LYRA US Equity☆

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.

Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition, and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Annual Report on Form 10-K. In addition, even if our results of operations, financial condition, and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report on Form 10-K, they may not be predictive of results or developments in future periods.

The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Annual Report on Form 10-K, including those risks identified under Part I, Item 1A. Risk Factors.

We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions, or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.

Overview

We are a clinical-stage biotechnology company focused on the development and commercialization of innovative, anti-inflammatory therapies for the localized treatment of patients with chronic rhinosinusitis, or CRS. Our product candidates, LYR-210 and LYR-220, are bioabsorbable nasal inserts designed to be administered in a simple in-office procedure and intended to deliver six months of continuous anti-inflammatory drug therapy to the sinonasal passages for the treatment of CRS with a single administration. The therapeutic embedded within LYR-210 and LYR-220 is mometasone furoate, or MF, which is the active ingredient in various U.S. Food and Drug Administration, or FDA, approved drugs and has a well-established efficacy and safety profile. CRS is an inflammatory disease of the paranasal sinuses which leads to debilitating symptoms and significant morbidities and affects approximately 14 million people in the United States.

LYR-210

LYR-210 is designed to treat CRS patients who have failed previous medical management. LYR-210 has a smaller dimension and is intended for patients with narrow anatomy, primarily patients who have not undergone ethmoid sinus surgery. A pivotal Phase 3 program of LYR-210, called the ENLIGHTEN program, consists of two pivotal trials and is currently ongoing.

LYR-220

Our second pipeline product candidate, LYR-220, is designed for use in CRS patients who have failed previous medical management and who continue to require treatment to manage CRS symptoms despite having had ethmoid sinus surgery. LYR-220 employs a larger matrix designed for patients whose nasal cavity is larger including those patients whose nasal cavity is larger after having undergone ethmoid sinus surgery. A Phase 2 clinical trial of LYR-220, called BEACON, has recently concluded and topline data have been presented.

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Our Technology

Our innovative and proprietary drug delivery technology is designed to locally and continuously deliver small molecule drugs to the affected tissue over a sustained period of time from a single administration. The technology is comprised of three interrelated components:

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a bioabsorbable mesh scaffold, which is designed to maximize surface area for drug release while maintaining underlying tissue function;

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an engineered elastomeric matrix, a polymeric matrix composed of polymers having elastic characteristics, which has advanced physical properties resulting in implants with “shape memory” that dynamically adapt to nasal anatomy; and

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a versatile polymer-drug complex, which is designed to deliver six months of continuous local drug therapy with a single treatment.

We were incorporated as a Delaware corporation on November 21, 2005, and our headquarters is located in Watertown, Massachusetts. Our operations to date have been limited to organizing and staffing our Company, business planning, raising capital, developing our technology, building our intellectual property portfolio and conducting research and development activities for our product candidates. We do not have any products approved for sale and have not generated any revenue from product sales.

On May 5, 2020, we completed our IPO in which we issued and sold 4,025,000 shares of our common stock (including shares issued upon the underwriters’ exercise in full of their option to purchase additional shares of our common stock) at a public offering price of $16.00 per share, par value $0.001, for aggregate gross proceeds of $64.4 million. We received approximately $57.3 million in net proceeds after deducting underwriting discounts and commissions and offering expenses paid by us. The shares began trading on The Nasdaq Global Market on May 1, 2020. Upon completion of our IPO, all of our outstanding shares of convertible preferred stock converted into 8,335,248 shares of our common stock, par value $0.001.

From inception through December 31, 2023, we have raised an aggregate of $416.1 million to fund our operations, of which $162.1 million were gross proceeds from sales of our redeemable convertible preferred stock, $96.3 million were net proceeds from our April 2022 Financing (as defined below), $46.5 million were net proceeds from our May 2023 Financing (as defined below), $57.3 million were net proceeds from our initial public offering, $16.8 million were gross proceeds from government contracts and $17.0 million were gross proceeds from the LianBio License Agreement. Further, the Company currently has an effective shelf registration statement on Form S-3 (No. 333-256020) filed with the SEC on May 11, 2021 (“Form S-3”), under which it may offer from time to time in one or more offerings any combination of common and preferred stock, debt securities, warrants and units of up to $250.0 million in the aggregate. As of December 31, 2023, the Company sold 6,017,568 shares resulting in net proceeds of $19.1 million.

We have incurred significant net operating losses in every year since inception and expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year and could be substantial. Our net losses were $62.7 million and $55.3 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $311.4 million. We anticipate that our expenses will continue to increase significantly as we:

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conduct additional clinical trials of our most advanced product candidate, LYR-210, including two ongoing pivotal Phase 3 clinical trials of LYR-210;

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conduct a Phase 3 clinical trial of LYR-220;

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continue to discover and develop additional product candidates;

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establish manufacturing and supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain marketing approval;

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seek regulatory and marketing approvals for 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 regulatory approval in geographies in which we plan to commercialize our products ourselves;

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maintain, expand and protect our intellectual property portfolio;

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hire additional staff, including clinical, scientific, technical, regulatory, operational, financial, commercial and support personnel, to execute our business plan; and

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add clinical, scientific, operational, financial and management information systems and personnel to support our product development and potential future commercialization efforts, and to enable us to operate as a public company.

We do not expect to generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate. Additionally, we may engage third party contract manufacturers to manufacture out products in the future. We do not yet have a sales organization. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to fund our operations through public or private equity or debt financings or other sources, including strategic collaborations and licensing arrangements. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current product candidates, or any additional product candidates, if developed.

Because of the numerous risks and uncertainties associated with therapeutics product development, we are unable to accurately predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to 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 unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

Based on our current operating plan, management has concluded that there is substantial doubt regarding our ability to continue as a going concern. As of December 31, 2023, we had cash and cash equivalents totaling $22.4 million and short-term investments of $80.4 million and management believes that our existing cash, cash equivalents, and short-term investments will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2025. We have based these estimates on assumptions that may prove to be imprecise or incorrect, and we may use our available capital resources sooner than we currently expect. See “—Liquidity and Capital Resources.” Because of the numerous risks and uncertainties associated with the development of our product candidates and any future product candidates and technology, and because the extent to which we may enter into collaborations with third parties for development of any of our product candidates is unknown, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates.

If we raise additional funds through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, 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 through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Financial Operations Overview

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. As of December 31, 2023, we have recognized $3.2 million of collaboration revenue from our LianBio License Agreement.

If our development efforts for our product candidates are successful and result in regulatory approval and successful commercialization efforts, or additional collaboration agreements, we may generate revenue in the future from product sales, payments from additional collaboration or license agreements that we may enter into with third parties, or any combination thereof. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.

We expect that our revenue for the next several years will be derived primarily from our collaboration agreement with LianBio as well as any additional collaborations that we may enter into in the future. We cannot provide assurance as to the timing of future milestone or royalty payments or that we will receive any of these payments at all.

Collaboration Agreement

On September 26, 2022, we entered into an amended LianBio License Agreement with LianBio to develop and commercialize LYR-210 in Greater China (mainland China, Hong Kong, Taiwan, and Macau), South Korea, Singapore and Thailand. Under the terms of the LianBio License Agreement, we received an upfront payment of $12.0 million and are eligible to receive up to $135.0 million in future payments based upon the achievement of specified development, regulatory and commercialization milestones. Upon commercialization on a region-by-region basis, we will be entitled to receive low double-digit royalties based on net sales of LYR-210 in the licensed territories. LianBio will be responsible for the clinical development and commercialization of LYR-210 in the licensed territories, and we will retain all rights to LYR-210 in all other geographies. As part of the LianBio License Agreement, LianBio will also have the first right to obtain development and commercial rights in the licensed territories to our LYR-220 product candidate.

We assessed this arrangement in accordance with ASC 606: Revenue from Contracts with Customers (“ASC 606”), and concluded that the contract counterparty, LianBio, is a customer. At the commencement of the arrangement, we identified the following material promises: (1) license to develop and commercialize LYR-210, (2) manufacturing activities related to the clinical supply of LYR-210, (3) a non-exclusive license to manufacture LYR-210 and obligation to transfer manufacturing technology in the case of a supply failure, and (4) the Company’s performance of the development activities related to the global Phase 3 clinical trial. We determined that the license to develop and commercialize LYR-210, the manufacturing activities related to the clinical supply of LYR-210, and the non-exclusive license to manufacture LYR-210 and obligation to transfer manufacturing technology in the case of a supply failure represent a single performance obligation because of the specialized nature of the LYR-210 manufacturing process whereby the license cannot be separated from the manufacturing activities related to the supply of LYR-210 and the right to manufacture LYR-210 is only available if there is a supply failure. For the purposes of ASC 606, we determined there were two distinct performance obligations: (1) the license to develop and commercialize LYR-210, manufacturing activities related to the clinical supply of LYR-210, and the non-exclusive license to manufacture LYR-210 and obligation to transfer manufacturing technology in the case of a supply failure, and (2) the Company’s performance of the development activities related to the global Phase 3 clinical trial.

Under the LianBio License Agreement, in order to evaluate the transaction price for purposes of ASC 606, we determined that the upfront payment of $12.0 million and the reimbursable cost of the clinical supply of LYR-210 constitute the entirety of the consideration to be included in the transaction price as of the outset of the arrangement, which was allocated to the two performance obligations. The potential milestone payments that we are eligible to receive were excluded from the transaction price, as all milestone amounts were fully constrained based on the probability of achievement.

Additionally, we determined that LianBio’s right of first refusal to obtain development and commercial rights in the licensed territories to LYR-220 is an option as any agreement would be negotiated at arm’s length and as a result does not provide a material right to LianBio and as such, is not considered a performance obligation.

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We will recognize the revenue associated with the license to develop and commercialize LYR-210, manufacturing activities related to the clinical supply of LYR-210, and the non-exclusive license to manufacture LYR-210 and obligation to transfer manufacturing technology in the case of a supply failure combined performance obligation as the clinical supply of LYR-210 is delivered. We recognize revenue associated with the development activities related to the global Phase 3 clinical trial performance obligation as the development activities are performed using an input method, according to the costs incurred as to the development activities related to the global Phase 3 clinical trial and the costs expected to be incurred in the future to satisfy the performance obligation. The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation. The amounts received that have not yet been recognized as revenue are deferred as a contract liability on our consolidated balance sheet and will be recognized as the clinical supply of LYR-210 is delivered and over the remaining time it takes to conduct the global Phase 3 clinical trial, respectively.

LianBio announced that in October 2023 its Board of Directors commenced a comprehensive strategic review of its business. The LianBio Board ultimately concluded that selling off assets and winding down operations was the best way to realize maximum shareholder value. LianBio reported that a substantial portion of the wind down activities, including fulfillment of transition service obligations under its existing agreements and gradual cessation of currently active clinical trials, will be completed by the end of 2024. LianBio announced in 2024 that it was further reducing the size of its workforce to approximately 50 employees with plans to reduce that number further over the course of 2024. LianBio stated it will maintain a core group of employees necessary to implement an orderly wind down and support its efforts to maximize the value of its remaining business and assets including the collaboration with the Company. Due to these developments, the future of the Company’s collaboration with LianBio is uncertain as LianBio continues its wind down, while seeking a third party to acquire LianBio’s rights under the LianBio 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 research activities, including the development of and pursuit of regulatory approval of our most advanced product candidate, LYR-210, for the treatment of CRS, which include:

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

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expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with CROs, investigative sites, and consultants;

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costs of manufacturing our product candidates for use in our clinical trials, including fees paid to CMOs as well as other manufacturers that provide components of our product candidates for use in our potential future clinical trials;

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consulting and professional fees related to research and development activities;

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costs related to compliance with clinical regulatory requirements; and

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facility costs and other allocated expenses, which include expenses for rent and maintenance of our facility, utilities, depreciation, and other supplies; and

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costs related to the termination of an agreement with a former contract manufacturer organization; and

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impairment costs related to long-lived assets.

