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 September 30, 2021

OR

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

Commission File Number: 001-33038

ZIOPHARM Oncology, Inc.

(Exact name of registrant as specified in its charter)

Delaware	84-1475642
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One First Avenue, Parris Building 34, Navy Yard Plaza

Boston, Massachusetts 02129

(617) 259-1970

(Address, including zip code, and telephone number, including

area code, of registrant’s principal executive offices)

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	ZIOP	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. 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 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.

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). Yes: ☐ No: ☑

As of October 29, 2021, the number of outstanding shares of the registrant’s common stock, $0.001 par value, was 216,145,826 shares.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that are based on our current beliefs and expectations. These forward-looking statements may be accompanied by such words as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “target,” “will” and other words and terms of similar meaning, although not all forward-looking statements contain these identifying words. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that these statements are based on a combination of facts and factors currently known by us and our expectations of the future, about which we cannot be certain.

The forward-looking statements in this Quarterly Report include, but are not limited to, statements about:

our ability to raise substantial additional capital to fund our planned operations in the near term;

estimates regarding our expenses, use of cash, timing of future cash needs and anticipated capital requirements;

the development of our product candidates, including statements regarding the initiation, timing, progress and results of our preclinical studies, clinical trials and research and development programs;

our ability to advance our product candidates through various stages of development, especially through pivotal safety and efficacy trials;

the risk that final trial data may not support interim analysis of the viability of our product candidates;

our expectation regarding the safety and efficacy of our product candidates;

the timing, scope or likelihood of regulatory filings and approvals from the U.S. Food and Drug Administration ("FDA") or equivalent foreign regulatory agencies for our product candidates and for which indications;

our ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existing license agreements;

our ability to enter into partnerships or strategic collaboration agreements, our ability to achieve the results contemplated and the potential benefits to be derived from relationships with collaborators;

our ability to maintain and establish collaborations and licenses; developments and projections relating to competition from other pharmaceutical and biotechnology companies or our industry;

our estimates regarding the potential market opportunity for our product candidates;

the anticipated rate and degree of commercial scope and potential, as well as market acceptance of our product candidates for any indication, if approved;

anticipated milestones and other payments under licensing, collaboration or acquisition agreements, research and development costs and other expenses;

our intellectual property position, including the strength and enforceability of our intellectual property rights;

our ability to attract, hire, and retain qualified employees and key personnel;

the impact of government laws and regulations in the United States and foreign countries;

our expectations regarding the impact of the ongoing coronavirus disease 2019, or COVID-19, pandemic, including the expected duration of disruption and immediate and long-term impact and effect on our business and operations;

the diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic; and

other risks and uncertainties, including those listed under Part II, Item 1A, “Risk Factors”.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual

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results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

NOTE REGARDING COMPANY REFERENCES

Throughout this Quarterly Report on Form 10-Q, “Ziopharm,” the “Company,” “we,” “us” and “our” refer to ZIOPHARM Oncology, Inc. and its subsidiaries.

NOTE REGARDING TRADEMARKS

All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.

SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS

Our business faces significant risks and uncertainties. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. You should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report. Some of the more significant risks include the following:

Our business, operations and clinical development plans and timelines could be adversely affected by the effects of health epidemics, including the COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our contract manufacturers, clinical research organizations, or CROs, shippers and others.

We will require substantial additional financial resources to continue ongoing development of our product candidates and pursue our business objectives; if we are unable to obtain these additional resources when needed, we may be forced to delay or discontinue our planned operations, including clinical testing of our product candidates.

Our plans to develop and commercialize non-viral TCR T-cell therapy can be considered a new approach to cancer treatment, the successful development of which is subject to significant challenges.

Our current product candidates are based on novel technologies and are supported by limited clinical data and we cannot assure you that our current and planned clinical trials will produce data that supports regulatory approval of one or more of these product candidates.

If we are unable to obtain the necessary U.S. or worldwide regulatory approvals to commercialize any product candidate, our business will suffer.

