SEC Filing | Nkarta, Inc.

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nktx-10q_20200930.htm

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 September 30, 2020

☐	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: 001-39370

Nkarta, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	47-4515206
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6000 Shoreline Court, Suite 102 South San Francisco, CA	94080
(Address of principal executive offices)	(Zip Code)

(415) 582-4923

(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(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

NKTX

The Nasdaq Stock Market LLC

(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, 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.

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 November 9, 2020, the registrant had 32,595,397 shares of common stock, par value $0.0001 per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements:	1
	Condensed Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019	1
	Condensed Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019 (unaudited)	2
	Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2020 and 2019 (unaudited)	3
	Condensed Statements of Cash Flows for the three and nine months ended September 30, 2020 and 2019 (unaudited)	5
	Notes to Unaudited Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other Information	29
Item 6.	Exhibits	30
Signatures		32

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements, including statements about:

•

the success, cost, timing and potential indications of our product candidate development activities and clinical trials, including our currently planned and potential future clinical trials of NKX101 and NKX019;

•

our ability to achieve our milestones for development of our product candidates;

•

our ability to obtain and maintain regulatory approval of our product candidates, including NKX101 and NKX019, in any of the indications for which we plan to develop them, and any related restrictions, limitations and/or warnings in the label of an approved product;

•

the future results of ongoing or later clinical trials, including of NKX101 and NKX019;

•

our ability to obtain funding for our operations, including funding necessary to complete the clinical trials of any of our product candidates;

•

risks associated with the COVID-19 pandemic, which may adversely impact our business, preclinical studies and clinical trials;

•

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

•

our ability to complete construction and qualification of manufacturing facilities to produce clinical and commercial products;

•

our ability to develop, characterize, and control manufacturing processes for our product candidates;

•

the size and growth potential of the markets for our products, and our ability to identify target patient populations and serve those markets, especially for diseases with small patient populations;

•

our ability to successfully commercialize our products, including obtaining reimbursement on favorable terms;

•

our ability to develop and maintain sales and marketing capabilities;

•

the rate and degree of market acceptance of our products;

•

our ability to obtain and maintain insurance coverage and reimbursement for our product candidates;

•

our ability to grow our organization and increase the size of our facilities to meet our anticipated growth;

•

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

•

our ability to attract and retain strategic partners with development, regulatory and commercialization expertise;

•

the success of competing therapies that are or become available;

•

our ability to attract and retain key scientific, commercial or management personnel;

•

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

•

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

•

our expectations regarding our ability to obtain and maintain intellectual property protection for our products and our ability to operate our business without infringing on the intellectual property rights of others;

•

regulatory developments in the United States and foreign countries; and

•

our ability to maintain our license agreement with National University of Singapore and St. Jude Children’s Research Hospital with respect to certain rights to NKX101 and NKX019;

•

other risks and factors described in this Quarterly Report on Form 10-Q and those listed under “Risk Factors” in our Form S-1 filed with the SEC, which became effective on July 9, 2020, as updated by our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020.

In some cases, you can identify forward-looking statements by the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” or “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read the section titled “Risk Factors” set forth in Part II, Item 1A of this Quarterly Report on Form 10-Q for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties. 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. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.

You should read this Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NKARTA, INC.

CONDENSED BALANCE SHEETS

(Unaudited, in thousands)

	September 30, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	188,568		$	20,607
Short-term investments, available-for-sale		141,191			16,384
Prepaid expenses and other current assets		3,635			474
Total current assets		333,394			37,465
Restricted cash		413			268
Property and equipment, net		9,180			3,080
Operating lease right-of-use assets		8,763			7,144
Other long-term assets		545			455
Total assets	$	352,295		$	48,412
Liabilities and stockholders’ deficit
Current liabilities
Accounts payable	$	2,262		$	1,882
Operating lease liabilities, current portion		1,476			1,516
Preferred stock purchase right liability		—			1,478
Accrued and other current liabilities		5,821			3,289
Total current liabilities		9,559			8,165
Operating lease liabilities, net of current portion		7,659			5,780
Other long-term liabilities		96			134
Total liabilities		17,314			14,079
Commitments
Convertible preferred stock		—			59,815
Stockholders’ equity (deficit)
Common stock		3			1
Additional paid-in capital		435,098			1,179
Accumulated other comprehensive loss		4			(2	)
Accumulated deficit		(100,124	)		(26,660	)
Total stockholders’ equity (deficit)		334,981			(25,482	)
Total liabilities and stockholders’ equity (deficit)	$	352,295		$	48,412

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

NKARTA, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited, in thousands except share and per share data)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Collaboration revenue	$	—		$	—		$	—		$	115
Operating expenses
Research and development		9,828			4,620			24,950			10,535
General and administrative		3,918			1,289			8,560			3,281
Total operating expenses		13,746			5,909			33,510			13,816
Loss from operations		(13,746	)		(5,909	)		(33,510	)		(13,701	)
Other income (expense), net:
Change in fair value of preferred stock purchase right liability		—			3,383			(40,163	)		3,383
Change in fair value of derivative liability		—			858			—			858
Loss from extinguishment of debt		—			(752	)		—			(752	)
Interest income		206			—			358			60
Interest expense		—			(283	)		—			(472	)
Other income (expense), net		(153	)		35			(149	)		35
Total other income (expense), net		53			3,241			(39,954	)		3,112
Net loss	$	(13,693	)	$	(2,668	)	$	(73,464	)	$	(10,589	)
Comprehensive loss:
Net loss	$	(13,693	)	$	(2,668	)	$	(73,464	)	$	(10,589	)
Other comprehensive loss		3			—			6			—
Comprehensive loss	$	(13,690	)	$	(2,668	)	$	(73,458	)	$	(10,589	)
Net loss per share, basic and diluted	$	(0.44	)	$	(1.75	)	$	(6.39	)	$	(7.45	)
Weighted average shares used to compute net loss per share, basic and diluted		30,981,441			1,528,510			11,499,327			1,421,882

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

NKARTA, INC.

