GERON CORP 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) GERON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS) JUNE 30, DECEMBER 31, 2022 2021 (UNAUDITED) (NOTE 1) ASSETS Current assets: Cash and cash equivalents $ 76,057 $ 34,871 Restricted cash 364 364 Marketable securities 143,230 148,851 Interest and other receivables 4,254 1,763 Prepaid and other current assets 3,470 1,357 Total current assets 227,375 187,206 Noncurrent marketable securities — 28,651 Property and equipment, net 641 650 Operating leases, right-of-use assets 4,442 4,727 Deposits and other assets 5,703 4,800 $ 238,161 $ 226,034 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,521 $ 6,687 Accrued compensation and benefits 5,613 8,099 Operating lease liabilities 913 901 Debt 5,162 — Accrued liabilities 30,670 29,834 Total current liabilities 46,879 45,521 Noncurrent operating lease liabilities 3,977 4,267 Noncurrent debt 45,258 49,830 Commitments and contingencies Stockholders' equity: Common stock 378 324 Additional paid-in capital 1,472,407 1,398,006 Accumulated deficit ( 1,329,956 ) ( 1,271,741 ) Accumulated other comprehensive loss ( 782 ) ( 173 ) Total stockholders' equity 142,047 126,416 $ 238,161 $ 226,034 See accompanying notes. 3 GERON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2022 2021 2022 2021 Revenues: License fees and royalties $ 73 $ 107 $ 196 $ 244 Operating expenses: Research and development 20,606 21,937 42,705 43,050 General and administrative 7,443 7,059 14,142 14,537 Total operating expenses 28,049 28,996 56,847 57,587 Loss from operations ( 27,976 ) ( 28,889 ) ( 56,651 ) ( 57,343 ) Interest income 330 136 442 309 Interest expense ( 1,581 ) ( 804 ) ( 3,060 ) ( 1,547 ) Other income and (expense), net 1,110 ( 17 ) 1,054 1,183 Net loss $ ( 28,117 ) $ ( 29,574 ) $ ( 58,215 ) $ ( 57,398 ) Basic and diluted net loss per share $ ( 0.07 ) $ ( 0.09 ) $ ( 0.16 ) $ ( 0.18 ) Shares used in computing basic and diluted net loss per share 403,868,713 327,026,907 368,166,148 325,342,161 See accompanying notes. 4 GERON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (IN THOUSANDS) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2022 2021 2022 2021 Net loss $ ( 28,117 ) $ ( 29,574 ) $ ( 58,215 ) $ ( 57,398 ) Net unrealized loss on marketable securities ( 82 ) ( 32 ) ( 621 ) ( 75 ) Foreign currency translation adjustments 11 — 12 — Comprehensive loss $ ( 28,188 ) $ ( 29,606 ) $ ( 58,824 ) $ ( 57,473 ) See accompanying notes. 5 GERON CORPORATION CONDENSED CONSOLIDATED STATEMENTS O F STOCKHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Stockholders' Shares Amount Capital Deficit Gain (Loss) Equity Balances at December 31, 2021 323,731,591 $ 324 $ 1,398,006 $ ( 1,271,741 ) $ ( 173 ) $ 126,416 Net loss — — — ( 30,098 ) — ( 30,098 ) Other comprehensive loss — — — — ( 538 ) ( 538 ) Stock-based compensation related to issuance of common stock and options in exchange for services 5,284 — 15 — — 15 Stock-based compensation for equity-based awards to employees and directors — — 1,692 — — 1,692 Balances at March 31, 2022 323,736,875 324 1,399,713 ( 1,301,839 ) ( 711 ) 97,487 Net loss — — — ( 28,117 ) — ( 28,117 ) Other comprehensive loss — — — — ( 71 ) ( 71 ) Issuance of common stock, pre-funded warrant and warrants to purchase common stock in public offering, net of issuance costs of $ 5,066 53,333,334 53 69,863 — — 69,916 Stock-based compensation related to issuance of common stock and options in exchange for services 4,637 — 13 — — 13 Issuances of common stock under equity plans 589,913 1 760 — — 761 Stock-based compensation for equity-based awards to employees and directors — — 2,058 — — 2,058 Balances at June 30, 2022 377,664,759 $ 378 $ 1,472,407 $ ( 1,329,956 ) $ ( 782 ) $ 142,047 6 GERON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED) Accumulated Additional Other Total Common Stock Paid-In Accumulated Comprehensive Stockholders' Shares Amount Capital Deficit Gain (Loss) Equity Balances at December 31, 2020 310,566,853 $ 310 $ 1,366,188 $ ( 1,155,629 ) $ 78 $ 210,947 Net loss — — — ( 27,824 ) — ( 27,824 ) Other comprehensive loss — — — — ( 43 ) ( 43 ) Issuance of common stock in connection with at market offering, net of issuance costs of $ 374 7,948,505 8 16,226 — — 16,234 Stock-based compensation related to issuance of common stock and options in exchange for services 4,549 — 25 — — 25 Issuance of common stock in connection with exercise of warrants 8,869 — 12 — — 12 Issuances of common stock under equity plans 16,232 — 17 — — 17 Stock-based compensation for equity-based awards to employees and directors — — 1,794 — — 1,794 Balances at March 31, 2021 318,545,008 318 1,384,262 ( 1,183,453 ) 35 201,162 Net loss — — — ( 29,574 ) — ( 29,574 ) Other comprehensive loss — — — — ( 32 ) ( 32 ) Stock-based compensation related to issuance of common stock and options in exchange for services 5,097 — 23 — — 23 Issuance of common stock in connection with exercise of warrants 1,897,472 2 2,465 — — 2,467 Issuances of common stock under equity plans 151,618 1 186 — — 187 Stock-based compensation for equity-based awards to employees and directors — — 1,973 — — 1,973 Balances at June 30, 2021 320,599,195 $ 321 $ 1,388,909 $ ( 1,213,027 ) $ 3 $ 176,206 See accompanying notes. 7 GERON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2022 2021 Cash flows from operating activities: Net loss $ ( 58,215 ) $ ( 57,398 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 129 101 Accretion and amortization on investments, net 304 778 Amortization of debt issuance costs/debt discount 704 374 Gain on sales of equity investment — ( 1,233 ) Stock-based compensation for services by non-employees 28 48 Stock-based compensation for employees and directors 3,750 3,767 Amortization of right-of-use assets 285 266 Changes in assets and liabilities: Current and noncurrent assets ( 5,507 ) ( 3,042 ) Current and noncurrent liabilities ( 4,094 ) 5,791 Net cash used in operating activities ( 62,616 ) ( 50,548 ) Cash flows from investing activities: Purchases of property and equipment ( 120 ) ( 10 ) Purchases of marketable securities ( 57,049 ) ( 82,430 ) Proceeds from maturities of marketable securities 90,406 149,834 Proceeds from sales of equity investment — 1,594 Net cash provided by investing activities 33,237 68,988 Cash flows from financing activities: Proceeds from issuances of common stock from equity plans 761 204 Proceeds from issuance of common stock and warrants in public offering, net of paid issuance costs 69,916 — Proceeds from issuances of common stock from at market offerings, net of paid issuance costs — 16,234 Proceeds from exercise of warrants — 2,479 Proceeds from debt financing — 10,000 Debt discount and issuance costs for debt financing ( 114 ) — Net cash provided by financing activities 70,563 28,917 Net effect of unrealized losses and exchange rates on cash, cash equivalents and restricted cash 2 — Net change in cash, cash equivalents and restricted cash 41,186 47,357 Cash, cash equivalents and restricted cash at the beginning of the period 35,235 10,288 Cash, cash equivalents and restricted cash at the end of the period $ 76,421 $ 57,645 See accompanying notes. 8 GERON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2022 (UNAUDITED ) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The terms “Geron”, the “Company”, “we” and “us” as used in this report refer to Geron Corporation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by United States, or U.S., generally accepted accounting principles, or GAAP, for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022 or any other period. These unaudited condensed consolidated financial statements and notes should be read in conjunction with the audited financial statements for each of the three years ended December 31, 2021, included in our Annual Report on Form 10-K for the year ended December 31, 2021, or the Form 10-K. The accompanying condensed balance sheet as of December 31, 2021 has been derived from audited financial statements at that date. Principles of Consolidation The condensed consolidated financial statements include the accounts of Geron and our wholly-owned subsidiary, Geron UK Limited, or Geron UK, a United Kingdom company. Geron UK was incorporated in September 2021, and its operations commenced in January 2022. We have eliminated intercompany accounts and transactions. We prepare the financial statements of Geron UK using the local currency as the functional currency. We translate the assets and liabilities of Geron UK at rates of exchange at the balance sheet date and translate income and expense items at average monthly rates of exchange. The resultant translation adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders’ equity, on our condensed consolidated balance sheets. Net Loss Per Share Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding for the periods presented without consideration of potential common shares. In April 2022, we entered into an underwriting agreement in connection with a public offering of our common stock, pursuant to which we issued a pre-funded warrant to purchase 18,095,238 shares of our common stock, also known as the 2022 pre-funded warrant, together with accompanying warrants to purchase shares of our common stock. In May 2020, we entered into an underwriting agreement in connection with a public offering of our common stock, pursuant to which we issued a pre-funded warrant to purchase 8,335,239 shares of our common stock, also known as the 2020 pre-funded warrant, together with accompanying warrants to purchase shares of our common stock. The 2022 pre-funded warrant and 2020 pre-funded warrant are exercisable immediately at an exercise price of $ 0.001 per share. We included the 2022 pre-funded warrant and 2020 pre-funded warrant in the computation of basic net loss per share, as applicable, since their exercise price is negligible, and they may be exercised at any time. See Note 6 on Stockholders' Equity for further discussion of the April 2022 public offering. Diluted net income per share would be calculated by adjusting the weighted-average number of shares of common stock outstanding for the dilutive effect of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued, as determined using the treasury-stock method. Potential dilutive securities consist of outstanding stock options and warrants to purchase our common stock. Diluted net loss per share excludes potential dilutive securities for all periods presented as their effect would be anti-dilutive. Accordingly, basic and diluted net loss per share is the same for all periods presented in the accompanying condensed consolidated statements of operations. Since we incurred a net loss for the three and six months ended June 30, 2022 and 2021 , the diluted net loss per share calculation excludes potential dilutive securities of 153,703,476 and 106,492,740 , respectively, related to outstanding stock options and warrants as their effect would have been anti-dilutive. Use of Estimates The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to accrued liabilities, revenue recognition, fair value of marketable securities and equity investments, operating leases, right-of-use assets, lease liabilities, income taxes, and stock-based compensation. We base our estimates on historical experience and on various other market specific and relevant assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates. 9 Fair Value of Financial Instruments Cash Equivalents and Marketable Securities We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. We are subject to credit risk related to our cash equivalents and marketable securities. Our marketable debt securities include U.S. Treasury securities, municipal securities, government-sponsored enterprise securities, commercial paper and corporate notes. We classify our marketable debt securities as available for sale. We record available for sale debt securities at fair value with unrealized gains and losses reported in accumulated other comprehensive income (loss) in stockholders’ equity. Realized gains and losses are included in interest income and are derived using the specific identification method for determining the cost of securities sold and have been insignificant to date. Dividend and interest income are recognized when earned and included in interest income on our condensed consolidated statements of operations. We recognize a charge when the declines in the fair values below the amortized cost bases of our available for sale securities are judged to be other than temporary. We consider various factors in determining whether to recognize an other than temporary charge, including whether we intend to sell the security or whether it is more likely than not that we would be required to sell the security before recovery of the amortized cost basis. Declines in market value judged as other than temporary result in a charge to interest income. We have not recorded any other-than-temporary impairment charges on our available-for-sale securities for the three and six months ended June 30, 2022 and 2021 . See Note 2 on Fair Value Measurements. Leases At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on the unique facts and circumstances present. Operating leases are included in operating leases, right-of-use assets and lease liabilities on our condensed consolidated balance sheets. