# Clene Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Clene Inc.](/companies/clnn.md) (CIK 1822791)
- Form: 10-Q
- Filed: 2023-11-07
- Accepted by EDGAR: Nov 7, 2023, 12:47 ET
- Period: 2023-09-30
- Accession: 0001437749-23-030487
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1822791/000143774923030487/clnn20230930_10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1822791/000143774923030487/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $108.0k | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $484.0k | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $12.0k | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $83.0k | us-gaap:CostOfRevenue |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $6.0m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $20.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$9.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$30.6m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $1.2m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $3.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$2.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$39.3m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.02 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.41 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$23.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $287.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $42.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $46.4m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $60.4m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $15.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $39.0m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $21.4m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 66,536 characters.

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements reflecting our or management team’s expectations, hopes, beliefs, intentions, strategies, estimates, and assumptions concerning events and financial trends that may affect our future financial condition or results of operations. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would,” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section titled “Risk Factors” in our Annual Report on Form 10-K. We undertake no obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws. Unless the context otherwise requires, for purposes of this section, the terms the “Company,” “we,” “us,” or “our” are intended to mean the business and operations of Clene Inc. and its consolidated subsidiaries.*

### Business Overview

We are a clinical-stage pharmaceutical company pioneering the discovery, development, and commercialization of novel clean-surfaced nanotechnology (“CSN®”) therapeutics. CSN® therapeutics are comprised of atoms of transition elements that, when assembled in nanocrystal form, possess unusually high, unique catalytic activities not present in those same elements in bulk form. These catalytic activities drive, support, and maintain beneficial metabolic and energetic cellular reactions within diseased, stressed, and damaged cells.

Our patent-protected, proprietary position affords us the potential to develop a broad and deep pipeline of novel CSN therapeutics to address a range of diseases with high impact on human health. We began in 2013 by innovating an electro-crystal-chemistry drug development platform that draws from advances in nanotechnology, plasma and quantum physics, material science, and biochemistry. Our platform process results in nanocrystals with faceted structures and surfaces that are free of the chemical surface modifications that accompany other production methods. Many traditional methods of nanoparticle synthesis involve the unavoidable deposition of potentially toxic organic residues and stabilizing surfactants on the particle surfaces. Synthesizing stable nanocrystals that are both nontoxic and highly catalytic has overcome this significant hurdle in harnessing transition metal catalytic activity for human therapeutic use. Our clean-surfaced nanocrystals exhibit catalytic activities many-fold higher than multiple other commercially available nanoparticles, produced using various techniques, that we have comparatively evaluated.

We have multiple drug assets currently in development and/or clinical trials for applications primarily in neurology. Our development and clinical efforts are currently focused on addressing the high unmet medical needs in central nervous system disorders including Amyotrophic Lateral Sclerosis (“ALS”), Multiple Sclerosis (“MS”), and Parkinson’s Disease (“PD”). We currently have no drugs approved for commercial sale and have not generated any revenue from drug sales. We have never been profitable and have incurred operating losses in each year since inception. We generate revenue from sales of dietary supplements through our wholly owned subsidiary, dOrbital, Inc., or through an exclusive license with 4Life Research LLC (“4Life”), a stockholder and related party. We anticipate these revenues to be small compared to our operating expenses and to the revenue we expect to generate from potential future sales of our drug candidates, for which we are currently conducting clinical trials.

### Reverse Recapitalization

Clene Nanomedicine, Inc. (“Clene Nanomedicine”) became a public company on December 30, 2020 (the “Closing Date”) when it completed a reverse recapitalization (the “Reverse Recapitalization”) with Tottenham Acquisition I Limited (“Tottenham”), and with Tottenham’s wholly-owned subsidiary and our predecessor, Chelsea Worldwide Inc., and Creative Worldwide Inc., a wholly-owned subsidiary of Chelsea Worldwide Inc. On the Closing Date, Chelsea Worldwide Inc. changed its name to Clene Inc. and listed its shares of common stock, par value $0.0001 per share (“Common Stock”) on the Nasdaq Capital Market (“Nasdaq”) under the symbol “CLNN.”

In connection with the Reverse Recapitalization, certain of Clene Nanomedicine’s common stockholders are entitled to receive earn-out payments (the “Clene Nanomedicine Contingent Earn-out”), and Tottenham’s former officers and directors and Norwich Investment Limited (collectively, the “Initial Stockholders”) are entitled to receive earn-out payments (the “Initial Stockholders Contingent Earn-out,” and both collectively the “Contingent Earn-outs”) based on achieving certain milestones.

### Recent Developments of Our Clinical Programs

#### Amyotrophic Lateral Sclerosis

On September 25, 2023, we reported long-term follow-up data for patients treated with CNM-Au8 for up to 133 weeks in the open label extension (“OLE”) of the Phase 2/3 HEALEY ALS Platform Trial, which evaluated the safety and efficacy of CNM-Au8 in patients with ALS. These *post hoc* results show significantly improved survival compared to the Pooled Resource Open-Access ALS Clinical Trials (“PRO-ACT”) database, the largest U.S. clinical database of previous ALS trials. ALS clinical trials with shorter double-blind treatment duration such as 24 weeks have used historical placebo controls from prior trials to determine the relative survival benefit of investigational treatment over longer-term follow-up (open label data). The PRO-ACT dataset is derived from pooled ALS clinical trial data from 29 completed Phase 2 and Phase 3 ALS clinical trials. Millions of de-identified longitudinally collected records from more than 11,600 individuals with ALS were standardized across trials and merged to create the PRO-ACT database. This database provides a useful and validated surrogate for survival status of past participants in ALS clinical trials with long-term follow-up. In this analysis, 59 participants who were originally randomized to CNM-Au8 30mg were compared to matched placebo participants derived from the PRO-ACT dataset:

- Originally randomized CNM-Au8 30mg treated participants (n=59) demonstrated a statistically significant 49% decreased risk of death compared to PRO-ACT matched placebo patients through long-term follow-up (covariate adjusted HR=0.510; 95% CI 0.263-0.987, p=0.046).
- In a pooled analysis of the HEALEY ALS Platform Trial and the RESCUE-ALS clinical trial, participants originally randomized to CNM-Au8 30mg (n=82) demonstrated a statistically significant 59% decreased risk of death compared to PRO-ACT matched placebo patients through long-term follow-up (covariate adjusted HR=0.406, 95% CI: 0.220-0.749, p=0.004).

We previously reported a statistically significant reduction of plasma neurofilament light chain (“NfL”) levels for CNM-Au8 treated participants compared to placebo after 24 weeks of treatment in the double-blind, placebo-controlled period of the HEALEY ALS Platform Trial. NfL is a key biomarker of neurodegeneration and is released from neurons following axonal injury, especially in people living with ALS, where higher levels of NfL have been found to predict more rapid decline in clinical function and increased mortality risk. Surrogate biomarkers such as NfL have recently been used to support an approval by the U.S. Food and Drug Administration (“FDA”) for the treatment of ALS.

Additional biomarker and long-term survival data from the HEALEY ALS Platform Trial double-blind and OLE periods have been collected and are undergoing testing preparatory for analysis, and we expect to report the data as follows: (i) plasma NfL data from the OLE by the first quarter of 2024, (ii) additional long-term survival data from the OLE by the first quarter of 2024, and (iii) exploratory results for time to clinical worsening events and ALSFRS-R for the OLE in the first quarter of 2024.

