Cue Biopharma(CUE) - 2021 Q1 - Quarterly Report

FORM 10-Q TABLE OF CONTENTS PART I. FINANCIAL INFORMATION This part presents unaudited financial statements, management's discussion, market risk, and controls for Q1 2021 and 2020 Item 1. Financial Statements This item presents unaudited consolidated financial statements, including balance sheets, income statements, equity, cash flows, and notes Consolidated Balance Sheets These balance sheets present the company's financial position, assets, liabilities, and stockholders' equity as of March 31, 2021, and December 31, 2020 Consolidated Balance Sheet Highlights (Unaudited, in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :----------------------------------- | :------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $73,257 | $74,866 | | Marketable securities | $— | $10,003 | | Total current assets | $77,405 | $87,527 | | Total assets | $88,721 | $99,533 | | Liabilities | | | | Total current liabilities | $16,633 | $16,315 | | Total liabilities | $19,052 | $20,622 | | Stockholders' Equity | | | | Total stockholders' equity | $69,669 | $78,911 | Consolidated Statements of Operations and Other Comprehensive Loss This statement details revenues, operating expenses, and net loss for Q1 2021 and 2020, showing increased collaboration revenue and net loss Consolidated Statements of Operations Highlights (Unaudited, in thousands, except per share amounts) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Collaboration revenue | $1,553 | $900 | | General and administrative expenses | $4,255 | $3,989 | | Research and development expenses | $9,816 | $9,906 | | Total operating expenses | $14,071 | $13,895 | | Loss from operations | $(12,518) | $(12,995) | | Net loss | $(12,505) | $(12,818) | | Net loss per common share – basic and diluted | $(0.41) | $(0.48) | | Weighted average common shares outstanding – basic and diluted | 30,434,525 | 26,569,681 | Consolidated Statements of Stockholders' Equity This statement outlines changes in stockholders' equity for Q1 2021 and 2020, reflecting stock-based compensation, option exercises, and net loss Stockholders' Equity Changes (Unaudited, in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :----------------------------------- | :------------- | :---------------- | | Total Stockholders' Equity | $69,669 | $78,911 | | Common Stock Shares Outstanding | 30,499,803 | 30,351,366 | | Additional Paid-in Capital | $235,428 | $232,159 | | Accumulated Deficit | $(165,790) | $(153,285) | - Key activities impacting equity during Q1 2021 included $2.436 million in stock-based compensation, $919 thousand from stock option exercises, and a net loss of $12.505 million[21] Consolidated Statements of Cash Flows These statements detail cash flows from operating, investing, and financing activities for Q1 2021 and 2020, showing a net decrease in cash Consolidated Statements of Cash Flows Highlights (Unaudited, in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(11,795) | $(10,944) | | Net cash (used in) provided by investing activities | $9,352 | $(9,950) | | Net cash provided by financing activities | $834 | $36 | | Net decrease in cash, cash equivalents, and restricted cash | $(1,609) | $(20,858) | | Cash, cash equivalents, and restricted cash at end of period | $73,407 | $23,582 | Notes to the Consolidated Financial Statements These notes provide detailed explanations and disclosures for the consolidated financial statements, covering organization, accounting policies, and financial accounts 1. Organization and Basis of Presentation This note describes Cue Biopharma, Inc.'s business focus as a clinical-stage biopharmaceutical company and its financial position, including recurring losses and capital needs - Cue Biopharma, Inc. is a clinical-stage biopharmaceutical company focused on engineering injectable biologics to modulate T cells for treating cancers, chronic infectious diseases, and autoimmune disorders[28] - The company has incurred recurring losses and negative cash flows since inception, with $73.257 million in unrestricted cash, cash equivalents, and marketable securities as of March 31, 2021, deemed sufficient for at least the next twelve months[29] 2. Summary of Significant Accounting Policies This section outlines key accounting policies for the unaudited consolidated financial statements, including revenue recognition, stock-based compensation, and COVID-19 impacts Basis of Presentation The