We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as clinical site

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activations, patient enrollment, or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and may be reflected in our consolidated financial statements as prepaid or accrued research and development expenses.

Our research and development expenses consist primarily of costs such as employee compensation, consulting fees, fees paid to CMOs and CRO expenses in connection with our preclinical and clinical development activities. We typically use our employee and infrastructure resources across our development programs and we do not allocate personnel costs and other internal costs to specific product candidates or development programs with the exception of the costs to manufacture our product candidates.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we initiate and conduct additional clinical trials, including two clinical trials for LYR-210 and one clinical trial for LYR-220, scale our manufacturing processes, and continue to discover and develop additional product candidates.

The successful development of LYR-210, LYR-220, and other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the development of these product candidates. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs, and timing of preclinical studies, clinical trials, and development of our product candidates will depend on a variety of factors, including:

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successful completion of clinical trials with safety, tolerability, and efficacy profiles for LYR-210, LYR-220, and any potential future product candidates that are satisfactory to the FDA or any comparable foreign regulatory authority;

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approval of an IND for any potential future product candidate to commence planned or future clinical trials in the United States or foreign countries;

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significant and changing government regulation and regulatory guidance;

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timing and receipt of marketing approvals from applicable regulatory authorities;

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making arrangements with CMOs for third-party clinical and commercial manufacturing to obtain sufficient supply of our product candidates;

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obtaining and maintaining patent and other intellectual property protection and regulatory exclusivity for our product candidates;

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commercializing the product candidates, if and when approved, whether alone or in collaboration with others;

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competition with other therapies; and

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business interruptions resulting from COVID-19.

A change in the outcome of any of these variables with respect to the development, manufacture, or commercialization enabling activities of any of our product candidates would significantly change the costs, timing, and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we may be required to expend significant additional financial resources and time on the completion of clinical development.

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General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, and administrative functions. General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor, and public relations, accounting, auditing, tax services, and insurance costs.

We expect that our general and administrative expenses will continue to increase in the future to support continued research and development activities and potential commercialization of our product candidates. These increases will likely include increased costs related to the hiring of additional personnel and fees to outside consultants, attorneys, and accountants, among other expenses. Additionally, we will continue to incur increased expenses associated with being a public company, including costs of additional personnel, accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs, and investor and public relations costs.

Interest Income

Interest income consists of interest income earned on our cash and cash equivalents and short-term investments.

Income Tax Expense

Income tax consists of income tax related to the Company's Massachusetts Security Corporation. The Company has not recorded any benefits related to its operating losses due to uncertainty regarding future taxable income.

Critical Accounting Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods and estimates used to assess our ability to continue as a going concern. 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 various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially 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 appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates.

Going Concern Evaluation and Presentation

Based on our current operating plan, we believe that our current cash, cash equivalents, and short-term investments will be sufficient to enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2025. Significant assumptions exist surrounding the use of our capital resources which could give rise to the use of available capital resources sooner than we currently expect. Changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. Because the length of time and activities associated with successful development of LYR-210 and LYR-220 is highly uncertain, we are unable to estimate the actual funds we will require for development, approval, and any approved marketing and commercialization activities.

Revenue Recognition

Under ASC Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the

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entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We only apply the five-step model to contracts when it is probable that the entity will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

Once a contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determines those that are performance obligations. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. We assess if these options provide a material right to the customer and if so, they are considered performance obligations. The identification of material rights requires judgments related to the determination of the value of the underlying good or service relative to the option exercise price. The exercise of a material right is accounted for as a contract modification for accounting purposes.

We assess whether each promised good or service is distinct for the purpose of identifying the performance obligations in the contract. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (that is, the good or service is capable of being distinct) and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (that is, the promise to transfer the good or service is distinct within the context of the contract). In assessing whether a promised good or service is distinct, we consider factors such as the research, manufacturing and commercialization capabilities of the collaboration partner, and the availability of the associated expertise in the general marketplace. We also consider the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, an entity is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, we consider applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. We validate the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

If the consideration promised in a contract includes a variable amount, we estimate the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. We determine the amount of variable consideration by using the expected value method or the most likely amount method. We include the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, we re-evaluate the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

If an arrangement includes development and regulatory milestone payments, we evaluate whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

For arrangements with licenses of intellectual property that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty has been allocated has been satisfied.

In determining the transaction price, we adjust consideration for the effects of the time value of money if the timing of payments provides us with a significant benefit of financing. We do not assess whether a contract has a significant

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financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. We assessed our revenue generating arrangement in order to determine whether a significant financing component exists and concluded that a significant financing component does not exist.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied, either at a point in time or over time, and if over time recognition is based on the use of an output or input method.

Collaborative arrangement revenue

On May 31, 2021, and amended on September 26, 2022, the Company entered into the LianBio License Agreement with LianBio, to develop and commercialize LYR-210 in Greater China (mainland China, Hong Kong, Taiwan, and Macau), South Korea, Singapore and Thailand. See Note 10 to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion of the arrangement.

As part of the accounting for this arrangement, we must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. For example, a proportion of the stand-alone selling price is related to research and clinical trial work and development performed whereby revenue is recognized as the underlying services are performed using a cost-to-cost model. We measure the extent of progress towards completion based on the ratio of actual costs incurred to the total estimated costs expected upon satisfying the identified performance obligation.

Accrued Research and Development Expenses

As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued research and development expenses. This process involves reviewing purchase orders and open contracts, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated cost incurred for the services when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly 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 consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include the following costs incurred for services in connection with research and development activities for which we have not yet been invoiced:

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vendors in connection with preclinical development activities;

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vendors in connection with the testing of preclinical and clinical trial materials;

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CROs in connection with preclinical and clinical studies; and

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investigative sites in connection with clinical trials.

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We contract with CROs to conduct clinical and other research and development services on our behalf. We base our expenses related to CROs on our estimates of the services received and efforts expended pursuant to quotes and contracts with them. The financial terms of these agreements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. There may be instances in which payments made to our CROs will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made.

Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to our prior estimates of accrued research and development expenses.

Stock-Based Compensation

We apply the fair value recognition provisions of ASC 718, Compensation—Stock Compensation, or ASC 718, for stock-based awards granted to employees and directors for their services on the board of directors. Determining the amount of stock-based compensation to be recorded requires us to develop estimates of the fair value of stock options as of their grant date. We estimate the fair value of each stock option grant using the Black-Scholes option-pricing model. Calculating the fair value of stock-based awards requires that we make subjective assumptions.

Pursuant to ASC 718, we measure stock-based awards granted to employees and members of the board of directors at fair value on the date of grant and recognize the corresponding stock-based compensation expense of those awards on a straight-line basis over the requisite service period, which is generally the vesting period of the respective award. We have historically granted stock options with exercise prices equivalent to the fair value of our common stock as of the date of grant.

We account for stock-based awards to non-employees in accordance with ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, or ASU No. 2018-07, which simplifies the accounting for stock-based payments granted to non-employees for goods and services. Under ASU No. 2018-07, most of the guidance on such payments to non-employees would be aligned with the requirements for stock-based payments granted to employees. Stock-based compensation arrangements to non-employees are accounted for in accordance with the applicable provisions of ASC 718 using a grant date fair value approach.

The Black-Scholes option-pricing model uses the following inputs: the fair value of our common stock, 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. We utilize historical volatility to approximate expected volatility. Prior to our IPO in 2020, we have historically been a private company and lack company-specific historical and implied volatility data. Therefore, we have based our computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to us, including stage of product development, life science industry focus, length of trading history, and similar vesting provisions. The historical volatility data is calculated based on a period of time commensurate with the expected term assumption. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available or until circumstances change, such that the identified entities are no longer representative companies. In the latter case, more suitable, similar entities whose share prices are publicly available would be utilized in the calculation. We use the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The expected term is applied to the stock option grant group as a whole, as we do not expect substantially different exercise or post-vesting termination behavior among its employee population. For options granted to non-employees, we utilize the contractual term of the share-based payment as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The expected dividend yield is assumed to be zero as we have never paid cash dividends and has no current plans to pay any cash dividends on its common stock. Our policy is to recognize forfeitures as they occur.

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Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands):

Year Ended December 31, Dollar

Operating expenses:

Other income:

Income tax expense (59 ) (13 ) (46 )

Collaboration Revenue

The increase in collaboration revenue was a result of revenue recognized under the LianBio License Agreement.

Research and Development Expenses

Research and development expense increased by $9.2 million to $48.0 million for the year ended December 31, 2023 from $38.8 million for the year ended December 31, 2022.

The increase in research and development expenses for the year ended December 31, 2023 was primarily attributable to an increase in clinical spend of $6.3 million as we progress our clinical trials; an increase in employee related costs of $4.6 million as we increased research and development headcount, a $0.4 million cost increase due to depreciation and shared allocation and support costs within research and development; and an increase in professional and consulting costs of $0.4 million related to additional research and development activities. The increase in research and development expenses for the year-ended December 31, 2023 were partially offset by a $2.0 million decrease in product development and manufacturing costs related to bringing production efforts in-house; and a $0.6 million gain related to our legal settlement with a former contract manufacturer.

General and Administrative Expenses

General and administrative expense increased by $1.5 million to $19.1 million for the year ended December 31, 2023 from $17.6 million for the year ended December 31, 2022.

The increase in general and administrative expenses for the year ended December 31, 2023 was primarily attributable to an increase in employee related fees of $1.0 million; an increase of $0.8 million in professional and consulting fees to support increased G&A activities; $0.4 million related to the Company's financing efforts and a $0.3 million cost increase due to depreciation and shared allocation and support costs with respect to general & administrative matters. The increase in general and administrative expenses for the year-ended December 31, 2023, were partially offset by a $1.0 million decrease in costs related to savings on D&O insurance.

Loss on Impairment of Long-Lived Assets

In October of 2022, we terminated an agreement with a contract manufacturer organization, or CMO. Prior to termination, we had funded certain leasehold improvements at the CMO’s facility that we do not anticipate receiving the

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benefit of in the future and has accordingly impaired the respective assets. Additionally, we recognized $1.6 million and $1.3 million related to loss on impairment of long-lived research and development assets for the periods ended December 31, 2023 and 2022, respectively, both related to the agreement termination referred to above based on specific facts and circumstances in the respective periods. This impairment evaluation related to the net book value of leasehold improvement and laboratory equipment assets held at the CMO.

Interest Income

Interest income increased $3.5 million to $4.5 million for the year ended December 31, 2023 from $1.0 million for the year ended December 31, 2022. The increase in interest income was attributable to higher cash balances and an improved cash management and investment strategy for the year ended December 31, 2023.

Income Tax Expense

During the year ended December 31, 2023 we recorded an income tax expense related to investment income of $59,000 related to our short-term investments held by our Massachusetts Securities Corporation. During the year ended December 31, 2022, we recorded an income tax expense of $13,000 related to our short-term investments held by the Massachusetts Securities Corporation. The increase in income tax expense was primarily attributable to the balance held within our short-term investments.

