SEC Filing | IN8bio, Inc.

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10-Q

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, 2023


☐	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: 001-39692

IN8BIO, INC.

(Exact name of Registrant as specified in its Charter)


Delaware	82-5462585
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

350 5th Avenue, Suite 5330 New York, New York	10118
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (646) 600-6438

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, $0.0001 par value per share	INAB	The Nasdaq Stock Market LLC

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.

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 ☒

The number of shares of Registrant’s Common Stock outstanding as of May 7, 2023 was 29,750,348.

Table of Contents


		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements (Unaudited)	1
	Condensed Balance Sheets	1
	Condensed Statements of Operations	2
	Condensed Statements of Stockholders’ Equity	3
	Condensed Statements of Cash Flows	4
	Notes to Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	67
	Signatures

PART I—FINANCIAL INFORMATION

Item 1. Condensed Financial Statements

IN8BIO, INC.

CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)


	March 31,
	2023			December 31,
	(unaudited)			2022
Assets				(Note 2)
Current assets
Cash	$	10,860		$	18,182
Prepaid expenses and other current assets		3,542			4,052
Total Current Assets		14,402			22,234
Non-current assets
Property and equipment, net		4,198			4,397
Construction in progress		45			29
Restricted cash		253			252
Right-of-use assets - finance leases		1,503			1,691
Right-of-use assets - operating leases		4,022			4,181
Other non-current assets		255			255
Total Non-Current Assets		10,276			10,805
Total Assets	$	24,678		$	33,039
Liabilities and Stockholders' Equity
Liabilities
Current liabilities
Accounts payable	$	870		$	2,091
Accrued expenses and other current liabilities		1,492			2,342
Short-term finance lease liability		654			682
Short-term operating lease liability		732			707
Total Current Liabilities		3,748			5,822
Long-term finance lease liability		664			811
Long-term operating lease liability		3,478			3,674
Total Non-Current Liabilities		4,142			4,485
Total Liabilities		7,890			10,307
Stockholders' Equity
Preferred stock, par value $0.0001 per share; 10,000,000 shares authorized at March 31, 2023 and December 31, 2022, respectively. No shares issued and outstanding		—			—
Common stock, par value $0.0001 per share; 490,000,000 shares authorized at March 31, 2023 and December 31, 2022; 24,960,869 and 24,545,157 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		3			3
Additional paid-in capital		85,522			83,941
Accumulated deficit		(68,737	)		(61,212	)
Total Stockholders' Equity		16,788			22,732
Total Liabilities and Stockholders' Equity	$	24,678		$	33,039

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

IN8BIO, INC.

CONDENSED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Operating expenses:
Research and development	$	4,385		$	2,381
General and administrative		3,470			3,764
Total operating expenses		7,855			6,145
Other income		330			—
Loss from operations		(7,525	)		(6,145	)
Net loss	$	(7,525	)	$	(6,145	)
Net loss per share – basic and diluted	$	(0.30	)	$	(0.33	)
Weighted-average number of shares used in computing net loss per common share, basic and diluted		24,732,580			18,800,546

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

IN8BIO INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)


	Common Stock				Additional Paid-In		Accumulated			Total
	Shares		Amount		Capital		Deficit			Stockholders' Equity
Balance at December 31, 2021		18,781,242	$	2	$	70,872	$	(32,691	)	$	38,183
Stock option exercises		31,025		—		33		—			33
Stock-based compensation expense		—		—		764		—			764
Net loss		—		—		—		(6,145	)		(6,145	)
Balance at March 31, 2022		18,812,267	$	2	$	71,669	$	(38,836	)	$	32,835

Balance at December 31, 2022		24,545,157	$	3	$	83,941	$	(61,212	)	$	22,732
Issuance of common stock, net of issuance cost		415,712		—		722		—			722
Stock-based compensation expense		—		—		859		—			859
Net loss		—		—		—		(7,525	)		(7,525	)
Balance at March 31, 2023		24,960,869	$	3	$	85,522	$	(68,737	)	$	16,788