unaudited consolidated financial statements are prepared under SEC rules and U.S. GAAP, consolidating Cue Biopharma Inc. and its wholly-owned subsidiary - Financial statements are unaudited, prepared under SEC rules and U.S. GAAP, and consolidate Cue Biopharma Inc. and its wholly-owned subsidiary[30][34] Public Offerings The company used ATM equity offerings in March and June 2020 to sell common stock, raising approximately $34.3 million and $22.4 million net of commissions - The company completed a March 2020 ATM offering, selling 1,824,901 shares for $34.3 million (net)[32] - Under the June 2020 ATM offering, 1,192,000 shares were sold for $22.4 million (net) as of March 31, 2021, with up to $40 million authorized[32] Consolidation The consolidated financial statements include Cue Biopharma Inc. and its wholly-owned subsidiary, with all intercompany transactions eliminated - Consolidated financial statements include Cue Biopharma Inc. and its wholly-owned subsidiary, Cue Biopharma Securities Corporation, Inc., with all intercompany transactions eliminated[34] Reclassifications Certain prior year amounts were reclassified for consistency with the current year's presentation, with no impact on reported results of operations - Prior year amounts were reclassified for consistency, with no effect on reported results[35] Use of Estimates Financial statement preparation requires significant management estimates and assumptions, particularly for collaboration revenue, accrued expenses, and stock-based compensation, with potential COVID-19 impacts - Management relies on estimates for collaboration revenue, accrued expenses, stock-based compensation, deferred tax assets, and long-lived assets[36] - The COVID-19 pandemic's impact on financial results and liquidity is uncertain and could materially affect future consolidated financial statements[36] Cash Concentrations The company holds cash in federally insured accounts with a high credit rating institution, sometimes exceeding insurance limits, but has not experienced losses - Cash balances are held in federally insured accounts with a high credit rating financial institution, sometimes exceeding insurance limits, but no losses have been incurred[37] Cash and Cash Equivalents Cash equivalents include highly liquid investments with maturities of three months or less at purchase, primarily invested in money market funds - Cash equivalents are highly liquid investments with maturities of three months or less, primarily in money market funds[38] Marketable Securities Marketable securities are classified as available-for-sale, recorded at fair value, with unrealized gains/losses in other comprehensive loss, primarily consisting of U.S. Treasury obligations - Marketable securities are classified as available-for-sale, recorded at fair value, with unrealized gains/losses in other comprehensive loss and realized gains/losses in other income[39] - Investments are primarily in United States Treasury obligations[39] Restricted Cash The company held $150,000 in restricted cash as of March 31, 2021, and December 31, 2020, to collateralize a credit card - $150,000 in restricted cash was held to collateralize a credit card as of March 31, 2021, and December 31, 2020[41] Property and Equipment Property and equipment are recorded at cost and depreciated using the straight-line method over estimated useful lives, with depreciation allocated to general and administrative or R&D - Property and equipment are recorded at cost and depreciated using the straight-line method over 3-8 years[42] - Depreciation and amortization expense is recognized in general and administrative or research and development expenses[42] Trademark The company's "CUE BIOLOGICS Mark" trademark is a long-term asset with a 15-year useful life, incurring approximately $3,000 in quarterly amortization expense - Trademark "CUE BIOLOGICS Mark" is a long-term asset with a 15-year useful life[43][44] - Amortization expense was approximately $3,000 for the three months ended March 31, 2021 and 2020[44] Revenue Recognition Collaboration revenue is recognized under ASC 606, primarily from intellectual property licenses and R&D services, using the "most likely amount" method for variable consideration - Collaboration revenue is recognized under ASC 606, primarily from licenses and R&D services[45] - The "most likely amount" method is used to estimate variable consideration, and transaction prices