[PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section details Nkarta, Inc.'s financial performance and position, including statements, notes, management's analysis, market risk, and controls [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents Nkarta, Inc.'s unaudited condensed financial statements for the period ended March 31, 2022, including balance sheets, statements of operations and comprehensive loss, stockholders' equity, and cash flows, along with detailed notes. The company reported an increased net loss and accumulated deficit, but maintains sufficient liquidity for the next 12 months, bolstered by a recent public offering [Condensed Balance Sheets](index=6&type=section&id=Condensed%20Balance%20Sheets) Presents Nkarta's financial position, detailing assets, liabilities, and equity as of March 31, 2022, and December 31, 2021 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Total Assets | $306,299 | $273,903 | | Total Liabilities | $77,593 | $22,936 | | Total Stockholders' Equity | $228,706 | $250,967 | | Operating Lease Right-of-Use Assets | $65,469 | $11,678 | | Operating Lease Liabilities, net of current portion | $66,740 | $9,975 | [Condensed Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Details Nkarta's financial performance, including operating expenses, net loss, and net loss per share for the three months ended March 31, 2022 and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | Research and development | $19,568 | $13,539 | | General and administrative | $6,530 | $5,942 | | Total operating expenses | $26,098 | $19,481 | | Net loss | $(25,987) | $(19,373) | | Net loss per share, basic and diluted | $(0.79) | $(0.59) | [Condensed Statements of Stockholders' Equity](index=8&type=section&id=Condensed%20Statements%20of%20Stockholders'%20Equity) Outlines changes in Nkarta's stockholders' equity, including net loss and share-based compensation, for the period ending March 31, 2022 | Metric | December 31, 2021 (in thousands) | March 31, 2022 (in thousands) | | :-------------------------------- | :------------------------------- | :---------------------------- | | Total Stockholders' Equity | $250,967 | $228,706 | | Net Loss | $(204,096) (Accumulated Deficit) | $(230,083) (Accumulated Deficit) | | Share-based compensation expense | N/A | $4,097 | | Unrealized loss on short-term investments | $(150) (Accumulated Other Comprehensive Loss) | $(606) (Accumulated Other Comprehensive Loss) | [Condensed Statements of Cash Flows](index=10&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Summarizes Nkarta's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2022 and 2021 | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(18,258) | $(14,647) | | Net cash used in investing activities | $(1,026) | $(20,194) | | Net cash provided by financing activities | $79 | $757 | | Net decrease in cash and cash equivalents | $(19,205) | $(34,084) | | Cash, cash equivalents, and restricted cash end of period | $43,709 | $63,021 | [Notes to Unaudited Condensed Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Provides detailed explanations and additional information supporting the unaudited condensed financial statements [Note 1. Organization and Description of Business](index=11&type=section&id=Note%201.%20Organization%20and%20Description%20of%20Business) Describes Nkarta's business as a biopharmaceutical company developing NK cell therapies and its financial status, including accumulated deficit and liquidity - Nkarta, Inc. is a biopharmaceutical company focused on developing engineered natural killer ("NK") cells to treat cancer, aiming for off-the-shelf NK cell therapy product candidates[30](index=30&type=chunk) - The company has incurred significant operating losses since inception, with an accumulated deficit of **$230.1 million** as of March 31, 2022[31](index=31&type=chunk) - Management believes current cash, cash equivalents, restricted cash, and short-term investments (**$219.1 million** as of March 31, 2022) will provide sufficient funds for at least twelve months[31](index=31&type=chunk)[32](index=32&type=chunk) - On April 28, 2022, the company issued and sold 15,333,334 shares of common stock in a public offering, generating approximately **$215.5 million** in net proceeds[33](index=33&type=chunk) [Note 2. Basis of Presentation and Significant Accounting Policies](index=11&type=section&id=Note%202.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) Explains the basis of financial statement preparation, impact of COVID-19, and the use of estimates in Nkarta's accounting policies - Unaudited condensed financial statements are prepared in accordance with U.S. GAAP for interim financial information, including normal and recurring adjustments[34](index=34&type=chunk) - The extent of the COVID-19 pandemic's impact on operational and financial performance is uncertain, but the CARES Act had no impact on the 2021 income tax provision[36](index=36&type=chunk) - Management uses estimates and assumptions (e.g., preclinical studies, fair value, share-based compensation, income taxes) based on historical experience and current events; actual results may differ[37](index=37&type=chunk) [Note 3. Net Loss Per Share](index=12&type=section&id=Note%203.%20Net%20Loss%20Per%20Share) Details the calculation of Nkarta's net loss per share, including the impact of potentially anti-dilutive securities | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss | $(25,987) | $(19,373) | | 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) | - Potentially dilutive securities (common stock options, restricted stock units, unvested common stock) were excluded from diluted net loss per share calculation as their inclusion would be anti-dilutive[38](index=38&type=chunk)[40](index=40&type=chunk) [Note 4. Fair Value of Financial Instruments](index=13&type=section&id=Note%204.%20Fair%20Value%20of%20Financial%20Instruments) Presents the fair value hierarchy and valuation of Nkarta's financial instruments, including money market funds and debt securities | Category | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Money market funds (Level 1) | $35,047 | $57,018 | | Corporate debt securities (Level 2) | $97,965 | $111,466 | | Commercial paper (Level 2) | $21,287 | $21,272 | | U.S. Government securities (Level 2) | $56,094 | $44,534 | | **Total Fair Value** | **$210,393** | **$234,290** | - Unrealized losses on available-for-sale securities (**$610 thousand** as of March 31, 2022) were caused by fluctuations in market value and interest rates, not credit risk[45](index=45&type=chunk)[46](index=46&type=chunk) [Note 5. Balance Sheet Components](index=14&type=section&id=Note%205.%20Balance%20Sheet%20Components) Provides a breakdown of specific balance sheet items, including prepaid expenses, property and equipment, and accrued liabilities | Asset/Liability | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------ | :------------------------------- | | Prepaid expenses and other current assets | $6,261 | $7,692 | | Property and equipment, net | $14,053 | $12,856 | | Accrued and other current liabilities | $6,321 | $9,347 | - Depreciation and amortization expense was **$0.6 million** for Q1 2022, up from **$0.3 million** for Q1 2021[49](index=49&type=chunk) [Note 6. Leases](index=15&type=section&id=Note%206.%20Leases) Details Nkarta's lease obligations, including rent expense, remaining lease term, and future minimum lease payments - Rent expense increased to **$2.6 million** for Q1 2022 from **$0.6 million** for Q1 2021[51](index=51&type=chunk) - The weighted-average remaining lease term was **11.5 years** as of March 31, 2022[51](index=51&type=chunk) | Year ending December 31, | Amount (in thousands) | | :----------------------- | :-------------------- | | 2022 (remaining nine months) | $4,144 | | 2023 | $9,278 | | 2024 | $9,269 | | 2025 | $9,533 | | 2026 | $9,877 | | 2027 and thereafter | $73,553 | | **Total undiscounted future minimum lease payments** | **$115,654** | | Total operating lease liabilities | $69,245 | - Entered into an Additional Lease Agreement in July 2021 for corporate office, manufacturing, and laboratory space, with rent commencing in January 2022, including tenant improvement allowances up to approximately **$25.2 million**[56](index=56&type=chunk) [Note 7. Commitments & Contingencies](index=16&type=section&id=Note%207.