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

IN8BIO, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Three Months Ended March 31,
	2023			2022
Operating activities
Net loss	$	(7,525	)	$	(6,145	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		243			16
Non-cash stock-based compensation		859			764
Amortization of finance lease right-of-use assets		188			149
Amortization of operating lease right-of-use assets		159			67
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		510			792
Accounts payable		(1,035	)		158
Accrued expenses and other current liabilities		(667	)		(351	)
Short-term operating lease liabilities		25			72
Long-term operating lease liabilities		(196	)		(81	)
Net cash used in operating activities		(7,439	)		(4,559	)
Investing activities
Purchases of property and equipment		(371	)		(8	)
Construction in progress		(58	)		(245	)
Net cash used in investing activities		(429	)		(253	)
Financing activities
Proceeds from the issuance of common stock, net of offering costs		722			—
Principal payments on finance leases		(175	)		(135	)
Exercise of common stock options		—			33
Net cash provided by (used in) financing activities		547			(102	)
Net decrease in cash and restricted cash		(7,321	)		(4,914	)
Cash and restricted cash at beginning of period		18,434			37,272
Cash and restricted cash at end of period	$	11,113		$	32,358

Cash, end of period	$	10,860		$	32,107
Restricted cash, end of period		253			251
Cash and restricted cash, end of period	$	11,113		$	32,358

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

IN8BIO, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1. ORGANIZATION AND NATURE OF OPERATIONS

Organization and Business

IN8bio, Inc. (the “Company”) is a clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of gamma-delta T cell product candidates for solid and liquid tumors. The Company’s lead product candidates are currently in Phase 1 clinical trials: INB-200, for the treatment of patients with newly diagnosed glioblastoma (“GBM”), and INB-100, for the treatment of patients with hematologic malignancies that are undergoing hematopoietic stem cell transplantation (“HSCT”). In addition, the Company is currently preparing to initiate patient enrollment in the company-sponsored Phase 2 clinical trial of INB-400 in which autologous genetically modified gamma-delta T cells will be assessed in newly diagnosed GBM patients. With additional funding, the Company is expecting to submit its company-sponsored investigational new drug application (“IND”) and initiate its Phase 1b clinical trial of INB-410 in which allogeneic genetically modified gamma-delta T cells will be assessed in both relapsed and newly diagnosed GBM patients in late 2023. The Company’s DeltEx platform has yielded a broad portfolio of preclinical programs, including INB-300 and INB-500, focused on addressing GBM and other solid tumor types.

Incysus, Inc. (“Incysus”) was a corporation formed in the State of Delaware on November 23, 2015 and Incysus, Ltd. was incorporated in Bermuda on February 8, 2016. Incysus was the wholly owned United States subsidiary of Incysus, Ltd. On May 7, 2018, Incysus, Ltd. reincorporated in the United States in a domestication transaction (the “Domestication”) in which Incysus, Ltd. converted into a newly formed Delaware corporation, Incysus Therapeutics, Inc. (“Incysus Therapeutics”). On July 24, 2019, Incysus Therapeutics merged with Incysus. Incysus Therapeutics subsequently changed its name to IN8bio, Inc. in August 2020. Following the Domestication in May 2018 and the merging of Incysus Therapeutics and Incysus in July 2019, the Company does not have any subsidiaries to consolidate. The Company is headquartered in New York, New York.

Going Concern

To date, the Company has funded its operations primarily with proceeds from various public and private offerings of its common and preferred stock. The Company has incurred recurring losses and negative operating cash flows since its inception, including net losses of $7.5 million and $6.1 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, the Company had an accumulated deficit of $68.7 million.

On August 16, 2022, the Company completed an underwritten public offering of 5,394,737 shares of its common stock at a public offering price of $1.90 per share, for net proceeds of approximately $9.0 million, after deducting underwriting discounts, commissions and offering expenses. On August 19, 2022, the underwriter partially exercised their option to purchase an additional 268,949 shares at the public offering price of $1.90 per share, resulting in additional net proceeds of approximately $0.4 million, after deducting underwriting discounts, commissions and offering expenses, increasing the aggregate net proceeds from the offering to approximately $9.4 million.

