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~~UNITED~~SECURITIES ~~STATES~~AND EXCHANGE COMMISSION

~~SECURITIES~~Washington, ~~AND~~D.C. ~~EXCHANGE~~20549 ~~COMMISSION~~

~~Washington,~~FORM ~~D.C.~~10-Q ~~20549~~

~~10-Q~~(Mark One)

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

☒For ~~QUARTERLY~~the ~~REPORT~~quarterly ~~PURSUANT~~period TOended ~~SECTION~~June 1330, OR2023 ~~15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~

~~For~~OR ~~the quarterly period ended March 31, 2023~~

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

☐For ~~TRANSITION~~the ~~REPORT~~transition ~~PURSUANT~~period ~~TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~from to .

Commission file number 001-36577

ContraFect Corporation

(Exact name of registrant as specified in its charter)

Delaware		39-2072586
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
(State or other jurisdiction ofincorporation or organization)		(I.R.S. EmployerIdentification No.)

28 Wells Avenue, 3rd Floor, Yonkers, NY		10701
(Address of principal executive offices)		(Zip Code)

(914) 207-2300

(Registrant’s telephone number, including area code)

N/A

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

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

Title of each class	~~Trading Symbol~~TradingSymbol(s)	Name of each ~~exchange~~exchangeon on which registered
Common Stock, $0.0001 par value per share	CFRX	Nasdaq Capital Market
Common Stock,$0.0001 par value per share	CFRX	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~12b~~Large accelerated filer ☐ Accelerated filer ☐ Non-2accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

~~Large~~If ~~accelerated~~an ~~filer~~emerging ☐growth ~~Accelerated~~company, ~~filer~~indicate ☐by ~~Non-accelerated~~check ~~filer~~mark ☒if ~~Smaller~~the ~~reporting~~registrant ~~company~~has ☒elected ~~Emerging~~not ~~growth~~to ~~company~~use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

IfIndicate ~~an emerging growth company, indicate~~ by check mark ifwhether the registrant ~~has~~is ~~elected~~a ~~not~~shell tocompany ~~use~~(as ~~the~~defined ~~extended~~in ~~transition~~Rule ~~period~~12b-2 ~~for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)~~ of the Exchange Act). Yes ☐ No ☒

~~12b-2~~The number of shares of the registrant’s Common Stock outstanding as of August 10, 2023 was 10,704,803.

~~The~~CONTRAFECT ~~number~~CORPORATION ~~of shares of the registrant’s Common Stock outstanding as of May 10, 2023 was 3,669,920.~~

~~Table~~INDEX ~~of Contents~~

CONTRAFECT CORPORATION


		Page No.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
SIGNATURES		64

~~INDEX~~FORWARD LOOKING STATEMENTS

		Page No.
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements		1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		28
Item 4.	Controls and Procedures		29
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		29
Item 1A.	Risk Factors		29
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		62
Item 3.	Defaults Upon Senior Securities		62
Item 4.	Mine Safety Disclosures		62
Item 5.	Other Information		62
Item 6.	Exhibits		63
SIGNATURES			64

The information in this Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, our ability to continue as a going concern, projected costs, prospects and plans and objectives of management. The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “targets”, “may”, “plans”, “projects”, “potential”, “will”, “would”, “could” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All such forward-looking statements involve significant risks and uncertainties, including, but not limited to, statements regarding:

•

~~Table~~the success, cost, timing and potential indications of ~~Contents~~our product development activities and clinical trials;

•

~~FORWARD~~our ~~LOOKING~~ability ~~STATEMENTS~~to advance into and through clinical development, make regulatory filings and ultimately obtain U.S. Food and Drug Administration (“FDA”) approval for our product candidates;

•

The information in this Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our ~~strategy,~~research ~~future operations, future financial position, future revenues, our ability to continue as a going concern, projected costs, prospects~~ and ~~plans~~development ~~and objectives of management. The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “targets”, “may”, “~~plans”, ~~“projects”, “potential”, “will”, “would”, “could”~~ and ~~similar~~ability ~~expressions are intended~~ to ~~identify~~bring forward~~-looking~~ ~~statements,~~additional ~~although~~product ~~not~~candidates ~~all~~into ~~forward-looking~~preclinical ~~statements contain these identifying words. All such forward-looking statements involve significant risks~~ and ~~uncertainties,~~clinical ~~including,~~development; ~~but not limited to, statements regarding:~~

•

~~• the success, cost, timing and potential indications of~~ our ~~product~~continued ~~development~~listing ~~activities~~on ~~and~~the ~~clinical~~Nasdaq ~~trials~~Capital Market;

•

• our ~~ability~~expectations toregarding ~~advance~~the ~~into~~impact ~~and~~of ~~through~~COVID-19 ~~clinical~~on ~~development~~our ~~and~~business, ~~ultimately~~operations ~~obtain~~and ~~U.S.~~financial ~~Food~~performance and ~~Drug Administration (“FDA”) approval for our product candidates~~position;

•

• our ~~research~~grant ~~and~~award ~~development~~from ~~plans~~the ~~and~~Military ~~ability~~Infectious toDiseases ~~bring~~Research ~~forward~~Program, ~~additional~~United ~~product~~States ~~candidates~~Army ~~into~~Medical ~~preclinical~~Research and ~~clinical~~Development ~~development~~Command (“USAMRDC”);

•

•the ~~our~~rate ~~expectations~~and ~~regarding~~degree ~~the~~of ~~impact~~market acceptance of ~~COVID-19~~our onproduct candidates and our ~~business,~~expectations ~~operations~~regarding ~~and~~the ~~financial~~size ~~performance~~of ~~and~~the ~~position~~commercial markets for our product candidates;

•

• our ~~contract~~future ~~with~~marketing ~~the Biomedical Advanced Research~~ and ~~Development~~sales ~~Authority (“BARDA”) (the “BARDA Contract”) and any exercise of BARDA’s options to extend the BARDA Contract~~programs;

•

~~• our grant award from~~ the ~~Military~~effect ~~Infectious~~of ~~Diseases~~competition ~~Research~~and ~~Program,~~proprietary ~~United~~rights ~~States~~of ~~Army~~third ~~Medical Research and Development Command (“USAMRDC”)~~parties;

•

•our ~~the~~recurring ~~rate~~losses ~~and~~from ~~degree~~operations ofraise ~~market~~substantial ~~acceptance~~doubt ofregarding our ~~product~~ability ~~candidates~~to ~~and~~continue ~~our~~as ~~expectations~~a ~~regarding~~going ~~the size of the commercial markets for our product candidates~~concern;

•

•anticipated ~~our~~reductions ~~future~~in ~~marketing~~operating ~~and sales programs~~expenses;

•

• the ~~effect~~availability of ~~competition~~ and ~~proprietary~~our ~~rights~~ability ofto ~~third~~obtain ~~parties~~additional financing;

•

•the ~~our~~effects ~~recurring~~of ~~losses~~existing ~~from~~and ~~operations~~future ~~raise~~federal, ~~substantial~~state ~~doubt~~and ~~regarding~~foreign ~~our ability to continue as a going concern~~regulations;

•

•the ~~anticipated~~seeking ~~reductions~~of injoint ~~operating~~development, ~~expenses~~licensing or distribution and collaboration and marketing arrangements with third parties; and

•

• the ~~availability~~period of ~~and~~time for which our ~~ability~~existing cash and cash equivalents will enable us to ~~obtain~~fund ~~additional~~our ~~financing;~~operations.

•As more fully described under the ~~effects~~heading “Risk Factors” contained elsewhere in this Quarterly Report on Form 10-Q, many important factors affect our ability to achieve our stated objectives and to develop and commercialize any product candidates. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks and uncertainties set forth in our filings with the SEC. You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of ~~existing~~the date on which they are made, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future ~~federal~~events or otherwise, ~~state~~except ~~and~~as ~~foreign~~required ~~regulations;~~by law.

•RISK ~~the~~FACTOR ~~seeking~~SUMMARY ~~of joint development, licensing or distribution and collaboration and marketing arrangements with third parties; and~~

•Our ~~the~~business ~~period~~is ofsubject ~~time~~to ~~for~~numerous ~~which~~risks ~~our~~and ~~existing~~uncertainties, ~~cash~~including ~~and~~those ~~cash~~described ~~equivalents~~in ~~will~~Part ~~enable~~II, usItem to1A. ~~fund~~“Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our ~~operations~~common stock. The principal risks and uncertainties affecting our business include the following:

•

AsWe ~~more~~have ~~fully~~incurred ~~described~~significant ~~under~~losses ~~the~~since ~~heading “Risk Factors” contained elsewhere in this Quarterly Report on Form 10-Q, many important factors affect~~ our ~~ability to achieve our stated objectives and to develop and commercialize any product candidates~~inception. We ~~may~~expect not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to ~~differ~~incur ~~materially~~losses ~~from~~for ~~those~~at inleast the ~~forward-looking~~next ~~statements,~~several ~~including,~~years ~~without limitation, the risks~~ and ~~uncertainties~~may ~~set~~never ~~forth~~achieve in our filings with the SEC. You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual results or ~~events~~maintain ~~could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make~~profitability. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

•

~~Table~~Our ofrecurring ~~Contents~~losses from operations raise substantial doubt regarding our ability to continue as a going concern.

•

~~RISK~~We ~~FACTOR~~currently ~~SUMMARY~~have no source of product revenue and have not yet generated any revenues from product sales.

•

~~Our~~We ~~business~~have isa ~~subject~~need tofor ~~numerous~~substantial ~~risks~~additional ~~and~~funding. ~~uncertainties,~~If ~~including~~we ~~those~~are ~~described~~unable into ~~Part~~raise IIcapital when needed, ~~Item 1A.~~we ~~“Risk~~could ~~Factors”~~be inforced ~~this~~to ~~Quarterly~~delay, ~~Report~~reduce onor ~~Form~~eliminate ~~10-Q.~~our ~~You~~product ~~should~~development ~~carefully~~programs ~~consider~~or ~~these~~commercialization ~~risks~~efforts, and ~~uncertainties~~we ~~when~~may ~~investing~~be inforced ~~our~~to ~~common~~sell ~~stock~~or liquidate our business. ~~The~~Any ~~principal~~financial ~~risks~~or ~~and~~strategic ~~uncertainties~~alternative ~~affecting~~we ~~our~~pursue ~~business~~may ~~include~~not ~~the~~be ~~following:~~successful.

•

•Raising Weadditional ~~have~~capital ~~incurred~~may ~~significant~~cause ~~losses~~dilution ~~since~~to our ~~inception.~~stockholders, Werestrict ~~expect~~our tooperations ~~incur~~or ~~losses~~require ~~for~~us atto ~~least~~relinquish ~~the~~rights ~~next~~to ~~several~~our ~~years~~technologies ~~and may never achieve~~ or ~~maintain~~product ~~profitability~~candidates.

•

•The ~~Our~~timing ~~recurring~~of ~~losses~~the ~~from~~milestone ~~operations~~and ~~raise~~royalty ~~substantial~~payments ~~doubt~~we ~~regarding~~are ~~our~~required ~~ability~~to make to ~~continue~~The asRockefeller aUniversity ~~going~~(“Rockefeller”) ~~concern~~under certain agreements is uncertain and could adversely affect our cash flows and results of operations.

•

•Our Weability ~~currently~~to ~~have~~utilize noour ~~source~~net ofoperating ~~product~~loss ~~revenue~~carryforwards and ~~have~~certain ~~not~~other ~~yet~~tax ~~generated~~attributes ~~any~~may ~~revenues~~be ~~from product sales~~limited.

•

•Any ~~We have a need for substantial additional funding. If we are unable to raise capital when needed~~pandemic, weepidemic ~~could be forced to delay, reduce~~ or ~~eliminate~~outbreak ~~our~~of ~~product~~an ~~development~~infectious ~~programs~~disease ormay ~~commercialization~~materially ~~efforts,~~ and weadversely ~~may~~impact ~~be forced to sell or liquidate~~ our business., ~~Any~~including ~~financial~~our orpreclinical ~~strategic~~studies ~~alternative~~and weclinical ~~pursue may not be successful~~trials.

•

•We Ifare ~~BARDA~~heavily ~~were~~dependent toon ~~eliminate,~~the ~~reduce,~~success orof ~~delay~~our ~~funding~~leading ~~for~~product ~~our~~candidates. ~~BARDA~~If ~~Contract,~~ we ~~would~~are ~~experience~~ultimately aunable ~~negative~~to ~~impact~~obtain onregulatory approval for any of our ~~programs~~product ~~associated~~candidates, ~~with~~our ~~such~~business ~~funding~~will be substantially harmed.

•

•If ~~Raising~~clinical ~~additional~~trials ~~capital~~of ~~may~~any ~~cause~~of ~~dilution~~our product candidates that we develop fail to ~~our~~demonstrate ~~stockholders~~safety and efficacy, ~~restrict~~or ~~our~~the ~~operations~~manufacturing for the commercial supply of drug substance or ~~require~~drug usproduct fails to ~~relinquish~~demonstrate ~~rights~~robustness, stability, purity and potency to ~~our~~the ~~technologies~~satisfaction of the FDA or similar international regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and commercialization of our product candidates.

•

•We ~~The~~may ~~timing~~be ofrequired ~~the~~to ~~milestone~~suspend ~~and~~or ~~royalty~~discontinue ~~payments~~clinical wetrials ~~are~~due ~~required~~ to ~~make~~adverse toside ~~The~~effects ~~Rockefeller~~or ~~University~~other ~~(“Rockefeller”)~~safety ~~under~~risks ~~certain~~that ~~agreements~~could ispreclude ~~uncertain~~approval ~~and~~of ~~could~~any ~~adversely~~of ~~affect~~ our ~~cash~~product ~~flows and results of operations~~candidates.

•

•Delays ~~Our~~in ~~ability~~clinical trials are common and have many causes, and any such delays could result in increased costs to ~~utilize~~us and jeopardize, delay or prevent our ~~net~~ability ~~operating~~to ~~loss~~obtain ~~carryforwards~~regulatory approval and ~~certain~~commence ~~other~~product ~~tax~~sales ~~attributes~~as ~~may~~currently ~~be limited~~contemplated.

•

•We ~~The~~are ~~COVID-19~~significantly ~~pandemic~~dependent oron ~~another pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact~~ our ~~business,~~license ~~including~~agreements ~~our~~with ~~preclinical~~Rockefeller ~~studies~~that ~~and~~relate ~~clinical~~to ~~trials~~exebacase.

•

• We ~~are~~rely ~~heavily~~on ~~dependent~~Contract onResearch ~~the~~Organizations ~~success~~(“CROs”) ofto conduct our ~~leading~~preclinical ~~product~~studies ~~candidates~~and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we ~~are~~may be delayed in obtaining, or may ultimately ~~unable~~not be able to obtain, regulatory approval for commercialization of any of our product candidates~~, our business will be substantially harmed~~.

•

•We Ifrely on contract manufacturing organizations (“CMOs”) to manufacture clinical ~~trials~~and ofcommercial ~~any~~supplies of our product candidates. ~~that~~In weaddition ~~develop~~to ~~fail~~the torisks ~~demonstrate~~associated ~~safety~~with ~~and~~the ~~efficacy,~~manufacture orof ~~the~~our ~~manufacturing~~product ~~for~~candidates, ~~the~~which ~~commercial~~could ~~supply~~include ofcost ~~drug~~overruns, ~~substance~~new orimpurities, ~~drug~~difficulties ~~product~~in ~~fails~~process toor ~~demonstrate~~formulation ~~robustness~~development, ~~stability,~~scaling ~~purity~~up ~~and~~or ~~potency~~reproducing tomanufacturing ~~the~~processes ~~satisfaction~~and lack of ~~the~~timely ~~FDA~~availability orof ~~similar~~raw ~~international~~materials, ~~regulatory~~if ~~authorities~~these orthird parties do not ~~otherwise~~successfully ~~produce~~carry ~~positive~~out ~~results,~~their wecontractual ~~may~~duties ~~incur~~or ~~additional~~meet ~~costs~~expected ordeadlines, ~~experience~~we ~~delays~~may be delayed in ~~completing~~obtaining, or may ultimately not be ~~unable~~able to ~~complete~~obtain, ~~the~~regulatory ~~development~~approval ~~and~~for commercialization of any of our product candidates.

