CADL US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis contains forward-looking statements that involve risks and uncertainties. You should review the section titled “Risk factors” in this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described below.

Overview

We are a late clinical stage biopharmaceutical company focused on helping patients fight cancer with oncolytic viral immunotherapies. Our engineered viruses are designed to induce immunogenic death through direct viral-mediated cytotoxicity in cancer cells, thus releasing tumor neo-antigens and creating a pro-inflammatory microenvironment at the site of injection. Our approach combines an in-depth knowledge of viral immunotherapy with extensive clinical experience across a wide range of indications. Based on the broad range of data that we have generated from our preclinical models and clinical trials using our approach, we have observed what we believe to be systemic immune response against locally injected tumors and their distant metastases. We have established two oncolytic viral immunotherapy platforms based on novel, genetically modified adenovirus and herpes simplex virus (HSV) constructs. In our clinical results to date from CAN-2409, our lead product from our adenovirus platform, and CAN-3110, our lead product candidate from our HSV platform, we have observed that these candidates may have the potential to address significant unmet patient need and improve clinical outcomes in novel indications across broader patient populations.

Since our formation, we have devoted substantially all our resources to developing our oncolytic viral immunotherapy and our adenovirus platform, conducting research and development activities, including product candidate development, recruiting skilled personnel, establishing our intellectual property portfolio, raising capital and providing general and administrative support for these operations. We have financed our operations primarily through proceeds from the sale of convertible notes, common stock and our convertible preferred stock. As of December 31, 2021, we have raised approximately $160.6 million through a combination of convertible notes, common stock, convertible preferred stock financings, and government grants.

We were incorporated under the laws of the State of Delaware in June 2003. Our principal executive office is located at 117 Kendrick St, Suite 450, Needham, Massachusetts 02494. On November 30, 2020, we formally changed our name to Candel Therapeutics, Inc., previously Advantagene, Inc. Since our formation, we have incurred significant operating losses and have not generated any revenue from the sale of products. Our ability to generate any product revenue or product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were $36.1 million, $17.7 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $80.3 million.

We will not generate revenue from product sales unless and until we successfully complete clinical development, obtain regulatory approval for, and successfully commercialize our product candidates. The lengthy process of securing marketing approvals for new drugs requires the expenditure of substantial resources. Any significant delay or failure to obtain regulatory approvals would materially adversely affect our product candidates development efforts and our business overall. In addition, if we obtain regulatory approval for any of our product candidates, we expect to incur significant expenses related to developing our commercialization capability to support product sales, marketing, manufacturing and distribution activities. In addition, following the closing of this offering, we expect to incur significant additional costs associated with operating as a public company. We anticipate that our expenses will increase significantly as we:

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advance the development of our product candidate pipeline;

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initiate and continue research and preclinical and clinical development of potential new product candidates;

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maintain, expand and protect our intellectual property portfolio;

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acquire or in-license additional product candidates and technologies;

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expand our infrastructure and facilities to accommodate our growing employee base and ongoing development activities;

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establish agreements with contract research organizations, or CROs, and third-party contract manufacturing organizations, or CMOs, in connection with our preclinical studies and clinical trials and the development of our manufacturing capabilities;

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develop the manufacturing process and capabilities for future clinical trials and commercialization;

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manufacture larger quantities of our product candidates for clinical development and potential commercialization;

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seek marketing approvals for our product candidates that successfully complete clinical trials, if any;

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establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; and

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add operational, financial and management information systems and personnel, including personnel to support our research and development programs, any future commercialization efforts and our transition to operating as a public company.

As a result of these anticipated expenditures, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time, if ever, as we can generate significant revenue from product sales, we expect to finance our cash needs through a combination of public or private equity or debt financings and other sources, which may include collaborations, strategic alliances and licensing arrangements with third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. Our inability to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We cannot assure you that we will ever generate sufficient revenue to achieve profitability.

Because of the numerous risks and uncertainties associated with the development of therapeutics, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we can generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be required to raise additional capital on terms that are unfavorable to us or we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

Collaborations

We are a party to a number of license and collaboration agreements under which we license patents, patent applications and other intellectual property to and from third parties.

Periphagen. On December 9, 2019, we entered into a series of agreements, including an exclusive license agreement, a novation agreement, an equipment purchase agreement and an intellectual property assignment agreement, collectively the Periphagen Agreements, with Periphagen, whereby we acquired certain assets and licensed certain rights (including specified patent rights and know-how, or the Licensed IP Rights) of Periphagen, primarily consisting of exclusive rights to their technology platform and a portfolio of pre-clinical, development stage virus vectors. The primary classes of assets are HSV-derived assets expressing neurotrophin-3 (or NT-3 Assets) and other HSV-derived assets (Gene Transfer Neuro-Assets). Under the license agreement, Periphagen granted us a worldwide exclusive license with the right to grant sublicenses through multiple tiers under the Licensed IP Rights to conduct research and to develop, make, have made, use, have used, offer for sale, have sold, export and import products incorporating the Licensed IP Rights in all fields of use except the treatment, diagnosis, and prevention of nononcologic skin diseases and conditions (including use as an aesthetic).

MGB. On January 20, 2018, we entered into an exclusive option agreement, or the Option Agreement, with MGB. Pursuant to the Option Agreement, we obtained the exclusive right from MGB to negotiate a world-wide, royalty-bearing license to develop and commercialize products covered by certain MGB patents, including those patents covering CAN-3110, in the field of gene therapy and oncolytic vector therapy for the treatment or prevention of cancerous tumors in humans or animals, as such field is further detailed in the Option Agreement, or the Licensed Field. In consideration for MGB’s granting of the exclusive option, we paid MGB a non-refundable fee of $40,000.

Under the Option Agreement, we were required to use reasonable efforts to enter into a clinical trial agreement with MGB. We entered into such clinical trial agreement with MGB, or the MGB Clinical Trial Agreement, on June 19, 2018. Under the MGB Clinical Trial Agreement, we have committed to remitting financial support for the performance of a specified Phase 1 clinical trial by MGB pursuant to a protocol summary contained in the Option Agreement.

On September 15, 2020, we exercised our option and entered into an exclusive patent license agreement with MGB, or the MGB License Agreement. Under the MGB License Agreement, MGB granted to us (a) an exclusive, royalty-bearing license under certain of MGB’s patents to make, have made, use, have used, sell and have sold certain products covered by such licensed patents, or the Licensed Products and otherwise practice processes covered by such licensed patents, or Licensed Processes; and (b) a non-exclusive, royalty-bearing license under certain other of MGB’s patents to make, have made, use, have used, sell and have sold Licensed Products, but not to sell or have sold Licensed Processes. The foregoing rights are sublicensable, subject to sublicensing terms set forth in the MGB License Agreement. In connection with executing the MGB License Agreement, we paid a license issue fee and also agreed to reimburse MGB for all reasonable fees and expenses MGB had incurred and will incur for the preparation, filing, prosecution and maintenance of the licensed patent rights.

Ventagen. On March 1, 2014, we entered into an exclusive license agreement, or the Ventagen Agreement, with Ventagen, a related party. The Ventagen Agreement provides Ventagen an exclusive license, with rights to grant

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sublicense (subject to certain terms and conditions) under any worldwide patent rights and know-how owned or controlled by us during the term of the Ventagen Agreement which cover applicable technology utilizing the delivery method of the herpes derived TK protein to tumors or other tissues via a viral vector (as further specified therein), to research, use, have used, import, have imported, export, have exported, offer for sale, have sold, sell, distribute and market certain products for the prevention or treatment of cancer in humans and any use in animals (or the Field of Use), or the Licensed Products, for commercial sale and distribution within Mexico, Belize, Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua, Panama, Colombia and Bolivia. Ventagen is 49.5% owned by certain of our shareholders.

As of December 31, 2021, we had cash and cash equivalents of $82.6 million. On February 24, 2022, we entered into a loan and security agreement (the Loan Agreement) with a bank pursuant to which the bank has agreed to provide term loans to the Company in an aggregate principal amount of up to $25.0 million. We borrowed $20.0 million upon entering into the Loan Agreement. We believe the existing cash and cash equivalents on hand as of December 31, 2021 plus the proceeds under the Loan Agreement will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and capital resources.”

Components of our results of operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from sales of products in the foreseeable future. We are recognizing as research and development service revenue $1.0 million that we received in 2014 and 2015 from Ventagen for an exclusive license to develop products for commercial sale and development within certain countries. The $1.0 million is being recognized as revenue over the period during which we provide services under the license agreement.

Operating expenses

Our operating expenses since inception have consisted solely of research and development costs and general and administrative costs.

Research and development expenses

Research and development expenses consist primarily of costs incurred for our product development activities for our two primary drug candidates, CAN-2409 and CAN-3110. We expense research and development costs as incurred. These include the following:

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employee-related costs, including salaries, benefits and stock-based compensation expense, for personnel engaged in research, development and clinical management functions;

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expenses incurred under agreements with third party clinical sites for the treatment and follow-up for patients enrolled in our clinical trials;

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the cost of acquiring and manufacturing preclinical study materials, including manufacturing registration and validation batches;

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payments made under third-party licensing agreements;

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costs incurred to develop the manufacturing process and capabilities for future clinical trials and commercialization. Our clinical trial material for use in our existing clinical trials was manufactured in prior years;

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costs related to compliance with quality and regulatory requirements;

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costs of outside consultants, primarily related to regulatory; and

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facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities and insurance, and other operating costs if specifically identifiable to research and development activities.

We expect that our research and development expenses will continue to increase substantially for the foreseeable future and will comprise a larger percentage of our total expenses as we complete our clinical trials and commence additional clinical trials, continue to discover and develop additional product candidates and develop and scale our manufacturing capabilities. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to increased scale and duration of later stage clinical trials.