%20Commitments%20%26%20Contingencies) Outlines Nkarta's indemnification obligations for officers and directors and its letter of credit agreements - The company indemnifies its officers and directors for certain events, with potential unlimited future payments, but limited by a director and officer insurance policy[59](index=59&type=chunk) - As of March 31, 2022, the company has **$2.1 million** in letter of credit agreements as collateral for its corporate headquarters' operating lease and an additional facility[60](index=60&type=chunk) [Note 8. CRISPR Collaboration Agreement](index=16&type=section&id=Note%208.%20CRISPR%20Collaboration%20Agreement) Describes Nkarta's research collaboration with CRISPR Therapeutics AG for co-developing CAR-NK and NK+T product candidates - On May 5, 2021, Nkarta entered into a research collaboration agreement with CRISPR Therapeutics AG to co-develop and co-commercialize engineered CAR-NK and NK+T product candidates[61](index=61&type=chunk) - Nkarta and CRISPR share equally in all research and development costs and potential profits worldwide related to Collaboration Products[62](index=62&type=chunk) - Nkarta received licenses from CRISPR for two CRISPR-Cas9 gene editing targets and will receive licenses for up to three more for its own NK cell products, with potential future milestone and royalty payments[61](index=61&type=chunk)[63](index=63&type=chunk) - As of March 31, 2022, Nkarta had a **$1.0 million** receivable under the research cost sharing provision from the CRISPR Agreement[62](index=62&type=chunk) [Note 9. Share-Based Compensation](index=17&type=section&id=Note%209.%20Share-Based%20Compensation) Details Nkarta's share-based compensation plans, expenses, and stock option activity for the reporting period - The 2020 Performance Incentive Plan authorizes 5,945,002 shares for awards, with an automatic annual increase[65](index=65&type=chunk) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Research and development | $1,855 | $1,570 | | General and administrative | $2,242 | $1,777 | | **Total share-based compensation** | **$4,097** | **$3,347** | - Total unrecognized compensation cost for unvested stock options was **$38.9 million** (expected over 2.51 years) and for unvested restricted stock awards was **$2.6 million** (expected over 3.79 years) as of March 31, 2022[71](index=71&type=chunk) | Stock Option Activity (Q1 2022) | Number of Shares | | :------------------------------ | :--------------- | | Outstanding at December 31, 2021 | 4,204,686 | | Granted | 1,007,090 | | Exercised | (21,067) | | Forfeited | (120,342) | | Outstanding at March 31, 2022 | 5,070,367 | | Exercisable at March 31, 2022 | 1,784,571 | [Note 10. Income Taxes](index=18&type=section&id=Note%2010.%20Income%20Taxes) Explains Nkarta's income tax position, noting no provision for income taxes and a full valuation allowance against deferred tax assets - No provision for income taxes was recorded for the three months ended March 31, 2022, or 2021[72](index=72&type=chunk) - The company's deferred tax assets are fully offset by a valuation allowance[72](index=72&type=chunk) [Note 11. Subsequent Events](index=18&type=section&id=Note%2011.%20Subsequent%20Events) Reports on significant events occurring after the balance sheet date, specifically a public offering of common stock - On April 28, 2022, Nkarta issued and sold 15,333,334 shares of common stock in an underwritten public offering at **$15.00** per share[73](index=73&type=chunk) - The total net proceeds to the company from the offering were approximately **$215.5 million**[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of Nkarta's financial condition and operational results, highlighting its focus on developing allogeneic CAR-NK cell therapies with co-lead candidates NKX101 and NKX019 in Phase 1 trials. The company continues to incur significant losses due to extensive R&D activities and public company costs, but a recent **$215.5 million** public offering has bolstered its liquidity. The COVID-19 pandemic has caused operational disruptions and delays in clinical trials and manufacturing. The discussion also covers critical accounting policies, market risk, and the company's status under the JOBS Act [Overview](index=19&type=section&id=Overview) Provides a high-level summary of Nkarta's business, product candidates, financial performance, recent public offering, and COVID-19 impact - Nkarta is a biopharmaceutical company developing allogeneic, off-the-shelf engineered natural killer ("NK") cell therapies to treat cancer[76](index=76&type=chunk) - Co-lead product candidates, NKX101 and NKX019, are in ongoing Phase 1 clinical trials for relapsed/refractory acute myeloid leukemia/higher-risk myelodysplastic syndromes and B-cell malignancies, respectively[76](index=76&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) - The company incurred a net loss of **$26.0 million** for the three months ended March 31, 2022, and an accumulated deficit of **$230.1 million** as of that date, expecting continued significant losses[81](index=81&type=chunk) - On April 28, 2022, Nkarta issued and sold 15,333,334 shares of common stock in a public offering, generating approximately **$215.5 million** in net proceeds[84](index=84&type=chunk) - The COVID-19 pandemic has caused disruptions in supply, clinical trial conduct and enrollment, construction of the GMP manufacturing facility, and internal research efforts[85](index=85&type=chunk) [Financial Operations Overview](index=20&type=section&id=Financial%20Operations%20Overview) Describes the primary components of Nkarta's research and development, general and administrative expenses, and interest income - Research and development costs primarily include employee-related expenses, preclinical studies, clinical trials, manufacturing, and regulatory compliance, expensed as incurred[86](index=86&type=chunk)[88](index=88&type=chunk) - General and administrative expenses consist mainly of salaries, share-based compensation for executive and administrative functions, legal fees, professional fees, and facility-related costs[92](index=92&type=chunk) - Interest income is derived from cash, cash equivalents, and short-term investments, adjusted for amortization of purchase premiums and accretion of discounts[94](index=94&type=chunk) [Results of Operations](index=22&type=section&id=Results%20of%20Operations) Analyzes Nkarta's operating expenses and net loss for the three months ended March 31, 2022, compared to the prior year | Operating Expense | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Research and development | $19,568 | $13,539 | $6,029 | | General and administrative | $6,530 | $5,942 | $588 | | Total operating expenses | $26,098 | $19,481 | $6,617 | | Net loss | $(25,987) | $(19,373) | $(6,614) | - The increase in R&D expenses was primarily due to higher personnel costs (**$1.8 million**), program costs for NKX101 and NKX019 (**$2.9 million**), and other internal research costs (**$2.4 million**), partially offset by **$1.0 million** in partner cost sharing from the CRISPR Agreement[96](index=96&type=chunk) - The increase in G&A expenses was mainly due to higher personnel costs (**$0.8 million**, including **$0.5 million** in share-based compensation) and other G&A expenses, partially offset by a **$0.4 million** decrease in legal expenses[97](index=97&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses Nkarta's cash position, recent capital raise, funding sufficiency, and material cash requirements from operating leases - As of March 31, 2022, Nkarta had **$219.1 million** in cash, cash equivalents, restricted cash, and short-term investments[99](index=99&type=chunk) - The company received approximately **$215.5 million** in net proceeds from an underwritten public offering completed on April 28, 2022[101](index=101&type=chunk) - Management believes current