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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2021

OR

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

For the transition period from                      to                     

Commission File Number: 001-38443

 

Cogent Biosciences, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

46-5308248

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

200 Cambridge Park Drive, Suite 2500

Cambridge, Massachusetts

 

02140

(Address of principal executive offices)

 

(Zip code)

(617) 945-5576

(Registrant’s telephone number, including area code)

 

 

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

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange

on which registered

Common Stock, $0.001 Par Value

 

COGT

 

The 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  

 

As of August 13, 2021, there were 39,848,804 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

 

 

 

 


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. These statements involve known and unknown risks, uncertainties, and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “might,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential,” “seek,” “would” or “continue,” or the negative of these terms or other similar expressions. The forward looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in Item 1A. “Risk Factors” in our most recent Annual Report on Form 10-K. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:

 

the potential impacts of raising additional capital, including dilution to our existing stockholders, restrictions on our operations or requirements that we relinquish rights to our technologies or product candidates;

 

business interruptions resulting from the coronavirus disease (“COVID-19”) outbreak or similar public health crises, which could cause a disruption to the development of our product candidates and adversely impact our business;

 

the success, cost, and timing of our product development activities and clinical trials;

 

the timing of our planned regulatory submissions to the FDA for our product candidate bezuclastinib, also known as CGT9486;

 

our ability to obtain and maintain regulatory approval for our bezuclastinib product candidate and any other product candidates we may develop, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;

 

the potential for our identified research priorities to advance our bezuclastinib product candidate or for our research team to discover additional product candidates;

 

the ability to license additional intellectual property rights relating to our current or future product candidates from third-parties and to comply with our existing or future license agreements and/or collaboration agreements;

 

our ability to commercialize our current and future product candidates in light of the intellectual property rights of others;

 

our ability to obtain funding for our operations, including funding necessary to complete further discovery, development and commercialization of our existing and future product candidates;

 

the scalability and commercial viability of our manufacturing methods and processes;

 

the commercialization of our product candidates, if approved;

 

our plans to research, discover, develop, and commercialize our product candidates;

 

our ability to attract collaborators with development, regulatory, and commercialization expertise;

 

future agreements with third parties in connection with the commercialization of our product candidates and any other approved product;

 

the size and growth potential of the markets for our product candidates, and our ability to serve those markets;

 

the rate and degree of market acceptance of our product candidates;

 

the pricing and reimbursement of our product candidates, if approved;

 

regulatory developments in the United States and foreign countries;

i


 

 

our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

 

the development and success of competing therapies that are or may become available in clinical trials or commercially;

 

our ability to attract and retain key scientific and management personnel;

 

the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;

 

our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;

 

our use of the proceeds from the private placements, sales of our preferred stock and public offerings of our common stock from time to time; and

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates.

While we may elect to update these forward-looking statements at some point in the future, whether as a result of any new information, future events, or otherwise, we have no current intention of doing so except to the extent required by applicable law.

ii


Cogent Biosciences, Inc.

Table of Contents

 

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

 

PART II—OTHER INFORMATION

 

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 6.

Exhibits

26

Signatures

27

 

 

 

iii


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

218,105

 

 

$

242,190

 

Prepaid expenses and other current assets

 

 

3,245

 

 

 

2,722

 

Total current assets

 

 

221,350

 

 

 

244,912

 

Operating lease, right-of-use asset

 

 

3,715

 

 

 

4,615

 

Property and equipment, net

 

 

226

 

 

 

134

 

Restricted cash

 

 

1,255

 

 

 

1,255

 

Other assets

 

 

1,970

 

 

 

 

Total assets

 

$

228,516

 

 

$

250,916

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,992

 

 

$

732

 

Accrued expenses and other current liabilities

 

 

6,445

 

 

 

4,779

 

CVR liability (Note 3)

 

 

3,060

 

 

 

5,531

 

Operating lease liability

 

 

2,184

 

 

 

2,052

 

Total current liabilities

 

 

13,681

 

 

 

13,094

 

Operating lease liability, net of current portion

 

 

2,031

 

 

 

3,155

 

Total liabilities

 

 

15,712

 

 

 

16,249

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 9,000,000 shares authorized; no shares issued

   or outstanding

 

