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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 March 31, 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: 001-39376

 

Poseida Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

47-2846548

(State or Other Jurisdiction of

Incorporation or Organization)

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

9390 Towne Centre Drive, Suite 200, San Diego, California

92121

(Address of Principal Executive Offices)

(Zip Code)

(858) 779-3100

(Registrant’s telephone number, including area code)

 

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

PSTX

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 May 6, 2022, the registrant had 62,704,726 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

 

POSEIDA THERAPEUTICS, INC.

Index

 

PART I. FINANCIAL INFORMATION

 

Page

 

 

 

Item 1. Financial Statements (Unaudited)

 

4

Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

 

4

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021

 

5

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021.

 

6

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021

 

7

Notes to Condensed Consolidated Financial Statements

 

8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

20

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

 

79

Item 3. Defaults Upon Senior Securities

 

79

Item 4. Mine Safety Disclosures

 

79

Item 5. Other Information

 

79

Item 6. Exhibits

 

80

Signatures

 

81

 

1


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. 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 or financial condition, business strategy, plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will” or “would” or the negative of these words or other similar terms or expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

 

our expectations regarding the timing, scope and results of our development activities, including our ongoing and planned clinical trials;

 

the timing of and plans for regulatory filings;

 

our plans to obtain and maintain regulatory approvals of our product candidates in any of the indications for which we plan to develop them, and any related restrictions, limitations, and/or warnings in the label of an approved product candidate;

 

the potential benefits of our product candidates and technologies;

 

our expectations regarding the use of our platform technologies to generate novel product candidates;

 

the market opportunities for our product candidates and our ability to maximize those opportunities;

 

our business strategies and goals;

 

estimates of our expenses, capital requirements, any future revenue, and need for additional financing;

 

our expectations regarding manufacturing capabilities and plans;

 

the performance of our third-party suppliers and manufacturers;

 

our ability to attract and/or retain new and existing collaborators with development, regulatory, manufacturing and commercialization expertise and our expectations regarding the potential benefits to be derived from such collaborations;

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our platform technologies and product candidates and our ability to operate our business without infringing on the intellectual property rights of others;

 

our expectations regarding developments and projections relating to our competitors, competing therapies that are or become available, and our industry;

 

our expectations regarding the impact of the COVID-19 pandemic and the Russia-Ukraine conflict on our business and operations, anticipated timelines, our industry and the economy;

 

future changes in or impact of law and regulations in the United States and foreign countries; and

 

the sufficiency of our existing cash and cash equivalents to fund our operations.

We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, strategy, short- and long-term business operations and objectives and financial needs.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. 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 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.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, advancements, discoveries, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person assumes responsibility for the accuracy and completeness of the

2


 

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 to changes in our expectations.

Unless the context otherwise indicates, references in this Quarterly Report on Form 10-Q to the terms “Poseida”, “the Company,” “we,” “our” and “us” refer to Poseida Therapeutics, Inc. and its subsidiaries.

We regularly make material business and financial information available to our investors using our investor relations website (https://investors.poseida.com). We therefore encourage investors and others interested in Poseida to review the information that we make available on our website, in addition to following our filings with the Securities and Exchange Commission, or the SEC, press releases and conference calls.

3


 

PART I.  FINANCIAL INFORMATION

Item 1.Financial Statements  

 

POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

183,489

 

 

$

206,325

 

Prepaid expenses and other current assets

 

 

7,021

 

 

 

7,548

 

Total current assets

 

 

190,510

 

 

 

213,873

 

Property and equipment, net

 

 

22,101

 

 

 

22,050

 

Operating lease right-of-use assets

 

 

28,947

 

 

 

26,177

 

Intangible assets

 

 

1,320

 

 

 

1,320

 

Goodwill

 

 

4,228

 

 

 

4,228

 

Other long-term assets

 

 

1,046

 

 

 

1,661

 

Total assets

 

$

248,152

 

 

$

269,309

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,589

 

 

$

8,961

 

Accrued expenses and other liabilities

 

 

29,584

 

 

 

23,540

 

Operating lease liabilities, current

 

 

7,386

 

 

 

6,337

 

Deferred revenue, current

 

 

3,359

 

 

 

4,497

 

Total current liabilities

 

 

43,918

 

 

 

43,335

 

Operating lease liabilities, non-current

 

