10-Q 1 amti-10q_20220930.htm 10-Q amti-10q_20220930.htm
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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39306

 

APPLIED MOLECULAR TRANSPORT INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

81-4481426

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

450 East Jamie Court

South San Francisco, California

94080

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: 650-392-0420

 


(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

AMTI

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes No

As of October 31, 2022, the registrant had 38,943,097 shares of common stock, $0.0001 par value per share, outstanding.

 

 


Table of Contents

 

 

Table of Contents

 

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Condensed Financial Statements (Unaudited)

2

 

Condensed Balance Sheets

2

 

Condensed Statements of Operations and Comprehensive Loss

3

 

Condensed Statements of Stockholders’ Equity

4

 

Condensed Statements of Cash Flows

6

 

Notes to Condensed Financial Statements (Unaudited)

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

 

 

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

31

Item 1A.

Risk Factors

31

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

81

Item 3.

Defaults Upon Senior Securities

82

Item 4.

Mine Safety Disclosures

82

Item 5.

Other Information

82

Item 6.

Exhibits

83

Signatures

84

 

 

 


Table of Contents

 

 

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information regarding our expectations on the timing of clinical study initiation and results and the timing and success of future development of our product candidates, potential regulatory approval of our product candidates, our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities, reliance on third parties, financing needs, the sufficiency of the Company’s existing cash and cash equivalents, our ability to protect our intellectual property position, the impact on our business of certain geo-political events, the development of macroeconomic conditions, the impact of the COVID-19 pandemic on our business, and impact of the Affordable Care Act and other legislation and regulation, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons. Actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

 

 

 


Table of Contents

 

 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Financial Statements (Unaudited)

Applied Molecular Transport Inc.

Condensed Balance Sheets

(unaudited)

 

(in thousands, except share and per share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

76,020

 

 

$

159,821

 

Prepaid expenses

 

 

3,210

 

 

 

6,685

 

Other current assets

 

 

1,047

 

 

 

594

 

Total current assets

 

 

80,277

 

 

 

167,100

 

Property and equipment, net

 

 

8,780

 

 

 

6,998

 

Operating lease ROU assets, net

 

 

33,446

 

 

 

38,142

 

Finance lease ROU assets, net

 

 

639

 

 

 

652

 

Restricted cash

 

 

916

 

 

 

1,025

 

Other assets

 

 

549

 

 

 

121

 

Total assets

 

$

124,607

 

 

$

214,038

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,374

 

 

$

2,211

 

Accrued expenses

 

 

8,043

 

 

 

8,226

 

Lease liabilities, operating lease - current

 

 

4,449

 

 

 

3,584

 

Lease liabilities, finance lease - current

 

 

258

 

 

 

237

 

Total current liabilities

 

 

14,124

 

 

 

14,258

 

Lease liabilities, operating lease

 

 

31,785

 

 

 

35,785

 

Lease liabilities, finance lease

 

 

59

 

 

 

167

 

Other liabilities

 

 

244

 

 

 

241

 

Total liabilities

 

 

46,212

 

 

 

50,451

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 450,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 38,943,097 and 38,619,957 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

421,762

 

 

 

403,228

 

Accumulated deficit

 

 

(343,371

)

 

 

(239,645

)

Total stockholders’ equity

 

 

78,395

 

 

 

163,587

 

Total liabilities and stockholders’ equity

 

$

124,607

 

 

$

214,038

 

 

 

 

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

2


Table of Contents

 

Applied Molecular Transport Inc.

Condensed Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

18,238

 

 

$

18,350

 

 

$

75,386

 

 

$

49,765

 

General and administrative

 

 

7,288

 

 

 

7,641

 

 

 

28,738

 

 

 

20,333

 

Total operating expenses

 

 

25,526

 

 

 

25,991

 

 

 

104,124

 

 

 

70,098

 

Loss from operations

 

 

(25,526

)

 

 

(25,991

)

 

 

(104,124

)

 

 

(70,098

)

Interest income, net

 

 

321

 

 

 

5

 

 

 

393

 

 

 

104

 

Other income (expense), net

 

 

(1

)

 

 

(6

)

 

 

5

 

