What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-21 compared with 2023-03-15 · 141 added, 315 removed, 396 unchanged (54% of the section changed)

3 unchanged sentences

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm  

Consolidated Financial Statements

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Consolidated Statements of Operations and Comprehensive Loss

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

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We have audited the accompanying consolidated balance sheets of Compass Therapeutics, Inc.

and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in stockholders’

equity and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows each of the two years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

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The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control over financial reporting.

Accordingly, we express no such opinion.

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/s/ CohnReznick LLP

We have served as the Company’s auditor since March 2020.

Melville, New York

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Cash and cash equivalents

$ 34,946  

$ 144,514  

Marketable securities

151,663  

Prepaid expenses and other current assets

Total current assets

194,791  

147,105  

Property and equipment, net

Operating lease, right-of-use ("ROU") asset

$ 199,645  

$ 153,757  

Liabilities and Stockholders' Equity

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Accounts payable

$ 3,382  

Accrued expenses

11,690  

Operating lease obligations, current portion

Total current liabilities

16,169  

10,631  

Operating lease obligations, net of long-term portion

Operating lease obligations, net of current portion

Total liabilities

18,007  

13,679  

Commitments and Contingencies (Note 11)

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300,000 shares authorized;

126,495 and 101,303 shares issued at December 31, 2022 and 2021, respectively;

126,302 and 100,832 shares outstanding at December 31, 2022 and 2021, respectively

127,668 shares issued and outstanding at December 31, 2023;

126,495 shares issued and 126,302 shares outstanding at December 31, 2022

Additional paid-in-capital

454,741  

373,657  

Accumulated other comprehensive loss

( 302 )  

Accumulated other comprehensive income (loss)

Accumulated deficit

( 272,814 )  

Total stockholders' equity

181,638  

140,078  

Total liabilities and stockholders' equity

$ 199,645  

$ 153,757  

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

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General and administrative

In-process R&D

Total operating expenses

Loss from operations

Other income (expense)

Loss before income tax expense

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Other comprehensive loss:

Unrealized loss on marketable securities

Unrealized gain (loss) on marketable securities

Comprehensive loss

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and Subsidiaries

Consolidated Statements of Changes in Stockholders ’

Consolidated Statements of Changes in Stockholders ’ Equity

(In thousands)

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Stockholders'

Balance at December 31, 2020

51,221  

$ 191,348  

$ ( 151,408 )  

$ 39,945  

Common shares issued for Trigr Therapeutics, Inc.

10,265  

50,299  

50,300  

Common shares issued in Public Offering, net of issuance costs of $ 8.5 million

38,987  

127,981  

127,985  

Share-based awards

Stock-based compensation

( 82,181 )  

Income (Loss)

Balance at December 31, 2021

100,832  

$ 373,657  

$ ( 233,589 )  

$ 140,078  

Common shares issued in PIPE Offering, net of issuance costs of $ 4.5 million

25,000  

$ 75,739  

$ 75,742  

Common shares issued in PIPE Offering, net

Common stock issued upon exercise of options

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Cancelled shares

( 95 )  

Unrealized loss on marketable securities

( 302 )  

( 39,225 )  

Balance at December 31, 2022

126,302  

$ 454,741  

$ ( 302 )  

$ ( 272,814 )  

$ 181,638  

Common shares issued in ATM Offering, net

Common stock issued upon exercise of options

Share-based awards, net of tax remittance

Stock-based compensation

Unrealized gain on marketable securities

Balance at December 31, 2023

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

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Gain on disposal of equipment

Noncash interest expense

Stock-based compensation

Share-based compensation

Amortization of premium and discount on marketable securities

Write-off of in-process R&D

ROU asset amortization

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Purchases of property and equipment

Asset acquisition costs

Proceeds from sale of equipment

Net cash used in investing activities

Net cash provided by (used) in investing activities

Cash flows from financing activities:

Net proceeds from issuance of common stock

Proceeds from issuance of common stock

Issuance costs from issuance of common stock

Proceeds from exercise of stock options

Repayment of borrowings under loan

Taxes related to the vesting of RSUs

Net cash provided by financing activities

Net change in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of year

Cash, cash equivalents and restricted cash at end of year

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Supplemental disclosure of cash flow information

Cash paid for interest

ROU asset acquired through operating leases

Issuance of common stock for acquisition of Trigr Therapeutics, Inc.

