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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended March 31, 2023

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: 001-40499

 

Cyteir Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

45-5429901

(State or other jurisdiction of

incorporation or organization)

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

99 Hayden Ave., Building B, Suite 450

Lexington, MA

02421

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: 857-285-4140

 

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 $0.001 per share

 

CYT

 

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, 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 May 4, 2023, the registrant had 35,512,837 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

 

Condensed Consolidated Statements of Stockholders’ Equity

5

Condensed Consolidated Statements of Cash Flows

6

Notes to Unaudited Condensed Consolidated Financial Statements

7

Item 2.

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

16

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults Upon Senior Securities

25

Item 4.

Mine Safety Disclosures

25

Item 5.

Other Information

26

Item 6.

Exhibits

27

Signatures

28

 

 

 

i


 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements with respect to, among other things, our operations and financial performance. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” "estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “could,” “target,” “predict,” “seek” and similar expressions are intended to identify forward-looking statements. We include forward-looking information in our discussion of the following, among other topics, the initiation, timing, progress and results of our current and future clinical trials, including disclosing initial or preliminary data from our CYT-0851 combination cohorts with capecitabine and gemcitabine in mid-2023, advancing CYT-0851 into one or more expansion cohorts in 2023, advancing CYT-0851 into a randomized phase 2 clinical trial with registrational intent in platinum resistant ovarian cancer; and our estimates regarding our cash runway, expenses, future revenue, capital requirements and needs for additional financing.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those referenced in the section titled “Risk Factors,” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission on March 23, 2023, which could cause actual results to differ materially. Moreover, we operate in a very competitive and rapidly changing environment and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in or implied by any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date of this report. You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or reflect interim developments, except as required by law.

Some of the key factors that could cause actual results to differ include that:

• Our announced strategic prioritization and workforce reduction may not result in CYT-0851 being successfully advanced, may not result in anticipated savings, and may disrupt our business, and we may pursue additional strategic alternatives.

• We have a limited operating history and have no products approved for commercial sale, which may make it difficult for you to evaluate our current business and predict our future success and viability.

• We have incurred significant losses since inception. We expect to incur losses for the foreseeable future and may never achieve or maintain profitability.

• We will need substantial additional funding. If we are unable to raise capital when needed, we will be forced to delay, reduce, or eliminate our research and product development programs or future commercialization efforts.

• We have never successfully completed any clinical trials, and we may be unable to do so for CYT-0851 or any future drug candidates we develop.

• Our clinical trials may fail to demonstrate adequately the safety and efficacy of CYT-0851 or any future drug candidates, which would delay or prevent further clinical development of those candidates, or prevent marketing approval from FDA or similar regulatory authorities.

• Positive results from the clinical trials and preclinical studies of our drug candidates are not necessarily predictive of the results of later clinical trials or preclinical studies. If we cannot replicate the positive results from our clinical trials and preclinical studies of our drug candidates in our later clinical trials preclinical studies, we may be unable to successfully develop, obtain regulatory approval for and commercialize our drug candidates.

• Our clinical trials may fail to demonstrate adequately the safety and efficacy of any of our drug candidates, which would delay or prevent further clinical development of those candidates, or prevent marketing approval from FDA or similar regulatory authorities.

• We are developing CYT-0851 for use in combination with other therapies, which exposes us to additional risks.

1


 

• If we are unable to successfully develop and commercialize companion diagnostic tests for our drug candidates, or experience significant delays in doing so, we may not realize the full commercial potential of our drug candidates.

• Synthetic lethality represents an emerging class of precision medicine targets, and negative perceptions of the efficacy, safety or tolerability of this class of targets, including any that we develop, could adversely affect our ability to conduct our business, advance our drug candidates or obtain regulatory approvals.

• If we are unable to adequately protect and enforce our intellectual property or obtain and maintain patent protection for our technology and products or if the scope of the patent protection obtained is not sufficiently broad, our competitors or other third parties could develop and commercialize technology and products similar or identical to ours, and our ability to successfully develop and commercialize our technology and products may be impaired.

• Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

 

 

2


 

PART I—FINANCIAL INFORMATION

 

Item 1. Financial Statements.

CYTEIR THERAPEUTICS, INC.

Condensed consolidated balance sheets

(in thousands, except share and per share amounts)
(unaudited)

 

March 31,
2023

 

 

December 31,
2022

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

137,204

 

 

$

147,120

 

Prepaid expenses and other current assets

 

 

1,190

 

 

 

2,089

 

Total current assets

 

$

138,394

 

 

$

149,209

 

Property and equipment, net

 

 

323

 

 

 

1,699

 

Other assets

 

 

259

 

 

 

2,324

 

Total assets

 

$

138,976

 

 

$

153,232

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

674

 

 

$

1,128

 

Accrued expenses and other current liabilities

 

 

3,287

 

 

 

4,187

 

Total current liabilities

 

$

3,961

 

 

$

5,315

 

Other long term liabilities

 

 

39

 

 

 

1,631

 

Total liabilities

 

$

4,000

 

 

$

6,946

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.001 par value: 40,000,000 shares authorized
   as of March 31, 2023 and December 31, 2022;
no shares issued and
   outstanding as of March 31, 2023 and December 31, 2022

 

 

 

 

 

 

Common stock, $0.001 par value: 280,000,000 shares
   authorized as of March 31, 2023 and December 31, 2022;
   
35,658,429 and 35,575,694 shares issued as of March 31, 2023
   and December 31, 2022, respectively;
35,624,127 and
   
35,516,249 shares outstanding as of March 31, 2023 and
   December 31, 2022, respectively

 

 

35

 

 

 

35

 

Additional paid-in capital

 

 

285,541

 

 

 

284,365

 

Accumulated deficit

 

 

(150,600

)

 

 

(138,114

)

Total stockholders’ equity

 

 

134,976

 

 

 

146,286

 

Total liabilities and stockholders’ equity

 

$

138,976

 

 

$

153,232

 

 

See accompanying notes to condensed consolidated financial statements.

3


 

CYTEIR THERAPEUTICS, INC.

Condensed consolidated statements of operations

 

 

Three Months Ended
March 31,

 

(in thousands, except share and per share amounts)
(unaudited)

 

2023

 

 

2022

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

9,312

 

 

$

10,088

 

General and administrative

 

 

4,110

 

 

 

4,043

 

Total operating expenses

 

 

13,422

 

 

 

14,131

 

Loss from operations

 

 

(13,422

)

 

 

(14,131

)

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

1,543

 

 

 

29

 

Loss on disposal of property and equipment

 

 

(925

)

 

 

-

 

Gain on lease terminations and modification

 

 

318

 

 

 

-

 

Total other income (expense)

 

 

936

 

 

 

29

 

Net loss

 

$

(12,486

)

 

$

(14,102

)

Net loss per share—basic and diluted

 

$

(0.35

)

 

$

(0.40

)

Weighted-average common stock outstanding—basic and diluted

 

 

35,587,806

 

 

 

35,241,251

 

 

See accompanying notes to condensed consolidated financial statements.

4


 

CYTEIR THERAPEUTICS, INC.

Condensed consolidated statements of stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share amounts)
(unaudited)

Shares

 

 

Amount

 

 

Additional
paid-in
capital

 

 

Accumulated
deficit

 

 

Total
stockholders’
equity

 

Balance At December 31, 2021

 

35,219,834

 

 

$

35

 

 

$

279,310

 

 

$

(92,053

)

 

$

187,292

 

Exercise of common stock options

 

19,575

 

 

 

 

 

 

19

 

 

 

 

 

 

19

 

Vesting of early exercised options

 

32,605

 

 

 

 

 

 

39

 

 

 

 

 

 

39

 

Stock-based compensation expense

 

 

 

 

 

 

 

1,255

 

 

 

 

 

 

1,255

 

Net loss

 