On August 29, 2023, we reported updated data from the long-term OLE of the Phase 2 RESCUE-ALS clinical trial, which evaluated the efficacy, safety, and pharmacokinetics of CNM-Au8 in patients with early symptomatic ALS. The 24-month data cut, as of July 2023, showed a significant median survival benefit of 19.3 months using the rank-preserving structural failure time model (“RPSFTM”). The RPSFTM analysis method estimates the survival gained by receiving active treatment using the data from all study participants and then subtracts the benefit from ex-placebo participants switched to CNM-Au8 during the OLE to provide a comparison of CNM-Au8 versus placebo across the entire study period. This well-recognized method has been used to estimate cross-over treatment effects in a recent ALS trial, and oncology and other rare disease trials. The 24-month data cut also showed a significant 52% decreased risk of ALS clinical worsening (defined as the first occurrence of death, tracheostomy, assisted ventilation, or feeding tube placement) with CNM-Au8 treatment. The full data cut is as follows:

- Cross-over adjusted median survival (RPSFTM, all study participants, post hoc):
- 19.3 month median survival benefit (CNM-Au8 median survival of 34.2 months, placebo-adjusted median survival of 14.9 months).
- 75% decreased risk of long-term all-cause mortality in participants originally randomized to treatment with CNM-Au8 compared to those originally randomized to placebo after adjusting for benefit received by placebo after switching to CNM-Au8 (HR: 0.252, 95% CI: 0.106 to 0.597; bootstrap log-rank p\<0.001).
- Unadjusted median survival (without adjusting for the benefit received in ex-placebo participants; analyses include all study participants):
- 10.1 month median survival benefit when not accounting for the improvement by ex-placebo treated participants who switched to CNM-Au8 at the start of the OLE (CNM-Au8 median survival of 34.2 months; placebo median survival of 24.1 months).
- 46% decreased risk of all-cause mortality in participants originally randomized to treatment with CNM-Au8 compared to those originally randomized to placebo (HR: 0.54, 95% CI: 0.25-1.1, log-rank p=0.09).
- Observed survival versus ALS historical placebo controls:
- 70% decreased risk of long-term mortality in participants originally randomized to treatment with CNM-Au8 compared to matched placebo participants derived from the PRO-ACT database (Cox adjusted HR: 0.300, 95% CI: 0.09 to 0.79; p=0.03).
- 52% decreased risk of ALS clinical worsening events (HR: 0.48, 95% CI: 0.23-1.0, log-rank p=0.049) in the participants originally randomized to CNM-Au8 treatment versus original placebo.

CNM-Au8 was well-tolerated without long term safety concerns in both RESCUE-ALS and the HEALEY ALS Platform Trial, with over 500 collective years of exposure across ALS, MS, and PD participants in CNM-Au8 clinical trials and Expanded Access Protocol (compassionate use) programs without any identified safety signals. No serious adverse events have been assessed as related to CNM-Au8 treatment; adverse events observed with CNM-Au8 have been characterized as transient and predominantly mild-to-moderate in severity.

We are presently discussing the design of an international Phase 3 study, RESTORE-ALS, with expert ALS clinical advisors and expect to initiate the trial in the first half of 2024. We plan to work closely with regulatory health authorities from the FDA and European Medicines Agency (“EMA”), ALS experts, and patient representatives to determine the proper path to support potential approval. We do not know when or if we will be able to file a New Drug Application (“NDA”) with the FDA based on our accumulation of clinical evidence until we meet with the FDA to discuss the totality of our long-term survival data and NfL data. A meeting with the FDA has been scheduled in the fourth quarter of 2023. Contingent upon the outcome of the FDA meeting, we believe we could file an NDA with the FDA in the first half of 2024 with a potential accelerated approval Prescription Drug User Fee Act (“PDUFA”) action date by the end of 2024.

On October 5, 2023, in collaboration with Columbia University and Synapticure, a neurology specialty telehealth clinic, we announced the award of a four-year grant totaling $45.1 million from the National Institute of Neurological Disorders and Stroke, a division of the National Institute of Health, to support an Expanded Access Protocol (“EAP”) for CNM-Au8 (the “NIH EAP Grant”). In addition to this new EAP, we will continue to conduct our currently ongoing EAPs that have enrolled more than 200 participants since 2019. The NIH EAP Grant is part of the Accelerating Access to Critical Therapies for ALS Act, which was signed into law on December 23, 2021, with a call for increased public support of public-private partnerships that will innovate the development of, and increase access to, potential new treatments for ALS.

#### Multiple Sclerosis

In February and March 2023, we reported updated exploratory data from our Phase 2 VISIONARY-MS clinical trial, which evaluated the efficacy and safety of CNM-Au8 in stable relapsing remitting MS patients. We expect additional results up to 144 weeks from the OLE by the first quarter of 2024. We also completed the first dosing cohort of REPAIR-MS, an open-label, investigator blinded Phase 2 clinical trial, and have initiated a second dosing cohort in non-active progressive MS patients which is expected to be complete in the first half of 2024. We plan to work closely with regulatory health authorities from the FDA and EMA, MS experts, and patient representatives to determine the proper path to advance our assets into Phase 3 and potential future approval. We expect to meet with the FDA in an end of Phase 2 meeting in mid-2024. We are presently discussing the design of an international Phase 3 MS study with expert MS clinical advisors and expect to initiate the trial in the second half of 2024, contingent on funding.

The chart below reflects the growing body of evidence for CSN therapeutics from our completed and ongoing clinical programs.

### Recent Competition Update

Despite the great need for an effective disease-modifying treatment for ALS and significant research efforts by the pharmaceutical industry to meet this need, there have been limited clinical successes and no curative therapies approved to date. In May 2022, the FDA approved an orally administered version of edaravone, which has been available since 2017 as an intravenous infusion for the treatment of ALS. In September 2022, the FDA approved AMX0035, branded as Relyvrio, a drug from Amylyx Pharmaceuticals, Inc. for the treatment of ALS. AMX0035 previously received a conditional approval by Health Canada in June 2022. In October 2023, the EMA Committee for Medicinal Products for Human Use (“CHMP”) confirmed a June 2023 recommendation to refuse a marketing authorization for AMX0035 in the European Union, with the final decision expected from the European Commission by the end of 2023. In April 2023, the FDA granted accelerated approval to tofersen, branded as QALSODY, a drug from Biogen Inc. for the treatment of SOD1-ALS. A Marketing Authorization Application for tofersen is currently under review by the EMA.

On September 27, 2023, the FDA held a meeting of the FDA Cellular, Tissue and Gene Therapies Advisory Committee (the “Committee”) to review the Biologics License Application for NurOwn, an investigation therapeutic from BrainStorm Cell Therapeutics Inc. for the treatment of ALS. The Committee voted yes (1), no (17), and abstain (1) as to whether the NurOwn data presented demonstrate substantial evidence of effectiveness for treatment of mild to moderate ALS. The PDUFA action date is by December 8, 2023.

### Impact of the COVID-19 Pandemic

The extent of the impact of the COVID-19 pandemic, including the resurgence of cases relating to the spread of new variants, on our business and operations is highly uncertain. While the COVID-19 pandemic has led to various research restrictions and led to pauses and early conclusion of one of our clinical trials, these impacts have been temporary and to date we have not experienced material business disruptions or incurred impairment losses in the carrying values of our assets as a result of the COVID-19 pandemic. We are not aware of any specific related event or circumstance that would require us to revise the estimates reflected in our condensed consolidated financial statements. The extent to which the COVID-19 pandemic will directly or indirectly impact our business, financial condition, results of operations, and cash flows, including planned future clinical trials and research and development costs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19, the actions taken to contain or treat it, and the duration and intensity of the related effects.

