10-Q
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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 March 31, 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: 001-39370

 

 

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 May 9, 2022, the registrant had 48,404,331 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 March 31, 2022 and December 31, 2021 (unaudited)

1

 

Condensed Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021 (unaudited)

2

 

Condensed Statements of Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (unaudited)

3

 

Condensed Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (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

22

Item 4.

Controls and Procedures

22

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

23

Item 1A.

Risk Factors

23

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

66

Item 3.

Defaults Upon Senior Securities

67

Item 4.

Mine Safety Disclosures

67

Item 5.

Other Information

67

Item 6.

Exhibits

68

Signatures

69

 

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.

 

ii


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 and other third parties with whom we conduct business have been and could continue to be adversely affected by the effects of health epidemics, including the 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 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 pipeline 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. Interim, “topline” and preliminary data from our clinical trials may differ materially from the final data. 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.
We have entered into a research collaboration with CRISPR Therapeutics regarding certain product candidates, and we may enter into additional collaborations with third parties to develop or commercialize other product candidates. Our prospects with respect to those product candidates will depend in significant part on the success of those collaborations, and we may not realize the benefits of such collaborations.
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.

iii


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.
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.

 

 

 

 

 

 

iv


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

NKARTA, INC.

CONDENSED BALANCE SHEETS

(Unaudited, in thousands)

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

41,611

 

 

$

60,816

 

Short-term investments, available-for-sale

 

 

175,346

 

 

 

177,272

 

Prepaid expenses and other current assets

 

 

6,261

 

 

 

7,692

 

Total current assets

 

 

223,218

 

 

 

245,780

 

Restricted cash

 

 

2,098

 

 

 

2,098

 

Property and equipment, net

 

 

14,053

 

 

 

12,856

 

Operating lease right-of-use assets

 

 

65,469

 

 

 

11,678

 

Other long-term assets

 

 

1,461

 

 

 

1,491

 

Total assets

 

$

306,299

 

 

$

273,903

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

2,016

 

 

$

1,112

 

Operating lease liabilities, current portion

 

 

2,505

 

 

 

2,484

 

Accrued and other current liabilities

 

 

6,321

 

 

 

9,347

 

Total current liabilities

 

 

10,842

 

 

 

12,943

 

Operating lease liabilities, net of current portion

 

 

66,740

 

 

 

9,975

 

Other long-term liabilities

 

 

11

 

 

 

18

 

Total liabilities

 

 

77,593

 

 

 

22,936

 

Commitments and contingencies (Note 7)

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Preferred stock

 

 

 

 

 

 

Common stock

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

459,392

 

 

 

455,210

 

Accumulated other comprehensive loss

 

 

(606

)

 

 

(150

)

Accumulated deficit

 

 

(230,083

)

 

 

(204,096

)

Total stockholders’ equity

 

 

228,706

 

 

 

250,967

 

Total liabilities and stockholders’ equity

 

$

306,299

 

 

$

273,903

 

 

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
March 31,

 

 

 

2022

 

 

2021

 

Operating expenses

 

 

 

 

 

 

Research and development

 

$

19,568

 

 

$

13,539

 

General and administrative

 

 

6,530

 

 

 

5,942

 

Total operating expenses

 

 

26,098

 

 

 

19,481

 

Loss from operations

 

 

(26,098

)

 

 

(19,481

)

Other income (expense), net:

 

 

 

 

 

 

Interest income

 

 

112

 

 

 

110

 

Other expense, net

 

 

(1

)

 

 

(2

)

Total other income (expense), net

 

 

111

 

 

 

108

 

Net loss

 

$

(25,987

)

 

$

(19,373

)

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(25,987

)

 

$

(19,373

)

Other comprehensive gain (loss)

 

 

(456

)

 

 

31

 

Comprehensive loss

 

$

(26,443

)

 

$

(19,342

)

Net loss per share, basic and diluted

 

$

(0.79

)

 

$

(0.59

)

Weighted average shares used to compute net loss
   per share, basic and diluted

 

 

32,992,582

 

 

 

32,739,610

 

 

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

2


NKARTA, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share data)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance, December 31, 2021

 

 

32,971,107

 

 

$

3

 

 

$

455,210

 

 

$

(150

)

 

$

(204,096

)

 

$

250,967

 

Vesting of shares of common
   stock subject to repurchase

 

 