 

27,848

 

 

 

25,504

 

Term debt

 

 

57,967

 

 

 

29,357

 

Deferred CIRM grant liability

 

 

3,992

 

 

 

3,992

 

Deferred revenue, noncurrent

 

 

8,968

 

 

 

9,265

 

Deferred tax liability

 

 

55

 

 

 

55

 

Other long-term liabilities

 

 

1,702

 

 

 

1,590

 

Total liabilities

 

 

144,450

 

 

 

113,098

 

Commitments and Contingencies (Note 11)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value: 250,000,000 shares authorized at March 31, 2022 and December 31, 2021; 62,704,726 and 62,523,596 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

568,612

 

 

 

563,064

 

Accumulated deficit

 

 

(464,916

)

 

 

(406,859

)

Total stockholders’ equity

 

 

103,702

 

 

 

156,211

 

Total liabilities and stockholders’ equity

 

$

248,152

 

 

$

269,309

 

 

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

 

4


 

 

POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Collaboration revenue

 

$

1,435

 

 

$

 

Total revenue

 

 

1,435

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

48,850

 

 

 

29,095

 

General and administrative

 

 

9,546

 

 

 

8,369

 

Total operating expenses

 

 

58,396

 

 

 

37,464

 

Loss from operations

 

 

(56,961

)

 

 

(37,464

)

Other income (expense):

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,077

)

 

 

(838

)

Other expense, net

 

 

(19

)

 

 

(12

)

Net loss before income tax

 

 

(58,057

)

 

 

(38,314

)

Income tax expense

 

 

 

 

 

 

Net loss

 

$

(58,057

)

 

$

(38,314

)

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized gain on short-term investments

 

 

 

 

 

10

 

Comprehensive loss

 

$

(58,057

)

 

$

(38,304

)

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.93

)

 

$

(0.62

)

Weighted-average number of shares outstanding, basic and diluted

 

 

62,555,915

 

 

 

61,981,081

 

 

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

5


 

 

POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2022

 

 

 

62,523,596

 

 

$

6

 

 

$

563,064

 

 

$

 

 

$

(406,859

)

 

$

156,211

 

Issuance of common stock under employee stock compensation plans

 

 

 

181,130

 

 

 

 

 

 

681

 

 

 

 

 

 

 

 

 

681

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

4,867

 

 

 

 

 

 

 

 

 

4,867

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(58,057

)

 

 

(58,057

)

Balance at March 31, 2022

 

 

 

62,704,726

 

 

$

6

 

 

$

568,612

 

 

$

 

 

$

(464,916

)

 

$

103,702

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

Other

Comprehensive

 

 

Accumulated

 

 

Total

Stockholders’

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at January 1, 2021

 

 

 

 

 

 

 

61,860,897

 

 

$

6

 

 

$

543,842

 

 

$

5

 

 

$

(281,885

)

 

$

261,968

 

Issuance of common stock under employee stock compensation plans

 

 

 

265,839

 

 

 

 

 

 

360

 

 

 

 

 

 

 

 

 

360

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

3,462

 

 

 

 

 

 

 

 

 

3,462

 

Unrealized gain on available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

10

 

 

 

 

 

 

10

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,314

)

 

 

(38,314

)

Balance at March 31, 2021

 

 

 

62,126,736

 

 

$

6

 

 

$

547,664

 

 

$

15

 

 

$

(320,199

)

 

$

227,486

 

 

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

 

6


 

 

POSEIDA THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Operating Activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(58,057

)

 

$

(38,314

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

1,207

 

 

 

1,072

 

Deferred revenue

 

 

(1,435

)

 

 

 

Loss on contract termination

 

 

8,067

 

 

 

 

Loss on disposal of property and equipment

 

 

 

 

 

4

 

Stock-based compensation

 

 

4,867

 

 

 

3,462

 

Accretion of discount on issued term debt

 

 

173

 

 

 

168

 

Accretion of investment discount, net

 

 

 

 

 

46

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(667

)

 

 

793

 

Operating lease right-of-use assets

 

 

1,032

 

 

 

947

 

Other long-term assets

 

 

616

 

 

 

 

Accounts payable

 

 

(5,391

)

 

 

1,720

 

Accrued expenses and other liabilities

 

 

(703

)

 

 

(8,495

)

