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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2021

OR

 

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

Commission File Number: 001-39692

 

IN8BIO, INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

82-5462585

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

79 Madison Avenue

New York, New York

10016

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (646) 600-6438

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

INAB

 

The Nasdaq Stock Market LLC

 

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. YesNo

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). YesNo

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

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YesNo

The number of shares of Registrant’s Common Stock outstanding as of September 7, 2021 was 18,754,553.

 

 

 


Table of Contents

 

 

 

Page

PART I

FINANCIAL INFORMATION

 

Item 1.

Condensed Financial Statements (Unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations

2

 

Condensed Statements of Convertible Preferred Stock, Common Stock and Stockholders’ Deficit

3

 

Condensed Statements of Cash Flows

4

 

Notes to Condensed Financial Statements

5

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3.

Defaults Upon Senior Securities

67

Item 4.

Mine Safety Disclosures

67

Item 5.

Other Information

67

Item 6.

Exhibits

67

Signatures

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

IN8BIO, INC.

CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

June 30,

 

 

 

 

 

 

2021

 

 

December 31,

 

 

 

(unaudited)

 

 

2020

 

Assets

 

 

 

 

(Note 2)

 

Current assets

 

 

 

 

 

 

Cash

 

$

11,999

 

 

$

17,994

 

Prepaid expenses and other current assets

 

 

168

 

 

 

150

 

Total Current Assets

 

 

12,167

 

 

 

18,144

 

Non-current assets

 

 

 

 

 

 

Property and equipment, net

 

 

142

 

 

 

186

 

Deferred offering costs

 

 

3,362

 

 

 

2,439

 

Right of use assets - financing leases

 

 

990

 

 

 

 

Right of use assets - operating leases

 

 

762

 

 

 

 

Other non-current assets

 

 

141

 

 

 

141

 

Total Non-Current Assets

 

 

5,397

 

 

 

2,766

 

Total Assets

 

$

17,564

 

 

$

20,910

 

Liabilities, Convertible Preferred Stock and Stockholders' Deficit

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

462

 

 

$

620

 

Accrued expenses and other current liabilities

 

 

1,485

 

 

 

1,778

 

Short-term financing lease liability

 

 

517

 

 

 

 

Short-term operating lease liability

 

 

135

 

 

 

 

Loan payable, current

 

 

174

 

 

 

174

 

Total Current Liabilities

 

 

2,773

 

 

 

2,572

 

Deferred rent

 

 

 

 

 

17

 

Long-term financing lease liability

 

 

432

 

 

 

 

Long-term operating lease liability

 

 

698

 

 

 

 

Total Liabilities

 

 

3,903

 

 

 

2,589

 

Commitments and Contingencies

 

 

 

 

 

 

Convertible preferred stock, Series A, par value $0.0001 per share; 27,564,260 shares
   authorized at June 30, 2021 and December 31, 2020;
9,993,727 shares, issued and
   outstanding at June 30, 2021 and December 31, 2020, and a liquidation preference of
   $
39,390 and $37,969 at June 30, 2021 and December 31, 2020, respectively

 

 

34,900

 

 

 

34,900

 

Stockholders' Deficit

 

 

 

 

 

 

Common stock, par value $0.0001 per share; 50,700,000 shares authorized at June 30,
   2021 and December 31, 2020;
3,764,488 shares issued and outstanding at June 30,
   2021 and December 31, 2020, respectively

 

 

1

 

 

 

1

 

Additional paid-in capital

 

 

2,211

 

 

 

1,458

 

Accumulated deficit

 

 

(23,451

)

 

 

(18,038

)

Total Stockholders' Deficit

 

 

(21,239

)

 

 

(16,579

)

Total Liabilities, Convertible Preferred Stock and Stockholders' Deficit

 

$

17,564

 

 

$

20,910

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

1


IN8BIO, INC.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended
 June 30,

 

 

Six Months Ended
June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

2,064

 

 

$

1,784

 

 

$

3,310

 

 

$

2,836

 

General and administrative

 

 

986

 

 

 

1,090

 

 

 

2,103

 

 

 

1,729

 

Total operating expenses

 

 

3,050

 

 

 

2,874

 

 

 

5,413

 

 

 

4,565

 

Loss from operations

 

 

(3,050

)

 

 

(2,874

)

 

 

(5,413

)

 

 

(4,565

)

Net loss

 

$

(3,050

)

 

$

(2,874

)

 

$

(5,413

)

 

$

(4,565

)

Net loss attributable to common stockholders (Note 11)

 

$

(3,765

)

 

$

(3,178

)

 

$

(6,834

)

 

$

(5,129

)

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

 

$

(1.00

)

 

$

(0.92

)

 

$

(1.82

)

 

$

(1.52

)

Weighted-average number of shares used in computing net loss per
   common share, basic and diluted

 

 

3,764,488

 

 

 

3,462,182

 

 

 

3,764,488

 

 

 

3,383,774

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

2


IN8BIO INC.