•

•Even Weif ~~may~~the beFDA ~~required~~approves toany ~~suspend~~of orour ~~discontinue~~product ~~clinical~~candidates, ~~trials due to~~ adverse ~~side~~ effects ordiscovered ~~other~~after ~~safety~~approval ~~risks that~~ could ~~preclude~~adversely ~~approval~~affect ~~of any of~~ our ~~product candidates~~markets.

•

•Any ~~Delays~~Breakthrough inTherapy ~~clinical~~designation ~~trials~~that ~~are~~we ~~common~~may ~~and~~receive ~~have~~from ~~many~~the ~~causes,~~FDA ~~and~~for ~~any~~our ~~such~~product ~~delays~~candidates ~~could~~may ~~result~~not inlead ~~increased~~to ~~costs~~a tofaster usdevelopment ~~and~~or ~~jeopardize,~~regulatory ~~delay~~review or ~~prevent~~approval ~~our~~process, ~~ability~~and toit ~~obtain~~does ~~regulatory~~not ~~approval~~increase ~~and~~the ~~commence~~likelihood that our product ~~sales~~candidates aswill ~~currently~~receive ~~contemplated~~marketing approval.

•

• WeDevelopments ~~are~~by ~~significantly~~competitors ~~dependent~~may onrender our ~~license~~products ~~agreements~~or ~~with~~technologies ~~Rockefeller~~obsolete ~~that~~or ~~relate to exebacase~~non-competitive.

• We rely on Contract Research Organizations (“CROs”) to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of any of our product candidates.i

•

•The Welevel ~~rely~~of ~~on contract manufacturing organizations (“CMOs”) to manufacture clinical and~~ commercial ~~supplies~~success of ~~our~~any ~~product candidates. In addition to the risks associated with the manufacture~~ of our product candidates, ~~which~~that ~~could~~we ~~include~~develop ~~cost~~will ~~overruns,~~depend ~~new~~upon ~~impurities,~~significant ~~difficulties~~market inacceptance ~~process or formulation development, scaling up or reproducing manufacturing processes and lack~~ of ~~timely availability of raw materials, if~~ these ~~third~~products ~~parties~~among dophysicians ~~not~~and successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of any of our product candidatespayors.

•

•Coverage ~~Even~~and ifreimbursement ~~the~~may ~~FDA~~not ~~approves~~be available for any of our product candidates, ~~adverse~~that ~~effects~~we ~~discovered~~develop, ~~after~~including ~~approval~~as ~~could~~a ~~adversely~~result ~~affect~~of ~~our~~healthcare ~~markets~~reform measures.

•

•We ~~Any~~may ~~Breakthrough~~not ~~Therapy~~successfully ~~designation~~execute ~~that~~or weachieve ~~may~~the ~~receive~~expected ~~from~~benefits ~~the~~of ~~FDA~~our ~~for~~restructuring ~~our~~program ~~product~~and ~~candidates~~other ~~may~~cost ~~not~~saving ~~lead~~measures towe amay ~~faster~~take ~~development~~in orthe ~~regulatory~~future, ~~review~~and orour ~~approval~~efforts ~~process,~~may ~~and~~result itin ~~does~~further ~~not~~actions ~~increase~~and ~~the~~may ~~likelihood~~adversely ~~that~~affect our ~~product~~business, ~~candidates~~financial ~~will~~condition ~~receive~~and ~~marketing~~results ~~approval~~of operations.

•

iIf we are unable to establish our own marketing and sales capabilities, or enter into agreements with third parties, to market and sell our products after they are approved, we may not be able to generate revenues.

•

~~Table~~Interim, of“topline” ~~Contents~~and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

•

•Risks ~~Developments~~related byto ~~competitors~~regulatory ~~may~~approval ~~render~~of our ~~products~~product orcandidates ~~technologies~~and ~~obsolete~~other orlegal ~~non-competitive~~and compliance matters.

•

•Risks ~~The~~related ~~level~~to ofemployee ~~commercial~~matters ~~success~~and ~~of any of~~ our ~~product candidates that we develop will depend upon significant market acceptance of these products among physicians and payors~~operations.

•

•Risks ~~Coverage~~related ~~and~~to ~~reimbursement may not be available for any of~~ our ~~product~~intellectual ~~candidates that we develop, including as a result of healthcare reform measures~~property.

•

•Risks Werelated ~~may~~to ~~not successfully execute or achieve the expected benefits of~~ our ~~restructuring~~securities ~~program~~ and ~~other~~organizational ~~cost saving measures we may take in the future, and our efforts may result in further actions and may adversely affect our business, financial condition and results of operations~~documents.

•

•We do not expect that we will meet certain of Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules. If we are unable to ~~establish~~increase our ~~own~~stockholders' ~~marketing~~equity, ~~and~~we ~~sales~~will ~~capabilities,~~be ordelisted. ~~enter~~Delisting ~~into~~could ~~agreements~~negatively ~~with~~affect ~~third~~the ~~parties,~~price toof ~~market~~our common stock and ~~sell~~could ~~our~~make ~~products~~it ~~after~~more ~~they~~difficult ~~are~~for ~~approved,~~us weto ~~may~~sell ~~not~~securities bein ~~able~~a future financing or for you to ~~generate~~sell ~~revenues~~our common stock.

•

•Security ~~Interim~~breaches, ~~“topline”~~cybersecurity ~~and~~attacks, ~~preliminary~~failure ~~data~~of ~~from~~ our ~~clinical~~data ~~trials~~and ~~that~~personal weinformation ~~announce~~protections orand ~~publish~~those ~~from~~of ~~time~~third toparties ~~time~~and ~~may~~other ~~change~~disruptions ascould ~~more~~compromise ~~patient~~our ~~data~~information ~~become available~~ and ~~are~~technology ~~subject~~systems ~~to audit~~ and ~~verification~~expose ~~procedures~~us ~~that~~to ~~could~~liability, ~~result~~which inwould ~~material~~cause ~~changes~~our inbusiness ~~the~~and ~~final~~reputation ~~data~~to suffer.

•

•Our ~~Risks~~collection, ~~related~~control, processing, sharing, disclosure and otherwise use of personal data could give rise to ~~regulatory~~liabilities ~~approval~~as a result of ~~our~~governmental ~~product~~regulation, ~~candidates~~conflicting legal requirements, and ~~other~~evolving ~~legal~~laws concerning data privacy in the European Union (“EU”) and ~~compliance~~European ~~matters~~Economic Area (“E.E.A.”).

~~• Risks related to employee matters and our operations.~~ii

•CONTRAFECT ~~Risks~~CORPORATION ~~related to our intellectual property.~~

•PART ~~Risks~~I ~~related~~– toFINANCIAL ~~our~~INFORMATION ~~securities and organizational documents.~~

•ITEM ~~We currently do not meet certain of Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules~~1. IfFINANCIAL weSTATEMENTS are unable to regain compliance by June 30, 2023, we will be delisted. Delisting could negatively affect the price of our common stock and could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.

•CONTRAFECT ~~Security~~CORPORATION breaches, cybersecurity attacks, failure of our data and personal information protections and other disruptions could compromise our information and technology systems and expose us to liability, which would cause our business and reputation to suffer.

•Consolidated ~~Our~~Balance ~~collection,~~Sheets control, processing, sharing, disclosure and otherwise use of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements, and evolving laws concerning data privacy in the European Union (“EU”) and European Economic Area (“E.E.A.”).

ii(in thousands, except share data)


	June 30, 2023			December 31, 2022
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	14,422		$	8,907
Marketable securities		—			4,775
Prepaid expenses		1,521			1,382
Other current assets		571			2,642
Total current assets		16,514			17,706
Property and equipment, net		556			627
Operating lease right-of-use assets		2,077			2,241
Other assets		105			105
Total assets	$	19,252		$	20,679
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	11,557		$	13,671
Accrued and other current liabilities		4,239			6,498
Current portion of lease liabilities		677			671
Total current liabilities		16,473			20,840
Warrant liabilities		1,861			9,299
Long-term portion of lease liabilities		1,988			2,210
Other liabilities		38			182
Total liabilities		20,360			32,531
Commitments and contingencies		—			—
Stockholders’ deficit:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and none issued and outstanding at June 30, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value, 125,000,000 shares authorized, 10,704,803 and 594,983 shares issued and outstanding at June 30, 2023 and December 31, 2022		1			1
Additional paid-in capital		333,535			313,884
Accumulated other comprehensive loss		—			(32	)
Accumulated deficit		(334,644	)		(325,705	)
Total stockholders’ deficit		(1,108	)		(11,852	)
Total liabilities and stockholders’ deficit	$	19,252		$	20,679

~~CONTRAFECT~~See ~~CORPORATION~~accompanying notes.

~~PART I – FINANCIAL INFORMATION~~ 1

~~ITEM 1.~~CONTRAFECT ~~FINANCIAL~~CORPORATION ~~STATEMENTS~~

~~CONTRAFECT~~Consolidated ~~CORPORATION~~Statements of Operations

~~Consolidated~~(unaudited) ~~Balance Sheets~~

(in thousands, except share and per share data)

	March 31, 2023			December 31, 2022
	Three Months Ended June 30,						Six Months Ended June 30,
	(unaudited)			(audited)
	2023			2022			2023			2022
Assets
Operating expenses:
Current assets:
Research and development	$	4,870		$	16,760		$	10,165		$	29,485
Cash and cash equivalents	$	11,866		$	8,907
General and administrative		3,105			3,266			6,668			6,520
Marketable securities		2,025			4,775
Total operating expenses		7,975			20,026			16,833			36,005
Prepaid expenses		2,060			1,382
Loss from operations		(7,975	)		(20,026	)		(16,833	)		(36,005	)
Other current assets		1,747			2,642
Other income (expense):
Total current assets		17,698			17,706
Interest income, net		114			21			201			55
Property and equipment, net		587			627
Other expense		(96	)		—			(96	)		—
Operating lease right-of-use assets		2,162			2,241
Change in fair value of warrant liabilities		389			1,916			7,789			(2,296	)
Other assets		105			105
Total other income (expense)		407			1,937			7,894			(2,241	)
Total assets	$	20,552		$	20,679
Net loss	$	(7,568	)	$	(18,089	)	$	(8,939	)	$	(38,246	)
Liabilities and stockholders’ deficit
Per share information:
Current liabilities:
Net loss per share of common stock, basic and diluted	$	(1.94	)	$	(36.79	)	$	(3.04	)	$	(77.79	)
Accounts payable	$	10,828		$	13,671
Basic and diluted weighted average shares outstanding		3,901,839			491,626			2,943,979			491,626
Accrued and other current liabilities		8,150			6,498
Current portion of lease liabilities		674			671
Total current liabilities		19,652			20,840
Warrant liabilities		1,899			9,299
Long-term portion of lease liabilities		2,100			2,210
Other liabilities		38			182
Total liabilities		23,689			32,531
Commitments and contingencies		—			—
Stockholders’ deficit:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and none issued and outstanding at March 31, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value, 125,000,000 shares authorized, 1,565,920 and 594,983 shares issued and outstanding at March 31, 2023 and December 31, 2022		1			1
Additional paid-in capital		323,938			313,884
Accumulated other comprehensive loss		—			(32	)
Accumulated deficit		(327,076	)		(325,705	)
Total stockholders’ deficit		(3,137	)		(11,852	)
Total liabilities and stockholders’ deficit	$	20,552		$	20,679

See accompanying notes.

1 2

~~Table~~CONTRAFECT ofCORPORATION ~~Contents~~

~~CONTRAFECT~~Consolidated ~~CORPORATION~~Statements of Comprehensive Loss

~~Consolidated~~(unaudited) ~~Statements of Operations~~

(~~unaudited~~in thousands)

(in thousands, except share and per share data)


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net loss	$	(7,568	)	$	(18,089	)	$	(8,939	)	$	(38,246	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities		—			11			32			(129	)
Comprehensive loss	$	(7,568	)	$	(18,078	)	$	(8,907	)	$	(38,375	)

	Three Months Ended March 31,
	2023			2022
Operating expenses:
Research and development	$	5,295		$	12,725
General and administrative		3,563			3,254
Total operating expenses		8,858			15,979
Loss from operations		(8,858	)		(15,979	)
Other income (expense):
Interest income, net		87			34
Change in fair value of warrant liabilities		7,400			(4,212	)
Total other income (expense)		7,487			(4,178	)
Net loss	$	(1,371	)	$	(20,157	)
Per share information:
Net loss per share of common stock, basic and diluted	$	(0.69	)	$	(41.00	)
Basic and diluted weighted average shares outstanding		1,975,476			491,626

See accompanying notes.

~~See accompanying notes.~~ 3

2CONTRAFECT CORPORATION

~~Table~~Consolidated Statements of ~~Contents~~Stockholders’ (Deficit) Equity

~~CONTRAFECT~~(unaudited) ~~CORPORATION~~

~~Consolidated~~(in ~~Statements~~thousands, ofexcept ~~Comprehensive~~share ~~Loss~~data)

(unaudited)


	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Deficit
	Shares		Amount
Balance, December 31, 2022		594,983	$	1	$	313,884		$	(32	)	$	(325,705	)	$	(11,852	)
Issuance of securities in registered offering		128,000		—		10,000			—			—			10,000
Financing cost of sale of securities		—		—		(883	)		—			—			(883	)
Issuance of common stock for exercise of pre-funded warrants		842,937		—		5			—			—			5
Stock-based compensation		—		—		932			—			—			932
Unrealized gain on marketable securities		—		—		—			32			—			32
Net loss		—		—		—			—			(1,371	)		(1,371	)
Balance, March 31, 2023		1,565,920	$	1	$	323,938		$	—		$	(327,076	)	$	(3,137	)
Issuance of common stock for exercise of pre-funded warrants		2,104,000		—		—			—			—			—
Issuance of common stock for exercise of warrants		7,034,883		—		7,774			—			—			7,774
Financing cost of warrant inducement and exercise		—		—		(414	)		—			—			(414	)
Reversal of warrant liability due to exercise of warrants		—		—		1,442			—			—			1,442
Share-based compensation		—		—		795			—			—			795
Net loss		—		—		—			—			(7,568	)		(7,568	)
Balance, June 30, 2023		10,704,803	$	1	$	333,535		$	—		$	(334,644	)	$	(1,108	)

(in thousands)


	Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity
	Shares		Amount
Balance, December 31, 2021		491,626	$	1	$	310,011	$	(84	)	$	(260,552	)	$	49,376
Stock-based compensation		—		—		919		—			—			919
Unrealized loss on marketable securities		—		—		—		(140	)		—			(140	)
Net loss		—		—		—		—			(20,157	)		(20,157	)
Balance, March 31, 2022		491,626	$	1	$	310,930	$	(224	)	$	(280,709	)	$	29,998
Stock-based compensation		—		—		965		—			—			965
Unrealized loss on marketable securities		—		—		—		11			—			11
Net loss		—		—		—		—			(18,089	)		(18,089	)
Balance, June 30, 2022		491,626	$	1	$	311,895	$	(213	)	$	(298,798	)	$	12,885

	Three Months Ended March 31,
	2023			2022
Net loss	$	(1,371	)	$	(20,157	)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale securities		32			(140	)
Comprehensive loss	$	(1,339	)	$	(20,297	)

See accompanying notes.