### Financial Overview

Our financial condition, results of operations, and the period-to-period comparability of our financial results are principally affected by the following factors:

### Research and Development Expense

The discovery and development of novel drug candidates require a significant investment of resources over a prolonged period of time, and a core part of our strategy is to continue making sustained investments in this area. As a result of this commitment, our pipeline of drug candidates has been advancing and expanding.

Historically, substantially all of our research and development expenses relate to CNM-Au8, our lead asset, with the remainder spend on our CNM-ZnAg asset. Our research and development expenses are affected by the timing and advancement of our existing product pipeline as well as the timing and quantity of commencing new drug programs. Drug candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to costs and fees for per patient clinical trial sites for larger clinical trials, opening and monitoring clinical sites, contract research organization (“CRO”) activity, and manufacturing. We anticipate that our research and development expenses will decrease in 2023 due to the completion of many of our ongoing clinical trials but will increase in future years as we advance our assets into Phase 3 and explore potential accelerated approval with the FDA.

Research and development costs consist primarily of payroll and personnel expenses for salaries, benefits, and stock-based compensation; supplies and materials expenses to support our clinical trials; payments to CROs, principal investigators, and clinical trial sites; costs of preclinical activities; consulting costs; and allocated overhead costs, including rent, equipment, utilities, depreciation, insurance, and facilities maintenance. Research and development costs are charged to operations as incurred, and nonrefundable advance payments related to future research and development activities are initially recorded as assets and are expensed when we receive the related goods or services.

Our clinical trial accrual process seeks to account for expenses resulting from obligations under contracts with CROs, consultants, and clinical sites in connection with conducting clinical trials. The financial terms of these contracts vary and may result in payment flows that do not match the periods over which materials or services are provided to us under such contracts. We reflect the appropriate clinical trial expenses in the condensed consolidated financial statements by matching the appropriate expenses with the period in which services are performed. In the event advance payments are made to CROs, the payments are recorded as prepaid assets and expensed over the period in which services are performed.

### General and Administrative Expense

General and administrative expenses consist primarily of payroll and personnel expenses for salaries, benefits, and stock-based compensation; fees for legal, accounting, tax, and information technology services; fees for directors’ and officers’ insurance; expenses for business development activities and investor and public relations; rent, utilities, and facility costs; travel costs; and consulting fees.

We anticipate that our general and administrative expenses in future periods will be contingent on the outcome of our meeting with the FDA, which has been scheduled in the fourth quarter of 2023. If we are able to file an NDA with the FDA based on our accumulation of clinical evidence, we anticipate our general and administrative expenses would increase in future periods to support increases in our drug development activities and as we build out our commercial capabilities in advance of receiving regulatory approval. This potential increase will likely include increased headcount, increased stock compensation expenses, expanded infrastructure including certain sales and marketing activities performed ahead of regulatory approval, and increased insurance expenses. If we are unable to file an NDA based on our accumulation of clinical evidence, we would need to continue investing in clinical research activities and we anticipate our general and administrative expenses would decrease in future periods as we decrease commercial expansion projects, including at our Elkton, Maryland facility, and as we implement cost-saving initiatives, including a reduction in executive compensation, a hiring freeze, and elimination of certain staff positions.

### Total Other Income (Expense), Net

Total other income (expense), net, consists primarily of (i) interest income and interest expense, (ii) interest income and expense resulting from changes in fair value of our notes payable, (iii) changes in the fair value of our (a) common stock warrant liabilities and (b) Contingent Earn-outs, (iv) gains and losses on termination of leases, (v) commitment share expense from shares of Common Stock issued as a commitment fee, (vi) issuance costs allocated to liability-classified warrants, (vii) research and development tax credits, unconditional grants, and conditional grants for which applicable conditions have been met, and (viii) realized gains and losses on foreign currency transactions and other miscellaneous income and expense items.

### Results of Operations

Our results of operations for the three and nine months ended September 30, 2023 and 2022 were as follows:

*(in thousands)*

| Revenue: | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Product revenue | $65 | $130 | (50)% | $355 | $139 | 155% |
| Royalty revenue | 43 | 44 | (2)% | 129 | 100 | 29% |
| Total revenue | 108 | 174 | (38)% | 484 | 239 | 103% |
| Operating expenses: |  |  |  |  |  |  |
| Cost of revenue | 12 | 19 | (37)% | 83 | 19 | 337% |
| Research and development | 5,972 | 6,403 | (7)% | 19,982 | 24,149 | (17)% |
| General and administrative | 3,666 | 3,557 | 3% | 11,029 | 12,807 | (14)% |
| Total operating expenses | 9,650 | 9,979 | (3)% | 31,094 | 36,975 | (16)% |
| Loss from operations | (9,542) | (9,805) | (3)% | (30,610) | (36,736) | (17)% |
| Total other income (expense), net | 7,124 | (1,171) | \* | (8,721) | 7,872 | \* |
| Net loss | $(2,418) | $(10,976) | (78)% | $(39,331) | $(28,864) | 36% |

### Revenue

Product revenue relates to our Supplements segment and consists of (i) sales of an aqueous zinc-silver ion dietary (mineral) supplement sold by our wholly-owned subsidiary, dOrbital, Inc., under the trade name “rMetx™ ZnAg Immune Boost,” or under a supply agreement with 4Life under the trade name “Zinc Factor,” and (ii) sales of KHC46, an aqueous gold dietary (mineral) supplement of very low-concentration, sold under a supply agreement with 4Life under the trade name “Gold Factor.” Royalty revenue relates to our Supplements segment and consists of proceeds under an exclusive and royalty-bearing license agreement with 4Life relating to the sale of Gold Factor. During the three and nine months ended September 30, 2023 and 2022, changes in product and royalty revenues were due to the timing of purchases of Zinc Factor and Gold Factor by 4Life under the supply and license agreements.

### Cost of Revenue

Cost of revenue related to production and distribution costs for the sales of Gold Factor, Zinc Factor, and rMetx™ dietary supplements.

### Research and Development Expense

Research and development expense for the three and nine months ended September 30, 2023 and 2022 was as follows:

*(in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| CNM-Au8 | $1,207 | $2,083 | (42)% | $5,172 | $7,916 | (35)% |
| CNM-ZnAg | (284) | 638 | \* | 645 | 2,531 | (75)% |
| Unallocated | 1,702 | 711 | 139% | 4,082 | 3,894 | 5% |
| Personnel | 2,262 | 2,120 | 7% | 6,901 | 7,380 | (6)% |
| Stock-based compensation | 1,085 | 851 | 27% | 3,182 | 2,428 | 31% |
| Total research and development | $5,972 | $6,403 | (7)% | $19,982 | $24,149 | (17)% |

The change in research and development expenses was primarily due to the following:

(i) a decrease in expenses related to our lead drug candidate, CNM-Au8, primarily due to a decrease in expenses in the HEALEY ALS Platform Trial and our RESCUE-ALS, REPAIR-MS, REPAIR-PD, and VISIONARY-MS clinical trials due to completion of the blinded period of each trial, and decreased CRO and clinical operations expenses, partially offset by an increase in expenses related to our two EAPs with the Sean M. Healey & AMG Center for ALS due to increased enrollment and expansion of one EAP, increased expenses related to the long-term extension of our VISIONARY-MS clinical trial, and increased expenses related to non-clinical, pre-clinical, and regulatory activities;

(ii) a decrease in expenses related to CNM-ZnAg, primarily due to completion of the clinical trial for treatment of COVID-19 in 2022, and the renegotiation of our CRO fees during the three and nine months ended September 30, 2023,which resulted in a reversal of previously recognized expenses;

(iii) an increase in unallocated expenses, primarily due to increased rent, utility, and depreciation expenses due to our newly-leased facility in Elkton, Maryland and our expanded facility in North East, Maryland, partially offset by decreased research, manufacturing, and materials expenses;

(iv) a decrease in personnel expenses during the nine months ended September 30, 2023, primarily due to a reduction in headcount during the fourth quarter of 2022, partially offset by increased employee compensation and an increase clinical and regulatory activities during the three months ended September 30, 2023; and

(v) an increase in stock-based compensation expense, primarily due to the timing of award grants, vesting, and forfeitures for research and development personnel, partially offset by our decreased headcount in 2023.