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK, COMMON STOCK AND STOCKHOLDERS’ DEFICIT

(In thousands, except share data)

(Unaudited)

 

 

 

Convertible
Preferred Stock
Series A

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2019

 

 

2,713,980

 

 

$

8,896

 

 

 

 

3,235,671

 

 

$

1

 

 

$

238

 

 

$

(9,481

)

 

$

(9,242

)

Issuance of common stock – Class A in relation to license agreement

 

 

 

 

 

 

 

 

 

44,011

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock – Class A

 

 

 

 

 

 

 

 

 

182,500

 

 

 

 

 

 

200

 

 

 

 

 

 

200

 

Issuance of convertible preferred stock – Series A, net of $16 issuance costs

 

 

1,533,947

 

 

 

5,480

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

18

 

 

 

 

 

 

18

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,691

)

 

 

(1,691

)

Balance at March 31, 2020

 

 

4,247,927

 

 

$

14,376

 

 

 

 

3,462,182

 

 

$

1

 

 

$

456

 

 

$

(11,172

)

 

$

(10,715

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 

 

 

 

 

 

20

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,874

)

 

 

(2,874

)

Balance at June 30, 2020

 

 

4,247,927

 

 

$

14,376

 

 

 

 

3,462,182

 

 

$

1

 

 

$

476

 

 

$

(14,046

)

 

$

(13,569

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

9,993,727

 

 

$

34,900

 

 

 

 

3,764,488

 

 

$

1

 

 

$

1,458

 

 

$

(18,038

)

 

$

(16,579

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

361

 

 

 

 

 

 

361

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,363

)

 

 

(2,363

)

Balance at March 31, 2021

 

 

9,993,727

 

 

$

34,900

 

 

 

 

3,764,488

 

 

$

1

 

 

$

1,819

 

 

$

(20,401

)

 

$

(18,581

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

392

 

 

 

 

 

 

392

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,050

)

 

 

(3,050

)

Balance at June 30, 2021

 

 

9,993,727

 

 

$

34,900

 

 

 

 

3,764,488

 

 

$

1

 

 

$

2,211

 

 

$

(23,451

)

 

$

(21,239

)

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

3


 

IN8BIO, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

Net loss

 

$

(5,413

)

 

$

(4,565

)

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

 

 

 

 

 

 

Depreciation

 

 

44

 

 

 

44

 

Non-cash stock-based compensation

 

 

753

 

 

 

38

 

Amortization of financing lease right-of-use assets

 

 

250

 

 

 

 

Amortization of operating lease right-of-use assets

 

 

61

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(62

)

 

 

8

 

Other non-current assets

 

 

 

 

 

(1

)

Accounts payable

 

 

(372

)

 

 

1

 

Accrued expenses and other current liabilities

 

 

(221

)

 

 

1,191

 

Short-term operating lease liabilities

 

 

62

 

 

 

 

Long-term operating lease liabilities

 

 

(70

)

 

 

 

Net cash used in operating activities

 

 

(4,968

)

 

 

(3,284

)

Financing activities

 

 

 

 

 

 

Proceeds from the issuance of common stock - Class A

 

 

 

 

 

200

 

Proceeds from issuance of preferred stock - Series A, net of $16 of issuance costs

 

 

 

 

 

5,480

 

Principal payments on financing leases

 

 

(248

)

 

 

 

Proceeds from issuance of loan

 

 

 

 

 

174

 

Deferred offering costs paid

 

 

(779

)

 

 

 

Net cash (used in) provided by financing activities

 

 

(1,027

)

 

 

5,854

 

Net (decrease) increase in cash and restricted cash

 

 

(5,995

)

 

 

2,570

 

Cash and restricted cash at beginning of period

 

 

17,994

 

 

 

610

 

Cash and restricted cash at end of period

 

$

11,999

 

 

$

3,180

 

Supplemental disclosure of non-cash financing and investing information:

 

 

 

 

 

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

1,020

 

 

$

 

Initial measurement of operating lease right-of-use assets and liabilities

 

$

3,483

 

 

$

 

 

The accompanying notes are an integral part of these unaudited condensed financial statements.