financial resources are sufficient to fund operations for at least 12 months from the report's issuance date[104](index=104&type=chunk) | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | | Net cash used in operating activities | $(18,258) | $(14,647) | | Net cash used in investing activities | $(1,026) | $(20,194) | | Net cash provided by financing activities | $79 | $757 | - Material cash requirements include total undiscounted future minimum operating lease payments of **$115.7 million** as of March 31, 2022, with **$4.1 million** remaining for 2022[58](index=58&type=chunk)[112](index=112&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=25&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Identifies Nkarta's key accounting policies and estimates, including those for preclinical studies, lease liabilities, and share-based compensation - Key estimates and judgments include preclinical studies and clinical trial accruals, incremental borrowing rate for lease liability, and share-based compensation[119](index=119&type=chunk) - No significant changes in critical accounting policies and estimates occurred during the three months ended March 31, 2022[120](index=120&type=chunk) [Recently Issued Accounting Pronouncements](index=26&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) Directs readers to Note 2 for details on recently issued accounting pronouncements relevant to Nkarta's financial statements - Refer to Note 2 to the financial statements for information on recently issued accounting pronouncements[121](index=121&type=chunk) [Indemnification](index=26&type=section&id=Indemnification) Explains Nkarta's indemnification of officers and directors, noting no recorded liabilities due to minimal fair value - The company indemnifies its officers and directors for certain events, with no liabilities recorded as of March 31, 2022, or December 31, 2021, as the fair value is considered minimal[122](index=122&type=chunk) [Segment Information](index=26&type=section&id=Segment%20Information) States that Nkarta operates in a single reportable business segment - The company operates in one reportable business segment[123](index=123&type=chunk) [JOBS Act](index=26&type=section&id=JOBS%20Act) Describes Nkarta's status as an "emerging growth company" and "smaller reporting company" under the JOBS Act and its reliance on associated exemptions - Nkarta is an "emerging growth company" and "smaller reporting company" under the JOBS Act[124](index=124&type=chunk)[125](index=125&type=chunk) - The company irrevocably opted out of the extended transition period for complying with new or revised financial accounting standards[124](index=124&type=chunk) - Nkarta intends to rely on other JOBS Act exemptions, including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act[124](index=124&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=27&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Nkarta is exposed to market risks from interest rate fluctuations, foreign currency exchange rates, and inflation. The company's investment strategy prioritizes liquidity and principal preservation, and a 10% change in interest rates is not expected to materially impact its investment portfolio. Foreign currency risk is currently unhedged, and inflation has not had a material effect on operations - The company's financial instruments are subject to interest rate risk, but a **10%** change in interest rates would not have a material effect on the fair value of its investment portfolio as of March 31, 2022[127](index=127&type=chunk) - Nkarta is exposed to foreign currency exchange rate risk from international vendors but does not currently hedge this risk[128](index=128&type=chunk) - Inflation has not had a material effect on the company's results of operations during the periods presented[129](index=129&type=chunk) [Item 4. Controls and Procedures](index=27&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, assessed the effectiveness of Nkarta's disclosure controls and procedures as of March 31, 2022, concluding they were effective at a reasonable assurance level. No material changes in internal control over financial reporting occurred during the quarter - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022[130](index=130&type=chunk) - No changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2022, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[131](index=131&type=chunk) [PART II. OTHER INFORMATION](index=28&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers non-financial disclosures, including legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=28&type=section&id=Item%201.%20Legal%20Proceedings) Nkarta is not currently involved in any legal proceedings expected to materially impact its business. However, the company is facing ex parte reexaminations against certain licensed patents, including those related to its NKX101 product candidate, which are costly and could potentially narrow or invalidate its intellectual property rights - No claims or actions are currently pending against Nkarta that are likely to have a material adverse effect on its business, results of operations, financial condition, or growth prospects[134](index=134&type=chunk) - Third-party requests for ex parte reexamination have been filed against U.S. Patent Nos. 10,774,309 and 10,829,737, which relate to the NKX101 product candidate, and U.S. Patent No. 9,511,092[135](index=135&type=chunk) - These reexamination proceedings are time-consuming and costly, and could result in the narrowing or loss of rights under the relevant patents[135](index=135&type=chunk) [Item 1A. Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks associated with investing in Nkarta's common stock, covering its financial position, business operations, manufacturing, intellectual property, commercialization, and stock market performance. Key risks include a limited operating history, substantial ongoing losses, the need for additional capital, the novel and complex nature of its CAR-NK cell technology, potential delays in clinical development, intense competition, reliance on third-party manufacturers, challenges in protecting intellectual property, and uncertainties regarding market acceptance and reimbursement for its product candidates [Risks Related to our Financial Position](index=28&type=section&id=Risks%20Related%20to%20our%20Financial%20Position) Highlights financial risks for Nkarta, including limited operating history, significant ongoing losses, and the need for additional capital, exacerbated by the COVID-19 pandemic - Nkarta has a limited operating history and no products approved for commercial sale, making predictions about future success speculative[138](index=138&type=chunk) - The company has incurred significant operating losses since inception, with a net loss of **$26.0 million** for Q1 2022 and an accumulated deficit of **$230.1 million** as of March 31, 2022, and expects to continue incurring losses[139](index=139&type=chunk) - Additional capital will be required, which may cause dilution to stockholders, restrict operations, or necessitate relinquishing rights to product candidates[147](index=147&type=chunk)[148](index=148&type=chunk) - The COVID-19 pandemic has adversely affected business operations, including supply chain disruptions, clinical trial delays (NKX101, NKX019), and increased costs[153](index=153&type=chunk) [Risks Related to Our Business and Industry](index=32&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) Addresses business and industry-specific risks, such as reliance on novel CAR-NK technology, lengthy clinical development, competition, and the need for organizational growth - Nkarta's business depends on the success of its novel CAR-NK cell technology platform, which faces significant challenges in development, commercialization, and manufacturing due to its novelty[159](index=159&type=chunk)[161](index=161&type=chunk) - Clinical development is a lengthy, expensive, and uncertain process, with potential for substantial delays due to safety/efficacy issues, enrollment difficulties, or evolving regulatory