Liquidity and Capital Resources

Sources of Liquidity

From inception through December 31, 2023, we have raised an aggregate of $416.1 million to fund our operations, of which $162.1 million were gross proceeds from sales of our redeemable convertible preferred stock, $96.3 million were net proceeds from our April 2022 Financing (as defined below), $46.5 million were net proceeds from our May 2023 Financing (as defined below), $57.3 million were net proceeds from our initial public offering, $16.8 million were gross proceeds from government contracts and $17.0 million were gross proceeds from our license and collaboration agreement. Further, the Company currently has an effective shelf registration statement on Form S-3 (No. 333-256020) filed with the SEC on May 11, 2021 (“Form S-3”), under which it may offer from time to time in one or more offerings any combination of common and preferred stock, debt securities, warrants and units of up to $250.0 million in the aggregate. As of December 31, 2023, the Company sold 6,017,568 shares resulting in net proceeds of $19.1 million.

The following table provides information regarding our total cash, cash equivalents, and short-term investments at December 31, 2023 and 2022 (in thousands):

As of December 31,

We currently have an effective shelf registration statement on Form S-3 (No. 333-256020) filed with the SEC on May 11, 2021, or the Form S-3, under which we may offer from time to time in one or more offerings any combination of common and preferred stock, debt securities, warrants and units of up to $250.0 million in the aggregate. As of December 31, 2023, the Company sold 6,017,568 shares resulting in net proceeds of $19.1 million. See Note 7 for additional details.

On May 11, 2021, we entered into an Open Market Sales Agreement, or 2021 ATM Agreement, or Sales Agreement, with Jefferies LLC, or Jefferies, to sell shares of our common stock, from time to time, with aggregate gross sales proceeds of up to $50.0 million, through an at-the-market equity offering program under which Jefferies will act as our sales agent. As of December 31, 2022, we had received no proceeds from the sale of shares of common stock pursuant to the 2021 ATM Agreement. As of March 27, 2023 we terminated the 2021 ATM agreement with Jefferies.

On April 13, 2022, the Company announced the closing of its private placement of common stock (or, in lieu thereof, pre-funded warrants to purchase common stock), resulting in gross proceeds of approximately $100.5 million (“April 2022 Financing”). The Company received approximately $96.3 million in net proceeds after deducting estimated offering costs of $4.2 million. Pursuant to the securities purchase agreement, (i) certain investors purchased an aggregate of

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18,815,159 shares of common stock at $4.22 per share for gross proceeds to the Company of $79.4 million and (ii) certain investors purchased pre-funded warrants to purchase an aggregate of 5,000,000 shares of common stock, with the exercise price of $0.001 per share for gross proceeds of $21.1 million to the Company. The warrants are exercisable on and after April 13, 2022 and expire on April 12, 2027.

On May 25, 2023, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement"), with the purchasers named therein (the "Investors"), pursuant to which the Company agreed to sell securities to the Investors in a private placement (the "Private Placement"). The Purchase Agreement provided for the sale and issuance by the Company of: (i) an aggregate of 17,652,962 shares (the "Shares") of the Company's common stock, par value $0.001 per share (the "Common Stock"), and pre-funded warrants to purchase up to 2,408,188 shares of Common Stock (the "Pre-Funded Warrants"), with an exercise price of $0.001 per share, and (ii) accompanying warrants to purchase up to 10,030,575 shares of Common Stock (the "Purchase Warrants"), with an exercise price of $2.673 per share, for aggregate gross proceeds of approximately $50.0 million, before deducting private placement expenses. Each Share (or Pre-Funded Warrant to purchase one share) was issued with an accompanying Purchase Warrant to purchase one-half of one share, and the combined effective purchase price per share (or Pre-Funded Warrant to purchase one share) and accompanying Purchase Warrant to purchase one-half of one share was $2.4925 (less the exercise price of the Pre-Funded Warrant, if applicable). Each Pre-Funded Warrant was exercisable immediately and will expire on May 31, 2028. Each Purchase Warrant will be exercisable at any time on or after November 30, 2023 and will expire on November 30, 2028.

The closing of the Private Placement occurred on May 31, 2023.

On September 1, 2023, the Company entered into a Controlled Equity Offering Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co. ("Cantor") pursuant to which the Company may offer and sell, from time to time through Cantor, shares of the Company's common stock for aggregate gross proceeds of up to $50.0 million. The offering and sale of up to $50.0 million of the common shares has been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to the Company's Registration Statement on Form S-3 (File No. 333-256020) (the "Registration Statement"), which was originally filed with the SEC on May 11, 2021, and declared effective by the SEC on May 20, 2021, the base prospectus contained within the Registration Statement, and a prospectus supplement relating to the shares that was filed with the SEC on September 1, 2023 (the "Prospectus Supplement").

Pursuant to the Sales Agreement, Cantor may sell the shares in sales deemed to be "at the market offerings" as defined in Rule 415(a)(4) promulgated under the Securities Act. The Company has no obligation to sell any of the shares under the Sales Agreement and may at any time suspend or terminate the offering of the shares pursuant to the Sales Agreement upon notice to Cantor and subject to other conditions. Cantor will act as sales agent and will use commercially reasonable efforts to sell on the Company's behalf all of the shares requested to be sold by the Company, on mutually agreed terms between Cantor and the Company.

The Sales Agreement contains customary representations, warranties and agreements by the Company, and indemnification obligations of the Company and Cantor and other obligations of the parties. Under the terms of the Sales Agreement, the Company has agreed to pay Cantor a commission equal to 3.0% of the aggregate gross proceeds from any shares sold through it pursuant to the Sales Agreement. In addition, the Company has agreed to reimburse certain expenses incurred by Cantor in connection with the Sales Agreement.

On October 2, 2023, the Company sold an aggregate of 3,017,568 shares of common stock under the Sales Agreement, at a weighted average price of $3.71 per share, which generated net proceeds of $10.9 million. On November 15, 2023, the Company sold an aggregate of 3,000,000 shares of common stock under the Sales Agreement, at a weighted average price of $2.88 per share, which generated net proceeds of $8.2 million. On February 12, 2024, the Company executed a trade against the ATM Sales Agreement for a total of 1,041,666 shares at $4.80 per share for net proceeds of $4.8 million. Note this was not included in the cash & cash equivalents balance as of December 31, 2023.

Cash Flows

The following table provides information regarding our cash flows for the years ended December 31, 2023 and 2022 (in thousands):

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Year Ended December 31,

Net cash used in operating activities $ (63,304 ) $ (43,385 )

Net cash used in investing activities (12,584 ) (65,006 )

Net cash provided by financing activities 65,691 96,257

Net Cash Used in Operating Activities

The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.

Net cash used in operating activities was $63.3 million for the year ended December 31, 2023, primarily resulting from our net loss of $62.7 million, partially offset by non-cash adjustments of $4.3 million and cash used from changes in our operating assets and liabilities of $4.9 million. Our net loss was primarily attributed to research and development activities and our general and administrative expenses. Our net non-cash charges during the year ended December 31, 2023 primarily consisted of $5.9 million of share-based compensation expense, $1.6 million of non-cash loss on impairment of long-lived assets and $0.3 million of depreciation expense, which were partially offset by $3.5 million of net amortization of premiums on short-term investments. Net cash used in our operating assets and liabilities during the year ended December 31, 2023 consisted primarily of a decrease of $1.6 million of deferred revenue, as well as an increase in right-of-use assets of $5.1 million, a decrease in operating lease liabilities, of $1.2 million, both of which were partially offset by an increase in accrued expenses and accounts payable of $1.9 million and a decrease in prepaid expenses and other assets of $1.1 million due to the timing of payments.

Net cash used in operating activities was $43.4 million for the year ended December 31, 2022, primarily resulting from our net loss of $55.3 million, partially offset by non-cash adjustments of $7.3 million and cash provided by changes in our operating assets and liabilities of $4.6 million. Our net loss was primarily attributed to research and development activities and our general and administrative expenses. Our net non-cash charges during the year ended December 31, 2022 primarily consisted of $5.4 million of share-based compensation expense, $1.3 million of non-cash loss on impairment of long-lived assets and $1.1 million of depreciation expense, which were partially offset by $0.5 million of net amortization of premiums on short-term investments. Net cash provided by changes in our operating assets and liabilities during the year ended December 31, 2022 consisted primarily of an increase of $3.6 million of deferred revenue, $2.4 million, net increase in accrued expenses and accounts payable due to the timing of payments, partially offset by an increased in prepaid expenses and other assets of $1.3 million, also due to the timing of payments.

Net Cash Used in Investing Activities

Net cash used in investing activities was $12.6 million for the year ended December 31, 2023 compared to $65.0 million for the year ended December 31, 2022. The decrease in cash used in investing activities of $52.4 million was attributable to a decrease in the net purchase of short-term investments.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was $65.7 million for the year ended December 31, 2023 compared to $96.3 million for the year ended December 31, 2022. The decrease in cash provided by financing activities of $30.6 million was primarily attributable to the change in net proceeds from our equity financings. See Note 7 to the consolidated financial statements included in this Annual Report on Form 10-K for a further discussion of the Company's equity financings.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development for, begin the manufacturing scale up process for, initiate later stage clinical trials for, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing, and distribution. Furthermore, we will continue to incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce, or eliminate our research and development programs or future commercialization efforts.

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Management has concluded that there is substantial doubt regarding our ability to continue as a going concern based on our analysis under applicable accounting standards. Based on our current business plan, we anticipate that our cash, cash equivalents and short-term investment balance is sufficient to fund our operating expenses and capital expenditures into the first quarter of 2025. However, we have based this estimate on assumptions that may prove to be wrong. If, for any reason, our expenses differ materially from our assumptions or we utilize our cash more quickly than anticipated, or if we are unable to obtain funding on a timely basis we may be required to revise our business plan and strategy, which may result in us significantly curtailing, delaying or discontinuing one or more of our research or development programs or may result in us being unable to expand our operations or otherwise capitalize on our business opportunities. As a result, our business, financial condition, and results of operations could be materially adversely affected.

Management’s plans to obtain resources for the Company include obtaining capital from the sale of its equity securities, entering into strategic partnership arrangements and short-term borrowings from banks, stockholders or other related parties, if needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its aforementioned plans.

Our future capital requirements will depend on many factors, including:

•

the costs of conducting future clinical trials of LYR-210 and LYR-220;

•

the costs of manufacturing additional material for one or more pivotal Phase 3 clinical trials of LYR-210 and a Phase 3 clinical trial of LYR-220 as well as potential future clinical studies we might conduct for our other product candidates;

•

the costs of scaling up our manufacturing process and supply chain capacity to provide sufficient quantities of LYR-210 and LYR-220 for the potential commercialization of LYR-210 and LYR-220 if our clinical development program is successful and we obtain marketing approval;

•

the scope, progress, results, and costs of discovery, preclinical development, laboratory testing, and clinical trials for other potential product candidates we may develop, if any;

•

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

•

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

•

the achievement of milestones or occurrence of other developments that trigger payments under any collaboration agreements we might have at such time;

•

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

•

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

•

the costs of preparing, filing, and prosecuting patent applications, obtaining, maintaining, and enforcing our intellectual property rights, and defending intellectual property-related claims;

•

our headcount growth and associated costs as we expand our business operations, our research and development activities, and our manufacturing scale up;

•

the costs of operating as a public company; and

•

the cost of potential business interruptions resulting from COVID-19.

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Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.

Further, the global economy, including credit and financial markets, has periodically experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, rising interest and inflation rates, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. All of these factors could impact our liquidity and future funding requirements, including but not limited to our ability to raise additional capital when needed on acceptable terms, if at all. The duration of any economic slowdown is uncertain and the impact on our business is difficult to predict. See “Risk Factors— Unstable global political or economic conditions may have serious adverse consequences on our business, financial condition and share price.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and licensing arrangements. 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 interests 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. Any debt financing, if available, may involve agreements that include restrictive covenants that limit 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 funds through additional collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs, or product candidates, or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings 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 product candidates that we would otherwise prefer to develop and market ourselves.

