UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2022

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 001-39069

Aprea Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware	84-2246769
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
535 Boylston Street
Boston, Massachusetts	02116
(Address of principal executive offices)	(Zip Code)

(617) 463-9385

(Registrant’s telephone number, including area code)

Not Applicable

(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	Name of exchange on which registered:
Common stock, par value $0.001 per share	APRE	NASDAQ Global Select 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.

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 ⌧

There were 52,997,814 shares of the registrant’s common stock, $0.001 par value, outstanding as of November 9, 2022.

Aprea Therapeutics, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended September 30, 2022

PART I: FINANCIAL INFORMATION	5
Item 1. Financial Statements	5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	33
Item 4. Controls and Procedures	34
PART II: OTHER INFORMATION	34
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	92
Item 3. Defaults Upon Senior Securities	93
Item 4. Mine Safety Disclosures	93
Item 5. Other Information	93
Item 6. Exhibits	94

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes statements that are, or may be deemed, “forward-looking statements.” In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “designed,” “would,” “could,” “might,” “will,” “should,” “approximately” or, in each case, their negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Quarterly Report on Form 10-Q and include statements regarding our current intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our planned clinical trials, including the commencement of our Phase 1 trial of ATRN-119, our planned IND-enabling studies, including for ATRN-W1051, our ongoing and planned development, prospects for commercialization, and market uptake of our potential product candidates, the strength and breadth of our intellectual property, our planned clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, the legal and regulatory landscape impacting our business, the degree of clinical utility of our product candidates, particularly in specific patient populations, expectations regarding clinical trial data, our development and validation of manufacturing capabilities, our results of operations, financial condition, liquidity, prospects, growth and strategies, the length of time that we will be able to continue to fund our operating expenses and capital expenditures, our expected financing needs and sources of financing, the industry in which we operate and the trends that may affect the industry or us.

By their nature, forward-looking statements involve risks and uncertainties because they relate to future events, competitive dynamics, and healthcare, regulatory and scientific developments and depend on economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. We caution you that forward-looking statements are not guarantees, or predictive, of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q.

Some of the factors that we believe could cause actual results to differ from those anticipated or predicted include:

● our ability to continue to operate as an integrated company subsequent to our acquisition of Atrin Pharmaceuticals Inc.;

● estimates of our expenses, capital requirements and our needs for additional financing;

● business interruptions, including delays in enrollment and data collection of clinical trials, resulting from the outbreak of the novel coronavirus, COVID-19;

● the prospects of our product candidates, all of which are still in development;

● outcome and results of ongoing or future preclinical studies and clinical trials of our product candidates;

● our expectations regarding our ability to identify, discover or acquire additional suitable product candidates;

● the design of our planned clinical trials, including the sample size, trial duration, endpoint definition, event rate assumptions and eligibility criteria;

● our expectations regarding the timing of initiation of data readout from our clinical trials;

● market acceptance or commercial success of any product candidate we develop and the degree of acceptance among physicians, patients, patient advocacy groups, healthcare payors and the medical community;

● our expectations regarding competition, potential market size, the size of the patient populations for our product candidates, if approved for commercial use, and market acceptance;

● our ability to obtain regulatory approval of our product candidates, and any restrictions, limitations and/or warnings in their labels, if approved;

● the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates;

3

● potential claims relating to our intellectual property and third-party intellectual property;

● the duration of our intellectual property estate that will provide protection for our product candidates;

● developments relating to our competitors and our industry;

● our sales, marketing or distribution capabilities and our ability to commercialize our product candidates, if we obtain regulatory approval;

● current and future agreements with third parties in connection with conducting clinical trials, as well as the manufacturing of our product candidates;

● our expectations regarding the ability of our current contract manufacturing partners to produce our product candidates in the quantities and timeframe that we will require;

● our expectations regarding our future costs of goods;

● our ability to attract, retain and motivate key personnel and increase the size of our organization;

● our ability to establish collaborations in lieu of obtaining additional financing;

● the impact of government laws and regulations;

● the impact of our proposed Reverse Stock Split, if approved and executed;

● our financial performance; and

● our expectations regarding the time during which we will be an emerging growth company under the JOBS Act or a smaller reporting company under the Exchange Act.

Any forward-looking statements that we make in this Quarterly Report on Form 10-Q speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q. You should also read carefully the factors described in the “Risk Factors” included in Part II, Item 1A of this Quarterly Report, in Part I and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021 to better understand significant risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report on Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all.

This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

This Form 10-Q may include trademarks, tradenames, and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this Form 10-Q may appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.

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Aprea Therapeutics, Inc.

Part I – Financial Information

Item 1. Financial Statements

Aprea Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30,		December 31,
	2022		2021
Assets
Current assets:
Cash and cash equivalents	$	33,112,601	$	53,076,052
Prepaid expenses and other current assets		361,178		3,508,358
Total current assets		33,473,779		56,584,410
Property and equipment, net		12,237		23,870
Right of use lease asset		106,537		185,811
Other noncurrent assets		29,351		29,372
Total assets	$	33,621,904	$	56,823,463
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,136,064	$	1,773,032
Accrued expenses		2,751,524		5,352,996
Lease liability—current		110,551		190,471
Total current liabilities		3,998,139		7,316,499
Lease liability—noncurrent		—		—
Total liabilities		3,998,139		7,316,499
Commitments and contingencies (Note 8)
Series A convertible preferred stock, $0.001 par value, 40,000,000 shares authorized; 128,597 and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.		2,998,537		—
Stockholders’ equity:
Common stock, $0.001 par value, 400,000,000 shares authorized, 52,237,885 and 21,859,413 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively.		52,237		21,859
Additional paid-in capital		328,167,899		240,978,439
Accumulated other comprehensive loss		(10,240,645)		(10,358,956)
Accumulated deficit		(291,354,263)		(181,134,378)
Total stockholders’ equity		26,625,228		49,506,964
Total liabilities and stockholders' equity	$	33,621,904	$	56,823,463

See accompanying notes to unaudited condensed consolidated financial statements.

5

Aprea Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Operating expenses:
Research and development	$	1,117,576	$	6,015,616	$	15,870,867	$	19,433,721
General and administrative		3,082,618		3,414,795		18,849,549		10,183,953
Acquired in-process research and development		—		—		76,020,184		—
Total operating expenses		4,200,194		9,430,411		110,740,600		29,617,674
Other income (expense):
Interest income (expense), net		151,123		(33)		205,585		(1,678)
Foreign currency gain (loss)		24,353		(21,907)		315,130		247,233
Total other income (loss)		175,476		(21,940)		520,715		245,555
Net loss	$	(4,024,718)	$	(9,452,351)	$	(110,219,885)	$	(29,372,119)
Other comprehensive loss:
Foreign currency translation		26,161		(207,608)		118,311		(417,438)
Total comprehensive loss		(3,998,557)		(9,659,959)		(110,101,574)		(29,789,557)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.12)	$	(0.45)	$	(4.17)	$	(1.39)
Weighted-average common shares outstanding, basic and diluted		34,655,750		21,231,584		26,453,091		21,201,910

See accompanying notes to unaudited condensed consolidated financial statements.

6

Aprea Therapeutics, Inc.