### General and Administrative Expense

General and administrative expense for the three and nine months ended September 30, 2023 and 2022 was as follows:

*(in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Directors’ and officersʼ insurance | $398 | $849 | (53)% | $1,195 | $2,547 | (53)% |
| Legal | 35 | 87 | (60)% | 296 | 414 | (29)% |
| Finance and accounting | 489 | 217 | 125% | 1,207 | 901 | 34% |
| Public and investor relations | 94 | 124 | (24)% | 362 | 593 | (39)% |
| Personnel | 1,011 | 706 | 43% | 3,184 | 3,147 | 1% |
| Stock-based compensation | 1,311 | 1,247 | 5% | 3,888 | 4,056 | (4)% |
| Other | 328 | 327 | 0% | 897 | 1,149 | (22)% |
| Total general and administrative | $3,666 | $3,557 | 3% | $11,029 | $12,807 | (14)% |

The change in general and administrative expense was primarily due to the following:

(i) a decrease in directors’ and officers’ insurance fees;

(ii) a decrease in legal fees, primarily due to a decrease in general corporate legal fees, intellectual property fees, and legal fees related to financing and fundraising;

(iii) an increase in finance and accounting fees, primarily due to increased fees from auditors, consultants, advisors, and other financial vendors, partially offset by decreased tax fees;

(iv) a decrease in fees related to our public and investor relations efforts;

(v) an increase in personnel expenses primarily due to increased employee compensation during the three months ended September 30, 2023, partially offset by a reduction in headcount during the fourth quarter of 2022;

(vi) an increase in stock-based compensation expense during the three months ended September 30, 2023 and a decrease in stock-based compensation expense during the nine months ended September 30, 2023, primarily due to the timing of award grants, vesting, and forfeitures for general and administrative personnel, and our decreased headcount in 2023; and

(vii) a decrease in other expenses during the nine months ended September 30, 2023, primarily due to a decrease in expenses related to supplies and equipment, facilities, corporate and liability insurance, information technology, travel, business development, and office and professional expenses, partially offset by increased depreciation expense.

### Total Other Income (Expense), Net

Total other income (expense), net, for the three and nine months ended September 30, 2023 and 2022 was as follows:

*(in thousands)*

|  | Three Months Ended September 30, 2023 | 2022 | Change | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | --- | ---: | ---: | ---: |
| Interest income | $546 | $59 | 825% | $931 | $144 | 547% |
| Interest expense | (1,188) | (857) | 39% | (3,358) | (2,390) | 41% |
| Gain on termination of lease | — | — | \* | — | 420 | \* |
| Commitment share expense | — | — | \* | (402) | — | \* |
| Issuance costs for common stock warrant liability | — | — | \* | (333) | — | \* |
| Loss on initial issuance of equity | — | — | \* | (14,840) | — | \* |
| Change in fair value of common stock warrant liabilities | 6,341 | 149 | 4,156% | 5,958 | 151 | 3,846% |
| Change in fair value of Clene Nanomedicine contingent earn-out liability | 1,004 | (1,591) | \* | 2,114 | 6,662 | (68)% |
| Change in fair value of Initial Stockholders contingent earn-out liability | 129 | (205) | \* | 272 | 849 | (68)% |
| Research and development tax credits and unrestricted grants | 247 | 1,346 | (82)% | 902 | 2,001 | (55)% |
| Other income (expense), net | 45 | (72) | \* | 35 | 35 | 0% |
| Total other income (expense), net | $7,124 | $(1,171) | \* | $(8,721) | $7,872 | \* |

\* Not meaningful.

The change in total other income (expense), net, was primarily due to the following:

(i) an increase in interest income primarily due to increased balances of cash and cash equivalents and increasing interest rates on cash and cash equivalents; and an increase in interest expense primarily due to increasing interest rates and increased amortization of debt discount and debt issuance costs on notes payable;

(ii) a gain on termination of lease due to the termination of an operating lease for office space during the nine months ended September 30, 2022;

(iii) commitment share expense, due to the shares of Common Stock issued to Lincoln Park Capital Fund, LLC (“Lincoln Park”), as an initial fee for Lincoln Park’s commitment to purchase shares of Common Stock under a purchase agreement with the Company during the nine months ended September 30, 2023;

(iv) issuance costs from a public equity offering allocated to liability-classified warrants during the nine months ended September 30, 2023;

(v) a loss on initial issuance of equity from the fair value in excess of proceeds from a public equity offering during the nine months ended September 30, 2023;

(vi) a gain from a change in fair value of the common stock warrant liability due to the Original Avenue Warrant for the three and nine months ended September 30, 2022 and the New Avenue Warrant and Tranche A Warrant for the three and nine months ended September 30, 2023. The changes in fair value were due to the change in price of our Common Stock on Nasdaq and updates in the valuation model assumptions (see “Critical Accounting Estimates”). As of March 31, 2022, we reclassified Tranche 1 of the Original Avenue Warrant to additional paid-in capital. As of December 31, 2022, Tranche 2 of the Original Avenue Warrant expired, we recognized income of $0.2 million in the condensed consolidated statements of operations and comprehensive loss, and the warrant liability was extinguished;

(vii) a gain from a change in fair value of the Clene Nanomedicine Contingent Earn-out liability and Initial Stockholders Contingent Earn-out liability during the three months ended September 30, 2023, compared to a loss during the three months ended September 30, 2022; and a gain during the nine months ended September 30, 2023 and 2022. The changes were due to the price of our Common Stock on Nasdaq and updates in the valuation model assumptions at the end of each respective period (see “Critical Accounting Estimates”);

(viii) a decrease in research and development tax credits and unrestricted grants due to changes in the amount of qualifying research and development expenses incurred and changes in the reimbursement percentage; and

(ix) other income during the three months ended September 30, 2023 and the nine months ended September 30, 2023 and 2022,compared to other expense during the three months ended September 30, 2022, primarily due to realized gains and losses on foreign currency transactions and other miscellaneous income and expense items.

### Taxation

### United States

We are incorporated in the state of Delaware and subject to statutory U.S. federal corporate income tax at a rate of 21.00% for the nine months ended September 30, 2023 and 2022. We are also subject to state income tax in Utah at a rate of 4.65% and 4.85%, respectively, for the nine months ended September 30, 2023 and 2022, and in Maryland at a rate of 8.25% for the nine months ended September 30, 2023 and 2022. As of September 30, 2023 and December 31, 2022, we recorded a full valuation allowance against our net deferred tax assets due to the uncertainty as to whether such assets will be realized resulting from our three-year cumulative loss position and the uncertainty surrounding our ability to generate pre-tax income in the foreseeable future.