Emerging Growth Company Status

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period under the JOBS Act. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make comparison of our financials to those of other public companies more difficult.

We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, or December 31, 2025, (b) in which we have total annual gross revenues of $1.235 billion or more, or (c) in which we are deemed to be a large accelerated filer under the rules of the SEC, which means the market value of our outstanding common stock held by non-affiliates exceeds $700 million as of last business day of our most recently completed second fiscal quarter, and (2) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years.

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

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined in Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item 7A.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K and are incorporated herein by reference. An index to those financial statements is found in Item 15 of Part IV of this Annual Report on Form 10-K.

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

None.

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Item 9A. Controls and Procedures.

Management’s Evaluation of Disclosure Controls and Procedures

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2023.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, our management concluded that, as of December 31, 2023, our internal control over financial reporting was effective.

Attestation Report of the Independent Registered Public Accounting Firm

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”

Remediation of Material Weakness

In connection with the preparation of our unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2022, management identified a material weakness in our internal control over financial reporting related to the allocation of the translation price related to the LianBio License Agreement, which was entered into on May 31, 2021, and the associated allocation of previously identified constrained amounts of the transaction price to the two performance obligations identified in the LianBio License Agreement. This material weakness resulted in a restatement of our previously issued financial statements as of and for the three months ended March 31, 2022 and our previously issued financial statements as of and for the three and six months ended June 30, 2022.

In response to the material weakness, and as previously disclosed in Item 9A of our annual report on Form 10-K for the year ended December 31, 2022, we implemented a remediation plan which included, enhancing our review procedures with respect to accounting for any new and complex transactions through the use of third parties to assist with technical accounting in key judgment areas, implementing additional review procedures with respect to ASC 808 and ASC 606, and enhancing internal controls with regards to complex and nonrecurring transactions. The enhancements made to our control environment were in place as of December 31, 2023, and based on the evaluation of relevant internal controls, management has concluded that the material weakness previously identified have been remediated as of December 31, 2023.

To remediate the material weakness, we studied and clarified our understanding of the accounting for contracts that may be settled in the Company’s own stock, such as warrants, as highlighted in the SEC Statement and enhanced the accounting policy, controls and procedures related to the accounting for such contracts to determine proper accounting in accordance with U.S. GAAP as clarified by the SEC Statement. While these actions are subject to ongoing management evaluation, including the validation and testing of internal controls over a sustained period of financial reporting cycles, we

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are committed to remediating internal controls deficiencies as they are identified and committed to the continuous improvement of our overall control environment.

Changes in Internal Control Over Financial Reporting

Other than as described above under “Remediation of Material Weakness”, there has been no change in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) and 15d-15(f) of the Exchange Act during the quarter ended December 31, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

a) None.

b) During the fiscal quarter ended December 31, 2023, none of our directors or "officers" (as defined in Rule 16a-1(f) under the Exchange Act) informed us of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408, except as described in the table below:

1.

The trading arrangement marked as a “Rule 10b5-1 Trading Arrangement” is intended to satisfy the affirmative defense of Rule 10b5-1(c), as amended (the “Rule”).

2.

The trading arrangement permitted or permits transactions through and including the earlier to occur of (a) the completion of all purchases or sales or (b) the date listed in the table. The trading arrangement marked as a “Rule 10b5-1 Trading Arrangement” only permitted or only permits transactions upon expiration of the applicable mandatory cooling-off period under the Rule. The arrangement also provided or provides for automatic expiration in the event of death or a personal bankruptcy filing.

3.

Complied with the then-applicable requirements of Rule 10b5-1(c) when adopted in December 2023.

4.

Dr. Palasis adopted this trading arrangement for shares subject to option agreements that are scheduled to expire in 2025.

On March 18, 2024, the Company’s Board of Directors granted 275,000 restricted stock units to Dr. Waksal, which will vest in a single installment on January 31, 2025, and an option to purchase 500,000 shares of the Company’s common stock to Dr. Palasis, which vests in 48 equal monthly installments commencing on January 31, 2024. In addition, on March 21, 2024, the Company’s Board of Directors granted 385,000 performance-based restricted stock units to Dr. Waksal and a performance-based option to purchase 550,000 shares of the Company’s common stock to Dr. Palasis. Each of these performance-based awards will vest in a single installment on January 31, 2028, subject to the achievement by the Company of certain specified strategic milestones within specified timeframes, with potential accelerated vesting in connection with a change in control or qualifying termination of the executive officer’s employment.

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

Not Applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information about our Directors

The following table presents information concerning our board of directors as of December 31, 2023.

Name Age Position In Current Position Since

Michael Altman 42 Director June 2018

Edward Anderson 74 Director February 2019

C. Ann Merrifield 72 Director September 2019

Konstantin Poukalov 40 Director January 2020

W. Bradford Smith 68 Director November 2019

Nancy Snyderman, M.D., FACS 71 Director October 2020

James R. Tobin 79 Director March 2022

The following are brief biographies describing the backgrounds of our directors.

Harlan W. Waksal, M.D. has served as our Executive Chair since February 2022 and was elected to our board of directors in February 2022. Prior to his role with us as Executive Chair, Dr. Waksal served as President and Chief Executive Officer of Kadmon Holdings, Inc., or Kadmon, a biopharmaceutical company, from August 2014 and a director since 2013 until its acquisition by Sanofi in November 2021. Prior to joining Kadmon as an employee, Dr. Waksal served as President and Sole Proprietor of Waksal Consulting LLC from 2003 to 2014. From 2011 to 2014, Dr. Waksal served as Executive Vice President, Business and Scientific Affairs at Acasti Pharma, Inc., a publicly traded biopharmaceutical company, and as a consultant to Neptune Technologies & Bioresources, Inc., a publicly traded life sciences company and the parent company of Acasti. Dr. Waksal co‐founded ImClone Systems (“ImClone”) in 1987, a publicly traded biopharmaceutical company acquired by Eli Lilly and Company in 2008. Dr. Waksal served in senior roles at ImClone, including: President (1987 to 1994); Executive Vice President and Chief Operating Officer (1994 to 2002); and President, Chief Executive Officer and Chief Operating Officer (2002 to 2003). Dr. Waksal also served as a Director of ImClone from 1987 to 2005. Dr. Waksal served on the boards of Oberlin College and Sevion Therapeutics through March 2016 and the boards of Acasti and Neptune through February 2016 and July 2015, respectively. Dr. Waksal's additional roles include serving as a Member of the Board of Directors at Neptune Technologies & Bioresources, Observer of the Board of Directors at NeuroBiopharm, Chairman of the American Committee for the Weizmann Institute of Science and Member of the Technology Advisory Board at the New Jersey Edison Innovation Fund. Dr. Waksal received his B.A. from Oberlin College and his M.D. from Tufts University School of Medicine. He completed his training in internal medicine at New England Medical Center and in pathology at Kings County Hospital Center in Brooklyn. We believe Dr. Waksal’s extensive management experience in the life science industry and drug development experience provides him with the qualifications and skills to serve on our board of directors.

Maria Palasis, Ph.D. has served as our President and Chief Executive Officer and a member of our board of directors since January 2015. Prior to her role with us as President and Chief Executive Officer, Dr. Palasis held positions of increasing responsibility, the most recent of which was Executive Vice President and Chief Technology Officer from 2011 to 2015. Before that, in 2008, Dr. Palasis joined Arsenal Medical, Inc., a biotechnology company, as Executive Vice President and subsequently served as President and Chief Executive Officer and a member of the board of directors of Arsenal Medical from January 2015 to June 2018. Before that, from November 1995 to January 2008, Dr. Palasis was employed with the title of Director at Boston Scientific Corporation, a medical device company, where she managed a portfolio of external biotech and medical device investments and led the development of several combination therapies. Dr. Palasis holds a B.S. and Ph.D. in Chemical Engineering from the University of Cincinnati, and she held a postdoctoral fellowship in molecular biology at the University of Cincinnati School of Medicine. We believe that Dr. Palasis’ experience in the industry and knowledge of our Company qualifies her to serve on our board of directors.

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Michael Altman has served as a member of our board of directors since June 2018. Since 2007, Mr. Altman has been employed on the investment team at Perceptive Advisors, a life sciences focused investment firm, where he currently serves as Managing Director and focuses on medical devices, diagnostics, digital health and specialty pharmaceutical investments. Since October 2018, Mr. Altman has also served as Chief Financial Officer and member of the board of directors of ARYA Sciences Acquisition Corp. I, II, III, and IV, special purpose acquisition companies. From October 2005 to October 2007, Mr. Altman served as a healthcare trader and analyst at First New York Securities. Since June 2021, Mr. Altman has served on the board of directors of Nautilus Biotechnologies, Inc., a biotechnology company. Mr. Altman has also served on the board of directors of Vitruvius Therapeutics, Inc., a pharmaceutical company, since January 2018. Mr. Altman holds a B.S. in Business Administration from the University of Vermont and is a CFA Charter Holder. We believe that Mr. Altman’s broad operational and transactional experience qualifies him to serve on our board of directors.

Edward Anderson has served as a member of our board of directors since February 2019. Mr. Anderson founded two venture capital firms, North Bridge Venture Partners in June 1994, where he currently serves as a Managing Partner focusing on early-stage high-tech companies, and North Bridge Growth Equity in February 2007. Mr. Anderson currently serves as a member of the board of directors of Couchbase, Inc., a public software company, since 2020 and MarkForged, an IT company, since 2015. Mr. Anderson holds an M.A. from Columbia Business School and a B.F.A. from the University of Denver, where he has served on the board of trustees since 2011 and currently serves as chair on its Investment Committee. We believe that Mr. Anderson’s extensive experience in venture capital investments qualifies him to serve on our board of directors.

C. Ann Merrifield has served as a member of our board of directors since September 2019. Ms. Merrifield has also served as a member of the boards of directors for a portfolio of public and private companies in the life sciences sector, which include InVivo Therapeutics Holdings Corp., since November 2014, and Flexion Therapeutics, Inc., from June 2014 to November 2021 until it was acquired by Pacira BioSciences. From July 2015 to August 2018, she served as a director of Juniper Pharmaceuticals, Inc., a healthcare company, until it was acquired by Catalent, Inc. and from December 2016 to January 2019, she served as a director of Veritas Genetics, Inc. Ms. Merrifield also serves as a Trustee for MassMutual Premier, Select and MML Series Investment Funds, the Huntington Theatre Company, the YMCA of Greater Boston, and the International Institute of New England. From November 2012 to July 2014, Ms. Merrifield served as President, Chief Executive Officer and director of PathoGenetix Inc., a genomics company, which voluntarily filed for Chapter 7 bankruptcy in July 2014. Before that, Ms. Merrifield spent 18 years at Genzyme Corporation, serving in several leadership roles, including President of Genzyme Biosurgery, President of Genzyme Genetics and Senior Vice President, Business Excellence. Ms. Merrifield holds a B.A. in Zoology and a Master of Education from the University of Maine and an M.B.A. from the Tuck School of Business at Dartmouth College. We believe that Ms. Merrifield’s extensive industry experience qualifies her to serve on our board of directors.

Konstantin Poukalov has served as a member of our board of directors since January 2020. Since March 2019, Mr. Poukalov has served as Managing Director at Perceptive Advisors, a life sciences focused investment firm. Since October 2019, Mr. Poukalov has served on the board of directors of LianBio, a biotechnology company, as Executive Chairman. From July 2012 to October 2018, Mr. Poukalov served in roles of increasing responsibility at Kadmon Holdings, Inc., a biopharmaceutical company, most recently serving as Executive Vice President and Chief Financial Officer from July 2014 to October 2018. Mr. Poukalov holds a B.S. in Electrical Engineering from Stony Brook University. We believe that Mr. Poukalov’s extensive financial and industry experience qualify him to serve on our board of directors.