In November 2022, the Company filed a shelf registration statement on Form S-3 (File No. 333-268288) (the “Shelf Registration Statement”) with the Securities and Exchange Commission (“SEC”), which permits the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $200 million of its common stock and preferred stock, various series of debt securities and/or warrants to purchase any of such securities, of which $50 million of common stock may be issued and sold pursuant to an at-the-market offering program (“ATM”). The Company entered into a Controlled Equity OfferingSM sales agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”) and Truist Securities, Inc. (“Truist”) under which Cantor Fitzgerald and Truist agreed to act as sales agents to sell shares of the Company’s common stock, from time to time, through the ATM program. Under current SEC regulations, if at any time the Company's public float is less than $75.0 million, and for so long as the Company's public float remains less than $75.0 million, the amount the Company can raise through primary public offerings of securities in any 12-month period using shelf registration statements is limited to an aggregate of one-third of the Company's public float, which is referred to as the baby shelf rules. As of March 31, 2023, the Company's calculated public float was less than $75.0 million. During the three months ended March 31, 2023, the Company sold an aggregate of 415,712 shares of common stock under the ATM, resulting in net proceeds of approximately $0.7 million, after deducting fees and expenses. Subsequent to March 31, 2023, the Company sold $9.9 million in net proceeds, after deducting fees and expenses, pursuant to its ATM program.

The Company has not yet generated product sales and as a result has experienced operating losses since inception. The Company expects to incur additional losses in the future as it advances its product candidates through clinical trials, seeks to expand its product candidate portfolio through developing additional product candidates, grows its clinical, regulatory and quality capabilities, and incurs costs associated with operating as a public company, and, based on the Company’s business strategy, its existing cash of $10.9 million as of March 31, 2023, and the net proceeds of $9.9 million raised through the ATM program subsequent to March 31, 2023 will not be sufficient to fund the Company’s projected operating expenses and capital expenditure requirements beyond February 2024.

Accordingly, there is substantial doubt about the Company’s ability to continue to operate as a going concern. To continue to fund the operations of the Company beyond this time period, management has developed plans, which primarily consist of raising additional capital through some combination of public equity offerings, including through ATM offerings, and identifying strategic collaborations, licensing or other arrangements to support development of the Company’s product candidates. There is no assurance, however, that any additional financing or any revenue-generating collaboration will be available when needed, that management of the Company will be able to obtain financing or enter into a collaboration on terms acceptable to the Company, or that any additional financing or revenue generated through third party collaborations will be sufficient to fund our operations through this time period. If additional capital is not available, the Company will have to significantly delay, scale back or discontinue research and development programs or future commercialization efforts. The actual amount of cash that the Company will need to operate is subject to many factors. The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern and do not include adjustments that might result from the outcome of this uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

The Company’s significant accounting policies, which are disclosed in the audited financial statements for the year ended December 31, 2022 and the notes thereto, are included in the Company’s Annual Report on Form 10-K (the “Annual Report”) that was filed with the Securities and Exchange Commission (“SEC”) on March 30, 2023. Since the date of that filing, there have been no material changes to the Company’s significant accounting policies.

Basis of Presentation

The Company has prepared the accompanying condensed financial statements in conformity with generally accepted accounting principles in the United States (“U.S. GAAP”).

Unaudited Interim Financial Information

The condensed financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from these condensed financial statements, as is permitted by such rules and regulations. Accordingly, these condensed financial statements should be read in conjunction with the financial statements and notes thereto in the Company's Annual Report. The results for any interim period are not necessarily indicative of results for any future period. In the opinion of the Company’s management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included.