are allocated based on standalone selling prices[45] Research and Development Expenses R&D expenses include compensation, consultant fees, facility costs, and clinical trial costs, expensed as incurred or ratably over contract life - R&D expenses include compensation, consultant fees, facility costs, and clinical trial costs[47] - Expenses are charged to operations as incurred or ratably over contract life; nonrefundable advance payments are expensed as services are performed[48][49] Patent Expenses All patent costs, including legal and filing fees, are expensed as incurred due to development uncertainty, totaling $520,000 and $655,000 for Q1 2021 and 2020, respectively - All patent costs are expensed as incurred due to development uncertainty[51] Patent Expenses (in thousands) | Period | Patent Expenses | | :----------------------------------- | :-------------- | | Three Months Ended March 31, 2021 | $520 | | Three Months Ended March 31, 2020 | $655 | Licensing Fees and Costs Licensing fees and costs, primarily related to the Einstein License Agreement, are charged to research and development expense as incurred - Licensing fees and costs, mainly from the Einstein License Agreement, are expensed as R&D costs when incurred[52] Long-Lived Assets Long-lived assets are reviewed for impairment annually or when circumstances indicate carrying value may exceed fair value, with no historical impairments recorded - Long-lived assets are reviewed for impairment annually or when conditions change; no impairments have been recorded historically[53] Leases The company adopted ASC 842 on January 1, 2019, recognizing right-of-use assets and corresponding lease liabilities, with no material net impact on operations - Adopted ASC 842 on January 1, 2019, recognizing right-of-use assets and lease liabilities[54][122] - The adoption resulted in approximately $9.692 million of right-of-use assets and $9.347 million of lease liabilities, with no material net impact on operations or accumulated deficit[122] Stock-Based Compensation Stock-based awards are recognized at grant date fair value using the Black-Scholes model and expensed over the service period, with forfeitures accounted for as they occur - Stock-based awards are recognized at grant date fair value using the Black-Scholes model and expensed over the service period[56][57][58] - Forfeitures are accounted for as they occur[59] Comprehensive Income (Loss) Comprehensive income (loss) includes net income (loss) and other comprehensive income (loss), with unrealized gains or losses on available-for-sale securities being the only element - Comprehensive income (loss) includes net income (loss) and unrealized gains/losses on available-for-sale securities[61] Earnings (Loss) Per Share Basic and diluted loss per common share are identical due to the anti-dilutive effect of outstanding stock options and warrants for all periods presented - Basic and diluted loss per common share are identical due to the anti-dilutive effect of outstanding stock options and warrants[62] Anti-Dilutive Securities Excluded from EPS Calculation | Security Type | March 31, 2021 | March 31, 2020 | | :--------------------------- | :------------- | :------------- | | Common stock warrants | 851,969 | 1,189,827 | | Common stock options | 5,738,757 | 5,507,572 | | Nonvested restricted stock units | 213,336 | 250,001 | | Total | 6,804,062 | 6,947,400 | Fair Value of Financial Instruments The company uses a three-level fair value hierarchy for financial instruments, with cash equivalents valued using Level 1 inputs and marketable securities (Dec 31, 2020) using Level 2 - Financial instruments are valued using a three-level fair value hierarchy[65] - Cash equivalents are valued using Level 1 inputs; marketable securities (Dec 31, 2020) used Level 2[70][77] Recent Accounting Pronouncements The company is evaluating ASU No. 2016-13 (CECL) for credit losses, effective after December 15, 2022, and adopted ASU No. 2019-12 (Income Taxes) on January 1, 2021, with no material impact - Evaluating ASU No. 2016-13 (CECL) for credit losses, effective after December 15, 2022[72] - Adopted ASU No. 2019-12 (Income Taxes) on January 1, 2021, with no material impact[73] 3. Fair Value This note details the fair value measurements of the company's assets, primarily cash equivalents and marketable securities, categorized within the fair value hierarchy Fair Value Measurements (in thousands) | Asset | March 