requirements, especially for gene-edited therapies[169](index=169&type=chunk)[170](index=170&type=chunk)[172](index=172&type=chunk) - The business is highly dependent on the success of its co-lead product candidates, NKX101 and NKX019; failure of either could significantly impair development plans for other pipeline candidates[175](index=175&type=chunk)[176](index=176&type=chunk) - Nkarta faces significant competition from academic institutions and other biopharmaceutical companies developing similar or alternative cellular immunotherapy product candidates[216](index=216&type=chunk) - The company needs to significantly increase the size of its organization and effectively manage growth, including attracting and retaining highly qualified management, clinical, and scientific personnel[217](index=217&type=chunk)[219](index=219&type=chunk) [Risks Related to Manufacturing](index=46&type=section&id=Risks%20Related%20to%20Manufacturing) Details manufacturing risks, including the complexity of cell therapy production, potential delays from process changes, reliance on third parties and sole suppliers, and challenges in commercial-scale freezing and thawing - The manufacturing process for genetically engineered human cells is novel, complex, and highly regulated, susceptible to product loss, failure, or variation[227](index=227&type=chunk)[228](index=228&type=chunk) - Changes to the manufacturing process during development or after commercialization may require comparability studies and could significantly delay clinical development or commercialization[232](index=232&type=chunk) - Nkarta relies on third parties for manufacturing certain product candidates (NKX101) and critical materials (K562 cells, viral vectors), increasing risks of insufficient quantities or quality[234](index=234&type=chunk)[235](index=235&type=chunk) - The company is reliant on a sole supplier (Miltenyi) for certain manufacturing steps and reagents, posing risks of supply disruptions[241](index=241&type=chunk) - Nkarta has not yet developed a validated methodology for freezing and thawing commercial-scale quantities of CAR-NK cells or demonstrated long-term stability, which could limit adoption and increase costs[250](index=250&type=chunk)[251](index=251&type=chunk) [Risks Related to Our Intellectual Property](index=50&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Covers intellectual property risks, including dependence on license agreements, potential for competitor products, challenges to existing patents, infringement claims, and changes in patent law - Nkarta's rights to key NK cell engineering platform components are dependent on a license agreement with the National University of Singapore and St. Jude Children's Research Hospital, which could be terminated[253](index=253&type=chunk) - If patent protection is not sufficiently robust, competitors could develop and commercialize products and technology similar or identical to Nkarta's[266](index=266&type=chunk) - Issued patents, even after issuance, may be challenged (e.g., ex parte reexaminations against NKX101-related patents), potentially narrowing, invalidating, or holding them unenforceable[270](index=270&type=chunk)[272](index=272&type=chunk) - Claims of infringing third-party intellectual property rights would be costly and time-consuming, potentially leading to substantial damages or limiting commercialization[276](index=276&type=chunk)[278](index=278&type=chunk) - Changes in U.S. or international patent law or their interpretation could decrease the certainty of obtaining patents and diminish their value[286](index=286&type=chunk)[287](index=287&type=chunk) - The U.S. government could exercise certain rights (e.g., nonexclusive license, march-in rights, domestic manufacturing requirement) in technology developed under government-funded research, potentially limiting exclusive use[292](index=292&type=chunk)[294](index=294&type=chunk) [Risks Related to Commercialization](index=57&type=section&id=Risks%20Related%20to%20Commercialization) Outlines commercialization risks, such as the need for marketing and sales capabilities, regulatory limitations, market acceptance, reimbursement uncertainties, and compliance with healthcare laws - If product candidates are approved, Nkarta will need to develop or secure marketing, sales, and distribution capabilities, which it currently lacks, to successfully commercialize them[296](index=296&type=chunk) - Approved product candidates, including NKX101 and NKX019, could be subject to regulatory limitations on use, labeling, marketing, and distribution, and may require post-approval clinical trials[297](index=297&type=chunk)[298](index=298&type=chunk) - The commercial success of product candidates depends on market acceptance by physicians, patients, and third-party payors, which is uncertain[304](index=304&type=chunk) - Obtaining and maintaining adequate insurance coverage and reimbursement for product candidates, if approved, is crucial but uncertain, especially for novel cell therapies, and subject to increasing healthcare cost-containment efforts[308](index=308&type=chunk)[309](index=309&type=chunk)[310](index=310&type=chunk) - Healthcare reform initiatives (e.g., ACA) and other administrative and legislative proposals may harm Nkarta's business by controlling drug costs and restricting reimbursement[314](index=314&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - Business operations and relationships are subject to evolving global privacy laws (e.g., GDPR, CCPA) and other healthcare fraud and abuse laws, which could expose the company to significant penalties[322](index=322&type=chunk)[324](index=324&type=chunk)[327](index=327&type=chunk) [Risks Related to Our Common Stock](index=64&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Discusses risks specific to Nkarta's common stock, including price volatility, ownership concentration, potential for dilution, JOBS Act exemptions, and the absence of future cash dividends - The market price for Nkarta's common stock is likely to be highly volatile due to various factors, including clinical trial results, competitive products, and general economic conditions[328](index=328&type=chunk)[329](index=329&type=chunk) - Concentration of ownership (**42%** as of May 9, 2022) among existing executive officers, directors, and principal stockholders may prevent new investors from influencing significant corporate decisions[332](index=332&type=chunk) - A significant portion of total outstanding shares is eligible to be sold into the market, which could cause the market price of common stock to drop significantly[334](index=334&type=chunk)[335](index=335&type=chunk) - As an "emerging growth company" and "smaller reporting company," Nkarta relies on exemptions from certain disclosure and governance requirements, which may make its common stock less attractive to investors[336](index=336&type=chunk)[338](index=338&type=chunk) - Severance and change in control agreements with executive officers may require substantial payments upon termination, potentially affecting financial condition[339](index=339&type=chunk) - The ability to use net operating loss carryovers and certain other tax attributes may be limited due to ownership changes under Sections 382 and 383 of the Code[341](index=341&type=chunk)[342](index=342&type=chunk) - Nkarta does not expect to pay any cash dividends to common stockholders for the foreseeable future, with capital appreciation as the sole source of gain[343](index=343&type=chunk) [General Risk Factors](index=69&type=section&id=General%20Risk%20Factors) Addresses broader risks like potential acquisitions, litigation, increased public company costs, internal control failures, and cybersecurity threats - Any acquisitions or strategic collaborations may increase capital requirements, dilute stockholders, cause debt, or subject the company to other risks[353](index=353&type=chunk) - The company could be subject to securities class action litigation, which would result in substantial costs and diversion of management's attention[355](index=355&type=chunk) - Operating as a public company incurs