4


 

IN8BIO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND NATURE OF OPERATIONS

Organization and Business

IN8bio, Inc. (the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of gamma-delta T cell therapies for the treatment of cancer. The Company’s lead product candidates are currently in Phase 1 clinical trials: INB-200, for the treatment of newly diagnosed glioblastoma (“GBM”), and INB-100, for the treatment of patients with leukemia that are undergoing hematopoietic stem cell transplantation (“HSCT”). In addition, the Company’s DeltEx platform has yielded a broad portfolio of preclinical programs, including INB-400 and INB-300, focused on addressing other solid tumor types.

Incysus, Inc. (“Incysus”) was a corporation formed in the State of Delaware on November 23, 2015 and Incysus, Ltd. was incorporated in Bermuda on February 8, 2016. Incysus was the wholly owned United States subsidiary of Incysus, Ltd. On May 7, 2018, Incysus, Ltd. reincorporated in the United States in a domestication transaction (the “Domestication”) in which Incysus, Ltd. converted into a newly formed Delaware corporation, Incysus Therapeutics, Inc. (“Incysus Therapeutics”). On July 24, 2019, Incysus Therapeutics merged with Incysus. Incysus Therapeutics subsequently changed its name to IN8bio, Inc. in August 2020. Following the Domestication in May 2018 and the merging of Incysus Therapeutics and Incysus in July 2019, the Company did not have any subsidiaries to consolidate as of December 31, 2020. The Company is headquartered in New York, New York.

Coronavirus pandemic

The current COVID-19 (coronavirus) pandemic, which is impacting worldwide economic activity, poses risk that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. The extent to which the coronavirus impacts the Company’s operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the outbreak, new information that will emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. COVID-19 may impact the timing of regulatory approval of the investigational new drug (INDs) for clinical trials, the enrollment of any clinical trials that are approved, the availability of clinical trial materials and regulatory approval and commercialization of our products. COVID-19 may also impact the Company’s ability to access capital, which could negatively impact short-term and long-term liquidity.


Liquidity and Capital Resources

Through June 30, 2021, the Company funded its operations primarily with proceeds from the initial closing and additional closings of its Series A convertible preferred stock financing (“Series A Financing”). The Company has incurred recurring losses and negative operating cash flows from operations since its inception, including net losses of $5.4 million and $4.6 million for the six months ended June 30, 2021 and 2020, respectively. As of June 30, 2021, the Company had an accumulated deficit of $23.5 million. The Company expects to continue to generate operating losses for the foreseeable future.

On August 3, 2021, the Company completed its initial public offering (“IPO”) in which it issued and sold 4,000,000 shares of its common stock at a public offering price of $10.00 per share pursuant to its Registration Statement on Form S-1, as amended (File No. 333-249530). The Company received net proceeds from the initial public offering of $32.6 million, after deducting underwriters’ discounts, commissions, and estimated offering-related costs of $7.4 million. B. Riley Securities Inc. acted as the sole book-running manager for the IPO.

The Company has not yet generated product sales and as a result has experienced operating losses since inception. The Company expects to incur additional losses in the future to conduct research and development and will need to raise additional capital to fully implement management’s business plan. The Company intends to raise such capital through the issuance of additional equity, and potentially through borrowings, strategic alliances with partner companies and other licensing transactions. However, if such financing is not available at adequate levels, the Company may need to reevaluate its operating plans. Management believes that its existing cash of $12.0 million as of June 30, 2021 and the net proceeds of $32.6 million from the IPO will be sufficient to fund its operating expenses and capital expenditure requirements for at least 12 months from the issuance of these condensed financial statements.

5


 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company has prepared the accompanying condensed financial statements in conformity with generally accepted accounting principles in the United States (“US GAAP”).