Fixed asset costs included in accrued expenses

Unrealized loss on marketable securities

Unrealized (gain) loss on marketable securities

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

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Compass Therapeutics, Inc.

(“Compass”

or the “Company”) is a clinical-stage, oncology-focused biopharmaceutical company developing proprietary antibody-based therapeutics to treat multiple human diseases.

(“Compass” or the “Company”) is a clinical-stage, oncology-focused biopharmaceutical company developing proprietary antibody-based therapeutics to treat multiple human diseases.

Our scientific focus is on the relationship between angiogenesis and the immune system.

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The Company is subject to risks and uncertainties common to companies in the biotechnology and pharmaceutical industries.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s technology will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable.

The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

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The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the consolidated financial statements are issued.

Since its inception, the Company has funded its operations primarily with proceeds from the sale of its equity securities and borrowings under the 2018 Credit Facility.

Since its inception, the Company has funded its operations primarily with proceeds from the sale of its equity securities.

The Company has incurred recurring losses since its inception and had an accumulated deficit of $ 315.3 million on December 31, 2023.

The Company expects to continue to generate operating losses for the foreseeable future.

The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements into 2026.

The Company expects to continue o generate operating losses for the foreseeable future.

The Company expects that its cash, cash equivalents and marketable securities will be sufficient to fund its operating expenses and capital expenditure requirements into mid-2026.

The future viability of the Company beyond that point is dependent on its ability to raise additional capital to finance its operations.

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dependence on its key personnel;

risks related to patent protection and the Company’s pending patent applications;

dependence on third party collaborators for the discovery, development and commercialization of current and future product candidates;

and significant competition from other biotechnology and pharmaceutical companies.

Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Summary of Significant Accounting Policies

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The accompanying consolidated financial statements are presented in U.S.

dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of Consolidation

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The Company has one operating segment.

The Company’s chief operating decision-maker, its chief executive officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources.

All the Company’s long-lived assets are held in the United States.

The Company’s chief operating decision-maker, its chief executive officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources.

All the Company’s long-lived assets are held in the United States.

Cash and Cash Equivalents

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Marketable Securities

All of the Company’s investment securities are debt securities and bank instruments.

The Company carries these investments at fair value.

Unrealized gains and losses, if any, are reported as a separate component of stockholders’

Unrealized gains and losses, if any, are reported as a separate component of stockholders’ equity.

The cost of investment securities is adjusted for amortization of premiums and accretion of discounts to maturity.

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The Company invests its excess cash primarily in money market funds, U.S.

treasury notes, and high quality, marketable debt instruments of corporations in accordance with the Company’s investment policy.

The Company’s investment policy defines allowable investments and establishes guidelines relating to credit quality, diversification, and maturities of its investments to preserve principal and maintain liquidity.

treasury notes, and high quality, marketable debt instruments of corporations in accordance with the Company’s investment policy.

The Company has not experienced any realized losses related to its cash equivalents and marketable securities.

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Impairment of Long-Lived Assets

Long-lived assets consist of property, equipment and right-of-use (“ROU”) assets.

Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable.

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Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets and liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

An entity may choose to measure many financial instruments and certain other items at fair value at specified election dates.

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Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period.

Actual results could differ materially from the Company’s estimates.

The Company’s historical accrual estimates have not been materially different from the actual costs.

Actual results could differ materially from the Company’s estimates.

The Company’s historical accrual estimates have not been materially different from the actual costs.

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure.

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Stock-Based Compensation

The Company recognizes the grant‑date fair value of stock‑based awards issued to employees and nonemployee board members as compensation expense on a straight‑line basis over the service period of the award.

The Company uses the Black‑Scholes option pricing model to determine the grant‑date fair value of stock options and adjusts expense for forfeitures in the periods they occur.

The fair value of each equity award was determined by the Company on the date of grant and by using the methods and assumptions discussed below.

Certain of these inputs are subjective and generally require judgment to determine.

The stock price used to value equity awards is based on the closing price of the Company’s common stock as reported on the date of the grant.

For equity awards issued after June 2020 until the Company started trading on a public market in the second quarter of 2021, the valuation of the Company’s common stock was $ 5.00 per share, which was the share price paid by outside investors in the Company’s Private Placement in June 2020.

The stock price used to value equity awards is based on the closing price of the Company’s common stock as reported on the date of the grant.