~~See accompanying notes.~~ 4

3CONTRAFECT CORPORATION

~~Table~~Consolidated Statements of ~~Contents~~Cash Flows

~~CONTRAFECT~~(unaudited) ~~CORPORATION~~

~~Consolidated Statements of Stockholders’~~ (~~Deficit~~in thousands) ~~Equity~~

(unaudited)


	Six Months Ended June 30,
	2023			2022
Cash flows from operating activities
Net loss	$	(8,939	)	$	(38,246	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		81			76
Stock-based compensation expense		1,727			1,884
Issuance costs allocated to warrants		96			—
Change in fair value of warrant liabilities		(7,789	)		2,296
Net amortization of premium on marketable securities		57			502
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses and other current and non-current assets		2,791			(1,283	)
(Decrease) increase in accounts payable, accrued and other current liabilities		(4,973	)		8,419
Net cash used in operating activities		(16,949	)		(26,352	)
Cash flows from investing activities
Proceeds from maturities of marketable securities		4,750			19,247
Purchases of property and equipment		(20	)		—
Net cash provided by investing activities		4,730			19,247
Cash flows from financing activities
Proceeds from issuance of securities		19,567			—
Payment of financing costs of securities sold		(1,393	)		—
Repayments of insurance premium financing		(445	)		—
Proceeds from the exercise of pre-funded warrants		5			—
Net cash provided by financing activities		17,734			—
Net increase (decrease) in cash and cash equivalents		5,515			(7,105	)
Cash and cash equivalents at beginning of period		8,907			16,654
Cash and cash equivalents at end of period	$	14,422		$	9,549
Supplemental schedule of cash flow information
Issuance of warrants to purchase common stock	$	1,793		$	—
Cash paid for interest	$	15		$	—
Supplemental schedule of non-cash financing activities
Insurance premium financing	$	900		$	—

~~(in~~See ~~thousands,~~accompanying ~~except~~notes. ~~share data)~~

	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Deficit
	Shares		Amount
Balance, December 31, 2022		594,983	$	1	$	313,884		$	(32	)	$	(325,705	)	$	(11,852	)
Issuance of securities in registered offering		128,000		—		10,000			—			—			10,000
Financing cost of sale of securities		—		—		(883	)		—			—			(883	)
Issuance of common stock for exercise of pre-funded warrants		842,937		—		5			—			—			5
Stock-based compensation		—		—		932			—			—			932
Unrealized gain on marketable securities		—		—		—			32			—			32
Net loss		—		—		—			—			(1,371	)		(1,371	)
Balance, March 31, 2023		1,565,920	$	1	$	323,938		$	—		$	(327,076	)	$	(3,137	)

	Common Stock				Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Equity
	Shares		Amount
Balance, December 31, 2021		491,626	$	1	$	310,011	$	(84	)	$	(260,552	)	$	49,376
Stock-based compensation		—		—		919		—			—			919
Unrealized loss on marketable securities		—		—		—		(140	)		—			(140	)
Net loss		—		—		—		—			(20,157	)		(20,157	)
Balance, March 31, 2022		491,626	$	1	$	310,930	$	(224	)	$	(280,709	)	$	29,998

CONTRAFECT CORPORATION

~~See~~Notes ~~accompanying~~to ~~notes.~~Unaudited Consolidated Financial Statements

4June 30, 2023

~~Table~~1. Organization and Description of ~~Contents~~Business

~~CONTRAFECT~~Organization ~~CORPORATION~~and Business

~~Consolidated~~ContraFect ~~Statements~~Corporation (the “Company”) is a clinical-stage biotechnology company focused on the discovery and development of ~~Cash~~direct ~~Flows~~lytic agents (“DLAs”), including lysins and amurin peptides, as new medical modalities for the treatment of life-threatening, antibiotic-resistant infections. The Company intends to address antibiotic-resistant infections using product candidates from our lysin and amurin peptide platforms. DLAs are fundamentally different than antibiotics and offer a potential paradigm shift in the treatment of antibiotic-resistant infections. The Company’s most advanced product candidate is exebacase, a lysin which targets S. aureus, including methicillin-resistant strains, which causes serious infections such as bacteremia, pneumonia and osteomyelitis. S. aureus is also a frequent source of biofilm-dependent infections of heart valves (endocarditis), prosthetic joints, indwelling devices and catheters. These infections result in significant morbidity and mortality despite current antibiotic therapy.

Exebacase was being studied in a pivotal Phase 3 superiority study (~~unaudited~~the “DISRUPT study”) to evaluate the safety, tolerability, efficacy and pharmacokinetics of intravenous (“IV”) exebacase when used in addition to background standard of care antibiotic therapy for the treatment of S. aureus bacteremia, including right-sided endocarditis in adolescent and adult patients. On July 7, 2022, the Data Safety Monitoring Board (“DSMB”) conducted an interim futility analysis and recommended that the DISRUPT study be stopped because the conditional power of the study was below the pre-specified threshold for futility. Based on the DSMB’s recommendation, patient enrollment in the Phase 3 trial was stopped (“Trial Closure”). The Company continued to monitor all already enrolled patients and all patients completed their follow-up visits. The Company expects to complete all clinical study reports as required by the U.S. Food and Drug Administration (“FDA”).

(On July 29, 2022, the Company initiated a restructuring plan resulting in ~~thousands)~~a reduction in workforce. The restructuring plan was designed to reduce costs and align resources with the Company’s anticipated product development milestones for exebacase and CF-370 and to help preserve the value of the Company’s drug discovery operations. The restructuring reduced the Company’s workforce from 43 full-time employees as of June 30, 2022 to 27 full-time employees as of August 15, 2022, when the reduction was completed. The Company recognized a restructuring charge of $7.7 million, including $1.6 million related to employee termination costs and other related expenses from the workforce reduction and $6.1 million from the write-off of prepaid manufacturing costs following the suspension of IV exebacase related activities.

	Three Months Ended March 31,
	2023			2022
Cash flows from operating activities
Net loss	$	(1,371	)	$	(20,157	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		40			38
Stock-based compensation expense		932			919
Change in fair value of warrant liabilities		(7,400	)		4,212
Net amortization of premium on marketable securities		32			97
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses and other current and non-current assets		1,094			(1,412	)
(Decrease) increase in accounts payable, accrued and other current liabilities		(2,125	)		4,536
Net cash used in operating activities		(8,798	)		(11,767	)
Cash flows from investing activities
Proceeds from maturities of marketable securities		2,750			4,750
Purchases of property and equipment		(5	)		—
Net cash provided by investing activities		2,745			4,750
Cash flows from financing activities
Proceeds from issuance of securities		10,000			—
Payment of financing costs of securities sold		(883	)		—
Repayments of insurance premium financing		(110	)		—
Proceeds from the exercise of pre-funded warrants		5			—
Net cash provided by financing activities		9,012			—
Net increase (decrease) in cash and cash equivalents		2,959			(7,017	)
Cash and cash equivalents at beginning of period		8,907			16,654
Cash and cash equivalents at end of period	$	11,866		$	9,637
Supplemental schedule of cash flow information
Cash paid for interest	$	5		$	—
Supplemental schedule of non-cash financing activities
Insurance premium financing	$	900		$	—

The Company has incurred recurring losses since inception as a research and development organization and has an accumulated deficit of $334.6 million as of June 30, 2023. For the six months ended June 30, 2023, the Company used $16.9 million of cash in operations. The Company has relied on its ability to fund its operations through public and private debt and equity financings, and, to a lesser extent, grant funding and government contracts. The Company expects operating losses and negative cash flows to continue at significant levels in the future as it continues to advance its programs. As of June 30, 2023, the Company had $14.4 million in cash, cash equivalents and marketable securities, which, without additional funding, the Company believes will not be sufficient to meet its obligations within the next twelve months from the date of issuance of these consolidated financial statements. The Company plans to continue to fund its operations through public or private debt and equity financings, but there can be no assurances that such financing will continue to be available to the Company on satisfactory terms, or at all, particularly in light of the Trial Closure. As such, management has not considered the potential for future capital raises in its assessment of the Company’s ability to meet its obligations for the next twelve months, and substantial doubt exists about the Company’s ability to continue as a going concern for twelve months from the date the financial statements were issued. If the Company is unable to obtain funding, the Company would be forced to delay, further reduce its workforce or reduce or eliminate its research and development programs, which could adversely affect its business prospects, or the Company may be unable to continue operations or continue as a going concern and may be forced to sell or liquidate the business.

~~See~~The ~~accompanying~~consolidated ~~notes~~financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

5On March 22, 2021, the Company completed an underwritten public offering under the Company’s registration statement on Form S-3 (Reg. No. 333-246359) (the “Form-S-3”). The Form S-3 was declared effective by the SEC on August 31, 2020 and allows the Company to offer and sell from time-to-time up to $150.0 million of common stock, preferred stock, debt securities, warrants or units comprised of any combination of these securities. The Company issued 143,750 shares of its common stock, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, at a public

~~Table of Contents~~6

~~CONTRAFECT~~offering ~~CORPORATION~~price of $400.00 per share, resulting in net proceeds to the Company of $53.8 million after underwriting discounts and commissions and offering expenses payable by the Company.

~~Notes~~On December 15, 2022, the Company completed (i) a registered direct offering under the Form S-3 of 54,375 shares of its common stock and a pre-funded warrant to ~~Unaudited~~purchase ~~Consolidated~~623,919 ~~Financial~~shares ~~Statements~~of common stock (the “2022 pre-funded warrant”) and (ii) a concurrent private placement in which the Company issued a Class A warrant to purchase up to an aggregate of 1,356,589 shares of common stock (the “Class A Warrant”) and a Class B warrant to purchase up to an aggregate of 678,294 shares of common stock (the “Class B Warrant”) (collectively, the “2022 Offering”). All shares of common stock, the 2022 pre-funded warrant, the Class A Warrant and the Class B Warrant were issued together to a single accredited investor purchaser for consideration equating to $10.32 per share of common stock (or 2022 pre-funded warrant to purchase one share of common stock, less a nominal exercise price), together with a Class A Warrant to purchase two shares of common stock and a Class B warrant to purchase one share of common stock, in the case of each of the Class A Warrant and Class B Warrant, for no additional consideration but each with an exercise price per share of $10.32, for aggregate net proceeds to the Company of $6.1 million after placement agent fees and offering expenses payable by the Company.

On March 31 2, 2023, the Company completed (i) a registered direct offering under the Form S-3 of 128,000 shares of its common stock and a pre-funded warrant to purchase 2,372,000 shares of common stock (the “2023 pre-funded warrant”) and (ii) a concurrent private placement in which the Company issued a warrant to purchase up to an aggregate of 5,000,000 shares of common stock (the “2023 Warrant”) (collectively, the “2023 Offering”). All securities in the 2023 Offering were issued to the same single accredited investor purchaser as in the 2022 Offering for consideration equating to $4.00 per share of common stock (or 2023 pre-funded warrant to purchase one share of common stock, less a nominal exercise price), together with a 2023 Warrant to purchase two shares of common stock for no additional consideration but with an exercise price per share of $4.00, for aggregate net proceeds to the Company of $9.1 million after placement agent fees and offering expenses payable by the Company.

On June 26, 2023, the Company entered into an inducement offer to exercise common stock purchase warrants (the “Inducement Agreement”) with an institutional investor (the “Holder”) to purchase up to an aggregate of 7,034,883 shares of the Company’s common stock. The Inducement Agreement provided the Holder with the opportunity to exercise all of (i) the Class A Warrant, (ii) Class B Warrant and (iii) the 2023 Warrant (collectively, the “Existing Warrants”) held by the Holder, each at a reduced exercise price from $4.00 to $1.36 ~~Organization~~per underlying share, which was equal to the most recent closing price of the Company’s common stock on The Nasdaq Capital Market prior to the execution of the Inducement Agreement. In consideration for exercising the Existing Warrants (the “Warrant Exercise”), at an exercise price equal to $1.36 per underlying share, the Company issued to the Holder or (i) a new unregistered Class C Common Stock Purchase Warrant (the “Class C Warrant”) to purchase up to 1,406,977 shares of common stock, at an exercise price equal to $1.36 per underlying share and ~~Description~~(ii) a new unregistered Class D Common Stock Purchase Warrant (the “Class D Warrant” and together with the Class C Warrant, the “New Warrants”) to purchase up to 5,627,906 shares of ~~Business~~common stock, at an exercise price equal to $1.36 per underlying share (such shares of common stock issuable upon exercise of the New Warrants, the “New Warrant Shares”). The proceeds to the Company from the Warrant Exercise were $9.6 million, prior to deducting fees to the financial advisor and estimated expenses.

siThe significant changes in common stock outstanding have impacted and are expected to continue to impact the year-over-year comparability of the Company’s net loss per share calculations. All share and per share amounts have been adjusted for all periods presented to reflect a one-for-eighty reverse stock split effected on February 14, 2023.

S2. ~~aureus~~Summary of Significant Accounting Policies

S.Basis ~~aureus~~of Presentation

The accompanying financial information as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. ~~aureus~~generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet as of December 31, 2022 was derived from the Company’s audited consolidated financial statements, including all related disclosures, included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 31, 2023. There have been no material changes to the complete listing of significant accounting policies as described in Note 2 thereof.

~~pre-specified~~In the opinion of management, the unaudited financial information as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022 reflects all adjustments, which are normal recurring adjustments, necessary to present a fair statement of financial position, results of operations and cash flows. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

~~follow-up~~7

~~CF-370~~Principles of Consolidation

~~write~~The Company has a wholly-~~off~~owned subsidiary, ContraFect International Limited, in Scotland that establishes legal status for interactions with the European Economic Area. This subsidiary is dormant or is otherwise non-operative. Any inter-company accounts have been eliminated in consolidation.

~~The~~Significant ~~Company~~Risks ~~has incurred recurring losses since inception as a research~~ and ~~development~~Uncertainties organization and has an accumulated deficit of $327.1 million as of March 31, 2023. For the quarter ended March 31, 2023, the Company used $8.8 million of cash in operations. The Company has relied on its ability to fund its operations through public and private debt and equity financings, and, to a lesser extent, grant funding and government contracts. The Company expects operating losses and negative cash flows to continue at significant levels in the future as it continues to advance its programs. As of March 31, 2023, the Company had $13.9 million in cash, cash equivalents and marketable securities, which, without additional funding, the Company believes will not be sufficient to meet its obligations within the next twelve months from the date of issuance of these consolidated financial statements. The Company plans to continue to fund its operations through public or private debt and equity financings, but there can be no assurances that such financing will continue to be available to the Company on satisfactory terms, or at all, particularly in light of the Trial Closure. As such, management has not considered the potential for future capital raises in its assessment of the Company’s ability to meet its obligations for the next twelve months, and substantial doubt exists about the Company’s ability to continue as a going concern for twelve months from the date the financial statements were issued. If the Company is unable to obtain funding, the Company would be forced to delay, further reduce its workforce or reduce or eliminate its research and development programs, which could adversely affect its business prospects, or the Company may be unable to continue operations or continue as a going concern and may be forced to sell or liquidate the business.

The ~~consolidated~~Company’s ~~financial~~operations ~~statements~~are ~~have~~subject ~~been~~to ~~prepared~~a ~~assuming~~number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to, the results of clinical testing and trial activities of the Company’s ~~will~~products, ~~continue~~the asCompany’s aability ~~going~~to ~~concern~~obtain regulatory approval to market its products, ~~which~~competition ~~contemplates~~from ~~continuity~~products ofmanufactured ~~operations~~and sold or being developed by other companies, the ~~realization~~price of, ~~assets~~and demand for, the Company’s products, the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, the ~~satisfaction~~Company’s ofability ~~liabilities~~to raise capital and ~~commitments~~the ineffects of COVID-19 and the ~~normal~~recent ~~course~~failure of certain financial institutions, on the Company’s business, operations and financial performance and position.

S The Company currently relies on a single manufacturer of drug substance for each of its product candidates and two manufacturers of drug product, one located in the United States and one in Western Europe, and there are no long-3term supply agreements in place. A sustained disruption in the operations of any of these manufacturers, or in the event the Company would need to change to a new supplier, could result in a significant delay in the ability of the Company to complete any associated activities.

~~No. 333-246359)~~Use of Estimates

~~“Form-~~The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The Company bases estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to stock-~~3”)~~based compensation, warrant valuation, research and development accruals and prepaid expenses and realization of net deferred income tax assets. The Company’s actual results may differ from these estimates under different assumptions or conditions.

~~S-3~~Concentrations of Credit Risk

~~time-~~Financial instruments which potentially subject the Company to credit risk consist primarily of cash, cash equivalents and marketable securities. The Company holds these investments in highly rated financial institutions, and, by policy, limits the amounts of credit exposure to any one financial institution. These amounts at times may exceed federally insured limits. The Company’s accounts at Silicon Valley Bank have not experienced any credit losses and the Company does not believe it has material exposure to any significant credit risk on these funds. The Company maintains the majority of its cash, cash equivalents and marketable securities at other financial institutions. The Company has no off-~~time~~balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.

6Cash and Cash Equivalents

~~Table~~The Company considers all highly liquid investments with maturities at the date of ~~Contents~~purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposit, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value.

~~S-3~~Marketable Securities

~~pre~~Marketable securities consist of investments in corporate debt securities. Management determines the appropriate classification of the securities at the time they are acquired and evaluates the appropriateness of such classifications at each balance sheet date. The Company classifies its marketable securities as available-~~funded~~for-sale pursuant to ASC 320, Investments – Debt and Equity Securities. The Company classifies marketable securities available to fund current operations as current assets on its consolidated balance sheets. Marketable securities are classified as long-term assets on the consolidated balance sheets if (i) the Company has the intent and ability to hold the investments for a period of at least one year and (ii) the contractual maturity date of the investments is greater than one year. Marketable securities, together with accrued interest receivable, net of any allowance for credit losses, are recorded at fair value on the consolidated balance sheet, with unrealized gains and losses included as a component of accumulated other comprehensive loss in stockholders’ deficit and a component of total comprehensive loss in the consolidated statements of comprehensive loss, until realized. The fair value of these securities is based on quoted prices for identical or similar assets. Realized gains and losses are

~~(the “2022 pre-funded warrant”)~~ 8

included in interest income in the consolidated statement of operations on a specific-identification basis. There were no realized gains or losses on sales of marketable securities for the six months ended June 30, 2023 or 2022. There were no marketable securities that had been in an unrealized loss position for more than 12 months as of June 30, 2023 or December 31, 2022.