Use of Estimates

The preparation of condensed financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the condensed financial statements, and the reported amounts of expenses during the reporting periods presented. Such estimates and assumptions are used for, but are not limited to, the accrual of research and development expenses, deferred tax assets and liabilities and related valuation allowance, stock-based compensation, and the useful lives of property and equipment. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Actual results could differ from those estimates.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to significant concentrations of credit risk consist primarily of cash. All of the Company’s cash is deposited in accounts with major financial institutions. Such deposits are in excess of the federally insured limits.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Significant replacements and improvements are capitalized,

while maintenance and repairs, which do not improve or extend the life of the respective assets, are charged to expense as incurred. The estimated useful lives of the Company’s respective assets are as follows:


			Estimated Useful Life
Furniture			5 years
Machinery and equipment			3-5 years
Software			3 years
Leasehold Improvements			The shorter of the useful life of the leasehold improvement or the remaining term of the lease

Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated and amortized in accordance with the above guidelines once placed into service. Upon retirement or disposal of property and equipment, the cost and related accumulated depreciation and amortization are removed from the balance sheet and any gain or loss is reflected in the statement of operations.

Recently Issued Accounting Standards Updates

The Company did not adopt any new accounting guidance during the three months ended March 31, 2023 and as of the date of this report that had a material impact on the financial statements or disclosures. Additionally, there is no pending accounting guidance that the Company expects to have a material impact on the financial statements.

3. PREPAID EXPENSES AND OTHER CURRENT ASSETS

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


	March 31, 2023		December 31, 2022
Prepaid research and development	$	2,225	$	2,562
Prepaid insurance		716		1,258
Other		601		232
Total prepaid expenses and other current assets	$	3,542	$	4,052

4. PROPERTY AND EQUIPMENT, NET

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


	March 31, 2023			December 31, 2022
Machinery and equipment	$	364		$	358
Furniture and fixtures		370			335
Software		126			126
Leasehold improvements		3,902			3,899
Less accumulated depreciation and amortization		(564	)		(321	)
Property and equipment, net	$	4,198		$	4,397

Depreciation and amortization expense was $243,000 and $16,000 for the three months ended March 31, 2023 and 2022, respectively.

5. CONSTRUCTION IN PROGRESS

Construction in progress consists of the following (in thousands):


	March 31, 2023		December 31, 2022
Furniture	$	—	$	29
Internal use software not yet in service		45		—
Total construction in progress	$	45	$	29

6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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


	March 31, 2023		December 31, 2022
Accrued clinical trials	$	559	$	253
Accrued compensation		422		1,460
Accrued legal		104		211
Accrued other		407		418
Total accrued expenses and other current liabilities	$	1,492	$	2,342

7. STOCKHOLDERS' EQUITY

The Company’s authorized capital stock consists of 500,000,000 shares, all with a par value of $0.0001 per share, of which 490,000,000 shares are designated as common stock and 10,000,000 shares are designated as preferred stock. There were no shares of preferred stock outstanding as of March 31, 2023 and December 31, 2022, respectively.

8. STOCK-BASED COMPENSATION

2018 Equity Incentive Plan

On May 7, 2018, the Company established and adopted the 2018 Equity Incentive Plan (the “2018 Plan”) providing for the granting of stock awards for employees, directors and consultants to purchase shares of the Company’s common stock. Upon the effectiveness of the 2020 Plan (as defined below), the 2018 Plan was terminated and no further issuances were made under the 2018 Plan, although it continues to govern the terms of any equity grants that remain outstanding under the 2018 Plan.

2020 Equity Incentive Plan

The 2020 Equity Incentive Plan (the “2020 Plan”) was approved by the Board of Directors and the Company’s stockholders and became effective on July 29, 2021. The Board of Directors, or a committee thereof, is authorized to administer the 2020 Plan. The 2020 Plan provides for the grant of incentive stock options (“ISOs”) within the meaning of Section 422 of the U.S. Internal Revenue Code of 1986, (the “IRC”) as amended, to employees, and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants and any affiliates’ employees and consultants. The number of shares initially reserved for issuance under the 2020 Plan was 4,200,000, which automatically increases on January 1 of each year for a period of 10 years, beginning on January 1, 2022 and continuing through January 1, 2031, in an amount equal to 5% of the total number of shares of common stock outstanding on the last day of the immediately preceding year, or a lesser number of shares determined by the Board of Directors no later than the last day of the immediately preceding year. The maximum number of shares of common stock that may be issued upon the exercise of ISOs under the 2020 Plan will be 13,000,000 shares. On January 1, 2023, the shares reserved for issuance was increased by 1,227,257 shares. As of March 31, 2023, 2,355,050 shares were available for grant pursuant to the 2020 Plan.