W. Bradford Smith has served as a member of our board of directors since November 2019. Since November 2023, Mr. Smith has served as a consultant to Homology Medicines, Inc. (NASDAQ: FIXX), where he served as Chief Financial Officer, Chief Business Officer and Treasurer from March 2022 until November 2023, when the company announced it signed a merger agreement with Q32 Bio, Inc. He also served as Homology’s Chief Financial Officer and Treasurer from April 2017 to March 2022 and as Secretary from July 2017 to June 2020. From March 2014 to April 2017, Mr. Smith was Chief Financial Officer of Ocular Therapeutix, Inc., a biopharmaceutical company, where he led the company's strategic financings, including an IPO and subsequent follow-on offerings, and completed a development and commercialization deal with a major biopharmaceutical company. Prior to joining Ocular Therapeutix, Mr. Smith served as Chief Financial Officer of OmniGuide, Inc., a medical device company, from July 2008 to March 2014. Since May 2021, Mr. Smith has served on the board of directors of eGenesis, a private gene editing company. Mr. Smith holds a B.S. in Biology from Tufts University and an M.B.A. from the Whittemore School of Business and Economics at the University of New Hampshire. We believe that Mr. Smith’s extensive financial and industry experience qualify him to serve on our board of directors.

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Nancy Snyderman, M.D., FACS has served as a member of our board of directors since October 2020. Dr. Snyderman has also served on the boards of directors of Axonics Inc., a medical device company, since April 2019 and Alkermes plc, a biopharmaceutical company, since May 2016. From 2006 to 2018, Dr. Snyderman served as an advisory board member to GE's Healthymagination, General Electric Company’s healthcare initiative. From 2003 to 2008, Dr. Snyderman also served as a senior vice president for corporate communications at Johnson & Johnson. Dr. Snyderman is a board-certified Otolaryngologist-Head and Neck surgeon and clinical researcher and has had academic appointments at the University of Pennsylvania and the University of California-San Francisco. From 2016 to 2018, she served as a consulting professor at the Center for Innovation for Global Health at Stanford University. Dr. Snyderman is an Emmy award winning medical correspondent, having worked at ABC News from 1987 to 2003 and later as chief medical editor at NBC News from 2004 to 2015. Dr. Snyderman holds a B.A. in Microbiology from Indiana University and a M.D. from the University of Nebraska Medical Center and has completed residencies in Pediatrics and Otolaryngology Head and Neck Surgery at the University of Pittsburgh. We believe that Dr. Snyderman's extensive experience as an executive at a pharmaceutical company, as well as her roles in academia and as an advisor to policy organizations, qualifies her to serve on our board of directors.

James R. Tobin has served as a member of our board of directors since March 2022. Mr. Tobin is the retired President and CEO of Boston Scientific Corporation, a medical device company, where he served from 1999 to 2009. Prior to Boston Scientific, Mr. Tobin was the President and CEO of Biogen Inc., and, from 1994 to 1997, its President and Chief Operating Officer. Before Biogen, Mr. Tobin spent 22 years with Baxter International Inc., rising from Financial Analyst to President and Chief Operating Officer. Mr. Tobin currently serves as Chairman of the Board at TransMedics, Inc. and as a director of Globus Medical Inc., each of which are public companies, and as a director at Xenter, Inc., a private company. Mr. Tobin has also served on the boards of Oxford Immunotec, Inc., from 2014 to 2021, Corindus Vascular Robotics, from 2018 to 2019, Curis, Inc., from 1995 to 2015, Medical Simulation Corp, from 2012 to 2018, CardioDX, Inc., from 2014 to 2017, Chiasma, Inc., from 2015 to 2016, and Aptus Endosystems, Inc. from 2011 to 2015. Mr. Tobin holds an AB from Harvard College and an M.B.A. from Harvard Business School. Mr. Tobin also served as a Lieutenant in the U.S. Navy. We believe Mr. Tobin is qualified to serve on our board of directors because of his decades of experience as President and Chief Executive Officer or Chief Operating Officer of three large biotechnology and medical device companies.

Information about our Executive Officers

The following table presents information concerning our executive officers as of March 1, 2024.

Name Age Position In Current Position Since

Jason Cavalier 51 Chief Financial Officer and Treasurer September 2021

Richard Nieman, M.D. 61 Chief Medical Officer July 2022

John E. Bishop, Ph.D. 62 Chief Technology Officer February 2023

The following are brief biographies describing the backgrounds of our executive officers.

The biography for Dr. Waksal appears above.

The biography for Dr. Palasis appears above.

Jason Cavalier has served as our Chief Financial Officer, and Treasurer since September 2021. He also served as our Secretary from September 2021 to March 2024. Prior to joining our Company, Mr. Cavalier served as a Managing Director and the Head of Life Sciences Mergers and Acquisitions at Cantor Fitzgerald & Co., where he led transactions across the medical technology, diagnostics and biopharma sectors, from 2017 to 2021. Prior to that, Mr. Cavalier served as a Director, Mergers and Acquisitions, at RBC Capital Markets LLC from 2009 to 2017, where he primarily focused on advising senior management and boards of directors on a range of strategic advisory assignments including mergers, acquisitions, divestitures and leveraged buyouts. Mr. Cavalier has also held positions of increasing responsibility within the investment banking divisions of Barclays Capital Inc., Bear Stearns & Co. Inc., and Lehman Brothers Inc. Mr. Cavalier received a B.S. in Applied Economics and Business Management from Cornell University and an M.B.A. from Columbia University Business School.

Richard Nieman, M.D. has served as our Chief Medical Officer since July 2022. Dr Nieman, a pulmonologist by training, has had prior leadership roles as SVP & Worldwide Medical Head of Immunology at Bristol Myers Squibb (BMS)

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from March to November 2020, Head of R&D China at BMS, Global Medical Officer & Head of Medical at Teva from January 2013 to March 2018, and Head of Asia-Pacific Medical at Bayer from January 2009 to December 2012. At Teva, he led the company's medical and health economic and outcome research (HEOR) function of 550 professionals and was a member of the Specialty Executive Team. He has been involved in bringing numerous important medicines to the market in the U.S. and Europe, including Cinquair in asthma, Copaxone 40 mg 3x/week in multiple sclerosis, Austedo in movement disorders, Ajovy in migraine and Xarelto in thrombosis and stroke prevention. Richard is a Fellow of the UK Royal College of Physicians, a Visiting Senior Lecturer at the School of Cancer and Pharmaceutical Sciences, Kings College, London, and was a Visiting Professor at Fudan University School of Public Health in Shanghai, China. He has published extensively and trained and practiced medicine in the UK.

John E. Bishop, Ph.D. has served as our Chief Technology Officer since February 2023. Dr. Bishop previously served as the Senior Vice President, Chief Technology Officer at Forma Therapeutics Holdings, Inc. (Forma) from June 2021 to February 2023. Prior to joining Forma, he served as Senior Vice President of Pharmaceutical Sciences at Epizyme, Inc. (“Epizyme”) from May 2017 to May 2021, where he was responsible for the CMC and quality assurance functions. Prior to Epizyme, Dr. Bishop was Executive Vice President of Pharmaceutical Sciences at Genocea Biosciences Inc. from May 2016 to May 2017. Prior to that, he held positions of increasing responsibility at Momenta Pharmaceuticals, Inc., including Senior Vice President, Pharmaceutical Sciences from December 2006 to May 2016 and Vice President, Pharmaceutical Sciences and Manufacturing from November 2004 to December 2006. Dr. Bishop received his B.S. magna cum laude in Chemistry and German from Tufts University, his Ph.D. in Organic Chemistry from University of California, Berkeley and his M.B.A. from Northeastern University.

Family Relationships

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

Code of Business Conduct and Ethics

Our Board has adopted a written code of business conduct (the “Code of Business Conduct and Ethics”) that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. A copy of the Code of Business Conduct and Ethics is available on our website at www.lyratx.com in the “Governance” section of the “Investors & News” page. In addition, we intend to post on our website all disclosures that are required by law or The Nasdaq Stock Market LLC concerning any amendments to, or waivers from, any provision of our Code of Business Conduct and Ethics. We granted no waivers under our Code of Business Conduct and Ethics during the fiscal year 2023.

Audit Committee and Audit Committee Financial Expert

We have a separately-designated standing audit committee (“Audit Committee”) that consists of Edward Anderson, James R. Tobin and W. Bradford Smith. Mr. Smith serves as the Chair of the Audit Committee. Our board of directors has determined that all members of the audit committee (Edward Anderson, James R. Tobin and W. Bradford Smith) are independent directors under the Nasdaq rules and the additional independence standards applicable to audit committee members established pursuant to Rule 10A-3 under the Exchange Act. Our board of directors has also determined that each of Edward Anderson, James R. Tobin and W. Bradford Smith meets the “financial literacy” requirement for audit committee members under the Nasdaq Stock Market rules and W. Bradford Smith as well as James R. Tobin are “audit committee financial experts” within the meaning of the SEC rules.

Item 11. Executive Compensation.

This section discusses the material components of the executive compensation program for our executive officers who are named in the “2023 Summary Compensation Table” below. In 2023, our “named executive officers” and their positions were as follows:

•

Maria Palasis, Ph.D., President and Chief Executive Officer;

•

Harlan W. Waksal, M.D., Executive Chair and Chairperson of the Board; and

•

John Bishop, Ph.D., Chief Technology Officer

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2023 Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers for the years shown.

(1)

The amount represents a sign-on bonus in connection with Dr. Bishop's commencement of employment.

(2)

Amounts represent the full grant date fair value of stock options granted during 2023 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of all option awards made to named executive officers in Note 9 to the consolidated financial statements included in this Annual Report on Form 10-K.

(3)

Amounts represent performance-based annual cash bonuses determined by our board of directors for the named executive officers for fiscal year 2023. Dr. Bishop's annual cash bonus was pro-rated to reflect his partial year of employment with us.

(4)

Amounts for fiscal year 2023 represent company 401(k) matching contributions, and in the case of Dr. Waksal, travel expenses and related tax gross-ups.

(5)

Dr. Bishop commenced employment with us effective February 27, 2023.

Narrative to Summary Compensation Table

2023 Salaries

The named executive officers receive a base salary to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. For 2023, the base salaries for Dr. Palasis, Dr. Waksal and Dr. Bishop were $583,000, $200,000 and $455,000, respectively. Dr. Bishop's salary shown in the 2023 Summary Compensation Table above reflects a partial year of employment.

2023 Bonuses

For 2023, we offered Dr. Palasis and Dr. Bishop the opportunity to earn annual cash bonuses to compensate them for attaining short-term company goals as approved by our board of directors. Consistent with his employment agreement, Dr. Waksal is not eligible for an annual bonus unless our board of directors otherwise determines. For 2023, bonuses were based entirely on attaining clinical, regulatory, research and development, strategic and financial goals. The 2023 target bonuses for each of Dr. Palasis and Dr. Bishop were 55% and 40%, respectively, of his or her annual base salary earned for the year based on each individual's commencement date. Each individual's respective target bonuses was set by the board of directors. The actual annual cash bonuses awarded to Dr. Palasis and Dr. Bishop for 2023 performance are set forth above in the 2023 Summary Compensation Table in the column titled “Non-Equity Incentive Plan Compensation.”

