UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 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 | --- | --- | --- | --- | --- | |----------------|--------------------|-----------------------------------------------------------|---------------------------------------------------------- ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 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 No. 001-38359 Adicet Bio, Inc. (Exact name of registrant as specified in its charter) Delaware 81-3305277 (State or other jurisdiction of incorp ...

PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's analysis of financial condition and operations [Consolidated Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited consolidated financial statements show increased cash and assets due to a public offering, with continued net losses driven by rising R&D expenses [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets reflect a significant increase in cash and total assets primarily from financing activities Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $192,226 | $84,330 | | Total current assets | $199,025 | $100,336 | | Total assets | $257,195 | $153,835 | | **Liabilities & Equity** | | | | Total current liabilities | $20,032 | $22,479 | | Total liabilities | $39,971 | $44,008 | - Cash and cash equivalents significantly increased from **$84.3 million** at the end of 2020 to **$192.2 million** as of September 30, 2021, reflecting proceeds from financing activities during the period[20](index=20&type=chunk) [Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The statements show increased R&D expenses and a higher net loss, while revenue decreased due to milestone timing Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue—related party | $3,429 | $3,028 | $4,262 | $12,493 | | Research and development | $11,926 | $8,942 | $34,285 | $24,651 | | General and administrative | $5,213 | $7,741 | $15,868 | $17,684 | | Loss from operations | $(13,710) | $(13,655) | $(45,891) | $(29,842) | | Net loss | $(14,013) | $(14,779) | $(46,186) | $(27,720) | | Net loss per share | $(0.44) | $(2.84) | $(1.54) | $(8.69) | - Research and development expenses increased to **$34.3 million** for the nine months ended Sep 30, 2021, up from **$24.7 million** in the prior year period, reflecting increased clinical development activities[23](index=23&type=chunk) - Revenue for the nine months ended Sep 30, 2021, decreased significantly to **$4.3 million** from **$12.5 million** in the prior year period, primarily due to the timing of milestone achievements under the Regeneron agreement[23](index=23&type=chunk)[195](index=195&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash flows indicate significant funding from financing activities, offsetting operational cash burn and driving overall cash increase Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(37,608) | $(28,207) | | Net cash provided by investing activities | $282 | $102,769 | | Net cash provided by financing activities | $145,222 | $36 | | Net change in cash | $107,896 | $74,598 | - Financing activities provided **$145.2 million** in cash for the first nine months of 2021, primarily from the issuance of common stock, which was the main driver of the increase in the company's cash position[32](index=32&type=chunk)[225](index=225&type=chunk) - Investing activities in the first nine months of 2020 included **$64.1 million** in cash acquired from the Merger with resTORbio, which was not present in 2021[32](index=32&type=chunk)[224](index=224&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's clinical-stage progress, financial performance, and liquidity, highlighting increased R&D and a strengthened cash position - The company is developing "off-the-shelf" gamma delta T cell therapies, with its lead product candidate, ADI-001, in a Phase 1 clinical trial for Non-Hodgkin's Lymphoma (NHL) initiated in March 2021[156](index=156&type=chunk) - Interim clinical data from the initial dose escalation portion of the ADI-001 study is expected by the **end of 2021**[156](index=156&type=chunk) - The company plans to file an Investigational New Drug (IND) application for ADI-002, its first solid tumor candidate, in the **second quarter of 2022** and initiate Phase 1 trials in the **second half of 2022**[156](index=156&type=chunk) - In February 2021, the company raised approximately **$128.7 million** in net proceeds from an underwritten public offering and an additional **$15.0 million** from a concurrent private placement[161](index=161&type=chunk)[162](index=162&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) Operating results show increased R&D expenses and a decrease in revenue, contributing to a higher net loss Comparison of Operating Results (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue – related party | $3,429 | $3,028 | $4,262 | $12,493 | | Research and development | $11,926 | $8,942 | $34,285 | $24,651 | | General and administrative | $5,213 | $7,741 | $15,868 | $17,684 | | Net loss | $(14,013) | $(14,779) | $(46,186) | $(27,720) | - R&D expenses for the nine months ended Sep 30, 2021 increased by **$9.6 million (39%)** compared to the same period in 2020, driven by a **$4.0 million** increase