Expected term :

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The simplified method calculates the expected term as the average time to vesting and the contractual life of the award.

Expected volatility –

Due to the Company’s limited operating history and lack of Company-specific historical or implied volatility, the expected volatility assumption was determined by examining the historical volatilities of a group of industry peers whose share prices are publicly available.

Risk-free interest rate –

The risk-free rate assumption is based on U.S.

Treasury instruments, the terms of which were consistent with the expected term of the Company’s equity award.

Expected dividend –

The Company has not paid and does not intend to pay dividends.

Expected volatility – The expected volatility is calculated based on the historical volatility of our common stock over the expected term of the option.

Risk-free interest rate – The risk-free rate assumption is based on U.S.

Treasury instruments, the terms of which were consistent with the expected term of the Company’s equity award.

Expected dividend – The Company has not paid and does not intend to pay dividends.

Net Loss per Share

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Since a portion of these net operating loss carryforwards may be utilized in the future, many of these net operating loss carryforwards will remain subject to examination.

New Accounting Pronouncements

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740) :

Improvements to tax disclosures .

The purpose of ASU 2023-09 is to enhance the transparency and decision usefulness of income tax disclosures.

The ASU requires a significant expansion of the granularity of the income tax rate reconciliation as well as an expansion of other income tax disclosures.

The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024.

This will result in additional disclosures being included in our consolidated financial statements, once adopted.

The Company is evaluating the impact of ASU 2023-09 and does not expect ASU-2023-09 to have a significant impact on the consolidated financial statements.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016 02, Leases , which requires a lessee to record a ROU asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months.

The standard continues to have two types of leases for income statement recognition purposes:

operating leases and finance leases.

Operating leases result in the recognition of a single lease expense on a straight-line basis over the lease term, similar to the treatment for operating leases under the old standard.

Finance leases result in an accelerated expense similar to the accounting for capital leases under the old standard.

The new standard also contains amended guidance regarding the identification of embedded leases in service contracts and the identification of lease and non-lease components of an arrangement.

The Company adopted the new standard on January 1, 2021, using a modified retrospective approach and as a result did not adjust prior periods.

Adoption of the standard resulted in the recording of $ 5.1 million of operating lease ROU assets and operating lease liabilities but did not have a material impact on the Company’s net loss or cash flows.

There were no operating leases acquired in 2022.

In December 2019, the FASB issued ASU No.

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The new standard was effective beginning January 1, 2022.

The adoption of ASU 2019 - 12 did not have a material impact on the Company’s financial position and results of operations upon adoption.

There are no other pending accounting pronouncements that are expected to have a material impact on the Company’s consolidated financial statements.

The adoption of ASU 2019-12 did not have a material impact on the Company’s financial position and results of operations upon adoption.

The Company adopted Accounting Standards Update ASU No.

2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses of Financial Instruments on January 1, 2023.

Marketable debt securities for which the estimated fair value is below amortized cost are evaluated for credit impairment.

Credit impairment is recorded through the statements of operations via an allowance for credit losses and any remaining unrealized gains and losses are reported as a component of other comprehensive income (loss) within the statements of operations and comprehensive loss and as a separate component of stockholders’ equity.

For all marketable securities which the estimated fair value was below amortized cost as of December 31, 2023 and 2022, the decline in fair value was not driven by credit impairment.

There are no other pending accounting pronouncements that are expected to have a material impact on the Company’s consolidated financial statements.

Fair Value Measurements

The following tables present information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

Fair Value Measurements as of December 31, 2023 (000's):

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Corporate bonds

$ 87,760  

Commercial paper

37,682  

Certificates of deposit

19,667  

government treasuries

Asset-backed securities

Money market funds (cash equivalents)

$ 47,120  

$ 113,981  

$ 161,101  

Fair Value Measurements as of December 31, 2022 (000's):

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Identical Assets

Corporate bonds

Commercial paper

Certificates of deposit

Asset-backed securities

Money market funds (cash equivalents)

$ 130,005  

Marketable Securities

The objectives of the Company’s investment policy are to ensure the safety and preservation of invested funds, as well as to maintain liquidity sufficient to meet cash flow requirements.

The Company invests its excess cash in securities issued by financial institutions, commercial companies, and government agencies that management believes to be of high credit quality in order to limit the amount of its credit exposure.