 

 

 

 

 

 

 

 

 

(14,102

)

 

 

(14,102

)

Balance At March 31, 2022

 

35,272,014

 

 

$

35

 

 

$

280,623

 

 

$

(106,155

)

 

$

174,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

 

 

 

 

(in thousands, except share and per share amounts)
(unaudited)

Shares

 

 

Amount

 

 

Additional
paid-in
capital

 

 

Accumulated
deficit

 

 

Total
stockholders’
equity

 

Balance At December 31, 2022

 

35,516,249

 

 

$

35

 

 

$

284,365

 

 

$

(138,114

)

 

$

146,286

 

Exercise of common stock options

 

41,588

 

 

 

 

 

 

42

 

 

 

 

 

 

42

 

Vesting of early exercised options

 

25,144

 

 

 

 

 

 

31

 

 

 

 

 

 

31

 

Issuance of common stock under ESPP

 

41,146

 

 

 

 

 

 

61

 

 

 

 

 

 

61

 

Stock-based compensation expense

 

 

 

 

 

 

 

1,042

 

 

 

 

 

 

1,042

 

Net loss

 

 

 

 

 

 

 

 

 

 

(12,486

)

 

 

(12,486

)

Balance At March 31, 2023

 

35,624,127

 

 

$

35

 

 

$

285,541

 

 

$

(150,600

)

 

$

134,976

 

 

See accompanying notes to condensed consolidated financial statements.

5


 

CYTEIR THERAPEUTICS, INC.

Condensed consolidated statements of cash flows

 

 

Three Months Ended
March 31,

 

(in thousands)
(unaudited)

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(12,486

)

 

$

(14,102

)

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

 

 

 

 

 

 

Depreciation and amortization expense

 

 

150

 

 

 

159

 

Stock-based compensation

 

 

1,042

 

 

 

1,255

 

Non-cash lease expense

 

 

158

 

 

 

154

 

Loss on disposal of property and equipment

 

 

925

 

 

 

 

Gain on lease terminations and modification

 

 

(318

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,051

 

 

 

(322

)

Accounts payable

 

 

(454

)

 

 

1,713

 

Accrued expenses and other current liabilities

 

 

(235

)

 

 

(1,025

)

Net cash used in operating activities

 

$

(10,167

)

 

$

(12,168

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

 

 

 

(191

)

Proceeds from sales of property and equipment

 

 

150

 

 

 

 

Net cash provided by (used) in investing activities

 

$

150

 

 

$

(191

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock under ESPP

 

 

61

 

 

 

 

Proceeds from exercise of stock options

 

 

42

 

 

 

19

 

Net cash provided by financing activities

 

$

103

 

 

$

19

 

Net decrease in cash, cash equivalents, and restricted cash

 

 

(9,914

)

 

 

(12,340

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

147,377

 

 

 

189,979

 

Cash, cash equivalents and restricted cash at end of period

 

$

137,463

 

 

$

177,639

 

Supplemental disclosure of cash flows

 

 

 

 

 

 

Property and equipment purchases in accounts payable

 

$

 

 

$

11

 

Remeasurement of operating lease liabilities and right-of-use assets
due to lease modification

 

$

(1,908

)

 

 

 

Vesting of early exercised options

 

$

31

 

 

$

39

 

 

The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of each of the dates shown below:

 

 

Three Months Ended
March 31,

 

 

 

2023

 

 

2022

 

Cash and cash equivalents

 

$

137,204

 

 

$

177,383

 

Restricted cash (included in other assets)

 

 

259

 

 

 

256

 

Total cash, cash equivalents, and restricted cash

 

$

137,463

 

 

$

177,639

 

 

See accompanying notes to condensed consolidated financial statements.

6

 


 

CYTEIR THERAPEUTICS, INC.