31, 2021 Fair Value | December 31, 2020 Fair Value | Level | | :-------------------- | :------------------------ | :------------------------- | :---- | | Cash equivalents | $67,997 | $72,943 | Level 1 | | Marketable securities | $— | $10,003 | Level 2 | 4. Marketable Securities The company redeemed its entire investment in marketable securities by March 31, 2021, which totaled $10.003 million as of December 31, 2020, primarily in U.S. Treasury Securities - Entire investment in marketable securities redeemed by March 31, 2021[79] - As of December 31, 2020, marketable securities were $10.003 million, primarily U.S. Treasury Securities[79] 5. Property and Equipment This note provides a breakdown of property and equipment, net of accumulated depreciation, and details the depreciation expense for the periods Property and Equipment, Net (in thousands) | Category | March 31, 2021 | December 31, 2020 | | :----------------------- | :------------- | :---------------- | | Laboratory equipment | $5,022 | $4,148 | | Furniture and fixtures | $93 | $93 | | Computer equipment | $268 | $268 | | Leasehold improvements | $7 | $— | | Construction in progress | $421 | $405 | | Less accumulated depreciation | $(3,025) | $(2,807) | | Net property and equipment | $2,786 | $2,108 | - Depreciation expense for the three months ended March 31, 2021, was approximately $218,000 (vs. $194,000 in 2020), excluding trademark and capitalized license amortization[84] 6. Stock-Based Compensation This note details stock option valuation assumptions, summarizes stock option and RSU activity, and reports total stock-based compensation expense Stock Option Valuation Stock options are valued using the Black-Scholes model with specific assumptions for risk-free interest rate, expected dividend yield, volatility, and expected life Stock Option Valuation Assumptions (Black-Scholes Model) | Assumption | March 31, 2021 | March 31, 2020 | | :-------------------- | :------------- | :------------- | | Risk-free interest rate | 0.61 to 1.18% | 1.00 to 1.56% | | Expected dividend yield | 0% | 0% | | Expected volatility | 92.2-94.7% | 98.0-99.6% | | Expected life | 5.50 to 6.25 years | 4.0 to 6.25 years | - Stock options outstanding at March 31, 2021, were 5,738,757 with a weighted average exercise price of $9.79 and a remaining contractual life of 6.01 years[85] - Unrecognized stock-based compensation expense for stock options was approximately $23.048 million as of March 31, 2021, to be recognized over 2.6 years[85] Restricted Stock Units The company granted various RSUs with time-based vesting conditions to executive officers, with compensation expense recognized on a straight-line basis - Nonvested RSU balance at March 31, 2021, was 213,336 shares with a weighted average grant date fair value of $16.86 per share[90] - Unrecognized stock-based compensation for RSUs was approximately $2.406 million as of March 31, 2021, to be recognized over 1 year[90] Stock-based Compensation Total stock-based compensation expense for Q1 2021 was $2.436 million, a decrease from $3.175 million in the prior year, allocated between general and administrative and R&D expenses Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--------------------------- | :-------------------------------- | :-------------------------------- | | General and administrative | $1,114 | $1,017 | | Research and development | $1,322 | $2,158 | | Total | $2,436 | $3,175 | 7. Warrants The company had two tranches of common stock warrants outstanding at March 31, 2021, totaling 851,969 shares, with an intrinsic value of approximately $2.825 million for in-the-money warrants - Two tranches of common stock warrants outstanding at March 31, 2021, totaling 851,969 shares[92][94] - Intrinsic value of exercisable in-the-money warrants was approximately $2.825 million as of March 31, 2021[92] 8. Collaboration Revenue This note details the company's revenue recognition policies for collaboration agreements with Merck and LG Chem, outlining upfront payments, milestone eligibility, and recognized revenue - Merck Collaboration Agreement: Received $2.5 million upfront payment; eligible for up to $101.0 million in R&D milestones, $120.0 million in regulatory milestones, and $150.0 million in commercial milestones, plus tiered royalties[103][170] Collaboration Revenue from Merck Agreement (in thousands) | Period | Revenue | | :----------------------------------- | :------ | | Three Months