in payroll/personnel costs from higher headcount, a **$2.1 million** increase in stock-based compensation, and increased CRO and facility expenses related to ADI-001 development[198](index=198&type=chunk) - G&A expenses for the nine months ended Sep 30, 2021 decreased by **$1.8 million (10%)** compared to the prior year period, mainly due to a **$5.9 million** reduction in professional fees associated with the 2020 Merger, partially offset by higher payroll, insurance, and facility costs[199](index=199&type=chunk) - Revenue for the nine months ended Sep 30, 2021 decreased by **$8.2 million (66%)** year-over-year, primarily due to a **$10.0 million** milestone payment in June 2020 and a **$4.0 million** revenue reduction in Q1 2021 from an extended performance obligation timeline[195](index=195&type=chunk)[196](index=196&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) The company's cash position significantly improved due to recent financing, providing sufficient funds for the next twelve months - As of September 30, 2021, the company had **$192.2 million** in cash and cash equivalents[205](index=205&type=chunk) - The company believes its current cash and cash equivalents are sufficient to fund operations, capital expenditures, and debt service for at least the **next twelve months** from the report's issuance date[206](index=206&type=chunk)[212](index=212&type=chunk) - The company has a loan agreement with Pacific Western Bank for up to **$15.0 million**, primarily for financing leasehold improvements, with no funds drawn as of September 30, 2021[206](index=206&type=chunk)[207](index=207&type=chunk) - As of September 30, 2021, the company had an accumulated deficit of **$152.5 million**[211](index=211&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate exposure on cash equivalents, deemed immaterial due to short-term, low-risk investments - The company's main market risk stems from potential adverse changes in interest rates on its **$192.2 million** of cash and cash equivalents[237](index=237&type=chunk) - Due to the short-term maturities and low-risk profile of its cash equivalents, the company does not expect a **10%** change in interest rates to materially affect its fair value or future interest income[237](index=237&type=chunk) [Controls and Procedures](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) Material weaknesses in internal controls were identified, leading to ineffective disclosure controls, with remediation efforts underway - Management identified material weaknesses in internal control over financial reporting during the preparation of its financial statements for the quarter ended September 30, 2021[240](index=240&type=chunk) - The identified weaknesses include: - Lack of sufficient accounting professionals with appropriate experience - Lack of formal accounting policies, procedures, and monitoring controls - Ineffective controls over segregation of duties - Lack of formal processes to account for complex transactions[242](index=242&type=chunk) - Due to these material weaknesses, the CEO and CFO concluded that the company's disclosure controls and procedures were not effective as of September 30, 2021[243](index=243&type=chunk) - Remediation efforts are underway, including hiring a permanent VP Corporate Controller, implementing a new ERP system (Microsoft 365 Business Central) in January 2021, and re-evaluating and implementing additional internal controls[245](index=245&type=chunk) PART II. OTHER INFORMATION This section details legal proceedings, significant risk factors, and the exhibits filed with the report [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to materially impact its financial condition or operations - The company is not currently party to any legal proceedings that it expects to have a material adverse impact on its financial condition or operations[249](index=249&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) The company faces substantial risks including clinical trial uncertainties, manufacturing dependencies, financial control weaknesses, and reliance on key collaborations - The company's business is highly dependent on the success of its two lead product candidates, ADI-001 and ADI-002, which are based on novel gamma delta T cell technologies with significant development and regulatory challenges[3](index=3&type=chunk)[259](index=259&type=chunk)[265](index=265&type=chunk) - The company has a history of net losses (**$152.5 million** accumulated deficit as of Sep 30, 2021) and expects to incur substantial losses for the foreseeable future[254](index=254&type=chunk) - Adicet relies on third-party manufacturers for its product candidates, which increases risks related to supply, cost, and quality control, potentially impairing development and commercialization efforts[4](index=4&type=chunk)[300](index=300&type=chunk) - Material weaknesses have been identified in the company's internal control over financial reporting, which could harm the business and negatively impact stock value[5](index=5&type=chunk)[353](index=353&type=chunk) - The collaboration with Regeneron is critical; termination of the agreement or a material breach by Regeneron would materially harm the company's business and financial condition[6](index=6&type=chunk)[357](index=357&type=chunk) [Exhibits](index=90&type=section&id=Item%206.%20Exhibits) This section lists key exhibits filed, including corporate agreements and officer certifications - Key filed exhibits include a Sublease Agreement dated July 19, 2021, and a Fourth Amendment to the Loan and Security Agreement with Pacific Western Bank, dated October 21, 2021[486](index=486&type=chunk) - The report includes certifications from the Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act[486](index=486&type=chunk)