2020 Employee Stock Purchase Plan

The 2020 Employee Stock Purchase Plan (the “2020 ESPP”) was approved by the Company’s Board of Directors and the Company’s stockholders and became effective on July 29, 2021. A total of 200,000 shares of common stock were initially reserved for issuance under this plan, which automatically increases on January 1 of each year by the lesser of (i) 1% of the outstanding number of shares of common stock on the immediately preceding December 31 and (ii) 400,000, or such lesser number of shares as determined by our Board. The Board acted not to increase the number of shares of common stock reserved for future issuance under the ESPP as of January 1, 2023. As of March 31, 2023, no shares of common stock had been issued under the 2020 ESPP and 387,812 shares remained available for future issuance under the 2020 ESPP. The first offering period has not yet been decided by the Company’s Board of Directors or designated committee of the Company’s Board of Directors.

Stock Option Activity

The following is a summary of the stock option award activity during the three months ended March 31, 2023:


	Number of Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2022		4,003,294		$	4.90		8.28	$	860
Granted		20,750			2.00
Exercised		—			—
Forfeited		(169,040	)		2.27
Outstanding at March 31, 2023		3,855,004		$	5.00		8.39	$	51
Exercisable at March 31, 2023		1,503,046		$	5.86		7.89	$	35
Options expected to vest as of March 31, 2023		2,351,958		$	4.45		8.71	$	16

The weighted-average grant date fair value of options granted during the three months ended March 31, 2023 and 2022 was $2.00 and $4.10, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the market price of the Company’s common stock at March 31, 2023.

Stock-Based Compensation Expense

For the three months ended March 31, 2023 and 2022, the Company utilized the Black-Scholes option-pricing model for estimating the fair value of the stock options. The following table presents the assumptions and the Company’s methodology for developing each of the assumptions used:


	March 31, 2023	March 31, 2022
Volatility	91.91%	87.13%
Expected life (years)	6.08	6.08
Risk-free interest rate	3.99%	2.01%
Dividend rate	—	—

•

Volatility—The Company estimates the expected volatility of its common stock at the date of grant based on the historical volatility of comparable public companies over the expected term.

•

Expected life—The expected term represents the period that the Company’s stock option grants are expected to be outstanding. The expected term of the options granted to employees and non-employee directors by the Company has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. Under this approach, the weighted-average expected life is presumed to be the average of the vesting term and the contractual term of the option.

•

Risk-free interest rate—The risk-free rate for periods within the estimated life of the stock award is based on the U.S. Treasury yield curve in effect at the time of grant.

•

Dividend rate—The assumed dividend yield is based upon the Company’s expectation of not paying dividends in the foreseeable future.

Stock-based compensation expense was recorded in the following line items in the condensed statements of operations for the three months ended March 31, 2023 and 2022 (in thousands):


	Three Months Ended March 31,
	2023		2022
Research and development	$	389	$	294
General and administrative		470		470
Total stock-based compensation expense	$	859	$	764

No related tax benefits from stock-based compensation expense were recognized for the three months ended March 31, 2023 and 2022. As of March 31, 2023, there was $7.2 million in unrecognized stock-based compensation expense, which is expected to be recognized over a weighted-average period of 2.44 years.