### Australia

Our wholly-owned subsidiary, Clene Australia Pty Ltd (“Clene Australia”), was established in Australia in March 2018 and is subject to corporate income tax at a rate of 30.00% and 25.00% for the nine months ended September 30, 2023 and 2022, respectively. Clene Australia had no taxable income or provision for income taxes for the nine months ended September 30, 2023 and 2022. We recorded other income of $0.9 million and $2.0 million for the nine months ended September 30, 2023 and 2022, respectively, for research and development tax credits pertaining to Clene Australia for the 2023 and 2022 tax years, respectively.

### Netherlands

Our wholly-owned subsidiary, Clene Netherlands B.V. (“Clene Netherlands”), was established in the Netherlands in April 2021 and is subject to corporate income tax at a rate of 19.00% up to €200,000 of taxable income and 25.80% for taxable income in excess of €200,000 for the nine months ended September 30, 2023, and 15.00% up to €395,000 of taxable income and 25.80% for taxable income in excess of €395,000 for the nine months ended September 30, 2022. Clene Netherlands had no taxable income or provision for income taxes for the nine months ended September 30, 2023 and 2022.

### Liquidity and Capital Resources

### Sources of Capital

We have incurred significant losses and negative cash flows from operations since our inception. We expect to incur additional losses in the future to fund our operations and conduct research and development of our drug candidates. We recognize the need to raise additional capital to fully implement our business plan. The long-term continuation of our business plan is dependent upon the generation of sufficient revenues from our products to offset expenses and capital expenditures. In the event that we do not generate sufficient revenues and are unable to obtain funding, we will be forced to delay, reduce, or eliminate some or all of our research and development programs, product portfolio expansion, commercialization efforts, or capital expenditures, which could adversely affect our business prospects, ability to meet long-term liquidity needs, or we may be unable to continue operations.

Since our inception, we have dedicated substantially all of our resources to the development of our drug candidates. We have financed our operations principally through the following sources:

- gross proceeds of $175.1 million from equity financing, including sales of common stock, preferred stock, warrants to purchase common stock, our ATM offering program, and our equity purchase agreement program;
- gross proceeds of $32.3 million from borrowings under convertible promissory notes;
- gross proceeds of $27.3 million from borrowings under notes payable and convertible notes payable;
- gross proceeds of $9.4 million from the Reverse Recapitalization;
- gross proceeds of $8.9 million from refundable research and development tax credits;
- gross proceeds of $2.9 million from grants from various organizations; and
- gross proceeds of $1.0 million from stock option and warrant exercises.

We also received indirect financial support for the HEALEY ALS Platform Trial, administered by Massachusetts General Hospital, which conducted a platform trial for the treatment of ALS with certain drug candidates, including CNM-Au8, at significantly lower costs than we would have otherwise incurred if we had conducted a comparably designed clinical trial at reasonable market rates.

### Going Concern

We incurred a loss from operations of $30.6 million and $36.7 million for the nine months ended September 30, 2023 and 2022, respectively. Our accumulated deficit was $232.6 million and $193.2 million as of September 30, 2023 and December 31, 2022, respectively. Our cash, cash equivalents, and marketable securities totaled $42.1 million and $23.3 million as of September 30, 2023 and December 31, 2022, respectively, and net cash used in operating activities was $23.0 million and $31.3 million for the nine months ended September 30, 2023 and 2022, respectively.

We have incurred significant losses and negative cash flows from operations since our inception. We have not generated significant revenues since our inception, and we do not anticipate generating significant revenues unless we successfully complete development and obtain regulatory approval for commercialization of a drug candidate. We expect to incur additional losses in the future, particularly as we advance the development of our clinical-stage drug candidates, continue research and development of our preclinical drug candidates, and initiate additional clinical trials of, and seek regulatory approval for, these and other future drug candidates. We expect that within the next twelve months, we will not have sufficient cash and other resources on hand to sustain our current operations or meet our obligations as they become due unless we obtain additional financing. Additionally, pursuant to our term loan with Avenue Venture Opportunities Fund, L.P. (“Avenue”), we are required to maintain unrestricted cash and cash equivalents of at least $5.0 million to avoid acceleration of the full balance of the loan (see Note 8 to the condensed consolidated financial statements). These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

To mitigate our funding needs, we plan to raise additional funding, including exploring equity financing and offerings, debt financing, licensing or collaboration arrangements with third parties, as well as utilizing our existing at-the-market facility and equity purchase agreement and potential proceeds from the exercise of outstanding warrants and stock options. These plans are subject to market conditions and reliance on third parties, and there is no assurance that effective implementation of our plans will result in the necessary funding to continue current operations. We have implemented cost-saving initiatives, including delaying and reducing certain research and development programs and commercialization efforts and elimination of certain staff positions. We have concluded that our plans do not alleviate the substantial doubt about our ability to continue as a going concern beyond one year from the date the condensed consolidated financial statements are issued.

The accompanying condensed consolidated financial statements have been prepared assuming we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As a result, the accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amounts, or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

### Short-Term Material Cash Requirements

For at least the next twelve months, our primary capital requirements are to fund our operations, including research and development, personnel, regulatory, and other clinical trial costs related to development of our lead drug candidate, CNM-Au8; and general and administrative costs to support our drug development and pre-commercial activities in advance of receiving regulatory approval for our drug candidates. Firm commitments for funds include approximately $39,000 and $1.1 million of payments under finance and operating lease obligations, respectively; payment of principal and interest on notes payable totaling $13.1 million; and commitments under various agreements for capital expenditures totaling $0.4 million related to the construction of our manufacturing facilities. We expect to meet our short-term liquidity requirements primarily through cash on hand. Additional sources of funds include equity financing, debt financing, or other capital sources.

We enter into agreements in the normal course of business with CROs for clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are cancelable at any time by us, subject to payment of our remaining obligations under binding purchase orders and, in certain cases, nominal early termination fees. These commitments are not deemed significant.

### Long-Term Material Cash Requirements

Beyond the next twelve months, our primary capital requirements are to fund our operations, including research and development, personnel, regulatory, and other clinical trial costs related to development of our lead drug candidate, CNM-Au8; and general and administrative costs to support our drug development activities in advance of receiving regulatory approval for our drug candidates. Additional funds may be spent to initiate new clinical trials, at our discretion. Known obligations beyond the next twelve months include $7,000 and $6.7 million of payments under finance and operating lease obligations, respectively; and interest and principal repayment of notes payable of $19.1 million. We expect to meet our long-term liquidity requirements primarily through equity financing, debt financing, or other capital sources.

### Use of Funds

Our cash flows for the nine months ended September 30, 2023 and 2022 were as follows:

*(in thousands)*

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(22,999) | $(31,295) |
| Net cash provided by (used in) investing activities | 4,713 | (12,446) |
| Net cash provided by financing activities | 42,181 | 875 |
| Effect of foreign exchange rate changes on cash | (114) | (155) |
| Net increase (decrease) in cash, cash equivalents and restricted cash | $23,781 | $(43,021) |

Our primary use of cash in all periods presented was to fund our research and development, regulatory and other clinical trial costs, and general corporate expenditures.