PART I [Business](index=6&type=section&id=Item%201.%20Business) Adicet Bio develops allogeneic gamma delta T cell therapies for cancer, with lead candidates ADI-001 for NHL and ADI-002 for solid tumors - Adicet Bio is a biotechnology company developing allogeneic gamma delta T cell therapies, which are **"off-the-shelf" treatments for cancer and other diseases**[24](index=24&type=chunk) - The lead product candidate, ADI-001, targets **Non-Hodgkin's Lymphoma (NHL)**, with its IND cleared in October 2020 and a Phase 1 trial initiated in Q1 2021[25](index=25&type=chunk)[30](index=30&type=chunk) - The second product candidate, ADI-002, targets **solid tumors expressing GPC3**, with an IND filing planned for late 2021 and clinical trial initiation in 2022[31](index=31&type=chunk)[36](index=36&type=chunk) - The company utilizes a proprietary **T cell receptor-like antibody (TCRL) platform** to target intracellular tumor antigens, critical for treating solid tumors[32](index=32&type=chunk) - A key strategic partnership is a **five-year collaboration with Regeneron**, initiated in 2016, for engineered gamma delta immune cell therapeutics, with Regeneron having options to license candidates[34](index=34&type=chunk)[127](index=127&type=chunk) - The company relies on **third-party contract manufacturing organizations (CMOs)** for cGMP-compliant manufacture of its product candidates, lacking its own facility[142](index=142&type=chunk)[6](index=6&type=chunk) [Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including limited operating history, substantial net losses, reliance on lead candidates, novel technology challenges, and internal control weaknesses - The business is highly dependent on the success of its two lead product candidates, **ADI-001 and ADI-002**, with failure to obtain regulatory approval and commercialize them significantly harming the business[252](index=252&type=chunk)[2](index=2&type=chunk) - The company's gamma delta T cell candidates represent a **novel approach to cancer treatment**, creating significant challenges in manufacturing, efficacy, regulatory approval, and market acceptance[255](index=255&type=chunk)[2](index=2&type=chunk) - The company has incurred net losses every period since inception and anticipates substantial future losses, with an accumulated deficit of **$106.5 million as of December 31, 2020**[246](index=246&type=chunk)[247](index=247&type=chunk) - **Material weaknesses in internal control over financial reporting** have been identified, related to insufficient experienced accounting professionals, lack of formal policies, and inadequate segregation of duties[341](index=341&type=chunk)[342](index=342&type=chunk)[4](index=4&type=chunk) - The company relies on a collaboration with Regeneron; **termination or breach of this agreement would materially harm business prospects**, and the company is subject to exclusivity obligations[343](index=343&type=chunk)[351](index=351&type=chunk)[4](index=4&type=chunk) - The company does not operate its own manufacturing facility and relies on **third-party CMOs**, exposing it to risks of production delays, quality control issues, and supply chain disruptions[294](index=294&type=chunk)[6](index=6&type=chunk) - The **COVID-19 pandemic may adversely affect business operations**, including potential disruptions to the supply chain and the conduct of clinical trials[313](index=313&type=chunk)[314](index=314&type=chunk)[4](index=4&type=chunk) [Unresolved Staff Comments](index=87&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are **no unresolved staff comments**[454](index=454&type=chunk) [Properties](index=87&type=section&id=Item%202.%20Properties) The company leases office and laboratory facilities in Boston, Menlo Park, and Redwood City, with principal executive offices in Boston - Principal executive offices are located at **500 Boylston Street, 13th Floor, Boston, MA 02116**, with a lease expiring on July 31, 2026[454](index=454&type=chunk) - The company also leases office and laboratory space in **Menlo Park, CA** (lease expires March 31, 2022) and has a new lease for a facility in **Redwood City, CA**, with occupancy expected in Q2 2022[454](index=454&type=chunk) [Legal Proceedings](index=87&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, with prior merger-related lawsuits dismissed or settled - The company is **not currently a party to any material legal proceedings**[455](index=455&type=chunk) - Seven lawsuits filed in connection with the 2020 merger were either dismissed or settled for **$0.2 million** in the fourth quarter of 2020[767](index=767&type=chunk) [Mine Safety