Alaunos Therapeutics(TCRT) - 2021 Q3 - Quarterly Report

Form 10-Q Filing Information This section provides key filing details for the Quarterly Report on Form 10-Q, identifying the registrant and its filing status - The document is a Quarterly Report on Form 10-Q for the period ended September 30, 2021[2] - The registrant is ZIOPHARM Oncology, Inc., with common stock trading under the symbol ZIOP on The Nasdaq Stock Market LLC[2][4] - The company is classified as a Large Accelerated Filer[5] Forward-Looking Statements This section highlights the inherent risks and uncertainties associated with forward-looking statements in the report, which may cause actual results to differ materially - This report contains forward-looking statements based on current beliefs and expectations, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[6] - Key forward-looking statements include those regarding the ability to raise capital, estimates of expenses, timing and results of preclinical and clinical trials, regulatory approvals, intellectual property, and the impact of the COVID-19 pandemic[7] Summary of Selected Business Risks This section outlines critical business risks, including health epidemics, funding requirements, novel therapy development challenges, and internal control weaknesses - The company's business, operations, and clinical development plans are vulnerable to health epidemics, including the COVID-19 pandemic, affecting manufacturing, clinical trials, and third-party activities[14] - Substantial additional financial resources are required for ongoing product candidate development; failure to obtain these resources may lead to delays or discontinuation of planned operations[14] - The company's non-viral TCR T-cell therapy is a new approach to cancer treatment, subject to significant development challenges and supported by limited clinical data[14] - A material weakness in internal controls over financial reporting was identified as of June 30, 2021, and remained unremediated as of September 30, 2021[14] Part I - Financial Information This part encompasses the company's unaudited interim financial statements and management's discussion and analysis of financial condition and results of operations Financial Statements This section presents the unaudited interim financial statements, including the balance sheets, statements of operations, statements of changes in stockholders' equity, and statements of cash flows, along with detailed notes explaining the company's business, significant accounting policies, debt, equity, and various commitments and contingencies Balance Sheets This section presents the unaudited balance sheets, detailing assets, liabilities, and stockholders' equity as of September 30, 2021, and December 31, 2020 Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Change (vs. Dec 31, 2020) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $91,725 | $115,069 | -$23,344 | | Total current assets | $96,554 | $130,589 | -$34,035 | | Total assets | $113,762 | $146,345 | -$32,583 | | Total current liabilities | $28,173 | $18,368 | +$9,805 | | Total liabilities | $45,055 | $22,363 | +$22,692 | | Total stockholders' equity | $68,707 | $123,982 | -$55,275 | Statements of Operations This section provides the unaudited statements of operations, outlining revenues, expenses, and net loss for the three and nine months ended September 30, 2021 and 2020 Statements of Operations Highlights (in thousands) | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | Change (YoY) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | | Collaboration revenue | $398 | $0 | +$398 | $398 | $0 | +$398 | | Research and development | $14,521 | $13,968 | +$553 | $41,427 | $38,725 | +$2,702 | | General and administrative | $8,173 | $6,353 | +$1,820 | $25,469 | $18,862 | +$6,607 | | Total operating expenses | $22,694 | $20,321 | +$2,373 | $66,896 | $57,587 | +$9,309 | | Loss from operations | $(22,296) | $(20,321) | -$(1,975) | $(66,498) | $(57,587) | -$(8,911) | | Net loss | $(22,733) | $(20,315) | -$(2,418) | $(66,957) | $(57,204) | -$(9,753) | | Basic and diluted net loss per share | $(0.11) | $(0.10) | -$(0.01) | $(0.31) | $(0.27) | -$(0.04) | Statement of Changes in Stockholders' Equity This section details changes in stockholders' equity, including common stock, additional paid-in capital, and accumulated deficit, for the specified periods Statement of Changes in Stockholders' Equity Highlights (in thousands) | Metric | Balance at Dec 31, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 Changes (in thousands) | Balance at Sep 30, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Common Stock (Shares) | 214,591,906 | +1,553,898 | 216,145,804 | | Common Stock (Amount) | $215 | +$1 | $216 | | Additional Paid-In Capital | $887,868 | +$11,681 | $899,549 | | Accumulated Deficit | $(764,101) | -$(66,957) | $(831,058) | | Total Stockholders' Equity | $123,982 | -$(55,275) | $68,707 | Statements of Cash Flows This section presents the unaudited statements of cash flows, categorizing cash activities into operating, investing, and financing for the nine months ended September 30, 2021 and 2020 Cash Flow Activities (in