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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: 001-39370

 

 

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.

 

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 9, 2021, the registrant had 32,906,550 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 June 30, 2021 and December 31, 2020 (unaudited)

1

 

Condensed Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021 and 2020 (unaudited)

2

 

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and six months ended June 30, 2021 and 2020 (unaudited)

3

 

Condensed Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)

5

 

Notes to Unaudited Condensed Financial Statements

6

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 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3.

Defaults Upon Senior Securities

68

Item 4.

Mine Safety Disclosures

68

Item 5.

Other Information

68

Item 6.

Exhibits

69

Signatures

70

 

 

 

i


 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS


This Quarterly Report on Form 10-Q, and the information incorporated herein by reference, particularly in the sections captioned “Risk Factors” under Part II, Item 1A, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Part I, Item 2, contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. 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, these statements are based on our management’s beliefs and assumptions and on information currently available to our management as of the date of this Quarterly Report on Form 10-Q. 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. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. You should read the sections titled “Risk Factor Summary” below and “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, which such factors may be updated or supplemented from time to time by subsequent reports we file with the Securities and Exchange Commission.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

i


 

RISK FACTOR SUMMARY

 

Below is a summary of material factors that make an investment in our common stock speculative or risky. Importantly, this summary does not address all the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q. The below summary is qualified in its entirety by the more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q as part of your evaluation of an investment in our common stock.

 

 

We have a limited operating history and do not have any products approved for sale.

 

We have incurred significant losses since our inception and we expect to continue to incur significant losses for the foreseeable future.

 

We have never generated revenue from product sales and may never achieve or maintain profitability.

 

We will require additional capital, which, if available, may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.

 

Our business and the business or operations of our research partners, including CRISPR, and other third parties with whom we conduct business could be adversely affected by the effects of health epidemics, including the recent COVID-19 pandemic, in regions where we or third parties on which we rely have business operations.

 

Our business depends upon the success of our chimeric antigen receptor-natural killer cell, or CAR-NK, cell technology platform.

 

Utilizing CAR-NK cells represents a novel approach to the treatment of cancer, and we must overcome significant challenges in order to develop, commercialize and manufacture our product candidates.

 

Clinical development involves a lengthy and expensive process with an uncertain outcome, and we may encounter substantial delays due to a variety of reasons outside our control.

 

Our business is highly dependent on the success of our product candidates, and on the success of NKX101 and NKX019 in particular, and we may fail to develop NKX101, NKX019 and/or our other product candidates successfully or be unable to obtain regulatory approval for them.

 

Our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or commercialize these programs on a timely basis or at all.

 

The results of preclinical studies and early-stage clinical trials may not be predictive of future results. Initial success in any clinical trials may not be indicative of results obtained when these trials are completed or in later stage trials.

 

If any of our product candidates, or any competing product candidates, demonstrate relevant, serious adverse events, we may be required to halt or delay further clinical development.

 

If we fail to compete effectively with academic institutions and other biopharmaceutical companies that develop similar or alternatives to cellular immunotherapy product candidates, our business will be materially adversely affected.

 

Our manufacturing process is novel and complex, and we may encounter difficulties in production, or difficulties with internal manufacturing, which would delay or prevent our ability to provide a sufficient supply of our product candidates for clinical trials or our products for patients, if approved.

 

We rely on third parties to manufacture certain of our product candidates, and certain materials for use in the production of our product candidates, which increases the risk that we will not have sufficient quantities of such product candidates or materials, or such quantities at an acceptable cost, which could delay, prevent or impair our development or commercialization efforts.

 

We are reliant on a sole supplier for certain steps of our manufacturing process.

 

Delays in commissioning and receiving regulatory approvals for our manufacturing facilities could delay our development plans and thereby limit our ability to develop our product candidates and generate revenues.

 

If our license agreement with National University of Singapore and St. Jude’s Children’s Research Hospital, Inc. is terminated, we could lose our rights to key components enabling our NK cell engineering platform.

ii


 

If any patent protection we obtain is not sufficiently robust, our competitors could develop and commercialize products and technology similar or identical to ours.

 

If any of our product candidates are approved for marketing and commercialization and we have not developed or secured marketing, sales and distribution capabilities, either internally or from third parties, we will be unable to successfully commercialize such products and may not be able to generate product revenue.