Notes to condensed consolidated financial statements – (unaudited)

1. Nature of the business

Cyteir Therapeutics, Inc., (the “Company”) is a clinical-stage oncology company that is focused on the development of CYT-0851, an oral investigational drug candidate that inhibits monocarboxylate transporters. Cyteir’s current priority in CYT-0851 development is in combination with capecitabine or gemcitabine in a phase 1/2 clinical study, including patients with advanced ovarian cancer or other solid tumors, respectively. Through 2022, the Company used its expertise in DNA damage response biology and a disciplined approach to select targets for other novel, differentiated programs with the aim of building a patient-centric portfolio of effective cancer therapies. In January 2023, the Company announced a strategic prioritization that included the discontinuation of these preclinical efforts.

The Company was formed as a Delaware corporation on June 4, 2012, pursuant to the General Corporation Law of the State of Delaware. The Company has a principal office in Lexington, Massachusetts.

Liquidity

The Company has incurred net operating losses since inception and has funded its operations primarily with proceeds from the sale of redeemable convertible preferred stock and the issuance of common stock in its initial public offering, or IPO. As of March 31, 2023, the Company had cash and cash equivalents of $137.2 million and an accumulated deficit of $150.6 million. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future.

The Company expects that its cash and cash equivalents as of March 31, 2023 will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date these condensed consolidated financial statements are available to be issued.

The Company will need additional funding to support its planned operating activities. There can be no assurances, however, that the current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospects.

COVID-19 considerations

The development of the Company’s product candidates could be disrupted and materially adversely affected in by a pandemic, epidemic or outbreak of an infectious disease, such as the ongoing COVID-19 pandemic. These disruptions related to the COVID pandemic could affect the Company’s business, including, but not limited to, the ability of the Company's clinical research organizations, or CROs, to conduct clinical trials in countries outside of the United States, the Company’s ability to identify suitable clinical sites or open those sites for enrollment due to competing business needs, the Company’s ability to enroll patients due to their fear of coming into medical facilities and their perceived risk of becoming infected at such facilities, and the Company’s ability to monitor the clinical data generated at its clinical sites, required for completion of clinical trials.

 

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2. Summary of significant accounting policies

The Company's significant accounting policies are disclosed in the audited consolidated financial statements for the years ended December 31, 2022 and 2021 ("audited financial statements"), which are included in the Company's Annual Report on Form 10-K that was filed with the SEC on March 23, 2023. Since the date of the financial statements, there have been no changes to the Company's significant accounting policies, except as noted below.

Interim Financial Information

The accompanying condensed consolidated balance sheet at March 31, 2023, and the condensed consolidated statements of operations, statements of changes in stockholders’ equity for the three months ended March 31, 2023 and 2022 and condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 are unaudited. The condensed consolidated interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position at March 31, 2023 and the results of its operations for the three months ended March 31, 2023 and 2022 and its cash flows for the three months ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes related to the three months ended March 31, 2023 and 2022 are also unaudited. The results for the three months ended March 31, 2023 are not necessarily indicative of results to be expected for the full year or for any other subsequent interim period.


 

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3. Fair value measurement

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands):

 

 

 

 

 

 

March 31, 2023

 

Assets:

 

Total

 

 

Quoted prices in
active markets for
identical assets
(level 1)

 

 

Significant
other observable
inputs
(level 2)

 

 

Significant
other observable
inputs
(level 3)

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

136,975

 

 

$

136,975

 

 

$

 

 

$

 

Total assets

 

$

136,975

 

 

$

136,975

 

 

$

 

 

 

$

 

 

 

 

 

 

 

 

December 31, 2022

 

Assets

 

Total

 

 

Quoted prices in
active markets for
identical assets
(level 1)

 

 

Significant
other observable inputs
(level 2)

 

 

Significant
other observable inputs
(level 3)

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

146,870

 

 

$

146,870

 

 

$

 

 

$

 

Total assets

 

$

146,870

 

 

$

146,870

 

 

$

 

 

$

 

During the three months ended March 31, 2023 and the year ended December 31, 2022, there were no transfers between levels. The fair values of the Company’s cash equivalents, consisting of its standard checking accounts and money market funds, are based on quoted market prices in active markets without any valuation adjustment.