 

 

(90

)

Net loss

 

$

(25,206

)

 

$

(25,992

)

 

$

(103,726

)

 

$

(70,084

)

Net loss per share, basic and diluted

 

$

(0.65

)

 

$

(0.68

)

 

$

(2.68

)

 

$

(1.88

)

Weighted-average shares of common stock outstanding, basic and diluted

 

 

38,914,570

 

 

 

38,437,096

 

 

 

38,769,226

 

 

 

37,273,178

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(25,206

)

 

$

(25,992

)

 

$

(103,726

)

 

$

(70,084

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on investments

 

 

 

 

 

(5

)

 

 

 

 

 

(26

)

Total comprehensive loss

 

$

(25,206

)

 

$

(25,997

)

 

$

(103,726

)

 

$

(70,110

)

 

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

 

3


Table of Contents

 

 

Applied Molecular Transport Inc.

Condensed Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

As of December 31, 2021

 

 

38,619,957

 

 

$

4

 

 

$

403,228

 

 

$

 

 

$

(239,645

)

 

$

163,587

 

Exercise of common stock options

 

 

34,206

 

 

 

 

 

 

60

 

 

 

 

 

 

 

 

 

60

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

6,773

 

 

 

 

 

 

 

 

 

6,773

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(42,575

)

 

 

(42,575

)

As of March 31, 2022

 

 

38,654,163

 

 

$

4

 

 

$

410,061

 

 

$

-

 

 

$

(282,220

)

 

$

127,845

 

Issuance of common stock from employee stock purchase plan

 

 

66,497

 

 

 

 

 

 

231

 

 

 

 

 

 

 

 

 

231

 

Exercise of common stock options

 

 

16,073

 

 

 

 

 

 

31

 

 

 

 

 

 

 

 

 

31

 

Issuance of common stock upon vesting of restricted stock units

 

 

161,962

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,590

 

 

 

 

 

 

 

 

 

5,590

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(35,945

)

 

 

(35,945

)

As of June 30, 2022

 

 

38,898,695

 

 

$

4

 

 

$

415,913

 

 

$

-

 

 

$

(318,165

)

 

$

97,752

 

Exercise of common stock options

 

 

3,430

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Issuance of common stock upon vesting of restricted stock units

 

 

40,972

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

5,842

 

 

 

 

 

 

 

 

 

5,842

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,206

)

 

 

(25,206

)

As of September 30, 2022

 

 

38,943,097

 

 

$

4

 

 

$

421,762

 

 

$

-

 

 

$

(343,371

)

 

$

78,395

 

 

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

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Applied Molecular Transport Inc.

Condensed Statements of Stockholders’ Equity (continued)

(unaudited)

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

As of December 31, 2020

 

 

35,121,360

 

 

$

4

 

 

$

271,000

 

 

$

27

 

 

$

(139,358

)

 

$

131,673

 

Exercise of common stock options

 

 

129,290

 

 

 

 

 

 

397

 

 

 

 

 

 

 

 

 

397

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,951

 

 

 

 

 

 

 

 

 

1,951

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,462

)

 

 

(20,462

)

As of March 31, 2021

 

 

35,250,650

 

 

$

4

 

 

$

273,348

 

 

$

25

 

 

$

(159,820

)

 

$

113,557

 

Issuance of common stock upon follow-on offering, net of underwriters' commission and issuance costs of $7,947

 

 

2,875,000

 

 

 

 

 

 

112,801

 

 

 

 

 

 

 

 

 

112,801

 

Issuance of common stock from employee stock purchase plan

 

 

10,549

 

 

 

 

 

 

276

 

 

 

 

 

 

 

 

 

276

 

Exercise of common stock options

 

 

214,791

 

 

 

 

 

 

772

 

 

 

 

 

 

 

 

 

772

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,333

 

 

 

 

 

 

 

 

 

4,333

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,630

)

 

 

(23,630

)

As of June 30, 2021

 

 

38,350,990

 

 

$

4

 

 

$

391,530

 

 

$

6

 

 

$

(183,450

)

 

$

208,090

 

Exercise of common stock options

 

 

124,170

 

 

 

 

 

 

491

 

 

 

 

 

 

 

 

 

491

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

4,937

 

 

 

 

 

 

 

 

 

4,937

 

Unrealized loss on investments

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,992

)

 

 

(25,992

)

As of September 30, 2021

 

 

38,475,160

 

 

$

4

 

 

$

396,958

 

 

$

1

 

 

$

(209,442

)

 

$

187,521

 

 

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

 

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Applied Molecular Transport Inc.