We cannot determine with certainty the duration and costs of future clinical trials of CAN-2409 and CAN-3110 or any other product candidate we may develop or if, when, or to what extent we will generate revenue from the commercialization and sale of any product candidate for which we obtain marketing approval. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of, or obtain regulatory approval for, any of our current or future product candidates. The duration, costs,

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and timing of clinical trials and development of CAN-2409 and CAN-3110 and any other product candidate we may develop will depend on a variety of factors, including:

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the scope, rate of progress, expense and results of clinical trials;

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our successful enrollment in and completion of clinical trials, including our ability to generate positive data from any such trials;

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our ability to add and retain key research and development personnel;

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the actual probability of success for our product candidates, including their safety and efficacy, early clinical data, competition, manufacturing capability, and commercial viability;

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significant and changing government regulation and regulatory guidance;

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the timing and receipt of any marketing approvals;

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the progress of the development efforts of parties with whom we may enter into collaboration agreements, and the terms and timing of any additional collaboration agreements, license or other arrangement, including the timing of any payments thereunder;

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our ability to enter into agreements with CMOs for the commercial manufacture of our product candidate CAN-2409 and the clinical scale manufacture of our product candidate CAN-3110 as well as complete the development, construction and qualification of our clinical manufacturing facility in Needham;

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costs related to manufacturing of our product candidates or to account for any future changes in our manufacturing plans;

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our ability to successfully commercialize our product candidates, if and when approved;

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raising additional funds necessary to complete clinical development of our product candidates;

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our ability to obtain and maintain third-party insurance coverage and adequate reimbursement for our product candidates, if and when approved;

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the acceptance of our product candidates, if approved, by patients, the medical community and third-party payors;

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effectively competing with other products if our product candidates are approved;

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the impact of any business interruptions to our operations, including the timing and enrollment of patients in our planned clinical trials, or to those of our manufacturers, suppliers, or other vendors resulting from the ongoing COVID-19 pandemic or similar public health crisis;

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our ability to maintain a continued acceptable safety profile for our therapies following approval;

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our ability to obtain and maintain patents, trade secret and other intellectual property protection and regulatory exclusivity for our product candidates, both in the United States and internationally; and

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the expense of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.

A change in the outcome of any of these variables with respect to the development of a product candidate could significantly change the costs and timing associated with the development of that product candidate. We may never succeed in obtaining regulatory approval for any of our product candidates.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, business development, and administrative functions. General and administrative expenses also include legal fees relating to intellectual property and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs including directors and officers insurance; travel expenses; and facility-related expenses, which include direct depreciation costs and expenses for rent and maintenance of facilities, and other operating costs that are not specifically attributable to research and development activities.

We expect that our general and administrative expenses will increase in the future as we increase our personnel headcount to support our continued clinical development and manufacturing activities and to meet the requirements of a public company. We expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and Securities and Exchange Commission, or SEC, requirements; director and officer insurance costs; and investor and public relations costs.

Grant income

Grant income consists of amounts received under a grant from the National Institute of Health for development of CAN-2409 for use as a therapy for pancreatic cancer.

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Interest, dividend, and investment income

Interest, dividend and investment income consists of amounts earned on investment of cash equivalents and short-term investments.

Change in fair value of warrant liability

In connection with the November 13, 2018 issuance of Series B preferred stock we issued warrants to the purchasers of the Series B preferred stockholders, to purchase up to 7,344,982 shares of our common stock with an exercise price of $6.81 per share, and a warrant to the NC Incorporated Ohio Trust, an irrevocable trust funded by us, to purchase 162,740 shares of our common stock, $0.01 par value, at an exercise price of $1.46 per share, subject to adjustments as specified in the warrant agreement. Certain of those warrants are recorded as a liability on our balance sheet. The warrants recorded as a liability are remeasured to their fair value at each reporting date with changes in the fair value recognized as a component of other income (expense), net in the statements of operations and comprehensive loss. We will continue to recognize changes in the fair value of the warrant liability until the warrants are exercised, expire or qualify for equity classification. The fair value of the warrant liability is determined based on significant inputs not observable in the market. The fair value of the warrant liability uses various valuation methods, including the Monte Carlo method, the option-pricing method, probability-weighted expected return and the hybrid method, all of which incorporate assumptions and estimates, to value the common stock warrants. The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of common stock, risk-free interest rate, expected dividend yield, and the remaining contractual term of the warrants. Therefore, the fair value may not be appropriately captured by simple models.

Income taxes

Since our inception, we have generated cumulative federal and state net operating loss and research and development credit carryforwards for which we have not recorded any net tax benefit due to uncertainty around utilizing these tax attributes within their respective carryforward periods.

As of December 31, 2021, we had federal net operating loss carryforwards, or NOLs, of approximately $51.6 million and state NOLs of approximately $48.4 million which may be available to offset future taxable income. Our federal NOLs include $8.8 million available to reduce future taxable income through 2028 and approximately $42.8 million of NOLs that do not expire and are available to reduce future taxable income indefinitely. The state NOLs are available to offset future taxable income through 2032. As of December 31, 2021, we also had federal and state research and development tax credit carryforwards of $2.0 million and $1.1 million, respectively, which are available to offset federal and state tax liabilities through 2036 and 2028, respectively.

Realization of future tax benefits is dependent on many factors, including our ability to generate taxable income within the NOL period. Our management has evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets, which are comprised principally of net operating loss carryforwards and certain tax credits. Management has considered our history of cumulative net losses incurred since inception, as well as our lack of product revenue since inception, and has determined that it is more likely than not that we will not realize the benefits of its deferred tax assets. As a result, a full valuation allowance has been established at December 31, 2021.

NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as provided under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, as well as under similar state provisions. These ownership changes may limit the amount of NOLs that can be utilized annually to offset future taxable income. In general, an ownership change, as defined under Section 382 of the Code, or Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. We have completed several financings and not yet determined if such a limitation would be placed against our NOL. We will make such a determination prior to the utilization of any NOL

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Results of operations

The following table summarizes our results of operations for the years ended December 31, 2021 and 2020 (in thousands):

YEAR ENDED DECEMBER 31, INCREASE/

Research and development service revenue $ 125 $ 125 $ -

Operating expenses:

Interest, dividend and investment (expense) income, net (53 ) 111 (164 )

Change in fair value of warrant liability (11,421 ) (4,605 ) (6,816 )

Comparison of the Years End December 31, 2021 and 2020

Revenue

We had research and development service revenue of $125,000 for each of the years ended December 31, 2021 and 2020. This represents the recognition as research and development service revenue of a portion of the $1.0 million that we received in 2014 and 2015 from Ventagen, a related party, which is being recognized over the period during which we provide the services.

Research and development expenses

The following table summarizes our research and development expenses for the years ended December 31, 2021 and 2020 (in thousands):

YEAR ENDED DECEMBER 31, INCREASE

Depreciation and Impairment of fixed assets 717 91 626

Research and development expenses for the year ended December 31, 2021 were $15.2 million, compared to $8.8 million for the year ended December 31, 2020 and consisted primarily of $8.9 million and $5.3 million, respectively, of employee-related costs, including $1.2 million and $847,000, respectively, of non-cash stock compensation expense, $3.8 million and $2.2 million, respectively, of clinical development costs related to our clinical trial sites and the cost of treating and following up on patients in our clinical trials, $746,000 and $0, respectively, of recruiting costs, $717,000 and $91,000, respectively, of depreciation and impairment charges on fixed assets, and $584,000 and $812,000, respectively, of facility and occupancy-related costs. The increase of $6.4 million in research and development expenses for the year ended December 31, 2021, was primarily due to an increase of $3.7 million in employee-related costs, an increase of $1.7 million in clinical development costs, 746,000 of search fees and costs to recruit research and development employees, and a $553,000 charge for the impairment of certain fixed assets. The decrease in occupancy cost is due to the termination of the lease on the Company’s lease on its prior facility at the end of 2020. The $3.7 million increase in employee-related costs was primarily due to the increase of $1.0 million in non-cash compensation expense and an increase in the research and development headcount.

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General and administrative expenses

The following table summarizes our general and administrative expenses for the years ended December 31, 2021 and 2020 (in thousands):

YEAR ENDED DECEMBER 31, INCREASE

General and administrative expenses were $10.7 million for the year ended December 31, 2021 compared to $5.2 million for the year ended December 31, 2020 and consisted primarily of $5.6 million and $2.7 million, respectively, of employee-related costs, including $1.7 million and $1.3 million, respectively, of non-cash stock compensation expense, $3.0 million and $2.0 million, respectively, of professional and consulting fees and $1.2 million and $27,000, respectively, of insurance costs. The increase of $5.5 million in general and administrative expenses was primarily due to an increase of $2.9 million in employee – related costs as we increased our general and administrative headcount to manage growth and operate a public company, including an increase of $477,000 in non-cash compensation expense, an increase of $968,000 in professional and consulting fees, and an increase of $1.2 million in insurance expense. Insurance expense due to the cost of directors and officers insurance upon completion of the IPO. The increase in professional and consulting fees is primarily due to an increase in fees paid to personnel search firms, public relations consultants, commercial market research firms and legal and accounting firms.

Grant income

Grant income was $1.1 million for the year ended December 31, 2021 compared to $624,000 for the year ended December 31, 2020. Grant represents amounts received under a grant from the National Institutes of Health for development of CAN-2409 for use as a therapy for pancreatic cancer and in 2021, grant income also includes $464,000 for the forgiveness of a Paycheck Protection Plan loan in April 2021. The National Institutes of Health grant for development of CAN-2409 for use as a therapy for pancreatic cancer has expired at the end of 2021.

Interest, dividend and investment (expense) income, net

Interest, dividend and investment (expense) income, net was ($53,000) for the year ended December 31, 2021 compared to $111,000 of interest, dividend and investment income, net for the year ended December 31, 2020 and represents the earnings on our cash equivalents and short-term investments net of interest expense on outstanding debt obligations. The decrease in interest, dividend, and investment income in 2021 is primarily due to a decrease in the yields earned on cash equivalents.

Change in fair value of warrant liability

The change in fair value of our warrant liability was an increase in value of $11.4 million for the year ended December 31, 2021 compared to an increase in value of $4.6 million for the year ended December 31, 2020. The increase is primarily driven by an increase in the underlying value of our stock price.

Liquidity and capital resources

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we advance the clinical development of our product candidates. We expect that our research and development and general and administrative costs will continue to increase significantly, including in connection with conducting clinical trials for our product candidates, developing our manufacturing capabilities which may include the cost of establishing a relationship with contract manufacturers to support commercial launch of our product candidate CAN-2409 and costs associated with equipping our laboratory and clinical manufacturing facility to support clinical trials and commercialization and providing general and administrative support for our operations, including the cost associated with operating as a public company. As a result, we will need additional capital to fund our operations, which we may obtain from additional equity or debt financings, collaborations, licensing arrangements or other sources.