thousands) | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(46,342) | $(39,977) | $(6,365) | | Net cash used in investing activities | $(2,964) | $(6,012) | $3,048 | | Net cash provided by financing activities | $25,962 | $101,719 | $(75,757) | | Net increase (decrease) in cash and cash equivalents | $(23,344) | $55,730 | $(79,074) | | Cash and cash equivalents, end of period | $91,725 | $135,471 | $(43,746) | Notes to Financial Statements This section provides detailed explanatory notes supporting the unaudited interim financial statements, covering business overview, accounting policies, and specific financial items Business Overview This note describes the company's core business as a clinical-stage biopharmaceutical firm, its financial history, and current strategic focus - ZIOPHARM Oncology, Inc. is a clinical-stage biopharmaceutical company focused on developing next-generation immuno-oncology platforms, specifically TCR T-cell therapies for solid tumors using non-viral 'Sleeping Beauty' genetic engineering[34][35] - The company has operated at a loss since its inception in 2003, with an accumulated deficit of approximately $831.1 million as of September 30, 2021[37] - Cash and cash equivalents were approximately $91.7 million as of September 30, 2021, anticipated to fund operations into the second quarter of 2023[37] - The existing Controlled IL-12 clinical program for recurrent glioblastoma multiforme is being wound down, with the company seeking a partner for this program[36] Financings This note details the company's financing activities, including recent term loan agreements and equity offerings, and their impact on capital resources - In August 2021, the company entered into a Term Loan Agreement for an initial $25.0 million, with an additional $25.0 million available if certain funding and clinical milestones are met by August 31, 2022[44] - A February 2020 public offering raised approximately $84.8 million (net) from the sale of 27,826,086 shares, plus an additional $3.9 million (net) from an underwriters' option[45][46][47] - Under an At-the-Market (ATM) facility, the company sold 2,814,673 shares for approximately $13.0 million (net) during the nine months ended September 30, 2020, but had no sales in the same period of 2021[49][50] Summary of Significant Accounting Policies This note outlines the company's significant accounting policies, noting any recent changes and their impact on financial reporting - No material changes in accounting policies since the Annual Report, except for the adoption of ASU 2019-12 (Income Taxes) effective January 1, 2021, with no material impact[51][52] Debt This note provides details on the company's debt obligations, including the term loan agreement, its terms, and associated warrants Debt Summary (in thousands) | Metric | September 30, 2021 (in thousands) | | :-------------------------- | :--------------------------------------- | | Term Loan Agreement | $25,078 | | Unamortized discount on Term Loan Agreement | $(867) | | Total debt | $24,211 | | Less: current portion of long-term debt | $(12,037) | | Long-term debt | $12,174 | - On August 6, 2021, the company secured a $50.0 million Term Loan Agreement with SVB, with an initial $25.0 million drawn. Loans are secured by company assets (excluding intellectual property)[53] - Principal repayments for the initial tranche begin April 1, 2022, with a maturity of March 1, 2023, extendable to August 1, 2025, if an Equity Milestone is achieved[55] - Warrants to purchase 432,844 shares of common stock at $2.22 per share were issued to SVB in connection with the loan, recorded at a fair value of $0.8 million[61] Fair Value Measurements This note explains the company's fair value measurements for financial instruments, primarily cash equivalents, and their classification within the fair value hierarchy - The company classifies cash equivalents as Level 1 assets, representing deposits in short-term United States treasury money market mutual funds quoted in an active market[66][67] Fair Value Measurements (in thousands) | Asset | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Fair Value Hierarchy (Level) | | :---------------- | :-------------------------- | :-------------------------- | :--------------------------- | | Cash equivalents | $84,891 | $75,990 | Level 1 | Net Loss per Share This note details the calculation of basic and diluted net loss per share, including the treatment of potentially dilutive securities - Potentially dilutive shares (stock options, restricted stock, warrants) were excluded from diluted net loss per share calculation for all periods presented as their inclusion would be anti-dilutive[68] Potentially Dilutive Shares | Potentially Dilutive Shares | Sep 30, 2021 | Sep 30, 2020 | | :-------------------------- | :----------- | :----------- | | Stock options | 11,072,894 | 6,572,191 | | Inducement stock options | 97,500 | 863,333 | | Unvested restricted stock | 1,510,655 | 1,289,389 | | Warrants | 22,705,571 | 22,272,727 | | Total | 35,386,620 | 30,997,640 | Related Party Transactions This note describes the company's agreements and financial interactions with related parties, including collaboration partners and joint ventures - The company has collaboration agreements with PGEN Therapeutics, MD Anderson Cancer Center, and Vineti Inc.