Condensed Statements of Cash Flows

(unaudited)

(in thousands)

 

 

 

Nine Months Ended

September 30,

 

 

 

2022

 

 

2021

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(103,726

)

 

$

(70,084

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

18,205

 

 

 

11,221

 

Depreciation and amortization

 

 

2,468

 

 

 

2,403

 

Non-cash operating lease expense

 

 

6,433

 

 

 

2,117

 

Loss on impairment of property and equipment

 

 

80

 

 

 

 

Loss on disposal of property and equipment

 

 

 

 

 

71

 

Net accretion of discounts on investments

 

 

 

 

 

(69

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

3,475

 

 

 

(3,192

)

Other current assets

 

 

336

 

 

 

(313

)

Other assets

 

 

(428

)

 

 

75

 

Accounts payable

 

 

(837

)

 

 

(1,807

)

Accrued expenses

 

 

(221

)

 

 

1,520

 

Operating lease liabilities

 

 

(4,872

)

 

 

(2,071

)

Other liabilities

 

 

3

 

 

 

 

Net cash used in operating activities

 

 

(79,084

)

 

 

(60,129

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(4,146

)

 

 

(906

)

Proceeds from sales and maturities of investments

 

 

 

 

 

94,000

 

Net cash (used in) provided by investing activities

 

 

(4,146

)

 

 

93,094

 

Financing activities

 

 

 

 

 

 

 

 

Payments of deferred offering costs for “at-the-market” offering

 

 

(806

)

 

 

 

Principal payments on finance lease liabilities

 

 

(203

)

 

 

(173

)

Proceeds from issuance of common stock from employee stock purchase plan

 

 

231

 

 

 

276

 

Proceeds from exercise of common stock options

 

 

98

 

 

 

1,660

 

Proceeds from follow-on offering, net of underwriters' commission

 

 

 

 

 

113,505

 

Payments of issuance costs for follow-on offering

 

 

 

 

 

(704

)

Net cash (used in) provided by financing activities

 

 

(680

)

 

 

114,564

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

 

(83,910

)

 

 

147,529

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

160,846

 

 

 

5,951

 

Cash, cash equivalents and restricted cash, end of period

 

$

76,936

 

 

$

153,480

 

Supplemental cash flow data:

 

 

 

 

 

 

 

 

Cash paid for interest on finance lease liabilities

 

$

21

 

 

$

25

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Property and equipment included in accounts payable and accrued expenses

 

$

23

 

 

$

266

 

Deferred offering costs included in accounts payable and accrued expenses

 

$

15

 

 

$

 

 

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

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Table of Contents

 

Applied Molecular Transport Inc.

Notes to the Condensed Financial Statements

(unaudited)

1. Business and Principal Activities

Description of Business

Applied Molecular Transport Inc. (the Company) is a clinical-stage biopharmaceutical company leveraging its proprietary technology platform to design and develop a pipeline of novel oral and respiratory biologic product candidates to treat autoimmune, inflammatory, metabolic, and other diseases. The Company’s principal operations are in the United States with its headquarters in South San Francisco, California.

Since the date of incorporation in Delaware on November 21, 2016, the Company has devoted substantially all of its resources to research and development activities, including research activities such as drug discovery, preclinical studies, and clinical trials as well as development activities such as the manufacturing of clinical and research material, establishing and maintaining an intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.

Liquidity and Capital Resources

Management believes that its existing cash and cash equivalents as of September 30, 2022 will be sufficient to allow the Company to fund its current operating plan through at least 12 months from the date that this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (SEC).