Unaudited Interim Financial Information

The condensed financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from these condensed financial statements, as is permitted by such rules and regulations. Accordingly, these condensed financial statements should be read in conjunction with the financial statements and notes thereto for the years ended December 31, 2020 and 2019 included in the Company’s final prospectus that forms part of the Company’s Registration Statement on Form S-1 (File No. 333-249530), filed with the SEC pursuant to Rule 424(b)(4) on July 30, 2021 (the “Prospectus”). The results for any interim period are not necessarily indicative of results for any future period. In the opinion of the Company’s management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included

Use of Estimates

The preparation of condensed financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and the reported amounts of expenses during the reporting periods presented. Such estimates and assumptions are used for, but are not limited to, the accrual of research and development expenses, deferred tax assets and liabilities and related valuation allowance, fair value of common stock and stock-based compensation, and the useful lives of property and equipment. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Leases

Effective January 1, 2021, the Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02” or “ASC 842”), using the modified retrospective method and utilized the effective date as its date of initial application, with prior periods presented in accordance with previous guidance under Accounting Standards Codification ("ASC") ASC 840, Leases. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and current and non-current lease liabilities, as applicable.

Operating lease liabilities and their corresponding right-of-use assets are initially recorded based on the present value of lease payments over the expected remaining lease term. The interest rate implicit in lease contracts is typically not readily determinable. As a result, the Company utilizes its incremental borrowing rate to discount lease payments, which reflects the fixed rate at which the Company could borrow on a collateralized basis the amount of the lease payments in the same currency, for a similar term, in a similar economic environment. Prospectively, the Company will adjust the right-of-use assets for straight-line rent expense and remeasure the lease liability at the net present value using the same incremental borrowing rate that was in effect as of the lease commencement or transition date.

The Company elected the following practical expedients, which must be elected as a package and applied consistently to all of its leases at the transition date (including those for which the entity is a lessee or a lessor): i) the Company did not reassess whether any expired or existing contracts are or contain leases; ii) the Company did not reassess the lease classification for any expired or existing leases (that is, all existing leases that were classified as operating leases in accordance with ASC 840 are classified as operating leases, and all existing leases that were classified as capital leases in accordance with ASC 840 are classified as finance leases); and iii) the Company did not reassess initial direct costs for any existing leases.

For leases that existed prior to the date of initial application of ASC 842 (which were previously classified as operating leases), a lessee may elect to use either the total lease term measured at lease inception under ASC 840 or the remaining lease term as of the date of initial application of ASC 842 in determining the period for which to measure its incremental borrowing rate. In transition to ASC 842, the Company utilized the remaining lease term of its leases in determining the appropriate incremental borrowing rates.

In accordance with ASC 842, components of a lease should be split into three categories: lease components, non-lease components, and non-components. The fixed and in-substance fixed contract consideration (including any consideration related to non-components) must be allocated based on the respective relative fair values to the lease components and non-lease components.

6


 

Entities may elect not to separate lease and non-lease components. The Company has elected to account for lease and non-lease components together as a single lease component for all underlying assets and allocate all of the contract consideration to the lease component only. On the adoption date, $1.7 million was recognized as total lease liabilities and $1.8 million was recognized as total right-of-use assets on the Company’s condensed balance sheet.

Deferred Offering Costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process preferred stock or common stock financings as deferred offering costs until such financings are consummated. The deferred offering costs will be offset against the IPO proceeds during the quarter ending September 30, 2021 as a result of the consummation of the IPO. As of June 30, 2021 and December 31, 2020, the Company had deferred offering costs related to the IPO of $3.4 million and $2.4 million, respectively.

Recently Issued Accounting Standards Updates

In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU) No. 2019-12, Simplifying the Accounting for Income Taxes. ASU No. 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This update is effective for entities other than public business entities, including emerging growth companies that elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer is required to comply with such standards, for annual reporting periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. The Company is currently evaluating the impact, if any, that the adoption of this guidance will have on the condensed financial statements. 

3. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consist of the following (in thousands):

 

 

 

June 30,
2021

 

 

December 31,
2020

 

Machinery and equipment

 

$

443

 

 

$

443

 

Less accumulated depreciation

 

 

(301

)

 

 

(257

)

Property and equipment, net

 

$

142

 

 

$

186

 

 

Depreciation expense was $22,000 for the three months ended June 30, 2021 and 2020 and was $44,000 for the six months ended June 30, 2021 and 2020.

4. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):

 

 

 

June 31,
2021

 

 

December 31,
2020

 

Accrued offering costs

 

$

806

 

 

$

876

 

Accrued clinical trials

 

 

300

 

 

 

376

 

Accrued compensation

 

 

340

 

 

 

400

 

Accrued other

 

 

39

 

 

 

126

 

Total accrued expenses and other current liabilities

 

$

1,485

 

 

$

1,778

 

 

5. Debt

In April 2020, the Company was granted a loan (the “Loan”) in an amount of $0.2 million, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted on March 27, 2020. The Loan, which was in the form of a Note dated April 16, 2020, matures on April 16, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on November 16, 2020. The Note may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

Funds from the Loan may only be used for payroll costs, costs used to continue group healthcare benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company used the entire Loan amount for

7


 

qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. In August 2021, the Company repaid the Loan in full.