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Equity Compensation

We offer stock options to our employees, including our named executive officers, as the long-term incentive component of our compensation program. Our stock options generally allow employees to purchase shares of our common stock at a price equal to the fair market value of our common stock on the date of grant. With respect to grants made in connection with the commencement of employment, our stock options typically vest as to 25% of the underlying shares on the first anniversary of the vesting commencement date and in equal monthly installments over the following three years, subject to the holder’s continued service with us. From time to time, our board of directors may also construct alternate vesting schedules as it determines are appropriate to motivate particular employees. Historically, our stock options have been intended to qualify as “incentive stock options” to the extent permitted under the Internal Revenue Code.

The following table sets forth the stock options granted to our named executive officers in 2023.

Named Executive Officer 2023 Stock Options Granted

In connection with our annual performance review in January 2023, Dr. Palasis was granted an option to purchase 250,000 shares of our common stock and Dr. Waksal was granted an option to purchase 200,000 shares of our common stock. In June 2023, Dr. Palasis was granted an option to purchase 150,000 shares of our common stock in connection with certain goal achievement. These options vest in 48 equal monthly installments following the vesting commencement date, subject to such individual’s continued service to the Company on each applicable vesting date.

The option award to Dr. Bishop was made in connection with the commencement of his employment with us and is subject to our standard time-based vesting schedule for grants made in connection with the commencement of employment.

Other Elements of Compensation

Retirement Plan

We maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Our named executive officers are eligible to participate in the 401(k) plan on the same terms as other full-time employees. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies. For 2023, we made matching contributions of 50% of the first 6% of eligible compensation contributed under our 401(k) plan.

Employee Benefits and Perquisites

All of our full-time employees, including our named executive officers, are eligible to participate in our employee benefit plans and programs, including medical, dental, and vision benefits, health spending accounts, and short- and long-term disability, accidental death and dismemberment, and life insurance, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans.

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Outstanding Equity Awards at 2023 Fiscal Year-End

The following table summarizes the number of shares of common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2023.

(1)

Options vest and become exercisable in equal monthly installments over four years following the vesting commencement date, subject to the named executive officer’s continued service with us on each applicable vesting date.

(2)

Options were eligible to vest and become exercisable at the end of any given three-month period occurring prior to six years from the vesting commencement date in which we recognize revenue from the commercial sale of an FDA-approved product each month and in amounts, with respect to the second and third months of such period that increase from the revenue recognized from such product sales in the immediately preceding month, subject to Dr. Palasis’ continued employment with us on each applicable vesting date. Such milestone was not achieved during the six-year performance period; however, the options remain eligible to vest, in full or in part, in the event of certain terminations of Dr. Palasis' employment with us or upon a change in control transaction.

(3)

Options vest and become exercisable as to 25% of the underlying shares on the first anniversary of the vesting commencement date and in 36 equal monthly installments over the following three years, subject to the named executive officer’s continued service with us on each applicable vesting date.

(4)

Options vest and become exercisable as to one-third of the shares underlying the option, in each case, upon the achievement of three distinct market capitalization targets during the five-year performance period following the date of grant, provided that no more than one-third of the option may vest prior to the first anniversary of the date of grant, no more than two-thirds of the option may vest prior to the second anniversary of the date of grant and the option may not become fully vested prior to the third anniversary of the date of grant, subject to the named executive officer’s continued service on each applicable vesting date.

Executive Employment Agreements

We have entered into employment agreements with each of our named executive officers. The employment agreements provide for the annual base salaries, and annual target bonus opportunities, as applicable described above under the headings “2023 Salaries” and “2023 Bonuses.”

Each of our named executive officers is also entitled to reimbursement of reasonable travel and other business expenses incurred in the performance of such individual's duties to the Company in accordance with the Company's expense reimbursement policy.

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The employment agreements with Dr. Waksal and Dr. Bishop provide for an initial option award in connection with the commencement of their respective employment. Dr. Waksal was also promised an anti-dilutive option in an amount equal to the difference between the shares subject to the initial option and four percent of our “capitalization” (as defined in his employment agreement) immediately following our first bona fide equity financing following February 16, 2022. The anti-dilutive option was granted on June 16, 2022 and is subject to the same vesting terms as the initial option.

Additionally, Dr. Palasis and Dr. Waksal are each entitled to receive a cash bonus upon a change in control transaction in which our market capitalization equals or exceeds $750,000,000 (each, a “Transaction Bonus”), in an amount equal to 1.0% of our market capitalization at the time of the change in control transaction, subject to the named executive officer’s continued service through the completion of the change in control transaction and execution of a release of claims.

Under the employment agreements, if we terminate the employment of Dr. Palasis, Dr. Waksal or Dr. Bishop without “cause” or the executive resigns for “good reason” (each as defined below), subject to the executive’s timely execution of a release of claims and continued compliance with a separate restrictive covenant agreement (described below), the executive is entitled to receive (i) base salary continuation for a period of 12 months for Dr. Palasis and Dr. Waksal, and 9 months for Dr. Bishop; (ii) in the case of Dr. Palasis and Dr. Bishop payment of any annual bonus for the prior year earned but unpaid as of the date of termination (iii) direct payment of or reimbursement for continued medical, dental or vision coverage pursuant to COBRA for up to 12 months for Dr. Palasis and Dr. Waksal, and 9 months for Dr. Bishop, less the amount each named executive officer would have had to pay to receive such coverage as an active employee based on the cost sharing levels in effect on the named executive officer’s termination date, and (iv) in the case of Dr. Palasis and Dr. Waksal, any vested and exercisable options will remain outstanding and exercisable for 15 months or 12 months, respectively, following termination.

If we terminate Dr. Palasis, Dr. Waksal, or Dr. Bishop without “cause” or the executive resigns for “good reason,” in either case, on or within three months prior to or 12 months following a change in control, then, in lieu of the severance benefits described above, subject to the executive’s timely execution of a release of claims, the executive is entitled to receive (i) an amount equal in cash equal to 1.5 times for Dr. Palasis and Dr. Waksal, and 1.0 times for Dr. Bishop the sum of the named executive officer’s annual base salary plus target annual bonus for the year of termination, (ii) in the case of Dr. Palasis and Dr. Bishop, payment of any annual bonus for the prior year earned but unpaid as of the date of termination, (iii) direct payment of or reimbursement for continued medical, dental or vision coverage pursuant to COBRA for up to 18 months for Dr. Palasis and Dr. Waksal and 12 months for Dr. Bishop, less the amount each named executive officer would have had to pay to receive such coverage as an active employee based on the cost sharing levels in effect on the named executive officer’s termination date, (iv) accelerated vesting of all unvested equity or equity-based awards held by the named executive officer that vest solely based on the passage of time, with any such awards that vest based on the attainment of performance-vesting conditions being governed by the terms of the applicable award agreement, (v) in the case of Dr. Palasis and Dr. Waksal, any vested and exercisable options will remain outstanding and exercisable for 15 months or 12 months, respectively, following termination, and (vi) in the case of Dr. Palasis and Dr. Waksal, payment of the Transaction Bonus, provided that the conditions for payment are otherwise satisfied.

Each of our named executive officers has agreed to refrain from competing with us while employed and following his or her termination of employment for any reason for a period of one year and to refrain from soliciting our employees or customers while employed and following his or her termination of employment for any reason for a period of two years in the case of Dr. Palasis and one year in the case of Dr. Waksal and Dr. Bishop.

For purposes of the employment agreements, “cause” generally means the named executive officer’s refusal to substantially perform the duties associated with his or her position with our Company or to carry out the reasonable and lawful instructions of our board of directors concerning duties or actions consistent with his or her position, his or her breach of a material provision of the employment agreement which remains uncured (to the extent capable of cure) for a period of 30 days following written notice from our Company, his or her conviction, plea of no contest or nolo contendere or imposition of unadjudicated probation for any felony or crime involving moral turpitude, his or her unlawful use (including being under the influence) or possession of illegal drugs on our premises or while performing his or her duties and responsibilities under the employment agreement, or his or her commission of any act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against us.

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For purposes of the employment agreements, “good reason” generally means, subject to certain cure rights, the named executive officer’s termination of employment due to a reduction in salary or target bonus (other than a reduction of 20% or less of the named executive officer’s base salary implemented as part of an across the board, proportionate reduction of base salaries for other members of our management team), a material decrease in authority or areas of responsibility, our Company’s breach of any one or more of the material provisions of the employment agreement, or a relocation by our Company of the named executive officer’s primary office to a location more than 50 miles from the named executive officer’s primary office on the date of the agreement.

Director Compensation

2023 Director Compensation Table

Name Fees Earned or Paid in Cash($) Option Awards($)(1) Total($)

(1)

Amounts reflect the full grant-date fair value of stock awards and stock options granted during 2023 computed in accordance with ASC Topic 718, rather than the amounts paid to or realized by the named individual. We provide information regarding the assumptions used to calculate the value of all stock awards and option awards made to our directors in Note 9 to the consolidated financial statements included in this Annual Report on Form 10-K.

The table below shows the aggregate numbers of option awards (exercisable and unexercisable) held as of December 31, 2023 by each non-employee director. None of our non-employee directors held unvested stock awards as of December 31, 2023.

Name Options Outstanding at Fiscal Year End

Konstantin Poukalov 49,000

Nancy Snyderman, M.D. 49,000

Non-Employee Director Compensation Program

Compensation received by our non-employee directors for their services on our board of directors under our non-employee director compensation program consisted of the following amounts for fiscal year 2023:

•

Upon the director’s initial election or appointment to our board of directors, an option to purchase 40,000 shares of our common stock;

•

If the director has served on our board of directors for at least six months as of the date of an annual meeting of stockholders and will continue to serve as a director immediately following such meeting, an option to purchase 20,000 shares of our common stock on the date of the annual meeting;

•

An annual director fee of $40,000;

•

If the director serves as lead independent director or chair or on a committee of our board of directors, an additional annual fee as follows:

•

Chair of the board or lead independent director: $30,000;

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•

Chair of the audit committee: $20,000;

•

Audit committee member other than the chair, $7,500;

•

Chair of the compensation committee, $15,000;

•

Compensation committee member other than the chair, $5,250;

•

Chair of the nominating and corporate governance committee, $8,000; and

•

Nominating and corporate governance committee member other than the chair, $4,000.

In December 2023, upon the recommendation of the Compensation Committee following a competitive market review by Pay Governance, the Compensation Committee’s independent compensation consultant, the Board approved the following changes to our non-employee director compensation program, effective January 1, 2024:

•

With respect to the option award granted upon the director’s initial election or appointment to our board of directors, increased the shares of our common stock subject to the option from 40,000 to 60,000 shares;

•

With respect to the option awarded annually for a director who has served on our board of directors for at least six months as of the date of an annual meeting of stockholders and will continue to serve as a director immediately following such meeting, increased the shares of our common stock subject to the option from 20,000 to 30,000 shares;

•

The additional annual fee paid to the chair of the nominating and corporate governance committee was increased from $8,000 to $10,000;

•

The additional annual fee paid to members of the audit committee (other than the chair) was increased from $7,500 to $10,000;

•

The additional annual fee paid to members of the compensation committee (other than the chair) was increased from $5,250 to $7,500; and

•

The additional annual fee paid to members of the nominating and corporate governance committee (other than the chair) was increased from $4,000 to $5,000.

Director fees under the program are payable in arrears in four equal quarterly installments not later than the fifteenth day following the final day of each calendar quarter, provided that the amount of each payment is prorated for any portion of a quarter that a director is not serving on our board of directors and no fee was payable in respect of any period prior to the effective date of the registration statement relating to our initial public offering.