Ended March 31, 2021 | $765 | | Three Months Ended March 31, 2020 | $55 | - LG Chem Collaboration Agreement: Received $5.0 million upfront cash payment and $5.0 million equity investment; eligible for up to $400.0 million in research, development, regulatory, and sales milestones, plus tiered single-digit royalties[105][175] - LG Chem milestone payments earned: $2.5 million for CUE-101 IND acceptance (May 2019) and $1.25 million for pre-clinical candidate selection (Dec 2020)[106][107][175] Collaboration Revenue from LG Chem Agreement (in thousands) | Period | Revenue | | :----------------------------------- | :------ | | Three Months Ended March 31, 2021 | $788 | | Three Months Ended March 31, 2020 | $844 | 9. Commitments and Contingencies This note outlines the company's commitments under the Einstein License Agreement and collaboration agreements, stating no material legal proceedings or accruals for contingent liabilities Einstein License Agreement The company holds an exclusive worldwide license from Einstein for its core technology platform, involving annual fees and potential milestone payments - Exclusive worldwide license from Albert Einstein College of Medicine for core technology platform[112][162][163] - Potential milestone payments up to $1.85 million per product/indication and $5.75 million for cumulative sales[113] - Incurred $18,750 in fees and expenses to Einstein for the three months ended March 31, 2021 and 2020[112][165] Collaboration Agreement with Merck Refers to Note 8 for details on the Merck Collaboration Agreement Collaboration Agreement with LG Chem Life Sciences Refers to Note 8 for details on the LG Chem Collaboration Agreement Contingencies The company accrues for probable and estimable contingent liabilities but has no such accruals and is not a party to any material legal proceedings - No accruals for contingent liabilities and not a party to any material legal proceedings as of March 31, 2021[116][117][223] 10. Leases This note details the company's operating lease for office and laboratory space in Cambridge, Massachusetts, including lease terms, amendments, and financial impacts under ASC 842 - Leases approximately 19,900 square feet of office space in Cambridge, Massachusetts, expiring June 14, 2022[118][127] - As of March 31, 2021, recorded $5.656 million for operating right-of-use asset and $4.989 million (short-term) and $1.085 million (long-term) for operating lease liability[128] Lease Information (in thousands) | Metric | Three Months Ended March 31, 2021 | | :----------------------------------- | :-------------------------------- | | Total rent expense | $1,220 | | Operating cash flows from operating leases | $1,174 | | Weighted average discount rate | 6.0% | | Weighted average remaining lease term | 1.21 years | 11. Subsequent Events Subsequent to March 31, 2021, the company sold an additional 907,700 shares under the June 2020 ATM Agreement for $10.4 million (net), totaling $32.7 million, and LG Chem's option expired - Subsequent to March 31, 2021, an additional 907,700 shares were sold under the June 2020 ATM Agreement for $10.4 million (net), totaling $32.7 million[132] - LG Chem's option for an additional Immuno-STAT oncology target expired on April 30, 2021[133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, operations, future outlook, Immuno-STAT platform, pipeline, COVID-19 impact, and liquidity Overview Cue Biopharma is a clinical-stage biopharmaceutical company developing a novel Immuno-STAT platform to selectively modulate T cells for cancer, chronic infectious diseases, and autoimmune disorders - Clinical-stage biopharmaceutical company engineering Immuno-STAT platform for selective T cell modulation in cancer, chronic infectious diseases, and autoimmune disorders[136] - Immuno-STATs aim for modularity, versatility, broad disease coverage, manufacturability, and convenient administration, avoiding broad immune activation/suppression side effects[136] Our Immuno-STAT Platform Pipeline The company's Immuno-STAT platform includes four biologic series for various indications, with CUE-101 in Phase 1 trials showing favorable tolerability and anti-tumor activity - Immuno-STAT platform includes CUE-100 (oncology, IL-2 based), CUE-200 (chronic infections, CD80/4-1BBL), CUE-300 (autoimmune, PD-L1), and CUE-400 (autoimmune, iTregs with IL-2/TGF-beta)[137] - CUE-101 (most advanced) is in Phase 1 monotherapy and combination trials (with KEYTRUDA®) for HPV-driven R/M head and neck cancer, demonstrating favorable tolerability and anti-tumor activity (confirmed PR and SDs)[139][141][142][143] - CUE-102 (WT1) is advancing towards an IND filing in H1 2022, with preclinical data supporting selective T cell expansion and effector function[144][146] - Neo-STAT™ is a derivative scaffold designed for greater flexibility in targeting multiple tumor epitopes, enhanced production, and potential for personalized neo-antigen strategies[147] - RDI-STAT (Re-Directed Immuno-STAT) platform engineered to address tumor escape mechanisms of HLA loss by re-purposing anti-viral T cell repertoire to kill cancers[148] - CUE-300 series for autoimmune disorders (e.g., type 1 diabetes) and CUE-401 for chronic autoimmune diseases (activating regulatory T cells) are also advancing[149][150] Coronavirus ("COVID-19") Pandemic The COVID-19 pandemic has not significantly impacted productivity, but CUE-102 cGMP material manufacturing was delayed, pushing its IND filing to Q1 2022 - Precautionary measures (remote work, travel restrictions) due to COVID-19 have not significantly impacted productivity[151] - CUE-102 cGMP material manufacturing delayed by ~6 weeks due to Defense Production Act, shifting IND filing from Q4 2021 to Q1 2022[152][154] Plan of Operation The company is in the development phase, focusing on early-stage clinical development of Immuno-STAT candidates, with a strategy to seek strategic partnerships for later-stage development - Company is in development phase, focusing on research, testing, optimization, and early-stage clinical development of Immuno-STAT candidates[155][156] - Strategy includes establishing strategic partnerships for later-stage clinical development and commercialization[157] Critical Accounting Policies and Significant Judgements and Estimates Management's discussion relies on financial statements requiring significant estimates for collaboration revenue, accrued expenses, and stock-based compensation, with no material changes in Q1 2021 - Financial statements require significant estimates for collaboration revenue, accrued expenses, stock-based compensation, deferred tax assets, and long-lived assets[158] - No material changes to critical accounting policies and estimates during the three months ended March 31, 2021[159] Recent Accounting Pronouncements and Adopted Standards This section refers to Note 2 for a discussion of recent accounting pronouncements Significant Contracts and Agreements Related to Research and Development Activities This section details key agreements underpinning the company's R&D efforts, including the Einstein License Agreement and collaboration agreements with Merck and LG Chem Einstein License Agreement The company holds an exclusive worldwide license from Albert Einstein College of Medicine for its core technology platform, involving royalty payments, annual maintenance fees, and milestone payments - Exclusive worldwide license from Einstein for core technology platform, with rights to sublicense[162][163] - Obligations include royalties, escalating annual maintenance fees (creditable against royalties), and significant milestone payments[163] - In compliance with obligations as of March 31, 2021[164] Collaboration Agreement with Merck The Merck Collaboration Agreement focuses on researching and developing Immuno-STAT drug candidates for autoimmune diseases, with Merck paying a $2.5 million upfront fee and the company eligible for up to $371 million in milestones plus tiered royalties - Collaboration with Merck for Immuno-STAT drug candidates targeting autoimmune disease indications[168] - Received $2.5 million nonrefundable upfront payment[170] - Eligible for up to $101.0 million in R&D milestones, $120.0 million in regulatory milestones, and $150.0 million in commercial milestones, plus tiered royalties[170] Collaboration Agreement with LG Chem The LG Chem Collaboration Agreement grants exclusive rights for Immuno-STATs in oncology in certain Asian countries, with the company receiving a $5.0 million upfront payment and equity investment, and eligible for up to $400.0 million in milestones plus tiered royalties - Collaboration with LG Chem for Immuno-STATs in oncology, granting exclusive license in certain Asian countries[172][174] - Received $5.0 million non-refundable upfront payment and a $5.0 million equity investment[175] - Eligible for up to $400.0 million in