Loan payable at June 30, 2021 and December 31, 2020 consists of the following (in thousands except years and percentage):

 

 

 

Year of
Maturity

 

Interest
Rate

 

 

Outstanding Principal

 

Loan payable

 

2022

 

 

1.00

%

 

$

174

 

 

6. CONVERTIBLE PREFERRED STOCK

Convertible Series A Preferred Stock

From January through August 2020, the Company issued 7,048,351 shares of Series A convertible preferred stock (“Series A Preferred Stock”) at $3.5833 per share for $25.3 million in gross proceeds related to the Series A Preferred Stock agreement from 2018.

At June 30, 2021, a total of $35.0 million, at $3.5833 per share, had been raised by the Company through the Series A preferred financing and the issuance of the Note Series 2018A convertible promissory note that converted into Series A Preferred Stock on May 7, 2018 following the Domestication. The Series A Preferred Stock includes 9,993,727 shares issued and outstanding on June 30, 2021 and December 31, 2020. In connection with the issuance of Series A Preferred Stock in 2018, the Company issued 231,396 warrants to purchase Series A Preferred Stock, accounted for as issuance costs and classified as a liability. In October 2020, the warrants were exercised and converted into Series A Preferred Stock.

In August 2020, the Company increased the authorized shares of Series A Preferred Stock, par value $0.0001 per share, to 27,564,260 shares.

Dividends

Dividends at the rate per annum of $0.2866 per share shall accrue on the Series A Preferred Stock, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock. Accruing dividends accrue from day to day, whether or not declared, and are cumulative; provided that such accruing dividends are payable only when, as and if declared by the Board of Directors and the Company is under no obligation to pay such accruing dividends.

Liquidation

The Series A Preferred Stock has a liquidation preference to the holders of common stock. The Series A Preferred Stock has a liquidation preference of $3.5833 per share plus any accrued but unpaid dividends.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or a deemed liquidation event, the holders of the shares of Series A Preferred Stock then outstanding are entitled to be paid out of the assets of the Company available for distribution to its stockholders before any payments are made to the holders of common stock by reason of their ownership thereof, an amount per share equal to one times the Series A original issue price, plus any accruing dividends accrued but unpaid thereon, whether or not declared.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or a deemed liquidation event, after payment in full of all Series A liquidation amounts required to be paid to the holders of shares of Series A Preferred Stock, the remaining assets of the Company available for distribution to its stockholders are required to be distributed among the holders of the shares of Series A Preferred Stock and common stock, pro-rata based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to common stock, provided, that if the aggregate amount which the holders of Series A Preferred Stock are entitled to receive exceeds $3.92361 per share (the “Maximum Participation Amount”), each holder of Series A Preferred Stock is entitled to receive upon such liquidation, dissolution or winding up of the Company, the greater of (i) the Maximum Participation Amount and (ii) the amount such holder would have received if all shares of Series A Preferred Stock had been converted into common stock immediately prior to such liquidation, dissolution or winding up of the Company.

Voting Rights

Each holder of outstanding shares of Series A Preferred Stock is entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of the Series A Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter.

8


 