Operating lease liabilities

 

 

(1,033

)

 

 

(459

)

Net cash used in operating activities

 

 

(51,324

)

 

 

(39,056

)

Investing Activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(743

)

 

 

(475

)

Proceeds from maturities of short-term investments

 

 

 

 

 

125,000

 

Net cash provided by (used in) investing activities

 

 

(743

)

 

 

124,525

 

Financing Activities:

 

 

 

 

 

 

 

 

Net proceeds from issuance of common stock under employee stock compensation plans

 

 

681

 

 

 

360

 

Payment of debt issuance costs

 

 

(1,450

)

 

 

 

Proceeds from term debt

 

 

30,000

 

 

 

 

Net cash provided by financing activities

 

 

29,231

 

 

 

360

 

Net increase (decrease) in cash and cash equivalents

 

 

(22,836

)

 

 

85,829

 

Cash and cash equivalents at beginning of period

 

 

206,325

 

 

 

83,966

 

Cash and cash equivalents at end of period

 

$

183,489

 

 

$

169,795

 

 

 

 

 

 

 

 

 

 

Non-cash operating, investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment in accounts payable and accrued liabilities

 

$

516

 

 

$

502

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

718

 

 

$

671

 

 

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

 

7


 

 

Note 1. Nature of Business and Basis of Presentation

Nature of Operations

Poseida Therapeutics, Inc. (the “Company” or “Poseida”) is a clinical-stage biopharmaceutical company dedicated to utilizing its proprietary genetic engineering platform technologies to create next generation cell and gene therapeutics with the capacity to cure. The Company has discovered and is developing a broad portfolio of product candidates in a variety of indications based on its core proprietary platforms, including the Company’s non-viral piggyBac DNA Delivery System, Cas-CLOVER Site-specific Gene Editing System and nanoparticle- and AAV-based gene delivery technologies.

The Company is subject to risks and uncertainties common to development-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts will require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s therapeutic development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales.

Liquidity and Capital Resources

The Company has experienced net losses and negative cash flows from operations since its inception and has relied on its ability to fund its operations primarily through equity financings. For the three months ended March 31, 2022, the Company incurred a net loss of $58.1 million and negative cash flows from operations of $51.3 million. The Company expects to continue to incur net losses and negative cash flows from operations for at least the next several years. As of March 31, 2022, the Company had an accumulated deficit of $464.9 million.

As of March 31, 2022, the Company had cash and cash equivalents of $183.5 million. Management concluded that the balance of cash and cash equivalents may not be sufficient to fund the Company’s planned expenditures and meet its obligations for at least 12 months following the financial statement issuance date without raising additional funding or making changes to operating plans or programs to reduce expenses. As a result, there is substantial doubt about the Company’s ability to continue as a going concern for 12 months following the issuance date of the condensed consolidated financial statements for the three months ended March 31, 2022. The Company’s ability to continue as a going concern is dependent upon its ability to obtain additional funding or adjust operating plans or programs and associated spending. Management believes that the Company’s liquidity position provides sufficient runway to achieve critical research and development milestones and demonstrate continued progress in the gene therapy and cell therapy programs. Management intends to raise additional capital through equity offerings and/or debt financings, or from other potential sources of liquidity, which may include collaborations, licensing or other commercial agreements for one or more of the Company’s research programs or patent portfolios. Adequate funding, if needed, may not be available to the Company on acceptable terms, or at all. The Company’s ability to obtain additional funds may be adversely impacted by potential worsening global economic conditions and the disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from, among other things, the continuing public health concerns regarding the COVID-19 pandemic and civil and political unrest in certain countries and regions. If the Company is unable to raise capital when needed or on attractive terms, it would be forced to delay, reduce, or eliminate its research and development programs or other operations. If any of these events occur, the Company’s ability to achieve its operational goals would be adversely affected. The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that might result from the outcome of this uncertainty.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements reflect the Company’s financial position, results of operations and cash flows, in conformity with generally accepted accounting principles in the United States of America (“GAAP”), for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The accompanying condensed consolidated financial statements include the accounts of Poseida Therapeutics, Inc. and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. These unaudited condensed consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly state the financial position and the results of its operations and cash flows for interim periods presented. Interim-period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual

8


 

Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on March 10, 2022 from which the Company derived its condensed consolidated balance sheet as of December 31, 2021.