#### Operating Activities

Net cash used in operating activities was $23.0 million for the nine months ended September 30, 2023, which resulted from a net loss of $39.3 million, adjusted for non-cash items totaling $17.0 million and a net change in operating assets and liabilities of $0.7 million. Significant non-cash items included (i) depreciation expense of $1.3 million related to laboratory and office equipment and leasehold improvements; (ii) non-cash lease expense of $0.3 million; (iii) commitment share expense of $0.4 million related to the shares of Common Stock issued to Lincoln Park as an initial fee for Lincoln Park’s commitment to purchase shares of Common Stock under a purchase agreement with the Company; (iv) issuance costs of $0.3 million from a public equity offering allocated to liability-classified warrants; (v) a loss on initial issuance of equity of $14.8 million from the fair value in excess of proceeds from a public equity offering; (vi) stock-based compensation expense of $7.1 million; (vii) accretion of debt discount of $0.8 million; (viii) non-cash interest expense of $0.3 million; (ix) the changes in fair value of the Clene Nanomedicine and Initial Stockholders Contingent Earn-outs of $2.1 million and $0.3 million, respectively, primarily driven by the decrease of the closing price of our Common Stock on Nasdaq and changes in valuation model inputs; and (x) the change in fair value of the common stock warrant liabilities of $6.0 million, primarily driven by the increase of the closing price of our Common Stock on Nasdaq and changes in valuation model inputs. The net change in operating assets and liabilities was primarily attributable to the following: (a) a decrease in accounts receivable of $0.1 million and a decrease in accounts payable of $1.1 million due to the timing of vendor invoicing and payments; (b) an increase in inventory of $0.1 million; (c) a decrease in prepaid expenses and other current assets of $1.5 million due to the timing of vendor invoicing and payments, the timing of receipt of metals to be used in research and development, and a decrease in research and development tax credits receivable; (d) a decrease in accrued liabilities of $0.7 million primarily due to decreased accrued compensation and benefits and CRO and clinical fees; and (e) a decrease in operating lease obligations of $0.4 million.

Net cash used in operating activities was $31.3 million for the nine months ended September 30, 2022, which resulted from a net loss of $28.9 million, adjusted for non-cash items totaling $0.2 million and a net change in operating assets and liabilities of $2.6 million. Significant non-cash items included (i) depreciation expense of $0.7 million related to laboratory and office equipment and leasehold improvements; (ii) non-cash lease expense of $0.3 million; (iii) stock-based compensation expense of $6.5 million; (iv) gain on termination of lease of $0.4 million; (v) accretion of debt discount of $0.7 million; (vi) non-cash interest expense of $0.1 million; and (vii) the changes in the fair value of the Clene Nanomedicine and Initial Stockholders Contingent Earn-outs of $6.7 million and $0.9 million, respectively. The changes in fair value of these instruments were primarily driven by the decrease of the closing price of our Common Stock on Nasdaq. The net change in operating assets and liabilities was primarily attributable to the following: (a) an increase in accounts receivable of $0.1 million and an increase in accounts payable of $0.2 million due to the timing of vendor invoicing and payments; (b) an increase in prepaid expenses and other current assets of $0.9 million due to the timing of vendor invoicing and payments, the timing of receipt of metals to be used in research and development, and an increase in Australia research and development credit receivable; (c) a decrease in accrued liabilities of $1.5 million primarily due to decreased accrued compensation and benefits; and (d) a decrease in operating lease obligations of $0.4 million.

#### Investing Activities

Net cash provided by investing activities was $4.7 million for the nine months ended September 30, 2023, which consisted of proceeds from maturities of marketable securities of $5.0 million, partially offset by purchases of property and equipment of $0.3 million. Net cash used in investing activities was $12.5 million for the nine months ended September 30, 2022, which consisted of (i) purchases of marketable securities of $24.6 million and (ii) purchases of property and equipment of $3.5 million, offset primarily by (iii) proceeds from maturity of marketable securities of $8.0 million and (iv) proceeds from sale of marketable securities of $7.6 million.

#### Financing Activities

Net cash provided by financing activities was $42.2 million for the nine months ended September 30, 2023, which consisted of (i) proceeds from issuance of common stock and warrants, net of offering costs, of $42.1 million, and (ii) proceeds from the issuance of notes payable of $0.4 million; partially offset by (iii) payments of notes payable modification fees of $0.2 million and (iv) payments of finance lease obligations of $0.1 million. Net cash provided by financing activities was $0.9 million for the nine months ended September 30, 2022, which consisted of (i) proceeds from exercise of stock options of $0.3 million, (ii) at-the-market offering proceeds of $0.1 million net of $4,000 placement agent commissions, and (iii) proceeds from the issuance of notes payable of $0.7 million; offset primarily by (iv) payments of finance lease obligations of $0.1 million, (v) payment of debt issuance costs of $30,000, and (vi) payment of deferred offering costs of $0.1 million.

#### Public Offering

In June 2023, we sold 50,000,000 units at a sale price of $0.80 per unit pursuant to an underwriting agreement with Canaccord Genuity LLC(“Canaccord”) as underwriter. Each unit consisted of (i) one share of Common Stock, (ii) one warrant to purchase one share of Common Stock at an exercise price of $1.10 per share (the “Tranche A Warrants”), and (iii) one warrant to purchase one share of Common Stock at an exercise price of $1.50 per share (the “Tranche B Warrants”). The aggregate gross proceeds were $40.0 million, excluding the proceeds, if any, from the exercise of the Tranche A Warrants and Tranche B Warrants. We cannot predict when or if the Tranche A Warrants or Tranche B Warrants will be exercised, and it is possible they may expire and/or never be exercised. We paid underwriting discounts and commissions of $2.4 million and offering expenses of $0.2 million. The offering was made pursuant to our registration statement on Form S-3 (file number 333-264299), which was declared effective by the SEC on April 26, 2022, a related registration statement pursuant to Rule 462(b) (file number 333-272692), filed with the SEC and effective on June 16, 2023, and our prospectus supplement relating to the offering.

#### Common Stock Sales Agreement

During the nine months ended September 30, 2023, we sold 2,895,090 shares of Common Stock under our Equity Distribution Agreement (the “ATM Agreement”) with Canaccord, generated gross proceeds of $4.5 million, and paid commissions of $0.1 million. We did not make any sales during the three months ended September 30, 2023. During the three and nine months ended September 30, 2022 we sold 40,000 shares of Common Stock and generated gross proceeds of $0.1 million. Commissions paid to the Placement Agents were insignificant. The issuance and sale of Common Stock by us under the ATM Agreement was made pursuant to our registration statement on Form S-3 (file number 333-264299), which was declared effective by the Securities and Exchange Commission on April 26, 2022, and our prospectus supplement relating to the offering. On June 16, 2023, we delivered written notice to Canaccord that we were suspending and terminating the prospectus supplement (the “ATM Prospectus Supplement”) related to our Common Stock issuable pursuant to the ATM Agreement. We will not make any further sales of our securities pursuant to the ATM Agreement, unless and until a new prospectus supplement is filed. Other than the termination and suspension of the ATM Prospectus Supplement, the ATM Agreement remains in full force and effect.