Protective Provisions

At any time when at least 131,400 shares of Series A Preferred Stock remain outstanding (subject to appropriate adjustments), the Company shall not take any of the following actions without (1) the vote or written consent of the holders of at least 60% of the then outstanding shares of Series A Preferred Stock separately as a class and (2) prior approval of at least 60% of the members of the Company’s Board of Directors then in office: (i) liquidate, dissolve or wind-up the business and affairs of the Company, effect any merger or consolidation or any other Deemed Liquidation Event, or consent to any of the foregoing; (ii) amend, alter or repeal any provision of the Company’s certificate of incorporation or bylaws in a manner that adversely affects the powers, preferences or rights of the Series A Preferred Stock; (iii) create, or authorize the creation of, or issue shares of, or obligate itself to issue shares of, any additional class or series of capital stock unless the same ranks junior to the Series A Preferred Stock with respect to the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends and rights of redemption; (iv) increase or decrease the authorized number of shares of Preferred Stock or of Series A Preferred Stock, or increase or decrease the authorized number of shares of any additional class or series of capital stock of the Company; (v) (a) reclassify, alter or amend any existing security of the Company that is pari passu with the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to the Series A Preferred Stock in respect of any such right, preference, or privilege or (b) reclassify, alter or amend any existing security of the Company that is junior to the Series A Preferred Stock in respect of the distribution of assets on the liquidation, dissolution or winding up of the Company, the payment of dividends or rights of redemption, if such reclassification, alteration or amendment would render such other security senior to or pari passu with the Series A Preferred Stock in respect of any such right, preference or privilege; (vi) purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Company other than (a) redemptions of or dividends or distributions on the Series A Preferred Stock as expressly authorized in the Certificate of Incorporation, (b) dividends or other distributions payable on the common stock solely in the form of additional shares of common stock and (c) repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Company or any subsidiary in connection with the cessation of such employment or service at the lower of the original purchase price or the then current fair market value thereof; (vii) create, or authorize the creation of, or issue, or authorize the issuance of any debt security or permit any subsidiary to take any such action with respect to any debt security, if the aggregate indebtedness of the Company and its subsidiaries for borrowed money following such action would exceed $2,000,000 (other than equipment leases or bank lines of credit); (viii) create, or hold capital stock in, any subsidiary that is not wholly owned (either directly or through one or more other subsidiaries) by the Company, or permit any subsidiary to create, or authorize the creation of, or issue or obligate itself to issue, any shares of any class or series of capital stock, or sell, transfer or otherwise dispose of any capital stock of any direct or indirect subsidiary of the Company, or permit any direct or indirect subsidiary to sell, lease, transfer, exclusively license or otherwise dispose (in a single transaction or series of related transactions) of all or substantially all of the assets of such subsidiary; or (ix) increase or decrease the authorized number of directors constituting the Board of Directors.

Optional and Mandatory Conversion Rights

Each share of Series A Preferred Stock is convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series A original issue price by the Series A conversion price in effect at the time of conversion. The Series A conversion price is initially equal to $3.5833. Such initial Series A conversion price, and the rate at which shares of Series A Preferred Stock may be converted into shares of common stock, is subject to adjustment.

In connection with the Series A Preferred Stock issuance in August 2020, the Series A conversion price was adjusted to $3.2583.

At the time of issuance, no beneficial conversion charge was recorded as the fair value of the Series A Preferred Stock was determined by management to be less than the stated conversion value. When the triggering event that forces conversion where both price and shares are known, the beneficial conversion charge will be recorded.

Redemption

The Series A Preferred Stock is redeemable upon the occurrence of a deemed liquidation event, which is not solely in control of the Company. Therefore, the Series A Preferred Stock has been classified as temporary equity.

Series A Preferred Stock Warrants

On May 7, 2018, in connection with the sale and issuance of the Series A Preferred Stock, the Company issued liability-classified warrants to purchase an aggregate of 231,396 shares of Series A Preferred Stock (the “2018 Warrants”), with an exercise price of $0.0003 per share of Series A Preferred Stock, subject to adjustment per the terms of the 2018 Warrants. The 2018 Warrants

9


 

were exercisable immediately on date of issuance and expire five years from issuance, in May 2023. These warrants were subject to an earlier expiration upon the closing of the Company’s qualifying initial public offering of common stock. In October 2020, the warrants were exercised at the price of $0.0003 per share and the warrant liability was settled for its fair value of $0.8 million.

7. COMMON STOCK

The Company has 50,700,000 authorized shares of common stock, par value $0.0001 per share, of which 3,764,488 shares were issued and outstanding as of June 30, 2021 and December 31, 2021.

In October 2020, the Company entered into a common stock purchase agreement with a director of the Company to issue and sell 29,674 shares of its common stock for a total purchase price of $0.2 million.

In March 2020, the Company entered into a common stock purchase agreement with a director of the Company to issue and sell 182,500 shares of its common stock for a total purchase price of $0.2 million.

 

8. STOCK-BASED COMPENSATION

2018 Equity Incentive Plan

On May 7, 2018, the Company established and adopted the 2018 Equity Incentive Plan (the “2018 Plan”) providing for the granting of stock awards for employees, directors and consultants to purchase shares of the Company’s common stock. A total of 2,101,478 shares were authorized under the 2018 Plan and 476,840 and 854,320 shares are available for granting of stock awards as of June 30, 2021 and December 31, 2020, respectively. The 2018 Plan provides for the granting of the following types of stock awards: (i) incentive stock options, (ii) non-statutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards and (vi) other stock awards. Incentive stock options may be granted only to employees of the Company. Stock awards other than incentive stock options may be granted to employees, directors and consultants who are providing continuous service to the Company.