Risk and Uncertainties

In March 2020, the World Health Organization made the assessment that a novel strain of coronavirus, SARS-CoV-2, a novel strain of coronavirus, commonly referred to as COVID-19 had become a global pandemic. The impact of this pandemic has been and may continue to be extensive in many aspects of society, which has resulted in and may continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.

Impacts to the Company’s business, some of which the Company has experienced to date, include, but are not limited to, temporary closures of its facilities or those of its vendors, disruptions or restrictions on its employees’ ability to travel, disruptions to or delays in ongoing laboratory experiments, preclinical studies, clinical trials, third-party manufacturing supply and other operations, the diversion of healthcare resources away from the conduct of clinical trials to focus on pandemic concerns, interruptions or delays in the operations of the U.S. Food and Drug Administration (“FDA”) or other regulatory authorities, and the Company’s ability to raise capital and conduct business development activities.

Russia’s invasion of Ukraine and the retaliatory measures that have been taken, or could be taken in the future, by the United States, NATO, and other countries have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could disrupt the Company’s supply chain and adversely affect its ability to conduct ongoing and future clinical trials of the Company’s product candidates. The extent to which the ongoing conflict ultimately impacts the Company’s business is highly uncertain and cannot be predicted with confidence at this time.

Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. On an ongoing basis, the Company evaluates its estimates, which include, but are not limited to, estimates related to revenue, accrued expenses, research and development expenses, stock-based compensation expense and deferred tax valuation allowances. The Company bases its estimates on historical experience and other market-specific or relevant assumptions that it believes to be reasonable under the circumstances. Actual results may differ from those estimates or assumptions.

Fair Value Measurements

Certain financial instruments are required to be recorded at fair value. Other financial instruments, like cash are recorded at cost, which approximates fair value. Cash equivalents and short-term investments are comprised of available-for-sale securities, which are carried at fair value. Additionally, carrying amounts of accounts payable and accrued liabilities approximate fair value because of the short maturity of those instruments. The carrying value of the Company’s term debt approximates its fair value due to its variable interest rate, which approximates a market interest rate.

Concentration of Business Risk

The Company operates in one reportable business segment and has one customer. The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and materials for its development programs. These programs could be adversely affected by a significant interruption in these manufacturing services.

Leases

The Company accounts for leases in accordance with Accounting Standards Codification Topic 842, Leases, (“ASC 842”). The Company determines if an arrangement is a lease at contract inception. A lease exists when a contract conveys the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The definition of a lease embodies two conditions: (1) there is an identified asset in the contract that is land or a depreciable asset (i.e., property, plant, and equipment), and (2) the Company has the right to control the use of the identified asset.

Operating leases where the Company is the lessee are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, current and operating lease liabilities, non-current on its condensed consolidated balance sheets. The lease liabilities are initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date.

9


 

ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. The rates implicit in the Company’s leases are not known, therefore, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The lease term for all of the Company’s leases includes the noncancelable period of the lease. Where the Company’s lease term is impacted by options to extend or terminate the lease, when it is reasonably certain that it will exercise such option, then the lease payments are included in the measurement of the lease asset or liability.

The Company has elected not to recognize ROU assets and lease liabilities for all short-term leases that have a lease term of 12 months or less. The Company recognizes the lease payments associated with its short-term leases as an expense on a straight-line basis over the lease term. There are no variable lease payments associated with these leases. Additionally, the Company has elected to account for the lease and non-lease components together as a single lease component for its real estate asset class.

Revenue Recognition

The Company’s revenues to date have been generated primarily through collaboration and license agreements. The Company’s collaboration and license agreements may contain multiple elements including intellectual property licenses and research, and development services. Consideration the Company receives under these arrangements may include upfront payments, research and development funding, cost reimbursements, research, development, regulatory and commercial milestone payments, and royalty payments.

The Company applies Accounting Standard Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), issued by the Financial Accounting Standards Board (“FASB”) to account for its contracts with customers. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for these services and excludes sales incentives and amounts collected on behalf of third parties. The Company analyzes the nature of these performance obligations in the context of individual collaboration and license agreements in order to assess the distinct performance obligations. The Company evaluates its contracts with customers for proper classification in the consolidated statements of operations based on the nature of the underlying activity. Transactions with customers recorded in the Company’s consolidated statements of operations are recorded on either a gross or net basis, depending on the characteristics of the collaborative relationship.