 

 

 

 

 

Series A non-voting convertible preferred stock, $0.001 par value; 1,000,000

   shares authorized; 103,289 and 132,244 shares issued and outstanding at

   June 30, 2021 and December 31, 2020, respectively

 

 

85,400

 

 

 

110,881

 

Common stock, $0.001 par value; 150,000,000 shares authorized; 39,830,767

   shares and 32,347,905 shares issued and outstanding at June 30, 2021 and

   December 31, 2020, respectively

 

 

40

 

 

 

32

 

Additional paid-in capital

 

 

354,341

 

 

 

322,454

 

Accumulated deficit

 

 

(226,977

)

 

 

(198,700

)

Total stockholders’ equity

 

 

212,804

 

 

 

234,667

 

Total liabilities and stockholders’ equity

 

$

228,516

 

 

$

250,916

 

 

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

1


 

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Collaboration revenue

 

$

 

 

$

528

 

 

$

 

 

$

7,559

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

12,388

 

 

 

5,129

 

 

 

20,601

 

 

 

14,627

 

General and administrative

 

 

4,904

 

 

 

2,802

 

 

 

9,491

 

 

 

6,476

 

Total operating expenses

 

 

17,292

 

 

 

7,931

 

 

 

30,092

 

 

 

21,103

 

Loss from operations

 

 

(17,292

)

 

 

(7,403

)

 

 

(30,092

)

 

 

(13,544

)

Other income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

120

 

 

 

3

 

 

 

245

 

 

 

50

 

Other income

 

 

623

 

 

 

7

 

 

 

1,227

 

 

 

7

 

Change in fair value of CVR liability

 

 

 

 

 

 

 

 

343

 

 

 

 

Total other income

 

 

743

 

 

 

10

 

 

 

1,815

 

 

 

57

 

Net loss and comprehensive loss

 

$

(16,549

)

 

$

(7,393

)

 

$

(28,277

)

 

$

(13,487

)

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

 

$

(0.43

)

 

$

(0.95

)

 

$

(0.77

)

 

$

(1.76

)

Weighted average common shares outstanding, basic and diluted

 

 

38,441,729

 

 

 

7,777,487

 

 

 

36,670,353

 

 

 

7,655,837

 

 

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

2


 

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

 

 

 

Series A Non-Voting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred

Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2020

 

 

132,244

 

 

$

110,881

 

 

 

32,347,905

 

 

$

32

 

 

$

322,454

 

 

$

(198,700

)

 

$

234,667

 

Conversion of Series A non-voting preferred

   stock into common stock

 

 

(18,409

)

 

 

(16,200

)

 

 

4,602,250

 

 

 

5

 

 

 

16,195

 

 

 

 

 

 

 

Issuance of common stock to settle CVR liability

 

 

 

 

 

 

 

 

212,429

 

 

 

 

 

 

2,043

 

 

 

 

 

 

2,043

 

Issuance of common stock for services

 

 

 

 

 

 

 

 

31,683

 

 

 

 

 

 

260

 

 

 

 

 

 

260

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,521

 

 

 

 

 

 

1,521

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,728

)

 

 

(11,728

)

Balances at March 31, 2021

 

 

113,835

 

 

$

94,681

 

 

 

37,194,267

 

 

$

37

 

 

$

342,473

 

 

$

(210,428

)

 

$

226,763

 

Conversion of Series A non-voting preferred

   stock into common stock

 

 

(10,546

)

 

 

(9,281

)

 

 

2,636,500

 

 

 

3

 

 

 

9,278

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,590

 

 

 

 

 

 

2,590

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16,549

)

 

 

(16,549

)

Balances at June 30, 2021

 

 

103,289

 

 

$

85,400

 

 

 

39,830,767

 

 

$

40

 

 

$

354,341

 

 

$

(226,977

)

 

$

212,804

 

 

 

 

 

 

Series A Non-Voting

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible Preferred

Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at December 31, 2019

 

 

 

 

$

 

 

 

7,665,763

 

 

$

8

 

 

$

155,646

 

 

$

(123,892

)

 

$

31,762

 

Issuance of common stock upon exercise of

   stock options

 

 

 

 

 

 

 

 

51,823

 

 

 