The following is a summary of the stock option award activity during the six months ended June 30, 2021:

 

 

 

Number
of Stock
Options

 

 

Weighted-
Average
Exercise
Price

 

 

Weighted-
Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Outstanding at December 31, 2020

 

 

1,247,158

 

 

$

5.16

 

 

 

9.34

 

 

$

1,486

 

Granted

 

 

305,132

 

 

 

5.36

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Cancelled

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2021

 

 

1,552,290

 

 

$

5.20

 

 

 

9.15

 

 

$

1,486

 

Exercisable at June 30, 2021

 

 

238,172

 

 

$

2.77

 

 

 

8.13

 

 

$

715

 

Options expected to vest as of June 30, 2021

 

 

1,314,118

 

 

$

5.64

 

 

 

9.15

 

 

$

771

 

 

Generally, options are granted with an exercise price at, or in excess of, the fair value of common stock at the date of issuance. Options typically vest over a one- to four-year period in equal increments. The original term of all options is 10 years.

The weighted-average grant date fair value of options granted during the six months ended June 30, 2021 and 2020 is $4.02 and $0.96, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company’s common stock at the end of the reporting period.

10


 

Stock-Based Compensation Expense

For the six months ended June 30, 2021 and 2020, the Company utilized the Black-Scholes option-pricing model for estimating the fair value of the stock options and common stock warrants granted. The following table presents the assumptions and the Company’s methodology for developing each of the assumptions used:

 

 

 

June 30,
2021

 

June 30,
2020

Volatility

 

88.78%

 

83.3%

Expected life (years)

 

6.08

 

6.08

Risk-free interest rate

 

0.67%

 

0.45%-1.4%

Dividend rate

 

%

 

%

 

Volatility—The Company estimates the expected volatility of its common stock at the date of grant based on the historical volatility of comparable public companies over the expected term.
Expected life—The expected life is estimated as the contractual term.
Risk-free interest rate—The risk-free rate for periods within the estimated life of the stock award is based on the U.S. Treasury yield curve in effect at the time of grant.
Dividend rate—The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future.

Stock-based compensation expense was recorded in the following line items in the condensed statements of operations for the three and six months ended June 30, 2021 and 2020 (in thousands):

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Research and development

 

$

180

 

 

$

17

 

 

$

348

 

 

$

33

 

General and administrative

 

 

212

 

 

 

3

 

 

 

405

 

 

 

5

 

Total stock-based compensation expense

 

$

392

 

 

$

20

 

 

$

753

 

 

$

38

 

 

No related tax benefits from stock-based compensation expense were recognized for the three and six months ended June 30, 2021 and 2020. As of June 30, 2021, there was $4.7 million in unrecognized stock-based compensation cost, which is expected to be recognized over a weighted-average period of 3.0 years.

9. LICENSE AGREEMENTS

Emory University, Children’s Healthcare of Atlanta, Inc. and UAB Research Foundation

In June 2016, the Company entered into an exclusive license agreement with Emory University, Children’s Healthcare of Atlanta, Inc. and UAB, as amended from time to time (the “Emory License Agreement”). The Emory License Agreement was amended in October 2017 and July 2020. Under the Emory License Agreement, the Company obtained an exclusive worldwide license under certain immunotherapy related patents and know-how related to gamma-delta T cells developed by Emory University, Children’s Healthcare of Atlanta, Inc. and UABRF’s affiliate, the University of Alabama at Birmingham, to develop, make, have made, use, sell, import and otherwise commercialize products that are covered by such patents or otherwise incorporate or use the licensed technology. Such exclusive license is subject to certain rights retained by these institutions and also the U.S. government.

In consideration of the license granted under the Emory License Agreement, the Company paid Emory University a nominal upfront payment. In addition, the Company is required to pay Emory University development milestones totaling up to an aggregate of $1.4 million, low-single-digit to mid-single-digit tiered running royalties on the net sales of the licensed products, including an annual minimum royalty beginning on a specified period after the first sale of a licensed product, and a share of certain payments that the Company may receive from sublicenses. In addition, in the event no milestone payments have been paid in certain years, the Company will be required to pay an annual license maintenance fee. The Emory License Agreement also requires the Company to reimburse Emory University for the cost of the prosecution and maintenance of the licensed patents. Pursuant to the Emory License Agreement, the Company is required to use its best efforts to develop, manufacture and commercialize the licensed product, and is obligated to meet certain specified deadlines in the development of the licensed products.