Condensed Consolidated Statements of Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

							Additional		Other				Stockholders’
	Series A Preferred Stock			Common Stock			Paid‑in		Comprehensive		Accumulated		Equity
	Shares	Amount		Shares	Amount		Capital		Loss		Deficit		(Deficit)
Balance, December 31, 2020	—	$	—	21,186,827	$	21,187	$	231,418,356	$	(10,037,261)	$	(144,007,075)	$	77,395,207
Exercise of stock options	—		—	—		—		—		—		—		—
Stock‑based compensation	—		—	—		—		1,822,562		—		—		1,822,562
Foreign currency translation	—		—	—		—		—		(402,850)		—		(402,850)
Net loss	—		—	—		—		—		—		(9,668,755)		(9,668,755)
Balance, March 31, 2021	—	$	—	21,186,827	$	21,187	$	233,240,918	$	(10,440,111)	$	(153,675,830)	$	69,146,164
Stock‑based compensation	—	$	—	—		—		1,863,498		—		—		1,863,498
Foreign currency translation	—		—	—		—		—		193,020		—		193,020
Net loss	—		—	—		—		—		—		(10,251,013)		(10,251,013)
Balance, June 30, 2021	—	$	—	21,186,827	$	21,187	$	235,104,416	$	(10,247,091)	$	(163,926,843)	$	60,951,669
Exercise of stock options	—		—	93,894		94		86,876		—		—		86,970
Vesting of restricted stock units	—		—	79,419		79		(79)		—		—		—
Stock‑based compensation	—	$	—	—		—		2,036,591		—		—		2,036,591
Foreign currency translation	—		—	—		—		—		(207,608)		—		(207,608)
Net loss	—		—	—		—		—		—		(9,452,351)		(9,452,351)
Balance, September 30, 2021	—		—	21,360,140	$	21,360	$	237,227,804	$	(10,454,699)	$	(173,379,194)	$	53,415,271
Balance, December 31, 2021	—	$	—	21,859,413	$	21,859	$	240,978,439	$	(10,358,956)	$	(181,134,378)	$	49,506,964
Vesting of restricted stock units				114,889		115		(115)		—		—		—
Stock‑based compensation	—		—	—		—		2,084,060		—		—		2,084,060
Foreign currency translation	—		—	—		—		—		(65,505)		—		(65,505)
Net loss	—		—	—		—		—		—		(7,936,693)		(7,936,693)
Balance, March 31, 2022	—	$	—	21,974,302	$	21,974	$	243,062,384	$	(10,424,461)	$	(189,071,071)	$	43,588,826
Issuance of preferred stock upon acquisition of Atrin	2,949,630	$	68,777,468	—	$	—	$	—	$	—	$	—	$	—
Issuance of common stock upon acquisition of Atrin	—		—	1,117,394		1,117		1,328,582		—		—		1,329,699
Value of assumed stock options	—		—	—		—		2,602,850						2,602,850
Vesting of restricted stock units	—		—	310,150		310		(310)		—		—		—
Stock‑based compensation	—		—	—		—		14,801,615		—		—		14,801,615
Foreign currency translation	—		—	—		—		—		157,655		—		157,655
Net loss	—		—	—		—		—		—		(98,258,474)		(98,258,474)
Balance, June 30, 2022	2,949,630	$	68,777,468	23,401,846	$	23,401	$	261,795,121	$	(10,266,806)	$	(287,329,545)	$	(35,777,829)
Issuance of common stock pursuant to at-the-market stock sales, net				625,709		626		583,821		—		—		584,447
Conversion of preferred stock to common stock	(2,821,033)		(65,778,931)	28,210,330		28,210		65,750,721		—		—		65,778,931
Stock‑based compensation				—		—		38,236		—		—		38,236
Foreign currency translation				—		—		—		26,161		—		26,161
Net loss				—		—		—		—		(4,024,718)		(4,024,718)
Balance, September 30, 2022	128,597	$	2,998,537	52,237,885	$	52,237	$	328,167,899	$	(10,240,645)	$	(291,354,263)	$	26,625,228

See accompanying notes to unaudited condensed consolidated financial statements.

7

Aprea Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(110,219,885)	$	(29,372,119)
Adjustments to reconcile net loss to net cash used in operating activities:
Acquired in-process research and development		72,523,293		—
Depreciation and amortization		6,788		9,860
Stock‑based compensation		16,923,911		5,722,651
Amortization of right of use lease asset		182,042		195,825
Foreign currency gain		(315,130)		(247,233)
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		3,166,506		2,648,090
Accounts payable		(565,203)		(1,955,231)
Accrued expenses and other liabilities		(2,510,258)		(4,303,808)
Lease liability		(182,688)		(205,427)
Net cash used in operating activities		(20,990,624)		(27,507,392)
Cash flows from investing activities:
Purchases of property and equipment		—		—
Net cash used in investing activities		—		—
Cash flows from financing activities:
Proceeds from the exercise of stock options		—		86,970
Proceeds from at-the-market sales of common stock, net		584,447		—
Net cash provided by financing activities		584,447		86,970
Decrease in cash and cash equivalents		(20,406,177)		(27,420,422)
Effect of exchange rate changes on cash		442,726		(168,860)
Cash and cash equivalents—beginning of year		53,076,052		89,017,686
Cash and cash equivalents—end of period	$	33,112,601	$	61,428,404
Non-cash investing and financing activities:
Operating lease liabilities arising from obtaining right-of-use assets	$	113,612	$	124,043
Issuance of convertible preferred stock and common stock in connection with acquisition		70,107,167

See accompanying notes to unaudited condensed consolidated financial statements.

8

Aprea Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of business and basis of presentation

Nature of business—Aprea Therapeutics, Inc. (or the “Company”) is a clinical-stage biopharmaceutical company focused on developing and commercializing novel cancer therapeutics targeting DNA damage response pathways. The Company began principal operations in 2006 and is headquartered in Boston, Massachusetts with research facilities in Doylestown, Pennsylvania. Prior to the acquisition of Atrin Pharmaceuticals Inc. (Atrin), the Company was engaged in the clinical development of cancer therapeutics that reactivate the mutant p53 tumor suppressor protein. In December 2020, the Company announced that its pivotal Phase 3 myelodysplastic syndromes trial failed to meet its predefined primary endpoint of complete remission (CR) rate. Given these results, FDA feedback and the costs of continuing the APR-246 development program, the Company has shifted primary focus of its activities to the assets acquired in the May 16, 2022 acquisition of Atrin (see Note 3). The Company’s lead product candidate, which was acquired in the Atrin acquisition, is ATRN-119, a Phase 1-ready small molecule ATR inhibitor being developed for solid tumor indications.

Agreement and plan of merger—On May 16, 2022, the Company acquired Atrin Pharmaceuticals Inc., a Delaware corporation (the “Atrin Acquisition”). Under the terms of the Agreement and Plan or Merger dated May 16, 2022 (the “Merger Agreement”), the Company issued to the stockholders of Atrin 1,117,394 shares of the Company’s common stock, par value $0.001 per share, and 2,949,630 shares of Series A convertible preferred stock (“Series A Preferred Stock”) (as described below). The Series A Preferred Stock had a conversion value on the closing date of $68.8 million. In addition, the Company assumed options granted under the Atrin stock option plan, which became options to purchase 3,275,149 shares of the Company’s common stock. See Note 3 for additional information.

Series A Preferred Stock—As a result of the Atrin Acquisition, the Company issued the following Series A Preferred Stock:

	Series A Preferred Stock	Common Stock Issuable Upon Conversion (1)
Outstanding shares issued in merger	2,949,630	29,496,300

(1) Each share of Series A Preferred Stock is convertible into 10 shares of common stock.

The Company held a stockholders’ meeting on July 28, 2022 where approval of the conversion of the Series A Preferred Stock into shares of the Company’s common stock in accordance with Nasdaq Listing Rule 5635(a) was received. A majority of the Series A Preferred Stockholders elected to convert their Series A Preferred Stock into common stock during the quarter ended September 30, 2022 (see Note 6).

Basis of presentation and management plans—The accompanying financial statements are prepared in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of convertible preferred stock and common stock.

The Company is subject to risks common to companies in the biopharmaceutical industry. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be maintained, that any therapeutic products developed will obtain required regulatory approval or that any approved or consumer products will be commercially viable. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will generate significant product sales.

9

Aprea Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company believes that the September 30, 2022 cash balance of approximately $33.1 million will be sufficient to fund the Company’s operations through the end of 2023. In the event that additional funds are not available thereafter, management would expect to significantly reduce expenditures to conserve cash, which would involve scaling back or curtailing new development activity.

2. Summary of significant accounting policies

The Company's complete listing of significant accounting policies are described in Note 2 to the Company's audited consolidated financial statements as of December 31, 2021 included in its annual report on Form 10-K filed with the Securities and Exchange Commission (or the “SEC”).

Principles of consolidation—The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries Aprea Therapeutics AB, which was incorporated in May 2009 and Aprea US, Inc., which was incorporated in June 2016. Management has concluded it has a single reporting segment for purposes of reporting financial condition and results of operations. All intercompany transactions and balances have been eliminated.