[69][70][72] - The joint venture Eden BioCell with TriArm Therapeutics was mutually agreed to be dissolved in September 2021[75] - As of September 30, 2021, the net balance of cash resources at MD Anderson available to offset expenses was zero, with $1.1 million in accounts receivable due from MD Anderson and $2.1 million in accrued expenses due to MD Anderson[71] Commitments and Contingencies This note outlines the company's contractual commitments and potential contingent liabilities, such as license agreements and development cost reimbursements - The company holds exclusive worldwide rights to research, develop, and commercialize IL-12, CD19 CAR, and TCR products for cancer under a license agreement with PGEN, involving an annual license fee of $0.1 million and potential milestone payments up to $52.5 million per program, plus tiered royalties[77][79][80] - Under the 2019 Research and Development Agreement with MD Anderson, the company will reimburse up to $20.0 million for development costs incurred after January 1, 2021, and pay low-single digit royalties on net sales of TCR products, along with potential benchmark payments totaling $36.5 million[91] - The company holds an exclusive worldwide license from the NCI for certain intellectual property related to TCR T-cell therapy products, requiring minimum annual royalties of $0.3 million (reducible to $0.1 million) and potential benchmark payments of $4.3 million[93][96][98] Leases This note provides information on the company's operating lease agreements for office and lab spaces, including future payment obligations - The company extended its Boston office lease through August 2026 and has multiple lease agreements for office and lab space in Houston at MD Anderson, with the latest extension through April 2028[111][113][114] Lease Expense (in thousands) | Lease Expense (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost | $352 | $267 | $1,113 | $768 | - Future minimum operating lease payments total $6.747 million, with $1.097 million due in less than 1 year as of September 30, 2021[118] Stock-Based Compensation This note details the company's stock-based compensation plans, including expense recognition, option grants, and unrecognized compensation costs Stock-Based Compensation Expense (in thousands) | Expense (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Research and development | $535 | $522 | $2,115 | $1,587 | | General and administrative | $1,836 | $1,270 | $7,742 | $3,806 | | Total stock-based compensation expense | $2,371 | $1,792 | $9,857 | $5,393 | - Total unrecognized compensation costs related to unvested stock options amounted to $8.0 million (weighted-average period of 2.03 years) and for unvested restricted stock amounted to $2.4 million (weighted-average period of 2.19 years) as of September 30, 2021[123][124] - The company granted 7,150,438 stock options during the nine months ended September 30, 2021, with a weighted-average grant date fair value of $1.91 per share[119] Warrants This note describes the various warrants issued by the company, their terms, and their accounting treatment - In August 2021, the company issued warrants to SVB to purchase 432,844 shares of common stock at $2.22 per share, valued at $0.8 million, in connection with the Term Loan Agreement[132] - In 2019, the company issued 2019 warrants to purchase up to 17,803,031 additional shares of common stock at an exercise price of $7.00 as an inducement for 2018 warrant exercises, resulting in a $60.8 million non-cash charge[130] - Warrants to purchase 3,333,333 shares were issued to MD Anderson in connection with the 2019 Agreement, with an initial exercise price of $0.001 per share and a grant date fair value of $14.5 million, vesting upon the occurrence of certain clinical milestones[131] Restructuring This note details the company's recent strategic reduction in force, including the number of employees affected and associated severance expenses - On September 27, 2021, the company announced a strategic reduction in force, notifying approximately 60 full-time employees of termination to lower costs and realign business strategy[133] Severance Expense (in thousands) | Severance Expense (in thousands) | September 30, 2021 | | :-------------------------- | :------------------- | | Research and Development | $2,248 | | General and Administrative | $1,289 | | Total Severance Expense | $3,537 | Joint Venture This note discusses the dissolution of the Eden BioCell joint venture and its prior activities in CAR-T cell therapy development - The joint venture Eden BioCell with TriArm Therapeutics, established in 2018 for CAR-T therapies in Greater China, was mutually agreed to be dissolved in September 2021[135][144] - Eden BioCell began treating patients in a clinical trial with the investigational CD19 RPM CAR-T cell therapy in Taiwan in March 2021, with two patients treated and no serious adverse safety events reported[142] - Based on laboratory data from the first two patients, further process development work is required for the CD19 RPM CAR-T cell