~~pre~~The Company reviews marketable securities for other-~~funded~~than-temporary impairment whenever the fair value of a marketable security is less than the amortized cost and evidence indicates that a marketable security’s carrying amount is not recoverable within a reasonable period of time. Other-than-temporary impairments of investments are recognized in the consolidated statements of operations if the Company has experienced a credit loss, has the intent to sell the marketable security, or if it is more likely than not that the Company will be required to sell the marketable security before recovery of the amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to the end of the period.

~~per~~Fair Value of Financial Instruments

~~2022~~The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts payable, accrued liabilities and warrant liabilities. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. The fair value of the Company’s warrant liabilities is based upon unobservable inputs, as described further below.

~~pre-funded~~The Company discloses information on all assets and liabilities reported at fair value using a hierarchy of inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability, and are developed based on the best information available in the circumstances. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The three levels of the fair value hierarchy are described below:

~~S-3~~Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

~~pre-funded~~Level 2—Valuations based on quoted prices for similar assets or liabilities in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

(Level 3—Valuations that require inputs that reflect the ~~“2023~~Company’s ~~pre-funded~~own ~~warrant”)~~assumptions that are both significant to the fair value measurement and unobservable.

~~2023~~To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

~~pre~~The Company had no liabilities classified as Level 1 or Level 2. The carrying amounts reported in the accompanying financial statements for accounts payable and accrued expenses approximate their respective fair values due to their short-~~funded~~term maturities. The fair value of the warrant liabilities is discussed in Note 4, “Fair Value Measurements.”

~~one~~Stock-~~for-eighty~~based Compensation

2Stock-based compensation is measured and recognized as compensation expense for all stock-based payment awards made to employees, directors, and non-employees, including employee stock options. ~~Summary~~Compensation expense based on the grant date fair value is generally amortized over the requisite service period of ~~Significant~~the ~~Accounting~~award ~~Policies~~on a straight-line basis.

seThe fair value of options is calculated using the Black-Scholes option pricing model on the date of grant based on key assumptions such as stock price, risk free interest rates, expected volatility, expected term, and expected dividend yield. The Company’s estimates of these assumptions are based on historical data and judgment regarding future trends and factors.

The accompanying financial information as of March 31, 2023 and for the three months ended March 31, 2023 and 2022 has been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to such rules and regulations. The consolidated balance sheet as of December 31, 2022 was derived from the Company’s audited consolidated financial statements, including all related disclosures, included in the Company’s Annual Report on Form 10-K that was filed with the SEC on March 31, 2023. There have been no material changes to the complete listing of significant accounting policies as described in Note 2 thereof. 9

InGovernment ~~the~~Contracts ~~opinion of management, the unaudited financial information as of March 31, 2023~~ and ~~for~~Grant ~~the~~Agreements three months ended March 31, 2023 and 2022 reflects all adjustments, which are normal recurring adjustments, necessary to present a fair statement of financial position, results of operations and cash flows. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the operating results for the full fiscal year or any future periods.

~~cip~~On March 10, 2021, the Company entered into a cost-share contract (the “BARDA Contract”) with BARDA, a division of the U.S. Department of Health and Human Services’ Office of the Assistant Secretary for Preparedness and Response. The base period for the BARDA Contract included government funding of up to $9.8 million to reimburse expenses to support the conduct of the Phase 3 DISRUPT study and futility analysis. In connection with the Trial Closure, the BARDA Contract was modified to provide for up to $6.6 million in funding to support a futility outcome root-cause analysis and the close-out of the Phase 3 DISRUPT study of exebacase. The BARDA Contract ended on July 31, 2023.

~~non-operative~~The Company recognizes a receivable in other current assets with a related reduction in its research and development expenses when the actual reimbursable costs have been incurred and the Company has complied with the conditions of the applicable government contract or grant agreement and the amounts will be received. The Company recognized a reduction to its research and development expense in the amount of $0.6 million and $2.2 million for the three months ended June 30, 2023 and 2022, and $3.2 million and $4.3 million for the six months ended June 30, 2023 and 2022, respectively. The receivable for government contracts and grant agreements as of June 30, 2023 and December 31, 2022 was $0.6 million and $2.6 million, respectively. The Company has $2.0 million of committed government contract and grant agreement funding remaining as of June 30, 2023.

~~Significant~~ ~~Risks~~Restructuring ~~and Uncertainties~~

~~COVID-19~~The Company has made estimates and judgments regarding the amount and timing of its restructuring expense and liability, including current and future period termination benefits and other costs to be incurred when related actions take place. Actual results may differ from these estimates. Restructuring charges are reflected in the Company’s consolidated statements of operations.

7Net Loss Per Share

~~Table~~Basic net loss per share applicable to common stockholders is calculated by dividing net loss applicable to common stockholders by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share applicable to common stockholders is calculated by adjusting weighted average shares outstanding for the dilutive effect of ~~Contents~~common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the dilutive net loss per share applicable to common stockholders’ calculation, stock options and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share applicable to common stockholders, as their effect would be anti-dilutive; therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.

tRecently ~~the~~Adopted Accounting Pronouncements

~~imat~~Credit Losses

~~The~~On ~~preparation~~January of1, ~~financial~~2023, ~~statements~~the inCompany ~~conformity~~adopted ~~with~~Accounting ~~U.S.~~Standards ~~GAAP~~Update ~~requires~~No. ~~management~~2016-13, toFinancial ~~make~~Instruments-Credit ~~estimates~~Losses ~~and~~(ASU ~~assumptions~~2016-13). ~~that~~ASU ~~affect~~2016-13 amended the ~~reported~~guidance ~~amounts~~for ofmeasuring ~~assets~~ and ~~liabilities~~recording ~~and~~credit ~~disclosure~~losses ofon ~~contingent~~financial assets ~~and~~measured ~~liabilities~~ at ~~the~~amortized ~~date~~cost ofby ~~the~~replacing ~~financial statements and~~ the ~~reported~~“incurred ~~amounts~~loss” ofmodel ~~expenses~~with ~~during~~an ~~the~~“expected ~~reporting~~loss” ~~period~~model. ~~The~~Accordingly, ~~Company~~these ~~bases~~financial ~~estimates~~assets ~~and~~will ~~assumptions~~be onpresented ~~historical~~at ~~experience~~the ~~when~~net ~~available~~amount ~~and~~expected ~~on various factors that it believes~~ to be ~~reasonable under the circumstances~~collected. OnThis annew ~~ongoing~~standard ~~basis,~~also ~~the~~requires ~~Company~~that ~~evaluates~~credit ~~its~~losses ~~estimates and assumptions, including those~~ related to ~~stock~~available-~~based~~for-sale ~~compensation,~~debt ~~warrant~~securities ~~valuation,~~be ~~research~~recorded ~~and~~through ~~development~~an ~~accruals~~allowance ~~and~~for ~~prepaid~~such ~~expenses~~losses ~~and~~rather ~~realization~~than ofreducing ~~net~~the ~~deferred~~carrying ~~income~~amount ~~tax~~under ~~assets~~the current, other-than-temporary-impairment model. The ~~Company’s~~adoption ~~actual~~of ~~results~~the ~~may~~new ~~differ~~guidance ~~from~~did ~~these~~not ~~estimates~~affect ~~under~~the ~~different~~Company’s ~~assumptions~~consolidated orfinancial ~~conditions~~statements.

t3. RMarketable Securities

~~off-balance~~The Company held no marketable securities as of June 30, 2023.

~~ivalen~~Marketable securities at December 31, 2022 consisted of the following (in thousands):

The Company considers all highly liquid investments with maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include bank demand deposits, marketable securities with maturities of three months or less at purchase, and money market funds that invest primarily in certificates of deposit, commercial paper and U.S. government and U.S. government agency obligations. Cash equivalents are reported at fair value.


Marketable Securities	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Current:
Corporate debt	$	4,807	$	—	$	(32	)	$	4,775

~~Marketable~~Corporate ~~Securities~~debt includes obligations issued by investment-grade corporations. At December 31, 2022, the Company held only investments that have maturities of less than one year.

~~available-for-sale~~10

~~Investments~~4. –Fair ~~Debt~~Value ~~and~~Measurements ~~Equity Securities~~

The ~~Company~~following ~~reviews marketable securities for other-than-temporary impairment whenever the~~ fair value ofhierarchy atable ~~marketable~~presents ~~security~~information isabout ~~less than~~ the ~~amortized cost and evidence indicates that a marketable security~~Company’s ~~carrying~~financial ~~amount~~assets isand ~~not~~liabilities ~~recoverable~~measured ~~within~~at afair ~~reasonable~~value ~~period~~on ~~of time. Other-than-temporary impairments of investments are recognized in the consolidated statements of operations if the Company has experienced~~ a ~~credit~~recurring ~~loss,~~basis ~~has~~as ~~the intent to sell the marketable security, or if it is more likely than not that the Company will be required to sell the marketable security before recovery~~ of ~~the~~June ~~amortized cost basis. Evidence considered in this assessment includes reasons for the impairment~~30, ~~compliance~~2023 ~~with~~and ~~the~~December ~~Company’s investment policy~~31, ~~the~~2022 ~~severity and the duration of the impairment and changes~~ (in ~~value~~thousands): ~~subsequent to the end of the period.~~


	Fair Value Measurement as of June 30, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	13,496	$	—	$	—
Marketable securities		—		—		—
Warrant liabilities		—		—		1,861
Total	$	13,496	$	—	$	1,861

Table of Contents


	Fair Value Measurement as of December 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	7,596	$	—	$	—
Marketable securities		4,775		—		—
Warrant liabilities		—		—		9,299
Total	$	12,371	$	—	$	9,299

~~lue~~The Company issued warrants to the purchasers of its 2020 Offering (the “2020 Warrants”). The Company determined that these warrants should be classified as a liability and considered as a Level 3 financial instrument (see also Note 9, “Capital Structure”). The 2020 Warrants were re-measured at each subsequent reporting period and changes in fair value have been recognized in the consolidated statement of operations. The following assumptions were used in a Black-Scholes option-pricing model to determine the fair value of the warrant liability as of December 31, 2022. On May 27, 2023, the 2020 Warrants expired in accordance with their terms and are no longer exercisable.

The Company’s financial instruments consist of cash and cash equivalents, marketable securities, accounts payable, accrued liabilities and warrant liabilities. Fair value estimates of these instruments are made at a specific point in time, based on relevant market information. These estimates may be subjective in nature and involve uncertainties and matters of judgment and therefore cannot be determined with precision. The fair value of the Company’s warrant liabilities is based upon unobservable inputs, as described further below.


	As of December 31, 2022
Expected volatility		80.2	%
Remaining contractual term (in years)		0.42
Risk-free interest rate		4.76	%
Expected dividend yield	— %

The Company ~~discloses~~issued ~~information~~the onClass ~~all~~A ~~assets~~Warrant and ~~liabilities~~Class ~~reported~~B atWarrant ~~fair~~to ~~value~~the ~~using~~purchaser ~~a hierarchy~~ of ~~inputs~~its ~~used~~2022 inOffering ~~measuring~~(together, ~~fair value that maximizes~~ the ~~use~~“2022 ofWarrants”). ~~observable~~The ~~inputs~~Company ~~and~~determined ~~minimizes~~that ~~the~~these ~~use~~warrants ofshould ~~unobservable~~be ~~inputs~~classified byas ~~requiring~~a ~~that~~liability ~~the~~and ~~observable~~considered ~~inputs~~as bea ~~used~~Level ~~when~~3 ~~available.~~financial ~~Observable~~instrument ~~inputs~~(see ~~are~~also ~~inputs~~Note ~~that~~9, ~~market~~“Capital ~~participants~~Structure”). ~~would~~On ~~use~~June in26, ~~pricing~~2023, the ~~asset~~Class orA ~~liability~~Warrant ~~based~~and onClass ~~market~~B ~~data~~Warrant, ~~obtained~~together ~~from~~with ~~sources independent of~~ the ~~Company.~~2023 ~~Unobservable~~Warrant, ~~inputs~~were ~~are~~exercised ~~inputs~~in ~~that~~full ~~reflect~~pursuant ~~the~~to ~~Company’s assumptions about~~ the ~~inputs~~Inducement ~~that~~Agreement. ~~market~~The ~~participants~~2022 ~~would~~Warrants ~~use~~were inre-measured ~~pricing~~at ~~the~~each ~~asset~~subsequent orreporting ~~liability,~~period and ~~are developed based~~ on ~~the~~June ~~best~~26, ~~information~~2023 ~~available~~and in the ~~circumstances.~~changes ~~The~~in fair value ~~hierarchy~~have ~~applies~~been ~~only~~recognized ~~to the valuation inputs used~~ in ~~determining~~ the ~~reported~~consolidated ~~fair~~statement ~~value~~ of ~~the~~operations. ~~investments~~The ~~and~~following isassumptions ~~not~~were aused ~~measure~~in ofa ~~the~~Black-Scholes ~~investment~~option-pricing ~~credit~~model ~~quality.~~to ~~The~~determine ~~three levels of~~ the fair value ~~hierarchy~~of ~~are~~the ~~described~~warrant ~~below~~liability:

Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.


	Class A Warrants						Class B Warrants
	As of June 26, 2023			As of December 31, 2022			As of June 26, 2023			As of December 31, 2022
Expected volatility		135.5	%		99.8	%		129.5	%		140.3	%
Remaining contractual term (in years)		4.63			5.08			0.13			0.58
Risk-free interest rate		4.13	%		3.99	%		5.32	%		4.76	%
Expected dividend yield	— %			— %			—%			—%

~~Level~~The ~~2—Valuations~~Company ~~based~~issued onthe ~~quoted~~Class ~~prices~~C ~~for~~Warrant ~~similar~~pursuant ~~assets~~to orthe ~~liabilities~~Inducement inAgreement ~~markets~~and determined that ~~are~~this ~~not~~warrant ~~active~~should orbe ~~for~~classified ~~which~~as ~~all~~a ~~significant~~liability ~~inputs~~and ~~are~~considered ~~observable,~~as ~~either~~a ~~directly~~Level or3 ~~indirectly~~financial instrument (see also Note 9, “Capital Structure”). The Class C Warrant was re-measured at each subsequent reporting period and the changes in fair value have been recognized in the consolidated statement

~~Level 3—Valuations that require inputs that reflect the Company’s own assumptions that are both significant to the fair value measurement and unobservable.~~ 11

~~To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination~~ of ~~fair value requires more judgment~~operations. ~~Accordingly,~~The ~~the~~following ~~degree~~assumptions ofwere ~~judgment~~used ~~exercised by the Company~~ in ~~determining~~a ~~fair~~Black-Scholes ~~value~~option-pricing ismodel ~~greatest~~to ~~for~~determine ~~instruments categorized in Level 3. A financial instrument’s level within~~ the fair value ~~hierarchy is based on the lowest level~~ of ~~any input that is significant to~~ the ~~fair~~warrant ~~value~~liability: ~~measurement.~~

The Company had no liabilities classified as Level 1 or Level 2. The carrying amounts reported in the accompanying financial statements for accounts payable and accrued expenses approximate their respective fair values due to their short-term maturities. The fair value of the warrant liabilities is discussed in Note 4, “Fair Value Measurements.”


	As of June 30, 2023			At Issuance
Expected volatility		129.1	%		129.1	%
Remaining contractual term (in years)		5.25			5.25
Risk-free interest rate		4.13	%		4.02	%
Expected dividend yield	— %			— %

mWarrant liabilities

~~non-employees~~The following tables present a reconciliation of the Company’s financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three and six months ended June 30, 2023 and 2022 (in thousands):

The fair value of options is calculated using the Black-Scholes option pricing model on the date of grant based on key assumptions such as stock price, risk free interest rates, expected volatility, expected term, and expected dividend yield. The Company’s estimates of these assumptions are based on historical data and judgment regarding future trends and factors.