#### Common Stock Purchase Agreement

During the nine months ended September 30, 2023, we sold 400,000 shares of Common Stock under the purchase agreement (the “Purchase Agreement”) with Lincoln Park, issued 2,893 Additional Commitment Shares, and generated proceeds of $0.4 million. We did not sell any Common Stock under the Purchase Agreement during the three months ended September 30, 2023. The issuance and sale of Common Stock under the Purchase Agreement was made pursuant to our registration statement on Form S-3 (file number 333-264299), which was declared effective by the SEC on April 26, 2022, and our prospectus supplement relating to the transaction. On June 16, 2023, we delivered written notice to Lincoln Park that we were terminating the prospectus supplement (the “Purchase Agreement Prospectus Supplement”) and the offering with respect to our unsold shares of Common Stock issuable pursuant to the Purchase Agreement. We will not make any further sales of our securities pursuant to the Purchase Agreement, unless and until a new prospectus supplement is filed. Other than the termination of the Purchase Agreement Prospectus Supplement and offering with respect to future sales by us, the Purchase Agreement remains in full force and effect.

### Critical Accounting Estimates

Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with U.S. Generally Accepted Accounting Principles. The preparation of these condensed consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, revenues, costs, and expenses. We evaluate our estimates and judgments on an ongoing basis, and our actual results may differ from these estimates. We base our estimates on historical experience, known trends and events, contractual milestones, and other various factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We consider the following estimates to be critical as they involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition and results of operations.

### Contingent Earn-Out Liabilities

In connection with the Reverse Recapitalization, certain stockholders are entitled to the Contingent Earn-outs payments based on achievement of certain milestones. In accordance with ASC 815, we classified the Contingent Earn-outs as liabilities and measured them at fair value on the date of the Reverse Recapitalization. We remeasure the liabilities at each reporting date and record the change in fair value as a component of other income (expense), net, in the condensed consolidated statements of operations and comprehensive loss. We estimate the fair value using a Monte Carlo valuation model, which requires significant judgment. The unobservable inputs include the expected stock price volatility, the risk-free interest rate, and the expected term. As of September 30, 2023 and December 31, 2022, the unobservable inputs were as follows:

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Expected stock price volatility | 100.00% | 115.00% |
| Risk-free interest rate | 5.00% | 4.20% |
| Expected dividend yield | 0.00% | 0.00% |
| Expected term (in years) | 2.25 | 3.00 |

The change in fair value of the Clene Nanomedicine Contingent Earn-out resulted in a gain of $2.1 million and $6.7 million for the nine months ended September 30, 2023 and 2022, respectively. The change in fair value of the Initial Stockholders Contingent Earn-out resulted in a gain of $0.3 million and $0.9 million for the nine months ended September 30, 2023 and 2022, respectively.

### Convertible Notes

Pursuant to the 2021 Avenue Loan, $5.0 million of the outstanding principal is subject to the Avenue Conversion Feature. In accordance with ASU 2020-06, *Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity*, we classified this portion as convertible notes payable in the condensed consolidated balance sheets and did not separate the Avenue Conversion Feature from the host contract as it did not meet the requirements for accounting as a derivative instrument. We account for the convertible note as a single liability measured at its amortized cost. As of September 30, 2023 and December 31, 2022, the convertible note was carried at $4.8 million and $4.8 million, respectively.

We classified the 2022 DHCD Loan as convertible notes payable in the condensed consolidated balance sheets and did not separate the conversion option from the host contract as it did not meet the requirements for accounting as a derivative instrument. We account for the convertible note as a single liability measured at its amortized cost. As of September 30, 2023 and December 31, 2022, the convertible note was carried at $5.2 million and $5.0 million, respectively.

### Common Stock Warrant Liabilities

Pursuant to an amendment to the 2021 Avenue Loan in June 2023, we issued a warrant to purchase 3,000,000 shares of Common Stock at $0.80 per share (the “New Avenue Warrant”). In accordance with ASC 815, we recognized the New Avenue Warrant as a derivative liability measured at fair value and will remeasure the New Avenue Warrant at each reporting date and record the change in fair value as a component of other income (expense), net, in the condensed consolidated statements of operations and comprehensive loss. We estimate the fair value using a Black-Scholes option-pricing model with probability weights for the occurrence of the following events: (i) settlement of the instrument upon a change of control transaction, (ii) dissolution of the Company, or (iii) another outcome outside of (i)-(ii). These estimates require significant judgment. As of September 30, 2023, the unobservable inputs were as follows:

| Expected stock price volatility Risk-free interest rate | September 30, 2023 70.00% – 110.00% 4.63% – 5.52% |
| --- | ---: |
| Expected dividend yield | 0.00% |
| Expected term (in years) | 0.58 – 4.75 |
| Probability of change of control | 5.00% |
| Probability of dissolution | 60.00% |
| Probability of other outcome | 35.00% |

Pursuant to an underwritten public offering in June 2023, we issued the Tranche A Warrants to purchase 50,000,000 shares of Common Stock at $1.10 per share and the Tranche B Warrants to purchase 50,000,000 shares of Common Stock at $1.50 per share. In accordance with ASC 815, we recognized the Tranche A Warrant as a derivative liability measured at fair value and will remeasure the Tranche A Warrant at each reporting date and record the change in fair value as a component of other income (expense), net, in the condensed consolidated statements of operations and comprehensive loss. We estimate the fair value using a Black-Scholes option-pricing model with probability weights for the occurrence of the following events: (i) FDA acceptance of an NDA for CNM-Au8, (ii) settlement upon a fundamental transaction, (iii) dissolution of the Company, and (iv) another outcome outside of (i)-(iii). These estimates require significant judgment. As of September 30, 2023, the unobservable inputs were as follows:

| Expected stock price volatility Risk-free interest rate | September 30, 2023 75.00% – 110.00% 4.87% – 5.50% |
| --- | ---: |
| Expected dividend yield | 0.00% |
| Expected term (in years) | 0.75 – 2.71 |
| Probability of NDA acceptance | 30.00% |
| Probability of fundamental transaction | 5.00% |
| Probability of dissolution | 60.00% |
| Probability of other outcome | 5.00% |

The Tranche B Warrant qualified for equity classification at issuance. We estimated the nonrecurring fair value measurement using a Black-Scholes option-pricing model with probability weights for the occurrence of the following events: (i) FDA approval of an NDA for CNM-Au8, (ii) settlement upon a fundamental transaction, (iii) dissolution of the Company, and (iv) another outcome outside of (i)-(iii). These estimates require significant judgment. The unobservable inputs to the Black-Scholes option pricing model were as follows:

| Expected stock price volatility Risk-free interest rate | June 16, 2023 100.00% – 110.00% 3.88% – 4.97% |
| --- | ---: |
| Expected dividend yield | 0.00% |
| Expected term (in years) | 1.46 – 7.00 |
| Probability of NDA approval | 22.50% |
| Probability of fundamental transaction | 5.00% |
| Probability of dissolution | 71.50% |
| Probability of other outcome | 1.00% |

35

### Income Taxes

We account for uncertainty in income taxes by applying a two-step process to determine the amount of tax benefit to be recognized in the condensed consolidated financial statements. First, the tax position is evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. Additionally, we assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. The estimation of these factors requires significant judgment. Based on our evaluation of these factors, we have not recorded income tax benefits for the net operating losses or for research and development tax credits or other deferred tax assets due to uncertainty of realizing benefits from these items.