We do not currently have any approved products and have never generated any revenue from product sales. We have financed our operations primarily through proceeds from government grants and proceeds from the sale of convertible notes, common stock, and our convertible preferred stock. As of December 31, 2021, we have raised approximately $160.6 million, including $15.4 million of government grants, $66.1 million from the sale of convertible preferred stock,

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and $79.1 million from the sale of our common in our IPO. Our cash and cash equivalents totaled $82.6 million as of December 31, 2021. We had $560,000 of long-term debt as of December 31, 2021 with a maturity in November 2027.

On February 24, 2022, the Company entered into a loan and security agreement Loan Agreement with a bank pursuant to which the bank has agreed to provide term loans to the Company in an aggregate principal amount of up to $25.0 million. The Company borrowed $20.0 million upon entering into the Loan Agreement. The Company can borrow up to an additional aggregate principal amount not to exceed $5.0 million, at any time on or prior to December 31, 2022, following the Company having provided evidence to the bank of (a) achievement of positive Phase 2 clinical activity data from the Company’s CAN-2409 NSCLC clinical trial, (b) dosing of its first patient in its Phase 3 CAN-2409 high grade glioma clinical trial and (c) receipt on or prior to December 31, 2022, of net cash proceeds in an amount equal to at least $75.0 million from the issuance and sale of equity securities to investors acceptable to SVB. The term loans are secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property, which is subject to a negative pledge under the Loan Agreement.

The term loans bear interest at a floating rate per annum equal to the greater of (A) 5.75% and (B) the prime rate (as published in the money rates section of The Wall Street Journal) plus 2.50%. The Company is required to make monthly interest payments, and commencing on February 1, 2024, 24 consecutive installments of principal plus monthly payments of accrued interest. Upon repayment in full of the term loans, the Company will be required to pay a final payment fee equal to 4.50% of the original principal amount of any funded term loan being repaid.

The Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB Term Loans, subject to a prepayment premium of 1% to 3% based upon the timing of the prepayment.

Cash flows

The following table summarizes our sources and uses of cash for the periods presented (in thousands):

YEARS ENDED DECEMBER 31,

Net cash (used in) operating activities $ (22,218 ) $ (9,071 )

Net cash provided by (used in) investing activities (1,835 ) 38,455

Net cash provided by financing activities 71,800 490

Net increase in cash and cash equivalents $ 47,747 $ 29,874

Cash flows for the years ended December 31, 2021 and 2020

Operating activities

Net cash used in operating activities for the year ended December 31, 2021 was $22.2 million, primarily consisting of a net loss of $36.1 million as we incurred expenses associated with our clinical programs, we increased our headcount and had costs associated with being a public company in the second half of the year. In addition, we had non-cash charges of $14.8 million for the change in the fair value of the warrant liability, stock-based compensation expense, and impairment and depreciation of fixed assets. Net cash used in operating activities was also impacted by $876,000 in changes in operating assets and liabilities, primarily driven by an increase of $669,000 in accounts payable, $410,000 in deferred rent, $297,000 in accrued expenses, which were offset by an increase of $2.2 million in prepaids and other long term assets.

Net cash used in operating activities for the year ended December 31, 2020 was $9.1 million, primarily consisting of a net loss of $17.7 million as we incurred expenses associated with our clinical programs and we increased our headcount. In addition, we had non-cash charges of $6.8 million for the change in the fair value of the warrant liability, stock-based compensation expense and depreciation and amortization. Net cash used in operating activities was also impacted by $1.8 million in changes in operating assets and liabilities, primarily driven by an increase of $1.5 million in accrued expenses, $289,000 in accounts payable.

Investing activities

Net cash used in investing activities for the year ended December 31, 2021 was $1.8 million, which was attributable to the use of $1.8 million for purchases of fixed assets.

Net cash provided by investing activities for the year ended December 31, 2020 was $38.5 million, which was attributable to a net sale of $39.9 million in available-for-sale securities and the use of $1.5 million for purchases of fixed assets.

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Financing activities

Net cash provided by financing activities for the year ended December 31, 2021 was $71.8 million consisting of $71.3 million in net proceeds from our IPO and $465,000 in proceeds received from warrant and option exercises.

Net cash provided by financing activities for the year ended December 31, 2020 was $490,000 consisting of $460,000 received under the Paycheck Protection Program and $30,000 of proceeds from exercise of stock options.

Funding requirements

We expect our operating expenses to increase substantially in the future in connection with our ongoing activities, particularly as we advance CAN-2409 and CAN-3110 through research and development, clinical trials, develop our manufacturing capabilities and build our laboratory and clinical manufacturing facility, as we research and develop additional product candidates including preclinical activities and as we prepare for marketing approval and commercialization. We also expect to incur additional costs associated with operating as a public company.

Specifically, our costs and expenses will increase as we:

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advance the clinical development of CAN-2409 and CAN-3110;

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pursue the preclinical and clinical development of other product candidates using our HSV platform;

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develop our manufacturing capabilities, including establishing a relationship with a contract manufacturer for commercial manufacturing of our product candidate CAN-2409 and the construction of our laboratory and clinical manufacturing facility for our product candidate CAN-3110; and

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expand our operational, financial, and management systems and increase personnel, including personnel to support our operations as a public company.

We believe that our existing cash and cash equivalents, including the receipt of $20.0 million on February 24, 2022 under the Loan Agreement with a bank, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023. We have based this estimate on assumptions that may prove to be incorrect, and we could utilize our available capital resources sooner than we currently expect.

Because of the numerous risks and uncertainties associated with the research, development, and commercialization of therapeutics, it is difficult to estimate with certainty the amount of our working capital requirements. Our future funding requirements will depend on many factors, including:

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the progress, costs, and results of our clinical development and clinical trials for CAN-2409 and CAN-3110;

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the progress, costs, and results of our additional research and preclinical development programs;

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the costs, timing and outcome of regulatory review of our product candidates;

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our ability to establish and maintain collaborations on favorable terms, if at all;

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the outcome, timing and cost of meeting regulatory requirements established by the FDA and comparable foreign regulatory authorities, if applicable, for our product candidates;

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the costs and timing of internal process development for our manufacturing capabilities;

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the scope, progress, results, and costs of any product candidates that we may derive from our HSV platform or with collaborators;

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the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; hire additional personnel in research, manufacturing, and regulatory and clinical development, as well as management personnel;

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the extent to which we in-license or acquire rights to other products, product candidates, or technologies;

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additions or departures of key scientific or management personnel;

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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution for any of our product candidates for which we obtain marketing approval;

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the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; and

▪

the costs of operating as a public company.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our cash needs through a combination of public or private equity or debt financings and other sources, which may include collaborations strategic alliances and licensing arrangements with third parties. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available,

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may involve agreements that include restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business. If we raise additional funds through other sources, such as collaboration agreements, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, product development, and research programs or product candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds when needed, we may be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.

Our primary contractual obligation is our facility lease which extends to August of 2026. The table below summarizes the contractual obligations that will become due as of December 31, 2021:

PAYMENTS DUE BY PERIOD

(in thousands)

TOTAL LESS THAN1 YEAR 1 TO 3YEARS 3 TO 5YEARS

(1)

Represents future minimum lease payments under our operating leases for office and laboratory space at our Needham, Massachusetts facility (see our financial statements included elsewhere in this Annual Report on Form 10-K for additional information on these lease agreements).

We also enter into contracts in the normal course of business with hospitals, clinics, universities, and other third parties for clinical trials and testing and with construction contractors and process developers for the construction of our manufacturing facility. These contracts do not contain minimum purchase commitments and are cancelable by us upon prior written notice. Payments due upon cancelation consist only of payments for services provided or expenses incurred, including noncancelable obligations of our service providers, up to the date of cancelation. These payments are not included in the table above as the amount and timing of such payments are not known.

Critical accounting estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are 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 evaluate our estimates and assumptions on an ongoing basis. Our actual results may materially differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following accounting policies are those most significant to the judgments and estimates used in the preparation of our consolidated financial statements.

Accrued Research and Development Expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. Most of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of these estimates with the service providers and make adjustments, if necessary. Examples of estimated accrued research and development expenses include fees paid to the following:

▪

contractors and vendors working on the construction and development of our commercial-scale manufacturing facility;

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▪

clinical trial sites where patients are being treated with our product candidates; and

▪

consultants providing services related to process development, regulatory and other services.

Actual services performed may vary from our estimates, resulting in adjustments to research and development costs or inventories in future periods. Changes in these estimates that result in material changes to our accruals could materially affect our results of operations.

Determination of fair value of warrants

In connection with the Series B Convertible Preferred Stock issuance, the Company issued warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet. The fair value of the warrant liability was determined based on significant inputs not observable in the market. The fair value of the warrant liability uses various valuation methods, including the Monte Carlo method, the option-pricing method, probability-weighted expected return and the hybrid method, all of which incorporate assumptions and estimates, to value the common stock warrants. The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of common stock prior to the IPO, risk-free interest rate, expected dividend yield, expected volatility of the price of the underlying preferred stock, and the remaining contractual term of the warrants. The most significant assumption in the model impacting the fair value of the common stock warrants is the fair value of the Company’s common stock as of each remeasurement date. Prior to the IPO, the Company determined the fair value per share of the underlying common stock by taking into consideration the most recent sales of preferred stock, results obtained from third-party valuations and additional factors that are deemed relevant.

Stock-based compensation

We measure stock options and other stock-based awards granted to our employees, directors, consultants, advisors based on the fair value on the date of the grant, awards, net of actual forfeitures, over the requisite service period, which is generally the vesting period of the respective award. For stock-based awards granted to non-employees, compensation expense is recognized over the vesting period which approximates the period over which services are rendered by such non-employees.

We estimate the fair value of each stock option grant on the date of grant using the Black-Scholes option-pricing model, which uses as inputs the fair value of our common stock and assumptions we make for the expected volatility of our common stock, the expected term of our stock options, the risk-free interest rate for a period that approximates the expected term of our stock options, and our expected dividend yield.