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of remaining lease payments over the expected lease term. The present value of remaining lease payments within the 12 months following the balance sheet date are classified as current lease liabilities. The present value of lease payments not within the 12 months following the balance sheet date are classified as noncurrent lease liabilities. The interest rate implicit in lease contracts is typically not readily determinable. As such, to calculate the net present value of lease payments, we apply our incremental borrowing rate, which is the estimated rate to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment as of the lease commencement date. We may adjust the right-of-use assets for certain adjustments, such as initial direct costs paid or incentives received. In addition, we include any options to extend or terminate the lease in the expected lease term when it is reasonably certain that we will exercise any such option. Lease expense is recognized on a straight-line basis over the expected lease term. For lease agreements entered into after January 1, 2019 that include lease and non-lease components, such components are generally accounted for separately. We have also elected not to recognize on our condensed consolidated balance sheets leases with terms of one year or less. Debt Issuance Costs and Debt Discounts Debt issuance costs include legal fees, accounting fees, and other direct costs incurred in connection with the execution of our debt financing. Debt discounts represent costs paid to the lenders. Debt issuance costs and debt discounts are deducted from the carrying amount of the debt liability and are amortized to interest expense over the term of the related debt using the effective interest method. Revenue Recognition We recognize revenue in accordance with the provisions of Accounting Standards Codification Topic 606, Revenue from Contracts with Customers , or Topic 606. In determining the appropriate amount and timing of revenue to be recognized under this guidance, we perform the following five steps: (i) identify the contract(s) with our customer; (ii) identify the promised goods or services in the agreement and determine whether they are performance obligations, including whether they are distinct in the context of the agreement; (iii) measure the transaction price, including the constraint on variable consideration; (iv) allocate the transaction price to the performance obligations based on stand-alone selling prices; and (v) recognize revenue when (or as) we satisfy each performance obligation. A performance obligation is a promise in an agreement to transfer a distinct good or service to the customer and is the unit of account in Topic 606. Significant management judgment is required to determine the level of effort required and the period over which completion of the performance obligations is expected under an agreement. If reasonable estimates regarding when performance obligations are either complete or substantially complete cannot be made, then revenue recognition is deferred until a reasonable estimate can be made. Revenue is then recognized over the remaining estimated period of performance using the cumulative catch-up method. 10 We allocate the total transaction price to each performance obligation based on the estimated relative stand-alone selling prices of the promised goods or services underlying each performance obligation. Estimated selling prices for license rights are calculated using an income approach model and include the following key assumptions, judgments and estimates: the development timeline, revenue forecast, commercialization expenses, discount rate and probabilities of technical and regulatory success. Following is a description of the principal activities from which we generate revenue. License fees and royalty revenue primarily represent amounts earned under agreements that out-license our technology to various companies. License Agreements We previously entered into several license agreements with various oncology, diagnostics, research tools and biologics production companies, whereby we granted certain rights to our non-imetelstat related technologies. Under these agreements, non-refundable upfront fees and annual license maintenance fees were considered fixed consideration, while milestone payments and royalties were identified as variable consideration. As of June 30, 2021, no active license agreements remain. In connection with the divestiture of Geron’s human embryonic stem cell assets, including intellectual property and proprietary technology, to Lineage Cell Therapeutics, Inc. (formerly BioTime, Inc. which acquired Asterias Biotherapeutics, Inc.) in 2013, we are entitled to receive royalties on sales of certain research or commercial products utilizing Geron’s divested intellectual property. Licenses of Intellectual Property. If we determine the license to intellectual property is distinct from the other performance obligations identified in the agreement and the licensee can use and benefit from the license, we recognize revenue from non-refundable upfront fees allocated to the license upon the completion of the transfer of the license to the licensee. For such licenses, we recognize revenue from annual license maintenance fees upon the start of the new license period. For licenses that are bundled with other performance obligations, we assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable upfront fees or annual license maintenance fees. At each reporting date, we reassess the progress and, if necessary, adjust the measure of performance and related revenue recognition. Milestone Payments . At the inception of each agreement that includes milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone is included in the transaction price. For milestones that we do not deem to be probable of being achieved, the associated milestone payments are fully constrained and the value of the milestone is excluded from the transaction price with no revenue being recognized. For example, milestone payments that are not within our control, such as regulatory-related accomplishments, are not considered probable of being achieved until those accomplishments have been communicated by the relevant regulatory authority. Once the assessment of probability of achievement becomes probable, we recognize revenue for the milestone payment. At each reporting date, we assess the probability of achievement of each milestone under any current agreements. Royalties . For agreements with sales-based royalties, including milestone payments based on the level of sales, where the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (a) when the related sales occur, or (b) when the performance obligation, to which some or all of the royalty has been allocated, has been satisfied (or partially satisfied). At each reporting date, we estimate the sales incurred by each licensee during the reporting period based on historical experience and accrue the associated royalty amount. Restricted Cash Restricted cash consists of funds maintained in separate money market or certificate of deposit accounts for credit card purchases. Research and Development Expenses Research and development expenses currently consist of expenses incurred in developing and testing imetelstat and research related to potential next generation telomerase inhibitors. These expenses include, but are not limited to, payroll and personnel expense, lab supplies, non-clinical studies, clinical trials, including support for investigator-led clinical trials, raw materials to manufacture clinical trial drugs, manufacturing costs for research and clinical trial materials, sponsored research at other labs, consulting, costs to maintain technology licenses and research-related overhead. Our current imetelstat clinical trials are being supported by contract research organizations, or CROs, and other vendors. We accrue expenses for clinical trial activities performed by CROs based upon the estimated amount of work completed on each trial. For clinical trial expenses and related expenses associated with the conduct of clinical trials, the significant factors used in estimating accruals include the number of patients enrolled, the number of active clinical sites, and the duration for which the patients have been enrolled in the trial. We monitor patient enrollment levels and related activities to the extent possible through internal reviews, review of contractual terms and correspondence with CROs. We base our estimates on the best information available at the time. However, 11 additional information may become available to us which will allow us to make a more accurate estimate in future periods. In that event, we may be required to record adjustments to research and development expenses in future periods when the actual level of activity becomes more certain. Depreciation and Amortization We record property and equipment at cost and calculate depreciation using the straight-line method over the estimated useful lives of the assets, generally four years . Leasehold improvements are amortized over the shorter of the estimated useful life or remaining term of the lease. Stock-Based Compensation We maintain various stock incentive plans under which stock options and restricted stock awards can be granted to employees, non-employee directors and consultants. We also have an employee stock purchase plan for all eligible employees. We recognize stock-based compensation expense based on grant-date fair values of service-based stock options on a straight-line basis over the requisite service period, which is generally the vesting period. For performance-based stock options with vesting based on the achievement of certain strategic milestones, stock-based compensation expense is recognized over the period from the date the performance condition is determined to be probable of occurring through the date the applicable condition is expected to be met and is reduced for estimated forfeitures, as applicable. If the performance condition is not considered probable of being achieved, no stock-based compensation expense is recognized until such time as the performance condition is considered probable of being met, if at all. If the assessment of probability of the performance condition changes, the impact of the change in estimate would be recognized in the period of the change. The determination of grant-date fair values for our service-based and performance-based stock options and employee stock purchases using the Black Scholes option‑pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. The grant-date fair value for service-based restricted stock awards is determined using the fair value of our common stock on the date of grant. We evaluate whether an adjustment to the assumptions of fair value of our common stock and historical volatility are required if observed prices of our common stock materially differ from historical information. The following table summarizes the stock-based compensation expense included in operating expenses on our condensed consolidated statements of operations related to stock options and employee stock purchases for the three and six months ended June 30, 2022 and 2021, which was allocated as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 Research and development $ 1,012 $ 906 $ 1,867 $ 1,731 General and administrative 1,046 1,067 1,883 2,036 Stock-based compensation expense included in operating expenses $ 2,058 $ 1,973 $ 3,750 $ 3,767 As stock-based compensation expense recognized in our condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021 is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures, but at a minimum, reflects the grant-date fair value of those awards that actually vested in the period. Forfeitures have been estimated at the time of grant based on historical data and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. We have not recognized any stock-based compensation expense for performance-based stock options on our condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021, as achievement of the specified strategic milestones was not considered probable at that time. Stock Options We grant service-based and performance-based stock options under our equity plans to employees, non-employee directors and consultants. The service-based vesting period for employee stock options is generally four years from the date of the stock option grant. Performance-based stock options vest upon the achievement of specified strategic milestones. The fair value of service-based stock options granted during the six months ended June 30, 2022 and 2021 has been estimated at the date of grant using the Black Scholes option-pricing model with the following assumptions: Six Months Ended June 30, 2022 2021 Dividend yield 0 % 0 % Expected volatility range 77.7 % to 79.9 % 77.8 % to 78.3 % Risk-free interest rate