9. LICENSE AGREEMENTS

Emory University, Children’s Healthcare of Atlanta, Inc. and UAB Research Foundation

In June 2016, the Company entered into an exclusive license agreement with Emory University, Children’s Healthcare of Atlanta, Inc. and UAB Research Foundation ("UABRF"), as amended from time to time (the “Emory License Agreement”). The Emory License Agreement was amended in October 2017 and July 2020. Under the Emory License Agreement, the Company obtained an exclusive worldwide license under certain immunotherapy related patents and know-how related to gamma-delta T cells developed by Emory University, Children’s Healthcare of Atlanta, Inc. and UABRF’s affiliate, the University of Alabama at Birmingham, to develop, make, have made, use, sell, import and otherwise commercialize products that are covered by such patents or otherwise incorporate or use the licensed technology. Such exclusive license is subject to certain rights retained by these institutions and also the U.S. government.

In consideration of the license granted under the Emory License Agreement, the Company paid Emory University a nominal upfront payment. In addition, the Company is required to pay Emory University development milestones totaling up to an aggregate of $1.4 million, low-single-digit to mid-single-digit tiered running royalties on the net sales of the licensed products, including an annual minimum royalty beginning on a specified period after the first sale of a licensed product, and a share of certain payments that the Company may receive from sublicenses. In addition, in the event no milestone payments have been paid in certain years, the Company will be required to pay an annual license maintenance fee. The Emory License Agreement also requires the Company to reimburse Emory University for the cost of the prosecution and maintenance of the licensed patents. Pursuant to the Emory License Agreement, the Company is required to use its best efforts to develop, manufacture and commercialize the licensed product, and is obligated to meet certain specified deadlines in the development of the licensed products.

The term of the Emory License Agreement will continue until 15 years after the first commercial sale of the licensed product, or the expiration of the relevant licensed patents, whichever is later. The Company may terminate the Emory License Agreement at will at any time upon prior written notice to Emory University. Emory University has the right to terminate the Emory License Agreement if the Company materially breaches the agreement (including failure to meet diligence obligations) and fails to cure such breach within a specified cure period, if the Company becomes bankrupt or insolvent or decides to cease development and commercialization of the licensed product, or if the Company challenges the validity or enforceability of any licensed patents.

Exclusive License Agreement with UABRF

In March 2016, the Company entered into an exclusive license agreement with UABRF, as amended from time to time (the “UABRF License Agreement”). The Company amended the UABRF License Agreement in December 2016, January 2017, June 2017 and November 2018. Under the UABRF License Agreement, the Company obtained an exclusive worldwide license under certain immunotherapy-related patents related to the use of gamma-delta T cells, certain CAR-T cells and combination treatments for cellular therapies developed by the University of Alabama at Birmingham and owned by UABRF to develop, make, have made, use, sell, import and otherwise commercialize products that are covered by such patents. Such exclusive license is subject to certain rights retained by UABRF and also the U.S. government.

In consideration of the license granted under the UABRF License Agreement, the Company paid UABRF a nominal upfront payment and issued 91,250 shares of common stock to UABRF, which were subject to certain antidilution rights.

In addition, the Company is required to pay UABRF development milestones totaling up to an aggregate of $1.4 million, lump-sum royalties on cumulative net sales totaling up to an aggregate of $22.5 million, mid-single-digit running royalties on net sales of the licensed products, low-single-digit running royalties on net sales of the licensed products, and a share of certain non-royalty income that the Company may receive, including from any sublicenses. The UABRF License Agreement also requires the Company to reimburse UABRF for the cost of the prosecution and maintenance of the licensed patents.

Pursuant to the UABRF License Agreement, the Company is required to use good faith reasonable commercial efforts to develop, manufacture and commercialize the licensed product.

The term of the UABRF License Agreement will continue until the expiration of the licensed patents. The Company may terminate the UABRF License Agreement at will at any time upon prior written notice to UABRF. UABRF has the right to terminate the UABRF License Agreement if the Company materially breaches the agreement and fails to cure such breach within a specified cure period, if the Company fails to diligently undertake development and commercialization activities as set forth in the development and commercialization plan, if the Company underreports its payment obligations or underpays by more than a specified threshold, if the Company challenges the validity or enforceability of any licensed patents, or if the Company becomes bankrupt or insolvent.

