What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-17 compared with 2021-03-09 · 134 added, 61 removed, 163 unchanged (54% of the section changed)

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We are a clinical-stage immuno-oncology company specializing in the development and commercialization of novel T cell-based immunotherapies and innovative peptide-based vaccines for the treatment of hematological malignancies and solid tumor indications.

We developed our lead product candidates from our MultiTAA-specific T cell technology, which is based on the selective expansion of non-engineered, tumor-specific T cells that recognize tumor associated antigens, or TAAs, which are tumor targets, and then kill tumor cells expressing those targets.

These T cells are designed to recognize multiple tumor targets to produce broad spectrum anti-tumor activity.

We are advancing two pipelines of product candidates as part of our MultiTAA-specific T cell program:

the autologous T cells for the treatment of lymphoma, multiple myeloma, or MM, and selected solid tumors and the allogeneic T cells for the treatment of acute myeloid leukemia, or AML, and acute lymphoblastic leukemia, or ALL.

Because we do not genetically engineer the MultiTAA-specific T cell therapies, we believe that our product candidates are easier and less expensive to manufacture, have lower toxicities than current engineered chimeric antigen receptor, or CAR-T, and T cell receptor-based therapies and may provide patients with meaningful clinical benefit.

We are also developing innovative peptide-based immunotherapeutic vaccines for the treatment of metastatic solid tumors.

We are pursuing post-transplant AML as the lead indication for our first company-sponsored MultiTAA-specific T cell program.

In April 2020, the FDA granted orphan drug designation to MT-401 for the treatment of AML after receiving an allogeneic stem cell transplant.

The MultiTAA-specific T cell therapy has been well tolerated in an ongoing Phase 1 clinical trial in AML and myelodysplastic syndrome, or MDS, conducted by our strategic partner Baylor College of Medicine, or BCM.

As reported in a recent publication by Lulla et al., 11 of the 17 patients in the adjuvant disease setting dosed with the MultiTAA-specific T cell therapy after receiving an allogeneic hematopoietic stem cell transplant, or HSCT, never relapsed [median leukemia-free survival, or LFS, not reached at a median follow-up of 1.9 years], with 11 of 15 patients remaining alive (estimated two-year overall survival of 77%) at a median follow-up of 1.9 years post-infusion, which compares favorably with HSCT outcomes for risk-matched AML/MDS patients post-HSCT [median LFS of nine to 15 months and two-year survival probability of 42%].

Additionally, eight patients were treated for active disease that was resistant to salvage therapy post-HSCT with a median of five prior lines of therapy (range:

One of the eight patients crossed over from the adjuvant group, while two patients enrolled twice, but all three patients had active AML that failed another line of salvage therapy after their first MultiTAA-specific T cell infusion.

Two of the eight patients achieved objective responses, with one complete response and one partial response, with six patients continuing with stable disease.

We submitted an investigational new drug, or IND, application to the United States Food and Drug Administration, or the FDA, to initiate a Phase 2 clinical trial of MultiTAA-specific T cell therapy, which we refer to as MT-401 (zedenoleucel), in post-allogeneic HSCT patients with AML in both the adjuvant and active disease setting.

The dose administered in this multicenter trial is the approximate flat dose equivalent of the current maximum tolerated dose from the ongoing Phase 1 trial.

In the adjuvant setting, patients will be randomized to either MultiTAA-specific T cell therapy at approximately 90 days post-transplant versus standard of care observation, while the active disease patients will receive MT-401 following relapse post-transplant as part of a single-arm group.

We expect to complete the safety lead-in portion of the trial in the first half of 2021.

We anticipate that we will initiate the remainder of the Phase 2 trial in the third quarter of 2021 and complete enrollment of 20 patients in that phase of the trial in the fourth quarter of 2021 in order to report results from the active disease arm of the trial in the first quarter of 2022.

We expect to begin manufacturing MT-401 for the Phase 2 trial at our cGMP manufacturing facility in the third quarter of 2021.

We reported interim data for an ongoing Phase 1/2 clinical trial of the MultiTAA-specific T cell therapy for the treatment of pancreatic adenocarcinoma being conducted by BCM.

In this trial, we have observed a clinical benefit correlated with the post-infusion detection of tumor-reactive T cells in patient peripheral blood and within tumor biopsy samples in patients in the tumor-resection arm of the trial.

These T cells exhibited activity against both targeted antigens and non-targeted TAAs, indicating induction of antigen spreading.

To date, we have not observed any cytokine release syndrome or neurotoxicity in this trial.

We are also evaluating the MultiTAA-specific T cell therapies in a Phase 2 clinical trial for the treatment of breast cancer and in Phase 1 clinical trials for the treatment of ALL, lymphoma, MM and sarcoma, all of which are being conducted by BCM.