To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it is entitled in exchange for the goods or services it transfers to the customer.

Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these condensed consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Pronouncements

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation- Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40) which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another Topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument ASU 2021-04 also provides further guidance on measuring the effect of a modification or an

10


 

exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange. ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The Company adopted ASU 2021-04 on January 1, 2022. The adoption of this standard had no impact on the Company’s condensed consolidated financial statements and disclosures.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which established ASC 326, Financial Instruments - Credit Losses. This ASU, along with subsequent amendments, improves financial reporting by requiring timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions and reasonable and supportable forecasts. This guidance will become effective for the Company beginning January 1, 2023, with early adoption permitted. The Company is currently evaluating the potential impact ASU 2016-13 may have on its financial position and results of operations upon adoption.

Note 3. Composition of Certain Balance Sheet Components

Property and equipment, net

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

 

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Laboratory equipment

 

$

15,271

 

 

$

14,192

 

Leasehold improvements

 

 

13,941

 

 

 

13,910

 

Computer equipment and software

 

 

2,227

 

 

 

2,137

 

Furniture and fixtures

 

 

983

 

 

 

928

 

Construction in progress

 

 

23

 

 

 

20

 

Total property and equipment

 

 

32,445

 

 

 

31,187

 

Less: Accumulated depreciation and amortization

 

 

(10,344

)

 

 

(9,137

)

Total property and equipment, net

 

$

22,101

 

 

$

22,050

 

 

Depreciation and amortization expense associated with property and equipment was $1.2 million and $1.1 million for the three months ended March 31, 2022 and 2021, respectively.

Accrued expenses and other liabilities

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

 

 

 

March 31,

2022

 

 

December 31,

2021

 

Contract research services

 

$

14,898

 

 

$

12,292

 

Accrued loss on contract termination

 

 

6,250

 

 

 

 

Payroll and related expense

 

 

4,379

 

 

 

8,760

 

Other

 

 

4,057

 

 

 

2,488

 

Total accrued expenses and other liabilities

 

$

29,584

 

 

$

23,540

 

The accrued loss on a contract termination represents a loss resulting from an early termination of the Company’s contract with one of its autologous contract manufacturers during the three months ended March 31, 2022, consisting of future contractual payment obligations.

11


 

Note 4. Financial Instruments

The following table summarizes the amortized cost and fair value of securities available-for-sale (in thousands):

 

 

 

Amortized

Cost/Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair Value

 

March 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

166,128

 

 

$

 

 

$

 

 

$

166,128

 

Total

 

$

166,128

 

 

$

 

 

$

 

 

$

166,128

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market fund

 

$

176,102

 

 

$

 

 

$

 

 

$

176,102

 

Total

 

$

176,102

 

 

$

 

 

$

 

 

$

176,102

 

 

The Company reviews its investment portfolio to identify and evaluate investments that have an indication of possible other-than-temporary impairment. Factors considered in determining whether a loss is other-than-temporary include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the investee, and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value. The Company does not intend to sell any investments prior to recovery of their amortized cost basis for any investments in an unrealized loss position.

Note 5. Fair Value Measurement

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of inputs that may be used to measure fair value:

 

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities

 

Level 2 — Significant other observable inputs other than Level 1 prices such as quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability

 

Level 3 — Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity)

 

The Company classifies its money market funds and U.S. treasury securities, which are valued based on quoted market prices in active markets with no valuation adjustment, as Level 1 assets within the fair value hierarchy.

12


 

The following table summarizes the Company’s valuation hierarchy for its financial assets and liabilities measured at fair value on a recurring basis (in thousands):

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

March 31, 2022:

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)

 

$

166,128

 

 

$

 

 

$

 

Total

 

$

166,128

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds(1)

 

$

176,102

 

 

$

 

 

$

 

Total

 

$

176,102

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Included in cash and cash equivalents in the accompanying condensed consolidated balance sheets.