 

 

 

38

 

 

 

 

 

 

38

 

Issuance of common stock under

   Employee Stock Purchase Plan

 

 

 

 

 

 

 

 

14,252

 

 

 

 

 

 

35

 

 

 

 

 

 

35

 

Issuance of common stock to LPC as a

   commitment fee

 

 

 

 

 

 

 

 

181,595

 

 

 

 

 

 

262

 

 

 

 

 

 

262

 

Acquisition and retirement of treasury stock

 

 

 

 

 

 

 

 

(207,961

)

 

 

 

 

 

(808

)

 

 

 

 

 

 

(808

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

507

 

 

 

 

 

 

507

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,094

)

 

 

(6,094

)

Balances at March 31, 2020

 

 

 

 

$

-

 

 

 

7,705,472

 

 

$

8

 

 

$

155,680

 

 

$

(129,986

)

 

$

25,702

 

Issuance of common stock upon exercise of

   stock options

 

 

 

 

 

 

 

 

85,012

 

 

 

 

 

 

62

 

 

 

 

 

 

62

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

870

 

 

 

 

 

 

870

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,393

)

 

 

(7,393

)

Balances at June 30, 2020

 

 

 

 

$

 

 

 

7,790,484

 

 

$

8

 

 

$

156,612

 

 

$

(137,379

)

 

$

19,241

 

 

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

3


 

COGENT BIOSCIENCES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(28,277

)

 

$

(13,487

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

31

 

 

 

581

 

Stock-based compensation expense

 

 

4,371

 

 

 

1,639

 

Noncash consideration received from a customer

 

 

 

 

 

(808

)

Change in fair value of CVR liability

 

 

(343

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

2,000

 

Prepaid expenses and other current assets

 

 

(523

)

 

 

(1,440

)

Operating lease, right-of-use asset

 

 

900

 

 

 

718

 

Other assets

 

 

(1,970

)

 

 

427

 

Accounts payable

 

 

1,260

 

 

 

(2,551

)

Accrued expenses and other current liabilities

 

 

1,666

 

 

 

(1,504

)

Operating lease liability

 

 

(992

)

 

 

(789

)

Deferred revenue

 

 

 

 

 

(1,003

)

Net cash used in operating activities

 

 

(23,877

)

 

 

(16,217

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(123

)

 

 

 

Net cash used in investing activities

 

 

(123

)

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock upon stock option exercises

 

 

 

 

 

100

 

Proceeds from issuance of stock from employee stock purchase plan

 

 

 

 

 

35

 

Payment to CVR Holders

 

 

(85

)

 

 

 

Net cash provided by (used in) financing activities

 

 

(85

)

 

 

135

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(24,085

)

 

 

(16,082

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

243,445

 

 

 

38,679

 

Cash, cash equivalents and restricted cash at end of period

 

$

219,360

 

 

$

22,597

 

Supplemental disclosure of noncash investing and financing information:

 

 

 

 

 

 

 

 

Conversion of Series A non-voting convertible preferred stock into common stock

 

$

25,481

 

 

$

 

Issuance of shares in partial settlement of CVR liability

 

$

2,043

 

 

$

 

 

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

4


 

COGENT BIOSCIENCES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

1. Nature of the Business and Basis of Presentation

Cogent Biosciences, Inc. (“Cogent” or the “Company”) is a biotechnology company focused on developing precision therapies for genetically defined diseases. Cogent’s approach is to design rational precision therapies that treat the underlying cause of disease and improve the lives of patients. Cogent’s most advanced program is bezuclastinib, also known as CGT9486, a highly selective tyrosine kinase inhibitor designed to potently inhibit the KIT D816V mutation as well as other mutations in KIT exon 17. In the vast majority of cases, KIT D816V is responsible for driving Systemic Mastocytosis (“SM”), a serious disease caused by unchecked proliferation of mast cells. Exon 17 mutations are also found in patients with advanced gastrointestinal stromal tumors (“GIST”), a type of cancer with strong dependence on oncogenic KIT signaling. Bezuclastinib is a highly selective and potent KIT inhibitor with the potential to provide a new treatment option for these patient populations. In addition to bezuclastinib, the Company’s research team is developing a portfolio of novel targeted therapies to help patients fighting serious, genetically driven diseases. The Company was incorporated in March 2014 under the laws of the State of Delaware. On October 2, 2020 the Company filed an amendment to its certificate of incorporation to change its name from Unum Therapeutics Inc. to Cogent Biosciences, Inc. The name change became effective on October 6, 2020. In connection with the name change, the Company’s common stock began trading under the ticker symbol “COGT” and the new CUSIP for the Company’s common stock is 19240Q 201.