Unaudited interim consolidated financial statements—The accompanying unaudited interim condensed consolidated financial statements have been prepared by the Company in accordance with U.S. GAAP for interim information and pursuant to the rules and regulations of the SEC for reporting on Form 10-Q. Accordingly, certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed interim financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s annual report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

The unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements, and in management’s opinion, include all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the financial information for the interim periods have been made. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year or any future period.

Use of estimates—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, liabilities, revenue, and expenses as of and 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. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates. Significant items subject to such estimates and assumptions, are used for, but not limited to, include stock-based compensation and accounting for research and development costs.

Foreign currency and currency translation—The functional currency for Aprea Therapeutics AB is the Swedish Krona. Assets and liabilities of Aprea Therapeutics AB are translated into United States dollars at the exchange rate in effect on the balance sheet date. Operating expenses are translated at the average exchange rate in effect during the period. Unrealized translation gains and losses are recorded as a cumulative translation adjustment, which is included in the consolidated statements of stockholders’ equity as a component of accumulated other comprehensive loss. Adjustments that arise from exchange rate changes on transactions denominated in a currency other than the local currency are included in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss as incurred.

Cash and cash equivalents— The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

10

Aprea Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Fair value of financial instruments—The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received upon sale of an asset or paid to transfer a liability between market participants at measurement dates. ASC Topic 820, Fair Value Measurement (“ASC 820”), establishes a three-level valuation hierarchy for instruments measured at fair value. The hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The hierarchy defines three levels of valuation inputs, of which the first two are considered observable and the last is considered unobservable:

● Level 1 inputs: Quoted prices in active markets for identical assets or liabilities.

● Level 2 inputs: Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable, such as quoted market prices, interest rates and yield curves.

● Level 3 inputs: Unobservable inputs developed using estimates or assumptions developed by the Company, which reflect those that a market participant would use in pricing the asset or liability.

To the extent that the 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.

The Company’s financial instruments consist of cash and cash equivalents and accounts payable. The carrying amount of accounts payable is considered a reasonable estimate of fair value due to the short-term maturity.

Accounting for leases—The Company adopted the Lease standard (ASC 842) effective January 1, 2019, using the modified retrospective method. The new standard provided a number of optional practical expedients in transition. The Company elected to apply the ‘package of practical expedients’ which allowed them to not reassess (i) whether existing or expired arrangements contain a lease, (ii) the lease classification of existing or expired leases, or (iii) whether previous initial direct costs would qualify for capitalization under the new lease standard. The Company also elected to apply (i) the practical expedient which allows them to not separate lease and non-lease components, for new leases entered into after adoption and (ii) the short-term lease exemption for all leases with an original term of less than 12 months, for purposes of applying the recognition and measurements requirements in the new standard.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on specific facts and circumstances, the existence of an identified asset(s), if any, and the Company’s control over the use of the identified asset(s), if applicable. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of future lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The Company’s incremental borrowing rate ranged from approximately 3.0% to 4.3% based on the remaining lease term of the applicable leases.

The Company has elected not to separate lease and non-lease components as a single component. Operating leases are recognized on the balance sheet as ROU lease assets, lease liabilities current and lease liabilities non-current. Fixed rents are included in the calculation of the lease balances while variable costs paid for certain operating and pass-through costs are excluded. Lease expense is recognized over the expected term on a straight-line basis.

Stock-based compensation—The Company measures stock options and other stock-based awards granted to employees and directors based on their fair value on the date of the grant and recognize compensation expense of those awards over the requisite service period, which is generally the vesting period of the respective award. The Company applies the straight-line method of expense recognition to all awards with only service based vesting conditions.

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Aprea Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed in accordance with the FASB issued ASU No. 2018-07, Compensation Stock Compensation (Topic 718): Improvements to Nonemployee Share Based Payment Accounting. The new standard largely aligns the accounting for share based payment awards issued to employees and nonemployees by expanding the scope of ASC 718 to apply to nonemployee share based transactions, as long as the transaction is not effectively a form of financing.

The Company estimates the fair value of each stock option grant on the date of grant using the Black Scholes option pricing model, which uses as inputs the fair value of the Company’s common stock and assumptions the Company makes for the volatility of its common stock, the expected term of its stock options, the risk-free interest rate for a period that approximates the expected term of its stock options and its expected dividend yield. The Company elects to account for forfeitures when they occur.

The Company also awards restricted stock units (“RSUs”) to employees and directors. RSUs are generally subject to forfeiture if employment terminates prior to the completion of the vesting restrictions. The Company expenses the cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs at the date of grant, ratably over the period during which the vesting restrictions lapse.

Net loss per share—The Company has reported losses since inception and has computed basic net loss per share attributable to common stockholders by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period, without consideration for potentially dilutive securities. The Company computes diluted net loss per common share after giving consideration to all potentially dilutive common shares, including options to purchase common stock, outstanding during the period determined using the treasury-stock and if-converted methods, except where the effect of including such securities would be antidilutive. Because the Company has reported net losses since inception, these potential common shares have been anti-dilutive and basic and diluted loss per share have been the same.

The following table sets forth the potentially dilutive securities that have been excluded from the calculation of diluted net loss per share because to include them would be anti-dilutive (in common stock equivalent shares):

	Nine months ended September 30,
	2022	2021
Convertible preferred stock	128,597	—
Options to purchase common stock	9,606,504	4,719,115
Unvested restricted stock units	254,770	399,719
Total shares of common stock equivalents	9,989,871	5,118,834

Acquired in-process research and development—The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, including transaction costs. In an asset acquisition, the cost allocated to acquire in-process research and development (“IPR&D) with no alternative future use is charged to expense at the acquisition date. Please see Note 3 – “Acquisition of Atrin” for additional information.

Recently issued accounting pronouncements—From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying financial statements.

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Aprea Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

3. Acquisition of Atrin

On May 16, 2022, the Company completed its acquisition of Atrin in accordance with the terms of the Merger Agreement as described in Note 1 – “Nature of business and basis of presentation”. Under the terms of the Merger Agreement, the Company issued 1,117,394 shares of common stock and 2,949,630 shares of Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into 10 shares of Common Stock. A majority of the Series A Preferred Stockholders elected to convert their Series A Preferred Stock into common stock during the quarter ended September 30, 2022 (see Note 6).

The Company concluded the Atrin acquisition was not the acquisition of a business, as substantially all of the fair value of the non-monetary assets acquired was concentrated in a single identifiable asset, ATRN-119.

The Company determined that the cost to acquire the Atrin assets was $76.2 million, based on the fair value of the equity consideration issued and including direct costs of the acquisition of $3.5 million. The net assets acquired in connection with the Atrin acquisition were recorded at their estimated fair values as of May 16, 2022, which is the date the Atrin acquisition was completed. The following table summarizes the net assets acquired based on their estimated fair values as of May 16, 2022:

Acquired IPR&D	$	76,020,184
Cash and cash equivalents		2,489,745
Prepaid expenses and other assets		34,579
Accounts payable and accrued liabilities		(2,336,462)
Total Acquisition Value	$	76,208,046

The Atrin acquisition was accounted for as an asset acquisition as Atrin was not considered to be a business under ASC 805 or SEC Rule 11-01(d). In the estimation of fair value of the asset purchase consideration, the Company used the carrying value of the cash and cash equivalents, prepaid expenses, accounts payable, and accrued liabilities as the most reliable indicator of fair value based on the associated short-term nature of the balances. The remaining fair value was attributable to the acquired IPR&D. Since Atrin was in preclinical development and no clinical trials had commenced at the time of the acquisition, the cost attributable to the IPR&D was expensed in the Company’s consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2022, as the acquired IPR&D had no alternative future use, as determined by the Company in accordance with U.S. GAAP.

As a result of the Atrin acquisition, the Company announced in May 2022 it was closing its research facility in Sweden and reducing its related workforce in Sweden. The closure of the Swedish research facility and the reduction in workforce resulted in total expenses for employee severance and employee benefits of approximately $1.1 million, of which was recorded as of May 16, 2022. As of September 30, 2022, the remaining liability is approximately $0.4 million.