range 1.69 % to 3.41 % 0.51 % to 0.94 % Expected term 5.5 years 5.5 years 12 Employee Stock Purchase Plan The fair value of employees’ stock purchase rights during the six months ended June 30, 2022 and 2021 has been estimated using the Black Scholes option-pricing model with the following assumptions: Six Months Ended June 30, 2022 2021 Dividend yield 0 % 0 % Expected volatility range 50.9 % to 61.4 % 50.7 % to 68.0 % Risk-free interest rate range 0.09 % to 0.40 % 0.09 % to 0.16 % Expected term range 6 months to 12 months 6 months to 12 months Dividend yield is based on historical cash dividend payments and Geron has paid no cash dividends to date. The expected volatility range is based on historical volatilities of our stock, since traded options on Geron common stock do not correspond to option terms and the trading volume of options is limited. The risk-free interest rate range is based on the U.S. Zero Coupon Treasury Strip Yields for the expected term in effect on the date of grant for an award. The expected term of stock options is derived from actual historical exercise and post-vesting cancellation data and represents the period of time that stock options granted are expected to be outstanding. The expected term of employees’ stock purchase rights is equal to the purchase period. Non-Employee Stock-Based Awards We measure share-based payments to non-employees based on the grant-date fair value of the equity awards. We recognize stock-based compensation expense for the fair value of the vested portion of non-employee stock-based awards on our condensed consolidated statements of operations. Segment Information Our executive management team represents our chief decision maker. We view our operations as a single segment, the development of therapeutic products for oncology. As a result, the financial information disclosed herein materially represents all of the financial information related to our principal operating segment. Recent Accounting Pronouncements New Accounting Pronouncements – Issued But Not Yet Adopted In June 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2016-13, Measurement of Credit Losses on Financial Instruments , or ASU 2016-13. The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about an entity's expected credit losses on financial instruments and other commitments to extend credit at each reporting date. To achieve this objective, the amendments in this update replace the incurred loss impairment methodology currently used today with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to develop credit loss estimates. Subsequent to issuing ASU 2016-13, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses , or ASU 2018-19, for the purpose of clarifying certain aspects of ASU 2016-13. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief , or ASU 2019-05, to provide entities with more flexibility in applying the fair value option on adoption of the credit impairment standard. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments – Credit Losses , or ASU 2019-11, which expands the scope of the practical expedient that allows entities to exclude the accrued interest component of amortized cost from various disclosure. Entities that elect to apply the practical expedient must disclose the total amount of accrued interest that they exclude from their disclosures of amortized cost. ASU 2018-19, ASU 2019-05 and ASU 2019-11 have the same effective date and transition requirements as ASU 2016-13. ASU 2016-13 will be effective for fiscal years beginning after December 15, 2022, using a modified retrospective approach, for smaller reporting companies. Early adoption is permitted. We plan to adopt ASU 2016-13 and related updates as of January 1, 2023. We do not expect the adoption of this standard to have a material impact on our condensed consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity , or ASU 2020-06. The key elements of ASU 2020-06 aim to reduce unnecessary complexity in GAAP for certain financial instruments with characteristics of liabilities and equity. In addressing the complexity, the FASB focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. For convertible instruments, the FASB decided to reduce the number of accounting models for convertible debt instruments and convertible preferred stock. For contracts in an entity’s own equity, the FASB observed that the application of the derivatives scope exception guidance results in accounting for some contracts as derivatives while accounting for economically similar contracts as equity. The FASB also decided to improve and amend the related earnings per share guidance. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years for public business entities that are not smaller reporting companies. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, and interim periods within those 13 fiscal years. We plan to adopt ASU 2020-06 as of January 1, 2024. We do not expect the adoption of this standard to have a material impact on our condensed consolidated financial statements. Other recent accounting pronouncements issued by the FASB did not or are not believed by management to have a material impact on our condensed consolidated financial statements. 2. FAIR VALUE MEASUREMENTS Cash Equivalents and Marketable Securities Cash equivalents, restricted cash and marketable securities by security type at June 30, 2022 were as follows: Gross Gross Amortized Unrealized Unrealized Estimated (In thousands) Cost Gains Losses Fair Value Included in cash and cash equivalents: Money market funds $ 24,789 $ — $ — $ 24,789 Commercial paper 44,243 — ( 10 ) 44,233 $ 69,032 $ — $ ( 10 ) $ 69,022 Restricted cash: Money market fund $ 93 $ — $ — $ 93 Certificate of deposit 271 — — 271 $ 364 $ — $ — $ 364 Marketable securities: U.S. Treasury securities (due in less than one year) $ 31,019 $ — $ ( 207 ) $ 30,812 Municipal securities (due in less than one year) 3,000 — ( 57 ) 2,943 Government-sponsored enterprise securities (due in less than one year) 5,000 — ( 47 ) 4,953 Commercial paper (due in less than one year) 67,034 7 ( 204 ) 66,837 Corporate notes (due in less than one year) 37,961 — ( 276 ) 37,685 $ 144,014 $ 7 $ ( 791 ) $ 143,230 14 Cash equivalents, restricted cash and marketable securities by security type at December 31, 2021 were as follows: Gross Gross Amortized Unrealized Unrealized Estimated (In thousands) Cost Gains Losses Fair Value Included in cash and cash equivalents: Money market funds $ 24,207 $ — $ — $ 24,207 Commercial paper 7,499 — — 7,499 $ 31,706 $ — $ — $ 31,706 Restricted cash: Money market fund $ 93 $ — $ — $ 93 Certificate of deposit 271 — — 271 $ 364 $ — $ — $ 364 Marketable securities: U.S. Treasury securities (due in less than one year) $ 15,585 $ — $ ( 18 ) $ 15,567 U.S. Treasury securities (due in one to two years) 1,524 — ( 3 ) 1,521 Municipal securities (due in one to two years) 3,000 — ( 15 ) 2,985 Government-sponsored enterprise securities (due in less than one year) 12,500 — ( 7 ) 12,493 Commercial paper (due in less than one year) 84,398 2 ( 38 ) 84,362 Corporate notes (due in less than one year) 36,444 2 ( 17 ) 36,429 Corporate notes (due in one to two years) 24,224 — ( 79 ) 24,145 $ 177,675 $ 4 $ ( 177 ) $ 177,502 15 Cash equivalents and marketable securities with unrealized losses that have been in a continuous unrealized loss position for less than 12 months and 12 months or longer at June 30, 2022 and December 31, 2021 were as follows: Less Than 12 Months 12 Months or Longer Total Gross Gross Gross Estimated Unrealized Estimated Unrealized Estimated Unrealized (In thousands) Fair Value Losses Fair Value Losses Fair Value Losses As of June 30, 2022: U.S. Treasury securities (due in less than one year) $ 30,812 $ ( 207 ) $ — $ — $ 30,812 $ ( 207 ) Municipal securities (due in less than one year) 2,943 ( 57 ) — — 2,943 ( 57 ) Government-sponsored enterprise securities (due in less than one year) — — 4,953 ( 47 ) 4,953 ( 47 ) Commercial paper (due in less than one year) 94,341 ( 214 ) — — 94,341 ( 214 ) Corporate notes (due in less than one year) 24,249 ( 102 ) 13,437 ( 174 ) 37,686 ( 276 ) $ 152,345 $ ( 580 ) $ 18,390 $ ( 221 ) $ 170,735 $ ( 801 ) As of December 31, 2021: U.S. Treasury securities (due in less than one year) $ 15,567 $ ( 18 ) $ — $ — $ 15,567 $ ( 18 ) U.S. Treasury securities (due in one to two years) 1,521 ( 3 ) — — 1,521 ( 3 ) Municipal securities (due in one to two years) 2,985 ( 15 ) — — 2,985 ( 15 ) Government-sponsored enterprise securities (due in less than one year) 1,500 — 4,993 ( 7 ) 6,493 ( 7 ) Commercial paper (due in less than one year) 66,872 ( 38 ) — — 66,872 ( 38 ) Corporate notes (due in less than one year) 16,001 ( 17 ) — — 16,001 ( 17 ) Corporate notes (due in one to two years) 24,145 ( 79 ) — — 24,145 ( 79 ) $ 128,591 $ ( 170 ) $ 4,993 $ ( 7 ) $ 133,584 $ ( 177 ) The gross unrealized losses related to U.S. Treasury securities, municipal securities, government-sponsored enterprise securities, commercial paper and corporate notes as of June 30, 2022 and December 31, 2021 were due to changes in interest rates and not credit risk. We determined that the gross unrealized losses on our cash equivalents and marketable securities as of June 30, 2022 and December 31, 2021 were temporary in nature. Our exposure to unrealized losses may increase in the future due to the economic pressures or uncertainties associated with local or global economic recessions as a result of the ongoing COVID-19 pandemic and ongoing geopolitical events, such as the current military conflict between Ukraine and Russia. We review our investments quarterly to identify and evaluate whether any investments have indications of possible other-than-temporary impairment. Factors considered in determining whether a loss is temporary include the length of time and extent to which the fair value has been less than the amortized cost basis and whether we intend to sell the security or whether it is more likely than not that we would be required to sell the security before recovery of the amortized cost basis. We currently do not intend to sell these securities before recovery of their amortized cost bases. 16 Fair Value on a Recurring Basis We categorize financial instruments recorded at fair value on our condensed consolidated balance sheets based upon the level of judgment associated with inputs used to measure their fair value. The categories are as follows: Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2 — Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. Level 3 — Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Money market funds are categorized as Level 1 within the fair value hierarchy as their fair values are based on quoted prices available in active markets. U.S. Treasury securities, municipal securities, government-sponsored enterprise securities, commercial paper, and corporate notes are categorized as Level 2 within the fair value hierarchy as their fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The following table presents information about our financial instruments that are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 and indicates the fair value category assigned. Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Active Markets for Significant Other Unobservable Identical Assets Observable Inputs Inputs (In thousands) Level 1 Level 2 Level 3 Total As of June 30, 2022: Money market funds (1) $ 24,789 $ — $ — $ 24,789 U.S. Treasury securities (2) — 30,812 — 30,812 Municipal securities (2) — 2,943 — 2,943 Government-sponsored enterprise securities (2) — 4,953 — 4,953 Commercial paper (1)(2) — 111,070 — 111,070 Corporate notes (2) — 37,685 — 37,685 Total $ 24,789 $ 187,463 $ — $ 212,252 As of December 31, 2021: Money market funds (1) $ 24,207 $ — $ — $ 24,207 U.S. Treasury securities (2)(3) — 17,088 — 17,088 Municipal securities (3) — 2,985 — 2,985 Government-sponsored enterprise securities (2) — 12,493 — 12,493 Commercial paper (1)(2) — 91,861 — 91,861 Corporate notes (2)(3) — 60,574 — 60,574 Total $ 24,207 $ 185,001 $ — $ 209,208 (1) Included in cash and cash equivalents on our condensed consolidated balance sheets. (2) Included in current portion of marketable securities on our condensed consolidated balance sheets. (3) Included in noncurrent portion of marketable securities on our condensed consolidated balance sheets. 