MiNK Therapeutics, Inc. 10-Q

Item 1. Financial Statements. MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, 2022 December 31, 2021 ASSETS Cash and cash equivalents $ 34,688,446 $ 38,888,828 Prepaid expenses 183,721 1,761 Other current assets 604,641 744,321 Total current assets 35,476,808 39,634,910 Equipment, net of accumulated depreciation of $ 193,217 and $ 168,605 at March 31, 2022 and December 31, 2021, respectively 665,212 606,595 Total assets $ 36,142,020 $ 40,241,505 LIABILITIES AND STOCKHOLDERS’ EQUITY Accounts payable $ 3,727,049 $ 2,995,645 Accrued liabilities 2,652,771 1,763,688 Other current liabilities 5,413,840 5,760,609 Due to related parties 7,040,026 5,945,094 Total current liabilities 18,833,686 16,465,036 Commitments and contingencies STOCKHOLDERS’ EQUITY Common stock, par value $ 0.00001 per share; 150,000,000 shares authorized; 33,560,914 and 33,476,523 shares issued at March 31, 2022 and December 31, 2021, respectively 336 335 Additional paid-in capital 108,135,459 107,349,265 Accumulated other comprehensive loss ( 102,498 ) ( 625,269 ) Accumulated deficit ( 90,724,963 ) ( 82,947,862 ) Total stockholders’ equity 17,308,334 23,776,469 Total liabilities and stockholders’ equity $ 36,142,020 $ 40,241,505 See accompanying notes to unaudited condensed consolidated financial statements. 1 MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) Three Months Ended March 31, 2022 2021 Operating expenses: Research and development $ 5,277,335 $ 3,097,711 General and administrative 2,096,954 594,981 Change in fair value of convertible affiliated note — ( 684,436 ) Operating loss ( 7,374,289 ) ( 3,008,256 ) Other expense, net: Interest expense, net ( 848 ) ( 743,695 ) Other expense, net ( 401,964 ) ( 94,243 ) Net loss $ ( 7,777,101 ) $ ( 3,846,194 ) Per common share data: Basic and diluted net loss per common share $ ( 0.23 ) $ ( 0.16 ) Weighted average number of common shares outstanding 33,504,472 24,177,315 Other comprehensive income: Foreign currency translation gain $ 522,771 $ 353,305 Comprehensive loss $ ( 7,254,330 ) $ ( 3,492,889 ) See accompanying notes to unaudited condensed consolidated financial statements. 2 MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) Common Stock Accumulated Number of Shares Par Value Additional Paid-In Capital Other Comprehensive Income (Loss) Accumulated Deficit Total Balance at December 31, 2021 33,476,523 $ 335 $ 107,349,265 $ ( 625,269 ) $ ( 82,947,862 ) 23,776,469 Net loss — — — — ( 7,777,101 ) ( 7,777,101 ) Other comprehensive income — — — 522,771 — 522,771 Option exercises 84,391 1 688 — — 689 Grant and recognition of stock options — — 741,773 — — 741,773 Recognition of parent stock options — — 43,733 — — 43,733 Balance at March 31, 2022 33,560,914 $ 336 $ 108,135,459 $ ( 102,498 ) $ ( 90,724,963 ) $ 17,308,334 3 MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) Common Stock Accumulated Number of Shares Par Value Additional Paid-In Capital Other Comprehensive Income (Loss) Accumulated Deficit Total Balance at December 31, 2020 24,177,315 $ 242 $ 383,711 $ ( 1,523,038 ) $ ( 52,735,092 ) $ ( 53,874,177 ) Net loss — — — — ( 3,846,194 ) ( 3,846,194 ) Other comprehensive income — — — 353,305 — 353,305 Grant and recognition of stock options — — 263,081 — — 263,081 Recognition of parent stock options — — 19,949 — — 19,949 Balance at March 31, 2021 24,177,315 $ 242 $ 666,741 $ ( 1,169,733 ) $ ( 56,581,286 ) $ ( 57,084,036 ) See accompanying notes to unaudited condensed consolidated financial statements. 4 MINK THERAPEUTICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 7,777,101 ) $ ( 3,846,194 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 27,077 16,194 Share-based compensation 785,506 283,030 Interest accrued on convertible affiliated note — 743,695 Change in fair value of convertible affiliated note — ( 684,436 ) Changes in operating assets and liabilities: Prepaid expenses ( 181,974 ) ( 135,468 ) Accounts payable 642,226 ( 306,813 ) Accrued liabilities and other current liabilities 1,191,631 146,469 Other operating assets and liabilities 1,116,150 ( 425,150 ) Net cash used in operating activities ( 4,196,485 ) ( 4,208,673 ) Cash flows from investing activities: Purchases of plant and equipment — ( 39,520 ) Net cash used in investing activities — ( 39,520 ) Cash flows from financing activities: Proceeds from option exercises 689 — Proceeds from issuance of convertible affiliated note — 2,324,499 Net cash provided by financing activities 689 2,324,499 Effect of exchange rate changes on cash ( 4,586 ) 42,812 Net decrease in cash and cash equivalents ( 4,200,382 ) ( 1,880,882 ) Cash and cash equivalents, beginning of period 38,888,828 2,691,156 Cash and cash equivalents, end of period $ 34,688,446 $ 810,274 Supplemental cash flow information: Cash paid for interest $ 1,550 $ — Supplemental disclosures - non-cash activities: Purchases of plant and equipment in accounts payable and accrued liabilities $ 91,928 $ — See accompanying notes to unaudited condensed consolidated financial statements. 