therapy[143] Subsequent Events This note confirms that no material events occurred after the balance sheet date that would require adjustment or disclosure - No material subsequent events impacting the financial statements or disclosures were identified from the balance sheet date through the date of issuance[145] Management's Discussion and Analysis This section provides management's perspective on the company's financial condition and results of operations, highlighting key business developments, financial performance, liquidity, and capital resources, with a focus on the TCR T-cell therapy program and recent restructuring efforts Overview This section provides a high-level summary of the company's business, strategic focus on TCR T-cell therapies, and historical financial performance - The company is a clinical-stage biopharmaceutical company focused on developing next-generation immuno-oncology platforms, specifically TCR T-cell therapies for solid tumors using the 'Sleeping Beauty' non-viral genetic engineering system[152] - The company has incurred significant net losses since inception, with a net loss of $67.0 million for the nine months ended September 30, 2021, and an accumulated deficit of $831.1 million[155] - Significant operating expenditures and net losses are expected to continue, with substantial increases in expenses anticipated for clinical trials, regulatory approvals, internal systems, personnel, and manufacturing scale-up[155] Recent Developments This section highlights recent strategic actions, including a workforce restructuring and the ongoing impact of the COVID-19 pandemic on operations - A restructuring announced on September 27, 2021, eliminated approximately 60 positions, with anticipated cost savings extending the cash runway into the second quarter of 2023[157] - The ongoing COVID-19 global pandemic continues to present significant health and economic challenges, potentially impacting productivity, supply chains, and clinical programs and timelines[158] Clinical, Manufacturing, Scientific, and Regulatory Developments This section details progress in clinical trials, manufacturing capabilities, and regulatory approvals, alongside updates on strategic program prioritization - The FDA cleared the company-sponsored IND application for a Phase 1/2 clinical trial evaluating TCRs from its library for various solid tumors, with patient dosing anticipated in the first half of 2022[159] - The company has built and will open its own cGMP clinical production unit (CPU), with commissioning and aseptic process validation completed in Q2 2021, and engineering/process qualification runs completed in October[160][161] - The Eden BioCell joint venture with TriArm Therapeutics was mutually agreed to be dissolved in September 2021 to prioritize efforts and capital on the TCR-T program[166] - The existing Controlled IL-12 clinical program for recurrent glioblastoma multiforme is being wound down, and the company is seeking a partner for this technology[167] Financial Overview This section provides a comprehensive review of the company's financial performance, including results of operations, liquidity, and capital resources Overview of Results of Operations This section summarizes the key components of the company's financial performance, including revenue and expense trends for the reporting periods License Income This section details the collaboration revenue generated from licensing agreements for the reported periods Collaboration Revenue (in thousands) | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | Change (YoY) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | | Collaboration revenue | $398 | $0 | +$398 | $398 | $0 | +$398 | Research and Development Expenses This section analyzes changes in research and development expenses, attributing fluctuations to restructuring charges and program costs Research and Development Expenses (in thousands) | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | Change (YoY) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | | Research and development | $14,521 | $13,968 | +$553 | $41,427 | $38,725 | +$2,702 | - Q3 2021 R&D expenses increased by $0.6 million YoY, primarily due to a $2.2 million charge recognized during the third quarter related to the strategic restructuring event, partially offset by $1.6 million in reduced trial and consulting costs[169] - YTD Q3 2021 R&D expenses increased by $2.7 million YoY, driven by a $2.2 million restructuring charge, $4.8 million in salary and employee-related expenses, and $1.5 million in facilities and other related expenses, offset by $5.8 million in reduced program and consulting costs[170] - Direct external expenses for the TCR Library program were $4.7 million for the three months ended September 30, 2021, and $11.7 million since inception[174] General and Administrative Expenses This section examines the trends in general and administrative expenses, highlighting the impact of severance charges and consulting costs General and Administrative Expenses (in thousands) | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | Change (YoY) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------------- | | General