17 3. ACCRUED LIABILITIES Accrued liabilities consisted of the following as of June 30, 2022 and December 31, 2021: June 30, December 31, (In thousands) 2022 2021 CRO and clinical trial costs $ 21,581 $ 22,804 Manufacturing activities 5,699 4,123 Professional legal and accounting fees 2,602 2,030 Interest payable 422 336 Other 366 541 $ 30,670 $ 29,834 4. DEBT On September 30, 2020, we, Hercules Capital, Inc., or Hercules, and Silicon Valley Bank, or SVB, entered into a term loan facility, or the Original Loan Agreement, up to $ 75,000,000 , as amended in August 2021. On June 30, 2022, or the Effective Date, we entered into a second amendment to the Original Loan Agreement, or as amended, the Loan Agreement. Under the second amendment, the aggregate principal amount available to us increased from $ 75,000,000 to $ 125,000,000 , with such principal being available in a series of tranches, subject to certain terms and conditions. As of June 30, 2022 , a total of $ 50,000,000 has been drawn under the Loan Agreement. Under the second amendment, the $ 75,000,000 in remaining loan principal as of June 30, 2022 can be drawn as follows: a) the first tranche of $ 20,000,000 is available within 30 days of the achievement of certain clinical and financial milestones until September 15, 2023 , subject to the achievement of such milestones; b) the second tranche of $ 10,000,000 is available from January 1, 2023 until December 15, 2023 , subject to the achievement of certain clinical and regulatory milestones, and satisfaction of certain other requirements; c) the third tranche of $ 20,000,000 is available from September 15, 2023 until September 15, 2024 , subject to the achievement of certain clinical and regulatory milestones, and satisfaction of certain capitalization requirements; and d) the final tranche of $ 25,000,000 is available through December 31, 2024 , subject to approval by an investment committee comprised of Hercules and SVB. With the exception of the final tranche, and subject to achievement of the applicable milestones and other requirements with respect to each tranche, draw downs are at our election. On the Effective Date of the second amendment, we paid $ 100,000 as a facility charge that we recognized as a debt discount and will be amortizing such cost to interest expense over the life of the loan using the effective interest rate method. Additional facility charges applied to future draw downs will be treated similarly. As of June 30, 2022, we also incurred approximately $ 14,000 in legal fees in connection with the second amendment, which we recognized as debt issuance costs and will be amortizing such cost to interest expense over the life of the loan using the effective interest rate method. Future debt issuance costs will be treated similarly. Under the second amendment, if we choose to prepay the principal with respect to any future draw down after the Effective Date, any such prepayment within the first 36 months after the Effective Date will be subject to a prepayment charge equal to 1.5 % of the principal amount prepaid. No prepayment charge will be assessed for any prepayment occurring more than 36 months after the Effective Date. Under the second amendment, the maturity date, interest only payment dates, end of term charges, collateral, events of default, representations, warranties and covenants remain consistent with the terms of the Original Loan Agreement, except as follows: • Beginning June 1, 2022 and prior to the regulatory approval for imetelstat, or the potential Regulatory Approval, if any, we are required to maintain a minimum cash balance in an amount equal to the greater of: 50 % of the outstanding principal amount under the Loan Agreement or $ 30,000,000 . • After the potential Regulatory Approval, if any, the minimum cash requirement may be satisfied through one of the following three options, as elected by us: a) maintaining a cash balance in an amount not less than 40 % of the outstanding principal amount under the Loan Agreement; b) maintaining a cash balance in an amount not less than 25 % of the outstanding principal amount under the Loan Agreement, if our market cap is or exceeds $ 750,000,000 ; or c) maintaining six month net product revenues of at least 70 % of net product revenues forecasted by us, should any potential Regulatory Approval for imetelstat be obtained. We are in compliance with the covenants under the Loan Agreement as of June 30, 2022. As of June 30, 2022 , the net carrying value of the debt under the Loan Agreement was $ 50,420,000 , which includes the principal amount of $ 50,000,000 less net unamortized debt discounts and issuance costs of $ 801,000 plus accrued end of term charge of $ 1,221,000 . The carrying value of the debt approximates the fair value as of June 30, 2022. The debt discounts and debt issuance costs are being amortized to interest expense over the life of the outstanding loan amounts using the effective interest rate method. 18 The following table presents future minimum payments, including interest and the end of term charge, under the Loan Agreement as of June 30, 2022 (in thousands): Remainder of 2022 $ 2,653 2023 25,880 2024 33,498 Total 62,031 Less: amount representing interest ( 8,756 ) Less: unamortized debt discounts and issuance costs ( 801 ) Less: unamortized end of term charge ( 2,054 ) Less: current portion of debt ( 5,162 ) Noncurrent portion of debt $ 45,258 5. CONTINGENCIES AND UNCERTAINTIES Purported Securities Lawsuits Between January 23, 2020 and March 5, 2020, three securities class action lawsuits were filed against us and certain of our officers. One of the lawsuits was voluntarily dismissed on March 19, 2020. The other two lawsuits, filed in the U.S. District Court, or the Court, for the Northern District of California, or the Northern District, were consolidated by the Court on May 14, 2020, and on August 20, 2020, the lead plaintiffs filed a consolidated class action complaint. The consolidated class action complaint alleges violations of the Securities Exchange Act of 1934, as amended, or the Exchange Act, in connection with allegedly false and misleading statements made by us related to IMbark, our Phase 2 clinical trial designed to evaluate two dosing regimens of imetelstat (either 4.7 mg/kg or 9.4 mg/kg administered by intravenous infusion every three weeks) in relapsed/refractory myelofibrosis, during the period from March 19, 2018, to September 26, 2018. The consolidated class action complaint alleges, among other things, that we violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by failing to disclose facts related to the alleged failure of IMbark to meet the two primary endpoints of the trial, spleen response rate and Total Symptom Score, and that our stock price dropped when such information was disclosed. The plaintiffs in the consolidated class action complaint seek damages and interest, and an award of reasonable costs, including attorneys’ fees. On October 22, 2020, lead plaintiffs filed an amended consolidated class action complaint. We filed a motion to dismiss the amended consolidated class action complaint on November 23, 2020. On April 12, 2021, the Court granted in part and denied in part our motion to dismiss. Our answer to the amended consolidated class action complaint was filed on May 13, 2021. On September 30, 2021, lead plaintiffs filed their motion for class certification, and on April 2, 2022, the Court granted the lead plaintiffs’ motion for class certification. Discovery has commenced and will be completed by October 14, 2022. Trial is scheduled to begin on January 17, 2023. Between April 23, 2020 and June 8, 2021, seven shareholder derivative actions were filed, naming as defendants certain of our current officers and certain current and former members of our board. Of these actions, or the Derivative Lawsuits, two were filed in the Northern District, two were filed in the Court of Chancery of the State of Delaware, two were filed in the U.S. District Court for the District of Delaware, and one was filed in the Superior Court of California for the County of San Mateo, respectively. The plaintiffs in the Derivative Lawsuits allege breach of fiduciary duty and/or violations of Section 14 of the Exchange Act, based on the same underlying facts as the consolidated class action lawsuit described above. The plaintiffs seek damages, corporate governance reforms, equitable relief, restitution, and an award of reasonable costs, including attorneys’ fees. The status of the seven Derivative Lawsuits is currently as follows: • On July 2, 2021, we filed a motion to dismiss the consolidated shareholder derivative actions filed in the Court of Chancery of the State of Delaware, or the Chancery Court Derivative Lawsuits. On September 1, 2021, the plaintiffs filed a consolidated amended complaint in the Chancery Court Derivative Lawsuits. On October 12, 2021, we filed our motion to dismiss the consolidated amended complaint. The Court of Chancery of the State of Delaware heard oral argument on the motion on February 15, 2022, and, on June 22, 2022, issued an order staying its decision on our motion to dismiss until after the trial in the consolidated class action lawsuit described above; • The consolidated shareholder derivative actions filed in the U.S. District Court for the District of Delaware have been stayed pending the ruling on our motion to dismiss the Chancery Court Derivative Lawsuits; • The consolidated shareholder derivative actions filed in the Northern District were stayed through the ruling on our motion to dismiss the Chancery Court Derivative Lawsuits. Subsequent to the grant of class certification on April 2, 2022, in the consolidated class action lawsuit described above, on May 3, 2022, the Northern District entered an order providing plaintiffs until June 7, 2022, to file an amended complaint. On June 7, 2022, plaintiffs filed an amended shareholder derivative complaint. On July 6, 2022, the Northern District entered an order staying the consolidated shareholder derivative actions filed in the Northern District until the earlier of either a public announcement of a settlement in the consolidated class action lawsuit described above or a final, non-appealable judgment in the consolidated class action lawsuit described above; and 19 • Our motion to dismiss the shareholder derivative action pursuant to the forum selection clause in our amended and restated bylaws was filed in the Superior Court of California for the County of San Mateo on August 5, 2021. At the hearing on the motion to dismiss on November 2, 2021, the court granted our motion to dismiss and stayed the case until April 19, 2022. At the case management conference on April 19, 2022, the court continued the stay until June 14, 2022. At the case management conference on June 14, 2022, the court continued the stay until December 13, 2022, when it will hold a further case management conference. The pending lawsuits and any other related lawsuits are subject to inherent uncertainties, and the actual defense and disposition costs will depend upon many unknown factors. The outcome of the pending lawsuits and any other related lawsuits is necessarily uncertain. We could be forced to expend significant resources in the defense against the pending lawsuits and any other related lawsuits, and we may not prevail. In addition, we may incur substantial legal fees and costs in connection with such lawsuits. We currently are not able to estimate the possible cost to us from these matters, as the pending lawsuits are currently at an early stage, and we cannot be certain how long it may take to resolve the pending lawsuits or the possible amount of any damages that we may be required to pay. Such amounts could be material to our consolidated financial statements if we do not prevail in the defense against the pending lawsuits and any other related lawsuits, or even if we do prevail. We have not established any reserve for any potential liability relating to the pending lawsuits and any other related lawsuits. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. Risks Related to Global Economic Conditions, COVID-19 and the Military Conflict Between Ukraine and Russia As of the date of this filing, significant uncertainty exists concerning the ultimate duration and severity of the COVID-19 pandemic and the military conflict between Ukraine and Russia. Both of these events have caused widespread, rapidly-evolving and unpredictable impacts on global societies, economies, financial markets and business practices. With respect to the COVID-19 pandemic, we are closely monitoring the impact of the pandemic, the identification of new variants of the COVID-19 virus and related developments, and our focus remains on promoting employee health and safety while continuing to advance the development of imetelstat. For both our Phase 3 clinical trials, IMerge and IMpactMF, we have limited ongoing clinical trial activity in Ukraine and Russia, but we have experienced, and may continue to experience, delays and suspensions in clinical trial activities at clinical sites in Ukraine and Russia due to the current political and civil unrest conditions. With support from our CRO, we are monitoring the impact of the conflict on our clinical trial activities. Due to the dynamic and unpredictable effects of the COVID-19 pandemic, we have had and expect to continue to have disruptions and/or delays in our imetelstat development program, including with respect to our ability to initiate trial sites, enroll and assess patients, maintain patient enrollment, ensure patient clinical and lab collection visits, conduct monitoring visits, supply study drug, report trial results, and interact with regulators or other important agencies due to limitations in employee resources or otherwise. Restrictions on travel, availability of site personnel, and diversion of hospital staff and resources to COVID-19 patients, have disrupted our trial operations, as well as patient recruitment in many areas, resulting in a slowdown in patient enrollment and/or deviations from or disruptions in key clinical trial activities, such as clinical trial site initiation and monitoring. If the effects of the COVID-19 pandemic continue and/or become more severe, we could experience significant disruptions to our clinical development timelines, delays in clinical site initiation and patient enrollment in IMpactMF, IMproveMF and the planned investigator-led clinical trials in acute myeloid leukemia, or AML, and Intermediate-2 or High-risk myelodysplastic syndromes, or higher risk MDS, and other disruptions that could severely impact our business and the imetelstat development program. We have taken and intend to take those actions with regard to COVID-19 that may be required by federal, state or local authorities or that we determine are in the best interests of our patients, investigators, employees and stockholders. In response to the COVID-19 pandemic and “shelter in place” and similar orders issued by state and local governments, we have allowed voluntary access to our offices in California and New Jersey to employees who have been vaccinated, and almost all of our employees continue to work remotely without any significant disruption to our business. Our increased reliance on personnel working remotely could increase our cybersecurity risk, create data accessibility concerns and make us more susceptible to communication disruptions, any of which could adversely impact our business operations. These and similar, and perhaps more severe, disruptions in our operations could occur which would negatively impact our business and business prospects, our financial condition and the future of imetelstat. The effects of the COVID-19 pandemic and the military conflict between Ukraine and Russia, including the significant sanctions imposed against Russia, as well as broader economic conditions, including inflation, rising interest rates and the prospects for recession, have increased market volatility and could result in a significant long-term disruption of global financial markets, reducing or eliminating our ability to raise additional capital, which could negatively affect our liquidity, our ability to complete IMerge Phase 3 and IMpactMF and to commence, conduct and complete any other potential future clinical trials of imetelstat. In addition, the global economic slowdown caused by, among other things, the COVID-19 pandemic and the military conflict between Ukraine and Russia, as well as inflation, rising interest rates and the prospects for recession, could materially and adversely affect our business and the value of our common stock. The extent to which the COVID-19 pandemic and the military conflict between Ukraine and Russia ultimately impact our business, our regulatory and clinical development activities, clinical supply chain and other business operations, as well as the value of and market for our common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration and severity of the pandemic, travel restrictions, quarantines, social distancing 20 and business closure requirements in the U.S. and in other countries, the effectiveness of actions taken globally to contain and treat COVID-19 and whether the military conflict between Ukraine and Russia resolves in a timely manner, or at all. Accordingly, we do not yet know the full extent of potential delays or impacts on our business, our regulatory and clinical development activities, clinical supply chain and other business operations or the global economy as a whole. However, these effects could materially and adversely affect our business and business prospects, our financial condition and the future of imetelstat. 6. STOCKHOLDERS’ EQUITY Public Offering On April 1, 2022, we completed an underwritten public offering of 53,333,334 shares of our common stock and a pre-funded warrant to purchase 18,095,238 shares of our common stock, also known as the 2022 pre-funded warrant, together with accompanying warrants to purchase 35,714,286 shares of our common stock, also known as the 2022 stock purchase warrants. The shares of common stock and the 2022 pre-funded warrant were immediately separable from the 2022 stock purchase warrants. All of the securities were issued separately. The combined public offering price of the common stock and accompanying 2022 stock purchase warrants was $ 1.05 per share. The 2022 stock purchase warrants have an exercise price of $ 1.45 per share and are exercisable immediately. The term of the 2022 stock purchase warrants expires on the earlier to occur of (a) the date that is 30 business days following the date on which we first issue a press release disclosing, if applicable, that the United States Food and Drug Administration, or FDA, has accepted for filing a New Drug Application submitted to the FDA for imetelstat in Low or Intermediate-1 risk myelodysplastic syndromes and (b) April 1, 2027. The combined public offering price of the 2022 pre-funded warrant and accompanying 2022 stock purchase warrant was $ 1.049 per share. The 2022 pre-funded warrant has an exercise price of $ 0.001 per share and may be exercised at any time until the 2022 pre-funded warrant is exercised in full. As of June 30, 2022 , none of the 2022 pre-funded warrant and 2022 stock purchase warrants have been exercised. The net cash proceeds from this offering were $ 69,916,000 , after deducting the underwriting discount and other offering expenses paid by us, and exclude any future proceeds from the exercise of the 2022 pre-funded warrant and 2022 stock purchase warrants. Upon the issuance of the 2022 pre-funded warrant and 2022 stock purchase warrants, we evaluated the terms of each warrant to determine the appropriate accounting and classification pursuant to FASB Accounting Standards Codification Topic 480, Distinguishing Liabilities from Equity , and FASB Accounting Standards Codification Topic 815, Derivatives and Hedging . Warrants are classified as liabilities when the warrant terms allow settlement of the warrant exercise in cash and classified as equity when the warrant terms only allow settlement in shares of common stock. The terms of the 2022 pre-funded warrant and the 2022 stock purchase warrants include certain provisions related to fundamental transactions and a cashless exercise provision in the event registered shares are not available, and do not include any mandatory redemption provisions. Based on our evaluation, we concluded the 2022 pre-funded warrant and the 2022 stock purchase warrants should be classified as equity with no subsequent remeasurement as long as such warrants continue to be classified as equity. Employee Stock Purchase Plan In May 2022, our stockholders approved an amendment to our 2014 Employee Stock Purchase Plan to increase the total number of shares issuable under such plan by 1,000,000 shares of common stock. 2018 Equity Incentive Plan In May 2022, our stockholders approved an amendment to our 2018 Equity Incentive Plan to increase the total number of shares issuable under such plan by 11,000,000 shares of common stock. 2018 Inducement Award Plan In December 2018, our board of directors approved the adoption of the 2018 Inducement Award Plan, or the Inducement Plan, to be used exclusively for grants of inducement awards to individuals who were not previously our employees or non-employee directors, other than following a bona fide period of non-employment. As of June 30, 2022, a total of 16,100,000 shares of our common stock had been reserved (subject to customary adjustments in the event of a change in capital structure) under the Inducement Plan. In July 2022, our Compensation Committee approved an amendment to increase the reserve under the Inducement Plan by 5,000,000 shares. The Inducement Plan provides for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and other stock awards, and all awards under the Inducement Plan are intended to meet the standards under Rule 5635(c)(4) of the Nasdaq Listing Rules. The terms and conditions of the Inducement Plan and the inducement awards to be granted thereunder are substantially similar to our stockholder-approved 2018 Equity Incentive Plan. 21 ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. In some cases, forward-looking statements can be identified by the use of terminology such as “may,” “expects,” “plans,” “intends,” “will,” “should,” “projects,” “believes,” “predicts,” “anticipates,” “estimates,” “potential” or “continue,” or the negative thereof or other comparable terminology. These statements are within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements appear throughout the Form 10-Q and are statements regarding our intent, belief, or current expectations, primarily with respect to our business and related industry developments. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Form 10-Q. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us and described in Part II, Item 1A, entitled “Risk Factors,” and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Form 10-Q. OVERVIEW The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q; and the sections entitled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Form 10-K for the year ended December 31, 2021, as filed with the United States Securities and Exchange Commission, or SEC, on March 10, 2022, or 2021 Form 10-K. Business Overview Geron is a late-stage clinical biopharmaceutical company that is focused on the development and potential commercialization of imetelstat, a first-in-class telomerase inhibitor. Geron’s vision is to become a leader in the treatment of blood cancers, or hematologic malignancies, and is committed to improving and extending the lives of patients by changing the course of these diseases by targeting telomerase. We believe data from our prior Phase 2 clinical trials provide strong evidence that imetelstat targets telomerase to inhibit the uncontrolled proliferation of malignant stem and progenitor cells enabling recovery of bone marrow and normal blood cell production, which indicate potential disease-modifying activity. We believe this potential disease modification may differentiate imetelstat from other currently approved and investigational treatments in myeloid hematologic malignancies. We are conducting two ongoing Phase 3 clinical trials that are designed to enable registration of imetelstat: (i) IMerge Phase 3 in Low or Intermediate-1 risk myelodysplastic syndromes, or lower risk MDS, and (ii) IMpactMF in Intermediate-2 or High-risk myelofibrosis, or refractory MF. For IMerge Phase 3, we expect top-line results to be available in early January 2023, based on current planning assumptions. In July 2022, the regularly scheduled Independent Data Monitoring Committee for IMerge Phase 3 met, and the committee recommended the trial continue without modification. Assuming the results of IMerge Phase 3 support regulatory submissions, we plan to submit a New Drug Application, or NDA, in the U.S. in the first half of 2023, and a marketing authorization application, or MAA, in Europe in the second half of 2023, for imetelstat in lower risk MDS. Under either priority or standard review for the NDA and, upon potential approval by the FDA, we expect that commercial launch of imetelstat in lower risk MDS in the U.S. could occur as early as the first half of 2024. In Europe, we anticipate review of the MAA by the European Medicines Agency, or EMA, could take approximately 12 months and, if approved, that commercial launch of imetelstat in lower risk MDS in Europe could occur as early as the second half of 2024. For IMpactMF, clinical site openings and patient screening and enrollment continue. Under current planning assumptions, we expect the trial to be fully enrolled in 2024. In addition, we expect the interim analysis for overall survival, or OS, for IMpactMF may occur in 2024 and the final analysis in 2025. Because these analyses are event-driven, the results may be available at different times than currently expected. In May 2022, the first clinical site opened for enrollment in IMproveMF, a Phase 1 clinical trial of imetelstat in combination with ruxolitinib in frontline Intermediate-2 or High-risk myelofibrosis, or frontline MF, patients. In addition, in collaboration with key opinion leaders with expertise in acute myeloid leukemia, or AML, we plan to support one or more investigator-led clinical trials in AML and Intermediate-2 or High-risk myelodysplastic syndromes, or higher risk MDS, to evaluate imetelstat as a single agent and in combination with venetoclax or hypomethylating agents, or HMAs, in the second half of 2022. Imetelstat has been granted Fast Track designations by the FDA for the treatment of patients with transfusion-dependent anemia due to lower risk MDS, who do not have a deletion 5q chromosomal abnormality, also known as non-del(5q), and who are refractory or resistant to treatment with an erythropoiesis stimulating agent, or ESA, and for the treatment of patients with myelofibrosis, or MF, 22 who have relapsed after or are refractory to treatment with a janus associated kinase, or JAK, inhibitor, also