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The Company believes the individual unrealized losses represent temporary declines primarily resulting from interest rate changes.

Realized gains and losses are included in other income (loss) in the consolidated statements of operations and comprehensive loss and are determined using the specific identification method with transactions recorded on a trade date basis.

Realized gains and losses are included in other income in the consolidated statements of operations and comprehensive loss and are determined using the specific identification method with transactions recorded on a trade date basis.

The Company classifies marketable securities that are available for use in current operations as current assets on the consolidated balance sheet.

The following tables summarize marketable securities held at December 31, 2022 ( in thousands):

The following tables summarize marketable securities held at December 31, 2023 and 2022 (in thousands):

Fair Value Measurements as of December 31, 2023 Using:

Amortized Cost

Unrealized gains

Unrealized Losses

Corporate bonds

$ 87,998  

$ ( 250 )  

$ 87,760  

Commercial paper

37,680  

( 31 )  

37,682  

Certificates of deposit

19,689  

( 38 )  

19,667  

government treasuries

Asset-backed securities

( 47 )  

$ 151,965  

$ ( 366 )  

$ 151,663  

December 31, 2022

Fair Value Measurements as of December 31, 2022 Using:

Amortized Cost

Unrealized gains

Unrealized Losses

Corporate bonds

Commercial paper

Certificates of deposit

Asset-backed securities

As of December 31,

Maturing in one year or less

$ 134,620  

Maturing after one year through two years

17,043  

$ 151,663  

There were no marketable securities as of December 31, 2021.

Property and Equipment

Property and equipment consist of the following:

$ 5,137  

$ 5,351  

Furniture and fixtures

Leasehold improvements

Total property and equipment–at cost

Accumulated depreciation and amortization

( 5,568 )  

Property and equipment, net

$ 1,567  

$ 2,243  

Total depreciation and amortization expense for years ended December 31, 2023 and 2022, was $ 0.7 million and $ 0.8 million, respectively.

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Project expenses

$ 10,038  

Compensation and benefits

Accrued milestone

Total accrued expenses

$ 11,690  

$ 8,775  

Project expenses is primarily made up of $ 8.8 million of accrued manufacturing expenses and $ 1.3 million of accrued clinical expenses.

Manufacturing expenses are primarily for the manufacture and purchase of drug product for CTX- 009 including $ 6.4 million of minimum contractual obligations.

Stockholders ’

In June 2021, the Company issued 10.3 million shares of its common stock related to the acquisition of Trigr Therapeutics, Inc.

(“TRIGR”).

In the fourth quarter of 2022, 95 thousand of these shares were cancelled due to contractual obligations outstanding prior to the acquisition.

See Note 16 for further information on the TRIGR transaction.

In November 2021, the Company sold through an underwritten public offering, 35,715,000 shares of the Company’s common stock, at a price to the public of $ 3.50 per share, less underwriting discounts and commissions.

The Company granted the underwriters a 30 -day option to purchase up to an additional 5,357,250 shares of Common Stock, at the public offering price of $ 3.50 , less any underwriting discounts and commissions.

In December 2021, pursuant to this 30 -day option, the Company sold an additional 3,271,857 shares of our common stock, for a total of 38,986,857 shares of common stock sold as part of the Follow-On Public Offering.

The aggregate gross proceeds from the Follow-On Public Offering were approximately $ 136.5 million.

In connection with the Follow-On Public Offering, we paid the underwriters and other legal and accounting costs of $ 8.5 million, for net proceeds of approximately $ 128.0 million.

In November 2022, the Company sold through a Private Investment in Public Entity (“PIPE”) offering of 25,000,000 shares of our common stock at a purchase price of $ 3.21 per share.

Project expenses in 2022 were primarily made up of $ 8.8 million of accrued manufacturing expenses including $ 6.4 million of minimum contractual obligations which were paid in 2023.

Stockholders ’ Equity

In November 2022, the Company sold through a Private Investment in Public Entity (“PIPE”) offering of 25,000,000 shares of our common stock at a purchase price of $ 3.21 per share.

The gross proceeds to us from the PIPE were $ 80.3 million.

In connection with the PIPE, the Company paid $ 4.5 million to the underwriters (and for other legal and accounting costs), for net proceeds of $ 75.7 million.

In June 2023, the Company sold, through its ATM program pursuant to its Open Market Sale Agreement SM with Jefferies LLC, 951,873 shares of common stock at an average price of $ 3.28 for total proceeds of $ 3.1 million and net proceeds of $ 3.0 million in ATM offerings.