On July 6, 2020, the Company completed its asset acquisition of Kiq Bio LLC (“Kiq”) (the “Kiq Acquisition”), in accordance with the terms of the Agreement and Plan of Merger (the “Merger Agreement”), signed and closed on July 6, 2020. Under the terms of the Merger Agreement, at the closing of the Merger, the Company issued the securityholders of Kiq 1,558,975 shares of common stock and 44,687 shares of Series A Preferred Stock.

On July 9, 2020, the Company completed a Private Investment in Public Equity (“PIPE”) of 118,638 Series A Non-Voting Convertible Preferred Stock to new and existing investors in exchange for gross proceeds of $104.4 million, or net proceeds of $98.9 million, after deducting commissions and offering costs.

On August 28, 2020, the Company sold its assets, rights and interests relating to its Bolt-on Chimeric Receptor (“BOXR”) technology and Autologous Cell Therapy Industrial Automation (“ACTIA”) technology (collectively, the “BOXR Platform”), to Sotio LLC (“Sotio”) (the “BOXR Platform Transaction”), pursuant to an asset purchase agreement by and among the Company, Sotio and Sotio NV as Guarantor (the “BOXR Platform Purchase Agreement”). Pursuant to the BOXR Platform Purchase Agreement, Sotio has agreed to pay the Company total cash consideration of up to $11.5 million, consisting of an upfront payment of $8.1 on the Closing Date and potential milestone payments of up to $3.4 million in the aggregate upon the achievement of certain milestones related to the issuance of Specified Claims (as described in the BOXR Platform Purchase Agreement) by the U.S. Patent and Trademark Office and the European Patent Office. No amounts related to the potential future milestone payments to be received from Sotio have been recognized as of June 30, 2021.

On December 4, 2020, the Company completed an underwritten public offering of 11,794,872 shares of its common stock at a public offering price of $9.75 per share. This included the exercise in full by the underwriters of their 30-day option to purchase up to 1,538,461 additional shares of common stock. The net proceeds from the offering were approximately $107.7 million, after deducting the underwriting discounts and commissions of $6.9 million and offering expenses of $0.4 million.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, the impact of COVID-19, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.            

The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The Company has incurred recurring losses since inception, including a net loss of $28.3 million for the six months ended June 30, 2021. As of June 30, 2021, the Company had an accumulated deficit of $227.0 million. The Company expects to continue to generate operating losses in the foreseeable future. As of the issuance date of the interim condensed consolidated financial statements, the Company expects that its cash and cash equivalents will be sufficient to fund its operating expenses and capital expenditure requirements for at least the next 12 months from issuance of the condensed consolidated financial statements.  

The Company expects that it will continue to incur significant expenses in connection with its ongoing business activities. The Company will need to seek additional funding through equity offerings, debt financings, collaborations, licensing arrangements and other marketing and distribution arrangements, partnerships, joint ventures, combinations or divestitures of one or more of its assets or businesses. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter

5


 

into collaborative arrangements or divest its assets. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. Arrangements with collaborators or others may require the Company to relinquish rights to certain of its technologies or product candidates. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate its research and development programs or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations.

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The consolidated balance sheet at December 31, 2020 was derived from audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K on file with the SEC. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of June 30, 2021 and results of operations for the three and six months ended June 30, 2021 and 2020 and cash flows for the six months ended June 30, 2021 and 2020 have been made. The Company’s results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Mono, Inc. and Kiq Bio LLC. All intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the accrual of research and development expenses, the valuation of the CVR liability and the valuation of stock-based awards. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates, as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.