Determination of fair value of common stock

Prior to the IPO, there had been no public market for our common stock and as such, the estimated fair value of our common stock had been determined by our board of directors as of the date of each option grant, with input from management, taking into consideration our most recently available third-party valuations of common stock at the time of the grants, as well as our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. Third-party valuations, or valuation reports, were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

For the December 1, 2020, January 1, 2021, and June 15, 2021 third-party prepared valuation reports, a probability-weighted expected return method was used to determine the fair value of the common stock. The present value of the common stock under each of these three identified scenarios was weighted based on the probability of each scenario occurring to determine the value of the common stock. These third-party valuations resulted in a valuation of our common stock of $3.96, $4.97 and $6.64 per share as of December 1, 2020, January 1, 2021 and June 15, 2021, respectively.

In addition to considering the results of the valuation reports, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, including:

▪

the prices at which we sold shares of convertible preferred stock and the superior rights and preferences of the convertible preferred stock relative to our common stock at the time of each grant;

▪

the progress of our research and development programs, including the status and results of preclinical studies and clinical trials for our product candidates;

▪

our stage of development and commercialization and our business strategy;

▪

external market conditions affecting the biotechnology industry and trends within that industry;

▪

our financial position, including cash on hand, and our historical and forecasted performance and operating results;

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▪

the lack of an active public market for our common stock and our convertible preferred stock;

▪

the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or sale of our company considering prevailing market conditions; and

▪

the analysis of IPOs and the market performance of similar companies in the biotechnology industry.

The assumptions underlying these valuations were highly complex and subjective and represented management’s best estimates, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could be materially different.

Subsequent to the IPO, a public trading market for our common stock has been established and it is no longer necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and other such awards we may grant, as the fair value of our common stock is determined based on the quoted market price of our common stock.

Recent accounting pronouncements

A description of recent accounting pronouncements that may potentially impact our financial position, results of operations, or cash flows is disclosed in Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on form 10-K.

Emerging growth company status

In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an “emerging growth company,” or an EGC, can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Thus, an EGC can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period for new or revised accounting standards during the period in which we remain an emerging growth company; however, we may adopt certain new or revised accounting standards early.

We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year in which we have more than $1.07 billion in annual revenue; (2) the date we qualify as a “large accelerated filer,” with at least $700.0 million of equity securities held by non-affiliates; (3) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period; and (4) the last day of the fiscal year ending after the fifth anniversary of our initial public offering.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. Our interest-earning assets consist of cash and cash equivalents, which are denominated in U.S. dollars. We had cash and cash equivalents of $82.6 million, or 92.6% of our total assets, as of December 31, 2021. Interest, dividend, and investment income earned on these assets was $24,000 for the year ended December 31, 2021. Our interest income is sensitive to changes in the general level of interest rates, primarily U.S. interest rates. Such interest-earning instruments carry a degree of interest rate risk; however, a change by 10% in interest rates would not have a material impact on our financial position or results of operations during the year ended December 31, 2021.

We are also exposed to interest rate risk with respect to the loan and security agreement what we entered into in February 2022 that bears a variable interest based on the Prime Rate.

We are not currently exposed to significant market risk related to changes in foreign currency exchange rates.

Inflation generally affects us by increasing our costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during the years ended December 31, 2021 and 2020.

Item 8. Financial Statements and Supplementary Data.

Our consolidated financial statements, together with the report of our independent registered public accounting firm, appear beginning on page F-1 of this Annual Report for the year ended December 31, 2021.

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities and Exchange Act of 1934, as amended). We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021. Based on the evaluation of our disclosure controls and procedures as of December 31, 2021, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

In preparation of our financial statements to meet the requirements of our IPO, we determined that material weaknesses in our internal control over financial reporting existed during fiscal 2020 and remain unremediated as of December 31, 2021. 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 a company’s annual and interim financial statements will not be detected or prevented on a timely basis. The material weaknesses we identified are related to;

(1) the fact that we did not have sufficient finance and accounting staff with U.S. GAAP technical and accounting expertise to evaluate and account for significant transactions and oversee our third-party consultants. As a result we did not design and maintain formal accounting policies, processes and controls to analyze, account for and disclose certain complex transactions, which led to inappropriate accounting conclusions associated with stock compensation expenses.

(2) the fact that we lacked proper monitoring entity level controls and segregation of duties due to our small accounting staff.

Remediation Activities

Management has been actively engaged in remediating the above described material weaknesses. The following remedial actions have been taken during the year ended December 31, 2021;

(1) hiring an experienced Chief Financial Officer with experience serving as acting chief financial officer of a public company and serving as an audit partner at a major accounting firm and a Controller with experience working at a public company and as a manager at a major public accounting firm;

(2) strengthening supervisory reviews by our financial management, and

(3) expanding our accounting and finance team to add additional qualified accounting and finance resources, which may include augmenting our finance team with third-party consultants that possess the required expertise to assist management with their review.

The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations. As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies. This may include the hiring of additional qualified personnel and implementation of a new accounting system.

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While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls. Additional time is required to complete implementation and to assess and ensure the sustainability of these procedures. We believe the above actions will be effective in remediating the material weaknesses described above and we will continue to devote significant time and attention to these remedial efforts. However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.

Management’s Report on Internal Control Over Financial Reporting

This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Changes in Internal Control Over Financial Reporting

The items described in “Remediation Activities” above are considered a change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report on Form 10-K.

Name Age Position

Executive Officers

Francesca Barone, M.D., Ph.D. 45 Chief Scienctific Officer

Nathan Caffo 53 Chief Business Officer

John Canepa 66 Chief Financial Officer

Susan Stewart, J.D. 61 Chief Regulatory Officer

Non-employee Directors

Paul B. Manning (2) 66 Chairman of the Board of Directors

Alan E. Smith, Ph.D., FRS, CBE (2) 76 Director

Chris Martell (1) (2) 43 Director

Diem Nguyen, Ph.D., M.B.A. 50 Director

Edward J. Benz, Jr., M.D. (3) 75 Director

Estuardo Aguilar-Cordova, M.D., inf., Ph.D. (3) 64 Director

Shaan C. Gandhi, M.D., D.Phil (1)(3) 36 Director

Udi Meirav, Ph.D. (1) 61 Director

(1) Member of audit committee

(2) Member of compensation committee

(3) Member of nominating and corporate governance committee

Executive officers

Paul Peter Tak, M.D., Ph.D., FMedSci, has served as President and Chief Executive Officer of Candel since September 2020. He received hismedical degree cum laude from the Free University in Amsterdam and was trained as an internist, rheumatologist and immunologist at Leiden University Medical Center, where he also received his Ph.D. He has been Clinical Associate Professor of Medicine at the University of California San Diego. Next, he served as Professor of Medicine and founding Chair of the Department of Clinical Immunology and Rheumatology at the Academic Medical Centre/University of Amsterdam (AMC). During this time, he founded Arthrogen b.v., a biotech company focused on gene therapy. He has published extensively in peer-reviewed journals and received numerous awards. He has been elected Fellow of the Academy of Medical Sciences (U.K.). At GlaxoSmithKline he served as Senior Vice President, Chief Immunology Officer, and Global Development Leader from 2011 to 2018. He oversaw the creation of a portfolio of new medicines for immune-mediated inflammatory diseases, cancer, infectious disease and pain, including anti-OSM antibody, anti-LAG3 antibody, ESM-BET inhibitor, RIP1 kinase inhibitor, anti-GM-CSF antibody, anti-CCL17 antibody, Benlysta sc, gepotidacin, molibresib (BET inhibitor), belantamab mafodotin (anti-BCMA antibody-drug conjugate), and NY-ESO1 SPEAR T cell therapy. He was the Chair of the Scientific Review Board, the governing body accountable for the scientific assessment of GSK’s R&D portfolio. From 2018 to 2020, Dr. Tak served as venture partner at Flagship Pioneering and also as President and CEO of Kintai Therapeutics, a start-up focused on enteric signaling networks, where he oversaw the creation of a portfolio of proprietary small molecules called precision enteric medicines for the treatment of obesity, neurological disease, and cancer. In addition, he has served as President and CEO of Tempero Pharmaceuticals, Board Member of Galvani Bioelectronics, ViiV Healthcare, Sitryx Therapeutics (co-founder), Omega Therapeutics, Levicept, and Citryll.

Francesca Barone, M.D., Ph.D., has been Candel's Chief Scientific Officer since February 2022 and previously served as our Vice President, Head of Research from November 2020 to February 2022. She joined Candel in November 2020 as Head of experimental medicine and discovery, overseeing the implementation of biological measures of outcome and biomarker studies in the clinical pipeline, and directing the design of Candel novel discovery platform. Before joining Candel, Dr. Barone served as VP and Head of Experimental Medicine at Kintai Therapeutics, Inc, a Flagship Pioneering, Inc. company, from May 2019 through its merger into Senda Biosciences, Inc. in November 2021. While serving in that position she was responsible both for preclinical development, leading the biology team while supporting the definition of the company clinical strategy in the areas of immune-oncology, metabolic disease and neuroinflammation. Prior to moving to industry, Dr. Barone served as Reader (Associate Professor) in Experimental Rheumatology at the University of Birmingham (UK). During her tenure she also served as Academic Director of Business Engagement for the College of Medical and Dental Sciences and Director of the laboratories for Immuno-phenotyping in the Institute of Translational Medicine. She has published extensively in peer-reviewed journals, was the recipient of two fellowship to support her research program and led efforts to establish collaborative alliances between

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the University of Birmingham and world leader pharmacology industries. She received hermedical degree cum laude from the University of Rome, Sapienza and was trained in the same university as Rheumatologist. She received her Ph.D. at Kings College, London.