In connection with the Atrin acquisition, a non-transferable contingent value right (a “CVR”) was distributed to the Aprea stockholders of record as of the close of business on May 13, 2022. Holders of the CVR will be entitled to receive certain stock and/or cash payments from proceeds received by the Company, if any, related to the disposition of its legacy assets in the 2 year period following the closing of the transaction. The CVR had a deminimus value as of May 16, 2022 and September 30, 2022.

4. Leases

The Company is party to operating leases for office and laboratory space. The Company’s finance leases are immaterial both individually and in the aggregate. The Company has elected to apply the short-term lease exception to all leases of one year or less. Rent expense for three and nine months ended September 30, 2022 was $77,022 and $236,738,

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Aprea Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

respectively. Rent expense for the three and nine months ended September 30, 2021 was $81,657 and $257,744, respectively.

The Company has an operating lease in Boston, Massachusetts for office space which was amended effective July 1, 2021. The lease will expire on December 31, 2022 and does not have any renewal options. The Company has an operating lease for office and laboratory space in Doylestown, Pennsylvania which expires on December 31, 2022. The Company also has an operating lease for office and laboratory space in Solna, Sweden which was extended effective January 1, 2022 and now expires on June 30, 2023.

Quantitative information regarding the Company’s leases for the three and nine months ended September 30, 2022 and 2021 is as follows:

	Three months ended September 30,				Nine months ended September 30,
Lease Cost	2022		2021		2022		2021
Operating lease cost	$	61,248	$	59,700	$	182,042	$	176,104
Other Information
Operating cash flows paid for amounts included in the measurement of lease liabilities	$	64,056	$	64,056	$	192,169	$	191,022
Operating lease liabilities arising from obtaining right‑of‑use assets	$	—	$	124,043	$	123,786	$	124,043
Weighted average remaining lease term (years)		0.25-0.75		0.75-1.25		0.25-0.75		0.75-1.25
Weighted average discount rate		3.0 - 4.3%		3.0 - 4.3%		3.0 - 4.3%		3.0 - 4.3%

Future lease payments under noncancelable leases are as follows at September 30, 2022:

	Operating
Future Lease Payments	Leases
2022	$	58,742
2023		53,224
Total Lease Payments	$	111,966
Less: Imputed Interest		(1,415)
Total Lease Liabilities	$	110,551

As most of the Company’s leases do not provide an implicit rate, the Company used its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

5. Accrued expenses

Accrued expenses consist of the following:

	September 30,		December 31,
	2022		2021
Professional fees	$	75,196	$	247,123
Compensation and benefits		1,572,350		1,418,309
Research and development		731,638		3,504,375
Other		372,340		183,189
Total accrued expenses	$	2,751,524	$	5,352,996

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Aprea Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

6. Stockholders’ equity

The total number of shares of all classes of capital stock that the Company is authorized to issue is 440,000,000 shares, consisting of 400,000,000 shares of common stock, par value $0.001 per share and 40,000,000 shares of preferred stock, par value $0.001 per share.

Conversion of Series A Preferred Stock

As discussed in Note 1 and Note 3, the Company issued to the shareholders of Atrin 2,949,630 shares of Series A Preferred Stock as partial consideration of the Atrin acquisition. Each share of Series A Preferred Stock is convertible into 10 shares of common stock. The Company held a stockholders’ meeting on July 28, 2022 where approval of the conversion of the Series A Preferred Stock into shares of the Company’s common stock in accordance with Nasdaq Listing Rule 5635(a) was received. As of September 30, 2022, a total of 2,821,033 shares of Series A Preferred Stock was converted into 28,210,330 shares of common stock. As of September 30, 2022, a total of 128,597 shares of Series A Preferred Stock remained outstanding.

Common Stock

The holders of common stock are entitled to one vote for each share of common stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, after the payment or provision for payment of all debts and liabilities of the Company, the holders of common stock shall be entitled to share in the remaining assets of the Company available for distribution, if any.

Shelf Registration Statement

On November 12, 2020, the Company filed a universal shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an aggregate of $350.0 million. On November 30, 2020, the Shelf Registration Statement was declared effective by the SEC. The universal shelf registration statement includes an at-the-market (“ATM”) offering program and the Company filed a Prospectus Supplement dated September 2, 2022, for the sale of up to $14,744,728 of shares of the Company’s common stock pursuant to its ATM offering program. The Company agreed to pay a commission of 3% of the gross proceeds of any common stock sold in connection with the ATM offering program. During the three and nine months ended September 30, 2022, the Company issued and sold 625,709 shares of common stock under the ATM offering program resulting in net proceeds to the Company of approximately $0.6 million. The Company did not sell any stock under the ATM offering program during the three and nine months ended September 30, 2021.

Stock-Based Compensation Expense

The Company recorded stock-based compensation expense of $38,236, and $16,923,911 for the three and nine months ended September 30, 2022, respectively. The company recorded compensation expense of $2,036,591 and $5,722,651 for the three and nine months ended September 30, 2021, respectively.

7. Income Taxes

The Company has no income tax expense due to operating losses incurred for the three and nine months ended September 30, 2022 and 2021. The Company has provided a valuation allowance for the full amount of the net deferred tax assets as, based on all available evidence, it is considered more likely than not that all the recorded deferred tax assets will not be realized in a future period.

Realization of the future tax benefits is dependent on may factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Under the provisions of the U.S. Internal Revenue Code and

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Aprea Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Sweden tax law, certain substantial changes in the Company’s ownership, including a sale of the Company or significant changes in ownership due to sales of equity, may have limited, or may limit in the future, the amount of net operating loss carryforwards that could be used annually to offset future taxable income. For U.S. and Swedish income tax purposes, the Company has not completed a study to assess whether a change of control has occurred or whether there have been changes of control since the Company’s formation due to the complexity and cost associated with such study and because there could be additional changes of control in the future. As a result, the Company is not able to estimate the effect of the change in control, if any, on the Company’s ability to utilize U.S. or Swedish net operating losses or other tax attribute carryforwards in the future. For Swedish income tax purposes, the Company’s net operating losses may be subject to limitations in accordance with the country’s group contribution restriction laws.

The Company files tax returns in Sweden, the United States and Massachusetts. Income tax returns prior to 2018 in the United States and Massachusetts are no longer subject to examination and income tax returns prior to 2015 are no longer subject to examination in Sweden. The Company is not currently under examination by the IRS or any other jurisdictions for any tax years.

As tax law is complex and often subject to varied interpretations, it is uncertain whether some of the Company’s tax positions will be sustained upon examination. Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in the Company’s financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. Substantially all of these unrecognized tax benefits, if recognized, would benefit the Company’s effective income tax rate.

As of September 30, 2022 and December 31, 2021, the Company had approximately $0.1 million of liabilities related to uncertain tax positions. As the Company’s uncertain tax positions can be offset by available net operating losses, the Company did not recognize interest and penalties for 2022 and 2021.

8. Commitments and contingencies

The Company records a provision for contingent losses when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. As of September 30, 2022, the Company has not recorded a provision for any contingent losses.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited financial information and notes thereto included in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, including forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report, on our Quarterly Report for the period ended June 30, 2022 and in our Annual Report on Form 10-K for the year ended December 31, 2021, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a biopharmaceutical company focused on developing novel synthetic lethality-based cancer therapeutics that target DNA damage response (DDR) pathways. Our approach is built upon a platform of integrated discovery technologies to enrich our pipeline with novel targets in synthetic lethality and cancer treatment. Together with our expertise in small molecule drug discovery, we are applying the capabilities of our discovery platform to the development of new precision oncology therapies and the identification of patient populations most likely to benefit.