and administrative | $8,173 | $6,353 | +$1,820 | $25,469 | $18,862 | +$6,607 | - Q3 2021 G&A expenses increased by $1.8 million YoY, mainly due to $1.3 million in employee-related severance charges from the September 2021 strategic reduction in force and an increase of $0.8 million related to consulting service costs, partially offset by a $0.3 million decrease in salary and employee-related costs[178] - YTD Q3 2021 G&A expenses increased by $6.6 million YoY, primarily due to $1.3 million in employee-related severance charges, $4.2 million related to employee-related expenses, and $1.1 million related to consulting service costs[179] Other Income (Expense), Net This section reviews other non-operating income and expenses, primarily focusing on interest expense from the term loan Other Income (Expense), Net (in thousands) | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | Change (YoY) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Interest expense, net | $(444) | $7 | $(451) | $(444) | $412 | $(856) | | Other expense, net | $7 | $(1) | $8 | $(15) | $(29) | $14 | | Total Other income (expense), net | $(437) | $6 | $(443) | $(459) | $383 | $(842) | - The increase in other expense, net, for both the three and nine months ended September 30, 2021, was primarily due to interest expense associated with the Term Loan with Silicon Valley Bank[180] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, including funding sources and requirements Source of Liquidity This section identifies the primary means by which the company has financed its operations, including equity offerings and debt facilities - The company has financed operations primarily through public equity offerings, private placements, term debt, and collaborations, raising an aggregate of $739.1 million from equity issuances and the SVB term loan through September 30, 2021[182] - An initial $25.0 million term loan was funded in August 2021 from Silicon Valley Bank, with an additional $25.0 million available upon meeting certain funding and clinical milestones[183] - No shares were sold under the At-the-Market (ATM) facility during the three or nine months ended September 30, 2021[187] Funding Requirements This section outlines the company's anticipated capital needs and the potential challenges in securing additional financing to support future operations - Cash resources are anticipated to fund operations into the second quarter of 2023, with no committed sources of additional capital at this time[188] - The company's ability to raise additional capital may be hindered by the unpredictability of capital markets and the ongoing COVID-19 pandemic[188] - If adequate additional funds are not available, the company may be forced to delay, reduce, or eliminate research and development programs or product commercialization efforts[188] Cash Flows This section analyzes the company's cash inflows and outflows from operating, investing, and financing activities for the reported periods Cash Flow Activities (in thousands) | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | Change (YoY) | | :--------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(46,342) | $(39,977) | $(6,365) | | Net cash used in investing activities | $(2,964) | $(6,012) | $3,048 | | Net cash provided by financing activities | $25,962 | $101,719 | $(75,757) | | Net increase (decrease) in cash and cash equivalents | $(23,344) | $55,730 | $(79,074) | - Net cash used in operating activities increased by $6.365 million YoY, primarily due to a net loss of $66.0 million, partially offset by changes in receivables, prepaid expenses, and stock-based compensation[190] - Net cash used in investing activities decreased by $3.048 million YoY, reflecting reduced cash used for expanding internal cell therapy capabilities[191] - Net cash provided by financing activities decreased significantly by $75.757 million YoY, mainly due to lower proceeds from equity offerings in 2021 compared to 2020, partially offset by the new Term Loan[192] Operating Capital and Capital Expenditure Requirements This section discusses the company's ongoing need for working capital and capital expenditures to support its research, development, and operational activities - The company anticipates continued losses and significant cash requirements for clinical trials, regulatory approvals, manufacturing, and intellectual property protection[193][194] - Working capital as of September 30, 2021, was $68.5 million, a decrease from $112.2 million at December 31, 2020[195] - The realignment of resources to the Sleeping Beauty program and the strategic reduction in force are expected to reduce cash expenditures[195] Contractual Obligations This section details the company's significant contractual commitments, including operating leases, royalty fees, and term loan repayments Contractual Obligations (in thousands) | Obligation (in thousands) | Total | Less than 1 year | 2 - 3 years | 4 - 5 years | More than 5 years | | :-------------------------- | :---- | :--------------- | :---------- | :---------- | :---------------- | | Operating leases | $6,747 | $1,097 | $2,281 | $2,391 | $978 | | Royalty and license fees | $3,277 | $350 | $700 | $450 | $1,777 | | Term loan | $28,481 | $14,258 | $14,223 | $0 | $0 | | Total | $38,505 | $15,705 | $17,204 | $2,841 | $2,755 | - The company's contractual obligations include operating leases for corporate headquarters and lab/office space, royalty and license fees (e.g., $0.1 million annual fee to PGEN), and term loan repayments[197][198][199][200] Off-balance Sheet Arrangements This section confirms the absence of any material off-balance sheet arrangements that could significantly impact the company's financial position - The company did not have any material off-balance sheet arrangements during the periods presented[201] Critical Accounting Policies and Estimates This section reiterates the company's critical accounting policies and estimates, consistent with those disclosed in the annual report - Critical accounting policies and estimates remain consistent with those identified in the Annual Report, primarily relating to clinical trial expenses, collaboration agreements, fair value measurements for stock-based compensation, and income taxes[202] Quantitative and Qualitative Disclosures about Market Risk The company's market risk exposure is limited to its cash and cash equivalents, which are managed to preserve capital and maximize income with minimal interest rate risk. Currency fluctuations are not expected to have a material impact due to the absence of clinical studies outside the U.S - Market risk exposure is limited to cash, which is held in interest-bearing bank accounts, United States treasuries, and other government-backed investments, subject to minimal interest rate risk[203] - Currency fluctuations are not expected to materially impact financial position, results of operations, or cash flows, as there are currently no clinical studies or clinical trials taking place outside of the United States[204] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, at a reasonable assurance level, despite an unremediated material weakness in internal controls over financial reporting related to insufficient accounting resources for timely account reconciliation and review. Remediation efforts are underway Evaluation of Disclosure Controls and Procedures This section presents management's conclusion on the effectiveness of the company's disclosure controls and procedures as of the reporting date - Management, with the participation of its principal executive officer and principal accounting officer, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2021[205] Material Weakness This section identifies a material weakness in internal controls over financial reporting and clarifies its impact on the financial statements - A material weakness in internal controls over financial reporting, related to the lack of sufficient accounting resources for timely account reconciliation and review, was identified as of June 30, 2021, and remained unremediated as of September 30, 2021[206] - This material weakness had no impact on any amounts reported in the financial statements for the quarter ended September 30, 2021, or for any previous period[206] Remediation Efforts to Address Material Weakness This section outlines the company's action plans and ongoing efforts to remediate the identified material weakness in internal controls - Remediation action plans, including reassessing the design and operation of internal controls over the financial statement close process and realigning accounting staffing levels, have been identified and implemented[207] - The effectiveness of these implemented internal controls will be tested beginning in the fourth quarter of 2021[207] Changes in Internal Control over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting during the quarter - Other than the disclosed remediation actions for the material weakness, there were no material changes in internal control over financial reporting during the quarter ended September 30, 2021[209] Part II - Other Information This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and other significant corporate information Legal Proceedings The company may periodically face legal proceedings and claims in the ordinary course of business, but as of September 30, 2021, management believes there are no material matters likely to have a material adverse effect on its financial position, results of operations, or cash flows - The company may periodically become subject to legal proceedings and claims arising in connection with ongoing business activities, with uncertain outcomes that could materially affect financial results[210] - As of September 30, 2021, management's opinion is that there are no material matters likely to result in a material adverse effect on the company's financial position, results of operations, or cash flows[211] Risk Factors This section details significant risks that could materially affect the company's business and financial results, including those related to health epidemics (like COVID-19), the need for substantial additional financing, challenges in developing novel cancer treatments, intense competition, reliance on third-party licenses, and the volatility of its stock price Risks Related to Our Business This section