Stock-Based Compensation

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General and administrative

$ 5,330  

$ 4,029  

Restricted Stock

A summary of the Company’s restricted share activity during the years ended December 31, 2022 and 2021 is as follows:

A summary of the Company’s restricted share activity during the years ended December 31, 2023 and 2022 is as follows:

Shares (000's)

Unvested, December 31, 2021

$ 2.46  

( 359 )  

$ 1.83  

Forfeited or canceled

( 66 )  

$ 1.70  

Unvested, December 31, 2022

$ 1.76  

( 258 )  

$ 1.77  

Forfeited or canceled

( 20 )  

$ 1.77  

Unvested, December 31, 2023

$ 1.74  

The weighted average grant date fair value for unvested restricted stock as of December 31, 2022 was $ 1.74 per share. As of December 31, 2022, remaining unrecognized compensation cost related to restricted stock awards to be recognized in future periods totaled $ 0.3 million, which is expected to be recognized over a weighted average period of 0.9 years.

No restricted share awards were granted for the year ended December 31, 2022 and 2021.

In June 2020, the Company’s board of directors adopted the 2020 Plan and reserved 2.9 million shares of common stock for issuance under this plan.

As of December 31, 2023, there was no remaining unrecognized compensation cost related to restricted stock awards.

No restricted share awards were granted for the years ended December 31, 2023 and 2022.

In June 2020, the Company’s board of directors adopted the 2020 Plan and reserved 2.9 million shares of common stock for issuance under this plan.

The 2020 Plan provides that the number of shares reserved and available for issuance under the 2020 Plan will automatically increase each January 1, beginning on January 1, 2021, by the lesser of (i) 4% of the outstanding number of shares of our common stock on the immediately preceding December 31 or (ii) such number of shares as determined by the plan administrator no later than the immediately preceding December 31.

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Life (in years)

Intrinsic Value

Aggregate Intrinsic Value (000's)

Outstanding at December 31, 2021

$ 5.00  

$ 5.02  

Forfeited/cancelled

( 322 )  

$ 5.00  

Outstanding at December 31, 2022

$ 5.01  

$ 2.30  

$ 2.26  

Forfeited/cancelled

( 552 )  

$ 4.78  

Outstanding at December 31, 2023

$ 3.89  

$ 6,316  

Vested at December 31, 2023

$ 4.65  

$ 1,216  

For the year ended December 31, 2023, the weighted average grant date fair value for options granted was $ 3.69 .

The aggregate intrinsic value for options vested and outstanding as of December 31, 2022 was $ 1.2 million and $ 6.3 million, respectively.

The aggregate intrinsic value for options vested and outstanding as of December 31, 2023 and 2022 was $ 11 thousand and $ 6.3 million, respectively.

As of December 31, 2023, the unrecognized compensation cost related to outstanding options was $ 9.5 million, expected to be recognized over a weighted average period of approximately 2.6 years.

The weighted average assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options granted to employees and directors during the years ended December 31, 2023 and 2022 were as follows:

Year Ended December 31,

Expected term (in years)

Risk-free rate

2.02 %  

Expected volatility

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Average Price

Value (000's)

Average Fair Value (000's)

Unvested, December 31, 2021

1 unchanged sentence

Unvested, December 31, 2022

$ 3.83  

$ 4,596  

( 300 )  

Forfeited or canceled

Unvested, December 31, 2023

$ 3.83  

$ 3,447  

Weighted average price per share is the weighted grant price based on the closing market price of each of the stock grants.

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ABL Bio Corporation ("ABL Bio") Agreements

Our wholly-owned subsidiary, TRIGR, and ABL Bio, a South Korean biotechnology company, entered into an exclusive global (excluding South Korea) license agreement (the “TRIGR License Agreement”) which granted TRIGR a license to ABL001, ABL Bio’s bispecific antibody targeting DLL4 and VEGF-A (renamed CTX- 009 ).

Under the terms of the agreement, ABL Bio and TRIGR would jointly develop CTX- 009, with ABL Bio responsible for development of CTX- 009 throughout the end of Phase 1 clinical trials and TRIGR responsible for the development of CTX- 009 from Phase 2 and onward.