Prior to the acquisition of Atrin, we were engaged in the clinical development of cancer therapeutics that reactivate the mutant p53 tumor suppressor protein. In December 2020, we announced that our pivotal Phase 3 myelodysplastic syndromes trial failed to meet its predefined primary endpoint of complete remission (CR) rate. Given these results, FDA feedback and the costs of continuing the APR-246 development program, we shifted the primary focus of our activities to the assets acquired in the May 16, 2022 acquisition of Atrin Pharmaceuticals Inc., or Atrin, a privately held company focused on developing next-generation cancer therapeutics that regulate the DDR, including the ATRN-119 and ATRN-W1051 programs. Following the acquisition of Atrin, the Company’s primary focus is the discovery and development of proprietary molecules targeting DDR pathways in oncology through synthetic lethality. This focus leverages Atrin’s development of a proprietary discovery platform to interrogate DDR pathways that may enable identification of both potential novel DDR targets for future development and potential biomarkers for enhanced sensitivity and patient selection in clinical trials. The acquisition of Atrin was the result of thorough evaluation of strategic options, which commenced in the fourth quarter of 2021. We believe the acquisition represents a potential opportunity to create long-term value for our stockholders.

DDR Overview

Cells are continuously exposed to endogenous and exogenous stress that can lead to DNA damage. To counter this lethal threat, cells have mechanisms to detect DNA damage, activate the appropriate repair pathway or, if irreparable, induce cell cycle arrest or apoptosis. These DDR processes are vital for cell survival.

Cancer cells rely on various alternative pathways to repair and resist DNA damage and replication stress. Many of these DDR-related genes are mutated across cancers, as loss of the DDR pathway allows cancer cells to rapidly evolve and grow out of control. Notably, functional loss of these pathways also creates a vulnerability in these cancers because mutation or loss of some DDR genes increases reliance on other DDR genes to support continued cancer cell growth. When mutation or loss of two DDR genes leads to cell death, the interplay between these genes is synthetic lethality. Importantly, selective targeting of specific members of the DDR pathway represents an attractive potential therapeutic approach for the treatment of cancer. Furthermore, because genes that are mutated in cancers continue to function normally in healthy tissues, this treatment approach can potentially reduce drug-induced toxicity while maintaining anti-cancer activity.

Leveraging synthetic lethality in therapeutic targeting of DDR represents an emerging strategy to treat a broad spectrum of cancers that currently lack effective treatments. Our team was the first to identify ATR as a drug target that synergistically kills cancer cells based on one of their most fundamental characteristics, oncogene expression. Aprea’s development pipeline is based on our discovery platforms and a rationally designed series of novel molecules. We have

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developed highly selective small molecule regulators of DDR proteins that play fundamental roles in these response pathways.

Platform of Integrated Discovery Technologies

Our drug discovery and development processes integrate three unique platforms: Repli-Biom, ATRIZE™ and SCET™. These integrated technologies provide us with the opportunity to enrich our pipeline with novel targets in synthetic lethality and cancer treatment. In addition, by utilizing our integrated technologies we have identified cancer-associated gene alterations that can lead to increased sensitivity to Aprea’s DDR inhibitors and may provide future opportunities for improved efficacy and tolerability in cancer treatment.

Repli-Biom

Repli-Biom identifies proteins that cancer cells use to resist the effects of drug treatment. This integrated proteomic, genomic and machine learning approach identifies response factors that both participate in the molecular response to drug treatment and are highly mutated in cancers.

Absence of these resistance factors predict sensitivity to drug treatment, thus potentially promoting durable drug responses. In addition, this approach is being used to identify novel combination therapy approaches and new drug targets to advance Aprea’s drug development programs.

ATRIZE

ATRIZE is an innovative, high-throughput system to detect disruption of DNA synthesis and DDR activation, and thus is ideal for screening DDR inhibitors. ATRIZE may significantly reduce the time required to discover active drug candidates and optimize their design for precision cancer therapy.

SCET

SCET is a medicinal chemistry cyclization approach to generate highly potent and selective enzyme inhibitors. The SCET approach enables the design and synthesis of novel conformationally-constrained drug candidates with potentially higher affinity and specificity for the target enzyme. By utilizing this approach, we believe that we have developed highly potent and specific anticancer drug candidates with decreased off-target activities.

DDR Product Candidates

ATRN-119

Ataxia Telangiectasia and Rad3-related (ATR) and Checkpoint Kinase 1 (CHK1) are critical DNA damage response kinases that prevent the collapse of replication forks into DNA double strand breaks (DSBs). ATR is one of several key regulators of the response to defective DNA replication and DNA damage, which occurs more commonly in cancer cells than in normal cells.

In response to these cancer-associated genomic insults, ATR is activated to inhibit progression to cellular division and prevent the assembly of the SLX1-SLX4, MUS81-EME1 and XPF-ERCC1 (SMX) endonuclease (DNA cutting) complex. When ATR is inhibited, the SMX complex is inappropriately activated, promoting the cutting of replication forks into DSBs. In association with ATR’s fundamental roles in these replication responses, cells with increased oncogenic stress, p53 mutations and deficiencies in DDR pathways are predicted to have increased sensitivity to ATR inhibition. Accordingly, ATR inhibition is also predicted to sensitize cells to DNA-damaging chemotherapy, radiotherapy and PARP inhibitor treatments, making ATR inhibitors particularly attractive for the development of novel combination therapies.

We have developed an orally bioavailable, highly potent and selective macrocyclic small molecule inhibitor of ATR (ATRN-119) that has the potential to have less toxicity to normal tissues while continuing to capitalize on cancer

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vulnerabilities due to oncogenic stress and DDR pathway defects. We are conducting a Phase 1 clinical trial to evaluate ATRN-119 monotherapy in cancer patients with defined genetic mutations. This trial was activated and opened for enrollment in the third quarter of 2022 and we expect to open 1-2 additional sites in the fourth quarter of 2022.

ATRN-119 and related second-generation candidates were discovered by Atrin. We believe the selectivity and toxicology profiles of ATRN-119 may be differentiated from other ATR inhibitors currently being developed by other companies and we are planning to study ATRN-119 as both a monotherapy and in combination with standard of care in Phase 1/2 clinical trials in solid tumor malignancies. We currently retain worldwide development and commercialization rights to all of our ATR inhibitor product candidates.

ATRN-W1051

WEE1 kinase is a key regulator of multiple phases of the cell cycle, most prominently in progression from G1 to S phase and from S/G2 to M phase through inhibitory phosphorylation of CDK2 and CDK1, respectively. Thus, when WEE1 is inhibited, both G1-S and G2-M checkpoints are abrogated, leading to premature S-phase and M-phase entry. Notably, the replication stress caused by cyclin E1 overexpression is transformed into toxic levels of DSBs and cancer cell death when WEE1 is inhibited. These findings suggest cyclin E overexpression as a cancer-associated vulnerability that may be capitalized on by WEE1 inhibitors.

We have discovered and initiated development of an orally bioavailable, highly potent and selective small molecule WEE1 inhibitor, ATRN-W1051, that is distinct from other WEE1 inhibitors based on its potentially superior pharmacokinetic properties and selectivity regarding common off-targets (PLK1/2/3). ATRN-W1051 is currently in preclinical development, and we anticipate commencing IND-enabling studies in the fourth quarter of 2022.

ATRN-W1051 was discovered by Atrin. We believe the selectivity profile of ATRN-W1051 may be differentiated from other WEE1 inhibitors currently being developed by other companies and we are planning to study ATRN-W1051 as both a monotherapy and in combination with standard of care for the treatment of multiple cancers. We currently retain worldwide development and commercialization rights to ATRN-W1051.

p53 Reactivator Programs

Eprenetapopt

APR-246, or eprenetapopt, is a small molecule p53 reactivator that has been tested in clinical trials for solid tumors and for hematologic malignancies, including myelodysplastic syndromes, or MDS, and acute myeloid leukemia, or AML. Eprenetapopt has received Orphan Drug and Fast Track designations from the FDA for MDS, Fast Track designation from the FDA for AML, and Orphan Drug designation from the European Commission for MDS and AML, and we believe eprenetapopt will be a first-in-class therapy if approved by applicable regulators.

While we currently have no ongoing clinical trials of eprenetapopt, we have received clearance from FDA to proceed under our existing INDs with new Phase 1 dose-optimization clinical trials in relapsed/refractory MDS/AML and Richter’s transformed NHL, including initial testing of a new oral formulation of eprenetapopt.