Nathan Caffo, has been Candel’s Chief Business Officer since September 2020. From September 2018 to September 2020, he was CBO at ALXOncology, an immuno-oncology company, where he played a central role in the company’s financing including series B and C and debt financings totaling $120 million, as well as the company’s $186 million initial public offering. He was also responsible for all strategic partnering activities. Prior to ALX Oncology, he was President and CEO of Presage Biosciences, an oncology company that developed the first intratumoral microdosing platform for evaluation of multiple oncology agents where he worked from April 2009 to August 2018. While at Presage he led the company’s partnering strategy, resulting in over $30 million in upfront cash. Mr. Caffo’s 26-year industry career has been focused on cancer therapeutics, personalized medicine, and applications of genomic technology. Mr. Caffo also led drug in-licensing at Perlegen Sciences, a genomic medicine spin-off of Affymetrix. Prior to that, he worked at Applied Biosystems (now Life Technologies) and its sister company Celera (now Quest Diagnostics) for 11 years in a number of technical and business roles, including managing the company’s genomics service business. Mr. Caffo has a B.S. in Microbiology from Pennsylvania State University.

John Canepa, has been Candel’s Chief Financial Officer since December 2020. Mr. Canepa has over 40 years of experience in the life scienceindustry as an audit partner with a large international public accounting firm, and as a financial executive with public and private life science companies. Prior to joining Candel, he served as Senior Advisor, Acting CFO of Frequency Therapeutics from December 2018 until November 2020. During this time, Frequency completed several public and private financings, including its initial public offering in October 2019, and dramatically expanded its operations. Prior to joining Frequency, Mr. Canepa served as CFO of Agilis Biotherapeutics from December 2017 to August 2018 and was instrumental in its sale to PTC Therapeutics in August 2018. Prior to Agilis, he was COO and CFO of Asterand Bioscience from October 2012 to August 2017 and led its sale to a private equity group in 2017. Mr. Canepa began his career at Arthur Andersen & Co. and was with the firm for 23 years. He was a partner in the Boston office technology practice and the worldwide leader of the firm’s life science practice. Mr. Canepa received a B.A. in Economics from Denison University and a Master’s Degree in Finance from Michigan State University. John is a Trustee of Mount Auburn Hospital in Cambridge Massachusetts and is on the board of the Beth Israel Lahey Health network.

Susan Stewart, J.D., has served as Candel’s Chief Regulatory Officer since October 2020. Ms. Stewart has worked for more than 28 years inbiopharmaceutical regulatory affairs, with significant experience devising innovative strategies for novel therapeutics, overseeing regulatory submissions at various stages of product development and leading interactions with global health authorities. As an independent consultant, she also serves as Chief Regulatory Officer at Kaleido Biosciences, and had served as senior vice president of regulatory affairs and quality at Kaleido Biosciences, senior vice president of regulatory affairs, quality, and compliance at Tokai Pharmaceuticals and vice president, regulatory affairs at Transmolecular. She also spent 13 years at Genzyme Corporation in regulatory and compliance roles, including serving as vice president, regulatory affairs after beginning her career with Abbott Laboratories. She received her J.D. from Concord Law School at Purdue University Global, her LL.M. from the Maurice A. Deane School of Law at Hofstra University and her B.A. from the University of Massachusetts. She is a Fellow of the Regulatory Affairs Professionals Society (RAPS), a Director of the Board, and holds Regulatory Affairs Certifications (RAC) for both the United States and Europe.

Non-Employee Directors

Paul B. Manning has served as a member of Candel's board of directors since November 2018. Mr. Manning currently serves as the Chief ExecutiveOfficer of PBM Capital Group, LLC, or PBM Capital, a private equity investment firm in the business of investing in healthcare and life-science related companies, which he founded in 2010. Mr. Manning is a member of the board of directors of Liquidia Corporation (NASDAQ: LQDA) and Taysha Gene Therapies, Inc. (NASDAQ: TSHA), and he currently serves as Chairman of the board of directors of Verrica Pharmaceuticals Inc. (NASDAQ: VRCA) He previously served on the board of directors of Dova Pharmaceuticals, Inc., a biopharmaceutical company, from September 2016 to November 2019, and AveXis, Inc., a gene therapy company, from April 2014 to May 2018. Mr. Manning received a B.S. in microbiology from the University of Massachusetts. We believe Mr. Manning’s 30 years of managerial and operational experience in the healthcare industry and as an investor in healthcare related companies provides him with the appropriate set of skills to serve as a member of our board of directors.

Estuardo Aguilar-Cordova, M.D., Ph.D., has served as Candel's Founder and as Chief Scientific Officer from September 2020 to February 2022, and previously served asour Chief Executive Officer from 2002 until September 2020. He has more than 30 years of experience in the fields of biotherapeutics, cancer research and drug development, including serving as principal or co-investigator in more than 25 clinical trials ranging from Phase I to Phase III. Prior to starting Candel, Dr. Aguilar-Cordova held academic positions for nearly two decades. Most recently, he was deputy director of the Harvard Gene Therapy Initiative at Harvard Medical School in Boston and was a faculty member in Pediatrics, Hematology-Oncology at Baylor College of Medicine in Houston. He has served on numerous national oversight committees, including roles as chairman and member of the NIH Recombinant Advisory Committee (RAC), as a

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consultant to the FDA Biological Response Modifiers Advisory Committee (BRMAC), and as a member of the Vaccine and Related Products Advisory Committee (VRPAC). Dr. Aguilar-Cordova has also held other appointments including president of the Latin American Gene Therapy Society. Dr. Aguilar-Cordova has published more than 80 peer-reviewed scientific publications and book chapters, is on the editorial board of various professional journals and is an inventor on several patent applications. Dr. Aguilar-Cordova has an undergraduate degree in Biology and Chemistry from California State University, Bakersfield, an M.D. Inf. from the University del Valle de Guatemala and a Ph.D. from the University of California, Davis.

Edward J. Benz, Jr., M.D., has served as a member of Candel's board of directors since September 2017. Dr. Benz is the President and CEO Emeritusof the Dana-Farber Cancer Institute and a member of the Dana-Farber Cancer Institute Board of Directors. Dr. Benz is an expert in blood disorders and is board certified in both hematology and internal medicine. He is an active clinical hematologist and a National Institutes of Health (NIH) funded researcher with a focus on the molecular basis and genetics around inherited blood disorders. From October 2000 until his retirement in October 2016, Dr. Benz served as President and CEO of Dana-Faber Cancer Institute and the Richard and Susan Smith Professor of Medicine and Professor of Genetics at Harvard Medical School. Prior to his role at Dana-Farber, Dr. Benz served as chairman for the Department of Medicine and Sir William Osler Professor of Medicine at Johns Hopkins University School of Medicine, as well as physician in chief at Johns Hopkins Hospital. Dr. Benz has also served as President of the American Society of Hematology, the Association of American Cancer Institutes, the American Society for Clinical Investigation, the American Clinical and Climatological Society, and the Friends of the National Institute of Nursing Research. Over the course of his career, Dr. Benz has authored more than 300 articles, books, reviews and abstracts and has received numerous awards. Dr. Benz serves on the board of directors of F-star Therapeutics, Inc. (NASDAQ: FSTX) and Deciphera Pharmaceuticals, Inc. (NASDAQ: DCPH), and also serves on the board of directors of Renovacor, Inc. (NYSE: RCOR) and serves on our Research Advisory Board. We believe Dr. Benz’s experience in the field of hematology and blood disorders provides him with the appropriate set of skills to serve as a member of our board of directors.

Chris Martell has served as a member of Candel's board of directors since November 2018. Chris Martell is the manager of GTAM1 2012 ADV LLC andan investor at Martell Capital. Previously, Chris was a Partner at PBM Capital in 2018. Prior to joining PBM Capital, Chris had an 18-year career at J.P. Morgan where he was a managing director in the Healthcare Investment Banking and Mergers and Acquisitions groups. He led the execution of a wide range of transactions including mergers and acquisitions, spin-offs and corporate separations, initial public offerings and equity and debt financings for Medical Device, Life Science Tool and Diagnostic, Pharmaceutical and Biotechnology companies. Chris graduated from Yale University with a B.A. in Ethics, Politics and Economics. We believe Mr. Martell’s broad financial and investment banking experience, financial and transactional expertise and acumen in mergers and acquisitions and complex financial transactions provides him with the appropriate set of skills to serve as a member of our board of directors.

Udi Meirav, Ph.D., has served as a member of Candel's board of directors since 2004. Dr. Meirav is CEO of Calibre Biometrics, Inc., a company developing and manufacturing wearable devices for respiratory measurements and metabolic tracking. He is also the President and Founder of Boston-based EnVerid,Inc., an energy-efficiency materials company, a role he has served in since 2010 and was previously the Chief Executive Officer of Luminus Devices, Inc., a manufacturer of high performance LEDs for solid state lighting. Dr. Meirav has served on numerous boards of directors of companies involved in IT, life sciences, semiconductors and solid state lighting. He has also worked with Stata Venture Partners, an early stage venture capital fund, and with Strategic Decisions Group, a premier consulting firm with focus on pharmaceuticals and biomedical technology. Dr. Meirav has a Ph.D. in Physics from the Massachusetts Institute of Technology and a Bachelor of Science degree in Mathematics and Physics from Tel Aviv University. We believe Dr. Meirav’s multidisciplinary background with executive experience in technology and finance provides him with the appropriate set of skills to serve as a member of our board of directors.

Diem Nguyen, Ph.D., MBA, has served as a member of Candel's board of directors since July 2021. Dr. Nguyen is theChief Executive Officer and member of the board of directors of Xalud Therapeutics, a private biotechnology company, which is majority-owned by PBM Capital. Previously, Dr. Nguyen was the Executive Vice President of PPD, a leading global clinical research organization providing drug development services, a position she held from April 2018 to April 2020. Since 2008, Dr. Nguyen has held various leadership roles at Pfizer Inc., last serving as Global President, Americas of Pfizer Essential Health from January 2017 to March 2018. Dr. Nguyen is a director at Verrica Pharmaceuticals Inc. (NASDAQ: VRCA) and Children’s Hospital of Philadelphia. She received a B.A. in Chemistry with Specialization in Biochemistry and a Ph.D. in Biochemistry and Molecular Genetics from the University of Virginia, and an MBA in General Management from the University of Virginia’s Darden Graduate School of Business Administration. We believe that Dr. Nguyen’s managerial, commercial and medical experience in the pharmaceutical industry provides her with the appropriate set of skills to serve as a member of our board of directors.