Our product candidates are in various stages of clinical trials, which are very expensive and time-consuming. We cannot be certain when we will be able to submit a Biologics License Application, or BLA to the FDA and any failure or delay in completing clinical trials for our product candidates could harm our business.

We identified a material weakness in our internal controls over financial reporting as of June 30, 2021, which has not been remediated as of September 30, 2021. Remediation action plans have been identified and implemented. The testing of these controls implemented to date will begin in the fourth quarter of 2021. We may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or could have a material adverse effect on our business and trading price of our securities.

Our cell-based therapy immuno-oncology products rely on the availability of reagents, specialized equipment, and other specialty materials and infrastructure, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials, we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products.

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Our immuno-oncology product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval. Currently, limited numbers of cell therapy products have been approved in the United States and Europe.

Our reliance on third parties to formulate and manufacture our product candidates exposes us to a number of risks that may delay the development, regulatory approval and commercialization of our products or result in higher product costs.

If we are unable either to create sales, marketing and distribution capabilities or enter into agreements with third parties to perform these functions, we will be unable to commercialize our product candidates successfully.

Our immuno-oncology product candidates may face competition in the future from biosimilars and other developing technologies.

If we or our licensors fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish and our ability to successfully commercialize our products may be impaired.

Our stock price has been, and may continue to be, volatile.

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ZIOPHARM Oncology, Inc.

Table of Contents

		Page
Part I - Financial Information
Item 1.	Financial Statements	6
	Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	6
	Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)	7
	Statement of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (unaudited)	8
	Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)	10
	Notes to Financial Statements (unaudited)	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	33
Part II - Other Information
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	63
Item 3.	Defaults upon Senior Securities	63
Item 4.	Mine Safety Disclosures	63
Item 5.	Other Information	63
Item 6.	Exhibits	65

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Part I - Financial Information

Item 1. Financial Statements

ZIOPHARM Oncology, Inc.

BALANCE SHEETS

(unaudited)

(in thousands, except share and per share data)

	September 30, 2021			December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	91,725		$	115,069
Receivables		1,510			4,665
Prepaid expenses and other current assets		3,319			10,855
Total current assets		96,554			130,589
Property and equipment, net		11,662			10,231
Right of use asset		5,179			4,650
Deposits		365			130
Other non-current assets		2			745
Total assets	$	113,762		$	146,345
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,463		$	960
Current portion of long-term debt		12,037			—
Accrued expenses		13,963			16,589
Lease liability - current portion		710			819
Total current liabilities		28,173			18,368
Long-term debt		12,174			—
Lease liability - non-current portion		4,708			3,995
Total liabilities		45,055			22,363
Commitments and contingencies (Note 8)
Stockholders’ equity:
Common stock, $0.001 par value; 350,000,000 shares authorized;   216,145,804 and 214,591,906 shares issued and outstanding at    September 30, 2021 and December 31, 2020, respectively		216			215
Additional paid-in capital		899,549			887,868
Accumulated deficit		(831,058	)		(764,101	)
Total stockholders’ equity		68,707			123,982
Total liabilities and stockholders’ equity	$	113,762		$	146,345

The accompanying notes are an integral part of the unaudited interim financial statements.

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ZIOPHARM Oncology, Inc.

STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2021			2020			2021			2020
Collaboration revenue	$	398		$	—		$	398		$	—
Operating expenses:
Research and development		14,521			13,968			41,427			38,725
General and administrative		8,173			6,353			25,469			18,862
Total operating expenses		22,694			20,321			66,896			57,587
Loss from operations		(22,296	)		(20,321	)		(66,498	)		(57,587	)
Other income (expense):
Interest income (expense), net		(444	)		7			(444	)		412
Other income (expense), net		7			(1	)		(15	)		(29	)
Other income (expense), net		(437	)		6			(459	)		383
Net loss	$	(22,733	)	$	(20,315	)	$	(66,957	)	$	(57,204	)
Basic and diluted net loss per share	$	(0.11	)	$	(0.10	)	$	(0.31	)	$	(0.27	)
Weighted average common shares outstanding, basic and diluted		214,542,465			212,837,367			214,310,349			208,497,410

The accompanying notes are an integral part of the unaudited interim financial statements.