significant increased costs, and management must devote substantial time to new compliance initiatives, including Sarbanes-Oxley Section 404[358](index=358&type=chunk)[359](index=359&type=chunk) - Failure to maintain an effective system of internal control over financial reporting could lead to inaccurate financial results or fraud, eroding stockholder confidence[361](index=361&type=chunk) - Computer system interruptions or security breaches could significantly disrupt product development programs and business operations, leading to data loss or legal liabilities[365](index=365&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section confirms no unregistered sales of equity securities during the reporting period. Nkarta has utilized **$50.8 million** of its IPO net proceeds as of March 31, 2022, primarily for advancing product candidates, constructing its manufacturing facility, and general corporate purposes, with the remainder invested - There were no unregistered sales of equity securities during the period covered by this report[366](index=366&type=chunk) - As of March 31, 2022, Nkarta has used **$50.8 million** from the net proceeds of its July 2020 IPO[368](index=368&type=chunk) - Proceeds were primarily used to advance product candidates through preclinical studies and clinical trial programs, for the construction of its manufacturing facility, and for working capital and general corporate purposes[368](index=368&type=chunk) - The remaining IPO funds were invested in cash equivalents and other marketable securities[369](index=369&type=chunk) [Item 3. Defaults Upon Senior Securities](index=67&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[371](index=371&type=chunk) [Item 4. Mine Safety Disclosures](index=67&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Nkarta, Inc - Mine Safety Disclosures are not applicable[372](index=372&type=chunk) [Item 5. Other Information](index=67&type=section&id=Item%205.%20Other%20Information) No other information was reported for the period - No other information was reported[373](index=373&type=chunk) [Item 6. Exhibits](index=68&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, an amendment to the CRISPR Collaboration Agreement, officer certifications, and various Inline XBRL documents for financial data tagging - Key exhibits include the Amended and Restated Certificate of Incorporation (3.1), Amended and Restated Bylaws (3.2), and Amendment No. 1 to the Research Collaboration Agreement with CRISPR Therapeutics AG (10.1)[375](index=375&type=chunk) - Certifications of Principal Executive Officer (31.1) and Principal Financial Officer (31.2, 32) are included[375](index=375&type=chunk) - Inline XBRL Instance Document (101.INS) and other XBRL taxonomy extension documents (101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104) are filed[375](index=375&type=chunk) [Signatures](index=69&type=section&id=Signatures) The report was signed on May 12, 2022, by Paul J. Hastings, Chief Executive Officer, and Nadir Mahmood, Chief Financial and Business Officer - The report was signed by Paul J. Hastings, Chief Executive Officer, and Nadir Mahmood, Chief Financial and Business Officer[381](index=381&type=chunk) - The signing date for the report was May 12, 2022[381](index=381&type=chunk)

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 Number 001-39370 Nkarta, Inc. (Exact name of registrant as specified in its charter) Delaware 47-4515206 (State or other jurisdiction of incorpo ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Exact Name of Registrant as Specified in its Charter) Delaware 47-4515206 (State or other jurisdiction of incorporation or organization) 6000 Shoreline Court, Suite 102 South San Francisco, CA 94080 (Address of principal executive offices) (Zip Code) (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, 2021 OR ☐ TRANSITION REPORT PURSUA ...

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 inco ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q ☐ 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) (State or other jurisdiction of incorporation or organization) 6000 Shoreline Court, Suite 102 South San Francisco, CA 94080 (Address of principal executive offices) (Zip Code) (Mark One) ☒ QUARTERLY REPOR ...

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 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 Number 001-39370 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) (415) 582-4923 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: ...

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 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 ...

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements.) This section presents the company's unaudited condensed financial statements, including balance sheets, statements of operations, cash flows, and related notes [Condensed Balance Sheets](index=5&type=section&id=Condensed%20Balance%20Sheets) Condensed Balance Sheet Highlights (Unaudited) | Metric | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Assets | $43,615,739 | $48,411,752 | | Total Current Assets | $22,297,493 | $37,465,044 | | Cash and Cash Equivalents | $17,748,928 | $20,606,849 | | Short-term Investments | $3,897,148 | $16,384,273 | | Total Liabilities | $67,689,801 | $14,079,381 | | Preferred Stock Purchase Right Liability | $41,641,000 | $1,477,645 | | Total Stockholders' Deficit | $(83,888,944) | $(25,482,511) | - Total assets decreased by approximately **$4.8 million** from December 31, 2019, to June 30, 2020, primarily due to a significant reduction in short-term investments and cash[15](index=15&type=chunk) - Total liabilities increased substantially from **$14.1 million to $67.7 million**, driven mainly by a significant increase in the preferred stock purchase right liability[15](index=15&type=chunk) [Condensed Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Condensed Statements of Operations and Comprehensive Loss (Unaudited) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $0 | $2,308 | $0 | $115,385 | | Research and Development Expenses | $7,861,986 | $3,620,858 | $15,121,824 | $5,914,975 | | General and Administrative Expenses | $2,493,595 | $1,052,272 | $4,642,016 | $1,992,110 | | Total Operating Expenses | $10,355,581 | $4,673,130 | $19,763,840 | $7,907,085 | | Loss from Operations | $(10,355,581) | $(4,670,822) | $(19,763,840) | $(7,791,700) | | Change in Fair Value of Preferred Stock Purchase Right Liability | $(40,741,000) | $0 | $(40,163,355) | $0 | | Net Loss | $(51,065,117) | $(4,837,955) | $(59,771,120) | $(7,920,934) | | Net Loss Per Share (Basic and Diluted) | $(30.06) | $(3.39) | $(36.13) | $(5.79) | - **Net loss significantly increased** for both the three and six months ended June 30, 2020, primarily due to a substantial increase in the fair value of the preferred stock purchase right liability[16](index=16&type=chunk) - **Research and development expenses more than doubled** for both periods year-over-year, reflecting increased investment in product development[16](index=16&type=chunk) [Condensed Statements of Convertible Preferred Stock and Stockholders' Deficit](index=7&type=section&id=Condensed%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Deficit) Stockholders' Deficit Changes (Unaudited) | Metric | December 31, 2019 | June 30, 2020 | | :--- | :--- | :--- | | Total Stockholders' Deficit | $(25,482,511) | $(83,888,944) | | Accumulated Deficit | $(26,659,742) | $(86,430,862) | | Additional Paid-in Capital | $1,179,210 | $2,540,711 | - The total stockholders' deficit worsened significantly from **$(25.5) million** at December 31, 2019, to **$(83.9) million** at June 30, 2020, primarily due to the accumulated deficit from net losses[18](index=18&type=chunk) - Additional paid-in capital increased due to vesting of common stock, stock option exercises, and share-based compensation expense[18](index=18&type=chunk) [Condensed Statements of Cash Flows](index=9&type=section&id=Condensed%20Statements%20of%20Cash%20Flows) Condensed Statements of Cash Flows (Unaudited) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(18,528,423) | $(7,082,300) | | Net Cash Provided by (Used in) Investing Activities | $7,710,707 | $(704,801) | | Net Cash Provided by Financing Activities | $8,104,173 | $6,013,011 | | Net Decrease in Cash and Cash Equivalents | $(2,713,543) | $(1,774,090) | - Net cash used in operating activities increased significantly from **$7.1 million** in 2019 to **$18.5 million** in 2020, reflecting higher net losses and increased operating expenses[22](index=22&type=chunk) - Investing activities shifted from a net cash outflow of **$0.7 million** in 2019 to a net cash inflow of **$7.7 million** in 2020, primarily due to maturities of short-term investments[22](index=22&type=chunk) - Financing activities provided **$8.1 million** in 2020, mainly from proceeds of Series B preferred stock issuance, compared to **$6.0 million** in 2019 from convertible notes[22](index=22&type=chunk) [Notes to Unaudited Condensed Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) [1. Organization and Description of Business](index=10&type=section&id=1.