10. NET LOSS PER SHARE

Basic net loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is the same as basic net loss per share for the periods presented since the effects of potentially dilutive securities are antidilutive given the net loss of the Company.

Basic and diluted net loss per share is calculated as follows (in thousands, except share and per share amounts):


	Three Months Ended March 31,
	2023			2022
Net loss	$	(7,525	)	$	(6,145	)
Net loss per share—basic and diluted	$	(0.30	)	$	(0.33	)
Weighted-average number of shares used in computing net loss per share—basic and diluted		24,732,580			18,800,546

The following outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per share, as

their effect is antidilutive:

11. COMMITMENTS AND CONTINGENCIES

Intellectual Property

The Company has existing commitments to the licensors of the intellectual property which the Company has licensed. These commitments are based upon certain clinical research, regulatory, financial and sales milestones being achieved. Additionally, the Company is obligated to pay a single-digit royalty on commercial sales on a global basis of licensed products under the Emory License Agreement and the UABRF License Agreement. The royalty term is the later of 15 years from first commercial sale or expiration of the last-to-expire component of the licensed intellectual property.

Legal Proceedings

The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred costs related to such legal proceedings.

12. Facility LEASES

The Company has historically entered into lease arrangements for its facilities. As of March 31, 2023, the Company had three operating leases with required future minimum payments. In applying the transition guidance under Accounting Standards Update No. 2016-02, Leases, (“ASC 842”), the Company determined the classification of these leases to be operating leases and recorded right-of-use assets and lease liabilities as of the effective date. The Company’s leases generally do not include termination or purchase options.

Finance Leases

The Company entered into an agreement with an equipment leasing company in 2018, which provided up to $2.5 million for equipment purchases in the form of sale and leasebacks or direct leases. As of March 31, 2023, the Company had completed the sale and leaseback for four pieces of equipment and is leasing three other items directly from the leasing company. The terms of the leases are three years and afterwards provide for either annual extensions or an outright purchase of the equipment.

The equipment leases require two advance rental payments to be held as security deposits. The security deposits held amounted to approximately $255,000 as of each of March 31, 2023 and December 31, 2022 and are included in other non-current assets on the condensed balance sheets.

Operating Leases

The Company has an operating lease for office space in Birmingham, Alabama, for a 63-month term ending in March 2026, with an option to extend five years. Throughout the term of the lease, the Company is responsible for paying certain costs and expenses, in addition to the rent, as specified in the lease, including a proportionate share of applicable taxes, operating expenses and utilities.

The Company has an operating lease for office space in New York, New York, with a term that commenced on September 15, 2021, and continues through March 2027. Throughout the term of the lease, the Company is responsible for paying certain costs and expenses, in addition to the rent, as specified in the lease, including a proportionate share of applicable taxes, operating expenses and utilities.

The Company has identified an embedded lease within the University of Louisville Manufacturing Services Agreement, as the Company has the exclusive use of, and control over, a portion of the manufacturing facility and equipment of the facility during the contractual term of the manufacturing arrangement. The commencement date of the embedded lease was August 4, 2022 and it continues through August 2028.

The Company had a build-to-suit lease agreement with a third party to build out the Company's labs in Birmingham, Alabama, which was substantially completed in December 2022. The agreement had a threshold of $4.0 million of total costs incurred. The costs incurred and classified as property and equipment, net on the balance sheets were $4.1 million as of March 31, 2023.

The operating leases require security deposits at the inception of each lease. The security deposits amounted to approximately $263,000 and $262,000 as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023, approximately $253,000 was included in restricted cash and $10,000 was included in other current assets. As of December 31, 2022, approximately $252,000 was included in restricted cash and $10,000 was included in other current assets.

The following table contains a summary of the lease costs recognized under ASC 842 and other information pertaining to the Company’s finance and operating leases for the three months ended March 31, 2023 and 2022 (in thousands):


	Three Months Ended March 31,
	2023		2022
Lease Cost
Amortization of finance right-of-use assets	$	188	$	149
Interest on finance lease liabilities		33		14
Operating lease cost		288		112
Short-term lease cost