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ZIOPHARM Oncology, Inc.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Three and Nine Months Ended September 30, 2021 and 2020

(unaudited)

(in thousands)

For the Three Months Ended September 30, 2021
	Common Stock					Additional Paid In Capital		Accumulated Deficit			Total Stockholders’ Equity
	Shares			Amount
Balance at June 30, 2021		215,559,148		$	216	$	896,390	$	(808,325	)	$	88,281
Stock-based compensation		-			-		2,371		-			2,371
Restricted stock awards		875,000			-		-		-			-
Cancelled restricted common stock		(288,344	)		-		-		-			-
Issuance of warrants		-			-		788		-			788
Net loss		-			-		-		(22,733	)		(22,733	)
Balance at September 30, 2021		216,145,804		$	216	$	899,549	$	(831,058	)	$	68,707

For the Nine Months Ended September 30, 2021
	Common Stock					Additional Paid In Capital			Accumulated Deficit			Total Stockholders’ Equity
	Shares			Amount
Balance at December 31, 2020		214,591,906		$	215	$	887,868		$	(764,101	)	$	123,982
Stock-based compensation		-			-		9,857			-			9,857
Exercise of employee stock options		363,109			-		1,037			-			1,037
Restricted stock awards		1,601,224			1		(1	)		-			-
Cancelled restricted common stock		(410,435	)		-		-			-			-
Issuance of warrants		-			-		788			-			788
Net loss		-			-		-			(66,957	)		(66,957	)
Balance at September 30, 2021		216,145,804		$	216	$	899,549		$	(831,058	)	$	68,707

The accompanying notes are an integral part of the unaudited interim financial statements.

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ZIOPHARM Oncology, Inc.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (continued)

For the Three and Nine Months Ended September 30, 2021 and 2020

(unaudited)

(in thousands)

For the Three Months Ended September 30, 2020
	Common Stock				Additional Paid In Capital		Accumulated Deficit			Total Stockholders’ Equity
	Shares		Amount
Balance at June 30, 2020		214,150,940	$	214	$	884,214	$	(721,014	)	$	163,414
Stock-based compensation		-		-		1,792		-			1,792
Exercise of employee stock options		14,750		-		27		-			27
Net loss		-		-		-		(20,315	)		(20,315	)
Balance at September 30, 2020		214,165,690	$	214	$	886,033	$	(741,329	)	$	144,918

For the Nine Months Ended September 30, 2020
	Common Stock					Additional Paid In Capital			Accumulated Deficit			Total Stockholders’ Equity
	Shares			Amount
Balance at December 31, 2019		181,803,320		$	182	$	778,953		$	(684,125	)	$	95,010
Stock-based compensation		-			-		5,393			-			5,393
Exercise of employee stock options		22,916			-		43			-			43
Issuance of restricted common stock		555,900			1		(1	)		-			-
Cancelled restricted common stock		(141,230	)		-		-			-			-
Issuance of common stock in connection with a public offering, net of commissions and expense of $5.9 million		29,110,111			29		88,632			-			88,661
Issuance of common stock in connection with an at the market offering, net of commissions of $0.4 million		2,814,673			2		13,013			-			13,015
Net loss										(57,204	)		(57,204	)
Balance at September 30, 2020		214,165,690		$	214	$	886,033		$	(741,329	)	$	144,918

The accompanying notes are an integral part of the unaudited interim financial statements.

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ZIOPHARM Oncology, Inc.

STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	For the Nine Months Ended September 30,
	2021			2020
Cash flows from operating activities:
Net loss	$	(66,957	)	$	(57,204	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,892			708
Amortization of financing costs		148			-
Stock-based compensation		9,857			5,393
(Increase) decrease in:
Receivables		3,155			(2,098	)
Prepaid expenses and other current assets		7,646			8,249
Right of use asset		(529	)		(98	)
Other noncurrent assets		508			(636	)
Increase (decrease) in:
Accounts payable		503			1,713
Accrued expenses		(3,169	)		3,828
Lease liabilities		604			168
Net cash used in operating activities		(46,342	)		(39,977	)
Cash flows from investing activities:
Purchases of property and equipment		(2,964	)		(6,012	)
Net cash used in investing activities		(2,964	)		(6,012	)
Cash flows from financing activities:
Proceeds from long-term debt borrowing		25,000			-
Debt issuance costs		(75	)		-
Proceeds from exercise of stock options		1,037			43
Issuance of common stock in connection with a public offering, net		-			88,661
Issuance of common stock in connection with at the market offerings, net		-			13,015
Net cash provided by financing activities		25,962			101,719
Net increase (decrease) in cash and cash equivalents		(23,344	)		55,730
Cash and cash equivalents, beginning of period		115,069			79,741
Cash and cash equivalents, end of period	$	91,725		$	135,471
Supplementary disclosure of cash flow information:
Cash paid for interest	$	136		$	—
Amounts included in accrued expenses and accounts payable related    to property and equipment	$	348		$	1,163
Issuance costs in accounts payable and accrued expenses	$	184		$	—
Supplementary disclosure of noncash investing and financing activities
Warrants issued in a term loan	$	788		$	—

The accompanying notes are an integral part of the unaudited interim financial statements.

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS

(unaudited)

1. Business

Overview

ZIOPHARM Oncology, Inc., which is referred to herein as “Ziopharm,” or the “Company,” is a biopharmaceutical company seeking to develop, acquire, and commercialize, on its own or with partners, a diverse portfolio of immuno-oncology therapies.

The Company is a clinical stage biopharmaceutical company focused on discovering, developing and commercializing next generation immuno-oncology platforms that leverage cell therapies to treat patients with cancers. The Company is developing technologies that utilize the immune system by employing innovative cell engineering to deliver safe and effective cell therapies for the treatment of multiple cancer types. Specifically, the Company is focused on developing T-cell receptor, or TCR, T cell therapies to target neoantigens in solid tumors, or TCR-T. A part of the Company's platform is referred to as “Sleeping Beauty” and is based on the non-viral genetic engineering of immune cells using a transposon/transposase system that is intended to stably engineer T cells outside of the body for subsequent infusion.

The Company’s operations to date have consisted primarily of conducting research and development and raising capital to fund those efforts. In May 2021, the Company announced that it will be winding down our existing Controlled IL-12 clinical program for the treatment of recurrent glioblastoma multiforme. The Company will continue to seek a partner for this program and have also begun exploring potential synergies between this technology and our cell therapy programs. Costs incurred during the three and nine months ended September 30, 2021 under the program wind-down have not been material.

The Company has operated at a loss since its inception in 2003 and has no recurring revenues from operations. The Company anticipates that losses will continue for the foreseeable future. As of September 30, 2021, the Company had approximately $91.7 million of cash and cash equivalents. The Company’s accumulated deficit at September 30, 2021 was approximately $831.1 million. Given its current development plans and cash management efforts, the Company anticipates cash resources will be sufficient to fund operations into the second quarter of 2023. The Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, or if the Company is unsuccessful in entering into partnership agreements for further development of its product candidates, management may need to curtail its development efforts and planned operations to conserve cash.

The Company’s amended and restated certificate of incorporation authorizes it to issue 350,000,000 shares of common stock. As of October 29, 2021, there were 216,145,826 shares of common stock outstanding and an additional 33,778,465 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and note disclosures required by generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations.