 

 

Note 6. Collaborations and License Agreement with Takeda

In October 2021, the Company entered into a collaboration and license agreement (the “Takeda Collaboration Agreement”) with Takeda Pharmaceuticals USA, Inc. (“Takeda”), pursuant to which the Company granted to Takeda a worldwide exclusive license under the Company’s certain platform technologies including piggyBac, Cas-CLOVER, biodegradable DNA and RNA nanoparticle delivery technology and other proprietary genetic engineering platforms to research, develop, manufacture and commercialize gene therapy products for certain indications, including Hemophilia A. The parties are collaborating to initially develop up to six in vivo gene therapy programs and Takeda also has an option to add two additional programs to the collaboration. The Company is obligated to perform research activities to the extent requested by Takeda up to the candidate selection stage, after which Takeda is obligated to assume responsibility for further development, manufacturing and commercialization of each program.

Under the Takeda Collaboration Agreement, the Company received an upfront payment of $45.0 million, of which $5.0 million represents prepaid research funding. Takeda is obligated to provide funding for all collaboration program development costs; provided that the Company is obligated to perform certain platform development activities at its own cost. Under the Takeda Collaboration Agreement, the Company is eligible to receive preclinical milestone payments that could potentially exceed $82.5 million in the aggregate if preclinical milestones for all six programs are achieved. The Company is also eligible to receive future clinical development, regulatory and commercial milestone payments of $435.0 million in the aggregate per target, with a total potential deal value over the course of the collaboration of up to $2.7 billion, if milestones for all six programs are achieved and up to $3.6 billion if the milestones related to the two optional programs are also achieved. The Company is entitled to receive tiered royalty payments on net sales in the mid-single to low double digits, subject to certain standard reductions and offsets. Royalties will be payable, on a product-by-product and country-by-country basis, until the latest of the expiration of the licensed patents covering such product in such country, ten years from first commercial sale of such product in such country, or expiration of regulatory exclusivity for such product in such country.

The promised goods and services under the Takeda Collaboration Agreement were accounted for as following separate performance obligations: (i) development and commercialization licenses for initial two indications, (ii) separate material rights associated with four additional licenses Takeda has an option to acquire individually, (iii) platform technology enhancement services, and (iv) research and development services.

13


 

The Company recognizes revenue from platform technology enhancement services based on the amount of incurred development expenses reimbursed by the customer as a percentage of total expected reimbursable expenses associated with the contract. As of March 31, 2022, all future potential milestone payments were excluded from the estimated total transaction price as they were considered constrained.

For the three months ended March 31, 2022, the Company recognized revenue of $1.4 million from the Takeda Collaboration Agreement, consisting of the platform technology enhancement services and the research and development services, which are delivered over time. As of March 31, 2022, the balance of estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied, or partially unsatisfied, pursuant to the Company’s existing collaboration and license agreement consisted of $3.4 million presented as a deferred revenue, current and $9.0 million presented as a deferred revenue, non-current, in the accompanying condensed consolidated balance sheet.

Note 7. California Institute of Regenerative Medicine Award

The Company has been awarded funding from California Institute of Regenerative Medicine (“CIRM”) to develop certain internal programs. Under the terms of the funding both CIRM and the Company co-fund specified programs, under which funding is provided in developmental milestones determined as a part of the award. The Company is obligated to share potential future revenues for the related programs with CIRM. The percentage of revenues due to CIRM in the future is dependent on the amount of the award received and whether revenue is generated from product sales or through license fees. The maximum revenue sharing amount the Company may be required to pay to CIRM is equal to nine times the total amount awarded and paid to the Company. The Company has the option to decline any and all future grant amounts awarded by CIRM. As an alternative to revenue sharing, the Company has an option to convert any award to a loan, which such option the Company must exercise on or before ten business days after the FDA notifies the Company that it has accepted the Company’s application for marketing authorization. In the event the Company exercises its right to convert any award to a loan, it would be obligated to repay the loan within ten business days of making such election. Repayment amounts due to CIRM vary dependent on when the award is converted to a loan, ranging from 60% of the award granted to the full amount received and interest at the rate of the three-month LIBOR rate plus 10% per annum. Since the Company may be required to repay some or all of the amounts awarded by CIRM, the Company accounted for this award as a liability as the Company’s intention is to convert the award into a loan. Given the uncertainty in amounts due upon repayment, the Company has recorded amounts received without any discount or interest recorded, upon determination of amounts that would become due, the Company will adjust the amount of the liability accordingly.