Risks and Uncertainties

Impact of the COVID-19 Coronavirus

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The impact of the pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

The spread of COVID-19 has caused the Company to modify its business practices, including implementing a work-from-home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel, and it expects to continue to take actions as may be required or recommended by government authorities or as the Company determines are in the best interests of its employees, the patients it serves and other business partners in light of COVID-19. Potential impacts to the Company’s business include temporary closures of its facilities or those of its vendors, disruptions or restrictions on its employees’ ability to travel, disruptions to or delays in ongoing laboratory experiments and operations, the potential diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, and its ability to raise capital. As of June 30, 2021, there have been no material impacts to the Company. As the impact of COVID-19 continues to unfold, the Company will make continual assessments of the situation, as the extent to which the COVID-19 pandemic may materially impact the Company’s financial condition, liquidity or results of operations in the future is uncertain.  

6


 

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12 Simplifying the Accounting for Income Taxes, which eliminates the need for an organization to analyze whether the following apply in a given period: (1) exception to the incremental approach for intra-period tax allocation; (2) exceptions to accounting for basis differences when there are ownership changes in foreign investments; and (3) exceptions in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The Company adopted ASU 2019-12 on January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06 Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) related to the measurement and disclosure requirements for convertible instruments and contracts in an entity’s own equity. The pronouncement simplifies and adds disclosure requirements for the accounting and measurement of convertible instruments and the settlement assessment for contracts in an entity’s own equity. This pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2021 and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact that this standard will have on its condensed consolidated financial statements.

 

3. Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s assets that are measured at fair value on a recurring basis (in thousands):

 

 

 

Fair Value Measurements at June 30, 2021 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CVR Liability

 

$

 

 

$

 

 

$

3,060

 

 

$

3,060

 

Total Liabilities

 

$

 

 

$

 

 

$

3,060

 

 

$

3,060

 

 

 

 

Fair Value Measurements at December 31, 2020 Using:

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

 

 

$

486

 

 

$

 

 

$

486

 

Total Assets

 

$

 

 

$

486

 

 

$

 

 

$

486

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CVR Liability

 

$

 

 

$

 

 

$

5,531

 

 

$

5,531

 

Total Liabilities

 

$

 

 

$

 

 

$

5,531

 

 

$

5,531

 

 

Money market funds were valued by the Company using quoted prices in active markets for similar securities, which represent a Level 2 measurement within the fair value hierarchy.

On July 6, 2020, the Company issued a non-transferrable CVR, which was distributed to stockholders of record as of the close of business on July 6, 2020, and prior to the issuance of any shares to acquire Kiq or sold to the PIPE investors. Holders of the CVR are entitled to receive certain stock and/or cash payments from proceeds received by the Company, if any, related to the disposition of its legacy cell therapy assets for a period of three years from July 2020. On August 28, 2020, the Company sold the BOXR Platform and subsequently sold additional fixed assets, triggering the CVR payment and, per the terms of the CVR agreement, the payment will be made in shares or cash, depending on the timing of cash receipt. The Company classifies the CVR as a liability on its condensed consolidated balance sheet.

The fair value of the CVR liability was determined using the probability weighted discounted cash flow method to estimate future cash flows associated with the sale of the legacy cell therapy assets, including the BOXR platform, ACTR platform and other fixed assets based on assumptions at the date of the CVR issuance and each subsequent quarterly period end, less certain permitted deductions. The number of common shares is determined by dividing the proceeds by the closing price of the Company’s stock on July 6, 2020 of $8.80. The closing price of the Company’s common stock at each measurement date was used to determine the fair value of the share payments included in the CVR liability. The liability measured at the date of issuance was recorded as a common stock dividend, returning capital to the legacy stockholders of record as of the close of business on July 6, 2020. Changes in fair value of the liability

7


 

are recognized as a component of Other income (expense) in the condensed consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2021. The liability was valued based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. In November 2020, the Company issued 707,938 CVR shares of common stock in partial settlement of the CVR liability. In February 2021, the Company issued an additional 212,429 shares of common stock and paid $0.1 million in partial settlement of the CVR. Any settlement of the remaining CVR liability will be a cash settlement. At June 30, 2020, the Company had no financial liabilities outstanding measured at fair value.

The following table sets forth a summary of the changes in the fair value of the Company’s CVR liability:

 

 

 

For the Six Months

Ended June 30, 2021

 

Beginning balance