outlines key business risks, including the impact of health epidemics, funding needs, novel therapy development, internal control weaknesses, and management transitions - The COVID-19 pandemic could adversely affect business operations, clinical development plans, supply chain, and global financial markets, potentially impacting liquidity and the value of common stock[213][215][219] - The company will require substantial additional financial resources to fund operations beyond Q2 2023; inability to obtain financing may force delays or discontinuation of planned operations[221][222] - Developing and commercializing non-viral adoptive cellular therapies, such as TCR-T cell therapies, is a new approach to cancer treatment subject to significant challenges, including regulatory approval, manufacturing, and market acceptance[235] - A material weakness in internal controls over financial reporting was identified as of June 30, 2021, and remained unremediated as of September 30, 2021, posing risks to financial reporting accuracy and potentially affecting the business and stock price[230][231] - Recent senior management transitions (Interim CEO, Interim CFO, new CEO) and a September 2021 restructuring (eliminating approximately 60 positions) could disrupt business, lead to loss of institutional knowledge, and affect employee morale, potentially impacting operations and strategy implementation[265][268] Risks Related to Clinical Testing, Regulatory Approval, and Manufacturing This section details risks associated with clinical trials, regulatory approvals, manufacturing complexities, and supply chain dependencies for product candidates - Failure to obtain necessary U.S. or worldwide regulatory approvals for any product candidate would severely undermine the business, as the approval process is long, complex, costly, and has no guarantee of success[273][274] - Product candidates are in various stages of clinical trials, which are very expensive and time-consuming; any failure or delay in completing these trials could harm the business and delay revenue generation[276][277] - Product candidates may cause undesirable side effects or have other properties that could delay or prevent regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following any potential marketing approval[278][280] - Reliance on sole or limited source vendors for reagents, specialized equipment, and materials for cell-based therapy manufacturing exposes the company to risks of supply disruption, quality issues, and higher product costs[281][282] - The novel technology of immuno-oncology product candidates makes predicting development time and cost difficult, and regulatory approval processes are complex, frequently changing, and potentially longer for cell therapy products[287][288][289] Risks Related to Commercialization This section addresses challenges in commercializing product candidates, including marketing capabilities, market competition, physician acceptance, reimbursement, and healthcare reforms - The company currently lacks internal marketing, sales, and distribution capabilities and must either build them or secure third-party agreements to successfully commercialize product candidates[299] - The market for product candidates is highly competitive, with numerous pharmaceutical and biotechnology companies having greater resources and experience, potentially limiting market share and product revenues[302][303] - Physician and patient acceptance of product candidates is crucial for revenue generation, depending on perceived safety, effectiveness, cost-effectiveness, and reimbursement availability[305] - Obtaining coverage and adequate reimbursement from third-party payors is critical for commercialization, but is difficult to predict for novel gene and cell therapies and subject to cost-control measures[306][308][310] - Healthcare legislative reforms, including the ACA and initiatives to reduce drug pricing, could adversely affect the business and profitability by imposing more rigorous coverage criteria and downward pressure on prices[315][316][319][322] Risks Related to Intellectual Property This section highlights risks concerning patent protection, trade secrets, potential infringement claims, and compliance with license agreements for intellectual property - The company's success depends on obtaining and maintaining patent protection for its products and technologies, which is highly uncertain due to complex legal and factual questions, and potential challenges to patents[332][334][335] - Reliance on trade secret protection and confidentiality agreements for proprietary know-how may not provide adequate protection against unauthorized use or disclosure, potentially harming the business and competitive position[341] - Third-party claims of intellectual property infringement could lead to costly litigation, substantial monetary damages, or prevent the development and commercialization of products[342][347] - Failure to comply with procedural requirements for patent maintenance or any breach of license agreements could result in loss of patent rights or termination of licenses, adversely affecting the business[350][352] Other Risks Related to Our