known as relapsed/refractory MF. Imetelstat has also been granted orphan drug designations by the FDA in the U.S. and by the European Commission for the EMA in the EU for the treatment of myelodysplastic syndromes, or MDS, and also for the treatment of MF. In October 2021, we gained access to the Innovative Licensing and Access Pathway, or ILAP, in the United Kingdom, or U.K., through the receipt of an Innovation Passport for imetelstat to treat lower risk MDS. Financial Overview Since our inception, we have primarily financed our operations through the sale of equity securities, interest income on our marketable securities and payments we received under our collaborative and licensing arrangements. As of June 30, 2022, we had approximately $219.7 million in cash, cash equivalents, restricted cash and marketable securities and a long-term principal debt balance of $50.0 million. In April 2022, we completed an underwritten public offering of 53,333,334 shares of our common stock and a pre-funded warrant to purchase 18,095,238 shares of our common stock, also known as the 2022 pre-funded warrant, together with accompanying warrants to purchase 35,714,286 shares of our common stock, also known as the 2022 stock purchase warrants. The combined public offering price of the common stock and accompanying 2022 stock purchase warrants was $1.05 per share. The combined public offering price of the 2022 pre-funded warrant and accompanying 2022 stock purchase warrant was $1.049 per share. The net cash proceeds from this offering were $69.9 million, after deducting the underwriting discount and other offering expenses paid by us, and exclude any potential future proceeds from the exercise of the 2022 pre-funded warrant and 2022 stock purchase warrants. See Note 6 on Stockholders' Equity in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q for additional information about the underwritten public offering completed in April 2022. In June 2022, we entered into a second amendment to the Loan Agreement with Hercules and SVB. Under the second amendment, the aggregate principal amount available to us increased from $75.0 million to $125.0 million. As of June 30, 2022, $75.0 million is available to be drawn in a series of tranches under the Loan Agreement, subject to certain terms and conditions. See Note 4 on Debt in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q for additional information about the second amendment. Substantially all of our revenues to date have been payments under collaboration agreements, and milestones, royalties and other revenues from our licensing arrangements. We currently have no source of product revenue. While we reported a small profit for the year ended December 31, 2015 due to our recognition of revenue in connection with the upfront payment under a former imetelstat collaboration agreement, until 2015 we had never been profitable, and we have not reported any profit since. We have incurred significant net losses since our inception in 1990, resulting principally from costs incurred in connection with our research and development activities and from general and administrative costs associated with our operations. As of June 30, 2022, we had an accumulated deficit of approximately $1.3 billion. The significance of future losses, future revenues and any potential future profitability will depend primarily on the clinical and commercial success of imetelstat, our sole product candidate. Under current planning assumptions, we believe our existing capital resources, potential future proceeds of up to $124.3 million from the exercise of currently outstanding warrants and up to $50.0 million in potential available drawdowns under the Loan Agreement that are subject to our achievement of certain clinical and regulatory milestones and satisfaction of certain capitalization and other requirements, would be sufficient to fund our projected level of operations, which includes stage-gated activities for potential U.S. commercial launch of imetelstat in lower risk MDS, until the middle of 2024. Absent these potential future warrant proceeds and availability of debt drawdowns, under current planning assumptions, we believe our existing capital resources will be sufficient to fund our projected level of operations, which includes stage-gated activities for potential U.S. commercial launch of imetelstat in lower risk MDS, until the end of the third quarter of 2023. We will require substantial additional funding to further advance the imetelstat program, including through the completion of IMpactMF and IMproveMF and the planned investigator-led trials in AML and higher risk MDS, as well as conducting the clinical, regulatory and potential commercialization activities necessary to potentially bring imetelstat to market in lower risk MDS and refractory MF. If approved for marketing by regulatory authorities outside of the U.S., we may seek potential commercialization partners for such territories. We do not expect imetelstat to be commercially available for several years, if at all. Note on the COVID-19 Pandemic and Military Conflict Between Ukraine and Russia The ongoing COVID-19 pandemic and the military conflict between Ukraine and Russia are having widespread, rapidly-evolving, and unpredictable impacts on global societies, economies, financial markets and business practices. For both our Phase 3 clinical trials, IMerge and IMpactMF, we have limited ongoing clinical trial activity in Ukraine and Russia, but we have experienced, and may continue to experience, delays and suspensions in clinical trial activities at clinical sites in Ukraine and Russia, including delays in clinical site initiations, patient screening and enrollment, as well as constraints on available sites and site personnel. With support from our international clinical research organization, or CRO, we are monitoring the impact of the conflict on our clinical trial activities. We do not anticipate the pandemic or the conflict to affect our projected timing for top-line results in IMerge Phase 3 in early January 2023. For a discussion regarding the effect of the ongoing COVID-19 pandemic and the military conflict between Ukraine and Russia on our business and financial results, see the section entitled “Risk Factors” in Part II, Item 1A and Note 5 on 23 Contingencies and Uncertainties – Risks Related to Global Economic Conditions, COVID-19 and the Military Conflict Between Ukraine and Russia in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q. CRITICAL ACCOUNTING POLICIES AND ESTIMATES There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2022, as compared to the critical accounting policies and estimates disclosed in our 2021 Form 10-K. Our condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 1 on Summary of Significant Accounting Policies in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q describes the significant accounting policies used in the preparation of the condensed consolidated financial statements. Estimates and assumptions about future events and their effects cannot be determined with certainty. We base our estimates on historical experience and on various other assumptions believed to be applicable and reasonable under the circumstances. These estimates may change as new events occur, as additional information is obtained and as our operating environment changes. These changes historically have been minor and have been included in the condensed consolidated financial statements as soon as they became known. Based on a critical assessment of our accounting policies and the underlying judgments and uncertainties affecting the application of those policies, management believes that our condensed consolidated financial statements are fairly stated in accordance with accounting principles generally accepted in the United States, and present a meaningful presentation of our financial condition and results of operations. RESULTS OF OPERATIONS Our results of operations have fluctuated from period to period and may continue to fluctuate in the future. Results of operations for any period may be unrelated to results of operations for any other period. Thus, historical results should not be viewed as indicative of future operating results. We are subject to risks common to companies in our industry and at our stage of development, including, but not limited to, risks inherent in research and development efforts, including the development, manufacture, regulatory approval for and commercialization of, imetelstat; uncertainty of non-clinical and clinical trial results or regulatory approvals or clearances; the future development of imetelstat by us, including any future efficacy or safety results that may cause the benefit-risk profile of imetelstat to become unacceptable; the uncertain and unpredictable drug research and discovery process; overcoming disruptions and/or delays due to the COVID-19 pandemic or geopolitical events, such as the current military conflict between Ukraine and Russia; our need for substantial additional capital; enforcement of our patent and proprietary rights; reliance upon our CROs, contract manufacturing organizations, or CMOs, consultants, licensees, investigators and other third parties; and potential competition. In order for imetelstat to be commercialized, we must conduct non-clinical tests and clinical trials to demonstrate the safety and efficacy of imetelstat, obtain regulatory approvals or clearances and enter into manufacturing, distribution and marketing arrangements, as well as obtain market acceptance. We do not expect to receive revenue based on sales of imetelstat for several years, if at all. Revenues We previously entered into license or collaboration agreements with companies involved with oncology, diagnostics, research tools and biologics production, whereby we granted certain rights to our imetelstat and non-imetelstat related technologies. Under these agreements, non-refundable upfront fees and annual license maintenance fees were considered fixed consideration, while milestone payments and royalties were identified as variable consideration. As of June 30, 2021, no active license agreements for our imetelstat and non-imetelstat related technologies remain. In connection with the divestiture of Geron’s human embryonic stem cell assets, including intellectual property and proprietary technology, to Lineage Cell Therapeutics, Inc., or Lineage, (formerly BioTime, Inc. which acquired Asterias Biotherapeutics, Inc.) in 2013, we are entitled to receive royalties on sales from certain research or commercial products utilizing Geron’s divested intellectual property. We recognized license fee revenues of $28,000 for each of the three and six months ended June 30, 2021 related to a previous license agreement for our non-imetelstat related technologies. No comparable amounts were recognized for the three and six months ended June 30, 2022. We recognized royalty revenues of $73,000 and $196,000 for the three and six months ended June 30, 2022, respectively, compared to $79,000 and $216,000 for the same periods in 2021. Royalty revenues in 2022 and 2021 primarily reflect estimated royalties from sales of cell-based research products from our divested stem cell assets. Future license fee and royalty revenues are dependent on additional agreements being signed, if any, our current license agreement with Lineage being maintained and the underlying patent rights for the license remaining active. Historical revenues may not be predictive of future revenues. Absent any retroactive royalty payments, such as the one-time payment received from Lineage in 24 the fourth quarter of 2021, we expect revenues in 2022 to be lower than 2021 as a result of reduced royalties from sales of cell-based research products from our divested stem cell assets. Research and Development Expenses During the three and six months ended June 30, 2022 and 2021, our imetelstat program and our research discovery program related to potential next generation telomerase inhibitors were the only research and development programs we supported. For these research and development programs, we incur direct external, personnel-related and other research and development costs. For the three and six months ended June 30, 2022 and 2021, direct external expenses included costs for our CROs, consultants and other clinical-related vendors, as well as expenses for contract manufacturing and quality activities. Personnel-related expenses primarily consist of salaries and wages, stock-based compensation, payroll taxes and benefits for our employees involved with ongoing research and development efforts. Other research and development expenses primarily consist of research-related overhead associated with allocated expenses for rent and maintenance of facilities and other supplies. Research and development expenses for the three and six months ended June 30, 2022 and 2021 were as follows: Three Months Ended June 30, Six Months Ended June 30, (In thousands) 2022 2021 2022 2021 (Unaudited) Direct external expenses $ 13,819 $ 15,727 $ 28,926 $ 30,869 Personnel-related expenses 5,401 5,176 11,222 10,268 All other