As of December 2020, the MultiTAA-specific T cell therapies have been generally well tolerated by all of the patients enrolled in clinical trials in hematological and solid tumor indications with no incidents of cytokine release syndrome or neurotoxicity, which are frequently associated with CAR-T therapies.

Our ongoing clinical trials may be also affected by the COVID-19 pandemic.

Based on our observations in clinical trials in AML, pancreatic cancer, lymphoma, ALL and MM, we believe that the MultiTAA-specific T cell therapies have the potential to mediate a meaningful anti-tumor effect, as well as significant in vivo expansion of T cells.

We may initiate additional Phase 2 clinical trials investigating other indications in addition to our planned Phase 2 trial in post-transplant AML patients.

We developed our lead product candidates from our MultiTAA-specific T cell technology, which is based on the manufacture of non-engineered, tumor-specific T cells that recognize multiple tumor associated antigens, or TAAs.

MultiTAA-specific T cells are able to recognize multiple tumor targets to produce broad spectrum anti-tumor activity.

When infused into a cancer patient, the MultiTAA-specific T cells are designed to kill cancer cells expressing the TAA targets and potentially recruit the patient’s immune system to participate in the cancer killing process.

We licensed the underlying technology for MultiTAA-specific T cell therapy from BCM in March 2018.

BCM had utilized the therapy in seven exploratory clinical trials.

In these studies, BCM treated over 150 patients suffering from a variety of cancers including lymphoma, multiple myeloma, acute myeloid leukemia, acute lymphoblastic leukemia, pancreatic cancer, breast cancer and various sarcomas.

In those studies, BCM saw evidence of clinical benefit, expansion of infused cells, epitope spreading, and decreased toxicity compared to other cellular therapies.

We are advancing three product candidates as part of our MultiTAA-specific T cell program for:

autologous treatment of lymphoma, and selected solid tumors

allogeneic T cells for the treatment of acute myeloid leukemia, or AML

off-the-shelf products in various indications

Our current clinical development programs are:

● MT-401 for the treatment of post-transplant AML, currently in a Phase 2 clinical trial

● MT-401-OTS for the treatment of AML, for which we expect to dose the first patient in a Phase 2 clinical trial in 2023

● MT-601 for the treatment of pancreatic cancer, for which we plan to submit an IND to the FDA in 2022 to initiate a Phase 1 trial in 2023

● MT-601 for the treatment of lymphoma, for which we plan to submit an IND to the FDA in 2022 to initiate a Phase 1 trial in 2023

We believe that the simplicity of our manufacturing process allows additional modifications to expand MultiTAA-specific T cell recognition of cancer targets.

For example, we are currently analyzing the potential for a 12-antigen MultiTAA-specific T cell therapy and assessing the potential for combination therapies for our MultiTAA-specific T cell products.

We have positioned ourselves to be in full control of our research and development and clinical manufacturing needs by establishing a fully validated manufacturing facility.

We believe that this has key advantages that distinguish us from our competitors, particularly because we are less reliant on contract manufacturing organizations, which are expensive and often have long lead times, shortages of skilled labor and a backlog of customers.

Recent Development

On February 16, 2022, we received a notice from the Nasdaq Global Market that we were not in compliance with Nasdaq’s Listing Rule 5450(a)(1), as the minimum bid price of our common stock had been below $1.00 per share for 30 consecutive business days.

We have 180 days, or until August 15, 2022, to regain compliance with the minimum bid price requirement.

To regain compliance, the minimum bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-calendar day grace period.

In the event we do not regain compliance with the minimum bid price requirement by August 15, 2022, we may be eligible for an additional 180-calendar day compliance period if we elect to transfer to the Nasdaq Capital Market to take advantage of the additional compliance period offered on that market.

To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of our intention to cure the bid price deficiency during the second compliance period.

Financial Overview

Critical Accounting Policies

The consolidated financial statements are prepared in conformity with U.S.

GAAP, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses in the periods presented.

We believe that the accounting estimates employed are appropriate and resulting balances are reasonable;

however, due to inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods.

The critical accounting estimates that affect the consolidated financial statements and the judgments and assumptions used are consistent with those described under Note 3 in the Notes to Consolidated Financial Statements in this Form 10-K.

Research and Development Expenses

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Change in fair value of warrant liabilities

Loss on settlement

Interest income

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We did not generate any revenue during the years ended December 31, 2021 and 2020, respectively, from the sales or licensing of our product candidates.

In August 2021, we received notice of a Product Development Research award totaling approximately $13.1 million from the Cancer Prevention and Research Institute of Texas, or CPRIT, to support our Phase 2 clinical trial of MT-401.

During the year ended December 31, 2021, we recognized $1.2 million of revenue associated with the CPRIT grant.