research, development, regulatory, and sales milestones, plus tiered single-digit royalties[175] - LG Chem's option for an additional Immuno-STAT oncology target expired on April 30, 2021[174] Results of Operations This section analyzes the company's financial performance for Q1 2021 compared to 2020, focusing on collaboration revenue, operating expenses, and interest income Collaboration Revenue Collaboration revenue increased to $1.553 million for Q1 2021 from $900,000 for Q1 2020, entirely from the Merck and LG Chem agreements Collaboration Revenue (in thousands) | Period | Collaboration Revenue | | :----------------------------------- | :-------------------- | | Three Months Ended March 31, 2021 | $1,553 | | Three Months Ended March 31, 2020 | $900 | Operating Expenses Operating expenses include general and administrative and research and development costs, along with non-cash components, and are expected to increase with expanded R&D activities - Operating expenses include general and administrative, research and development, and non-cash components (depreciation, stock-based compensation)[180] - Expected to increase with expanded R&D activities and personnel[181][182] General and Administrative General and administrative expenses increased by $266,000 to $4.255 million for Q1 2021, primarily due to higher stock-based compensation and legal fees, partially offset by reduced travel General and Administrative Expenses (in thousands) | Period | General and Administrative Expenses | | :----------------------------------- | :-------------------------------- | | Three Months Ended March 31, 2021 | $4,255 | | Three Months Ended March 31, 2020 | $3,989 | - Increase primarily due to stock-based compensation ($1.114M vs $1.017M) and legal fees, offset by decreased travel due to COVID-19[187][188] Research and Development Research and development expenses slightly decreased by $90,000 to $9.816 million for Q1 2021, mainly due to lower laboratory and drug manufacturing costs, offset by increased stock-based compensation Research and Development Expenses (in thousands) | Period | Research and Development Expenses | | :----------------------------------- | :-------------------------------- | | Three Months Ended March 31, 2021 | $9,816 | | Three Months Ended March 31, 2020 | $9,906 | - Decrease primarily due to lower laboratory and drug substance manufacturing costs and clinical expenses, and reduced travel, offset by increased stock-based compensation ($1.322M vs $2.158M)[189][190] Interest Income Interest income decreased significantly to $13,000 for Q1 2021 from $177,000 for Q1 2020, due to reduced investment in cash equivalents and marketable securities Interest Income (in thousands) | Period | Interest Income | | :----------------------------------- | :-------------- | | Three Months Ended March 31, 2021 | $13 | | Three Months Ended March 31, 2020 | $177 | Liquidity and Capital Resources The company's liquidity is primarily from equity offerings and collaboration agreements, with current cash sufficient for 12 months, but additional capital will be needed for future growth - Liquidity primarily from equity offerings and collaboration agreements[192] - Unrestricted cash, cash equivalents, and marketable securities totaled $73.257 million as of March 31, 2021, sufficient for at least the next 12 months[192][207] - Additional capital or indebtedness will be required to fund future operations and growth[208] Cash Flows This section summarizes net cash flows from operating, investing, and financing activities, showing a net decrease in cash, cash equivalents, and restricted cash for Q1 2021 Summary of Cash Flows (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(11,795) | $(10,944) | | Net cash provided by (used in) investing activities | $9,352 | $(9,950) | | Net cash provided by financing activities | $834 | $36 | | Net decrease in cash, cash equivalents, and restricted cash | $(1,609) | $(20,858) | Operating Activities Net cash used in operating activities increased by $851,000 to $11.795 million for Q1 2021, primarily due to increased deposits for laboratory and drug substance manufacturing costs Net Cash Used in Operating Activities (in thousands) | Period | Net Cash Used in Operating Activities | | :----------------------------------- | :------------------------------------ | | Three Months Ended March 31, 2021 | $(11,795) | | Three Months Ended March 31, 2020 | $(10,944) | - Increase in cash