### Stock-Based Compensation

We account for stock-based compensation arrangements using a fair value-based method for costs related to all share-based payments including stock options and stock awards. The fair value is recognized over the period during which a grantee was required to provide services in exchange for the option award and service-based stock awards, known as the requisite service period (usually the vesting period), on a straight-line basis. For stock awards with market conditions, the fair value is recognized over the period based on the expected milestone achievement dates as the derived service period (usually the vesting period), on a straight-line basis. For stock awards with performance conditions, the grant-date fair value of these awards is the market price on the applicable grant date, and compensation expense will be recognized when the conditions become probable of being satisfied. We will recognize a cumulative true-up adjustment once the conditions become probable of being satisfied as the related service period had been completed in a prior period. We elect to account for forfeitures as they occur, rather than estimating expected forfeitures.

We estimate the fair value of stock options using a Black-Scholes option-pricing model, which requires significant judgment. The unobservable inputs include the expected price volatility, risk-free interest rate, expected dividend yield, and expected term. For the nine months ended September 30, 2023 and 2022, the unobservable inputs were as follows:

| Expected stock price volatility Risk-free interest rate | Nine Months Ended September 30, 2023 96.22% – 103.24% 3.26% – 4.41% | 2022 89.57% – 98.13% 1.65% – 3.00% |
| --- | ---: | ---: |
| Expected dividend yield | 0.00% | 0.00% |
| Expected term of options (in years) | 5.00 – 6.43 | 5.00 – 6.98 |

We estimate the fair value of restricted stock awards using a Monte Carlo valuation model to simulate the achievement of certain stock price milestones. The unobservable inputs include the expected stock price volatility, risk-free interest rate, and expected term. No restricted stock awards were granted during the nine months ended September 30, 2023 and 2022.

## Controls and procedures

As filed, 6,641 characters.

### Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2023, as such term is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”). As a result of this evaluation, our principal executive officer and principal financial officer have concluded that, as of September 30, 2023, our disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below. Notwithstanding the identified material weaknesses, management, including our principal executive officer and principal financial officer, believes the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly represent, in all material respects, our financial condition, results of operations and cash flows as of and for the periods presented in accordance with United States Generally Accepted Accounting Principles.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission (the “SEC”) rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

### Material Weaknesses in Internal Control over Financial Reporting

In connection with the audit of our financial statements as of and for the years ended December 31, 2022 and 2021, our management identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses identified relate to the fact that we did not design or maintain an effective control environment commensurate with our financial reporting requirements. This deficiency in our control environment contributed to the following additional material weaknesses related to control activities and information and communication within our internal control over financial reporting:

- we did not design and maintain controls over the preparation and review of reconciliations and the review and segregation of duties over manual journal entries, including controls over the completeness and accuracy of information; and
- we did not design and maintain information technology (“IT”) general controls for IT systems that are relevant to the preparation of the financial statements. Specifically, we did not design and maintain: (a) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to our appropriate personnel; (b) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized, and implemented appropriately; (c) computer operations controls to ensure that data backups are authorized and monitored; and (d) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.

Each of the control deficiencies described above could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, our management has determined that each of the control deficiencies described above constitute material weaknesses.

### Material Weakness Remediation

Management continues to be actively engaged and committed to taking the steps necessary to remediate the control deficiencies that constituted the above material weaknesses. During 2022, we made the following enhancements to our control environment:

- we have strengthened the experience of our internal accounting team, to provide oversight, structure and reporting lines, and to provide additional review over our disclosures, including hiring a new Chief Financial Officer;
- we engaged external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP, and to assist us with documenting and assessing our accounting policies and procedures; and
- we implemented a new Enterprise Resource Planning system to enhance the accuracy of our financial records, enable the enforcement of systematic segregation of duties, and improve our information technology general controls environment.

Our remediation activities are continuing during 2023. In addition to the above actions, we expect to engage in additional activities, or have completed additional activities, including, but not limited to:

- adding more technical accounting resources to enhance our control environment; and
- until we have sufficient technical accounting resources, engaging external consultants to provide support and to assist us in our evaluation of more complex applications of GAAP.

We continue to enhance corporate oversight over process-level controls and structures to ensure that there is appropriate assignment of authority, responsibility, and accountability to enable remediation of our material weaknesses. We believe that our remediation plan will be sufficient to remediate the identified material weaknesses and strengthen our internal control over financial reporting. As we continue to evaluate, and work to improve, our internal control over financial reporting, management may determine that additional measures to address control deficiencies or modifications to the remediation plan are necessary.

### Changes in Internal Control over Financial Reporting

Other than changes described under “—*Material Weakness Remediation,”* there were no changes in our internal control over financial reporting during the quarter ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 4,188 characters.

Our business, financial condition, and results of operations can be affected by a number of factors, whether currently known or unknown, including but not limited to those described in Part I, Item 1A, Risk Factors of our 2022 Annual Report on Form 10-K which was filed with the SEC on March 13, 2023. Except for the risk factor disclosed below, and the risk factor disclosed in Part II, Item 1A, Risk Factors, of our Quarterly Report on Form 10-Q for the period ended March 31, 2023, which was filed with the SEC on May 12, 2023, there have been no material changes to the risk factors since previously disclosed in the 2022 Annual Report on Form 10-K. Any one or more of these factors could, directly or indirectly, cause our actual financial condition and results of operations to vary materially from past, or from anticipated future, financial condition and results of operations. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, results of operations, and stock price.

***We do not satisfy all continued listing requirements of Nasdaq. There can be no assurance that we will be able to comply with the continued listing requirements of Nasdaq.***

As previously disclosed, on August 1, 2023, we received a written notice (the “Notice”) from The Nasdaq Stock Market LLC that for the last 30 consecutive business days, the bid price for our Common Stock had closed below the minimum $1.00 per share requirement for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). The Notice had no immediate effect on the listing of our Common Stock and our Common Stock will continue to be listed on Nasdaq under the symbol “CLNN.”

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have a period of 180 calendar days, or until January 29, 2024, to regain compliance with the Minimum Bid Price Requirement. If at any time before January 29, 2024, the bid price of our Common Stock closes at $1.00 per share or more for a minimum of 10 consecutive business days, Nasdaq will provide us with a written confirmation of compliance with the Minimum Bid Price Requirement.

If we do not regain compliance with the Minimum Bid Price Requirement by January 29, 2024, we may be eligible for an additional 180-day compliance period, provided that on the 180th day of the first compliance period we meet the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on Nasdaq, with the exception of the Minimum Bid Price Requirement, and notifies Nasdaq of our intent to cure the deficiency with the Minimum Bid Price Requirement during the second compliance period by effecting a reverse stock split, if necessary. If we do not regain compliance with the Minimum Bid Price Requirement when required, Nasdaq will provide written notification to us that our Common Stock is subject to delisting. At that time, we may appeal the delisting determination to a Nasdaq hearings panel.

We intend to actively monitor the bid price for our Common Stock between now and January 29, 2024, and will consider our available options to regain compliance with the Minimum Bid Price Requirement. There can be no assurance that we will regain compliance with the Minimum Bid Price Requirement or maintain compliance with any of the other Nasdaq continued listing requirements.

If Nasdaq delists our shares of Common Stock or warrants from trading on its exchange for failure to meet Nasdaq’s listing requirements, we and our stockholders could face significant material adverse consequences including:

- a limited availability of market quotations for our securities;
- reduced liquidity for our securities;
- a determination that our Common Stock is a “penny stock” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
- a limited amount of news and analyst coverage; and
- a decreased ability to issue additional securities or obtain additional financing in the future.

Filed Nov 7, 2023.
Source: SEC EDGAR, the filing index for accession 0001437749-23-030487. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.