The Company has incurred significant losses and negative cash flows from operations since its inception. As of September 30, 2022, the Company had an accumulated deficit of $343.4 million and does not expect positive cash flows from operations in the foreseeable future. The Company expects to incur significant and increasing losses until regulatory approval is granted and successful commercialization is achieved for any of its product candidates. Regulatory approval is not guaranteed and may never be obtained. The Company has historically financed its operations primarily through private placements of its convertible preferred stock and sale of common stock upon the completion of the Initial Public Offering (IPO) and follow-on equity offering. In addition, on January 27, 2022, the Company entered into a Sales Agreement with SVB Securities LLC and JMP Securities LLC, as the Company’s sales agents (Agents), pursuant to which the Company may offer and sell from time to time through the Agents up to $150.0 million in shares of the Company’s common stock through an “at-the-market” program (ATM facility). As of September 30, 2022, the Company had not yet sold any shares of common stock under the ATM facility. The Company may seek to raise additional capital through debt financings, private or public equity financings, license agreements, collaborative agreements or other arrangements with other companies, or other sources of financing. There can be no assurance that such financing will be available or will be at terms acceptable to the Company.

Strategic Plan Announcement

In May 2022, the Company implemented a strategic plan to focus the business on its clinical program for AMT-101 (Strategic Plan). The Strategic Plan is intended to preserve capital, ensuring that the Company is appropriately resourced to advance AMT-101 through key development milestones.

Employment Related Agreements

Under the Strategic Plan, the Company reduced its workforce by approximately 40%. Impacted employees received notice that their positions were eliminated on May 16, 2022. Impacted employees were eligible to receive severance benefits and Company funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a customary separation agreement, which included a general release of claims against the Company. For certain employees, the Company accelerated vesting of restricted stock units (“RSUs”) to May 16, 2022 from the original vesting date of June 1, 2022.

In connection with the Strategic Plan, the Company recognized restructuring charges of approximately $3.8 million in the nine months ended September 30, 2022. These restructuring charges were primarily related to severance payments and other employee-related separation costs of $3.3 million, contract termination fees of $0.5 million, a lease termination fee of $0.3 million, impairment of property and equipment of $0.1 million and insignificant legal expenses, partially offset by a $0.4 million reduction in stock-based compensation expense as a result of applying modification accounting for accelerated vesting of RSUs. As of September 30, 2022, accrued contract termination fees of $0.4 million remained unpaid and are expected to be paid within one year.

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Risks and Uncertainties

The COVID-19 virus has spread extensively throughout the world, resulting in the World Health Organization characterizing COVID-19 as a pandemic. While significant progress in addressing the pandemic has been made with multiple vaccines and treatment options now available, the emergence of highly transmissible variants of the virus have resulted in periodic surges in infection rates around the world and a cycle of fluctuating public health restrictions designed to mitigate the spread of the virus. The extent to which the COVID-19 pandemic impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted, such as the spread or emergence of new variants, the duration and severity of surges in outbreaks, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to address its impact, including on financial markets or otherwise. The Company continues to have a hybrid work environment with a majority of the Company’s workforce either working exclusively from home or working from home for part of their work week. The Company’s financial results could be affected by the COVID-19 pandemic in various ways. As a result of the COVID-19 pandemic, the Company has experienced and could experience disruptions that could severely impact the Company’s business, current and planned critical trials and preclinical studies. For example, the COVID-19 pandemic could result in delays to the Company’s clinical trials and preclinical studies for numerous reasons including difficulties in enrolling patients or healthy volunteers, diversion of healthcare resources away from the conduct of clinical trials, delays in receiving regulatory authorities to initiate clinical trials, and delays in receiving supplies to conduct clinical trials and preclinical studies. There has also been an increase in infections from COVID-19 variants which has impacted patient recruitment at certain of the Company’s clinical trial sites and could result in increased costs and delays. In addition, as a result of ongoing COVID-19 research and the current global supply chain issues, there is currently limited availability for certain resources required to conduct some of the Company’s preclinical studies and clinical trials, which may result in longer lead times, increased costs, and delays in completing preclinical studies and clinical trials. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trial and other related business activities. The Company is carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on the Company’s financial condition and results of operations as of September 30, 2022.