expenses 1,386 1,034 2,557 1,913 Total research and development expenses $ 20,606 $ 21,937 $ 42,705 $ 43,050 The decrease in research and development expenses for the three and six months ended June 30, 2022, compared to the same periods in 2021, primarily reflects the net result of decreased manufacturing costs due to the timing of imetelstat manufacturing batches; partially offset by increased personnel-related expenses for additional headcount and higher consulting costs related to preparation for top-line results and regulatory submissions in lower risk MDS. We expect research and development expenses to increase in the future as we support the current two Phase 3 clinical trials of imetelstat, IMerge and IMpactMF, the IMproveMF trial and planned investigator-led trials in AML and higher risk MDS. At this time, we cannot provide reliable estimates of how much time or investment will be necessary to advance imetelstat toward commercialization. For a more complete discussion of the risks and uncertainties associated with the development of imetelstat, see the sub‑sections entitled “Risks Related to the Development of Imetelstat” and “Risks Related to Regulatory Compliance Matters and Commercialization of Imetelstat” in Part II, Item 1A entitled “Risk Factors” and elsewhere in this quarterly report on Form 10‑Q. General and Administrative Expenses General and administrative expenses were $7.4 million and $14.1 million for the three and six months ended June 30, 2022, respectively, compared to $7.1 million and $14.5 million for the same periods in 2021. The increase in general and administrative expenses for the three months ended June 30, 2022, compared to the same period in 2021, primarily reflects the net result of increased costs for commercial preparatory activities of approximately $563,000 and higher personnel-related expenses of approximately $573,000 for additional headcount; partially offset by lower legal fees of approximately $364,000 and reduced consulting costs of approximately $530,000 related to modernizing the internal infrastructure to support potential commercial launch. The decrease in general and administrative expenses for the six months ended June 30, 2022, compared to the same period in 2021, primarily reflects the net result of reduced consulting costs of approximately $1.2 million related to modernizing the internal infrastructure to support potential commercial launch and lower legal fees of approximately $586,000; partially offset by higher personnel-related expenses of approximately $797,000 for additional headcount and higher costs for commercial preparatory activities of approximately $349,000. We expect general and administrative expenses to increase in the future as the imetelstat program matures and potential stage-gated commercialization activities continue. Interest Income Interest income was $330,000 and $442,000 for the three and six months ended June 30, 2022, respectively, compared to $136,000 and $309,000 for the same periods in 2021. The increase in interest income for the three and six months ended June 30, 2022, compared to the same periods in 2021, primarily reflects a larger marketable securities portfolio with the receipt of net cash proceeds from the underwritten public offering completed in April 2022 and higher yields from recent marketable securities purchases. Interest earned in future periods will depend on the size of our marketable securities portfolio and prevailing interest rates. See Note 6 on Stockholders' Equity in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q for additional information about the underwritten public offering completed in April 2022. 25 Interest Expense Interest expense was $1.6 million and $3.1 million for the three and six months ended June 30, 2022, respectively, compared to $804,000 and $1.5 million for the same periods in 2021. The increase in interest expense for the three and six months ended June 30, 2022, compared to the same periods in 2021, primarily reflects rising interest rates and an increased principal debt balance under the Loan Agreement. Currently, we have $50.0 million in principal debt outstanding. Interest expense reflects interest owed under the Loan Agreement, as well as amortization of associated debt issuance costs and debt discounts using the effective interest method and accrual for an end of term charge. See Note 4 on Debt in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q for additional information about the Loan Agreement. Other Income and (Expense), Net Net other income was $1.1 million and $1.1 million for the three and six months ended June 30, 2022, respectively, compared to net other expense of $17,000 and net other income of $1.2 million for the same periods in 2021. In the second quarter of 2022, we recognized other income of approximately $1.3 million related to the reimbursement of certain legal expenses under our insurance policies. During the first quarter of 2021, we sold our entire equity investment in BARD1 Life Sciences Limited, a company listed on the Australian stock exchange, resulting in a net realized gain of $1.2 million, including foreign currency translation adjustments. Net other income and (expense) also includes bank charges related to our cash operating accounts and marketable securities portfolio. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 2022, we had cash, restricted cash, cash equivalents, and marketable securities of $219.7 million, compared to $212.7 million at December 31, 2021. The increase in cash, restricted cash, cash equivalents and marketable securities during the six months ended June 30, 2022 was primarily the net result of the receipt of net cash proceeds of $69.9 million from our underwritten public offering completed in April 2022, partially offset by cash being used for operations. On April 1, 2022, we completed an underwritten public offering of 53,333,334 shares of our common stock and a pre-funded warrant to purchase 18,095,238 shares of our common stock, also known as the 2022 pre-funded warrant, together with accompanying warrants to purchase 35,714,286 shares of our common stock, also known as the 2022 stock purchase warrants. The combined public offering price of the common stock and accompanying 2022 stock purchase warrants was $1.05 per share. The combined public offering price of the 2022 pre-funded warrant and accompanying 2022 stock purchase warrant was $1.049 per share. The net cash proceeds from this offering were $69.9 million, after deducting the underwriting discount and other offering expenses paid by us, and exclude any potential future proceeds from the exercise of the 2022 pre-funded warrant and 2022 stock purchase warrants. See Note 6 on Stockholders' Equity in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q for additional information about the underwritten public offering completed in April 2022. As of June 30, 2022 and December 31, 2021 we had a long-term principal debt balance of $50.0 million under the Loan Agreement with Hercules and SVB. In June 2022, we entered into a second amendment to the Loan Agreement with Hercules and SVB. Under the second amendment, the aggregate principal amount available to us increased from $75.0 million to $125.0 million. As of June 30, 2022, a total of $75.0 million is available to be drawn in a series of tranches under the Loan Agreement, subject to certain terms and conditions. Of this amount, $50.0 million is available subject to our achievement of certain clinical and regulatory milestones and satisfaction of certain capitalization and other requirements, and the remaining $25.0 million is available subject to approval by an investment committee comprised of Hercules and SVB. See Note 4 on Debt in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q for additional information on the second amendment. We have an investment policy to invest our cash in liquid, investment grade securities, such as interest-bearing money market funds, certificates of deposit, U.S. Treasury securities, municipal securities, government and agency securities, commercial paper and corporate notes. Our investment portfolio does not contain securities with exposure to sub-prime mortgages, collateralized debt obligations, asset-backed securities or auction rate securities and, to date, we have not recognized any other-than-temporary impairment charges on our marketable securities or any significant changes in aggregate fair value that would impact our cash resources or liquidity. To date, we have not experienced lack of access to our invested cash and cash equivalents; however, access to our invested cash and cash equivalents may be impacted by adverse conditions in the financial and credit markets. On September 4, 2020, we entered into an At Market Issuance Sales Agreement, or the 2020 Sales Agreement, with B. Riley Securities, Inc., or B. Riley Securities, pursuant to which we may elect to issue and sell shares of our common stock having an aggregate offering price of up to $100.0 million in such quantities and on such minimum price terms as we set from time to time through B. Riley Securities as our sales agent. We pay B. Riley Securities an aggregate commission rate equal to up to 3.0% of the gross proceeds of the sales price per share for common stock sold through B. Riley Securities under the 2020 Sales Agreement. For the year ended December 31, 2021, we sold an aggregate of 10,571,556 shares of our common stock pursuant to the 2020 Sales Agreement, resulting in net cash proceeds to us of approximately $20.4 million, after deducting sales commissions and other offering expenses payable by us. We did not sell any shares of our common stock pursuant to the 2020 Sales Agreement during the six months ended June 30, 2022. Approximately $79.1 million of our common stock remained available for issuance under the 2020 Sales Agreement as of June 30, 2022. The 2020 Sales Agreement will expire upon the earlier of: (a) the sale of all common stock subject to the 2020 Sales Agreement, or (b) September 4, 2023. 26 Financing Strategy We may, from time to time, consider additional funding through a combination of new collaborative arrangements, strategic alliances, and additional equity and debt financings or from other sources. We will continue to manage our capital structure and consider all financing opportunities, whenever they may occur, that could strengthen our long-term liquidity profile. Any such capital transactions may or may not be similar to transactions in which we have engaged in the past. There can be no assurance that any such financing opportunities will be available on acceptable terms, if at all. Future Funding Requirements Under current planning assumptions, we believe our existing capital resources, including the potential future proceeds of up to $124.3 million from the exercise of currently outstanding warrants and potential drawdowns of up to $50.0 million under the Loan Agreement that are subject to our achievement of certain clinical and regulatory milestones and satisfaction of certain capitalization and other requirements, would be sufficient to fund our projected level of operations, which includes stage-gated activities for potential U.S. commercial launch of imetelstat in lower risk MDS, until the middle of 2024. Absent these potential warrant proceeds and availability of debt drawdowns under the Loan Agreement, under current planning assumptions, we believe our existing capital resources will be sufficient to fund our projected level of operations, which includes stage-gated activities for potential U.S. commercial launch of imetelstat in lower risk MDS, until the end of the third quarter of 2023. Importantly, our ability to raise additional capital to fund our operations after the end of the third quarter of 2023 will be substantially dependent on the top-line results from IMerge Phase 3. If the top-line results from IMerge Phase 3 are negative, inconclusive or otherwise do not meet the expectations of investors, analysts and our lenders, our ability to raise additional capital to fund our operations after the end of the third quarter of 2023 will be substantially impaired, which might cause us to cease operations. In any event, we will require substantial additional funding to further advance the imetelstat program, including through the completion of IMpactMF and IMproveMF and the planned investigator-led trials in AML and higher risk MDS, as well as conducting the clinical, regulatory and potential commercialization activities necessary to potentially bring imetelstat to market in lower risk MDS and refractory MF. In addition, our ability to commercialize imetelstat in the U.S., if regulatory approval is granted, depends on us being able to establish sales and marketing capabilities. Because the outcome of any clinical activities and/or regulatory approval process is highly uncertain, we cannot reasonably estimate whether any development activities we may undertake will succeed, and we may never recoup our investment in any imetelstat development, which would adversely affect our financial condition and our business and business prospects, and might