It is management’s opinion that the accompanying unaudited interim financial statements reflect all adjustments (which are normal and recurring) that are necessary for a fair presentation of the financial position of the Company and its results of operations and cash flows for the periods presented. The unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2020, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on March 1, 2021, or the Annual Report.

The results disclosed in the statements of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full fiscal year 2021.

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Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although the Company regularly assesses these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known.

The Company’s most significant estimates and judgments used in the preparation of its financial statements are:

Clinical trial expenses and other research and development expenses;

Collaboration agreements;

Fair value measurements of stock-based compensation; and

Income taxes.

Impact of COVID-19 Pandemic

With the ongoing COVID-19 pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business and operations. The Company continues to evaluate the impact of the COVID-19 global pandemic on patients, healthcare providers and its employees, as well as its operations and the operations of its business partners and healthcare communities. In response to the COVID-19 pandemic, the Company has implemented policies at its locations to mitigate the risk of exposure to COVID-19 by its personnel. The extent to which the COVID-19 pandemic impacts the Company’s business, clinical development and regulatory efforts and the value of its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements, the result of vaccination efforts and the effectiveness of any other actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the COVID-19 pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

2. Financings

August 2021 Term Loan

On August 6, 2021, the Company entered into a Loan and Security Agreement with Silicon Valley Bank and affiliates of Silicon Valley Bank (collectively, “SVB”) (the “Term Loan Agreement”). The Term Loan Agreement provides for an initial term loan of $25.0 million funded at the closing, with an additional tranche of $25.0 million available if certain funding and clinical milestones are met by August 31, 2022. Please refer to Note 4, Debt, for further discussion of the Company's Term Loan Agreement with SVB.

February 2020 Public Offering

On February 5, 2020, the Company entered into an underwriting agreement with Jefferies LLC, or Jeffries, as representative of the several underwriters named therein, relating to the issuance and sale of 27,826,086 shares of its common stock. The price to the public in the offering was $3.25 per share, and the underwriters agreed to purchase the shares from the Company pursuant to the underwriting agreement at a purchase price of $3.055 per share.

The offering was made pursuant to the Company’s effective registration statement on Form S-3ASR (File No. 333-232283) previously filed with the SEC, and a prospectus supplement thereunder. The underwriters purchased the 27,826,086 shares on February 5, 2020. The net proceeds from the offering were approximately $84.8 million after deducting underwriting discounts and offering expenses paid by the Company.

On March 10, 2020, the underwriters exercised their option to purchase an additional 1,284,025 shares. The net proceeds were approximately $3.9 million after deducting underwriting discounts and offering expenses paid by the Company.

At-the-Market (ATM) Facility

In June 2019, the Company entered into an Open Market Sale Agreement, or Sales Agreement, with Jefferies, pursuant to which the Company may offer and sell, from time to time through Jefferies, shares of its common stock having an aggregate offering price of up to $100.0 million. Shares will be sold pursuant to the Company’s effective registration statement on Form S-3ASR (File No. 333-232283), as previously filed with the SEC.

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During the nine months ended September 30, 2020, the Company sold an aggregate of 2,814,673 shares of its common stock at an average price of $4.77 per share under the Sales Agreement. The net proceeds from sales were approximately $13.0 million after deducting underwriting discounts.

During the nine months ended September 30, 2021, there were no sales under the Sales Agreement.

3. Summary of Significant Accounting Policies

The Company’s significant accounting policies were identified in the Company’s Annual Report. There have been no material changes in those policies since the filing of its Annual Report except as noted below.

New Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. The Company adopted this standard effective January 1, 2021, with no material impact upon adoption.

4. Debt

The carrying values of our debt obligation were as follows:

	September 30,
	2021
Term Loan Agreement	$	25,078
Unamortized discount on Term Loan Agreement		(867	)
Total debt		24,211
Less: current portion of long-term debt		(12,037	)
Long-term debt	$	12,174

On August 6, 2021, the Company entered into a $50.0 million Term Loan Agreement with SVB, with an initial borrowing of $25.0 million ("Term A Tranche"). Loans under the Term Loan Agreement are secured by a first lien of substantially all the assets of the Company, other than the Company's intellectual property. Proceeds from intellectual property are available as security for amounts borrowed.