In November 2018, the Company and ABL Bio, a South Korean biotechnology company, entered into an exclusive global (excluding South Korea) license agreement which granted the Company a license to CTX-009 (ABL001), ABL Bio’s bispecific antibody targeting DLL4 and VEGF-A.

Under the terms of the agreement, the two companies would jointly develop CTX-009, with ABL Bio responsible for development of CTX-009 throughout the end of Phase 1 clinical trials and the Company responsible for the development of CTX-009 from Phase 2 and onward.

ABL Bio received a $ 5 million upfront payment and $ 6 million development milestone payment.

In addition, ABL Bio is eligible to receive up to $ 96 million of development and regulatory milestone payments, and up to $ 303 million of commercial milestone payments and tiered single-digit royalties on net sales of CTX- 009 in Oncology.. 

ABL Bio is also eligible to receive up to $ 75 million in development and regulatory milestones and up to $ 110 million in commercial milestone payments and tiered, single-digit royalties on net sales of CTX-009 in ophthalmology.

The financial terms of the agreement were amended in May 2021 but remain substantially similar to the terms in the TRIGR License Agreement.

As a result of the TRIGR acquisition in 2021, the TRIGR License Agreement was assigned to the Company and the Company has assumed all the rights and liabilities of the agreement.

See Note 16 for further information on the TRIGR transaction.

In May 2021, TRIGR and ABL Bio terminated license agreements to several preclinical assets.

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Adimab Agreement

The Company entered into a collaboration agreement with Adimab, LLC ("Adimab") on October 16, 2014.

The agreement was amended on February 11, 2015.

The agreement also includes provisions for payment of royalties at rates ranging in the single digits as a percentage of future net sales within a specified term from the first commercial sale.

There were no milestone payments made during the year ended December 31, 2022.

The Company made milestone payments of $ 1.5 million in research and development during the year ended December 31, 2019, upon filing an IND for its product candidates associated with this license and first dosing of patient.

The Company entered into a collaboration agreement with Adimab, LLC on October 16, 2014.

The agreement includes provisions for payment of royalties at rates ranging in the single digits as a percentage of future net sales within a specified term from the first commercial sale for certain antibodies, including our product candidate, CTX-471.

There were no milestone payments made during 2023.

As of December 31, 2023, future potential milestone payments in connection with this agreement amounted to $ 2.0 million.

Commitments and Contingencies

The Company adopted ASU 2016 - 02, Leases (Topic 842 ) ("ASU 2016 - 02" ), effective January 1, 2021, using the modified retrospective transition method, in which the new standard is applied as of the date of initial adoption.

The Company recognized and measured agreements executed prior to the date of initial adoption that were considered leases on January 1, 2021.

No cumulative effect adjustment of initially applying the standard to the opening balance of retained earnings was made upon adoption.

The Company elected the package of practical expedients permitted under the transition guidance that will retain the lease classification and initial direct costs for any leases that exist prior to adoption of the standard.

In addition, the Company elected the accounting policy of not recording short-term leases with a lease term at the commencement date of 12 months or less on the consolidated balance sheet as permitted by the new standard.

The Company has evaluated its leases and determined that it has one lease that is classified as an operating lease.

The classification of this lease is consistent with the Company’s determination under the previous accounting standard.

When available, the Company will use the rate implicit in the lease to discount lease payments to present value;

however, the Company’s current lease does not provide an implicit rate.

Therefore, the Company used its incremental borrowing rate to discount the lease payments based on the date of the lease commencement.

The Company has one operating lease for its corporate office and laboratory facility (“Facility”) that was signed in December 2020.

The Company accounts for operating leases on a straight-line basis over the lease term, with recognition of a right-of-use asset and a corresponding lease liability, initially measured at the present value of the lease payments.

For leases with a term of 12 months or less, we recognize lease expense on a straight-line basis over the lease term.

The Company has one operating lease for its corporate office and laboratory facility (“Facility”) that was signed in December 2020.

The Company moved into the Facility in January 2021.

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The Facility lease contains scheduled rent increases over the lease term.

The discount rate used for the Facility lease is 6.25 %, and the remaining lease term of the Facility lease is two years and five months as of December 31, 2022.

The discount rate used for the Facility lease is 6.25 %, and the remaining lease term of the Facility lease is one year and five months as of December 31, 2023.

As this lease does not provide an implicit rate, the Company used its incremental borrowing rate to discount the lease payments based on the date of the lease commencement.