The Company uses the carrying amounts of its restricted cash, prepaid expenses and other current assets, accounts payable and accrued expenses and other current liabilities to approximate their fair value due to the short-term nature of these amounts.

4. Prepaid expenses and other current assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

March 31,
2023

 

 

December 31,
2022

 

Prepaid research and development expenses

 

$

273

 

 

$

786

 

Prepaid insurance

 

 

452

 

 

 

982

 

Prepaid other

 

 

213

 

 

 

304

 

Other receivables

 

 

252

 

 

 

17

 

     Total

 

$

1,190

 

 

$

2,089

 

 

 

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5. Property and equipment, net

On January 19, 2023, the Company announced a strategic prioritization of clinical development of CYT-0851, which included the discontinuation of preclinical efforts and a workforce reduction by approximately 70% of the Company's workforce. For the three months ended March 31, 2023, the Company recognized a loss on disposal of property and equipment totaling $0.9 million on the Company's condensed consolidated statements of operations.

Property and equipment, net consisted of the following (in thousands):

 

Acquisition cost

 

Laboratory and computer equipment

 

 

Leasehold improvements

 

 

Total

 

As of December 31, 2022

 

$

1,846

 

 

$

1,675

 

 

$

3,521

 

Disposals

 

 

(1,752

)

 

 

(1,266

)

 

 

(3,018

)

As of March 31, 2023

 

$

94

 

 

$

409

 

 

$

503

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation and amortization

 

Laboratory and computer equipment

 

 

Leasehold improvements

 

 

Total

 

As of December 31, 2022

 

$

(827

)

 

$

(995

)

 

$

(1,822

)

Depreciation expense

 

 

(56

)

 

 

(94

)

 

 

(150

)

Disposals

 

 

866

 

 

 

926

 

 

 

1,792

 

As of March 31, 2023

 

$

(17

)

 

$

(163

)

 

$

(180

)

 

 

 

 

 

 

 

 

 

 

Carrying amount

 

Laboratory and computer equipment

 

 

Leasehold improvements

 

 

Total

 

As of December 31, 2022

 

$

1,019

 

 

$

680

 

 

$

1,699

 

As of March 31, 2023

 

$

77

 

 

$

246

 

 

$

323

 

For both the three months ended March 31, 2023 and 2022, depreciation and amortization expense related to property and equipment was $0.2 million.

6. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

March 31,
2023

 

 

December 31,
2022

 

Accrued research and development expenses

 

$

1,394

 

 

$

1,356

 

Accrued compensation

 

 

1,229

 

 

 

1,510

 

Accrued other

 

 

566

 

 

 

432

 

Operating lease liabilities

 

 

98

 

 

 

889

 

     Total accrued expenses and other current liabilities

 

$

3,287

 

 

$

4,187

 

 

7. Common stock

The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of the holders of the preferred stock as set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

The holders of the common stock are entitled to one vote for each share of common stock held submitted to a vote of stockholders, and there are not any cumulative voting rights. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors subject to any preferential dividend rights of any series of preferred stock that the Company may designate and issue in the future.

As of March 31, 2023 and December 31, 2022, the Company has reserved the following shares of common stock for the potential exercise of stock options:

 

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March 31,

 

 

December 31,

 

 

 

2023

 

 

2022

 

Options to purchase common stock

 

 

4,208,336

 

 

 

3,460,897

 

Remaining shares reserved for future issuance

 

 

6,697,386

 

 

 

5,706,345

 

     Total

 

 

10,905,722

 

 

 

9,167,242

 

 