Alan E. Smith, Ph.D., FRS, CBE, has served as a member of Candel's board of directors since October 2015. Dr. Smith is the former Senior VicePresident (1989-2011) and Chief Scientific Officer of Genzyme Corporation, Cambridge, MA, a position he held from 1997 to 2011. Prior to its acquisition by Genzyme in 1989, Dr. Smith was the Vice President and

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Scientific Director of Integrated Genetics, a Massachusetts start-up biotechnology company. Dr. Smith sits on the Scientific Advisory Board of Pharnext, a start-up genomics company in Paris, France, and he is on the Board of Directors of Arecor, a start-up biotechnology company in Cambridge UK. From 2014 to 2020, he was chairman of the Board of Cambridge in America, the representative body of the University and Colleges of Cambridge in North America, and from 2016 -2019, he was chairman of Native Plant Trust, the first plant conservation organization in the United States. Dr. Smith has published extensively on the genetic code and protein synthesis, tumour virology, cell biology and cystic fibrosis. He holds a B.A. from Christ’s College, Cambridge UK and a Ph.D. from the Laboratory of Molecular Biology, Cambridge, England. He is a fellow of the Royal Society of London and of Christ’s College. We believe Dr. Smith’s executive experience provides him with the appropriate set of skills to serve as a member of our board of directors.

Shaan C. Gandhi, M.D., D.Phil. has served as a member of Candel's board of directors since May 2020. Dr. Gandhi is a Director at Northpond Ventures,LLC (Northpond Ventures), a global science, medical and technology-focused venture capital firm, where he leads the firm’s work in biotechnologies. Previously, Dr. Gandhi was a Principal at the Longwood Fund from 2018 to 2020, where he created and invested in life sciences companies, including Pyxis Oncology, a cancer immunotherapy company focused on novel modulators of the tumor microenvironment, which he co-founded and served as President. He was an attending hospitalist at Massachusetts General Hospital from 2018 to 2019, where he also did his residency in internal medicine from 2015 to 2018. He serves on the boards of directors of two other public companies, DICE Therapeutics (NASDAQ: DICE) and Vigil Neuroscience (NASDAQ: VIGL), as well as the boards of various private companies, including CAMP4 Therapeutics, Garuda Therapeutics, Kyverna Therapeutics, Mestag Therapeutics, Parthenon Therapeutics, StrideBio, Teckro, and Totus Medicines. He holds an M.D. from Harvard Medical School; an M.B.A. from Harvard Business School, where he was a Baker Scholar; a D.Phil. in medical oncology from the University of Oxford, where he was a Rhodes Scholar; and a B.S. with honors in biochemistry from Case Western Reserve University. We believe that Dr. Gandhi’s financial, managerial and medical experience coupled with his substantial experience as an investor in emerging biotechnology companies provides him with the appropriate set of skills to serve as a member of the board of directors.

Family Relationships

There are no family relationships among any of our directors or executive officers.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our equity securities to file reports of holdings and transactions in securities of the Company with the SEC.

Based solely on a review of on Forms 3, 4 and 5 and any amendments thereto filed electronically with the Securities and Exchange Commission with respect to the most recent fiscal year and written representations from the reporting persons, we believe all Section 16(a) filing requirements were satisfied in 2021 with the exception of the following filing: a Form 5 filing filed on February 14, 2022 by Diem Nguyen with respect to options granted by the Company in July 2021.

Code of Business Conduct and Ethics

Our board of directors has adopted a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions), agents and representatives, including directors and consultants.

The full text of our Code of Business Conduct and Ethics is posted on our website at www.candeltx.com. We intend to disclose future amendments to certain provisions of our Code of Business Conduct and Ethics on our website. The inclusion of our website address in this Annual Report does not include or incorporate by reference the information on our website into this Annual Report, and you should not consider that information a part of this Annual Report.

Audit Committee

The members of our audit committee are Shaan C. Gandhi, M.D., D.Phil, Chris Martell, and Udi Meirav, Ph.D. Christopher Martell is the chair of the audit committee. Our board of directors has determined that all members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq listing rules and that Christopher Martell is an “audit committee financial expert” (within the meaning of applicable SEC regulations). Each of the members of the audit committee are independent pursuant to applicable Nasdaq listing standards.

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Recommendation of Director Nominees by Stockholders

There have been no material changes to the procedures by which our stockholders may recommend nominees to the board of directors.

Limitations on Liability and Indemnification

As permitted by Delaware law, provisions in our amended and restated certificate of incorporation and amended and restated bylaws limit or eliminate the personal liability of directors for a breach of their fiduciary duty of care as a director. The duty of care generally requires that, when acting on behalf of the corporation, a director exercise an informed business judgment based on all material information reasonably available to him or her. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:

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any breach of the director’s duty of loyalty to us or our stockholders;

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any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

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any act related to unlawful stock repurchases, redemptions or other distributions or payments of dividends; or

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any transaction from which the director derived an improper personal benefit.

These limitations of liability do not limit or eliminate our rights or any stockholder’s rights to seek non-monetary relief, such as injunctive relief or rescission. These provisions will not alter a director’s liability under other laws, such as the federal securities laws or other state or federal laws. Our amended and restated certificate of incorporation also authorizes us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.

As permitted by Delaware law, our amended and restated bylaws provide that:

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we will indemnify our directors, officers, employees and other agents to the fullest extent permitted by law;

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we must advance expenses to our directors and officers, and may advance expenses to our employees and other agents, in connection with a legal proceeding to the fullest extent permitted by law; and

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the rights provided in our amended and restated bylaws are not exclusive.

If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director or officer, then the liability of our directors or officers will be so eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our amended and restated bylaws will also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our bylaws permit such indemnification. We have obtained such insurance.

In addition to the indemnification that is provided for in our amended and restated certificate of incorporation and amended and restated bylaws, we have entered into indemnification agreements with each of our directors and executive officers, which may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements may require us, among other things, to indemnify our directors and executive officers for some expenses, including attorneys’ fees, expenses, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of his service as one of our directors or executive officers or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.

This description of the indemnification provisions of our amended and restated certificate of incorporation, our amended and restated bylaws and our indemnification agreements is qualified in its entirety by reference to these documents, each of which is attached as an exhibit to this Annual Report.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act), may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.

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There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

Item 11. Executive Compensation.

Executive Compensation Overview

As an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act. This section provides an overview of the compensation awarded to and earned by each individual who served as our principal executive officer at any time during our years ended December 31, 2021 and 2020 and to our next two most highly compensated executive officers in respect of their service to our company for our years ended December 31, 2021 and 2020. We refer to these individuals as our named executive officers. Our named executive officers are:

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Paul Peter Tak, M.D., Ph.D., FMedSci, our President and Chief Executive Officer;

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Estuardo Aguilar-Cordova, M.D., Ph.D., our Founder, former Chief Scientific Officer and former Chief Executive Officer; and

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John Canepa, our Chief Financial Officer.

Our executive compensation program is based on a pay-for-performance philosophy. Compensation for our executive officers is composed primarily of the following main components: base salary, bonus and equity incentives in the form of stock options. Our executive officers, like all full-time employees, are eligible to participate in our health and welfare benefit plans. As we complete our transition from a private company to a publicly traded company, we intend to evaluate our compensation values and philosophy and compensation plans and arrangements as circumstances require. At a minimum, we expect to review executive compensation annually with input from a compensation consultant. As part of this review process, we expect the board of directors and the compensation committee to apply our values and philosophy, while considering the compensation levels needed to ensure our executive compensation program remains competitive. We will also review whether we are meeting our retention objectives and the potential cost of replacing a key employee.

Summary Compensation Table

The following table sets forth information regarding compensation awarded to and earned by our named executive officers for services rendered to us in all capacities during our years ended December 31, 2021 and 2020.

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Narrative to the Summary Compensation Table

Base Salary

Our named executive officers each receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. Base salaries are reviewed annually, typically in connection with our annual performance review process, approved by our board of directors or the compensation committee, and may be adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience.

For the fiscal year ended December 31, 2021, the annual base salary for Dr. Aguilar-Cordova and Mr. Canepa were $500,000, and $370,000, respectively, and the annual base salary for Dr. Tak was $500,000 through August of 2021. In September 2021, Dr. Tak’s annual base salary was increased to $670,000.

Annual Bonus

For the fiscal year ended December 31, 2021, each of the named executive officers was eligible to earn an annual cash bonus based on the achievement of certain corporate and individual performance milestones. The target annual bonus for each of Dr. Tak, Dr. Aguilar-Cordova and Mr. Canepa for the fiscal year ended December 31, 2021 were 50%, 50% and 40% of annual base salary, respectively.

Equity Compensation

Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executive officers with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executive officers and our stockholders. In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentives our executive officers to remain in our employment during the vesting period. Accordingly, our board of directors periodically reviews the equity incentive compensation of our executives, including our named executive officers, and from time to time may grant equity incentive awards to them in the form of stock options.

We typically grant stock option awards at the start of employment to each executive officer and our other employees as well as on an annual basis for retention purposes. We award our stock options on the date our board of directors or the CEO approves the grant. We set the option exercise price equal to the fair market value of our common stock on the date of grant.

401(k) Plan

We maintain a tax-qualified retirement plan (the 401(k) Plan) that provides eligible U.S. employees with an opportunity to save for retirement on a tax advantaged basis. Eligible employees are able to defer eligible compensation subject to applicable annual Code limits. Employees’ pre-tax or Roth contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’ directions. Employees are immediately and fully vested in their contributions. Our 401(k) Plan is intended to be qualified under Section 401(a) of the Code with our 401(k) Plan’s related trust intended to be tax exempt under Section 501(a) of the Code. As a

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tax-qualified retirement plan, contributions to our 401(k) Plan and earnings on those contributions are not taxable to the employees until distributed from our 401(k) Plan.

Health and Welfare Benefits

All of our named executive officers are eligible to participate in our employee benefit plans, including our medical, dental and vision insurance plans, in each case on the same basis as all of our other full-time employees.

We believe the perquisites described above are necessary and appropriate to provide a competitive compensation package to our named executive officers.

Rule 10b5-1 Sales Plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from the director or officer. The director or officer may amend or terminate the plan in some circumstances. Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.

Employment Arrangements and Severance Agreements with our Named Executive Officers

We have entered into employment agreements with each of our named executive officers.

Paul Peter Tak, M.D., Ph.D.

