product candidates, LYR-210 and LYR-220, are bioresorbable polymeric matrices designed to be administered in a brief, non-invasive, in-office procedure and intended to deliver up to six months of continuous drug therapy to the sinonasal passages for the treatment of chronic rhinosinusitis (“CRS”). The Company was incorporated as a Delaware corporation on November 21, 2005 and is located in Watertown, Massachusetts.

The Company is subject to risks common to companies in the therapeutics and pharmaceutical industry, including but not limited to, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval for any drug product candidate that it may identify and develop, the need to successfully commercialize and gain market acceptance of its product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development by competitors of technological innovations, reliance on third party manufacturers, ability to transition from pilot-scale manufacturing to large-scale production of products and the need to obtain adequate additional financing to fund the development of its product candidates.

From inception through September 30, 2022, the Company has raised an aggregate of $350.4 million to fund its operations, of which $162.1 million were gross proceeds from sales of its redeemable convertible preferred stock, $96.3 million were net proceeds from its April 2022 Financing (as defined below) (see Note 6); $57.3 million were net proceeds from its initial public offering, $16.8 million were gross proceeds from government contracts and $17.0 million were gross proceeds from its license and collaboration agreement. The Company has incurred recurring net losses since inception and had net losses of approximately $41.0 million and $29.9 million for the nine months ended September 30, 2022 and 2021, respectively. In addition, the Company has an accumulated deficit of approximately $234.4 million at September 30, 2022. The Company expects to continue to generate operating losses for the foreseeable future. At September 30, 2022, the Company had approximately $109.6 million of cash and cash equivalents.

The Company believes that its cash and cash equivalents as of September 30, 2022 will be sufficient to fund the Company’s operating plan for a period of at least one year from the issuance date of the condensed consolidated financial statements. The Company will need additional financing to support its continuing operations and pursue its growth strategy. Until such time as the Company can generate significant revenue from product sales, if ever, it expects to finance its operations through a combination of equity or debt financings, collaboration agreements, strategic alliances and licensing arrangements. The Company may be unable to raise additional funds or enter into such other agreements when needed on favorable terms or at all. The inability to obtain funding as and when needed would have a negative impact on the Company’s financial condition and ability to pursue its business strategies. If the Company is unable to obtain funding when needed, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. The Company will need to generate significant revenue to achieve profitability, and it may never do so.

6


LYRA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements — Continued

(unaudited)

 

COVID-19 Pandemic and CARES Act

The COVID-19 pandemic is affecting the United States and global economies and may affect the Company’s operations and those of third parties on which the Company relies, including by causing disruptions in the supply of the Company’s product candidates and the conduct of current and future clinical trials. In addition, the COVID-19 pandemic may affect the operations of the Food and Drug Administration and other health authorities, which could result in delays of reviews and approvals, including with respect to the Company’s product candidates. In light of developments relating to the COVID-19 pandemic, the Company discontinued enrollment at 67 patients in its Phase 2 LANTERN clinical trial and did not enroll patients in the United States. Additionally, while the economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact of the COVID-19 pandemic on the global financial markets may reduce the Company’s ability to access capital, which could negatively impact the Company’s short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change, including the length of time needed to vaccinate a significant segment of the global population and effectiveness of the vaccines with respect to the new variants of the virus. The Company does not yet know the full extent of potential delays or impacts on its business, financing or clinical trial activities or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which the Company relies.

On March 27, 2020, President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The Company deferred the employer side social security payments of which 50% were due on December 31, 2021 and the remainder on December 31, 2022. The CARES Act also appropriated funds for the SBA Paycheck Protection Program loans that are forgivable in certain situations to promote continued employment, as well as Economic Injury Disaster Loans to provide liquidity to small businesses harmed by COVID-19. On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law in order to provide further stimulus and support to those affected by the COVID-19 pandemic. The Company did not obtain funding from such loans. The Company does not believe the CARES Act or the Consolidated Appropriations Act, 2021 will have a material impact on its financial condition, results of operations, or liquidity.

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standard Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

The condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2022 and the results of its operations and its cash flows for the three and nine months ended September 30, 2022 and 2021. The results for the three and nine months ended September 30, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods, or any future year or period. These condensed consolidated financial statements should be read in conjunction with the audited financial statements as of and for the year ended December 31, 2021, and the notes thereto, which are included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 9, 2022.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 9, 2022. Since the date of those financial statements, there have been no changes to its significant accounting policies except as noted below.

7


LYRA THERAPEUTICS, INC.

Notes to Condensed Consolidated Financial Statements — Continued

(unaudited)

 

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and related disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of expenses during the reporting period. On an ongoing basis, the Company’s management evaluates its estimates, which include but are not limited to management’s judgments of revenue recognition, operating lease right-of-use assets, operating lease liabilities, accrued expenses, valuation of share-based awards and deferred income taxes. Due to the uncertainty inherent in such estimates, actual results may differ from these estimates.

Restricted Cash

The Company had restricted cash of approximately $1.4 million and $0.3 million as of September 30, 2022 and December 31, 2021, respectively, which are held in certificates of deposit and a collateral account at one of the Company’s financial institutions to secure the Company’s letters of credit for its facility leases, as discussed in Note 8.

Concentrations of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains all its cash and cash equivalents at two accredited financial institutions, in amounts that exceed federally insured limits.

The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts, or other foreign exchange hedging arrangements.

Net Loss per Share

The Company has reported losses since inception and has computed basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. The weighted-average common shares outstanding as of September 30, 2022 included pre-funded warrants to purchase up to an aggregate of 5,000,000 shares of common stock that were issued in connection with the April 2022 Financing (as defined below), as discussed in Note 6. The Company has computed diluted net loss per common share after giving consideration to all potentially dilutive common shares, including options to purchase common stock and restricted stock units, outstanding during the period determined using the treasury-stock and if-converted methods, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share have been the same.

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares):

 

 

 

Nine Months Ended
September 30,

 

 

 

2022

 

 

2021

 

Stock options

 

 

4,336,264

 

 

 

1,850,313

 

Restricted stock units

 

 

35,418