Disclosures](index=87&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company has no mine safety disclosures, rendering this item not applicable - This item is **not applicable**[455](index=455&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=88&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Adicet Bio's common stock trades on Nasdaq under 'ACET', with no cash dividends paid or intended, and a **$15.0 million** private placement completed in February 2021 - The company's common stock trades on **The Nasdaq Global Market under the symbol "ACET"**[457](index=457&type=chunk) - The company has **never declared or paid cash dividends** and intends to retain future earnings to fund business development[458](index=458&type=chunk) - In February 2021, the company raised **$15.0 million** through a private placement of **1,153,840 shares** of common stock at **$13.00 per share** to existing investors[459](index=459&type=chunk) [Reserved](index=88&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=89&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The company's financial condition is characterized by net losses, with a **$36.8 million** net loss in 2020, relying on equity financing and collaboration revenue, significantly improved by recent public and private offerings Results of Operations (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Change | % Change | |:---|---:|---:|---:|---:| | Revenue – related party | $17,903 | $995 | $16,908 | 1699% | | Research and development | $34,334 | $23,691 | $10,643 | 45% | | General and administrative | $22,760 | $8,692 | $14,068 | 162% | | **Loss from operations** | **($39,191)** | **($31,388)** | **($7,803)** | **25%** | | **Net loss** | **($36,678)** | **($28,138)** | **($8,540)** | **30%** | - The significant increase in 2020 revenue was primarily due to achieving a **$10.0 million milestone** under the Regeneron Agreement and increased R&D activities, leading to higher proportional performance revenue recognition[491](index=491&type=chunk) - R&D expenses rose by **$10.6 million (46%)** in 2020 due to increased personnel costs, higher CRO/CMO fees for ADI-001 manufacturing and preclinical activities, and merger-related costs[493](index=493&type=chunk) - G&A expenses increased by **$14.1 million (162%)** in 2020, mainly driven by **$7.1 million** in professional fees related to the merger and a **$5.1 million** increase in personnel expenses[494](index=494&type=chunk) Summary Statement of Cash Flows (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Net cash used in operating activities | ($41,552) | ($27,882) | ($18,180) | | Net cash provided by (used in) investing activities | $115,217 | ($47,931) | ($16,058) | | Net cash provided by financing activities | $303 | $76,945 | $11,046 | - As of December 31, 2020, the company had cash, cash equivalents, and marketable debt securities of **$94.6 million**, augmented in February 2021 by **$137.5 million** gross proceeds from a public offering and **$15.0 million** from a private placement[510](index=510&type=chunk)[517](index=517&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=105&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk on its **$94.6 million** in cash and investments, but a 10% rate change is not expected to be material - The company's market risk is primarily from potential adverse changes in interest rates affecting its **$94.6 million** in cash, cash equivalents, and marketable debt securities as of December 31, 2020[558](index=558&type=chunk) - Due to the short-term maturities and low-risk profile of its investments, a **10% change in interest rates** is not expected to materially impact the fair value of its holdings or future interest income[558](index=558&type=chunk) [Financial Statements and Supplementary Data](index=105&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section refers to the consolidated financial statements and the independent auditor's report, included from page F-1 to F-43 - The company's consolidated financial statements and the report of its independent registered public accounting firm are included in the report[560](index=560&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=105&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - There were **no changes in or disagreements with accountants** on accounting and financial disclosure[560](index=560&type=chunk) [Controls and Procedures](index=105&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective as of December 31, 2020, due to material weaknesses in internal control over financial reporting, with a remediation plan underway - Management, including the CEO and CFO, concluded that **disclosure controls and procedures were not effective** as of December 31, 2020[564](index=564&type=chunk) - **Material weaknesses** were identified in internal control over financial reporting, including: lack of sufficient experienced accounting staff, lack of formal accounting policies and procedures, ineffective controls over segregation of duties, and lack of controls to account for complex transactions[563](index=563&type=chunk) - A **remediation plan is in progress**, including hiring a permanent VP, Corporate Controller and a senior manager for technical accounting, implementing formal training, and deploying a new ERP system (Microsoft 365 Business Central) in January 2021[567](index=567&type=chunk) [Other Information](index=107&type=section&id=Item%209B.