5 MINK THERAPEUTICS, INC. AND SUBSIDIARIES NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (1) Business and Liquidity MiNK Therapeutics, Inc. (“MiNK” or the “Company”) is a clinical stage biopharmaceutical company pioneering the discovery, development and commercialization of allogeneic, off-the-shelf, invariant natural killer T (“iNKT”) cell therapies to treat cancer and other immune-mediated diseases. iNKT cells are a distinct T cell population that combine durable memory responses with the rapid cytolytic features of natural killer cells. iNKT cells offer distinct therapeutic advantages as a platform for allogeneic therapy in that the cells naturally home to tissues, aid clearance of tumors and infected cells and suppress graft-versus-host-disease. MiNK’s proprietary platform is designed to facilitate scalable and reproducible manufacturing for off-the-shelf delivery. As such, the Company believes that its approach represents a highly versatile application for therapeutic development in cancer and immune diseases. MiNK is leveraging its platform and manufacturing capabilities to develop a wholly owned or exclusively licensed pipeline of both native and engineered iNKT cells. Since inception, in 2017, until the completion of the Company’s initial public offering (“IPO”), the Company financed its operations primarily through funding from Agenus Inc. (“Agenus”), its parent company. The Company has incurred losses since inception and, as of March 31, 2022, had an accumulated deficit of $ 90.7 million. MiNK expects to continue incurring operating losses and negative cash flows for the foreseeable future. Based on the Company’s current plans and projections, MiNK believes its cash and cash equivalents balance as of March 31, 2022 of $ 34.7 million will be sufficient to satisfy its liquidity requirements for more than one year from when these financial statements were issued. Management continually addresses the Company’s liquidity position and adjusts spending as needed in order to preserve liquidity. The Company’s future liquidity needs will be determined primarily by the success of its operations with respect to the progression of the Company’s product candidates and key development and regulatory events in the future. Potential sources of additional funding for the Company include: (1) pursuing collaboration, out-licensing and/or partnering opportunities for the Company’s portfolio programs and product candidates with one or more third parties, (2) securing debt financing and/or (3) selling equity securities. MiNK’s product candidates are in various stages of development and significant additional expenditures will be required if the Company starts new trials, encounters delays in its programs, applies for regulatory approvals, continues development of its technologies, expands its operations, and/or brings its product candidates to market. The eventual total cost of each clinical trial is dependent on a number of factors such as trial design, length of the trial, number of clinical sites, and number of patients. The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive, and uncertain. Because all of the Company’s programs are at an early stage of clinical development, the Company is unable to reliably estimate the cost of completing its research and development programs or the timing for bringing such programs to various markets or substantial partnering or out-licensing arrangements, and, therefore, when, if ever, material cash inflows are likely to commence. (2) Significant Accounting Policies The Company’s significant accounting policies are disclosed in the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 18, 2022. Since the date of those financial statements, there have been no changes to the Company’s significant accounting policies. The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual consolidated financial statements. In the opinion of the Company’s management, the condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of the Company’s financial position and operating results. All significant intercompany transactions and accounts have been eliminated in consolidation. Operating results for the three months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that it believes to be reasonable under the circumstances. Actual results could differ materially from those estimates. 6 For the Company’s foreign subsidiaries, the local currency is the functional currency. Assets and liabilities of its foreign subsidiaries are translated into U.S. dollars using rates in effect at the balance sheet date while expenses are translated into U.S. dollars using average exchange rates during the period. The cumulative translation adjustment resulting from changes in exchange rates are included in the condensed consolidated balance sheets as a component of accumulated other comprehensive loss in total stockholders’ deficit. (3) Net Loss Per Share Basic loss per common share is calculated by dividing the net loss by the weighted average number of common shares outstanding. Diluted loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding plus the dilutive effect of outstanding instruments such as stock options. Because the Company reported a net loss for all periods presented, diluted loss per common share is the same as basic loss per common share, as the effect of utilizing the fully diluted share count would have reduced the net loss per common share. Therefore, the following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding as of March 31, 2022 and 2021, as they would