 

Our product candidates, including NKX101 and NKX019, could be subject to regulatory limitations following approval, if and when such approval is granted.

 

The market price for our common stock may be volatile, which could contribute to the loss of all or part of your investment.

 

Concentration of ownership of our shares of common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

 

 

 

 

 

iii


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NKARTA, INC.

CONDENSED BALANCE SHEETS

(Unaudited, in thousands, except share data)

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

24,421

 

 

$

96,692

 

Short-term investments, available-for-sale

 

 

255,382

 

 

 

218,221

 

Prepaid expenses and other current assets

 

 

4,132

 

 

 

3,922

 

Total current assets

 

 

283,935

 

 

 

318,835

 

Restricted cash

 

 

452

 

 

 

413

 

Property and equipment, net

 

 

11,350

 

 

 

9,350

 

Operating lease right-of-use assets

 

 

12,050

 

 

 

8,505

 

Other long-term assets

 

 

1,324

 

 

 

547

 

Total assets

 

$

309,111

 

 

$

337,650

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,161

 

 

$

1,176

 

Operating lease liabilities, current portion

 

 

2,287

 

 

 

1,402

 

Accrued and other current liabilities

 

 

5,808

 

 

 

6,253

 

Total current liabilities

 

 

10,256

 

 

 

8,831

 

Operating lease liabilities, net of current portion

 

 

10,408

 

 

 

7,517

 

Other long-term liabilities

 

 

65

 

 

 

82

 

Total liabilities

 

 

20,729

 

 

 

16,430

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

447,302

 

 

 

439,235

 

Accumulated other comprehensive income

 

 

6

 

 

 

3

 

Accumulated deficit

 

 

(158,929

)

 

 

(118,021

)

Total stockholders’ equity

 

 

288,382

 

 

 

321,220

 

Total liabilities and stockholders’ equity

 

$

309,111

 

 

$

337,650

 

 

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

1


NKARTA, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

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

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

15,957

 

 

$

7,862

 

 

$

29,496

 

 

$

15,122

 

General and administrative

 

 

5,677

 

 

 

2,493

 

 

 

11,618

 

 

 

4,642

 

Total operating expenses

 

 

21,634

 

 

 

10,355

 

 

 

41,114

 

 

 

19,764

 

Loss from operations

 

 

(21,634

)

 

 

(10,355

)

 

 

(41,114

)

 

 

(19,764

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of preferred stock

   purchase right liability

 

 

 

 

 

(40,741

)

 

 

 

 

 

(40,163

)

Interest income

 

 

104

 

 

 

27

 

 

 

214

 

 

 

152

 

Other income (expense), net

 

 

(5

)

 

 

4

 

 

 

(8

)

 

 

4

 

Total other income (expense), net

 

 

99

 

 

 

(40,710

)

 

 

206

 

 

 

(40,007

)

Net loss

 

$

(21,535

)

 

$

(51,065

)

 

$

(40,908

)

 

$

(59,771

)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(21,535

)

 

$

(51,065

)

 

$

(40,908

)

 

$

(59,771

)

Other comprehensive gain (loss)

 

 

(28

)

 

 

4

 

 

 

3

 

 

 

3

 

Comprehensive loss

 

$

(21,563

)

 

$

(51,061

)

 

$

(40,905

)

 

$

(59,768

)

Net loss per share, basic and diluted

 

$

(0.66

)

 

$

(30.06

)

 

$

(1.25

)

 

$

(36.13

)

Weighted average shares used to compute net loss

   per share, basic and diluted

 

 

32,827,365

 

 

 

1,698,560

 

 

 

32,783,730

 

 

 

1,654,304

 

 

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

2


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

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2020

 

 

 

 

$

 

 

 

 

32,627,963

 

 

$

3

 

 

$

439,235

 

 

$

3

 

 

$

(118,021

)

 

$

321,220

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

15,802

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock

   upon exercise of stock

   option, net of repurchase

 

 

 

 

 

 

 

 

 

154,489

 

 

 

 

 

 

756

 

 

 

 

 

 

 

 

 

756

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,347

 

 

 