%20Organization%20and%20Description%20of%20Business) - Nkarta, Inc is a biopharmaceutical company developing engineered natural killer (NK) cells to fight cancer, incorporated in Delaware in July 2015[25](index=25&type=chunk) - The company completed its Initial Public Offering (IPO) on July 14, 2020, issuing **16.1 million shares** at $18.00 per share, generating approximately **$265.5 million** in net proceeds[26](index=26&type=chunk) - As of June 30, 2020, the company had an accumulated deficit of **$86.4 million** and expects to incur net losses for the foreseeable future, but believes current funds will be sufficient for at least 12 months[27](index=27&type=chunk)[28](index=28&type=chunk) [2. Basis of Presentation and Significant Accounting Policies](index=10&type=section&id=2.%20Basis%20of%20Presentation%20and%20Significant%20Accounting%20Policies) - The unaudited condensed financial statements are prepared in accordance with U.S. GAAP for interim financial information and Regulation S-X, including only normal and recurring adjustments[29](index=29&type=chunk) - On July 1, 2020, the company effected a **1-for-3.7 reverse stock split**, retrospectively adjusting all common stock, options, and preferred stock data[33](index=33&type=chunk) - The COVID-19 pandemic's impact on the company's operations and financial performance is uncertain, but the company does not expect the CARES Act to have a material impact on its financial condition[34](index=34&type=chunk) [3. Net Loss Per Share](index=12&type=section&id=3.%20Net%20Loss%20Per%20Share) Net Loss Per Share (Basic and Diluted) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(51,065,117) | $(4,837,955) | $(59,771,120) | $(7,920,934) | | Weighted Average Shares Outstanding | 1,698,560 | 1,426,984 | 1,654,304 | 1,367,686 | | Net Loss Per Share | $(30.06) | $(3.39) | $(36.13) | $(5.79) | - Potentially dilutive securities, including convertible preferred stock and stock options, were excluded from diluted net loss per share calculations as their inclusion would be anti-dilutive[37](index=37&type=chunk)[42](index=42&type=chunk) - Immediately prior to the IPO on July 14, 2020, all outstanding convertible preferred stock converted into **14,689,215 shares** of common stock[43](index=43&type=chunk) [4. Fair Value of Financial Instruments](index=13&type=section&id=4.%20Fair%20Value%20of%20Financial%20Instruments) Fair Value of Financial Instruments (June 30, 2020) | Instrument | Total Fair Value | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Money Market Funds | $6,374,380 | $6,374,380 | — | — | | Corporate Debt Securities | $1,201,596 | — | $1,201,596 | — | | Commercial Paper | $2,695,552 | — | $2,695,552 | — | | Preferred Stock Purchase Right Liability | $41,641,000 | — | — | $41,641,000 | - The preferred stock purchase right liability, classified as Level 3, significantly increased from **$1.5 million** at December 31, 2019, to **$41.6 million** at June 30, 2020[44](index=44&type=chunk)[53](index=53&type=chunk) - On July 1, 2020, this liability was revalued and reclassified into equity upon the Series B Milestone Closing, where **27,066,206 shares** of Series B convertible preferred stock were issued for **$64.4 million**[52](index=52&type=chunk) [5. Balance Sheet Components](index=15&type=section&id=5.%20Balance%20Sheet%20Components) Property and Equipment, Net | Category | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Leasehold Improvements | $287,091 | $287,091 | | Furniture and Fixtures | $277,672 | $264,828 | | Research Equipment | $4,751,528 | $2,928,726 | | Computers and Software | $60,768 | $60,768 | | Construction in Progress | $3,300,674 | $183,505 | | Total Property and Equipment | $8,677,733 | $3,724,918 | | Less Accumulated Depreciation | $(926,798) | $(645,393) | | **Total Property and Equipment, Net** | **$7,750,935** | **$3,079,525** | - Construction in progress saw a substantial increase from **$183,505 to $3,300,674**, indicating significant ongoing capital expenditures[55](index=55&type=chunk) - Deferred offering costs, included in other long-term assets, increased from **$104,030 to $3,595,238**, reflecting expenses directly attributable to the IPO[56](index=56&type=chunk) [6. Leases](index=16&type=section&id=6.%20Leases) - The company has operating leases for corporate office, laboratory space, and a vivarium in South San Francisco, California[59](index=59&type=chunk) - Rent expense for the six months ended June 30, 2020, was **$0.9 million**, up from **$0.4 million** in the prior year[59](index=59&type=chunk) - In May 2020, an amendment was signed for an eight-year non-cancelable lease of additional office and laboratory space, expected to commence in Q1 2021[60](index=60&type=chunk) [7. Commitments & Contingencies](index=16&type=section&id=7.%20Commitments%20%26%20Contingencies) - The company indemnifies its officers and directors for certain events, with potential unlimited future payments, though limited by a director and officer insurance policy[62](index=62&type=chunk) - A **$0.4 million** letter of credit agreement serves as collateral for the corporate headquarters' operating lease, automatically renewing annually[63](index=63&type=chunk) [8. GSK Collaboration and License Agreement](index=17&type=section&id=8.%20GSK%20Collaboration%20and%20License%20Agreement) - The collaboration agreement with GlaxoSmithKline (GSK) for Engineered NK Cells was terminated on December 10, 2018[64](index=64&type=chunk) - Nominal revenue of approximately **$0.1 million** was recognized for wind-down activities in the six months ended June 30, 2019, with no revenue recorded for the same period in 2020[64](index=64&type=chunk) [9. Stockholders' Deficit](index=17&type=section&id=9.%20Stockholders'%20Deficit) - The company's authorized capital stock as of August 26, 2019, included **71,919,982 common shares** and **54,350,179 preferred shares**[65](index=65&type=chunk) - On July 1, 2020, the company completed the Series B Milestone Closing, issuing **27,066,206 shares** of Series B convertible preferred stock for gross proceeds of **$64.4 million**[69](index=69&type=chunk) - Immediately prior to the IPO on July 14, 2020, all outstanding convertible preferred stock converted into **14,689,215 shares** of common stock[70](index=70&type=chunk) [10. Share-Based Compensation](index=18&type=section&id=10.%20Share-Based%20Compensation) - The 2020 Performance Incentive Plan became effective upon IPO, authorizing **2,660,371 common shares** for awards, with an annual increase provision[74](index=74&type=chunk) Stock Option Activity (Six Months Ended June 30, 2020) | Metric | Options | Weighted Average Exercise Price | | :--- | :--- | :--- | | Outstanding at Dec 31, 2019 | 2,329,516 | $3.59 | | Granted | 240,262 | $4.30 | | Exercised | (142,539) | $2.10 | | Forfeited | (2,492) | $4.28 | | Outstanding at June 30, 2020 | 2,424,747 | $3.75 | - Share-based compensation expense was **$1.0 million** for the six months ended June 30, 2020, a significant increase from **$0.2 million** in the prior year, with **$5.4 million** in unrecognized cost remaining[79](index=79&type=chunk) [11. Income Taxes](index=19&type=section&id=11.