Cash paid for this lease was $ 1.3 million for the years ended December 31, 2023 and 2022.

The table below presents the undiscounted cash flows for the lease term.

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Years ending December 31,

$ 1,233  

Total minimum lease payments

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Operating lease obligations, long-term portion

$ 1,838  

Milestone payments

As part of the ABL Bio agreements, the Company is obligated to pay certain development milestone payments. 

In the fourth quarter of 2021, the Company was notified of the completion of Phase 1b of the clinical trial for CTX- 009.

As a result, the Company was obligated to pay a $ 6.0 million milestone payment to ABL Bio on the deliverance of the final report related to the clinical trial.

There were no accrued milestone payments as of December 31, 2022.

See Note 10 for this and other agreements.

Related Parties and Related-Party Transactions

There were no material related party transactions during the years ended December 31, 2022 and 2021.

Other income (expense)

Other income (expense) consisted of the following:

Interest income

$ 2,360  

Interest expense

Realized gain on disposal of equipment

Total other income (expenses)

$ 2,430  

Defined Contribution Plan

The Company has a 401 (k) defined contribution plan (the “401 (k) Plan”) for substantially all its employees.

The Company has a 401(k) defined contribution plan (the “401(k) Plan”) for substantially all its employees.

Eligible employees may make pre-tax or post-tax (Roth) contributions to the 401(k) Plan up to statutory limits.

Since January 1, 2020, the Company has been matching employee contributions to the plan up to 4 % of salary.

On July 1, 2023, the Company increased the employee matching contribution from 4 % to 6 %.

The Company made matching contributions of $ 0.2 million and $ 0.1 million for the years ended December 31, 2023 and 2022, respectively.

Other income consisted of the following:

Interest income, net

Realized gain on disposal of equipment

Total other income

The Company had no income tax for the years ended December 31, 2023 and 2022.

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Statutory rate

21.0 %  

Share-based compensation & other nondeductible expenses

-2.7 %  

Write-off of in-process R&D

Research credits

-0.1 %  

Change in valuation allowance

-25.2 %  

The Company accounts for income taxes under the asset and liability method.

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In determining the need for a valuation allowance, management reviews both positive and negative evidence, including current and historical results of operations, future income projections and the overall prospects of our business.

Based upon management’s assessment of all available evidence, the Company believes that it is more-likely-than- not that the deferred tax assets will not be realizable, and therefore, a valuation allowance has been established.

Based upon management’s assessment of all available evidence, the Company believes that it is more-likely-than-not that the deferred tax assets will not be realizable, and therefore, a valuation allowance has been established.

The valuation allowance for deferred tax assets was approximately $ 43.8 million and $ 28.0 million as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company has U.S.

federal and state net operating loss carryforwards (“NOLs”) of $ 59.1 million and $ 42.5 million, respectively.

As of December 31, 2022, the Company has federal and state research and development credit carryforwards (“R&D credits”) of $ 1.4 million and $ 2.4 million, respectively.

federal and state net operating loss carryforwards (“NOLs”) of $ 65.5 million and $ 58.8 million, respectively.

As of December 31, 2023, the Company has federal and state research and development credit carryforwards (“R&D credits”) of $ 3.7 million and $ 3.4 million, respectively.

For income tax purposes, federal NOLs will not expire since they were generated after 2017 and federal R&D credits will begin expiring in 2039.

For income tax purposes, state NOLs and state R&D credits will begin to expire in 2040 and 2031, respectively.

Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the “IRS”) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three -year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change.

Net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (the “IRS”) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change.

Subsequent ownership changes may further affect the limitation in future years.

The Company has not yet conducted a study to determine if any such limitation exists.

The Tax Cuts and Jobs Act of 2017 (“TCJA”) amended IRC Section 174 to require capitalization of all research and developmental (R&D) costs incurred in tax years beginning after December 31, 2021.

These costs are required to be amortized with a half-year convention over five years if the R&D activities are performed in the U.S., or over 15 years if the activities were performed outside the U.S.

The Company capitalized approximately $ 28.6 million and amortized $ 1.8 million of R&D expenses incurred for the year ended December 31, 2022. 

As of December 31, 2022, the Company had no uncertain tax positions, and as such, no related interest or penalties have been recorded in the statement of operations and comprehensive loss.