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Balance at beginning of period	$	1,899		$	6,742		$	9,299		$	2,530
Issuance of Class C Warrant		1,793			—			1,793			—
(Decrease) increase in fair value (1)		(389	)		(1,916	)		(7,789	)		2,296
Exercise of underlying warrants (2)		(1,442	)		—			(1,442	)		—
Balance at end of period	$	1,861		$	4,826		$	1,861		$	4,826

(1)

~~Government~~The ~~Contracts~~change ~~and~~in ~~Grant~~fair ~~Agreements~~values of the warrant liabilities is recorded in other income in the consolidated statement of operations.

(2)

~~close~~The remaining fair value of the warrant liabilities at the time of exercise was transferred into additional paid-~~out~~in capital in the consolidated balance sheet.

The ~~Company~~key ~~recognizes~~inputs ainto ~~receivable~~the inBlack-Scholes ~~other~~option ~~current~~pricing ~~assets~~model ~~with~~are ~~a related reduction in its research and development expenses when~~ the ~~actual~~per ~~reimbursable~~share ~~costs~~value ~~have been incurred~~ and the ~~Company~~expected ~~has~~volatility ~~complied with the conditions~~ of the ~~applicable~~Company’s ~~government~~common ~~contract or grant agreement and the amounts will be received~~stock. ~~The~~Significant ~~Company~~changes ~~recognized a reduction to its research and development expense~~ in ~~the~~these ~~amount~~inputs ofwill ~~$2.7 million~~directly ~~and~~increase ~~$2.1 million~~or ~~for~~decrease the ~~three~~estimated ~~months~~fair ~~ended~~value ~~March 31, 2023 and 2022, respectively. The receivable for government contracts and grant agreements as~~ of ~~March 31,~~the ~~2023 and December 31, 2022 was $1.7 million and $2.6 million, respectively. The~~ Company’s ~~has~~warrant $2liability.~~6 million~~ ~~of committed government contract and grant agreement funding remaining as of March 31, 2023.~~

95. Accrued and Other Current Liabilities

~~Table~~Accrued and other current liabilities consist of ~~Contents~~the following as of June 30, 2023 and December 31, 2022 (in thousands):

estr


	June 30, 2023		December 31, 2022
Accrued compensation costs	$	1,756	$	1,676
Accrued professional fees		1,268		970
Accrued research and development service fees		701		3,443
Accrued insurance and facilities operation expenses		484		252
Other accrued expenses		30		157
Total accrued and other current liabilities	$	4,239	$	6,498

~~cturing~~In February 2023, the Company entered into a financing agreement for $0.9 million for a portion of the Company’s annual directors and officers insurance premiums. The balance is due in monthly installments over eight months with an annual interest rate of 6.25%. The remaining balance was $0.5 million as of June 30, 2023 and was included in accounts payable and accrued and other current liabilities on the consolidated balance sheet.

~~Per S~~12

Basic net loss per share applicable to common stockholders is calculated by dividing net loss applicable to common stockholders by the weighted average shares outstanding during the period, without consideration for common stock equivalents6. ~~Diluted~~Net ~~net~~Loss ~~loss~~Per ~~per~~Share ~~share applicable to common stockholders is calculated by adjusting weighted average shares outstanding for the dilutive effect~~ of ~~common~~Common ~~stock~~Stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the dilutive net loss per share applicable to common stockholders’ calculation, stock options and warrants are considered to be common stock equivalents but are excluded from the calculation of diluted net loss per share applicable to common stockholders, as their effect would be anti-dilutive; therefore, basic and diluted net loss per share applicable to common stockholders were the same for all periods presented.

~~dopt~~Diluted loss per share is the same as basic loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive given the Company’s net loss. Basic loss per share is computed by dividing net loss available to common stockholders by the weighted-average number of common shares outstanding, including the weighted average effect of the pre-funded warrants the Company issued in connection with the 2022 and 2023 Offerings, the exercise of which requires nominal consideration for the delivery of shares of common stock. As such, the Company has considered the 574,937 common shares underlying the pre-funded warrants that were unexercised as of December 31, 2022 to be outstanding beginning on January 1, 2023 for the purposes of calculating basic EPS. There were no pre-funded warrants outstanding as of June 30, 2023.

~~noun~~The following table sets forth the computation of basic and diluted net loss per share for common stockholders (in thousands, except share and per share data):

Credit Losses


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Net loss	$	(7,568	)	$	(18,089	)	$	(8,939	)	$	(38,246	)
Weighted average shares of common stock outstanding		3,901,839			491,626			2,943,979			491,626
Net loss per share of common stock—basic and diluted	$	(1.94	)	$	(36.79	)	$	(3.04	)	$	(77.79	)

~~No. 2016-13~~The following potentially dilutive securities outstanding at June 30, 2023 and 2022 have been excluded from the computation of diluted weighted average shares outstanding, as they would have been anti-dilutive:

2016-13).


	June 30,
	2023		2022
Options to purchase common stock		79,519		55,612
Warrants to purchase common stock		7,034,883		136,563
Total		7,114,402		192,175

~~2016-13~~7. Commitments and Contingencies

~~available-for-sale~~Operating Leases

3In December 2010, the Company entered into a non-cancellable operating lease for office space and laboratory facilities in Yonkers, New York expiring in December 2025. ~~Marketable~~In ~~Securities~~December 2011, the Company entered into an amendment which extended the term of the lease through December 2027 (the “Third Floor Lease”). The lease provides for the option to renew for two additional five-year terms. The premises were occupied in June 2011. Monthly rent payments began the date the office and laboratory facilities were ready for occupancy.

~~Marketable~~In ~~securities~~January ~~at March 31~~2012, ~~2023~~the ~~consisted~~Company ofentered into a non-cancellable operating lease for additional office space and laboratory facilities in the ~~following~~same (building in ~~thousands~~Yonkers, New York expiring in December 2027 (the “Fourth Floor Lease”):. The Fourth Floor Lease provides for an option to renew for two additional five-year terms. Effective August 1, 2017, the Company relinquished 10,912 square feet of space under the Fourth Floor Lease and was relieved of its obligations related to such space.

Marketable Securities	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Current:
Corporate debt	$	2,025	$	—	$	—	$	2,025

The balance sheet classification of the Company’s lease liabilities was as follows (in thousands):

Marketable securities at December 31, 2022 consisted of the following (in thousands):


Description	June 30, 2023		December 31, 2022
Operating lease liabilities:
Current portion of lease liabilities	$	677	$	671
Long-term portion of lease liabilities	$	1,988	$	2,210

Marketable Securities	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Current:
Corporate debt	$	4,807	$	—	$	(32	)	$	4,775

The Company adopted Topic 842 in accounting for its lease liabilities as of January 1, 2019. Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used a discount rate of 9.93%, which was an estimate of its incremental borrowing rate based on the information available at the adoption date. The leases are renewable at the end of the lease term at the Company’s option. For the purposes of determining the remaining lease term in contemplation of available extensions, the Company did not consider either

~~Corporate debt includes obligations issued by investment-grade corporations. At March 31, 2023 and December 31, 2022, the Company held only investments that have maturities of less than one year.~~ 13

~~that~~renewal to be probable and therefore the remaining lease term used to determine the operating lease liability was 9.0 years at the adoption date.

~~tion~~As atof MJune 30, 2023, the maturities of our operating lease liabilities were as follows (in thousands):

Based on the Company’s evaluation, a credit loss allowance is not required, and the Company also evaluated its security for other-than-temporary impairment and considered the decline in market value for the security to be primarily attributable to current economic and market conditions. It was not more likely than not that the Company would have been required to sell the security prior to the recovery of the amortized cost basis. Based on this analysis, these marketable securities were


	Amount
July 1, 2023—December 31, 2023	$	354
Year ending December 31:
2024		721
2025		736
2026		750
2027		702
Total lease payments		3,263
Less: Present value adjustment		(598	)
Operating lease liabilities	$	2,665

~~considered~~Lease tocosts beunder ~~other-than-temporarily~~the ~~impaired~~terms as of ~~March 31, 2023, and~~ the ~~decline~~Company’s inleases ~~fair~~for ~~value below~~ the ~~amortized~~three ~~cost~~and ~~basis~~six ~~was~~months ~~recorded~~ended asJune ~~an unrealized loss~~30, ~~net~~2023 ofand ~~tax,~~2022 inwere ~~other~~as ~~comprehensive~~follows ~~loss~~ (in ~~the~~thousands): ~~consolidated statements of comprehensive loss.~~


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Operating lease cost (1)	$	150	$	154	$	301	$	307
Variable lease costs (2)		22		42		51		81
Total lease cost	$	172	$	196	$	352	$	388

(1)

~~Table~~Operating lease payments included in the measurement of ~~Contents~~the Company’s lease liabilities are comprised of fixed payments according to the terms of the Company’s leases.

(2)

4Variable lease payments consist of the Company’s utility costs billed by and paid to its landlord. ~~Fair~~Variable ~~Value~~lease ~~Measurements~~payments are presented as operating expenses in the Company’s Consolidated Statement of Operations in the same line item as expense arising from fixed lease payments and in net cash used in operating activities in the Company’s Statement of Cash Flows.

~~The~~Rockefeller ~~following~~University fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2023 and December 31, 2022 (in thousands):

	Fair Value Measurement as of March 31, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	10,186	$	—	$	—
Marketable securities		2,025		—		—
Warrant liabilities		—		—		1,899
Total	$	12,211	$	—	$	1,899

License Agreements

	Fair Value Measurement as of December 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Cash equivalents	$	7,596	$	—	$	—
Marketable securities		4,775		—		—
Warrant liabilities		—		—		9,299
Total	$	12,371	$	—	$	9,299

The Company has entered into the following license agreements with The Rockefeller University:

•

reOn July 12, 2011, the Company entered into a license agreement for the worldwide, exclusive right to a patent covering the composition of matter for the lysin PlySS2 for the treatment and prevention of diseases caused by gram-~~measured~~positive bacteria (the “CF-301 License”). The Company rebranded PlySS2 as CF-301 and subsequently, exebacase. The license gives the Company the right to exclusively develop, make, have made, use, import, lease, sell and offer for sale products that would otherwise infringe a claim of this patent application or patent.

•

~~used~~On June 1, 2011, the Company entered into a license agreement for the exclusive rights to The Rockefeller University’s interest in a ~~Black-Scholes~~joint ~~option~~patent application covering the method of delivering antibodies through the cell wall of gram-~~pricing~~positive ~~model~~bacteria to ~~determine~~ the ~~fair~~periplasmic ~~value~~space. This intellectual property was developed as a result of the ~~warrant~~sponsored ~~liability:~~research agreement between the Company and The Rockefeller University and was jointly discovered and filed by the two parties.

•

	As ofMarch 31, 2023			As ofDecember 31, 2022
Expected volatility		183.8	%		80.2	%
Remaining contractual term (in years)		0.17			0.42
Risk-free interest rate		4.79	%		4.76	%
Expected dividend yield		—	%		—	%

On September 23, 2010, the Company entered into a license agreement for the worldwide, exclusive right to develop, make, have made, use, import, lease, sell, and offer for sale products that would otherwise infringe a claim of the suite of patents and patent applications covering the composition of matter for eight individual lysin molecules for the treatment and prevention of diseases caused by gram-positive bacteria. The lysins in this suite have activity against Group B Streptococci, Staphylococcus aureus, Streptococcus pneumonia, Bacillus anthracis, Enterococcus faecalis and Enterococcus faecium.

In consideration for the licenses, the Company paid Rockefeller license initiation fees in cash and stock. The Company is currently required to pay $0.2 million each year until the licenses terminate. Depending on the success of its programs, the Company may also incur regulatory milestone payments up to a total of $5.0 million and royalties of up to 5% on net sales from products to Rockefeller. The Company is allowed to grant sublicenses to third parties without prior approval, subject to certain conditions and the

~~Warrant~~ 14

Wpayment of a certain percentage of all payments we receive from sublicensees. There were no milestone, royalty or sublicense payments made during the three or six months ended June 30, 2023 or 2022. The Company has made total milestone payments under the CF-301 License of $0.8 million as of June 30, 2023.

~~re-measured~~Each license agreement terminates upon the later of (i) the expiration or abandonment of the last licensed patent under the license agreement to expire or become abandoned, or (ii) 10 years after the first commercial sale of the first licensed product. The Rockefeller University may terminate any license agreement in the event of a breach of such agreement by the Company or if the Company challenges the validity or enforceability of the underlying patent rights. The Company may terminate any license agreement at any time on 60 days’ notice.

	Class A Warrants						Class B Warrants
	As of March 31, 2023			As of December 31, 2022			As of March 31, 2023			As of December 31, 2022
Expected volatility		108.0	%		99.8	%		164.7	%		140.3	%
Remaining contractual term (in years)		4.83			5.08			0.33			0.58
Risk-free interest rate		3.60	%		3.99	%		4.97	%		4.76	%
Expected dividend yield		—	%		—	%		—	%		—	%

Legal Contingencies

11From time to time, the Company may be involved in disputes and legal proceedings in the ordinary course of its business. These proceedings may include allegations of infringement of intellectual property, employment or other matters. The Company records a liability in its financial statements for these matters when a loss is known or considered probable and the amount can be reasonably estimated. The Company reviews these estimates each accounting period as additional information is known and adjusts the loss provision when appropriate. If a matter is both probable to result in a liability and the amounts of loss can be reasonably estimated, the Company estimates and discloses the possible loss or range of loss to the extent necessary to make the financial statements not misleading. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the Company’s financial statements. The Company currently has no legal proceedings ongoing that management estimates could have a material effect on the Company’s financial statements.

~~Table~~8. ofRestructuring ~~Contents~~

~~Warrant~~On ~~liabilities~~July 29, 2022, the Company initiated a restructuring plan resulting in a reduction in workforce. The restructuring plan was designed to reduce costs and align resources with the Company’s anticipated product development milestones for exebacase and CF-370 and to help preserve the value of the Company’s drug discovery operations. The restructuring reduced the Company’s workforce from 43 full-time employees as of June 30, 2022 to 27 full-time employees as of August 15, 2022, when the reduction was completed. The Company recognized a restructuring charge of $7.7 million, including $1.6 million related to employee termination costs, including severance, health benefits and other related expenses from the workforce reduction, and $6.1 million from the write-off of prepaid manufacturing costs following the suspension of IV exebacase manufacturing activities.

The ~~following~~restructuring ~~tables~~costs ~~present~~were aincluded ~~reconciliation~~in ofaccounts ~~the~~payable ~~Company’s~~and ~~financial~~accrued ~~liabilities~~and ~~measured~~other atcurrent ~~fair~~liabilities. ~~value~~Activity ~~on a recurring basis using significant unobservable inputs (Level 3)~~ for the three and six months ended ~~March 31~~June 30, 2023 ~~and~~is ~~2022~~summarized as follows (in thousands):

	Three Months Ended March 31,
	Three MonthsEnded June 30,2023			Six MonthsEnded June 30,2023
	2023			2022
Balance at beginning of period	$	6,927		$	7,143
Balance at beginning of period	$	9,299		$	2,530
Payments made		(3,315	)		(3,531	)
(Decrease) increase in fair value (1)		(7,400	)		4,212
Balance at end of period	$	3,612		$	3,612
Balance at end of period	$	1,899		$	6,742

~~(1)~~As ~~The~~of ~~change~~June 30, 2023, the Company had $3.6 million remaining in ~~fair~~accounts ~~values~~payable ofand ~~the~~accrued ~~warrant~~and other current liabilities, iswhich ~~recorded~~the inCompany ~~other~~expects ~~income~~to inbe paid by the ~~consolidated~~end ~~statement~~of the first quarter of ~~operations~~2024.

in9. Capital Structure

5On February 10, 2023, the stockholders of the Company approved a reverse stock-split of the Company’s outstanding shares of common stock at a ratio ranging from any whole number between 1-for-10 and 1-for-80, as determined by the Board of Directors in its discretion. ~~Accrued~~The Board subsequently determined to implement a reverse stock split at a ratio of 1-for-80. The stock split became effective on February 14, 2023. Accordingly, all share and ~~Other~~per ~~Current~~share ~~Liabilities~~amounts for all periods presented in the accompanying financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect this reverse stock split. Shares of common stock underlying outstanding stock options and other equity instruments were proportionately decreased and the respective per share value and exercise prices, if applicable, were proportionately increased in accordance with the terms of the agreements governing such securities.