%20Income%20Taxes) - No provision for income taxes was recorded for the three and six months ended June 30, 2020 and 2019, as deferred tax assets are fully offset by a valuation allowance[82](index=82&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of financial condition, operational results, liquidity, and critical accounting policies [Overview](index=20&type=section&id=Overview) - Nkarta is a biopharmaceutical company developing allogeneic, off-the-shelf engineered natural killer (NK) cell therapies for cancer, with co-lead product candidates NKX101 and NKX019[85](index=85&type=chunk) - The company has incurred significant net losses since inception, with an accumulated deficit of **$86.4 million** as of June 30, 2020, and expects operating expenses to increase substantially[87](index=87&type=chunk)[88](index=88&type=chunk) - The company completed its IPO on July 14, 2020, raising approximately **$265.5 million** in net proceeds, which is expected to fund operations for at least 12 months[90](index=90&type=chunk)[93](index=93&type=chunk) [Financial Operations Overview](index=21&type=section&id=Financial%20Operations%20Overview) [Collaboration Revenue](index=21&type=section&id=Collaboration%20Revenue) - Nkarta has no approved therapeutic products for sale and has not generated product sales revenue; future revenue depends on successful development and commercialization[95](index=95&type=chunk) - Prior collaboration revenue from GSK terminated in December 2018, with only nominal wind-down revenue recognized in 2019 and none in the first six months of 2020[95](index=95&type=chunk) [Operating Expenses](index=21&type=section&id=Operating%20Expenses) Research and Development Expenses (in thousands) | Category | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | NKX101 | $1,703 | $542 | $3,807 | $945 | | NKX019 | $77 | $15 | $87 | $15 | | Program 3 | $36 | $0 | $57 | $0 | | Personnel related | $3,928 | $1,683 | $7,094 | $2,885 | | Others | $2,118 | $1,381 | $4,077 | $2,070 | | **Total R&D Costs** | **$7,862** | **$3,621** | **$15,122** | **$5,915** | - Research and development expenses increased significantly, with NKX101 program costs rising from **$0.9 million to $3.8 million** for the six months ended June 30, 2020[100](index=100&type=chunk) - General and administrative expenses are expected to increase due to expanded R&D activities and costs associated with operating as a public company[105](index=105&type=chunk) [Other Income (Expense)](index=23&type=section&id=Other%20Income%20(Expense)) - A significant other expense of **$40.7 million** for the three months and **$40.2 million** for the six months ended June 30, 2020, was recognized due to the change in fair value of the preferred stock purchase right liability[106](index=106&type=chunk)[115](index=115&type=chunk)[120](index=120&type=chunk) - Interest income increased due to interest earned on cash, cash equivalents, and short-term investments, while interest expense from convertible promissory notes was nil in 2020[109](index=109&type=chunk)[110](index=110&type=chunk)[116](index=116&type=chunk)[121](index=121&type=chunk)[122](index=122&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Summary of Statement of Operations Data (in thousands) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Collaboration Revenue | $0 | $2 | $0 | $115 | | Research and Development | $7,862 | $3,621 | $15,122 | $5,915 | | General and Administrative | $2,494 | $1,052 | $4,642 | $1,992 | | Total Operating Expenses | $10,356 | $4,673 | $19,764 | $7,907 | | Loss from Operations | $(10,356) | $(4,671) | $(19,764) | $(7,792) | | Change in Fair Value of Preferred Stock Purchase Right Liability | $(40,741) | $0 | $(40,163) | $0 | | Net Loss | $(51,065) | $(4,838) | $(59,771) | $(7,921) | - Net loss for the three months ended June 30, 2020, was **$(51.1) million**, a significant increase from **$(4.8) million** in the prior year, primarily due to the **$40.7 million** change in fair value of preferred stock purchase right liability[112](index=112&type=chunk)[115](index=115&type=chunk) - For the six months ended June 30, 2020, net loss was **$(59.8) million**, compared to **$(7.9) million** in 2019, driven by increased R&D and G&A expenses, and the liability adjustment[112](index=112&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) [Sources of Liquidity](index=26&type=section&id=Sources%20of%20Liquidity) - Nkarta has incurred net losses and negative cash flows since inception and will require substantial additional funding to support operations[123](index=123&type=chunk)[124](index=124&type=chunk) - Funding has primarily come from convertible promissory notes, preferred stock private placements, and the recent IPO, which generated **$265.5 million** in net proceeds[125](index=125&type=chunk)[127](index=127&type=chunk) - As of June 30, 2020, cash, cash equivalents, restricted cash, and short-term investments totaled **$22.1 million**, expected to be sufficient for at least 12 months with recent financing[128](index=128&type=chunk) [Cash Flows](index=26&type=section&id=Cash%20Flows) Summary of Cash Flows (Six Months Ended June 30) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,528,423) | $(7,082,300) | | Net cash provided by (used in) investing activities | $7,710,707 | $(704,801) | | Net cash provided by financing activities | $8,104,173 | $6,013,011 | | Net decrease in cash and cash equivalents | $(2,713,543) | $(1,774,090) | - Operating cash outflow increased due to higher net loss, while investing activities turned positive due to maturities of short-term investments[130](index=130&type=chunk)[131](index=131&type=chunk) - Financing cash inflow was primarily from Series B preferred stock proceeds and stock option exercises in 2020, and convertible notes in 2019[132](index=132&type=chunk) [Funding Requirements](index=27&type=section&id=Funding%20Requirements) - Future capital requirements depend on clinical trial progress, regulatory review, manufacturing costs, and public company operational expenses[134](index=134&type=chunk) - The company's independent auditor expressed substantial doubt about its ability to continue as a going concern for the year ended December 31, 2019, prior to recent financings[135](index=135&type=chunk) - Additional funding may be sought through equity or debt financings, or collaborations, which could dilute stockholders or impose restrictive covenants[136](index=136&type=chunk) [Contractual Obligations and Commitments](index=28&type=section&id=Contractual%20Obligations%20and%20Commitments) Contractual Obligations and Commitments (June 30, 2020, in thousands) | Obligation | Total | Less Than 1 Year | 1 to 3 Years | 4 to 5 Years | More Than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Lease Commitments | $18,350 | $861 | $3,789 | $4,179 | $9,521 | - Operating lease commitments primarily relate to office, laboratory, and vivarium space in South San Francisco, with terms extending to 2026 and 2021 respectively[137](index=137&type=chunk)[138](index=138&type=chunk) - A second amendment in May 2020 added an eight-year non-cancelable lease for additional space, commencing in Q1 2021 and expiring in 2029[139](index=139&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company did not have any off-balance sheet arrangements during the periods presented[140](index=140&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) - Financial statements are prepared in accordance with U.S. GAAP, requiring management estimates and assumptions, particularly for accrued expenses and share-based compensation[141](index=141&type=chunk) - No significant changes in critical accounting policies and estimates occurred during the six months ended June 30, 2020[142](index=142&type=chunk) [Recently Issued Accounting Pronouncements](index=29&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) - The company adopted ASU 2016-13 (Financial Instruments—Credit Losses) and ASU 2018-13 (Fair Value Measurement) in Q1 2020, neither of which had a material