In September 2018, the Company was granted an award in the amount of $4.0 million from CIRM to support the Company’s preclinical studies for its P-PSMA-101 program. The Company received the full amount of the award based on achievement of specific developmental milestones. The amount of the award is presented as a deferred CIRM grant liability in the accompanying condensed consolidated balance sheet.

Note 8. Term Debt

In 2017, the Company entered into a loan and security agreement with Oxford Finance LLC (“Oxford”), which was subsequently amended (“Amended Loan Agreement”), pursuant to which the Company borrowed $20.0 million under a Term A loan and $10.0 million under a Term B loan.

In February 2022, the Company entered into a new Loan and Security Agreement (“2022 Loan Agreement”) with Oxford. Pursuant to the terms of the 2022 Loan Agreement, the Company borrowed $60.0 million in term loans (the “Term Loans”), of which $31.6 million was used to repay the balance outstanding under the Amended Loan Agreement, including $0.2 million of accrued interest. Under the 2022 Loan Agreement the interest-only period is through April 1, 2025, followed by 23 equal monthly payments of principal and applicable interest. Upon occurrence of a qualifying equity event, the interest-only period may be extended through April 1, 2026, followed by 11 equal monthly payments of principal and applicable interest. As a result, all amounts outstanding under the 2022 Loan Agreement will mature on February 1, 2027 (the “Maturity Date”). In connection with the repayment of the balance outstanding under the Amended Loan Agreement, the Company incurred amendment and final payment fees of $1.5 million previously due on the earlier of (i) the maturity date, (ii) acceleration of any Term A or Term B loans, or (iii) the prepayment of the Term A or Term B loans.

The Company accounted for this amendment as debt modification in accordance with ASC Topic 470, Debt because the modification was not considered substantial.

The balance outstanding under the 2022 Loan Agreement bears interest at a floating per annum rate equal to 7.83% plus the greater of (a) the 30-day U.S. Dollar (USD) LIBOR rate and (b) 0.11%. The interest rate applicable to the Term Loans as of March 31, 2022 was 7.94% per annum. The 2022 Loan Agreement includes a provision addressing replacement of LIBOR with an alternate

14


 

benchmark rate, which may include the Secured Overnight Financing Rate, when LIBOR is phased out. LIBOR is scheduled to be phased out in June 2023. Consistent with the Amended Loan Agreement, the Company is required to make a final payment fee of 7.5% of the principal balance outstanding, payable on the earlier of (i) the Maturity Date, (ii) acceleration of any Term Loan, or (iii) the prepayment of the Term Loan. As of March 31, 2022, there was $60.0 million outstanding under the Term Loans. In connection with the Amended Loan Agreement, the Company previously incurred debt issuance costs of $1.6 million, which have been recorded as a debt discount and are being accreted to interest expense over the term of the Term Loans. Interest on the Term Loans, consisting of the stated interest rate, final payment fee and amortization of the discount, is being recognized under the effective interest method using a rate of 9.67%. As of March 31, 2022, the balance of the unamortized debt discount was $2.0 million. The balance of the accrued final payment fee was $1.7 million as of March 31, 2022 and is presented as other long-term liability in the accompanying condensed consolidated balance sheet.

The Company has an option to repay the outstanding debt under the 2022 Loan Agreement at any time in increments of $5.0 million, subject to a prepayment fee of 1.0% if the Term Loans are prepaid on or prior to February 22, 2024, after which no prepayment penalty would be applied.

The Company may use the proceeds from the Term Loans solely for its working capital requirements and to fund its general business operations. The Company’s obligations under the 2022 Loan Agreement are secured by a first priority security interest in substantially all of its current and future assets, other than its intellectual property. In addition, the Company has also agreed not to encumber its intellectual property assets, except as permitted by the 2022 Loan Agreement. While any amounts are outstanding under the 2022 Loan Agreement, the Company is subject to a number of affirmative and restrictive covenants, including covenants regarding dispositions of property, business combinations or acquisitions, among other customary covenants. The Company is also restricted from declaring dividends or making other distributions or payments on its capital stock in excess of $0.3 million per calendar year, subject to limited exceptions. As of March 31, 2022, the Company was in compliance with all covenants under the 2022 Loan Agreement.