Company This section covers additional company-specific risks, such as stock price volatility, anti-takeover provisions, dividend policy, NOL limitations, and significant stockholder control - The market price for the company's common stock is highly volatile and can fluctuate significantly in response to various factors, including clinical trial results, regulatory approvals, and general market conditions[358][359] - Anti-takeover provisions in charter documents and Delaware law may make an acquisition of the company more difficult, potentially preventing beneficial changes for stockholders[361] - The company has never paid dividends on its common stock and does not anticipate doing so, meaning investors will only realize income from stock sales[362] - The ability to use net operating loss carryforwards (NOLs) and research and development tax credits (R&D credits) may be limited by 'ownership changes' under tax laws, potentially increasing future tax payments[363][364] - Principal stockholders, executive officers, and directors collectively own 51.4% of outstanding common stock, giving them substantial control over corporate decisions and potentially harming the market price[369] Risks Related to Indebtedness This section details risks associated with the company's debt, including servicing requirements, potential defaults, and restrictive covenants - The company has incurred indebtedness through the SVB Facility, with future funding dependent on performance and ability to raise additional capital; failure to meet milestones could reduce liquidity[372] - Servicing the debt will require a significant amount of cash, and insufficient funds or inability to obtain additional financing could lead to an event of default, acceleration of payments, and enforcement of security interests in assets[373][374] - Current and future debt financing may impose restrictive covenants on business operations, limiting corporate actions, acquisitions, and the cash available for investment in research and development[375] Unregistered Sale of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds occurred during the period[377] Defaults upon Senior Securities This item is not applicable for the reporting period - This item is not applicable[378] Mine Safety Disclosures This item is not applicable for the reporting period - This item is not applicable[379] Other Information This section details recent changes in the company's executive leadership, including the termination of the interim CFO's consulting agreement, the designation of the CEO as principal financial officer, the extension of the principal accounting officer's employment, and the appointment of a new principal accounting officer Termination of Interim CFO Consulting Agreement This section reports the termination of the interim Chief Financial Officer's consulting agreement, effective November 4, 2021 - On November 4, 2021, the consulting agreement with Danforth Advisors, LLC, for interim Chief Financial Officer Tim Cunningham's services, was terminated effective immediately[380] - The termination was not the result of any dispute or disagreement with the company or its Board of Directors[380] Designation of Principal Financial Officer This section announces the designation of the Chief Executive Officer as the principal financial officer, effective immediately - Effective immediately, Kevin S. Boyle, Sr., the company's Chief Executive Officer, was designated as its principal financial officer in addition to his role as principal executive officer, with no additional compensation[381] Extension of Principal Accounting Officer Employment This section details the extension of the Principal Accounting Officer's employment, with a final departure date of November 9, 2021 - Kevin G. Lafond, Senior Vice President Finance, Chief Accounting Officer, and Treasurer, had his employment extended, with his last day with the company set for November 9, 2021, in connection with the company's workforce reduction[382] Appointment of Principal Accounting Officer This section announces the appointment of Michael Wong as the new principal accounting officer, effective November 9, 2021 - Michael Wong, Vice President, Finance, was designated to serve as the principal accounting officer effective November 9, 2021[383] - Mr. Wong previously served as Director, Technical Accounting at McDermott International, Ltd., and Audit Senior Manager at Ernst & Young LLP, and is a licensed CPA in Texas and Canada[384] Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents, loan agreements, employment contracts, and certifications - The exhibits include the Amended and Restated Certificate of Incorporation, Warrant to Purchase Shares of Common Stock, Loan and Security Agreement, Employment Agreement for Kevin S. Boyle, Sr., and various certifications[386] Signatures This section contains the required signatures of the principal executive and accounting officers, certifying the accuracy of the report - The report was signed by Kevin S. Boyle Sr., Chief Executive Officer (Principal Executive Officer), and Kevin G. Lafond, Chief Accounting Officer and Treasurer (Principal Accounting Officer), on November 8, 2021[389]