The Company capitalized approximately $ 36.9 million and amortized $ 6.9 million of R&D expenses incurred for the year ended December 31, 2023.

As of December 31, 2023 and 2022, the Company had no uncertain tax positions, and as such, no related interest or penalties have been recorded in the statements of operations and comprehensive loss.

The Company recognizes interest and penalties related to uncertain tax positions as a component of income tax expense.

All tax years of the Company from inception are open to examination by federal tax and state tax authorities.

To the extent utilized in future years’

tax returns, net operating loss carryforwards at December 31, 2022 will remain subject to examination until the respective tax year is closed.

To the extent utilized in future years’ tax returns, net operating loss carryforwards at December 31, 2023 will remain subject to examination until the respective tax year is closed.

The Company has not been informed by any tax authorities for any jurisdiction that any of its tax years is under examination as of December 31, 2023.

Significant components of the Company’s deferred tax assets and liabilities are as follows:

Deferred tax assets

Federal net operating loss carryforwards

$ 12,405  

$ 10,847  

State net operating loss carryforwards

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Capitalized licensing fees

28,822  

19,287  

Less valuation allowance

( 28,013 )  

Deferred tax assets, net of valuation allowance

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Right-of-use assets

( 809 )  

Net deferred tax assets

Merger Transaction

On May 11, 2021, the Company and Trigr Therapeutics, Inc.

(“TRIGR”), a private biotechnology company, entered into a definitive merger agreement (the “Merger Agreement”).

Pursuant to the Merger Agreement, the Company, through its wholly-owned subsidiaries and a two -step merger structure, acquired all the outstanding shares of TRIGR (the “TRIGR Merger”).

On June 25, 2021, the TRIGR Merger was consummated.

Consideration payable to TRIGR shareholders at closing totaled an aggregate of 10,265,133 shares of the Company’s common stock with a fair value of $ 50.3 million (after giving effect to elimination of fractional shares that would otherwise be issued).

The Company incurred approximately $ 0.3 million of accounting and legal costs associated with the merger, for a total cost of the transaction of $ 50.6 million which was reported in 2021.

In addition, TRIGR shareholders are eligible to receive up to $ 9.0 million, representing earnout payments based on three independent events.

The first earnout payment of $ 2.0 million related to a milestone payment under the Elpiscience agreement, due to the Company upon IND approval of CTX- 009 in China and remitted to the TRIGR shareholders.

The IND was approved in China in the fourth quarter of 2021.

As a result, the Company acted as a conduit to this transaction and remitted the $ 2 million related to this milestone payment received from Elpiscience.

The second potential earnout payment of $ 2 million is contingent upon the Company entering into a regional license agreement with a specific third party.

Since the Company has not entered into a regional license agreement with that third party and assesses the probability of reaching such agreement with that party to be low, no provision is being made.

The third and last potential earnout is $ 5 million which is dependent on the Company successfully filing a biologics license application in the United States and being granted marketing approval for the product candidate acquired in the transaction, CTX- 009.

As CTX- 009 is in early clinical development and the clinical development of CTX- 009 and regulatory strategy are subject to substantial risk, it is not probable that this payment will be made, and as such, no provision is being made.

To determine whether the transaction meets the definition of a business acquisition or an asset acquisition in accordance with ASC 805 - 10 - 55, we had to assess the nature of the transaction and the fair value of the assets acquired in the transaction.

Our assessment concluded that the fair value of the transaction was substantially concentrated in a license to a single identifiable asset, CTX- 009, and a potential financial interest (in the form of royalties) in an additional set of early-stage similar assets.

The guidance further requires a business acquisition to include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.

Because all asset acquisitions include inputs, the existence of a substantive process is what distinguishes a business acquisition from an asset acquisition.

Our assessment was that there is no process or outputs that were being acquired with the TRIGR acquisition.

As a result, the TRIGR acquisition was considered to fall under the guidance of an asset acquisition rather than a business acquisition.

Accordingly, the Company allocated the $ 50.3 million transaction amount and $ 0.3 million of transaction costs to the acquired license.

As the license is considered in-process R&D, the Company expensed the acquired asset on the transaction date.

Subsequent Events

In the first quarter of 2024, the Company sold, through its Open Market Sale Agreement SM with Jefferies LLC, 9,790,577 shares of common stock at an average price of $ 1.85 for total proceeds of $ 18.1 million and net proceeds of $ 17.6 million.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data