%20Other%20Information) The company reports no other information - There is **no other information to report**[569](index=569&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=108&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding directors, executive officers, and corporate governance is **incorporated by reference** from the forthcoming 2021 Proxy Statement[571](index=571&type=chunk) [Executive Compensation](index=108&type=section&id=Item%2011.%20Executive%20Compensation) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding executive compensation is **incorporated by reference** from the forthcoming 2021 Proxy Statement[573](index=573&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=108&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding security ownership is **incorporated by reference** from the forthcoming 2021 Proxy Statement[574](index=574&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=108&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding related transactions and director independence is **incorporated by reference** from the forthcoming 2021 Proxy Statement[575](index=575&type=chunk) [Principal Accountant Fees and Services](index=108&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information for this item will be incorporated by reference from the company's definitive 2021 Proxy Statement - Information regarding principal accountant fees and services is **incorporated by reference** from the forthcoming 2021 Proxy Statement[576](index=576&type=chunk) PART IV [Exhibits and Financial Statement Schedules](index=109&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists documents filed as part of the Annual Report on Form 10-K, including consolidated financial statements and exhibits - The report includes the company's **consolidated financial statements**[578](index=578&type=chunk) - An **index of exhibits** filed with the report is provided[579](index=579&type=chunk) [Form 10-K Summary](index=109&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has elected not to include a summary of the Form 10-K - The company elected **not to include summary information**[580](index=580&type=chunk) Financial Statements [Consolidated Balance Sheets](index=113&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2020, total assets increased to **$153.8 million**, total liabilities were **$44.0 million**, and stockholders' equity improved to **$109.8 million**, reflecting the resTORbio merger Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2020 | Dec 31, 2019 | |:---|---:|---:| | **Assets** | | | | Cash and cash equivalents | $84,330 | $10,607 | | Total current assets | $100,336 | $64,186 | | Goodwill | $20,089 | $0 | | **Total assets** | **$153,835** | **$81,587** | | **Liabilities & Equity** | | | | Total current liabilities | $22,479 | $14,865 | | Total liabilities | $44,008 | $27,870 | | Total redeemable convertible preferred stock | $0 | $114,083 | | Total stockholders' equity (deficit) | $109,827 | ($60,366) | | **Total liabilities & stockholders' equity (deficit)** | **$153,835** | **$81,587** | [Consolidated Statements of Operations and Comprehensive Loss](index=114&type=section&id=Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) For 2020, the company reported a net loss of **$36.7 million** on revenues of **$17.9 million**, an increased loss driven by a **76% rise** in operating expenses due to pipeline advancement and merger costs Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Revenue—related party | $17,903 | $995 | $8,181 | | Research and development | $34,334 | $23,691 | $14,717 | | General and administrative | $22,760 | $8,692 | $8,428 | | **Total operating expenses** | **$57,094** | **$32,383** | **$23,145** | | **Loss from operations** | **($39,191)** | **($31,388)** | **($14,964)** | | **Net loss** | **($36,678)** | **($28,138)** | **($9,299)** | | Net loss per share | ($5.01) | ($13.15) | ($4.78) | [Consolidated Statements of Cash Flows](index=116&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For 2020, net cash used in operating activities was **$41.6 million**, while investing activities provided **$115.2 million**, resulting in a **$74.0 million** net increase in cash, cash equivalents, and restricted cash Consolidated Cash Flow Data (in thousands) | | Year Ended Dec 31, 2020 | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | |:---|---:|---:|---:| | Net cash used in operating activities | ($41,552) | ($27,882) | ($18,180) | | Net cash provided by (used in) investing activities | $115,217 | ($47,931) | ($16,058) | | Net cash provided by financing activities | $303 | $76,945 | $11,046 | | **Net increase (decrease) in cash, cash equivalents and restricted cash** | **$73,968** | **$1,132** | **($23,192)** |

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 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |--------------------------------------------------------------------------------|-------------------------------| | For the transition period from \nCommission File No. 001 ...