● Phase 1 Relapsed/Refractory MDS/AML Trial— In the first quarter of 2022, we received clearance from the FDA to proceed under our existing IND of a clinical trial in relapsed/refractory (R/R) MDS/AML. The trial is designed to determine the optimal pharmacologically active dose of eprenetapopt in combination with azacitidine in relapsed/refractory (R/R) MDS/AML.

● Phase 1 NHL Trial—In the first quarter of 2022 we received clearance from FDA to proceed under our existing IND with a clinical trial in relapsed/refractory (R/R) TP53 mutant Richter’s transformed NHL. Richter’s transformed NHL is a subset of CLL that is characterized by significantly more aggressive disease. The trial is designed to seek to determine the optimal pharmacologically active dose of eprenetapopt in combination with venetoclax and rituximab. The trial includes administration of an oral formulation of eprenetapopt as part of a monotherapy lead-in phase. Under the trial protocol,

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pharmacokinetic data following oral administration would be collected to assess exposure relative to intravenous administration and to inform potential future clinical opportunities of an oral dosage form of eprenetapopt.

Prior Developments in p53 Clinical Trials

● On August 4, 2021, the U.S. Food and Drug Administration (FDA) placed a partial clinical hold on the clinical trials of eprenetapopt in combination with azacitidine in our Phase 3 frontline MDS clinical trial, our Phase 2 MDS/AML Post-Transplant clinical trial and our Phase 1/2 AML clinical trial. The FDA’s concerns referred to the safety and efficacy data from the Phase 3 frontline MDS clinical trial. In particular, the FDA requested more information related to a potential risk-reward imbalance between the combination of eprenetapopt and azacitidine versus azacitidine alone as it relates to increased serious adverse events in the Phase 3 frontline clinical trial in MDS. At the time of the clinical hold announcement the MDS, AML and post-transplant maintenance trials had all completed enrollment. Patients who were benefiting from treatment could continue to receive study treatment. In December 2021 we discussed with FDA the data and analyses from the Phase 3 trial and reached preliminary agreement on proposals for new clinical trials in myeloid malignancies. In the first quarter of 2022, FDA informed us that it would continue the partial clinical hold on these three clinical trials, allowing patients currently on and benefiting from treatment to continue with treatment, but prohibiting enrollment of new patients. As all trials had already achieved full enrollment and primary endpoint readout, we had no plans to enroll new patients into any of these trials. These trials have been concluded and there are no patients receiving eprenetapopt in any of these trials. FDA has given us clearance to proceed under our existing myeloid malignancy IND with a new clinical trial in relapsed/refractory MDS and AML.

● On August 11, 2021, FDA placed a clinical hold on our clinical trial evaluating eprenetapopt in patients with non-Hodgkin lymphoma. The FDA’s concerns referred to the safety and efficacy data from the Phase 3 frontline MDS clinical trial in our myeloid malignancy program. In particular, the FDA requested more information related to a potential risk-reward imbalance between the combination of eprenetapopt and azacitidine versus azacitidine alone as it relates to increased serious adverse events in the Phase 3 frontline clinical trial in MDS. At the time of the clinical hold announcement the NHL trial had enrolled one patient. Patients who were benefiting from treatment could continue to receive study treatment and no additional patients could be enrolled until the clinical hold was resolved. There are currently no patients receiving eprenetapopt in this trial. In October 2021 we discussed with FDA the requested data and analyses from the Phase 3 trial and proposed amendments for clinical trials to proceed in our lymphoid malignancy program. FDA lifted the clinical hold in December 2021.

Next Generation Programs

APR-548

APR-548 is a second generation p53 reactivator that is a unique analog of eprenetapopt. APR-548 exhibits high oral bioavailability in preclinical testing and is being developed in an oral dosage form.

● Phase 1 MDS/AML Trial—We initiated a Phase 1 clinical trial testing APR-548 in relapsed/refractory MDS and AML. Enrollment in the first dosing cohort was completed. There are currently no patients receiving APR-548 in this trial and enrollment into the trial has been closed.

Corporate Background

Aprea Therapeutics AB, or Aprea AB, was originally incorporated in 2002 and commenced principal operations in 2006. We incorporated Aprea Therapeutics, Inc. (the “Company”) in May 2019. In September 2019 we completed a corporate reorganization and, as a result, all of the issued and outstanding stock of Aprea AB was exchanged for common stock, preferred stock or options, as applicable, of the Company As a result of such transactions, Aprea AB became a wholly-

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owned subsidiary of the Company. On May 16, 2022 we completed the acquisition of Atrin as more fully described below.

We have devoted substantially all of our resources to developing our product candidates, including eprenetapopt, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations primarily through private placements of preferred stock and the net proceeds received from the initial public offering (IPO) of our common stock. Through September 30, 2022, we had received net proceeds of approximately $226.2 million from our sales of preferred and common stock.

On May 16, 2022, we acquired Atrin in accordance with the terms of the Agreement and Plan of Merger date May 16, 2022 (the “Merger Agreement”), by and among Aprea, ATR Merger Sub I Inc., a Delaware corporation and wholly owned subsidiary of Aprea (“First Merger Sub”), ATR Merger Sub II LLC, a Delaware limited liability company and wholly owned subsidiary of Aprea (“Second Merger Sub”) and Atrin. Pursuant to the Merger Agreement, First Merger Sub merged with and into Atrin, pursuant to which Atrin was the surviving corporation and became a wholly owned subsidiary of Aprea (the “First Merger”). Immediately following the First Merger, Atrin merged with and into the second Merger Sub, pursuant to which Second Merger Sub was the surviving entity (the “Second Merger”, together with the First Merger, the “Merger”). The Atrin acquisition was accounted for as an asset acquisition for accounting purposes (see Note 3 to the financial statements).

Under the terms of the Merger agreement, at the closing of the Merger, Aprea issued to the securityholders of Atrin, 1,117,394 shares of the common stock of Aprea, par value $0.001 per share (the “Common Stock”) and 2,949,630 shares of Series A Preferred Stock, each share of which is convertible into 10 shares of common Stock. In addition, we assumed outstanding Atrin stock options, which became options for 3,275,149 shares of our common stock.

Pursuant to the Merger Agreement, Aprea held its annual stockholders’ meeting (the “Stockholders’ Meeting”) on July 28, 2022 where the following matters were approved; (i) the conversion of the Series A Preferred Stock into shares of Common Stock in accordance with Nasdaq Listing Rule 5635(a) and (ii) the ratification of the appointment by the Aprea Board of Directors of additional members to the Board.

Through September 30, 2022, a total of 2,821,033 shares of Series A Preferred Stock were converted into 28,210,330 shares of common stock. As of September 30, 2022, a total of 128,597 shares of Series A Preferred Stock remained outstanding.

Since our inception, we have incurred significant losses on an aggregate basis. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were $4.0 million and $110.2 million for the three and nine months ended September 30, 2022, respectively, $9.5 million and $29.4 million for the three and nine months ended September 30, 2021, respectively and $37.1 million, $53.5 million and $28.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. As of September 30, 2022, we had an accumulated deficit of $291.4 million. These losses have resulted primarily from costs incurred in connection with research and development activities, patent investment, and general and administrative costs associated with our operations and the acquisition of in process research and development associated with the acquisition of Atrin. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.

We anticipate that our expenses will increase substantially if and as we:

● conduct our planned clinical trials and additional preclinical research;

● initiate and continue research and preclinical and clinical development of our other product candidates;

● seek to identify and develop additional product candidates;

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

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

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

● maintain, expand, protect and enforce our intellectual property portfolio;

● acquire or in-license other drugs and technologies;

● defend against any claims of infringement, misappropriation or other violation of third-party intellectual property;

● hire and retain additional clinical, quality control and scientific personnel; and

● add operational, financial and management information systems and personnel, including personnel to support our drug development, any future commercialization efforts and our operation as a public company.

Furthermore, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.

As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. We may be unable to raise additional funds or enter into other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates.

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

As of September 30, 2022, we had cash and cash equivalents of $33.1 million. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements through the end of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.”