cause us to cease operations. In addition, our plans and timing expectations will be further delayed or interrupted if COVID-19 or pandemic conditions worsen, creating further limitations on our clinical trial activities, or could be disrupted by civil or political unrest (such as the current military conflict between Ukraine and Russia). Further, our future capital requirements are difficult to forecast and will depend on many factors, including: • the accuracy of the assumptions underlying our estimates for our capital needs; • the scope, progress, timing, magnitude and costs of clinical development, manufacturing and potential commercialization of imetelstat, including the number of indications being pursued, subject to clearances and approvals by the FDA and similar regulatory authorities in other countries; • the scope, progress, duration, results and costs of current clinical trials, including IMerge Phase 3, IMpactMF and IMproveMF, and potential future clinical trials of imetelstat, such as the planned investigator-led clinical trials in AML and higher risk MDS, as well as non-clinical studies and assessments of imetelstat; • delays or disruptions in opening sites, screening and enrolling patients or treating and following patients, in IMpactMF and IMproveMF or any potential future clinical trials of imetelstat, such as the planned investigator-led clinical trials in AML and higher risk MDS, whether as a result of the effects of the COVID-19 pandemic, the effects of the current military conflict between Ukraine and Russia or for any other reasons; • the costs, timing and outcomes of regulatory reviews or other regulatory actions related to imetelstat, such as obtaining and maintaining regulatory clearances and approvals for IMerge Phase 3 and IMpactMF in the U.S. and in other countries; • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; • the costs of manufacturing imetelstat, including our ability to achieve any meaningful reduction in manufacturing costs; • the costs of multiple third-party vendors and service providers, including our CROs and third-party manufacturers, to pursue the development, manufacturing and potential commercialization of imetelstat; • our ability to establish, enforce and maintain collaborative or other strategic arrangements for research, development, clinical testing and manufacturing of imetelstat and potential future commercialization and marketing; • our efforts to enhance operational, financial and management processes and systems that will be required for future development and commercialization of imetelstat, and our ability to successfully recruit and retain additional key personnel to support the development and potential future commercialization of imetelstat; 27 • our ability to successfully market and sell imetelstat, if imetelstat receives future regulatory approval or clearance, in the U.S. and other countries, and the associated costs; • the costs and timing necessary to build a sales force in the U.S. and potentially other countries to market and sell imetelstat, should it receive regulatory approval; • the sales price for imetelstat, if any; • the availability of coverage and adequate third-party reimbursement for imetelstat; • expenses associated with the pending securities class action lawsuits and derivative lawsuits, as well as any other potential litigation; • the extent and scope of our general and administrative expenses, including expenses associated with potential future litigation; • our level of indebtedness and associated debt service obligations; • the costs of maintaining and operating facilities in California and New Jersey, telecommunications and administrative oversight, as well as higher expenses for travel; • broader economic conditions, including inflation, rising interest rates and the prospects for recession, that may reduce our ability to access debt capital or financing on preferable terms, which may adversely affect future capital requirements and forecasts; and • the costs of enabling our personnel to work remotely, including providing supplies, equipment and technology necessary for them to perform their responsibilities. Until we can generate a sufficient amount of revenue from imetelstat to finance our cash requirements, which we may never achieve, we expect to finance future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements, which may not be possible. Availability of such financing sources may be negatively impacted with any further delays in reporting results from IMerge Phase 3 or IMpactMF. Additional financing through public or private debt or equity financings, including pursuant to the 2020 Sales Agreement with B. Riley Securities, the remaining tranches of up to $75.0 million available under the Loan Agreement, subject to the achievement of certain clinical and regulatory milestones and satisfaction of certain capitalization and other requirements, including approval by an investment committee comprised of Hercules and SVB, capital lease transactions or other financing sources may not be available on acceptable terms, or at all. We may be unable to raise equity capital, or may be forced to do so at a stock price or on other terms that could result in substantial dilution of ownership for our stockholders. The receptivity of the public and private debt and equity markets to proposed financings has been substantially affected by uncertainty in the general economic, market and political climate caused by the effects of the COVID-19 pandemic, the current military conflict between Ukraine and Russia and general economic conditions, and may in the future be affected by other factors which are unpredictable and over which we have no control. In this regard, the effects of the COVID-19 pandemic have increased market volatility and could result in a significant long-term disruption of global financial markets, which could reduce or eliminate our ability to raise additional funds through financings, and could negatively impact the terms upon which we may raise those funds. Similarly, political and civil unrest, such as the current military conflict between Ukraine and Russia and the related significant sanctions imposed against Russia, has created extreme volatility and disruption in the capital markets and is expected to have further global economic consequences. If the equity and credit markets deteriorate, including as a result of a resurgence of COVID-19, the current military conflict between Ukraine and Russia or other political unrest or war, including the possibility of expanded regional or global conflict, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. If we are unable to raise additional capital or establish alternative collaborative arrangements with third-party collaborative partners for imetelstat, the development of imetelstat may be further delayed, altered or abandoned, which might cause us to cease operations. In addition, we may seek additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. Due to uncertainty in the general economic, market and political climate, we may determine that it is necessary or appropriate to raise additional funds proactively to meet longer-term anticipated operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, including pursuant to the 2020 Sales Agreement, your ownership interest as a stockholder may be diluted, and the terms may include liquidation or other preferences that materially and adversely affect your rights as a stockholder. In addition, we have borrowed, and in the future may borrow, additional capital from institutional and commercial banking sources to fund imetelstat development and our future growth, including pursuant to our Loan Agreement or potentially pursuant to new arrangements with different lenders. We may borrow funds on terms under agreements, such as the Loan Agreement, that include restrictive covenants, including covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Moreover, if we raise additional funds through alliance, collaborative or licensing arrangements with third parties, we may have to relinquish valuable rights to imetelstat or our technologies or grant licenses on terms that are not favorable to us. 28 We cannot assure you that our existing capital resources, future interest income, and potential future sales of our common stock, including under the 2020 Sales Agreement with B. Riley Securities or potential future drawdowns, if available, of the remaining up to $75.0 million under the Loan Agreement, will be sufficient to fund our operating plans. In this regard, under the Loan Agreement, our ability to draw down any funds is subject to our achievement of certain clinical and regulatory milestones and satisfaction of certain capitalization requirements and other conditions, including approval by an investment committee comprised of Hercules and SVB. Without such approval, we will not be eligible to draw down any funds under the final $25.0 million tranche of the Loan Agreement, and we will need to obtain additional or alternative financing to advance our development of imetelstat. In any event, we will require substantial additional funding to further advance the imetelstat program, including through the completion of IMpactMF and IMproveMF and the planned investigator-led trials in AML and higher risk MDS, as well as conducting the clinical, regulatory and potential commercialization activities necessary to potentially bring imetelstat to market in lower risk MDS and refractory MF, and our need for additional funds may arise sooner than planned. If adequate funds are not available on a timely basis, if at all, we may be unable to pursue further development, including completing IMpactMF and IMproveMF, or commencing, conducting or completing potential future clinical trials of imetelstat, such as the planned investigator-led clinical trials in AML and higher risk MDS, or pursuing potential commercialization of imetelstat, which would severely harm our business and we might cease operations. Cash Flows from Operating Activities Net cash used in operations for the six months ended June 30, 2022 and 2021 was $62.6 million and $50.5 million, respectively. The increase in net cash used in operations for the six months ended June 30, 2022, compared to the same period in 2021, primarily reflects higher payments for research and development expenses in connection with supporting the current Phase 3 clinical trials, IMerge and IMpactMF, and increases in headcount. Cash Flows from Investing Activities Net cash provided by investing activities for the six months ended June 30, 2022 and 2021 was $33.2 million and $69.0 million, respectively. The decrease in net cash provided by investing activities for the six months ended June 30, 2022, compared to the same period in 2021, primarily reflects a higher rate of purchases than maturities of marketable securities in 2022 from the investment of net cash proceeds received from the underwritten public offering completed in April 2022. Cash Flows from Financing Activities Net cash provided by financing activities for the six months ended June 30, 2022 and 2021 was $70.6 million and $28.9 million, respectively. Financing activities in 2022 primarily reflect the receipt of net cash proceeds from the underwritten public offering completed in April 2022. Financing activities in 2021 primarily reflect the receipt of net cash proceeds from the sales of our common stock under the 2020 Sales Agreement with B. Riley Securities and a $10.0 million draw down under the Loan Agreement with Hercules and SVB. Contractual Obligations We have entered into arrangements that contractually obligate us to make payments that will affect our liquidity and cash flows in future periods. Our contractual obligations primarily consist of our current and noncurrent debt obligations under the Loan Agreement with Hercules and SVB, as described above and in Note 4 on Debt in Notes to Condensed Consolidated Financial Statements of this quarterly report on Form 10-Q, and obligations under non-cancellable operating leases. The aggregate amount of our future operating lease payments was reported in our 2021 Form 10-K and there have been no changes to the contractual terms of our operating leases during the six months ended June 30, 2022. In the normal course of business, we enter into agreements with CROs for clinical trials and third-party manufacturers for clinical supply manufacturing and with other vendors for preclinical research studies, investigator-led trials and other services and products for operating purposes. We have not considered these payments to be contractual obligations since the contracts are generally cancelable at any time by us upon less than 180 days’ prior written notice. We also have certain in-license agreements that require us to pay milestones to such third parties upon achievement of certain development, regulatory or commercial milestones. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and commercial milestones, which may not be achieved. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act, and are not required to provide the information specified under this item. 29