```markdown PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for the period ended June 30, 2020, reflect a significant reduction in operating losses compared to the prior year, driven by decreased research and development expenses following the discontinuation of a key clinical trial. The balance sheet shows a decline in assets due to cash consumption, while the company's overall financial position is heavily influenced by a pending merger with Adicet Bio, Inc. and a recent workforce reduction [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2020, the company's total assets decreased to $74.3 million from $93.9 million at year-end 2019, primarily due to the use of cash and the maturation of all marketable securities. Total liabilities also saw a significant reduction to $3.6 million from $12.2 million, mainly from settling accounts payable and accrued liabilities. Consequently, total stockholders' equity declined to $70.7 million from $81.7 million Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2020 (in millions) | December 31, 2019 (in millions) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $70.9 | $33.8 | | Marketable securities | $0 | $57.7 | | Total current assets | $73.7 | $93.3 | | **Total assets** | **$74.3** | **$93.9** | | **Liabilities & Equity** | | | | Total current liabilities | $3.6 | $12.2 | | **Total liabilities** | **$3.6** | **$12.2** | | **Total stockholders' equity** | **$70.7** | **$81.7** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a significantly lower net loss for both the three and six months ended June 30, 2020, compared to the same periods in 2019. The net loss for the second quarter was $5.6 million, down from $18.3 million year-over-year, primarily due to a substantial decrease in Research and Development expenses from $16.6 million to $1.8 million. General and Administrative expenses saw a moderate increase Statement of Operations Summary (in millions) | Metric | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Research and development | $1.8 | $16.6 | $6.6 | $25.4 | | General and administrative | $3.9 | $2.6 | $6.4 | $5.5 | | **Total operating expenses** | **$5.7** | **$19.2** | **$13.0** | **$30.9** | | Loss from operations | ($5.7) | ($19.2) | ($13.0) | ($30.9) | | **Net loss** | **($5.6)** | **($18.3)** | **($12.6)** | **($29.4)** | | Net loss per share | ($0.15) | ($0.51) | ($0.35) | ($0.91) | [Condensed Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity decreased from $81.7 million at December 31, 2019, to $70.7 million at June 30, 2020. The decline was primarily driven by the net loss of $12.6 million for the six-month period, which was partially offset by $1.7 million in stock-based compensation expense - The accumulated deficit grew from **($154.1) million** at the end of 2019 to **($166.8) million** by June 30, 2020, reflecting the ongoing net losses[14](index=14&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2020, net cash used in operating activities was $20.4 million, a decrease from $26.2 million in the prior-year period. The company generated $57.5 million from investing activities through the maturity of marketable securities, a reversal from the $9.7 million used in 2019. Financing activities were minimal in 2020, in contrast to 2019 when the company raised $50.4 million from stock offerings. This resulted in a net increase in cash of $37.1 million Cash Flow Summary (in millions) | Activity | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :--- | :--- | :--- | | Net cash used in operating activities | ($20.4) | ($26.2) | | Net cash provided by (used in) investing activities | $57.5 | ($9.7) | | Net cash (used in) provided by financing activities | ($0.002) | $50.4 | | **Net increase in cash** | **$37.1** | **$14.5** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes provide critical context to the financial statements, highlighting the company's strategic pivot. Key events include the failure of the PROTECTOR 1 Phase 3 study in November 2019, leading to the discontinuation of RTB101 development for respiratory illness. This triggered a workforce reduction and a search for strategic alternatives, culminating in a merger agreement with Adicet Bio, Inc. in April 2020. The notes also detail license agreements, stock compensation plans, and litigation related to the pending merger - In November 2019, the company announced that its PROTECTOR 1 Phase 3 study of RTB101 did not meet its primary endpoint, leading to the cessation of its development for clinically symptomatic respiratory illness[21](index=21&type=chunk) - On April 28, 2020, resTORbio entered into a merger agreement with Adicet Bio, Inc., under which Adicet will become a wholly-owned subsidiary. The company's future operations are highly dependent on the success of this merger[23](index=23&type=chunk)[24](index=24&type=chunk) - Following the Phase 3 study failure, the company implemented a restructuring plan, reducing its workforce by **10 employees** in late 2019 and early 2020. As of June 30, 2020, all related restructuring charges had been paid[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) - The company is facing **seven putative class action lawsuits** related to the proposed merger with Adicet, alleging that the proxy statement contains material misrepresentations and/or omissions[66](index=66&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strategic shift following the failure of the PROTECTOR 1 Phase 3 study, which led to halting development of RTB101 for respiratory illness and Parkinson's disease. The company initiated a review of strategic alternatives, resulting in the pending merger with Adicet Bio. A new clinical trial for RTB101 as a COVID-19 prophylaxis was initiated. The financial analysis shows a significant decrease in R&D expenses, while G&A expenses rose due to merger-related costs. The company's liquidity of $70.9 million in cash is deemed sufficient for