~~Accrued~~Common ~~and~~Stock ~~other current liabilities consist of the following as of March 31, 2023 and December 31, 2022 (in thousands):~~

	March 31, 2023		December 31, 2022
Accrued research and development service fees	$	4,019	$	3,443
Accrued compensation costs		1,653		1,676
Accrued professional fees		1,382		970
Accrued insurance and facilities operation expenses		1,066		252
Other accrued expenses		30		157
Total accrued and other current liabilities	$	8,150	$	6,498

As of June 30, 2023, the Company was authorized to issue 125,000,000 shares of common stock.

In February 2023, the Company entered into a financing agreement for $0.9 million for a portion of the Company’s annual directors and officers insurance premiums. The balance is due in monthly installments over eight months with an annual interest rate of 6.25%. The remaining balance was $0.8 million as of March 31, 2023 and was included in accrued and other current liabilities on the consolidated balance sheet.15

6.Follow-on ~~Net~~Offerings ~~Loss Per Share of Common Stock~~

~~pre-funded~~On May 27, 2020, the Company completed an underwritten public offering of 147,471 shares of its common stock and warrants to purchase an additional 110,603 shares of its common stock at an exercise price of $392.00 per share. The public offering price was $356.00 for one share of common stock and an accompanying warrant to purchase 0.75 shares of common stock, resulting in net proceeds to the Company of $48.9 million after underwriting discounts and commissions and offering expenses payable by the Company. The Company completed a concurrent private placement to Pfizer of 8,427 shares of common stock and an accompanying warrant to purchase an additional 6,320 shares of its common stock at an exercise price of $392.00 per share of common stock (the “Pfizer Warrant”), resulting in net proceeds to the Company of $3.0 million.

~~pre-funded~~On March 22, 2021, the Company completed an underwritten public offering of 143,750 shares of its common stock, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, at a public offering price of $400.00 per share, resulting in net proceeds to the Company of $53.8 million after underwriting discounts and commissions and offering expenses payable by the Company.

~~The~~On ~~following~~December ~~table~~15, ~~sets~~2022, ~~forth~~the Company completed the ~~computation~~2022 Offering. All shares of ~~basic~~common stock, the 2022 pre-funded warrant, the Class A Warrant and ~~diluted~~the ~~net~~Class ~~loss~~B ~~per~~Warrant ~~share~~were issued together to a single accredited investor purchaser for consideration equating to $10.32 share of common ~~stockholders~~stock (inor ~~thousands~~2022 pre-funded warrant to purchase one share of common stock, ~~except~~less a nominal exercise price), together with a Class A Warrant to purchase two shares of common stock and a Class B warrant to purchase one share of common stock, in the case of each of the Class A Warrant and Class B Warrant, for no additional consideration but each with an exercise price per share ~~data):~~of $10.32, for aggregate net proceeds to the Company of $6.1 million after placement agent fees and offering expenses payable by the Company. As of January 20, 2023, the 2022 pre-funded warrant had been fully exercised.

	Three Months Ended March 31,
	2023			2022
Net loss	$	(1,371	)	$	(20,157	)
Weighted average shares of common stock outstanding		1,975,476			491,626
Net loss per share of common stock—basic and diluted	$	(0.69	)	$	(41.00	)

At issuance, the 2022 Warrants were not exercisable and only became exercisable following (i) stockholder approval of (and the effectiveness of) an amendment to the Company’s certificate of incorporation that either combines outstanding shares of common stock with such combination ratio as determined by the Company’s board of directors and/or authorizes additional shares of common stock to such number as determined by the Company’s board of directors, in each case, so as to enable the issuance of the number of shares of common stock underlying the 2022 Warrants (disregarding any limitations on the exercise thereof), and (ii) the issuance of all shares of common stock issued in, or issuable pursuant to the exercise of the 2022 pre-funded warrant or 2022 Warrants issued in, the 2022 Offering as may have been required by the applicable rules and regulations of the Nasdaq Stock Market.

12On February 10, 2023, the stockholders of the Company approved the issuance of all shares of common stock issued in, or issuable pursuant to the exercise of the 2022 pre-funded warrant or 2022 Warrants issued in the 2022 Offering as may have been required by the applicable rules and regulations of the Nasdaq Stock Market, the approval of which, together with the approval and effectiveness of the 1-for-80 reverse stock-split effected on February 14, 2023, commenced the exercisability of the 2022 Warrants as of February 14, 2023. The resulting expiration dates of the 2022 Warrants have been reflected, where applicable, in the accompanying financial statements and notes thereto. On March 2, 2023, the exercise price of the 2022 Warrants, which are subject to an anti-dilution adjustment, were adjusted to $4.00 per share as a result of the 2023 Offering.

~~Table~~On March 2, 2023, the Company completed the 2023 Offering. All securities in the 2023 Offering were issued to the same single accredited investor purchaser from the 2022 Offering for consideration equating to $4.00 per share of ~~Contents~~common stock (or 2023 pre-funded warrant to purchase one share of common stock, less a nominal exercise price), together with a warrant to purchase two shares of common stock for no additional consideration but with an exercise price per share of $4.00, for aggregate net proceeds to the Company of $9.1 million after placement agent fees and offering expenses payable by the Company. As of April 17, 2023, the 2023 pre-funded warrant had been fully exercised.

On June 26, 2023, the Company entered into the Inducement Agreement with the Holder to exercise common stock purchase warrants and purchase up to an aggregate of 7,034,883 shares of the Company’s common stock. The ~~following~~Inducement ~~potentially~~Agreement ~~dilutive~~provided ~~securities~~the ~~outstanding~~Holder atwith ~~March 31~~the opportunity to exercise all of the Existing Warrants held by the Holder, ~~2023~~each ~~and~~at ~~2022~~a ~~have~~reduced ~~been~~exercise ~~excluded~~price from $4.00 to $1.36 per underlying share, which was equal to the ~~computation~~most recent closing price of ~~diluted~~the ~~weighted~~Company’s ~~average~~common stock on The Nasdaq Capital Market prior to the execution of the Inducement Agreement. In consideration for exercising the Existing Warrants at an exercise price equal to $1.36 per underlying share, the Company issued to the Holder the Class C Warrant to purchase up to 1,406,977 shares ~~outstanding~~of common stock, asat ~~they~~an ~~would~~exercise ~~have~~price ~~been~~equal ~~anti-dilutive:~~to $1.36 per underlying share and the Class D Warrant to purchase up to 5,627,906 shares of common stock, at an exercise price equal to $1.36 per underlying share. The proceeds to the Company from the Warrant Exercise were $9.6 million, prior to deducting fees to the financial advisor and estimated expenses.

	March 31,
	2023		2022
Options to purchase common stock		79,661		52,148
Warrants to purchase common stock		7,151,451		136,563
Total		7,231,112		188,711

At issuance, the New Warrants were not exercisable and only become exercisable following stockholder approval of the issuance of all shares of common stock issued in, or issuable pursuant to the exercise of the New Warrants issued pursuant to the Inducement Agreement as may have been required by the applicable rules and regulations of the Nasdaq Stock Market.

~~7. Commitments and Contingencies~~ 16

~~Operating~~The ~~Leases~~Class C Warrant and the warrants issued by the Company in its 2022 and 2020 offerings of securities contained certain terms that the Company determined required classification as liabilities in accordance with ASC 815. At issuance, the Company determined the fair value of the Class C Warrant, the 2022 Warrants and the 2020 Warrants to be $1.8 million, $11.0 million and $31.4 million, respectively, and recorded these balances as warrant liabilities, and reducing the amount of net proceeds recorded as additional paid-in-capital. The fair value of the 2022 Warrants exceeded the proceeds received in the 2022 Offering and the excess of $4.0 million was expensed as other expense. The Company consummated the 2022 Offering on market terms available at the time of the transaction to provide additional funding to advance its product candidates. The fair value of these warrants is re-measured at each reporting period and changes in fair value are recognized in the consolidated statement of operations (see Note 4, “Fair Value Measurements”). Additionally, the Company allocated $0.1 million, $0.9 million and $2.2 million of issuance costs to the Class C Warrant, the 2022 Warrants and the 2020 Warrants, respectively, based on the proportion of the proceeds allocated to the fair value of the warrants. The allocated issuance costs were expensed as other expense. The Class D Warrant, the 2023 Warrant and the Pfizer Warrant do not contain the same provisions and therefore the Company determined that the Class D Warrant, the 2023 Warrant and the Pfizer Warrant should be classified as equity in the Company’s consolidated balance sheet.

~~non-cancellable~~Voting

~~non-cancellable~~The holders of shares of common stock are entitled to one vote for each share of common stock held at all meetings of stockholders and written actions in lieu of meetings.

~~The~~Dividends ~~balance sheet classification of the Company’s lease liabilities was as follows (in thousands):~~

Description	March 31, 2023		December 31, 2022
Operating lease liabilities:
Current portion of lease liabilities	$	674	$	671
Long-term portion of lease liabilities	$	2,100	$	2,210

The holders of shares of common stock are entitled to receive dividends, if and when declared by the board of directors. As of June 30, 2023, no dividends have been declared or paid on the Company’s common stock since inception.

~~The~~Reserved ~~Company adopted Topic 842 in accounting~~ for ~~its~~Future ~~lease~~Issuance liabilities as of January 1, 2019. Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company used a discount rate of 9.93%, which was an estimate of its incremental borrowing rate based on the information available at the adoption date. The leases are renewable at the end of the lease term at the Company’s option. For the purposes of determining the remaining lease term in contemplation of available extensions, the Company did not consider either renewal to be probable and therefore the remaining lease term used to determine the operating lease liability was 9.0 years at the adoption date.

AsThe ofCompany ~~March 31,~~has ~~2023,~~reserved for future issuance the ~~maturities~~following number of ~~our~~shares ~~operating~~of ~~lease~~common ~~liabilities~~stock ~~were~~ as ~~follows~~of ~~(in~~June ~~thousands)~~30, 2023 and December 31, 2022:

	Amount
	June 30,2023			December 31,2022
April 1, 2023—December 31, 2023	$	531
Outstanding pre-funded warrants to purchase common stock		—			574,937
Year ending December 31:
Outstanding options to purchase common stock		79,519			55,565
2024		721
Outstanding warrants to purchase common stock		7,034,883			2,151,451
2025		736
For future issuance under the 2014 Omnibus Incentive Plan		1,162			1,317
2026		750
For future issuance under the 2021 Employment Inducement Plan		12,375			12,375
2027		702
		7,127,939			2,795,645
Total lease payments		3,440
Less: Present value adjustment		(666	)
Operating lease liabilities		2,774

1310. Stock Warrants

~~Table~~As of ~~Contents~~June 30, 2023 and December 31, 2022, the Company had warrants to purchase the underlying common stock outstanding as shown in the table below.

Lease costs under the terms of the Company’s leases for the three months ended March 31, 2023 and 2022 were as follows (in thousands):


	June 30, 2023		December 31, 2022
Class C Warrants		1,406,977		—
Class D Warrants		5,627,906		—
2022 Warrants		—		2,034,883
2020 Warrants		—		110,248
Pfizer Warrant		—		6,320
Warrants to purchase common stock		7,034,883		2,151,451
Weighted-average exercise price per share	$	1.36	$	31.00

	March 31,
	2023		2022
Operating lease cost (1)	$	151	$	153
Variable lease costs (2)		30		40
Total lease cost	$	181	$	193

11. Stock Option and Incentive Plans

~~(1)~~Amended ~~Operating~~and ~~lease~~Restated ~~payments~~2008 ~~included~~Equity inIncentive ~~the~~Plan ~~measurement of the Company’s lease liabilities are comprised of fixed payments according to the terms of the Company’s leases.~~

~~(2)~~In ~~Variable~~July ~~lease~~2008, ~~payments consist of~~ the Company’s ~~utility~~adopted ~~costs~~the ~~billed~~2008 byEquity ~~and~~Incentive ~~paid~~Plan to(the ~~its landlord~~“Plan”). ~~Variable~~On ~~lease~~February ~~payments~~26, ~~are~~2013, ~~presented as operating expenses in~~ the ~~Company’s~~board ~~Consolidated Statement~~ of ~~Operations~~directors inapproved ~~the~~an ~~same~~amended ~~line~~and ~~item~~restated asplan ~~expense~~(the ~~arising~~“Amended ~~from~~Plan”) ~~fixed~~under ~~lease~~which ~~payments~~the ~~and~~number inof ~~net~~shares ~~cash~~of ~~used~~common instock ~~operating~~available ~~activities~~for ~~in the Company’s Statement of Cash Flows.~~

~~Rockefeller University~~ 17

~~License~~issuance ~~Agreements~~was 1,964. For new awards, the period that vested awards would remain exercisable upon termination of service was reduced from ten years to two years. The board of directors also increased the number of shares of common stock available under the Company’s Amended Plan on February 24, 2014 and April 29, 2014 to 2,321 and 2,946, respectively. As of the closing of the Company’s IPO, there were no further grants made under the Amended Plan.

~~The~~2014 ~~Company~~Omnibus ~~has~~Incentive ~~entered~~Plan ~~into the following license agreements with The Rockefeller University:~~

•In OnApril ~~July 12~~2014, ~~2011,~~ the Company’s ~~entered~~board ~~into~~of adirectors ~~license~~adopted ~~agreement~~the ~~for~~2014 Omnibus Incentive Plan (the ~~worldwide,~~“2014 ~~exclusive~~Plan”). ~~right~~The to2014 aPlan ~~patent~~was ~~covering~~approved by the ~~composition~~Company’s ofshareholders ~~matter~~on ~~for~~July ~~the~~3, ~~lysin~~2014. ~~PlySS2~~The 2014 Plan allows for the ~~treatment~~granting of incentive and ~~prevention~~non-qualified ofstock ~~diseases~~options, ~~caused~~restricted bystock ~~gram-positive~~and ~~bacteria~~stock ~~(the~~unit ~~“CF~~awards, stock appreciation rights and other performance-~~301~~based ~~License”).~~awards ~~The~~to the Company’s ~~rebranded~~employees, ~~PlySS2~~members asof ~~CF-301~~the ~~and~~board ~~subsequently,~~of ~~exebacase.~~directors ~~The~~and ~~license~~consultants ~~gives~~of the Company. On July 28, 2014, the ~~right~~effective todate ~~exclusively~~of ~~develop,~~the ~~make~~2014 Plan, ~~have~~the ~~made,~~number ~~use,~~of ~~import,~~shares ~~lease,~~of ~~sell~~common ~~and~~stock ~~offer~~reserved pursuant to the 2014 Plan was 715. The 2014 Plan provides for ~~sale~~an ~~products~~annual ~~that~~increase, ~~would~~to ~~otherwise~~be ~~infringe~~added aon ~~claim~~the first day of ~~this~~each ~~patent~~fiscal ~~application~~year, orbeginning ~~patent.~~with the fiscal year ended December 31, 2015 and ending on January 1, 2024,

•equal Onto ~~June 1, 2011,~~ the ~~Company~~lesser ~~entered~~of ~~into~~(i) a4% ~~license~~of ~~agreement for~~ the ~~exclusive~~outstanding ~~rights~~shares toof ~~The~~common ~~Rockefeller~~stock ~~University’s~~on ~~interest~~December in31 aimmediately ~~joint~~preceding ~~patent~~such ~~application~~date ~~covering~~or ~~the~~(ii) ~~method~~a oflesser ~~delivering~~amount ~~antibodies~~determined ~~through~~by the ~~cell~~Company’s ~~wall~~board of ~~gram-positive~~directors. ~~bacteria~~Consistent towith the ~~periplasmic~~provision ~~space.~~for ~~This~~an ~~intellectual~~annual ~~property~~increase, ~~was~~an ~~developed~~additional as77,157 ashares ~~result~~ of ~~the~~common ~~sponsored~~stock ~~research~~have ~~agreement~~been ~~between~~reserved under the ~~Company~~2014 ~~and~~Plan ~~The~~as ~~Rockefeller~~of ~~University~~January ~~and~~1, ~~was jointly discovered and filed by the two parties~~2023.

•2021 OnEmployment ~~September~~Inducement ~~23,~~Omnibus ~~2010,~~Incentive ~~the~~Plan Company entered into a license agreement for the worldwide, exclusive right to develop, make, have made, use, import, lease, sell, and offer for sale products that would otherwise infringe a claim of the suite of patents and patent applications covering the composition of matter for eight individual lysin molecules for the treatment and prevention of diseases caused by gram-positive bacteria. The lysins in this suite have activity against Group B Streptococci, Staphylococcus aureus, Streptococcus pneumonia, Bacillus anthracis, Enterococcus faecalis and Enterococcus faecium.