8. Stock-based compensation

2012 Stock Incentive Plan

The Company adopted the 2012 Stock Incentive Plan (the “2012 Plan”) in November 2012 pursuant to which the Company can issue incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock awards. Recipients of stock options or stock appreciate rights shall be eligible to purchase shares of the Company’s common stock at an exercise price equal to the estimated fair market value of such stock on the date of grant. The exercise price may be less than fair market value if the stock award is granted pursuant to an assumption or substitution for another stock award in the event of a merger or sale of the Company. The maximum term of options granted under the 2012 Plan is ten years, and stock options typically vest over a four-year period. The Board may assign vesting terms to the stock option grants as deemed appropriate. The Company also has the right of refusal to purchase any proposed disposition of shares issued under the 2012 Plan. The 2012 Plan allows for early exercise of all stock option grants if authorized by the Board at the time of grant. The shares of common stock issued from the early exercise of stock options are restricted and vest over time. The Company has the option to repurchase any unvested shares at the original purchase price upon any voluntary or involuntary termination. At the discretion of the Board, unvested shares held by employees may accelerate vesting in the event of a change of control of the Company unless assumed or substituted by the acquirer or surviving entity. The 2012 Plan has been subsequently amended and provides for the issuance of up to 6,941,421 shares of common stock as of March 31, 2023, of which 2,732,632 shares of common stock remained available for future grant under the 2012 Plan upon the effectiveness of the 2021 Equity Incentive Plan (the “2021 Plan”) and were made available for future issuance under the 2021 Plan.

2021 Equity Incentive Plan

In June 2021, the Company’s board of directors adopted and the Company’s stockholders approved the 2021 Plan, which became effective immediately prior to the effectiveness of the registration statement for the IPO. The 2021 Plan provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock-based awards. Upon effectiveness of the 2021 Plan, the number of shares of common stock reserved for issuance under the 2021 Plan was 5,932,632, which represents 3,200,000 shares along with 2,732,632 shares of common stock reserved for issuance under the 2012 Plan that remained available for grant under the 2012 Plan immediately prior to the effectiveness of the 2021 Plan. Shares of the Company's common stock subject to outstanding awards granted under the 2012 Plan that expire unexercised or are terminated, surrendered, cancelled, forfeited or repurchased by the Company at their original issuance price pursuant to a contractual repurchase right will become available for issuance under the 2021 Plan. Upon adoption of the 2021 Plan, the Company ceased the grant of additional awards under the 2012 Plan. The 2021 Plan includes an "evergreen" provision, which provides for an annual increase to be added on January 1st of each year beginning in 2022 and continuing through and including 2031 by the lesser of (i) 5% of the number of shares of Stock outstanding as of such date and (ii) an amount determined by the board of directors. On January 1, 2023, the number of shares of Common Stock reserved and available for issuance under the 2021 Plan increased by 1,778,784 shares.

At March 31, 2023, 6,697,386 shares of common stock remained available for future grant under the 2021 Plan.

2021 Employee Stock Purchase Plan

In June 2021, the Company’s board of directors adopted, and the Company’s stockholders approved, the 2021 Employee Stock Purchase Plan (the “ESPP”), which became effective immediately prior to the effectiveness of the registration statement for the IPO. The ESPP is administered by the compensation committee of the Company’s board of directors, except that the Company’s board of directors may at any time act as the administrator of the ESPP. The ESPP provides participating employees with the opportunity to purchase shares of common stock, with an initial aggregate share pool of 300,000 shares of common stock. The number of shares of common stock reserved for issuance under the ESPP will automatically increase on January 1st of each year beginning in 2022 and continuing through and including 2031 by the least of (i) 1% of the number of shares of Stock outstanding as of such date, (ii) 600,000 shares of Stock and (iii) the number of shares of Stock determined by the Company’s board of directors on or prior to such date for such year, up to a maximum of 6,300,000 shares in the aggregate. On January 1, 2023, the number of shares of Common Stock reserved and available for issuance under the ESPP increased by 355,756 shares.