near-term operations, but future success is contingent on the merger - Following the failure of its Phase 3 study for respiratory illness, the company stopped that program and a Phase 1b/2a trial in Parkinson's disease. It has since pivoted to study RTB101 for COVID-19 prophylaxis in older adults[81](index=81&type=chunk)[82](index=82&type=chunk) - In February 2020, the company hired JMP Securities to explore strategic alternatives, leading to the merger agreement with Adicet Bio, Inc. on April 28, 2020. The transaction is expected to close in the second half of 2020[85](index=85&type=chunk)[86](index=86&type=chunk) Comparison of Operating Expenses (in millions) | Expense Category | Three Months Ended June 30, 2020 (in millions) | Three Months Ended June 30, 2019 (in millions) | Six Months Ended June 30, 2020 (in millions) | Six Months Ended June 30, 2019 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Research & Development | $1.8 | $16.6 | $6.6 | $25.4 | | General & Administrative | $3.9 | $2.6 | $6.4 | $5.5 | - The decrease in R&D expenses was due to the cessation of major clinical trials. The increase in G&A expenses was primarily driven by professional services fees related to the pending merger with Adicet[107](index=107&type=chunk)[108](index=108&type=chunk)[112](index=112&type=chunk)[113](index=113&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure stems from potential changes in interest rates, which could affect interest income on its $70.9 million of cash and cash equivalents. The company also has minor exposure to foreign currency fluctuations from contracts with global research and manufacturing organizations, but it does not currently engage in hedging activities. Inflation is not considered to have a material effect on operations - The main market risk is interest rate risk on the company's cash and cash equivalents of **$70.9 million**[129](index=129&type=chunk) - The company is subject to some foreign currency risk through its global contracts but does not hedge this exposure[130](index=130&type=chunk) [Item 4. Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on an evaluation as of June 30, 2020, the company's management, including the Chief Executive Officer and principal financial officer, concluded that the disclosure controls and procedures were effective at a reasonable assurance level. There were no material changes in the company's internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[132](index=132&type=chunk)[134](index=134&type=chunk) - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[135](index=135&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) The company is currently involved in multiple lawsuits filed by purported stockholders in connection with the proposed merger with Adicet Bio, Inc. These actions, including a putative class action, generally allege that the company's proxy statement filed with the SEC contains material misrepresentations and omissions regarding the merger process and financial analyses. The lawsuits seek to enjoin the merger and claim damages - Multiple stockholder lawsuits, including the 'Merger Actions', have been filed against the company, its directors, and Adicet concerning the proposed merger[138](index=138&type=chunk) - The lawsuits allege violations of the Exchange Act, claiming the proxy statement misrepresents or omits material information related to financial projections, analyses by JMP Securities, and the merger process[138](index=138&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section updates risk factors, with a primary focus on the pending merger with Adicet and the COVID-19 pandemic. Key risks include the potential failure to complete the merger, which could harm the stock price and business, and may result in a $6.1 million termination fee. The pendency of the merger creates uncertainty that could disrupt business and employee retention. Other risks include litigation related to the merger, the possibility that the Contingent Value Rights (CVRs) issued to stockholders will expire worthless, and potential business disruptions from the COVID-19 pandemic affecting clinical trials and operations - There is a significant risk that the merger with Adicet may not be completed, which could adversely affect the company's stock price and operations. A termination fee of **$6.1 million** may be payable to Adicet under certain circumstances[140](index=140&type=chunk)[144](index=144&type=chunk) - The company faces lawsuits arising from the proposed merger, which could delay or prevent its consummation and divert management's attention[158](index=158&type=chunk)[159](index=159&type=chunk) - The Contingent Value Rights (CVRs) to be issued to stockholders are contingent on the successful commercialization of RTB101 for a COVID-19 indication and may expire without any payment[162](index=162&type=chunk)[163](index=163&type=chunk) - The COVID-19 pandemic poses a risk of business interruption, potentially delaying clinical trial enrollment and disrupting operations due to factors like healthcare resource diversion and travel restrictions[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) [Other Items (Items 2, 3, 4, 5, 6)](index=33&type=section&id=Other%20Items%20(Items%202%2C%203%2C%204%2C%205%2C%206)) The company reported no unregistered sales of equity securities, defaults upon senior securities, or mine safety disclosures for the period. No other material information was disclosed under Item 5. Item 6 provides an index of the exhibits filed with this Quarterly Report on Form 10-Q - Items 2, 3, 4, and 5 are noted as 'Not applicable' or have no information to report[171](index=171&type=chunk) ```

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, 2020 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 No. 001-38359 resTORbio, Inc. (Exact name of registrant as specified in its charter) Delaware 81-3305277 (State or other jurisdiction of inco ...