The Term Loan Agreement requires the Company to meet certain funding and clinical milestones in order to either: (i) extend the maturity date of the initial loan ("Equity Milestone") or (ii) to utilize the Term Loan Agreement's remaining $25.0 million available borrowing capacity (“Term B Tranche”).

Principal repayments for the Term A Tranche will start on April 1, 2022, with a maturity date of March 1, 2023; however, if an Equity Milestone is achieved on or before March 31, 2022, principal repayments for the Term A Tranche will start on September 1, 2022, with a maturity date of August 1, 2025. Upon achievement of certain funding and clinical milestones associated with the Term B Tranche on or before August 31, 2022, the Company may borrow the remaining $25.0 million available under the Term Loan Agreement with principal repayments for the Term Loan Agreement starting on September 1, 2023 and a maturity date of August 1, 2025.

Outstanding loans bear interest, payable monthly, at the greater of (a) 7.75% and (b) the current published U.S. prime rate, plus a margin of 4.5%. As of September 30, 2021, interest on outstanding loans was 7.75%. In addition to the payment of the outstanding principal plus accrued interest due, the Company will also owe SVB 5.75% of the original principal amounts borrowed as a final payment ("Final Payment"). The Final Payment will be accreted over the term of the loan using the effective interest method.

The Company may, at its option, make up to two prepayments, each prepayment consisting of no less than $5,000,000 of any outstanding borrowings under the Term Loan Agreement, plus accrued and unpaid interest, subject to a prepayment premium. In addition to any outstanding principal plus accrued interest selected for prepayment, the Company would also prepay a pro-rata portion of the prepayment premium and the Final Payment associated with the principal amount being repaid. The Company cannot re-borrow any amounts previously paid.

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Should the Company fail to achieve the Equity Milestone on or before December 31, 2021, cash and cash equivalents equal to 50% of the then outstanding principal plus associated Final Payment must be deposited into an account pledged to SVB as additional cash collateral.

The Term Loan Agreement restricts the Company, apart from conducting its operations in the normal course of business and certain other permitted exceptions, from entering into mergers or acquisitions, incurring additional indebtedness, paying dividends, delisting its stock from the Nasdaq stock exchange or disposing of assets or making changes to its business operations without the consent of SVB.

The Term Loan Agreement also contains standard conditions, as well as insolvency and delisting of the Company’s common stock from Nasdaq, as deemed events of default. Should the debt become mandatorily repayable upon an event of default, a default interest rate of 3% above otherwise applicable rates would be due on any balances outstanding.

In connection with the Term Loan Agreement, the Company also issued warrants to SVB providing for the purchase of a total of 432,844 shares of its common stock at an exercise price of $2.22 per share. The warrants are exercisable in whole or in part any time prior to August 6, 2031, and were recorded at their relative fair value amount of $0.8 million in additional paid-in capital upon issuance (with an offsetting reduction to the carrying value of outstanding debt).

Should the Company achieve the Term B Milestone and borrow the remaining $25.0 million available under the Term Loan Agreement, an additional 432,842 warrants will be issued and recorded at that time to SVB with similar terms to the initial issuance described above.

The Term Loan Agreement issuance costs were approximately $1.0 million and primarily related to the warrants issued to SVB, which will be amortized into interest expense over the period to March 1, 2023. Interest expense, including the amortization of issuance costs, was $0.4 million for the third quarter of 2021.

The fair value of the Term Loan Agreement as of September 30, 2021 approximates its face value due to proximity to the transaction.

5. Fair Value Measurements

The Company accounts for its financial assets and liabilities using fair value measurements. The authoritative accounting guidance defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities, measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 were as follows:

($ in thousands)