 

 

 

 

 

 

3,347

 

Unrealized gain on

   short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31

 

 

 

 

 

 

31

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(19,373

)

 

 

(19,373

)

Balance, March 31, 2021

 

 

 

 

$

 

 

 

 

32,798,254

 

 

$

3

 

 

$

443,347

 

 

$

34

 

 

$

(137,394

)

 

$

305,990

 

Vesting of shares of common

   stock subject to repurchase

 

 

 

 

 

 

 

 

 

15,575

 

 

 

 

 

 

9

 

 

 

 

 

 

 

 

 

9

 

Issuance of common stock

   upon exercise of stock

   option, net of repurchase

 

 

 

 

 

 

 

 

 

39,032

 

 

 

 

 

 

256

 

 

 

 

 

 

 

 

 

256

 

Share-based compensation

   expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,690

 

 

 

 

 

 

 

 

 

3,690

 

Unrealized gain on

   short-term investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(28

)

 

 

 

 

 

(28

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,535

)

 

 

(21,535

)

Balance, June 30, 2021

 

 

 

 

$

 

 

 

 

32,852,861

 

 

$

3

 

 

$

447,302

 

 

$

6

 

 

$

(158,929

)

 

$

288,382

 

 

3


 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Deficit

 

Balance, December 31, 2019

 

 

27,283,973

 

 

$

59,815

 

 

 

 

1,600,601

 

 

$

1

 

 

$

1,179

 

 

$

(2

)

 

$

(26,660

)

 

$

(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

 

 

$

(3

)

 

$

(35,366

)

 

$

(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 loss 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

 

 

$

1

 

 

$

(86,431

)

 

$

(83,890

)

 

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

4


NKARTA, INC.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(40,908

)

 

$

(59,771

)

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

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

7,037

 

 

 

1,048

 

Depreciation and amortization

 

 

667

 

 

 

281

 

Accretion and amortization of premiums and discounts on investments, net

 

 

1,576

 

 

 

(32

)

Non-cash lease expense

 

 

231

 

 

 

178

 

Change in fair value of preferred stock purchase right liability

 

 

 

 

 

40,163

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(987

)

 

 

(368

)

Accounts payable and accrued and other liabilities

 

 

285

 

 

 

(27

)

Net cash used in operating activities

 

 

(32,099

)

 

 

(18,528

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(2,411

)

 

 

(4,812

)

Purchases of short-term investments

 

 

(86,234

)

 

 

(3,577

)

Maturities of short-term investments

 

 

47,500

 

 

 

16,100

 

Net cash provided by (used in) investing activities

 

 

(41,145

)

 

 

7,711

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

1,012

 

 

 

287

 

Proceeds from early exercise of stock options

 

 

 

 

 

12

 

Liability to related party

 

 

 

 

 

10,245

 

Payments of deferred offering costs

 

 

 

 

 

(2,440

)

Net cash provided by financing activities

 

 

1,012

 

 

 

8,104

 

Net decrease in cash and cash equivalents

 

 

(72,232

)

 

 

(2,713

)

Cash, cash equivalents, and restricted cash beginning of period

 

 

97,105

 

 

 

20,875

 

Cash, cash equivalents, and restricted cash end of period

 

$

24,873

 

 

$

18,162

 

Reconciliation of cash, cash equivalents and restricted cash to the balance sheet:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

24,421

 

 

$

17,749

 

Restricted cash

 

 

452

 

 

 

413

 

Total cash, cash equivalents and restricted cash

 

$

24,873

 

 

$

18,162

 

 

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

5


NKARTA, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

1. Organization and Description of Business

Description of the Business

Nkarta, Inc. (“Nkarta” or the “Company”) was incorporated in the State of Delaware in July 2015. The Company is a biopharmaceutical company developing engineered natural killer (“NK”) cells to treat cancer. The Company is focused on leveraging the natural potent power of NK cells to identify and kill abnormal cells and recruit adaptive immune effectors to generate responses that are specific and durable. Nkarta is combining its NK expansion platform technology with proprietary cell engineering technologies to generate an abundant supply of NK cells, engineer enhanced NK cell recognition of tumor targets, and improve persistence for sustained activity in the body for the treatment of cancer. Nkarta’s goal is to develop off-the-shelf NK cell therapy product candidates to improve outcomes for patients. The Company’s operations are based in South San Francisco, California and it operates in one segment.