Note 9. Stockholders’ Equity

 

Authorized Shares

In connection with the completion of the Company’s initial public offering in July 2020, the Company amended its certificate of incorporation to authorize 250,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of undesignated preferred stock, par value $0.0001 per share, that may be issued from time to time by the Company’s board of directors in one or more series. Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Company’s board of directors. Since the Company’s inception, there have been no dividends declared.

Warrants

Pursuant to the Amended Loan Agreement, the Company issued Oxford (i) in 2017, a warrant to purchase 93,518 shares of common stock at an exercise price of $4.28 per share, which will expire in 2027 unless earlier exercised and (ii) in 2018 and 2019, warrants to purchase an aggregate of 27,604 shares of common stock at an exercise price of $7.25 per share, which will expire in 2028 and 2029, respectively, unless earlier exercised.

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Note 10. Stock-Based Compensation

In July 2020, the Company’s board of directors and stockholders approved and adopted the 2020 Equity Incentive Plan (the “2020 Plan”). Under the 2020 Plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other stock or cash-based awards to individuals who are current employees, officers, directors or consultants of the Company. A total of 11,183,476 shares of common stock were approved to be initially reserved for issuance under the 2020 Plan. The number of shares that remained available for issuance under the Company’s previous equity incentive plan as of the effective date of the 2020 Plan and shares subject to outstanding awards under the Company’s previous equity incentive plan as of the effective date of the 2020 Plan that are subsequently canceled, forfeited or repurchased by the Company are added to the shares reserved under the 2020 Plan. The number of shares of common stock available for issuance under the 2020 Plan is automatically increased on the first day of each calendar year during the ten-year term of the 2020 Plan, beginning with January 1, 2021 and ending with January 1, 2030, by an amount equal to 5% of the outstanding number of shares of the Company’s common stock on December 31 of the preceding calendar year or such lesser amount as determined by the Company’s board of directors.

In February 2022, the Company’s board of directors approved and adopted the 2022 Inducement Plan (the “Inducement Plan”). Under the Inducement Plan, the Company may grant nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other awards to individuals not previously employees or non-employee directors of the Company, as an inducement toward entering into employment with the Company. The maximum number of shares of common stock that may be issued under the Inducement Plan is 2,000,000 shares.

Following is a summary of the Company’s stock option activity for the three months ended March 31, 2022:

 

 

 

Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual

Term (Years)

 

 

Intrinsic

Value

(thousands)

 

Balance at January 1, 2022

 

 

9,899,707

 

 

$

9.57

 

 

 

 

 

 

 

 

 

Granted

 

 

3,083,132

 

 

 

3.88

 

 

 

 

 

 

 

 

 

Exercised

 

 

(23,303

)

 

 

1.81

 

 

 

 

 

 

 

 

 

Forfeited/Cancelled

 

 

(140,663

)

 

 

9.97

 

 

 

 

 

 

 

 

 

Balance at March 31, 2022

 

 

12,818,873

 

 

$

8.21

 

 

 

8.77

 

 

$

3,674,177

 

Options vested and expected to vest as of March 31, 2022

 

 

12,818,873

 

 

$

8.21

 

 

 

8.77

 

 

$

3,674,177

 

Options vested and exercisable as of March 31, 2022

 

 

3,529,827

 

 

$

9.85

 

 

 

7.64

 

 

$

1,326,838

 

 

The aggregate intrinsic value of options exercised during the three months ended March 31, 2022 and 2021 was $34 thousand and $2.4 million, respectively, determined as of the date of exercise. The Company received $0.1 million and $0.4 million in cash from options exercised during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, total unrecognized compensation cost related to stock options was $46.2 million, and the weighted-average period over which this cost is expected to be recognized was approximately 2.9 years.

The Company uses the Black-Scholes option pricing model to estimate the fair value of each option grant on the date of grant or any other measurement date. The assumptions that the Company used to determine the fair value of options granted to employees, non-employees and directors were as follows:

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Risk-free interest rate

 

1.3%–1.9%

 

 

0.5%–0.7%

 

Expected volatility

 

83%–92%

 

 

82%

 

Expected term (years)

 

3.0–8.0

 

 

 

6.0

 

Dividend yield

 

 

 

 

 

 

The following is a summary of the Company’s restricted stock unit (“RSU”) activity for the three months ended March 31, 2022:

16


 

 

 

Shares

 

 

Weighted

Average

Grant Date

Fair Value

 

Balance at January 1, 2022

 

 

 

 

$