impact[39](index=39&type=chunk)[40](index=40&type=chunk) [Indemnification](index=29&type=section&id=Indemnification) - The company indemnifies its officers and directors, believing the fair value of these rights and agreements to be minimal, with no recorded liabilities as of June 30, 2020[144](index=144&type=chunk) [Segment Information](index=29&type=section&id=Segment%20Information) - The company operates in one reportable business segment[145](index=145&type=chunk) [JOBS Act](index=29&type=section&id=JOBS%20Act) - Nkarta is an 'emerging growth company' and 'smaller reporting company' under the JOBS Act, allowing it to take advantage of certain exemptions from disclosure requirements[146](index=146&type=chunk)[147](index=147&type=chunk) - The company irrevocably opted out of the extended transition period for complying with new or revised accounting standards[146](index=146&type=chunk)[344](index=344&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate and foreign currency exchange rate fluctuations - The company is exposed to market risk from changes in interest rates on its investment portfolio, but believes a **10% change** would not have a material effect[148](index=148&type=chunk) - Nkarta is exposed to foreign currency exchange rate fluctuations due to contracts with international vendors but does not currently hedge this risk[149](index=149&type=chunk) - Inflation, interest rate changes, and exchange rate fluctuations have not had a significant material effect on the company's results of operations[150](index=150&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of disclosure controls and procedures and changes in internal control over financial reporting - Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2020[151](index=151&type=chunk) - No changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2020, that materially affected, or are reasonably likely to materially affect, internal controls[152](index=152&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) This section states the company is not currently involved in any material legal proceedings - Management believes there are no pending claims or actions that would have a material adverse effect on the company's results of operations, financial condition, or cash flows[155](index=155&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks related to the company's financial position, business operations, manufacturing, and intellectual property [RISKS RELATED TO OUR FINANCIAL POSITION](index=31&type=section&id=RISKS%20RELATED%20TO%20OUR%20FINANCIAL%20POSITION) - Nkarta has a limited operating history since 2015, no approved products, and has incurred significant operating losses, with an accumulated deficit of **$86.4 million** as of June 30, 2020[157](index=157&type=chunk)[158](index=158&type=chunk) - The company will require substantial additional capital beyond its IPO proceeds to fund operations and development, and failure to raise funds could delay or discontinue programs[166](index=166&type=chunk)[169](index=169&type=chunk) - The **COVID-19 pandemic** has disrupted economic activity and could adversely affect business operations, preclinical studies, clinical trials, and access to capital[173](index=173&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) [Risks Related to Our Business and Industry](index=35&type=section&id=Risks%20Related%20to%20Our%20Business%20and%20Industry) - Success depends on the CAR-NK cell technology platform, which is novel and unproven in humans, requiring significant development, regulatory approval, and manufacturing challenges[179](index=179&type=chunk)[180](index=180&type=chunk) - Clinical development is lengthy, expensive, and uncertain, with potential for delays or termination due to safety, efficacy, regulatory issues, or external factors like the COVID-19 pandemic[187](index=187&type=chunk)[189](index=189&type=chunk) - The company faces intense competition from other biopharmaceutical companies developing cellular immunotherapies, some with greater resources or approved products[223](index=223&type=chunk) [Risks Related to Manufacturing](index=47&type=section&id=Risks%20Related%20to%20Manufacturing) - The manufacturing process for genetically engineered human cells is complex, highly regulated, and susceptible to product loss, failure, or variation[239](index=239&type=chunk)[240](index=240&type=chunk)[241](index=241&type=chunk) - Reliance on third-party manufacturers for product candidates increases risks of insufficient quantities, unacceptable costs, and non-compliance with cGMP requirements[243](index=243&type=chunk)[245](index=245&type=chunk) - The company is reliant on a sole supplier (Miltenyi) for critical manufacturing steps and reagents, posing a risk of supply disruptions and delays[248](index=248&type=chunk)[250](index=250&type=chunk) [Risks Related to Our Intellectual Property](index=51&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) - Termination of the license agreement with National University of Singapore and St Jude's Children's Research Hospital could result in loss of rights to key platform components[262](index=262&type=chunk) - The patent portfolio, with expiration dates between 2024 and 2041, may be inadequate to protect the company's competitive position[270](index=270&type=chunk)[271](index=271&type=chunk) - The company is involved in two patent re-examination proceedings, which are costly, time-consuming, and could narrow or invalidate patent rights[280](index=280&type=chunk) [Risks Related to Commercialization](index=57&type=section&id=Risks%20Related%20to%20Commercialization) - Failure to develop or secure marketing, sales, and distribution capabilities would prevent successful commercialization and revenue generation[303](index=303&type=chunk) - Commercial success depends on market acceptance by physicians, patients, and third-party payors, which is uncertain for novel cell therapies[313](index=313&type=chunk)[314](index=314&type=chunk) - Obtaining and maintaining adequate insurance coverage and reimbursement for product candidates, if approved, is uncertain and critical for market access[316](index=316&type=chunk)[317](index=317&type=chunk)[320](index=320&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered equity sales and confirms the use of IPO proceeds aligns with disclosed plans - During the six months ended June 30, 2020, the company granted **240,262 stock options** and saw **142,539 options exercised**, generating approximately **$298,961**[376](index=376&type=chunk) - These sales were exempt from registration under Rule 701 of the Securities Act, relating to compensatory benefit plans[368](index=368&type=chunk) - The company completed its IPO on July 14, 2020, issuing **16,100,000 common shares** for **$265.5 million** net proceeds, with no material change in the planned use of proceeds[369](index=369&type=chunk)[371](index=371&type=chunk) [Item 3. Defaults Upon Senior Securities](index=71&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities during the reported period - No defaults upon senior securities occurred during the period[373](index=373&type=chunk) [Item 4. Mine Safety Disclosures](index=71&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the company's operations - Mine safety disclosures are not applicable to the registrant[374](index=374&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - No other information is reported in this section[375](index=375&type=chunk) [Item 6. Exhibits](index=72&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including organizational documents, incentive plans, and certifications - Exhibits include the Amended and Restated Certificate of Incorporation and Bylaws, 2020 Performance Incentive Plan, and the Second Amendment to Lease Agreement[378](index=378&type=chunk) - Certifications from the Principal Executive Officer and Principal Financial Officer are filed herewith, as required by the Sarbanes-Oxley Act[378](index=378&type=chunk) [SIGNATURES](index=74&type=section&id=SIGNATURES) - The report is signed by Paul J Hastings, Chief Executive Officer, and Matthew Plunkett, Chief Financial Officer, on August 20, 2020[383](index=383&type=chunk)