In addition, currently there is a conflict involving Russia and Ukraine. The Company’s AMT-101 Phase 2 LOMBARD trial currently includes clinical trial sites located in Ukraine, Russia, and other Eastern European countries. The Board of Directors of the Company (Board of Directors) is receiving management reports and discusses with management at board meetings macro-economic and geopolitical developments, including the Russia/Ukraine conflict and the impact on the Company’s personnel, cybersecurity, sanctions and the Company’s clinical trial sites located in the region so that the Company can be prepared to react to new developments as they arise. This conflict has and may continue to impact the Company’s ability to conduct certain of our trials in Ukraine, Russia and other Eastern European countries, and may prevent the Company from obtaining data on patients already enrolled at sites in these countries. This could negatively impact the completion of the Company’s clinical trials and/or analyses of clinical results or result in increased costs, all of which could materially harm the Company’s business. The Board of Directors is monitoring and continues to assess and monitor risks related to the Russia/Ukraine conflict.

The extent of the ongoing impact of macroeconomic events on the Company’s business and on global economic activity is uncertain and the related financial impact cannot be reasonably estimated with any certainty at this time, although the impacts are expected to continue and may significantly affect the Company’s business. The Company expects that the impacts on its business will continue through this period of economic uncertainty as supply chain issues, inflation and other factors continue to worsen or emerge. Accordingly, management is carefully evaluating its liquidity position, communicating with and monitoring the actions of its suppliers and continuing to review its near-term operating expenses as the uncertainty related to these factors continues to unfold. The risks related to the Company’s business, including further discussion of the impact and possible future impacts of the COVID-19 pandemic and current economic conditions on the Company’s business, are further described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.  

 

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2. Summary of Significant Accounting Policies

Condensed Financial Statements (Unaudited)

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the SEC for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the Company’s results for the interim periods presented. The condensed balance sheet as of December 31, 2021 was derived from the Company’s audited financial statements. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim periods or future years.

The accompanying interim unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K, originally filed with the SEC on February 24, 2022, as amended by Form 10-K/A (Amendment No. 1) filed on March 25, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates on historical experience and market-specific or other relevant assumptions that it believes are reasonable under the circumstances. Assets and liabilities reported in the Company’s condensed balance sheets and expenses and income reported are affected by estimates and assumptions, which are used for, but are not limited to, recording research and development expenses and related accruals, and determining the fair value of stock options for stock-based compensation expense. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic. Actual results could differ from such estimates or assumptions.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and investments. From time to time, the Company invests in U.S. Treasury securities. The Company maintains bank deposits in federally insured financial institutions and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash, cash equivalents, and investments to the extent recorded in the condensed balance sheets. The Company has not experienced any losses on its deposits of cash, cash equivalents, and investments. The Company is subject to a number of risks similar to other clinical-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical studies or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, protection of its proprietary technology, and the need to secure and maintain adequate manufacturing arrangements with third parties or develop internal manufacturing capabilities. The Company’s product candidates will require approval from the U.S. Food and Drug Administration (FDA) and/or comparable foreign regulatory agencies prior to commercialization in their respective jurisdictions. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

Operating Segment

The Company operates and manages its business as one reportable and operating segment, which is the business of designing and developing a pipeline of novel oral and respiratory biologic product candidates to treat autoimmune, inflammatory, metabolic, and other diseases. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance.

Cash and Cash Equivalents

Cash and cash equivalents are held in accounts at financial institutions. Such deposits have and will continue to exceed federally insured limits in the foreseeable future. The Company considers all highly liquid investments purchased with original maturities of 90 days or less from the purchase date to be cash equivalents. Cash equivalents consist of amounts invested in money market funds exclusively composed of U.S. government obligations.

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Restricted Cash

As of September 30, 2022, the Company had $0.9 million in restricted cash, which was classified as long-term on the Company’s condensed balance sheets. The restricted cash was attributable to a letter of credit issued by the Company in connection with the operating lease for the Company’s headquarters (See Note 5). The letter of credit will expire 90 days after the expiration of the lease in 2029.

During the nine months ended September 30, 2022, the Company collected its $0.1 million letter of credit associated with the expiration of an operating lease.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed statements of cash flows (in thousands):

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

Cash and cash equival