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited, in thousands except share data)

	Convertible Preferred Stock						Common Stock				Additional paid-in		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares			Amount			Shares		Amount		capital		deficit			Loss			Deficit
Balance, December 31, 2019		27,283,973		$	59,815			1,600,601	$	1	$	1,179	$	(26,660	)	$	(2	)	$	(25,482	)
Vesting of shares of common stock subject to repurchase		—			—			17,494		—		14		—			—			14
Issuance of common stock upon exercise of stock option, net of repurchase		—			—			2,871		—		1		—			—			1
Share-based compensation expense		—			—			—		—		482		—			—			482
Unrealized loss on short-term investments		—			—			—		—		—		—			(1	)		(1	)
Net loss		—			—			—		—		—		(8,706	)		—			(8,706	)
Balance, March 31, 2020		27,283,973		$	59,815			1,620,966	$	1	$	1,676	$	(35,366	)	$	(3	)	$	(33,692	)
Vesting of shares of common stock subject to repurchase		—			—			19,110		—		12		—			—			12
Issuance of common stock upon exercise of stock option, net of repurchase		—			—			110,425		—		285		—			—			285
Share-based compensation expense		—			—			—		—		566		—			—			566
Unrealized gain on short-term investments		—			—			—		—		—		—			4			4
Net loss		—			—			—		—		—		(51,065	)		—			(51,065	)
Balance, June 30, 2020		27,283,973		$	59,815			1,750,501	$	1	$	2,539	$	(86,431	)	$	1		$	(83,890	)
Issuance of Series B second tranche convertible preferred stock, net of issuance cost		27,066,206			64,321			—		—		—		—			—			—
Reclassification of preferred stock purchase right liability to equity upon issuance of convertible preferred stock		—			41,641			—		—		—		—			—			—
Conversion of convertible preferred stock to common stock		(54,350,179	)		(165,777	)		14,689,215		1		165,776		—			—			165,777
Issuance of common stock upon initial public offering, net of issuance cost		—			—			16,100,000		1		265,129		—			—			265,130
Vesting of shares of common stock subject to repurchase		—			—			18,246		—		9		—			—			9
Issuance of common stock upon exercise of stock option, net of repurchase		—			—			10,370		—		36		—			—			36
Share-based compensation expense		—			—			—		—		1,609		—			—			1,609
Unrealized gain on short-term investments		—			—			—		—		—		—			3			3
Net loss		—			—			—		—		—		(13,693	)		—			(13,693	)
Balance, September 30, 2020		—		$	—			32,568,332	$	3	$	435,098	$	(100,124	)	$	4		$	334,981

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

NKARTA, INC.

CONDENSED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(Unaudited, in thousands except share data)

	Convertible Preferred Stock					Common Stock				Additional paid-in		Accumulated			Accumulated Other Comprehensive		Total Stockholders'
	Shares		Amount			Shares		Amount		capital		deficit			Loss		Deficit
Balance, December 31, 2018		6,170,349	$	12,709			1,231,840	$	1	$	187	$	(5,584	)	$	—	$	(5,396	)
Vesting of shares of common stock subject to repurchase		—		—			134,601		—		20		—			—		20
Share-based compensation expense		—		—			—		—		67		—			—		67
Net loss		—		—			—		—		—		(3,083	)		—		(3,083	)
Balance, March 31, 2019		6,170,349	$	12,709			1,366,441	$	1	$	274	$	(8,667	)	$	—	$	(8,392	)
Beneficial conversion feature upon issuance of convertible promissory notes		—		261			—		—		—		—			—		—
Vesting of shares of common stock subject to repurchase		—		—			96,030		—		5		—			—		5
Share-based compensation expense		—		—			—		—		88		—			—		88
Net loss		—		—			—		—		—		(4,838	)		—		(4,838	)
Balance, June 30, 2019		6,170,349	$	12,970			1,462,471	$	1	$	367	$	(13,505	)	$	—	$	(13,137	)
Reacquisition of beneficial conversion feature upon settlement of promissory notes		—		(145	)		—		—		—		—			—		—
Issuance of Series B convertible preferred stock, net of issuance costs		18,817,499		44,326			—		—		—		—			—		—
Series B preferred stock purchase right liability upon issuance of Series B convertible preferred stock		—		(2,795	)		—		—		—		—			—		—
Vesting of shares of common stock subject to repurchase		—		—			97,054		—		5		—			—		5
Issuance of common stock upon exercise of stock option, net of repurchase		—		—			6,334		—		—		—			—		—
Share-based compensation expense		—		—			—		—		227		—			—		227
Net loss		—		—			—		—		—		(2,668	)		—		(2,668	)
Balance, September 30, 2019		24,987,848	$	54,356			1,565,859	$	1	$	599	$	(16,173	)	$	—	$	(15,573	)

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

NKARTA, INC.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities
Net loss	$	(73,464	)	$	(10,589	)
Adjustments to reconcile net loss to net cash used in operating activities:
Share-based compensation expense		2,657			382
Depreciation and amortization		503			272
Accretion and amortization of investments, net		116			—
Non-cash lease expense		220			124
Change in fair value of preferred stock purchase right liability		40,163			(3,383	)
Change in fair value of derivative liability		—			(858	)
Non-cash loss from extinguishment of debt		—			752
Non-cash interest expense on convertible notes		—			472
Others		(15	)		—
Changes in operating assets and liabilities:
Prepaid expenses and other assets