Liquidity and Management Plans

The accompanying unaudited condensed financial statements have been prepared assuming that the Company will continue as a going concern. However, since inception, the Company has devoted substantially all of its efforts to organizing and staffing, business planning, raising capital, conducting preclinical studies and initiating clinical studies, and has not realized substantial revenues from its planned principal operations. In addition, the Company has a limited operating history, has incurred operating losses since inception and expects that it will continue to incur net losses into the foreseeable future as it continues its research and development activities. As of June 30, 2021, the Company had an accumulated deficit of $158.9 million and cash, cash equivalents, restricted cash and short-term investments of $280.3 million.

Management plans to continue to incur substantial costs in order to conduct research and development activities and additional capital will be needed to undertake these activities. The Company intends to raise such capital through debt or equity financings or other arrangements to fund operations. Management believes that the Company’s current cash, cash equivalents, restricted cash and short-term investments will provide sufficient funds to enable the Company to meet its obligations for at least twelve months from the filing date of this report.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020 have been prepared in accordance with U.S. generally accepted accounting principle (“U.S. GAAP”) for interim financial information and pursuant to Article 10 of Regulation S-X of the Securities Act of 1933, as amended (the “Securities Act”). Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that the Company believes are necessary to fairly state the Company’s financial position and the results of its operations and cash flows.

The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results expected for the full year or any subsequent interim period. The condensed balance sheet at December 31, 2020 has been derived from the audited financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because all of the disclosures required by U.S. GAAP for complete financial statements are not included herein, these unaudited condensed financial statements and the notes accompanying them should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed by the Company with the Securities and Exchange Commission (the “SEC”) on March 25, 2021.

COVID-19 Pandemic

The COVID-19 pandemic has caused disruptions in the global economy and has affected and may continue to affect the Company’s business and operations. The extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on certain developments, including the duration and spread of the outbreak, the development and spread of more contagious and/or vaccine-resistant variants, the effectiveness of actions taken in the United States and other countries to contain, vaccinate against, and treat the disease, and its impact on the Company’s current and planned preclinical studies and clinical trials, employees and vendors, all of which are uncertain and cannot be predicted. The extent to which the COVID-19 pandemic may

6


impact the Company’s financial condition or results of operations is uncertain. In response to the pandemic, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act had no impact on the Company’s income tax provision for the year ended December 31, 2020. The Company continues to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows. The Company currently does not expect to apply for loans or grants under the CARES Act.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to preclinical studies, fair value of assets and liabilities, share-based compensation and income taxes. Management bases its estimates on historical experience, knowledge of current events and actions it may undertake in the future that management believes to be reasonable under the circumstances. Actual results may differ from these estimates and assumptions.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration of potential dilutive securities. Diluted net loss per share is computed by dividing the net loss by the sum of the weighted average number of common shares plus the potential dilutive effects of potential dilutive securities outstanding during the period. Potential dilutive securities are excluded from diluted earnings or loss per share if the effect of such inclusion is antidilutive. The Company’s potentially dilutive securities, which include convertible preferred stock prior to the conversion of such shares to common stock, unvested common stock, and outstanding stock options under the Company’s equity incentive plan, have been excluded from the computation of diluted net loss per share as they would be anti-dilutive to the net loss per share. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Recent Accounting Pronouncements

Income Taxes. In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-12—Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in Topic 740 related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies aspects of the accounting for franchise taxes and enacted changes in tax laws or rates. This standard is effective for fiscal years beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard in the first quarter of 2021 using the prospective method, and the adoption did not have a material impact on the Company’s financial statements.

There were no other significant updates to the recently issued accounting standards other than as disclosed herewith for the six months ended June 30, 2021. Although there are several other new accounting pronouncements issued or proposed by the FASB, the Company does not believe any of those accounting pronouncements have had or will have a material impact on its financial position or operating results.

7


3. Net Loss Per Share

The following tables summarize the computation of the basic and diluted net loss per share (in thousands except share and per share data):

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(21,535

)

 

$