During the year ended December 31, 2020, we recognized $0.5 million of revenue associated with a grant awarded to Mayo Foundation from the US Department of Defense for the Phase 2 clinical trial of TPIV200 which Mayo paid to us for clinical supplies manufactured by us and provided for the clinical trial funded by the grant.

We refer to this grant as the Mayo Grant.

During the year ended December 31, 2019, we recognized $0.2 million of grant income from the Mayo Grant.

Operating Expenses

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o increase of $1.0 million in sponsored research and consulting expenses from BCM agreements,

o increase of $0.6 million in rent expenses,

o decrease of $1.3 million in our peptide vaccine clinical trial expenses due to the stages of ongoing clinical trials and the decreased number of active patients in such trials , and

o decrease of $0.1 million of other expenses.

o increase of $1.1 million in rent, utility and facilities expenses,

o increase of $1.8 million in clinical trial expenses related to MT-401,

o increase of $0.4 million in professional fees,

o increase of $0.3 million in stock-based compensation expenses,

o increase of $1.6 million in depreciation expense due to increased capital investments,

o increase of $0.3 million of other expenses, and

o decrease of $1.2 million in vaccine-based clinical trial expenses.

Included in research and development expenses are expenses related to agreements with BCM.

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In September 2019, we entered in a Clinical Supply Agreement with BCM, which provided for BCM to provide to us multi tumor antigen specific products.

During the year ended December 31, 2020, we incurred $0.6 million related to this agreement.

During the years ended December 31, 2021 and 2020, we incurred $1.2 million and $0.6 million related to this agreement, respectively.

In October 2019, we entered in a Workforce Grant Agreement with BCM, which provided for BCM to provide to us manpower costs of projects for manufacturing, quality control testing and validation run activities.

During the year ended December 31, 2020, we incurred $0.6 million related to this agreement.

During the years ended December 31, 2021 and 2020, we incurred $1.1 million and $0.6 million related to this agreement, respectively.

In August 2020, we entered in a Clinical Trial Agreement with BCM, which provided for BCM to provide to us investigator-initiated research studies.

During the year ended December 31, 2020, we incurred $0.3 million related to this agreement.

During the years ended December 31, 2021 and 2020, we incurred $0.5 million and $0.3 million related to this agreement, respectively.

General and Administrative Expenses

General and administrative expenses increased by 23% to $12.9 million for the year ended December 31, 2021 from $10.5 million during the prior period.

The increase in general and administrative expenses of $0.5 million was mainly comprised of the following:

The increase in general and administrative expenses of $2.5 million mainly comprised the following:

o increase of $0.7 million in headcount-related expenses as we increased the number of administrative personnel,

o increase of $0.2 million in rent expenses,

o increase of $0.4 million in rent and utility expenses,

o increase of $0.2 million in insurance expenses,

o decrease of $0.3 million in other general and administrative expenses, and

o decrease of $0.8 million in legal and professional fees.

Other Income (Expense)

o increase of $0.4 million in legal and professional expenses,

o increase of $0.3 million in recruiting expenses, and

o increase of $0.5 million in stock-based compensation.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities for the year ended December 31, 2021 was $0 as compared to $31,000 for the fiscal year ended December 31, 2020.

Arbitration settlement

An arbitration proceeding was brought against us before the Financial Industry Regulatory Authority, Inc., or FINRA by a broker seeking to be paid compensation for two financing transactions that occurred in 2018, a warrant conversion and a private placement, each brokered by another broker.

The broker’s claims were based on a placement agent agreement for a private placement it brokered in 2017, under which it alleged it was entitled to compensation for the 2018 transactions.

The FINRA panel found in favor of the broker and awarded the broker $2.4 million for compensation, interest and attorney fees, which we recorded in the year ended December 31, 2021.

We removed the case to the United States District Court for the Southern District of New York on September 27, 2021.

On October 22, 2021, we filed a motion in federal court to vacate the award.

On March 9, 2022, the Company was notified that its motion to vacate the award was denied and the broker was awarded an additional $0.1 million in interest.

Post judgment interest will continue to accrue at 1.02% until the judgement is paid.

Interest Income

Interest income was $0.1 million and $1.1 million for the years ended December 31, 2020 and 2019, respectively, and was attributable to interest income relating to funds that are held in U.S.

Interest income was $6,000 and $0.1 million for the years ended December 31, 2021 and 2020, respectively, and was attributable to interest income relating to funds that are held in U.S.

Treasury notes and U.S.

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As part of the reaction to the COVID-19 pandemic, the Federal Reserve cut rates in mid-March 2020 to a range of 0.0%-0.25%.

As such, we recorded lower interest income during the year ended December 31, 2020.

The increase in our net loss during the year ended December 31, 2021 compared to the year ended December 31, 2020 was due to the continued expansion of our research and development activities, increased expenses relating to future clinical trials, and the overall growth of our corporate infrastructure.