The COVID-19 pandemic

The novel coronavirus outbreak (COVID-19) has been declared a “Public Health Emergency of International Concern” by the World Health Organization. COVID-19 has spread to the countries in which we, our suppliers, and our other business partners conduct business. Governments in affected regions have implemented, and may continue to implement or re-implement, safety precautions, including quarantines, travel restrictions, business closures, cancellations of public gatherings, and other measures they deem necessary. Like many other organizations and individuals, the Company and our employees are taking additional steps to avoid or reduce infection, including limiting travel and implementing remote work arrangements. We will continue to actively monitor the situation and may take further actions that could alter our business operations as may be required by national, state, or local authorities, or that we determine are in the best interests of our employees and stockholders.

There are many uncertainties regarding the COVID-19 pandemic, and we are closely monitoring the impact of the pandemic on all aspects of our business, including how it will impact our clinical trials, employees, suppliers, vendors and business partners. While the pandemic did not materially affect our financial results and business operations for the

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three and nine months ended September 30, 2022, we are unable to predict the impact that COVID-19 will have on our financial position and operating results at this time due to numerous uncertainties such as the duration and spread of the outbreak. We will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to our operations if necessary.

Components of our results of operations

Revenue

We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for any of our product candidates are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements that we may enter into with third parties.

Operating expenses

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

Research and development expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:

● expenses incurred under agreements with third parties, including contract research organizations, or CROs, that conduct research, preclinical activities and clinical trials on our behalf as well as contract manufacturing organizations, or CMOs, that manufacture our product candidates for use in our preclinical and clinical trials;

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

● costs of outside consultants, including their fees, stock-based compensation and related travel expenses;

● costs of laboratory supplies and acquiring, developing and manufacturing preclinical study and clinical trial materials;

● expenses related to compliance with regulatory requirements; and

● facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expense research and development costs as incurred. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

We typically use our employee and infrastructure resources across our development programs. We track outsourced development costs and payments made to our research partners by product candidate or development program, but we do not allocate personnel costs or other internal costs to specific development programs or product candidates.

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Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future as we initiate clinical trials for ATRN-119 and other product candidates and continue to discover and develop additional product candidates.

We cannot determine with certainty the duration and costs of planned clinical trials of our product candidates or if, when, or to what extent we will generate revenue from the commercialization and sale of any our product candidates for which we obtain marketing approval. We may never succeed in obtaining marketing approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

● the scope, rate of progress, expense and results of any future clinical trials of our product candidates and other research and development activities that we may conduct;

● uncertainties in clinical trial design and patient enrollment rates;

● significant and changing government regulation and regulatory guidance;

● the timing and receipt of, and any limitations imposed by regulatory bodies on, any marketing approvals; and

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

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the U.S. Food and Drug Administration, or FDA, or another regulatory authority in a foreign jurisdiction were to require us to conduct clinical trials beyond the scope we currently anticipate, or additional clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as a result of the costs associated with the Merger as well as the expansion of operations subsequent to the Merger, as we increase our headcount to support personnel in research and development and to support our operations generally, and as we increase our research and development activities and activities related to the potential commercialization of our product candidates. We also expect to continue to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements; director and officer insurance costs; and investor and public relations costs.

Acquired In-Process Research and Development Expense

Acquired in-process research and development (“IPR&D”) expense resulted from the Atrin acquisition in May 2022 which was accounted for as an asset acquisition. The acquisition cost allocated to acquire IPR&D with no alternative future use was recorded as an expense at the acquisition date and no additional IPR&D expense relating to the Atrin acquisition is expected to be reported in future periods.

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Other income and expense

Interest income and expense

Interest income consists of income earned on our cash and cash equivalents. Interest expense consists of the interest component associated with our facility leases. Our interest income initially increased as our cash and cash equivalents were higher due to the cash proceeds received from our IPO. Such interest income is subsequently decreasing as (i) our cash balance decreases as we continue to fund operations and (ii) a change in interest rates.

Foreign currency gain

Our consolidated financial statements are presented in U.S. dollars, which is our reporting currency. The financial position and results of operations of our subsidiary Aprea AB is measured using the foreign subsidiary’s local currency as the functional currency. Aprea AB cash accounts holding U.S. dollars are remeasured based upon the exchange rate at the date of remeasurement with the resulting gain or loss included in the consolidated statement of operations and comprehensive loss. Expenses of such subsidiaries have been translated into U.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the consolidated balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders’ equity and as other comprehensive loss on the consolidated statement of operations and comprehensive loss.

Income taxes

We have not recorded any U.S. federal, state or foreign income tax expense or benefits for the net losses we have incurred in any year, due to our uncertainty of realizing a benefit from those items. We have provided a valuation allowance for the full amount of the net deferred tax assets as, based on all available evidence, it is considered more likely than not that all the recorded deferred tax assets will not be realized in a future period.

Critical accounting policies and use of estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in the notes to our financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.

Accrued research and development expenses

As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses at each balance sheet. This process involves reviewing open contract and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and

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circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:

● CROs in connection with performing research activities on our behalf and conducting preclinical studies and clinical trials on our behalf;

● investigative sites or other service providers in connection with clinical trials;

● vendors in connection with preclinical and clinical development activities; and

● vendors related to product manufacturing and development and distribution of preclinical and clinical supplies.

We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.

Stock-based compensation

We measure stock options and other stock-based awards granted to employees and directors based on their fair value on the date of the grant and recognize compensation expense of those awards, over the requisite service period, which is generally the vesting period of the respective award. We apply the straight-line method of expense recognition to all awards with only service-based vesting conditions and apply the graded-vesting method to all awards with performance-based vesting conditions or to awards with both service-based and performance-based vesting conditions.

For stock-based awards granted to non-employees, compensation expense is recognized over the period during which services are rendered by such non-employees until completed in accordance with the FASB issued ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The new standard largely aligns the accounting for share-based payment awards issued to employees and nonemployees by expanding the scope of ASC 718 to apply to nonemployee share-based transactions, as long as the transaction is not effectively a form of financing.

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

We also award restricted stock units (“RSUs”) to employees and directors. RSUs are generally subject to forfeiture if employment terminates prior to completion of the vesting restrictions. We expense the cost of the RSUs, which is determined to be the fair market value of the shares of common stock underlying the RSUs at the date of grant, ratably over the period during which the vesting restrictions lapse.

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Emerging growth company and smaller reporting company status

We are an emerging growth company (EGC), as defined in the JOBS Act. Under this act, emerging growth companies are permitted to delay adopting new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We may remain classified as an EGC until the end of the fiscal year in which the fifth anniversary of our IPO occurs, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last trading day of the second quarter before that time or if we have annual gross revenues of $1.235 billion or more in any fiscal year, we would cease to be an EGC as of December 31 of the applicable year. We also would cease to be an EGC if we issue more than $1 billion of non-convertible debt over a three-year period.

We are also a “smaller reporting company,” as such term is defined in Rule 12b-2 of the Exchange Act, meaning that the market value of our common stock held by non-affiliates is less than $700 million and our annual revenue is less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our common stock held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.

Results of operations

Comparison of the three months ended September 30, 2022 and 2021

	Three Months Ended September 30,
	2022		2021		Change
Operating expenses:
Research and development	$	1,117,576	$	6,015,616	$	(4,898,040)
General and administrative		3,082,618		3,414,795		(332,177)
Total operating expenses		4,200,194		9,430,411		(5,230,217)
Other income (expense):
Interest expense		151,123		(33)		151,156
Foreign currency gain		24,353		(21,907)		46,260
Total other income (expense)		175,476		(21,940)		197,416
Net loss	$	(4,024,718)	$	(9,452,351)	$	5,427,633

Research and development expenses

	Three Months Ended September 30,
	2022		2021		Change
APR-246	$	57,885	$	3,378,188	$	(3,320,303)
ATRN-119		396,608		—		396,608
Other early-stage development programs		137,662		1,067,960		(930,298)
Unallocated research and development expenses		525,421		1,569,468		(1,044,047)
Total research and development expenses	$	1,117,576	$	6,015,616	$	(4,898,040)

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Research and development expenses for the three months ended September 30, 2022 were $1.1 million, compared to $6.0 million for the three months ended September 30, 2021. The overall decrease of $4.9 million was primarily due to the overall activity in connection with the wrap up and close out of the clinical trials of eprenetapopt as follows:

● a decrease of $1.4 million related to the close out of our pivotal Phase 3 clinical trial of eprenetapopt with azacitidine for frontline treatment of TP53 mutant MDS;

● a decrease of $0.7 million related to the close out of our Phase 1/2 solid tumor trial;

● a decrease of $0.7 million in non-cash stock-based compensation expense. The decrease in non-cash stock-based compensation expense was related to the accelerated vesting of all outstanding and unvested stock options and RSUs in connection with the Atrin acquisition which occurred in the second quarter of 2022.