CFIn September 2021, the Company’s board of directors adopted the 2021 Employment Inducement Omnibus Incentive Plan (the “2021 Plan”), under which the number of shares of common stock reserved for issuance was 12,500. The 2021 Plan allows for the granting of non-~~301~~qualified stock options, restricted stock and stock unit awards, stock appreciation rights and other performance-based awards only to newly hired employees of the Company who have not previously been an employee or member of the board, or an employee who is being rehired following a bona fide period of non-employment by the Company.

~~Each~~2022 ~~license~~Employee ~~agreement~~Stock ~~terminates~~Purchase ~~upon~~Plan the later of (i) the expiration or abandonment of the last licensed patent under the license agreement to expire or become abandoned, or (ii) 10 years after the first commercial sale of the first licensed product. The Rockefeller University may terminate any license agreement in the event of a breach of such agreement by the Company or if the Company challenges the validity or enforceability of the underlying patent rights. The Company may terminate any license agreement at any time on 60 days’ notice.

~~Legal~~In ~~Contingencies~~March 2022, the Company’s board of directors adopted the 2022 Employee Stock Purchase Plan (the “2022 ESPP”). The 2022 ESPP was approved by the Company’s shareholders on May 17, 2022. The 2022 ESPP allows employees to buy Company stock through after-tax payroll deductions at a discount from market value. One component of the 2022 ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code, whereas the other component authorizes the grant of rights which need not qualify as rights granted pursuant to an “employee stock purchase plan” under Section 423. The number of shares of common stock initially available for issuance under the 2022 ESPP was 10,000 shares of common stock. As of June 30, 2023, no purchase rights were outstanding under the 2022 ESPP.

~~From~~Under ~~time~~the to2022 ~~time~~ESPP, ~~the~~employees ~~Company~~ may bepurchase ~~involved~~common instock ~~disputes~~through ~~and~~after-tax ~~legal~~payroll ~~proceedings~~deductions. inIn the ~~ordinary~~absence ~~course~~ of ~~its~~a ~~business.~~contrary ~~These proceedings may include allegations of infringement of intellectual property~~designation, ~~employment or other matters. The Company records a liability in its financial statements for these matters when a loss is known or considered probable and~~ the ~~amount~~purchase ~~can~~price will be ~~reasonably~~85% ~~estimated.~~of ~~The Company reviews these estimates each accounting period as additional information is known and adjusts~~ the ~~loss~~lower ~~provision when appropriate. If a matter is both probable to result in a liability and the amounts~~ of ~~loss can be reasonably estimated,~~ the ~~Company~~fair ~~estimates~~market ~~and~~value ~~discloses the possible loss or range~~ of ~~loss~~our tocommon ~~the~~stock ~~extent~~on ~~necessary to make~~ the ~~financial~~first ~~statements~~trading ~~not~~day ~~misleading.~~of Ifan ~~the~~offering ~~loss~~period ~~is not probable~~ or ~~cannot be reasonably estimated, a liability is not recorded in~~ the ~~Company’s~~last ~~financial~~trading ~~statements.~~day ~~The~~of ~~Company~~an ~~currently~~offering ~~has no legal proceedings ongoing that management estimates could have a material effect on the Company’s financial statements~~period.

14The Company recognized compensation expense for stock-based compensation based on the fair value of the underlying instrument. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. A summary of stock option activity for the six months ended June, 2023, is summarized as follows:

Table of Contents


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Options outstanding at December 31, 2022		55,565		$	548.79
Granted		25,125			5.03
Exercised		—			—
Expired		(1,046	)		1,763.01
Forfeited		(125	)		19.20
Options outstanding at June 30, 2023		79,519			359.96		8.07	$	—
Vested and exercisable at June 30, 2023		40,549		$	572.07		7.11	$	—

tThe fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. There were no options granted during the three months ended June 30, 2023. The weighted average grant date fair value of options granted

~~CF-370~~18

~~write-off~~during the three months ended June 30, 2022 was $3.32, and during the six months ended June 30, 2023 and 2022 was $5.03 and $3.33, respectively. Total compensation expense recognized amounted to $0.8 million and $1.0 million for the three months ended June 30, 2023 and 2022, respectively, and $1.7 million and $1.9 million for the six months ended June 30, 2023 and 2022, respectively. As of June 30, 2023, the total remaining unrecognized compensation cost related to unvested stock options was approximately $2.9 million which will be recognized over a weighted average period of approximately 1.8 years.

The ~~restructuring~~following ~~costs~~assumptions were ~~included~~used into ~~accounts~~compute ~~payable~~the ~~and~~fair ~~accrued~~value ~~and~~of ~~other~~stock ~~current~~options ~~liabilities.~~granted ~~Activity~~during ~~for~~ the ~~three months ended March 31, 2023 is summarized as follows (in thousands)~~period:

	Three Months Ended March 31, 2023
	Three Months EndedJune 30,						Six Months EndedJune 30,
Balance at beginning of period	$	7,143
	2023			2022			2023			2022
Payments made		(216	)
Risk free interest rate		—			2.94	%		4.00	%		2.15	%
Balance at end of period	$	6,927
Expected dividend yield		—			—			—			—
Expected term (in years)		—			5.52			6.06			5.95
Expected volatility		—			91.0	%		102.1	%		91.2	%

~~million~~Risk-free ~~remaining~~interest inrate—The ~~accounts~~Company ~~payable~~estimated ~~and~~the ~~accrued~~risk-free ~~and~~interest ~~other~~rate ~~current~~in ~~liabilities,~~reference ~~which~~to ~~the~~yield ~~Company~~on ~~expects~~U.S. toTreasury besecurities ~~paid~~with bya ~~the~~maturity ~~end~~date ofcommensurate with the ~~first~~expected ~~quarter~~term of ~~2024~~the associated award.

9Expected dividend yield—The Company estimated the expected dividend yield based on consideration of its historical dividend experience and future dividend expectations. ~~Capital~~The ~~Structure~~Company has not historically declared or paid dividends to common stockholders. Moreover, it does not intend to pay dividends in the future, but instead expects to retain any earnings to invest in its continued growth.

~~1-for-10~~Expected term—The Company based expected term on the midpoint of the vesting period and the contractual term of each respective option grant

~~1-for-80,~~Expected volatility—The Company estimated the expected volatility based on the Company’s historical volatility data.

~~1-for-80.~~19

~~Common~~ITEM ~~Stock~~2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

AsYou should read the following discussion and analysis of ~~March~~ our financial condition in conjunction with the information set forth in our financial statements and the notes to those statements included in this Quarterly Report on Form 10-Q and the audited financial statements and notes thereto as of and for the year ended December 31, ~~2023,~~2022 and the ~~Company~~related ~~was~~Management’s ~~authorized~~Discussion toand ~~issue~~Analysis ~~125~~of Financial Condition and Results of Operations,~~000,000~~ ~~shares~~both of ~~common~~which ~~stock~~are contained in our Annual Report on Form 10-K filed by us with the Securities and Exchange Commission (“SEC”) on March 31, 2023.

~~Follow~~All share and per share amounts have been adjusted to reflect a one-for-eighty reverse stock split effected on February 14, 2023.

OnOverview ~~May 27, 2020, the Company completed an underwritten public offering of~~

~~shares~~We are a clinical-stage biotechnology company focused on the discovery and development of ~~its~~direct ~~common~~lytic ~~stock~~agents (“DLAs”), including lysins and ~~warrants~~amurin peptides, as new medical modalities for the treatment of life-threatening, antibiotic-resistant infections. We believe DLAs are fundamentally different than antibiotics and offer a potential paradigm shift in the treatment of antibiotic-resistant infections. According to ~~purchase~~one of the most recent and comprehensive reports on the global burden of bacterial antimicrobial resistance (“AMR”), there were an ~~additional~~estimated 4.95 million deaths associated with bacterial AMR in 2019, including 1.27 million deaths directly attributable to bacterial AMR. The six leading pathogens for deaths associated with resistance (Escherichia coli (“E. coli”), Staphylococcus aureus (“S. aureus”), Klebsiella pneumoniae (“K. pneumoniae”), Streptococcus pneumoniae, Acinetobacter baumannii (“A. baumannii”), and Pseudomonas aeruginosa (“P. aeruginosa”)) were responsible for 929,000 deaths. Only one pathogen–drug combination, methicillin-resistant S. aureus (“MRSA”), caused more than 100,000 deaths in 2019.

~~shares~~Lysins are recombinantly-produced enzymes; when applied to bacteria, they cleave a key component of ~~its~~the ~~common~~target ~~stock~~bacteria’s atpeptidoglycan ancell ~~exercise~~wall, ~~price~~resulting in rapid bacterial cell death. In addition to the speed of $action and potent cidality, we believe lysins are differentiated by their other hallmark features, which include the demonstrated ability to eradicate biofilms and synergistically boost the efficacy of conventional antibiotics in animal models. Amurin peptides are a new class of DLAs, discovered in our laboratories, which disrupt the outer membrane of gram-negative bacteria, resulting in rapid bacterial cell death, offering a distinct mechanism of action from lysins. Amurins have a potent, broad spectrum of in vitro activity against a wide range of gram-negative pathogens, including deadly, drug-resistant P. aeruginosa, K. pneumoniae, E. coli, A. baumannii and Enterobacter cloacae bacteria species as well as difficult to treat pathogens such as Stenotrophomonas, Achromobacter and some Burkholderia species. The highly differentiated properties of DLAs underscore their potential use in addition to antibiotics with the goal of improving clinical outcomes compared to antibiotics alone. The development of DLAs involves a novel clinical and regulatory strategy, using superiority design clinical trials with the goal of delivering significantly improved clinical outcomes for patients with serious and/or antibiotic-resistant bacterial infections, including biofilm-associated infections. We believe this approach affords potential clinical benefits to patients as well as the potential ability to mitigate against further development of antibiotic resistance.

~~per~~We ~~share.~~have ~~The~~not generated any revenues and, to date, have funded our operations primarily through our initial public offering ~~price~~(“IPO”), ~~was~~our $follow-on public offerings, private placements of securities, and funding received from government contracts and various grants.

~~for~~On ~~one~~March 10, 2021, the Company entered into a cost-share contract (the “BARDA Contract”) with BARDA, a division of ~~common~~the ~~stock~~U.S. Department of Health and anHuman ~~accompanying~~Services’ ~~warrant~~Office of the Assistant Secretary for Preparedness and Response. The base period for the BARDA Contract included government funding of up to ~~purchase~~$9.8 million to reimburse expenses to support the conduct of the Phase 3 DISRUPT study and futility analysis. In connection with the Trial Closure, the BARDA Contract was modified to provide for up to $6.6 million in funding to support a futility outcome root-cause analysis and the close-out of the Phase 3 DISRUPT study of exebacase. The BARDA Contract ended on July 31, 2023.

On March 22, 2021, the Company completed an underwritten public offering under the Company’s registration statement on Form S-3 (Reg. No. 333-246359) (the “Form-S-3”). The Form S-3 was declared effective by the SEC on August 31, 2020 and allows the Company to offer and sell from time-to-time up to $150.0 million of common stock, preferred stock, debt securities, warrants or units comprised of any combination of these securities. The Company issued 143,750 shares of its common stock, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, at ana ~~exercise~~public offering price of $400.00 per share, resulting in net proceeds to the Company of $53.8 million after underwriting discounts and commissions and offering expenses payable by the Company.

On ~~March 22~~December 15, ~~2021~~2022, the Company completed an(i) ~~underwritten~~a ~~public~~registered direct offering under the Form S-3 of ~~143~~54,~~750~~375 shares of its common stock, ~~including~~and ~~shares~~a ~~sold~~pre-funded ~~pursuant~~warrant to ~~the~~purchase ~~fully exercised overallotment option granted to the underwriters in connection with the offering~~623,919 atshares ~~a public offering price~~ of ~~$400.00~~common ~~per~~stock ~~share, resulting in net proceeds to~~ (the ~~Company~~“2022 ofpre-funded ~~$53.8 million~~warrant”) ~~after underwriting discounts~~ and ~~commissions~~(ii) ~~and~~a ~~offering expenses payable by the Company.~~

1520

~~Table~~concurrent private placement in which the Company issued a Class A warrant to purchase up to an aggregate of ~~Contents~~1,356,589 shares of common stock (the “Class A Warrant”) and a Class B warrant to purchase up to an aggregate of 678,294 shares of common stock (the “Class B Warrant” and together with the Class A Warrant, the “2022 Warrants”) (collectively, the “2022 Offering”). All shares of common stock, the 2022 pre-funded warrant, the Class A Warrant and the Class B Warrant were issued together to a single accredited investor purchaser for consideration equating to $10.32 share of common stock (or 2022 pre-funded warrant to purchase one share of common stock, less a nominal exercise price), together with a Class A Warrant to purchase two shares of common stock and a Class B warrant to purchase one share of common stock, in the case of each of the Class A Warrant and Class B Warrant, for no additional consideration but each with an exercise price per share of $10.32, for aggregate net proceeds to the Company of $6.1 million after placement agent fees and offering expenses payable by the Company.

On January 31, 2023, the stockholders of the Company approved the issuance of all shares of common stock issued in, or issuable pursuant to the exercise of the 2022 pre-funded warrant or 2022 Warrants issued in, the 2022 Offering as was required by the applicable rules and regulations of the Nasdaq Stock Market LLC ("Nasdaq"), the approval of which, together with the approval and effectiveness of the 1-for-80 reverse stock-split effected on February 14, 2023, commenced the exercisability of the 2022 Warrants as of February 14, 2023.

On March 2, 2023, the Company completed (i) a registered direct offering under the Form S-3 of 128,000 shares of its common stock and a pre-funded warrant to purchase 2,372,000 shares of common stock (the “2023 pre-funded warrant”) and (ii) a concurrent private placement in which the Company issued a warrant to purchase up to an aggregate of 5,000,000 shares of common stock (collectively, the “2023 Offering). All securities in the 2023 Offering were issued to the same single accredited investor purchaser as in the 2022 Offering for consideration equating to $4.00 per share of common stock (or 2023 pre-funded warrant to purchase one share of common stock, less a nominal exercise price), together with a warrant to purchase two shares of common stock for no additional consideration but with an exercise price per share of $4.00, for aggregate net proceeds to the Company of $9.1 million after placement agent fees and offering expenses payable by the Company.

~~2022~~On June 26, 2023, the Company entered into an inducement offer to exercise common stock purchase warrants (the “Inducement Agreement”) with an institutional investor (the “Holder”) to purchase up to an aggregate of 7,034,883 shares of the Company’s common stock. The Inducement Agreement provided the Holder with the opportunity to exercise all of (i) the Class A Warrant, (ii) Class B Warrant and (iii) the 2023 Warrant (collectively, the “Existing Warrants”) held by the Holder, each at a reduced exercise price from $4.00 to $1.36 per underlying share, which was equal to the most recent closing price of the Company’s common stock on Nasdaq prior to the execution of the Inducement Agreement. In consideration for exercising the Existing Warrants (the “Warrant Exercise”), at an exercise price equal to $1.36 per underlying share, the Company issued to the Holder (i) a new unregistered Class C Common Stock Purchase Warrant (the “Class C Warrant”) to purchase up to 1,406,977 shares of common stock, at an exercise price equal to $1.36 per underlying share and (ii) a new unregistered Class D Common Stock Purchase Warrant (the “Class D Warrant” and together with the Class C Warrant, the “New Warrants”) to purchase up to 5,627,906 shares of common stock, at an exercise price equal to $1.36 per underlying share (such shares of common stock issuable upon exercise of the New Warrants, the “New Warrant Shares”). The proceeds to the Company from the Warrant Exercise were $9.6 million, prior to deducting fees to the financial advisor and estimated expenses.

~~pre~~We have never been profitable and our losses from operations were $8.9 million, $64.6 million and $47.3 million for the six months ended June 30, 2023 and the years ended December 31, 2022 and 2021, respectively. As of June 30, 2023, we had an accumulated deficit of $334.6 million. For the six months ended June 30, 2023, the Company used $16.9 million of cash in operations. We expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect the expenses for each program to increase as candidates advance through preclinical activities and clinical trials to seek regulatory approval and, if approved, commercialization. Accordingly, we will need additional financing to support our continuing operations and to continue as a going concern. We expect to seek to fund our operations through public or private equity, debt financings, equity-~~funded~~linked financings, collaborations, strategic alliances or transactions, licensing arrangements, research grants or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all, particularly in light of the Trial Closure (as defined below) and the substantial decline in the price of our common stock. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. Without additional funding, the Company believes it will not have sufficient funds to meet its obligations within the next twelve months from the date of issuance of the consolidated financial statements included in this Quarterly Report on Form 10-Q. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The recent substantial decline in the price per share of our common stock will likely make it more difficult for us to obtain financing.