10,924

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Issuance of common stock
   upon exercise of stock
   options

 

 

21,067

 

 

 

 

 

 

79

 

 

 

 

 

 

 

 

 

79

 

Share-based compensation
   expense

 

 

 

 

 

 

 

 

4,097

 

 

 

 

 

 

 

 

 

4,097

 

Unrealized loss on
   short-term investments

 

 

 

 

 

 

 

 

 

 

 

(456

)

 

 

 

 

 

(456

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,987

)

 

 

(25,987

)

Balance, March 31, 2022

 

 

33,003,098

 

 

$

3

 

 

$

459,392

 

 

$

(606

)

 

$

(230,083

)

 

$

228,706

 

 

3


NKARTA, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share data)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders'

 

 

 

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
   options

 

 

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

 

 

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

4


NKARTA, INC.

CONDENSED STATEMENT OF CASH FLOWS

(Unaudited, in thousands)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(25,987

)

 

$

(19,373

)

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

 

 

 

 

 

 

Share-based compensation expense

 

 

4,097

 

 

 

3,347

 

Depreciation and amortization

 

 

610

 

 

 

301

 

Accretion and amortization of premiums and discounts on investments, net

 

 

727

 

 

 

758

 

Non-cash lease expense

 

 

1,380

 

 

 

137

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

1,460

 

 

 

825

 

Operating lease right-of-use assets

 

 

1,319

 

 

 

 

Operating lease liabilities

 

 

295

 

 

 

 

Accounts payable and accrued and other liabilities

 

 

(2,159

)

 

 

(642

)

Net cash used in operating activities

 

 

(18,258

)

 

 

(14,647

)

Cash flows from investing activities

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,770

)

 

 

(1,033

)

Purchases of short-term investments

 

 

(28,472

)

 

 

(35,161

)

Maturities of short-term investments

 

 

29,216

 

 

 

16,000

 

Net cash used in investing activities

 

 

(1,026

)

 

 

(20,194

)

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

79

 

 

 

756

 

Proceeds from early exercise of stock options

 

 

 

 

 

1

 

Net cash provided by financing activities

 

 

79

 

 

 

757

 

Net increase in cash and cash equivalents

 

 

(19,205

)

 

 

(34,084

)

Cash, cash equivalents, and restricted cash beginning of period

 

 

62,914

 

 

 

97,105

 

Cash, cash equivalents, and restricted cash end of period

 

$

43,709

 

 

$

63,021

 

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

 

 

 

 

 

 

Cash and cash equivalents

 

 

41,611

 

 

$

62,608

 

Restricted cash

 

 

2,098

 

 

 

413

 

Total cash, cash equivalents and restricted cash

 

$

43,709

 

 

$

63,021

 

 

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 March 31, 2022, the Company had an accumulated deficit of $230.1 million and cash, cash equivalents, restricted cash and short-term investments of $219.1 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.

 

On April 28, 2022, the Company issued and sold 15,333,334 shares of its common stock in an underwritten public offering for total net proceeds of approximately $215.5 million. See Note 11, Subsequent Events for additional information.

 

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements as of March 31, 2022 and for the three months ended March 31, 2022 and 2021 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. 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 months ended March 31, 2022 are not necessarily indicative of the results expected for the full year or any subsequent interim period. The condensed balance sheet at December 31, 2021 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, 2021, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed by the Company with the SEC on March 17, 2022.

6


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 the pandemic’s 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 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, 2021. 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.

 

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
March 31,

 

 

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

Net loss

 

$

(25,987

)

 

$

(19,373

)

Denominator:

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

33,000,238

 

 

 

32,806,880

 

Less: weighted average unvested common stock
   issued upon early exercise of common stock
   options

 

 

(7,656

)

 

 

(67,270

)

Weighted average shares used to compute net loss
   per share, basic and diluted

 

 

32,992,582

 

 

 

32,739,610

 

Net loss per share, basic and diluted

 

$

(0.79

)

 

$

(0.59

)

 

7


The following table summarizes the outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because their inclusion would be anti-dilutive:

 

 

 

As of March 31,

 

 

 

2022

 

 

2021

 

Common stock options

 

 

5,070,367

 

 

 

4,185,431

 

Restricted stock units

 

 

229,418

 

 

 

4,185,431

 

Unvested common stock upon early exercise of common stock
   options

 

 

5,257

 

 

 

62,424

 