● a decrease of $0.4 million in pre-clinical development activities;

● a decrease of $0.3 million related to the close out of our Phase 2 post-transplant MDS/AML clinical trial;

● a decrease of $0.2 million related to the close out of our Phase 1 AML clinical trial;

● a decrease of $0.2 million related to the close out of our Phase 1/2 clinical trial in relapsed/refractory TP53 mutant chronic lymphoid leukemia (CLL) assessing eprenetapopt with venetoclax and rituximab and eprenetapopt with ibrutinib in order to further assess eprenetapopt in hematological malignancies;

● a decrease of $0.2 million related to the close out of our Phase 1 dose-escalation clinical trial of APR-548, a next generation p53 reactivator;

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2022 were $3.1 million, compared to $3.4 million for the three months ended September 30, 2021. The decrease of $0.3 million was primarily related to

● a decrease of $1.3 million in non-cash stock-based compensation expense. The decrease in non-cash stock-based compensation expense was related to the accelerated vesting of all outstanding and unvested stock options and RSUs in connection with the Atrin acquisition which occurred in the second quarter of 2022.

The above decrease was offset, in part by the following:

● an increase in professional of $0.6 million primarily associated with post acquisition activities.

Other income and expense

Foreign currency gain for the three months ended September 30, 2022 was $24,353 compared to a foreign currency loss of $21,907 for the three months ended September 30, 2021. The change in the foreign currency of $46,260 was primarily due to a strengthening of the U.S. dollar against the Swedish Krona during the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. Interest income, net for the three months ended September 30, 2022 consisted of interest income on our cash and cash equivalents, offset in part, by interest expense associated with our facility leases. Interest expense, net for the three months ended September 30, 2021 consisted of interest expense associated with our facility leases, offset in part, by interest income on our cash and cash equivalents.

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Comparison of the nine months ended September 30, 2022 and 2021

	Nine months ended September 30,
	2022		2021		Change
Operating expenses:
Research and development	$	15,870,867	$	19,433,721	$	(3,562,854)
General and administrative		18,849,549		10,183,953		8,665,596
Acquired in-process research and development		76,020,184		—		76,020,184
Total operating expenses		110,740,600		29,617,674		81,122,926
Other income (expense):
Interest expense		205,585		(1,678)		207,263
Foreign currency gain		315,130		247,233		67,897
Total other income (expense)		520,715		245,555		275,160
Net loss	$	(110,219,885)	$	(29,372,119)	$	(80,847,766)

Research and development expenses

	Nine months ended September 30,
	2022		2021		Change
APR-246	$	4,538,350	$	10,843,510	$	(6,305,160)
ATRN-119		415,916		—		415,916
Other early-stage development programs		1,171,987		3,493,027		(2,321,040)
Unallocated research and development expenses		9,744,614		5,097,184		4,647,430
Total research and development expenses	$	15,870,867	$	19,433,721	$	(3,562,854)

Research and development expenses for the nine months ended September 30, 2022 were $15.9 million, compared to $19.4 million for the nine months ended September 30, 2021. The overall decrease of $3.5 million was primarily due to the decreased activity in connection with the wrap up of the clinical trials of eprenetapopt as follows:

● a decrease of $3.2 million in non-cash stock-based compensation expense. The decrease in non-cash stock-based compensation expense was related to the accelerated vesting of all outstanding and unvested stock options and RSUs in connection with the Atrin acquisition which occurred in the second quarter of 2022; and

● a decrease of $0.5 million related to the close out of our Phase 1/2 solid tumor trial;

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2022 were $18.9 million, compared to $10.2 million for the nine months ended September 30, 2021. The increase of $8.7 million was primarily related to:

● an increase of $7.3 million in non-cash stock-based compensation expense. The increase in non-cash stock-based compensation expense was related to the accelerated vesting of all outstanding and unvested stock options and RSUs in connection with the Atrin acquisition which occurred in the second quarter of 2022; and

● an increase in professional of $0.8 million primarily associated with post acquisition activities.

Acquired In-process Research and Development (IPR&D) Expense

Acquired IPR&D expense was $76.0 million for the nine months ended September 30, 2022. Acquired IPR&D resulted from the Atrin Acquisition in May 2022 which was accounted for as an asset acquisition. The acquisition cost allocated

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to acquired IPR&D with no alternative future use was recorded as an expense as of the closing date of the Atrin Acquisition. No acquired IPR&D expense was incurred in the nine months ended September 30, 2021.

Other income and expense

Foreign currency gain for the nine months ended September 30, 2022 was $0.3 million compared to a foreign currency gain of $0.2 million the nine months ended September 30, 2021. Interest income, net for the nine months ended September 30, 2022 consisted of interest income on our cash and cash equivalents, offset in part, by interest expense associated with our facility leases. Interest expense, net for the nine months ended September 30, 2021 consisted of interest expense associated with our facility leases, offset in part, by interest earned on our cash and cash equivalents.

Liquidity and capital resources

Since our inception, we have incurred significant losses on an aggregate basis. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have financed our operations primarily through private placements of our preferred and common stock and the net proceeds received from the initial public offering (IPO) of our common stock. Through September 30, 2022, we had received net proceeds of $226.2 million from our sales of preferred and common stock. As of September 30, 2022, we had cash and cash equivalents of $33.1 million.

Cash flows

The following table summarizes our sources and uses of cash for each of the periods presented:

	Nine months ended September 30,
	2022		2021
Net cash provided by (used in):
Operating activities	$	(20,990,624)	$	(27,507,392)
Investing activities		—		—
Financing activities		584,447		86,970
Net increase in cash and cash equivalents	$	(20,406,177)	$	(27,420,422)

Operating activities.

Cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. Net cash used in operating activities was $21.0 million for the nine months ended September 30, 2022 compared to $27.5 million for the nine months ended September 30, 2021. The decrease in cash used in operating activities of $6.5 million was primarily attributable to an increase in our net loss of $80.8 million, which was largely due to acquired IPR&D associated with the Atrin acquisition of $76.0 million and a decrease in operating assets and liabilities of $3.7 million, partially offset by an increase in non-cash stock-based compensation of $11.2 million.

Investing activities.

No cash was used in investing activities for the nine months ended September 30, 2022 or 2021.

Financing activities.

Net cash provided by financing activities was $0.6 million for the nine months ended September 30, 2022 compared to $0.1 million for the nine months ended September 30, 2021. Cash provided by financing activities for the nine months ended September 30, 2022 was attributable to the net proceeds received from sales of common stock under our ATM program. Cash provided by financing activities for the nine months ended September 30, 2021 represented proceeds received from the exercise of stock options.

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Funding requirements

We expect our expenses to increase in connection with our ongoing and planned development activities. In addition, we have incurred and continue to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:

● initiate and conduct clinical trials and additional preclinical research for our product candidates;

● seek to identify and develop additional product candidates;

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

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

● require the manufacture of larger quantities of our product candidates for clinical development and potentially commercialization;

● maintain, expand, protect and enforce our intellectual property portfolio;

● acquire or in-license other drugs and technologies;

● defend against any claims of infringement, misappropriation or other violation of third-party intellectual property;

● hire and retain additional clinical, quality control and scientific personnel;

● build out new facilities or expand existing facilities to support our ongoing development activity;

● add operational, financial and management information systems and personnel, including personnel to support our drug development, any future commercialization efforts and our transition to a public company; and

● continue to operate as a public company.

As of September 30, 2022, we had cash and cash equivalents of $33.1 million. We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements through the end of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

Because of the numerous risks and uncertainties associated with the development of our product candidates and programs and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:

● the scope, progress, results and costs of our planned clinical trials, drug discovery and preclinical research for our product candidates;