~~2022~~On April 12, 2023, we received formal notice from the Nasdaq indicating that the Nasdaq Hearings Panel (the “Panel”) had granted the Company’s request for continued listing on The Nasdaq Capital Market, subject to the Company evidencing compliance with all applicable criteria for continued listing, including the $2.5 million minimum stockholders’ equity requirement set forth in Nasdaq Listing Rule 5550(b)(1) (the “Rule”), by no later than June 30, 2023. On July 21, 2023, we received notice from Nasdaq that

~~pre-funded~~21

~~pre~~we had regained compliance with the Rule (the “Compliance Notice”). However, the Company expects that it may not comply with the Rule upon filing of this Quarterly Report on Form 10-~~funded~~Q. In the Compliance Notice, Nasdaq indicated that if the Company fails to comply with the Rule within one year of the Compliance Notice, the Company would receive a Delist Determination Letter. The Company expects to have the ability to appeal any Delist Determination Letter. If we are delisted from the Nasdaq, it may become more difficult for us to obtain equity financing. For additional information regarding risks associated with potential delisting, see Part II, Item 1A, “We are required to meet the Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules, or we may risk delisting. Delisting could negatively affect the price of our common stock and could make it more difficult for us to sell securities in a future financing or for you to sell our common stock”.

~~2022~~If potential collaborators decline to do business with us or potential investors decline to participate in any future financings due to such concerns, our ability to increase our cash position may be limited. We will need to generate significant revenues to achieve profitability, and we may never do so.

~~pre-funded~~Financial Operations Overview

~~1-for-80~~Revenue

We have not generated any revenues to date. In the future, we may generate revenues from product sales. In addition, to the extent we enter into licensing or collaboration arrangements, we may have additional sources of revenue. We expect that any revenue we generate will fluctuate from quarter to quarter as a result of the amount and timing of payments that we may recognize upon the sale of our products, to the extent that any products are successfully commercialized, and the amount and timing of fees, reimbursements, milestone and other payments received under any future licensing or collaboration arrangements. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.

~~2023~~Research and development expenses

~~pre-funded~~Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:

•

~~2023~~employee-related expenses, including salaries, performance bonuses, benefits, travel and non-cash stock-based compensation expense;

•

~~pre-funded~~external research and development expenses incurred under arrangements with third parties such as contract research organizations, or CROs, contract manufacturers, consultants and academic institutions; and

•

~~paid-in-capital~~facilities and laboratory and other supplies.

reWe expense research and development costs to operations as incurred. We account for non-~~measured~~refundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received, rather than when the payment is made.

The ~~allocated~~following ~~issuance~~summarizes ~~costs~~our ~~were~~most ~~expensed~~advanced ascurrent ~~other~~research ~~expense. The 2023 Warrant~~ and ~~the~~development Pfizer Warrant do not contain the same fundamental transaction provisions and therefore the Company determined that the 2023 Warrant and the Pfizer Warrant should be classified as equity in the Company’s consolidated balance sheetprograms.

~~Voting~~Exebacase

~~The~~Our ~~holders~~first ofDLA ~~shares~~product candidate, exebacase, is currently being studied in an ongoing Phase 1b/2 study in patients with chronic prosthetic joint infections (“PJIs”) of ~~common~~the ~~stock~~knee ~~are~~due ~~entitled~~to S. aureus or coagulase-negative Staphylococci. In addition to ~~one~~PJIs, ~~vote~~Staphylococci, ~~for~~and ~~each~~S. ~~share~~aureus ofin particular, is also a common ~~stock~~cause ~~held~~of atbacteremia, ~~all~~pneumonia ~~meetings~~and osteomyelitis as well as biofilm-associated infections of ~~stockholders~~heart valves (endocarditis), indwelling devices and ~~written~~catheters. ~~actions~~These infections result in ~~lieu~~significant ofmorbidity ~~meetings~~and mortality despite currently available antibiotic therapies.

~~Dividends~~Exebacase is the first lysin to enter U.S. clinical trials and represents a first-in-class anti-bacterial therapeutic candidate. Exebacase was granted Breakthrough Therapy designation for development as a treatment for MRSA bloodstream infections (bacteremia), including right-sided endocarditis, when used in addition to standard-of-care anti-staphylococcal antibiotics ("SOCA") in adult patients, by the U.S. Food and Drug Administration (“FDA”) in February 2020. The Phase 2 data for MRSA-infected patients treated with exebacase which demonstrated superior outcomes in clinical response at Day 14 and in 30-day all-cause mortality as well as health economics benefits provided the basis for the FDA to grant Breakthrough Therapy designation.

~~The~~In ~~holders~~December of2019, ~~shares~~we ofinitiated ~~common~~the ~~stock~~Phase ~~are~~3 ~~entitled~~DISRUPT to(Direct ~~receive~~Lysis ~~dividends,~~of ifS. ~~and~~aureus ~~when~~Resistant ~~declared~~Pathogen byTrial) ~~the~~superiority ~~board~~design study of ~~directors~~exebacase. AsThe ofDISRUPT ~~March 31~~study was a randomized, ~~2023~~double-blind, noplacebo-controlled ~~dividends~~Phase ~~have~~3 ~~been~~clinical ~~declared~~trial orconducted ~~paid~~in on the ~~Company’s common stock since inception.~~

1622

~~Table~~U.S. alone to assess the efficacy and safety of ~~Contents~~exebacase in adult and adolescent patients with complicated S. aureus bacteremia, including right-sided endocarditis. Patients entering the study were randomized 2:1 to either exebacase or placebo, with all patients receiving SOC antistaphylococcal antibiotics. The primary efficacy endpoint of the study is clinical response at Day 14 in patients with MRSA bacteremia, including right-sided endocarditis. Secondary endpoints included clinical response at Day 14 in the All S. aureus patient group (MRSA and methicillin-sensitive S. aureus (“MSSA”)), 30-day all-cause mortality in MRSA patients, and clinical response at later timepoints.

~~Reserved~~In July 2022, the Data Safety Monitoring Board (“DSMB”) of the Company’s Phase 3 DISRUPT study completed a pre-specified, interim futility analysis and recommended that the DISRUPT study be stopped because the conditional power of the study was below the pre-specified threshold for ~~Future~~futility ~~Issuance~~in the DSMB charter. The recommendation was based on an analysis of the clinical response rate at day 14 (the primary efficacy endpoint of the study) in 84 patients, or approximately 60% of the total planned MRSA population with bacteremia, including right-sided endocarditis. Based on the DSMB’s recommendation, patient enrollment in the Phase 3 trial was stopped and the trial was closed (“Trial Closure”). We continued to monitor all already enrolled patients and all patients completed their follow-up visits. We also expect to complete all clinical study reports as required by the FDA.

~~The~~Analysis ~~Company~~of the complete dataset including all patient follow-up has ~~reserved~~been ~~for~~completed. ~~future~~The ~~issuance~~259 enrolled patients were randomly assigned in a 2:1 ratio to receive either exebacase or placebo in addition to SOCA. Randomization was stratified by MRSA or MSSA and by the ~~following~~presence ~~number~~or absence of ~~shares~~poorly controlled diabetes. Clinical responder rates at Day 14 in the MRSA population were 50.0% in the exebacase-treated group compared to 60.6% in the SOCA alone group (p=0.392). The result was unexpected based on the prior Phase 2 study of ~~common~~exebacase ~~stock~~that asestablished proof-of ~~March 31~~concept in patients with MRSA bacteremia, ~~2023~~including right-sided endocarditis. In the SOCA alone group, the clinical responder rate was unexpectedly high and ~~December 31~~the mortality rate was unexpectedly low based on the prior Phase 2 study and previously published clinical trials. Significant heterogeneity among the patient population, ~~2022:~~a small sample size at the time of the futility analysis, and imbalances in prognostic factors (including severity of illness at baseline as measured by APACHE II score, which favored the SOCA alone arm) contributed to the results. Overall rates of adverse events were similar in both groups and there were no adverse events of hypersensitivity related to exebacase.

	March 31, 2023		December 31, 2022
Outstanding pre-funded warrants to purchase common stock		2,104,000		574,937
Outstanding options to purchase common stock		79,661		55,565
Outstanding warrants to purchase common stock		7,151,451		2,151,451
For future issuance under the 2014 Omnibus Incentive Plan		1,020		1,317
For future issuance under the 2021 Employment Inducement Plan		12,375		12,375
		9,348,507		2,795,645

On September 30, 2022, we submitted a Clinical Trial Authorization (“CTA”) with the French National Agency for the Safety of Medicines and Health Products (“ANSM”) for the study of intra-articular exebacase in patients with chronic prosthetic joint infections of the knee due to S. aureus or coagulase-negative Staphylococci (“CoNS”). The CTA was approved by ANSM in November 2022 and, following IRB/EC approval of the study protocol, we initiated dosing of patients. We expect to report interim clinical data from the first cohort of patients in the second half of 2023.

10The approved trial is a Phase 1b/2 study of exebacase in the setting of an arthroscopic debridement with joint retention and systemic antibiotics ("DAIR") procedure in patients with chronic PJI of the knee due to S. ~~Stock~~aureus ~~Warrants~~and/or CoNS. The study is a randomized, double-blind, placebo-controlled two-part clinical study to be conducted at a single center in France to assess the efficacy and safety of exebacase. Part 1 will evaluate the safety, PK, early clinical outcomes, and microbiologic response in patients through Day 42. Up to 2 dose levels of intra-articularly administered exebacase in addition to systemic antibiotics will be studied in up to 2 patient cohorts. Part 2 will consist of a long-term follow-up study of safety and efficacy parameters in patients who complete Part 1 of the study. Follow-up assessments will be performed on Days 90, 180, 360 and 720, including health resource utilization and QoL measures. Patients entering the study will be randomized 3:1 to either exebacase or placebo, with all patients receiving study drug in the setting of a DAIR Procedure.

AsCF-370 ~~of March 31, 2023 and December 31, 2022, the Company had warrants to purchase the underlying common stock outstanding as shown in the table below.~~

	March 31, 2023		December 31, 2022
2023 Warrants		5,000,000		—
2022 Warrants		2,034,883		2,034,883
2020 Warrant		110,248		110,248
Pfizer Warrant		6,320		6,320
Warrants to purchase common stock		7,151,451		2,151,451
Weighted-average exercise price per share	$	10.32	$	31.00

Our next product candidate, CF-370, is designed to target a range of gram-negative bacteria, including P. aeruginosa, K. pneumoniae and A. baumannii, and has demonstrated potent in vivo activity against these pathogens, even against multidrug-resistant (“MDR”) and extensively drug-resistant (“XDR”) strains. Gram-negative pathogens are a major cause of morbidity and mortality in patients with hospital-acquired or ventilator-associated pneumonia and P. aeruginosa remains a major medical challenge for cystic fibrosis patients with chronic lung infections.

~~The~~We ~~following~~believe ~~table~~agents ~~summarizes~~which ~~information~~target ~~regarding~~P. aeruginosa, K. pneumoniae, Enterobacteriaceae and E. coli will be important therapeutic options for the ~~Company’s~~treatment ~~warrants~~of ~~outstanding~~serious, atpotentially ~~March 31~~life-threatening invasive infections caused by MDR and XDR pathogens. Because of the novel mechanism by which direct lytic agents kill bacteria and the lack of observable cross resistance to conventional antibiotics, ~~2023:~~the ß-lactam enzymes that degrade many antibiotics are not expected to have any effect on the activity of our investigational agents. We believe that direct lytic agents will help to improve clinical outcomes and decrease mortality of infections caused by these pathogens.

Exercise Prices	SharesUnderlyingOutstandingWarrants		Expiration Date
$ 4.00		678,294		August 14, 2023
$ 4.00		1,356,589		February 14, 2028
$ 4.00		5,000,000		March 2, 2028
$392.00		116,568		May 27, 2023
		7,151,451

We have studied CF-370 in multiple animal models with external organizations with both sensitive and resistant strains and using CF-370 in addition to either amikacin (“AMK”) or meropenem, demonstrating the superiority of the combination of CF-370

~~11. Stock Option and Incentive Plans~~ 23

~~Amended~~with SOC antibiotics. We believe the results from these studies provide in vivo proof-of-concept for CF-370 as a potential treatment for pulmonary infections caused by gram-negative pathogens and ~~Restated~~for ~~2008~~direct ~~Equity~~lytic ~~Incentive~~agents ~~Plan~~as a potential new modality to combat the threat of multidrug-resistant gram-negative pathogens. We continue to progress CF-370 through Investigational New Drug Application (“IND") enabling activities and we expect it to be our next molecule in clinical studies. We plan to submit an IND to the FDA in the third quarter of 2023 and, if allowed to proceed, to initiate phase 1 clinical studies of CF-370 in healthy volunteers shortly thereafter.

InTo ~~July 2008~~date, ~~the~~a ~~Company~~large ~~adopted~~portion ~~the~~of ~~2008~~our ~~Equity~~research ~~Incentive~~and ~~Plan~~development (work has related to the ~~“Plan”).~~establishment Onof ~~February 26,~~our ~~2013~~platform technologies, the ~~board~~advancement of ~~directors~~our ~~approved~~research anprojects ~~amended~~to discovery of clinical candidates, manufacturing and ~~restated~~preclinical ~~plan~~testing ~~(the~~of ~~“Amended~~our ~~Plan”)~~clinical ~~under~~candidates ~~which~~and ~~the~~clinical ~~number~~testing of ~~shares~~exebacase. We currently expect to focus the majority of ~~common~~our ~~stock~~resources ~~available~~on ~~for~~the ~~issuance~~exebacase ~~was~~and ~~1,964~~CF-370 programs. ~~For~~As ~~new~~our ~~awards~~pipeline progresses, ~~the~~we ~~period~~are ~~that~~able ~~vested~~to ~~awards~~leverage ~~would~~our ~~remain~~employee ~~exercisable~~and ~~upon~~infrastructure ~~termination~~resources ofacross ~~service~~multiple ~~was~~development ~~reduced~~and ~~from~~research ~~ten~~programs. ~~years~~We torecorded ~~two~~approximately ~~years~~$4.9 ~~The~~million ~~board~~and $16.8 million of ~~directors~~research ~~also~~and ~~increased~~development expenses for the ~~number~~three ofmonths ~~shares~~ended ofJune ~~common~~30, ~~stock~~2023 ~~available~~and ~~under~~2022 and $10.2 million and $29.5 million, respectively, for the ~~Company’s~~six ~~Amended~~months ~~Plan~~ended onJune ~~February 24~~30, ~~2014~~2023 and ~~April 29~~2022, ~~2014~~respectively. A breakdown of our research and development expenses by category is shown below. We do not currently utilize a formal time or laboratory project expense allocation system to 2allocate employee-related expenses,~~321~~ ~~and~~laboratory 2costs or depreciation to any particular project. Accordingly,~~946,~~ ~~respectively~~we do not allocate these expenses to individual projects or product candidates. AsHowever, ofwe ~~the~~do ~~closing~~allocate some portions of our research and development expenses in the ~~Company’s~~product ~~IPO~~development, ~~there~~external ~~were~~research noand ~~further~~licensing ~~grants~~and ~~made~~professional ~~under~~fees ~~the~~categories ~~Amended~~to ~~Plan~~exebacase and CF-370 as shown below.

~~2014~~The ~~Omnibus~~following ~~Incentive~~table ~~Plan~~summarizes our research and development expenses by category for the three and six months ended June 30, 2023 and 2022 (in thousands):

non-qualified


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Product development	$	2,927		$	14,458		$	8,624		$	25,017
Personnel related		1,358			2,418			2,583			4,809
Professional fees		492			1,110			961			2,135
Laboratory costs		380			530			716			1,089
Stock-based compensation		233			267			463			530
External research and licensing costs		30			205			51			247
Expenses reimbursed by grants		(550	)		(2,228	)		(3,233	)		(4,342	)
Total research and development expense	$	4,870		$	16,760		$	10,165		$	29,485

The following table summarizes our research and development expenses by program for the three and six months ended June 30, 2023 and 2022 (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023	2022
Exebacase	$	2,100	$	12,096	$

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