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The ESPP allows eligible employees to authorize payroll deductions of between 1% and 15% of their regular base salary or wages to be applied toward the purchase of shares of the Company's common stock on the last trading day of the offering period, subject to certain limitations contained in the ESPP. Participating employees will purchase shares of the Company's common stock at a discount of 15% on the lesser of the closing price of the Company's common stock on the Nasdaq Global Select Market (i) on the first trading day of the offering period or (ii) the last trading day of the offering period. The Company utilizes the Black Scholes option pricing model to compute the fair market value of the shares subject to outstanding options under the ESPP and compensation expense is recognized over the offering period.

Participation in the ESPP is voluntary. Eligible employees become participants in the ESPP by enrolling in the plan and authorizing payroll deductions in accordance with the terms of the ESPP. At the end of each offering period, accumulated payroll deductions are used to purchase the Company’s shares at the discounted price. The Company makes no contributions to the ESPP. A participant may withdraw from the ESPP or reduce contributions to the ESPP during an offering period. If the participant elects to withdraw during an offering period, all contributions are refunded as soon as administratively practicable. If a participant elects to withdraw during an offering period, the participant may not re-enroll in the current offering but may elect to participate in future offerings, subject to the terms of the ESPP. Only whole shares of the Company may be purchased under the ESPP.

The Company issued 41,147 common shares under the ESPP during the three months ended March 31, 2023 at an average price per share of $1.49. Cash received from purchases under the ESPP for the three months ended March 31, 2023 was $0.1 million. The Company recognized an immaterial amount of compensation expense for the ESPP during the three months ended March 31, 2023.

Early exercise of unvested stock options

Shares purchased by employees pursuant to the early exercise of stock options are not deemed, for accounting purposes, to be outstanding shares until those shares vest according to their respective vesting schedules. Cash received from employee exercises of unvested options is included in long-term liabilities on the condensed consolidated balance sheets. Amounts recorded are reclassified to common stock and additional paid-in capital as the shares vest. As of March 31, 2023 and December 31, 2022, there were 34,302 and 59,446 unvested shares related to early exercises of stock options, respectively.

Stock option valuation

The assumptions that the Company used in the Black Scholes option-pricing model to determine the grant date fair value of stock options granted were as follows:

 

 

 

March 31,
2023

December 31,
2022

Risk-free interest rate range

 

3.65%

1.89%-4.23%

Dividend yield

 

0.0%

0.0%

Expected life of options (years)

 

6.0

6.0

Volatility rate range

 

93.3%

92.4%-93.3%

 

The following table summarizes the Company’s stock option activity during the three months ended March 31, 2023:

 

 

 

Number of
shares

 

 

Weighted average
exercise price

 

 

Weighted average
remaining
contractual
term (in years)

 

 

Aggregate intrinsic
value
(in thousands)

 

Outstanding as of December 31, 2022

 

 

3,460,897

 

 

$

5.60

 

 

 

8.23

 

 

$

375

 

Granted

 

 

1,049,357

 

 

$

1.69

 

 

 

 

 

 

 

Exercised

 

 

(41,588

)

 

$

1.02

 

 

 

 

 

 

 

Forfeited or cancelled

 

 

(260,330

)

 

$

5.50

 

 

 

 

 

 

 

Outstanding as of March 31, 2023

 

 

4,208,336

 

 

$

4.68

 

 

 

6.68

 

 

$

586

 

Options vested and exercisable as of March 31, 2023

 

 

1,800,643

 

 

$

5.75

 

 

 

5.23

 

 

$

343

 

As of March 31, 2023, there was $6.8 million of unrecognized stock-based compensation expense related to the share-based compensation arrangements under the 2012 Plan. The Company expects to recognize this amount over a weighted-average period of 2.5 years.

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The aggregate intrinsic value of options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the common stock as of the end of the reporting period. The weighted-average grant date fair value of the Company’s stock options granted during the three months ended March 31, 2023 and 2022 was $1.31 and $4.52, respectively.

The total fair value of options vested during the three months ended March 31, 2023 and 2022 was $1.5 million and $1.1 million, respectively.

Stock-based compensation expense

Stock-based compensation expense included in the Company’s condensed consolidated statements of operations is as follows (in thousands):