be anti-dilutive: Three Months Ended March 31, 2022 2021 Stock options 6,847,531 4,859,118 Non-vested shares 848,779 — (4) Investments Cash equivalents consisted of the following as of March 31, 2022 (in thousands): March 31, 2022 Cost Estimated Fair Value Institutional money market funds $ 30,001 $ 30,001 (5) Accrued and Other Current Liabilities Accrued liabilities consisted of the following as of March 31, 2022 and December 31, 2021 (in thousands): March 31, 2022 December 31, 2021 Payroll $ 727 $ 575 Professional fees 707 531 Research services 1,212 656 Other 7 2 Total $ 2,653 $ 1,764 Other current liabilities of $ 5.2 million and $ 5.3 million as of March 31, 2022 and December 31, 2021, respectively, represent the repayable advance received under the Company’s research and development agreement with the Belgium Walloon Region Government. During 2020, the Company discontinued research efforts related to this program and is evaluating its options in accordance with the terms of the agreement. (6) Share-based Compensation Plans The Company primarily uses the Black-Scholes option pricing model to value options granted to employees and non-employees, as well as options granted to members of the Company’s Board of Directors. All stock option grants have 10-year terms and generally vest ratably over a 3 or 4-year period. 7 A summary of option activity for the three-month period ended March 31, 2022 is presented below: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at December 31, 2021 4,871,822 $ 1.38 Granted 2,060,100 3.11 Exercised ( 84,391 ) 0.01 Forfeited — — Outstanding at March 31, 2022 6,847,531 $ 1.92 8.67 $ 5,757,729 Vested or expected to vest at March 31, 2022 6,847,531 $ 1.92 8.67 $ 5,757,729 Exercisable at March 31, 2022 2,566,535 $ 0.97 7.99 $ 3,914,765 The weighted average grant-date fair values of options granted during the three-month period ended March 31, 2022, was $ 2.15 . During the three-month period ended March 31, 2022, all options were granted with exercise prices equal to the market value of the underlying shares of common stock on the grant date. As of March 31, 2022, there was $ 6.4 million of unrecognized share-based compensation expense related to these stock options which, if all milestones are achieved, will be recognized over a weighted average period of 3.1 years. A summary of non-vested stock activity for the three-month period ended March 31, 2022 is presented below: Nonvested Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2021 723,580 $ 2.91 Granted 125,199 3.60 Vested — — Forfeited — — Outstanding at March 31, 2022 848,779 $ 3.02 As of March 31, 2022, there was $ 1.6 million of unrecognized share-based compensation expense related to these non-vested shares which will be recognized over a weighted average period of 1.5 years. Stock based compensation expense also includes expense related to awards to employees of the Company from the Agenus 2019 Equity Incentive Plan. The impact on the Company’s results of operations from share-based compensation for the three months ended March 31, 2022 and 2021, was as follows: Three Months Ended March 31, 2022 2021 Research and development $ 118,204 $ 31,155 General and administrative 667,302 251,875 Total share-based compensation expense $ 785,506 $ 283,030 (7) Related Party Transactions Until the completion of its IPO, the Company relied on Agenus for all of its working capital requirements. For the periods presented, certain of the Company’s operations were fully integrated with Agenus, including, but not limited to, corporate functions such as finance, human resources, information technology and legal functions. The Company’s consolidated financial statements reflect all costs of doing business related to these operations. In September 2021, the Company entered into an Intellectual Property Assignment and License Agreement with Agenus (the “New Assignment and License Agreement”), upon which the prior intercompany agreement between Agenus and MiNK was terminated. Pursuant to the New Assignment and License Agreement, Agenus assigned to the Company certain patent rights and 8 know-how related to its iNKT product candidates and other patents and know-how related to its business. In addition to the patent rights assigned to the Company by Agenus, the Company also received an exclusive, royalty-free, sublicensable license to research, develop, manufacture and commercialize certain licensed technology in the field. The New Assignment and License Agreement further provides for the Company to grant Agenus a field-limited, non-exclusive, royalty-free license under the assigned patent rights, subject to MiNK’s discretion and provided such access would not reasonably result in a disruption of planned MiNK activities. Agenus has also agreed to provide the Company with Agenus’ biological material upon written request in order for the Company to use such material in its development activities of a combination therapy. Agenus may withhold the transfer of biological material, including, but not limited to, checkpoint modulating antibodies, for various reasons, including if such transfer would reasonably result in a disruption of planned Agenus activities. For any materials Agenus does share with the Company, the parties have agreed to enter into a separate agreement