Effective September 12, 2020, we entered into an employment agreement with Dr. Tak, or the Tak Employment Agreement, for the position of President and Chief Executive Officer. The Tak Employment Agreement provides for an annual base salary and an annual bonus opportunity. Pursuant to the Tak Employment Agreement Dr. Tak’s annual base salary will increase to $670,000 per year effective on the first anniversary of the commencement of his employment if the Company has completed an underwritten public offering on or prior to such date. The Tak Employment Agreement provides for a signing bonus in the gross amount of $170,000, payable in four equal quarterly installments of $42,500 each, commencing on the first payroll date following the commencement of his employment and on each 3-month anniversary of employment following his start date, provided that he remains employed through each date of payment. Pursuant to the Tak Employment Agreement, Dr. Tak is eligible to receive a lump sum payment of $80,000 to assist with relocation to the Greater Boston Area if and when he relocates in 2022, subject to repayment if Dr. Tak terminates his employment other than for “good reason” or we terminate his employment for “cause” (as such terms are defined in the Tak Employment Agreement) within 12 months of receipt of the relocation assistance payment. Pursuant to the Tak Employment Agreement, we will reimburse Dr. Tak for reasonable costs related to travel to Massachusetts and temporary housing in Massachusetts, not to exceed $20,000, which amount will be grossed up in respect of any related taxes, reasonable legal fees related to obtaining a visa, reasonable fees for independent tax and accounting advise not to exceed $10,000 per year, and reasonable legal fees related to negotiation of his employment agreement, not to exceed $10,000. Dr. Tak is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

Pursuant to the Tak Employment Agreement, in the event that Dr. Tak’s employment is terminated by us without cause or by Dr. Tak for good reason outside of the 3 month period preceding and 12 month period following the first event constituting a change in control (such period, the “change in control period”), subject to the execution and effectiveness of a severance and release of claims agreement within 60 days of such termination, he will be entitled to receive (i) an amount equal to 12 months of base salary plus Dr. Tak’s target bonus for the then-current year, less any payments Dr. Tak receives pursuant to his restrictive covenants agreement with the Company, payable in installments over 12 months commencing within 60 days of termination, and (ii) subject to the Dr. Tak’s timely election to continue COBRA health coverage and copayment of premium amounts at the applicable active employees’ rate, we will continue to pay the share of the premiums that we would have paid to provide health insurance to Dr. Tak until the earlier of (A) 12 months following termination or (B) Dr. Tak’s eligibility for group medical plan benefits under any other employer’s group medical plan. In the event that such termination occurs during the change in control period, Dr. Tak will, subject to the execution and effectiveness of a general severance and release of claims agreement within 60 days of such termination, be entitled to receive (x) a lump sum payment equal to 1.5 times the sum of Dr. Tak’s then-current base salary (or base salary in effect immediately prior to the change in control, if higher), plus his target bonus for the then-current year (or his target bonus in effect immediately prior to the change in control, if higher), less any payments pursuant to Dr. Tak receives pursuant to his restrictive covenants agreement with the Company, and (y) the benefits set forth in clause (ii) of the preceding sentence but for a period of 18 months. In addition, pursuant to the Tak Employment

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Agreement, all equity awards held by Dr. Tak that are subject to time based vesting will fully accelerate as of the earlier of the consummation of a “change in control” of the Company (as defined in the Tak Employment Agreement) or the termination of Dr. Tak’s employment by the Company without cause or by Dr. Tak for good reason. Furthermore, in the event of a change of control or Dr. Tak’s termination without cause or for good reason, Dr. Tak will have no less than 12 months to exercise vested, unexpired stock options.

Estuardo Aguilar-Cordova, M.D., Ph.D.

Effective November 13, 2018, we entered into an amended and restated employment agreement with Dr. Aguilar-Cordova, or the Estuardo Aguilar-Cordova Employment Agreement, for the position of President and Chief Executive Officer. Dr. Aguilar-Cordova subsequently transitioned to the role of our Chief Scientific Officer in September 2020 until February 2022. The Estuardo Aguilar-Cordova Employment Agreement provides for an annual base salary and an annual target bonus opportunity. Dr. Aguilar-Cordova is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

The Estuardo Aguilar-Cordova Employment Agreement was terminated in February 2022. As Dr. Aguilar-Cordova’s employment was terminated by us without “cause” (as such term was defined in the Estuardo Aguilar-Cordova Employment Agreement), upon the execution and effectiveness of a severance and release of claims agreement, he received (i) 12 months of base salary continuation, and (ii) subject to Dr. Aguilar-Cordova’s timely election to continue COBRA health coverage, we will pay the premiums necessary to continue Dr. Aguilar-Cordova’s and his covered dependents’ health insurance coverage until the earlier of (A) 12 months following termination or (B) Dr. Aguilar-Cordova’s eligibility for group medical plan benefits under any other employer’s group medical plan.

John Canepa

Effective December 1, 2020, we entered into an employment agreement with Mr. Canepa, or the Canepa Employment Agreement, for the position of Chief Financial Officer. The Canepa Employment Agreement provides for an annual base salary and an annual target bonus opportunity. Pursuant to the Canepa Employment Agreement Mr. Canepa received a signing bonus in the gross amount of $75,000, which is subject to repayment if Mr. Canepa voluntarily terminates his employment with the Company or if the Company terminates his employment for reasons excluding redundancy, ill health or a transfer of the part of the business in which he works within 12 months of the commencement of his employment. Mr. Canepa is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

Pursuant to the Canepa Employment Agreement, in the event that Mr. Canepa’s employment is terminated by us without cause or by Mr. Canepa for good reason, subject to the execution and effectiveness of a severance and release of claims agreement within 60 days of such termination, he will be entitled to receive (i) an amount equal to nine months of base salary plus Mr. Canepa’s target bonus for the then-current year, less any payments Mr. Canepa receives pursuant to his restrictive covenants agreement with the Company, payable in installments over 9 months commencing within 60 days of termination, and (ii) subject to the Mr. Canepa’s timely election to continue COBRA health coverage and copayment of premium amounts at the applicable active employees’ rate, we will continue to pay the share of the premiums that we would have paid to provide health insurance to Mr. Canepa until the earlier of (A) nine months following termination or (B) Mr. Canepa’s eligibility for group medical plan benefits under any other employer’s group medical plan. Pursuant to the Canepa Employment Agreement, all equity awards held by Mr. Canepa that are subject to time based vesting will fully accelerate if Mr. Canepa’s employment is terminated by the Company without “cause” or by Mr. Canepa for “good reason” within one month prior to or 12 months following the consummation of a “change in control” (as such terms are defined in the Canepa Employment Agreement).

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Outstanding Equity Awards

The following table sets forth information concerning outstanding equity awards held by our named executive officers as of December 31, 2021.

Option Awards (1)

Chief Financial Officer

Compensation Risk Assessment

We believe that although a portion of the compensation provided to our executive officers and other employees is performance-based, our executive compensation program does not encourage excessive or unnecessary risk taking.

This is primarily due to the fact that our compensation programs are designed to encourage our executive officers and other employees to remain focused on both short-term and long-term strategic goals. As a result, we do not believe that our compensation programs are reasonably likely to have a material adverse effect on us.

Director Compensation

The following table presents the total compensation for each person who served as a non-employee member of our board of directors and received compensation for such service during the year ended December 31, 2021. Other than as set forth in the table and described more fully below, we did not pay any compensation, make any equity awards to, or pay any other compensation to any of the non-employee members of our board of directors in 2021. Dr. Tak, our President and Chief Executive Officer, and Dr. Aguilar-Cordova, our Founder and former Chief Executive Officer and Chief Scientific Officer, did not receive any additional compensation for their service as a member of our board of directors. Dr. Tak’s and Dr. Aguilar-Cordova’s compensation for service as an employee for year ended December 31, 2021 is presented in “Executive Compensation-Summary Compensation Table.” We reimburse non-employee members of our board of directors for reasonable travel and out-of-pocket expenses incurred in connection with attending board of directors and committee meetings.

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Director Compensation Table - 2021

Shaan C. Gandhi, M.D., D.Phil (2) - - - -

Non-Employee Director Compensation Policy

Our board of directors has adopted a non-employee director compensation policy that is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. The fees paid to independent non-employee directors for service on our board of directors and for service on each committee of our board of directors on which the director is a member are set forth below:

Name MEMBER ANNUAL FEE ($) CHAIRMAN ADDITIONAL ANNUAL FEE ($)

Nominating and Corporate Governance Committee 4,000 8,000

In addition, each non-employee director elected or appointed to our board of directors will be granted an initial one-time non-qualified stock option to purchase 28,480 shares of our common stock, based on the current fair market value of our common stock, which shall vest in equal monthly installments over three years from the date of grant, subject to continued service through such vesting date(s). In addition, at the end of each year, each non-employee director, other than a director receiving an initial equity award, will be granted a non-qualified stock option to purchase 14,240 shares of our common stock, based on the then fair market value of our common stock, which will vest and become fully exercisable upon the earlier of (i) the first anniversary of the grant date or (ii) our next annual meeting of stockholders, subject to such director’s continued service as a director through such vesting date(s).

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Securities authorized for issuance under equity compensation plans

The following table provides information relating to our equity compensation plans as of December 31, 2021. As of December 31, 2021, we had two equity compensation plans, our 2021 Stock Option and Incentive Plan and our Employee Stock Purchase Plan, which were approved by our Board of Directors and our stockholders.

(a) (b) (c)

Equity compensation plans not approved by stockholders - - -

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information known to us regarding beneficial ownership of our capital stock outstanding as of March 1, 2022 for:

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each person, or group of affiliated persons, who is known by us to be the beneficial owner of five percent or more of our outstanding common stock;

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each of our directors;

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each of our named executive officers; and

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all of our current directors and executive officers as a group.

We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities as well as any shares of common stock that the person has the right to acquire within 60 days of March 1, 2022 through the exercise of stock options or other rights. These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them. Each individual or entity shown on the table has furnished information with respect to beneficial ownership. Except as otherwise indicated below, the address of each officer, director and five percent stockholder listed below is c/o Candel Therapeutics, Inc., 117 Kendrick St, Suite 450, Needham, Massachusetts 02494.