Stock options granted to our non-employee directors under the program have an exercise price equal to the fair market value of our common stock on the date of grant and expire not later than ten years after the date of grant. The stock options granted upon a director’s initial election or appointment vest in 36 substantially equal monthly installments following the date of grant. The stock options granted annually to directors vest in a single installment on the earlier of the day before the next annual meeting or the first anniversary of the date of grant. In addition, all unvested stock options vest in full upon the occurrence of a change in control.

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

Equity Compensation Plan Information (As of December 31, 2023)

(1)

Consists of the Lyra Therapeutics, Inc. 2020 Stock Incentive Plan, as amended (the “2020 Plan”), 2016 Equity Incentive Plan, as amended (“2016 Plan”), 2005 Equity Incentive Plan, as amended (“2005 Plan”), and 2020 Employee Stock Purchase Plan (“2020 ESPP”).

(2)

Consists of the Lyra Therapeutics, Inc. 2022 Employment Inducement Award Plan (the “Inducement Award Plan”), which was adopted without stockholder approval in reliance on the exception for “inducement awards” provided by Nasdaq Rule 5635(c)(4). The material terms of the Inducement Award Plan are described in Note 9 to the consolidated financial statements in this Annual Report on Form 10-K.

(3)

Includes 96,605 shares of common stock issuable upon exercise of stock options under the 2005 Plan, 421,066 shares of common stock issuable upon exercise of stock options under the 2016 Plan, and 2,749,307 shares of common stock issuable upon exercise of stock options under the 2020 Plan.

(4)

As of December 31, 2022, the weighted-average exercise price of outstanding options under the 2005 Plan was $22.76, the weighted-average exercise price of outstanding options under the 2016 Plan was $2.80, and the weighted-average exercise price of outstanding options under the 2020 Plan was $6.58.

(5)

Includes 1,544,538 shares available for future issuance under the 2020 Plan and 438,834 shares available for issuance under the 2020 ESPP. We no longer make any grants under the 2016 Plan or the 2005 Plan, and we have not yet commenced offering periods under the 2020 ESPP. The 2020 Plan provides for an annual increase on the first day of each calendar year beginning January 1, 2021 and ending on and including January 1, 2030, equal to the lesser of (A) 4% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year, and (B) such smaller number of shares as is determined by the board of directors, provided that no more than 8,800,000 shares of our common stock may be issued pursuant to the exercise of incentive stock options. On January 1, 2022, the shares available for grant under the 2020 Plan was automatically increased by 520,287 on January 1, 2023, the shares available for grant under the 2020 Plan was automatically increased by 1,273,106, and on January 1, 2024, the shares available for grant under the 2020 Plan was automatically increased by 2,288,582. In addition, any shares that were subject to awards outstanding under the 2005 Plan and the 2016 Plan as of the effective date of the 2020 Plan which are forfeited, expire, lapse for any reason or are settled for cash without the issuance of shares will be added to the number of shares available for issuance under the 2020 Plan. The 2020 ESPP provides for an annual increase on the first day of each calendar year beginning January 1, 2021 and ending on and including January 1, 2030, equal to the lesser of (A) 0.5% of the aggregate number of shares of common stock outstanding on the final day of the immediately preceding calendar year, and (B) such smaller number of shares as is determined by the board of directors, provided that no more than 987,500 shares of our common stock may be issued under the 2020 ESPP. On January 1, 2022, the shares available for grant under the 2020 ESPP was automatically increased by 65,035. On January 1, 2023, the shares available for grant under the 2020 ESPP was automatically increased by 159,138. On January 1, 2024, the shares available for grant under the 2020 ESPP was automatically increased by 286,072.

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Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information with respect to the beneficial ownership of our common stock by (i) each person or group of affiliated persons known by us to beneficially own more than 5% of our common stock and (ii) each of our named executive officers, each of our directors and all of our current executive officers and directors as a group as of March 1, 2024, unless otherwise indicated.

The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. Applicable percentage ownership is based on 59,743,123 shares of common stock outstanding as of March 1, 2024. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options held by such person that are currently exercisable or will become exercisable within 60 days of March 1, 2024 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person.

Name of Beneficial Owner Shares of Common Stock Beneficially Owned Percentage

5% or Greater Stockholders

Entities Affiliated with Perceptive Advisors, LLC(1) 12,757,563 21.35 %

Entities Affiliated with North Bridge Venture Partners(2) 5,888,416 9.85 %

Nantahala Capital Partners and affiliates(4) 4,752,324 7.95 %

Entities Affiliated with Vestal Point (7) 3,000,000 5.02 %

Named Executive Officers and Directors

Michael Altman (Perceptive) (1) 29,000 *

Konstantin Poukalov (Perceptive) (1) 29,000 *

Nancy L. Snyderman, M.D. (13) 28,011 *

* Less than 1% ownership as of March 1, 2024.

Unless noted otherwise, the address of all listed stockholders is 480 Arsenal Way, Watertown, MA 02472. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder unless noted otherwise, subject to community property laws where applicable.

________

(1)

Pursuantto a Schedule 13D/A filed with the SEC on February 14, 2024, Perceptive Life Sciences Master Fund, Ltd. (“Perceptive Life”) reported shared voting power and shared dispositive power over 11,469,117 shares of common stock; Perceptive LS (A), LLC (“Perceptive LS”) reported shared voting power and shared dispositive power over 1,288,446 shares of common stock; Joseph Edelman reported shared voting power and shared dispositive power over 12,757,563 shares of common stock; and Perceptive Advisors LLC reported shared voting power and shared dispositive power over 12,757,563 shares of common stock. Perceptive Advisors LLC serves as the investment advisor to Perceptive Life. Perceptive LS GP, LLC is the manager of Perceptive LS. Joseph Edelman is the managing member of Perceptive Advisors LLC and the sole member of Perceptive LS GP, LLC. Michael Altman and Konstantin Poukalov, two of our directors, are Managing Directors at Perceptive Advisors LLC. Messrs. Altman and Poukalov each have sole voting power and sole dispositive power over 29,000 shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024. The address of the aforementioned individuals and entities is c/o Perceptive Advisors, LLC, 51 Astor Place, 10th Floor, New York, New York 10003.

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(2)

Pursuant to a Schedule 13D/A filed with the SEC on June 9, 2023, North Bridge Venture Partners V-A, L.P. (“NBVP V-A”) reported shared voting power and shared dispositive power over 2,259,301 shares of common stock; North Bridge Venture Partners V-B, L.P. (“NBVP V-B”) reported shared voting power and shared dispositive power over 1,107,370 shares of common stock; and North Bridge Venture Partners VI, L.P. (“NBVP VI”) reported shared voting power and shared dispositive power over 2,521,745 shares of common stock. North Bridge Venture Management V, L.P. (“NBVM V”), is the sole General Partner of NBVP V-A and NBVP V-B and may be deemed to have voting and dispositive power with respect to the shares held by those entities. NBVM GP, LLC, the General Partner of NBVM V, may be deemed to have voting and dispositive power over the shares held of record by NBVP VA and NBVP V-B. Shared voting and dispositive power of such shares are vested in Edward T. Anderson and Richard A. D’Amore. North Bridge Venture Management VI, L.P. (“NBVM VI”), is the sole General Partner of NBVP VI. NBVM GP, LLC, the General Partner of NBVM VI, and may be deemed to have voting and dispositive power over the shares held of record by NBVP VI. Shared voting and dispositive power of such shares are vested in Edward T. Anderson and Richard A. D’Amore. Mr. Anderson, a member of our board of directors and a manager of NBVM GP, LLC, disclaims beneficial ownership over such shares, except to the extent of his pecuniary interest therein. Mr. Anderson has sole voting power and sole dispositive power over 29,000 shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024. The address of all entities affiliated with North Bridge Venture Partners is 150 A Street, Suite 102 Needham, MA 02492.

(3)

Pursuant to a Schedule 13G/A filed with the SEC on February 14, 2024, (i) Venrock Healthcare Capital Partners II, L.P. reported shared voting power and shared dispositive power over 414,413 shares and 230,486 shares issuable upon the exercise of immediately exercisable warrants (“Warrants”); (ii) VHCP Co-Investment Holdings II, LLC reported shared voting and shared dispositive power over 167,929 shares and 93,397 shares issuable upon the exercise of Warrants; (iii) Venrock Healthcare Capital Partners III, L.P reported shared voting and shared dispositive power over 895,791 shares and 904,524 shares issuable upon the exercise of Warrants; (iv) VHCP Co-Investment Holdings III, LLC reported shared voting power and shared dispositive power over 89,631 shares and 90,496 shares issuable upon the exercise of Warrants; and (v) Venrock Healthcare Capital Partners EG, L.P. reported shared voting power and shared dispositive power over 1,007,829 shares and 1,659,056 shares issuable upon the exercise of Warrants. The share numbers in the preceding sentence represent the maximum number of shares of common stock issuable upon exercise of the Warrants held by the Reporting Persons as a result of the beneficial ownership provision described in the following sentence. Under the terms of the Warrants, the Company may not effect the exercise of any such Warrant, and a holder will not be entitled to exercise any portion of such Warrant, if, upon giving effect to such exercise, the aggregate number of shares of common stock beneficially owned by the holder (together with its affiliates and other attribution parties) would exceed 9.999% of the number of shares of common stock outstanding immediately after giving effect to the exercise. Accordingly, notwithstanding the number of shares of common stock listed above as being beneficially owned by the entities affiliated with Venrock, the entities affiliated with Venrock disclaim beneficial ownership of the shares of common stock issuable upon exercise of the Warrants to the extent the number of shares of common stock beneficially owned by each entity affiliated with Venrock and any other person or entities with which such entity’s beneficial ownership would be aggregated for purposes of Section 13(d) of the Exchange Act would exceed 9.999% of the total number of shares of common stock outstanding. VHCP Management II, LLC is the general partner of Venrock Healthcare Capital Partners II, L.P. and the manager of VHCP Co-Investment Holdings II, LLC. VHCP Management III, LLC is the general partner of Venrock Healthcare Capital Partners III, L.P. and the manager of VHCP Co-Investment Holdings III, LLC. VHCP Management EG, LLC is the general partner of Venrock Healthcare Capital Partners EG, L.P. Mr. Nimish Shah and Mr. Bong Koh are the voting members of VHCP Management II, LLC, VHCP Management III, LLC and VHCP Management EG, LLC. The address of the aforementioned individuals and entities is 7 Bryant Park 23rd Floor, New York, NY 10018.

(4)

Pursuant to a Schedule 13G/A filed with the SEC on February 14, 2024, Nantahala Capital Management, LLC ("Nantahala") may be deemed to be the beneficial owner of 4,752,324 shares held by funds and separately managed accounts under its control, and as the managing members of Nantahala, each of Wilmot B. Harkey and Daniel Mack may be deemed to be a beneficial owner of those shares. The 4,752,324 shares includes 702,106 shares which may be acquired upon the exercise of warrants. The address of Nantahala and its affiliates is 130 Main Street, 2nd Floor, New Canaan, CT 06840.