governing the transfer and providing for joint ownership of the data. Agenus has agreed that during the full term of the New Assignment and License Agreement, and for three years thereafter, it will not develop, manufacture or commercialize an iNKT cell therapy, directly or indirectly by transferring such technology. The Company has the sole responsibility to develop, manufacture and commercialize products under this New Assignment and License Agreement. The Company may terminate the New Assignment and License Agreement without cause upon 90 days ’ prior written notice to Agenus. Either party may terminate if they believe there has been a material breach which has not been cured within 90 days (or 45 days for breach of payment obligations) of receiving such notice. In September 2021, the Company entered into an Intercompany General & Administrative Services Agreement with Agenus (the “New Intercompany Services Agreement”). Pursuant to the New Intercompany Services Agreement, Agenus provides MiNK with administrative support, including, without limitation, financial, legal, information technology and human resources administrative support and non-administrative services as may be agreed to between the parties from time to time. Agenus provides the services under the New Intercompany Services Agreement on a cost-plus basis and the Company is required to pay 105 % of Agenus’ costs. Under the New Intercompany Services Agreement, the Company is also entitled to use Agenus’ business offices and laboratory space and equipment in exchange for the Company contributing a proportionate payment for the use of such facilities and equipment. Either party may terminate the New Intercompany Services Agreement upon 30 days’ prior written notice. Allocated Agenus services primarily include payroll related expenses, facility costs and stock-based compensation and are included in the accompanying financial statements based on certain estimates and allocations. The allocation methods primarily include time devoted to activities and headcount-based allocations. Agenus business services and occupancy costs are allocated to the Company based on the Company’s headcount as a percentage of Agenus’. Under the prior intercompany services agreement between Agenus and MiNK, research services were charged between the entities based on hours spent on specific projects applied to hourly wage rates. As such, these allocations may not be indicative of the actual amounts that would have been recorded had the Company operated as an independent, publicly traded company for the periods presented. Allocation of Agenus services, net of approximately $ 856,000 and $ 250,000 for the three months ended March 31, 2022 and 2021, respectively, is included in Operating expenses in the Company’s statement of operations and Due to related parties in the Company’s condensed consolidated balance sheet. In February 2021, the Company entered into a fifth Convertible Promissory Note (the “Note”) with Agenus with terms identical to the convertible promissory note, as amended, issued to Agenus on April 1, 2019, increasing the amount of borrowing capacity to up to $ 50.0 million and extending the maturity to July 1, 2022. In September 2021, the Company entered into an amendment to the convertible promissory note with Agenus to provide, among other things, that the Note would automatically convert into the Company’s common stock upon the completion of the Company’s IPO. In accordance with the terms of the Note, interest was computed on the basis of a 360-day year at 8 % and accrued but was not payable until converted or paid. The Note was automatically converted, at a rate equal to the quotient obtained by dividing (i) the amount due on the date of conversion by (ii) 80 % of the per share price of the Company’s common stock sold in the Company’s IPO, into 5,451,958 shares of the Company’s common stock upon completion of the IPO in October 2021, and was not outstanding at March 31, 2022. (8) Fair Value Measurement The Company measured the Note at fair value. In connection with the Company’s IPO, the Note was automatically converted into 5,451,958 shares of the Company’s common stock and was not outstanding as of March 31, 2022. The fair value of the Note at March 31, 2021 was $ 46.2 million, based on the Level 2 valuation hierarchy of the fair value measurements standard using a scenario based present value methodology that was derived by evaluating the nature and terms of each note and considering the prevailing economic and market conditions at the balance sheet date. The impact of the change in the fair value for the three months ended March 31, 2021 was $ 684,000 . 9 (9) Contingencies The Company may currently be, or may become, a party to legal proceedings. While the Company currently believes that the ultimate outcome of any of these proceedings will not have a material adverse effect on its financial position, results of operations, or liquidity, litigation is subject to inherent uncertainty and consumes both cash and management attention. (10) Recent Accounting Pronouncements No new accounting pronouncement issued or effective during the three months ended March 31, 2022 had or is expected to have a material impact on the Company’s consolidated financial statements or disclosures. 10