 

 

 

5,305,042

 

 

 

8,433,286

 

 

4. Fair Value of Financial Instruments

The following tables summarize the fair value of the Company’s financial instruments (in thousands):

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

March 31,
2022

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

35,047

 

 

$

35,047

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

97,965

 

 

$

 

 

$

97,965

 

 

 

 

Commercial paper

 

 

21,287

 

 

 

 

 

 

21,287

 

 

 

 

U.S. Government securities

 

 

56,094

 

 

 

 

 

 

56,094

 

 

 

 

Total short-term investments

 

 

175,346

 

 

 

 

 

 

175,346

 

 

 

 

Total

 

$

210,393

 

 

$

35,047

 

 

$

175,346

 

 

$

 

 

 

 

 

 

 

Fair Value Measurements Using

 

 

 

December 31,
2021

 

 

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

57,018

 

 

$

57,018

 

 

$

 

 

$

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate debt securities

 

$

111,466

 

 

$

 

 

$

111,466

 

 

 

 

Commercial paper

 

 

21,272

 

 

 

 

 

 

21,272

 

 

 

 

U.S. Government securities

 

 

44,534

 

 

 

 

 

 

44,534

 

 

 

 

Total short-term investments

 

 

177,272

 

 

 

 

 

 

177,272

 

 

 

 

Total

 

$

234,290

 

 

$

57,018

 

 

$

177,272

 

 

$

 

Cash Equivalents and Short-Term Investments

Financial assets measured at fair value on a recurring basis consist of the Company’s cash equivalents and short-term investments. Cash equivalents consisted of money market funds and short-term investments consisted of commercial paper, U.S. Government securities and corporate bonds. The Company obtains pricing information from its investment manager and generally determines the fair value of investment securities using standard observable inputs, including reported trades, broker/dealer quotes, and bids and/or offers.

Investments are classified as Level 1 within the fair value hierarchy if their quoted prices are available in active markets for identical securities. Investments in money market funds of $35.0 million and $57.0 million as of March 31, 2022 and December 31, 2021, respectively, were classified as Level 1 instruments and were included in cash and cash equivalents.

8


Investments in marketable securities are valued using Level 2 inputs. Level 2 securities are initially valued at the transaction price and subsequently valued and reported upon utilizing inputs other than quoted prices that are observable either directly or indirectly, such as quotes from third-party pricing vendors. Fair values determined by Level 2 inputs, which utilize data points that are observable such as quoted prices, interest rates and yield curves, require the exercise of judgment and use of estimates, that if changed, could significantly affect the Company’s financial position and results of operations. The marketable securities of $175.3 million and $177.3 million as of March 31, 2022 and December 31, 2021, respectively, were classified as Level 2 instruments and were included in short-term investments. Accrued interest receivable related to short-term investments was $1.0 million as of both March 31, 2022 and December 31, 2021 and included as part of prepaid expenses and other current assets in the condensed balance sheets.

The following tables summarize the Company’s short-term investments accounted for as available-for-sale securities as of March 31, 2022 and December 31, 2021 (in thousands):

 

 

 

 

 

March 31, 2022

 

 

 

Maturity
(in years)

 

Amortized
Cost

 

 

Unrealized
Losses

 

 

Unrealized
Gains

 

 

Estimated
Fair Value

 

Corporate debt securities

 

1 year or less

 

$

98,273

 

 

$

(312

)

 

$

4

 

 

$

97,965

 

Commercial paper

 

1 year or less

 

 

21,287

 

 

 

 

 

 

 

 

 

21,287

 

U.S. Government securities

 

1 year or less

 

 

56,392

 

 

 

(298

)

 

 

 

 

 

56,094

 

Total

 

 

 

$

175,952

 

 

$

(610

)

 

$

4

 

 

$

175,346

 

 

 

 

 

 

December 31, 2021

 

 

 

Maturity
(in years)

 

Amortized
Cost

 

 

Unrealized
Losses

 

 

Unrealized
Gains

 

 

Estimated
Fair Value

 

Corporate debt securities

 

1 year or less

 

$

111,548

 

 

$

(89

)

 

$

7

 

 

$

111,466

 

Commercial paper

 

1 year or less

 

 

21,272

 

 

 

 

 

 

 

 

 

21,272

 

U.S. Government securities

 

1 year or less

 

 

44,602

 

 

 

(68

)