(5)

Pursuantto a Schedule 13G filed with the SEC on February 14, 2024, consists of (i) 4,272,816 shares of common stock held by each of Citadel Advisors LLC, Citadel Advisors Holdings LP and Citadel GP LLC with shared voting power and shared dispositive power and (ii) 14,111 shares of common stock held by each of Citadel Securities Group LP and Citadel Securities GP LLC with shared voting power and shared dispositive power. Kenneth Griffin reported shared voting power and shared dispositive power over 4,286,927 shares of common stock. Citadel Advisors LLC is the portfolio manager for Citadel CEMF Investments Ltd. Citadel Advisors Holdings LP is the sole member of Citadel Advisors LLC. Citadel GP LLC is the general partner of Citadel Advisors Holdings LP. Citadel Securities Group LP

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is the non-member manager of Citadel Securities LLC. Citadel Securities GP LLC is the general partner of Citadel Securities Group LP. Kenneth Griffin is the President and Chief Executive Officer of Citadel GP LLC, and owns a controlling interest in Citadel GP LLC and Citadel Securities GP LLC. The address of the aforementioned individual and entities is 200 S. Biscayne Blvd., Suite 3300, Miami, Florida 33131.

(6)

Pursuantto a Schedule 13G/A filed with the SEC on February 14, 2024, Point72 Asset Management, L.P. reported shared voting power and shared dispositive power over 3,000,000 shares of common stock; (ii) Cubist Systematic Strategies, LLC reported shared voting power and shared dispositive power over 30,283 shares of common stock; and Steven A. Cohen reported shared voting power and shared dispositive power over 3,030,283 shares of common stock. Point72 Capital Advisors, Inc. is the general partner of Point72 Asset Management, L.P. Mr. Cohen controls each of Point72 Asset Management, L.P., Point72 Capital Advisors, Inc. and Cubist Systematic Strategies, LLC. The address of Point72 Asset Management, L.P. and Mr. Cohen is 72 Cummings Point Road, Stamford, CT 06902 and the address of Cubist Systematic Strategies, LLC is 55 Hudson Yards, New York, NY 10001.

(7)

Pursuant to a Schedule 13G filed with the SEC on February 13, 2024, Vestal Point Capital, LP reported shared voting power and shared dispositive power over 3,000,000 shares of common stock and Ryan Wilder reported shared voting power and shared dispositive power over 3,000,000 shares of common stock. Mr. Wilder is the Chief Investment Officer and Managing Partner of Vestal Point Capital, LP and the Managing Member of Vestal Point Capital, LLC, the general partner of Vestal Point Capital, LP. The address of the aforementioned individual and each entity is 32 Broadway, Suite 602, New York, NY 10012.

(8)

Consists of options to purchase 1,005,631 shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024.

(9)

Consists of 261,966 shares of common stock and 1,044,500 options to purchase shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024.

(10)

Consists of options to purchase 125,625 shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024.

(11)

Consists of 11,328 shares of common stock and 27,788 options to purchase shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024.

(12)

Consists of options to purchase 27,789 shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024.

(13)

Consists of 1,025 shares of common stock and 26,986 options to purchase shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024.

(14)

Consists of options to purchase 10,069 shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024.

(15)

Consists of 6,162,735 shares of common stock and 2,568,088 options to purchase shares of common stock that are or will be immediately exercisable within 60 days of March 1, 2024.

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

Policies and Procedures for Approval of Related Person Transactions

Our board of directors recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests (or the perception thereof) and has adopted a written related person transactions policy to comply with Section 404 of the Exchange Act. Under the policy, our finance team is primarily responsible for developing and implementing processes and procedures to obtain information regarding related persons with respect to potential related person transactions and then determining, based on the facts and circumstances, whether such potential related person transactions do, in fact, constitute related person transactions requiring compliance with the policy. In addition, any potential related person transaction that is proposed to be entered into by the Company must be reported to the Company’s Chief Financial Officer, by both the related person and the person at the Company responsible for such potential related person transaction.

If our finance team determines that a transaction or relationship is a related person transaction requiring compliance with the policy, our Chief Financial Officer is required to present to the Audit Committee all relevant facts and circumstances relating to the related person transaction. Our Audit Committee must review the relevant facts and

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circumstances of each related person transaction, including if the transaction is on terms comparable to those that could be obtained in arm's length dealings with an unrelated third party and the extent of the related person's interest in the transaction, take into account the conflicts of interest and corporate opportunity provisions of our Code of Business Conduct and Ethics, and either approve or disapprove the related person transaction. If advance Audit Committee approval of a related person transaction requiring the Audit Committee's approval is not feasible, then the transaction may be preliminarily entered into by management upon prior approval of the transaction by the chair of the Audit Committee subject to ratification of the transaction by the Audit Committee at the Audit Committee's next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. If a transaction was not initially recognized as a related person transaction, then upon such recognition the transaction will be presented to the Audit Committee for ratification at the Audit Committee's next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction.

Our management will update the Audit Committee as to any material changes to any approved or ratified related person transaction and will provide a status report at least annually of all then current related person transactions. No director may participate in approval of a related person transaction for which he or she is a related person.

LianBio License Agreement

Entities affiliated with Perceptive Advisors, LLC are shareholders of both us and LianBio. Additionally, Konstantin Poukalov and Michael Altman are each a Managing Director at Perceptive Advisors, LLC and Mr. Poukalov is also the Executive Chairman of LianBio’s board of directors. See “Management’s Discussion and Analysis—Financial Operations Overview” for a description of the LianBio License Agreement.

Private Placement

On May 25, 2023, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with the purchasers named therein (the “Investors”), including Perceptive Advisers, LLC and, North Bridge Venture Partners, which are 5% or greater holders of our common stock and entities with which certain of our directors are related, pursuant to which we agreed to sell securities to the Investors in a private placement (the “Private Placement”). The Purchase Agreement provided for the sale and issuance by us of: (i) an aggregate of 17,652,962 shares of our common stock, and pre-funded warrants to purchase up to 2,408,188 shares of common stock, with an exercise price of $0.001 per share, and (ii) accompanying warrants to purchase up to 10,030,575 shares of common stock, with an exercise price of $2.673 per share, for aggregate gross proceeds of approximately $50.0 million, before deducting private placement expenses. See “Management’s Discussion and Analysis – Liquidity and Capital Resources” for a description of the Private Placement.

Investor Rights Agreement

On April 7, 2022, we entered into a Ninth Amended and Restated Investor Rights Agreement ("Investor Rights Agreement") with the holders of our then-outstanding preferred stock, including Perceptive Advisers, LLC and, North Bridge Venture Partners, which are 5% or greater holders of our common stock and entities with which certain of our directors are related. The agreement provides for certain rights relating to the registration of such holders’ common stock. On May 25, 2023, in connection with the Purchase Agreement, the Company entered into an Amendment No. 1 to Ninth Amended and Restated Investor Rights Agreement (“Amendment No. 1”) with certain Investors affiliated with Perceptive Advisors and North Bridge Venture Partners (the “IRA Covered Investors”). Pursuant to Amendment No. 1, the definition of “Registrable Shares” in the Investor Rights Agreement was amended to include all shares of common stock purchased by the IRA Covered Investors in the Private Placement.

Indemnification Agreements

We have entered into indemnification agreements with each of our directors and executive officers. These agreements, among other things, require us to indemnify each director (and in certain cases their related venture capital funds) and executive officer to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the director or executive officer in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director or executive officer.

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Independence of the Board of Directors

Our board of directors has determined that each of Michael Altman, Edward Anderson, C. Ann Merrifield, Konstantin Poukalov, W. Bradford Smith, Nancy Snyderman, M.D., FACS and James R. Tobin qualify as “independent” in accordance with the listing requirements of Nasdaq. The Nasdaq independence definition includes a series of objective tests, including that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business dealings with us. In addition, as required by Nasdaq rules, our board of directors has made a subjective determination as to each independent director that no relationships exist, which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management, including that Mr. Altman, Mr. Anderson and Mr. Poukalov are affiliated with certain of our significant stockholders. Harlan W. Waksal, M.D. and Maria Palasis, Ph.D. are not independent. There are no family relationships among any of our directors or executive officers.

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Item 14. Principal Accountant Fees and Services.

The following table summarizes the fees of BDO USA, P.C., our independent registered public accounting firm, billed to us for each of the last two fiscal years.

________

(1)

For 2023 and 2022, audit fees consist of fees for the audit of our financial statements, the review of the interim financial statements included in our quarterly reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings or engagements.

(2)

For 2022, tax fees consisted of fees for tax-related services, including tax compliance and tax advice.

Pre-Approval Policies and Procedures

The Audit Committee has adopted a policy (the “Pre-Approval Policy”) that sets forth the procedures and conditions pursuant to which audit and non-audit services proposed to be performed by the independent auditor may be pre-approved. The Pre-Approval Policy generally provides that we will not engage our independent auditor, BDO USA, P.C. to render any audit, audit-related, tax or permissible non-audit services unless the service is either (i) explicitly approved by the Audit Committee (“specific pre-approval”) or (ii) entered into pursuant to the pre-approval policies and procedures described in the Pre-Approval Policy (“general pre-approval”). Unless a type of service to be provided by BDO USA, P.C. has received general pre-approval under the Pre-Approval Policy, it requires specific pre-approval by the Audit Committee or by a designated member of the Audit Committee to whom the committee has delegated the authority to grant pre-approvals. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also require specific pre-approval. For both types of pre-approval, the Audit Committee will consider whether such services are consistent with the SEC's rules on auditor independence. The Audit Committee will also consider whether the independent auditor is best positioned to provide the most effective and efficient service, for reasons such as its familiarity with the Company's business, people, culture, accounting systems, risk profile and other factors, and whether the service might enhance the Company's ability to manage or control risk or improve audit quality. All such factors will be considered as a whole, and no one factor should necessarily be determinative. The Audit Committee periodically reviews and generally pre-approves any services (and related fee levels or budgeted amounts) that may be provided by BDO USA, P.C. without first obtaining specific pre-approvals from the Audit Committee or the Chair of the Audit Committee. The Audit Committee may revise the list of general pre-approved services from time to time, based on subsequent determinations.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)

Documents filed as part of this report:

(1)

Financial Statements.

The following documents are included on pages F-1 through F-31 attached hereto and are filed as part of this Annual Report on Form 10-K.

Page

Financial Statements:

Consolidated Balance Sheets F-3

Consolidated Statements of Operations and Comprehensive Loss F-4

Consolidated Statements Stockholders’ Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

(2)

Financial Statement Schedules.

No financial statement schedules have been submitted because they are not required or are not applicable or because the information required is included in the financial statements or the notes thereto.

(3)

List of Exhibits.

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investors, together with a schedule of warrants and warrantholders

4.8* Description of Securities

121

122

23.1* Consent of BDO USA, P.C. Independent Registered Public Accounting Firm

97.1* Policy for Recovery of Erroneously Awarded Compensation

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 Date File (embedded within the Inline XBRL document)

# Indicates management contract or compensatory plan.

* Filed herewith.

** Furnished herewith.

+ Certain portions of this exhibit (indicated by asterisks) have been redacted in compliance with Regulation S-K Item 601(b)(10)(iv).

Item 16. Form 10-K Summary

None.

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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.

LYRA THERAPEUTICS, INC.

Date: March 22, 2024 By: /s/ Maria Palasis, Ph.D.

Maria Palasis, Ph.D.

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.

Signature Title Date

/s/ Michael Altman Michael Altman Director March 22, 2024

/s/ Edward T. Anderson Edward T. Anderson Director March 22, 2024

/s/ C. Ann Merrifield C. Ann Merrifield Director March 22, 2024

/s/ Konstantin Poukalov Konstantin Poukalov Director March 22, 2024

/s/ W. Bradford Smith W. Bradford Smith Director March 22, 2024

/s/ James R. Tobin James R. Tobin Director March 22, 2024

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Balance Sheets F-3

Consolidated Statements of Operations and Comprehensive Loss F-4

Consolidated Statements of Stockholders’ Equity F-5

Consolidated Statements of Cash Flows F-6

Notes to Consolidated Financial Statements F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Stockholders and Board of Directors