The term of the Emory License Agreement will continue until 15 years after the first commercial sale of the licensed product, or the expiration of the relevant licensed patents, whichever is later. The Company may terminate the Emory License Agreement at will

11


 

at any time upon prior written notice to Emory University. Emory University has the right to terminate the Emory License Agreement if the Company materially breaches the agreement (including failure to meet diligence obligations) and fails to cure such breach within a specified cure period, if the Company becomes bankrupt or insolvent or decides to cease development and commercialization of the licensed product, or if the Company challenges the validity or enforceability of any licensed patents.

Exclusive License Agreement with UABRF

In March 2016, the Company entered into an exclusive license agreement with UABRF, as amended from time to time (the “UABRF License Agreement”). The Company amended the UABRF License Agreement in December 2016, January 2017, June 2017 and November 2018. Under the UABRF License Agreement, the Company obtained an exclusive worldwide license under certain immunotherapy-related patents related to the use of gamma-delta T cells, certain CAR-T cells and combination treatments for cellular therapies developed by the University of Alabama at Birmingham and owned by UABRF to develop, make, have made, use, sell, import and otherwise commercialize products that are covered by such patents. Such exclusive license is subject to certain rights retained by UABRF and also the U.S. government.

In consideration of the license granted under the UABRF License Agreement, the Company paid UABRF a nominal upfront payment and issued 91,250 shares of common stock to UABRF, which were subject to certain anti-dilution rights.

In addition, the Company is required to pay UABRF development milestones totaling up to an aggregate of $1.4 million, lump-sum royalties on cumulative net sales totaling up to an aggregate of $22.5 million, mid-single-digit running royalties on net sales of the licensed products, low-single-digit running royalties on net sales of the licensed products, and a share of certain non-royalty income that the Company may receive, including from any sublicenses. The UABRF License Agreement also requires the Company to reimburse UABRF for the cost of the prosecution and maintenance of the licensed patents.

Pursuant to the UABRF License Agreement, the Company is required to use good faith reasonable commercial efforts to develop, manufacture and commercialize the licensed product.

The term of the UABRF License Agreement will continue until the expiration of the licensed patents. The Company may terminate the UABRF License Agreement at will at any time upon prior written notice to UABRF. UABRF has the right to terminate the UABRF License Agreement if the Company materially breaches the agreement and fails to cure such breach within a specified cure period, if the Company fails to diligently undertake development and commercialization activities as set forth in the development and commercialization plan, if the Company underreports its payment obligations or underpays by more than a specified threshold, if the Company challenges the validity or enforceability of any licensed patents, or if the Company becomes bankrupt or insolvent.

Antidilution Provision

The antidilution provision required the Company to issue additional shares of common stock such that UABRF maintains a 2.5% ownership interest in the Company until it has raised at least $20.0 million through one or more rounds of investment. During the six months ended June 30, 2021 and 2020, the Company did not issue any additional shares common stock in connection with the antidilution provision. As of June 30, 2021, the Company had a total of 151,382 shares of common stock issued in satisfaction of this antidilution provision.

The Company assessed the antidilution right and determined that the right (i) meets the definition of a freestanding financial instrument that was not indexed to the Company’s own stock and (ii) meets the definition of a derivative and did not qualify for equity classification. The initial fair value of the antidilution liability, and the value at June 30, 2020, was determined to be immaterial based on the remote probability of an additional financing and the immaterial value of the total number of shares that could be issued pursuant to the provision. The antidilution provision was settled in August 2020 when the Company raised an additional $19.8 million in gross proceeds through the issuance and sale of Series A Preferred Stock for a total of $35.0 million in gross proceeds related to the issuance and sale of Series A Preferred Stock.

10. INCOME TAXES

The Company recorded no provision for income taxes for the three and six months ended June 30, 2021 and 2020.

Deferred tax assets and deferred tax liabilities are recognized based on temporary differences between the financial reporting and tax bases of assets and liabilities using statutory rates. Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and research and development credits. Under the applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not that the Company will not recognize the benefits of federal and state deferred tax assets. Accordingly, a full