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The percentage of beneficial ownership in the table below is based on 28,691,088 shares of common stock deemed to be outstanding as of March 1, 2022.

Shares Percentage

5% or Greater Shareholders:

Entities Affiliated with FMR, LLC (3) 2,262,842 7.9 %

Named Executive Officers and Directors:

Paul Peter Tak, M.D., Ph.D. FMedSci (4) 1,088,476 3.8 %

Alan E Smith, Ph.D., FRS, CBE (6) 69,164 *

Diem Nguyen, Ph.D. M.B.A. (8) 17,120 *

Edward J. Benz, Jr., M.D. (9) 69,164 *

Estuardo Aguilar-Cordova, M.D., inf., Ph.D. (10) 6,339,579 22.0 %

Shaan C. Gandhi, M.D., D.Phil -

Francesca Barone, M.D., Ph.D. (12) 19,185 *

* Less than one percent.

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Communications with the Board of Directors

Stockholders who want to communicate with members of the Board, including the independent directors, individually or as a group, should address their communications to the Board, the Board members or the Board committee, as the case may be, and send them by mail to c/o Candel Therapeutics, Inc., 117 Kendrick St, Suite 450, Needham, Massachusetts 02494. The Chair of the Audit Committee will forward all such communications directly to such Board members. Any such communications may be made on an anonymous and confidential basis.

A copy of any such written communication may also be forwarded to the Company’s legal counsel and a copy of such communication may be retained for a reasonable period of time. The director may discuss the matter with the Company’s legal counsel, with independent advisors, with non-management directors, or with the Company’s management, or may take other action or no action as the director determines in good faith, using reasonable judgment, and applying his or her own discretion.

The Audit Committee oversees the procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or audit matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting, internal accounting controls or auditing matters. The Company has also established a toll-free telephone number for the reporting of such activity, which is 855-590-2335.

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Board Committees

Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance committee, each of which operates pursuant to a charter adopted by our Board of Directors. We believe that the composition and functioning of all of our committees will comply with the applicable requirements of Nasdaq, the Sarbanes-Oxley Act of 2002 and SEC rules and regulations that will be applicable to us. We intend to comply with future requirements to the extent they become applicable to us.

The full text of our Audit Committee charter, Compensation Committee charter, and Nominating and Corporate Governance charter are posted on the investor relations portion of our website at www.candeltx.com. We do not incorporate the information contained on, or accessible through, our corporate website into this Annual Report, and you should not consider it a part of this Annual Report.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The following is a description of transactions or series of transactions since January 1, 2021 to which we were or will be a party, in which:

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the amount involved in the transaction exceeds, or will exceed, $120,000 (or, if less, 1% of the average of our total assets amounts at December 31, 2019 and 2020); and

•

in which any of our executive officers, directors or holder of five percent or more of any class of our capital stock, including their immediate family members or affiliated entities, had or will have a direct or indirect material interest.

Compensation arrangements for our named executive officers and our directors are described elsewhere in this Annual Report under “Director Compensation” and “Executive Compensation.”

All amounts in thousands unless otherwise noted.

Participation in our Initial Public Offering

Certain of our directors, executive officers and our 5% stockholders purchased shares of our common stock in our IPO at the initial public offering price. The following table sets forth the number of shares of our common stock purchased by directors, executive officers and 5% stockholders and their affiliates and the aggregate purchase price paid for such shares.

Shares of Common Stock Purchased Aggregate Cash Purchase Price

(1) GTAM1 2012 LLC is wholly owned by a trust for which Christopher Martell serves as trustee

Amended and Restated Investors’ Rights Agreement

We are a party to an amended and restated investors’ rights agreement, or the Investors’ Rights Agreement, dated as of March 19, 2020, with certain of our stockholders, including principal stockholders and their affiliates. The Investors’ Rights Agreement provides these holders the right to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing.

Employment Agreements

We have entered into employment agreements with certain of our executive officers. See “Item 11-Executive Compensation-Employment Arrangements and Severance Agreements with our Named Executive Officers.”

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Equity Grants

We have granted stock options to certain of our executive officers and members of our board of directors. See “Item 11-Executive Compensation.”

Indemnification Agreements

As permitted by Delaware law, provisions in our amended and restated certificate of incorporation and amended and restated bylaws limit or eliminate the personal liability of directors for a breach of their fiduciary duty of care as a director. In addition, we have entered into indemnification agreements with each of our executive officers and the members of our board of directors which may require us to indemnify them. See “Item 11-Executive Compensation-Limitations on Liability and Indemnification”

Policies for Approval of Related Party Transactions

Our board of directors reviews and approves transactions with directors, officers and holders of 5% or more of our voting securities and their affiliates, each a related party. Prior to our initial public offering, the material facts as to the related party’s relationship or interest in the transaction were disclosed to our board of directors prior to their consideration of such transaction, and the transaction was not considered approved by our board of directors unless a majority of the directors who are not interested in the transaction approved the transaction. Further, when stockholders were entitled to vote on a transaction with a related party, the material facts of the related party’s relationship or interest in the transaction were disclosed to the stockholders, who must have approved the transaction in good faith.

In connection with our initial public offering, our board of directors adopted a written related party transactions policy. Pursuant to this policy, the audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members.

Director Independence

Under the Nasdaq listing rules, independent directors must comprise a majority of a listed company’s board of directors within twelve months from the date of listing. In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent within twelve months from the date of listing. Audit committee members must also satisfy additional independence criteria, including those set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), and compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act. Under Nasdaq listing rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries, other than compensation for board service; or (2) be an affiliated person of the listed company or any of its subsidiaries. In order to be considered independent for purposes of Rule 10C-1, the board of directors must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to: the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director, and whether the director is affiliated with the company or any of its subsidiaries or affiliates.

136

Director Affiliations

Some of our directors are affiliated with and serve on the board of directors as representatives of entities which beneficially own or owned 5% or more of our common stock, as indicated below:

Name Principal Stockholder

Paul B. Manning PBM Capital

Shaan C. Gandhi, M.D., D.Phil Northpond Ventures, L.P.

Item 14. Principal Accounting Fees and Services.

Our independent public accounting firm is KPMG LLP, McLean, Virginia, PCAOB Auditor ID: 185. The Audit Committee has selected KPMG LLP as our independent registered public accounting firm for the years ended December 31, 2021 and 2020. In addition to retaining KPMG LLP to audit our consolidated financial statements for years ended December 31, 2021 and 2020, we may engage the firm from time to time during the year to perform other services.

The following table sets forth the aggregate fees billed by KPMG LLP in connection with services rendered during the last two fiscal years.

For the Year Ended

Audit Fees consist of fees for professional services rendered in connection with the audit of our annual consolidated financial statements, the review of the interim consolidated financial statements included in quarterly reports, services rendered in connection with SEC registration statements, including the IPO, and services that are normally provided by KPMG LLP, such as comfort letters, in connection with statutory and regulatory filings or engagements.

In fiscal 2021 and 2020, no services other than those discussed above were provided by KPMG LLP.

The Audit Committee has adopted a policy requiring pre-approval of all audit and non-audit related services to be performed by the Company’s independent auditor regardless of amount. These services may include audit services, audit-related services, tax services and other related services. KPMG LLP and management are required to periodically report to the Audit Committee regarding the extent of services provided by KPMG LLP in accordance with this pre-approval and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

The Audit Committee annually evaluates the qualifications, performance and independence of the Company’s independent registered public accounting firm. It selected KPMG as the Company’s independent registered public accounting firm for 2021. This selection was subsequently approved by the Board. The Audit Committee has reviewed and discussed with management and with KPMG the Company’s audited consolidated financial statements for the year ended December 31, 2021. In addition, the Audit Committee has discussed with KPMG the matters that independent registered public accounting firms must communicate to audit committees under applicable PCAOB standards.

The Audit Committee has also discussed and confirmed with KPMG its independence from the Company and received all written disclosures and correspondence required by the PCAOB Ethics and Independence requirement s. The Audit Committee has evaluated and concluded the non-audit services provided by KPMG to the Company do not impair KPMG’s independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board that the audited consolidated financial statements for the year ended December 31, 2021 and the related footnotes be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(1)

For a list of the financial statements included herein, see Index to the Consolidated Financial Statements on page F-1 of this Annual Report on Form 10-K, incorporated into this Item by reference.

(2)

Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.

(3)

Exhibits:

ExhibitNumber Description

4.2* Description of Securities

138

21.1* List of Subsidiary

23.1* Consent of KPMG LLP, Independent Registered Public Accounting Firm

101.SCH Inline XBRL Taxonomy Extension Schema Document

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed herewith.

+ The certifications furnished in Exhibit 32.1 hereto are deemed to be furnished with this Annual Report on form 10-K and will not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

# Indicates a management contract or any compensatory plan, contract or arrangement

Item 16. Form 10-K Summary

None.

139

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Company Name

Date: March 29, 2022 By: /s/ Paul Peter Tak

Paul Peter Tak, M.D., Ph.D., FMedSci

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name Title Date

Paul Peter Tak, M.D., Ph.D. FMedSci

John Canepa

/s/ Paul B Manning Chairman March 29, 2022

Paul B Manning

/s/ Edward J. Benz Jr. Director March 29, 2022

Edward J. Benz, Jr, M.D.

/s/ Chris Martell Director March 29, 2022

Chris Martell

/s/ Udi Meirav Director March 29, 2022

Udi Meirav, Ph.D.

/s/ Alan E. Smith Director March 29, 2022

Alan E. Smith, Ph.D., FRS, CBE

/s/ Estuardo Aguilar-Cordova Director March 29, 2022

Estuardo Aguilar-Cordova, M.D. Ph.D.

/s/ Shaan C. Gandhi Director March 29, 2022

Shaan C. Gandhi, M.D., D. Phil

/s/ Diem Nguyen Director March 29, 2022

Diem Nguyen, Ph.D., MBA

140

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Report of Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F-3

Consolidated Statement of Operations and Comprehensive Loss F-4

Consolidated Statement of Cash Flows F-6

Notes to Consolidated Financial Statements F-7-21

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Candel Therapeutics, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Candel Therapeutics, Inc and subsidiary (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the Company’s auditor since 2019

McLean, Virginia