used primarily due to increased deposits for laboratory and drug substance manufacturing costs[201] Investing Activities Cash provided by investing activities significantly increased by $19.302 million to $9.352 million for Q1 2021, primarily due to the redemption of all short-term marketable securities Net Cash (Used in) Provided by Investing Activities (in thousands) | Period | Net Cash (Used in) Provided by Investing Activities | | :----------------------------------- | :------------------------------------------ | | Three Months Ended March 31, 2021 | $9,352 | | Three Months Ended March 31, 2020 | $(9,950) | - Increase in cash provided primarily due to redemption of $10.000 million in short-term investments, offset by $648,000 in property and equipment purchases[204] Financing Activities Cash provided by financing activities increased by $798,000 to $834,000 for Q1 2021, mainly from proceeds from the exercise of common stock options Net Cash Provided by Financing Activities (in thousands) | Period | Net Cash Provided by Financing Activities | | :----------------------------------- | :------------------------------------ | | Three Months Ended March 31, 2021 | $834 | | Three Months Ended March 31, 2020 | $36 | - Increase primarily due to $919,000 in proceeds from the exercise of common stock options, offset by $85,000 for restricted stock buy-back[205] Funding Requirements The company anticipates increased expenses for R&D, clinical trials, regulatory approvals, and commercialization, requiring significant additional capital through various financing options - Expenses expected to increase due to R&D, clinical trials, regulatory approvals, and commercialization[206] - Future funding needs may be met through equity offerings (potential dilution), debt financings (security interests, debt service), collaborations (relinquish rights), or grants[211] Contractual Obligations and Commitments No material changes to contractual obligations and commitments were reported during Q1 2021 compared to December 31, 2020 - No material changes to contractual obligations and commitments during Q1 2021[213] Off-balance Sheet Arrangements As of March 31, 2021, the company had no off-balance sheet arrangements - No off-balance sheet arrangements as of March 31, 2021[214] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Cue Biopharma is not required to provide the information typically required by this item Item 4. Controls and Procedures This item addresses the effectiveness of the company's disclosure controls and procedures and internal control over financial reporting Disclosure Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021 - Disclosure controls and procedures were effective as of March 31, 2021[219] Inherent Limitations on Effectiveness of Controls Management acknowledges that control systems provide only reasonable assurance and may not prevent all errors or fraud due to inherent limitations - Control systems provide only reasonable, not absolute, assurance and may not prevent all errors or fraud due to inherent limitations[220] Changes in Internal Control over Financial Reporting There were no material changes in the company's internal control over financial reporting during the three months ended March 31, 2021 - No material changes in internal control over financial reporting during Q1 2021[221] PART II. OTHER INFORMATION This section provides additional information not covered in Part I, including legal proceedings, risk factors, equity sales, defaults, mine safety disclosures, and a list of exhibits Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings - Not a party to any material legal proceedings as of March 31, 2021[223] Item 1A. Risk Factors The company operates in a rapidly changing environment with various risks that could materially affect its business, financial condition, or results - Business is subject to significant risks in a rapidly changing environment[224] - Refer to the Annual Report on Form 10-K for a comprehensive list of risk factors[224] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period Item 3. Defaults Upon Senior Securities No defaults upon senior securities were reported for the period Item 4. Mine Safety Disclosures This item is not applicable to the company Item 5. Other Information No other information was reported for the period Item 6. Exhibits This item lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications and XBRL documents