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We have financed our operations primarily through public and private offerings of our stock and debt including warrants and the exercise thereof.

The following table sets forth our cash and cash equivalents and working capital as of December 31, 2020 and 2019:

Cash and cash equivalents

The following table sets forth our cash, cash equivalents and restricted cash and working capital as of December 31, 2021 and 2020:

Cash, cash equivalents and restricted cash

Working capital

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Financing activities

Net decrease in cash and cash equivalents

Net increase (decrease) in cash, cash equivalents and restricted cash

Operating Activities

Net cash used in operating activities during the year ended December 31, 2021 was $27.3 million.

The use of cash primarily related to our net loss of $28.7 million, in addition to the effect of changes in asset and liability accounts, including an increase in prepaid expenses and deposits of $0.5 million, an increase in accounts payable and accrued liabilities of $4.3 million and an increase in lease liabilities of $0.2 million.

The use of cash primarily related to our net loss of $41.9 million and a $5.5 million increase from changes in assets and liabilities.

This was in addition to $6.0 million of stock-based compensation, $2.1 million of depreciation expense and $1.0 million of right-of-use asset amortization and lease liability accretion.

Net cash used in operating activities during the year ended December 31, 2020 was $20.0 million.

The use of cash primarily related to our net loss of $21.4 million, in addition to the effect of changes in asset and liability accounts, including an increase in prepaid expenses and deposits of $1.4 million, a decrease in accounts payable and accrued liabilities of $1.0 million, a decrease in interest receivable of $52,000 and a net increase in lease liabilities of $0.2 million.

The use of cash primarily related to our net loss of $28.7 million and a $2.4 million increase from changes in assets and liabilities.

This was in addition to $5.2 million of stock-based compensation, $0.5 million in depreciation expense and $0.6 million of right-of-use asset amortization and lease liability accretion.

Investing Activities

Net cash used in investing activities was $10.4 million and $0.4 million for the purchase of property and equipment during the years ended December 31, 2020 and 2019, respectively.

The increase relates to $6.8 million in construction in progress towards the new modular cleanrooms and the buildout of our manufacturing facility, an additional $2.2 million in laboratory equipment, $0.6 million in computers and equipment, $0.5 million in furniture and fixtures and $0.3 million in leasehold improvements at the new research facility.

Net cash used in investing activities was $3.1 million and $9.3 million for the purchase of property and equipment and construction in progress for the years ended December 31, 2021 and 2020, respectively.

This included the purchase of $1.6 million and $3.4 million of property and equipment as well as $1.6 million and $5.8 million for the purchase of construction in progress for the years ended December 31, 2021 and 2020 respectively.

2021 purchases of property and equipment were comprised of $1.0 million in laboratory equipment, $0.2 million of computers, software and equipment and $0.3 million of furniture and fixtures and $0.1 million of leasehold improvements.

$1.6 million of purchases in construction in progress related to another modular cleanroom and the continued buildout of our manufacturing facility.

2020 purchases of property and equipment were comprised of $2.2 million of laboratory equipment, $0.6 million of computers and equipment, $0.3 million of furniture and fixtures as well as $0.3 million of leasehold improvements.

$5.8 million of purchases in construction in progress related to modular cleanrooms and the initial build out of our manufacturing facility.

Financing Activities

Net cash provided by financing activities was $52.6 million during the year ended December 31, 2021, primarily due to the net proceeds received from the underwritten public offering.

Net cash provided by financing activities was $6.7 million during the year ended December 31, 2020, mainly due to the sale of 4,113,440 shares of stock under the Purchase Agreement with Aspire Capital that provided proceeds to the Company of approximately $6.2 million, along with $0.5 million of proceeds from the exercise of stock warrants.

Net cash provided by financing activities was $0.8 million during the year ended December 31, 2019, due to the exercise of stock warrants and stock options.

Future Capital Requirements

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If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

On March 16, 2021, we issued an aggregate of 32,282,857 shares of our common stock, for net proceeds of $52.6 million pursuant to an underwritten public offering.

In August 2021, we received notice of a Product Development Research award totaling approximately $13.1 million from CPRIT to support our Phase 2 clinical trial of MT-401.

To date, we have received $2.4 million of funds from the CPRIT grant.

As of December 31, 2021, we had working capital of $33.1 million, compared to working capital of $18.0 million as of December 31, 2020.

Based on our revised clinical and research and development plans and our revised timing expectations related to the progress of our programs, we expect that our cash and cash equivalents as of December 31, 2020 will enable us to fund our operating expenses and capital expenditure requirements into the third quarter of 2021.

Operating expenses incurred during the fiscal year ended December 31, 2021 were $40.7 million compared to $29.4 million in the prior year.

Based on our revised clinical and research and development plans and our revised timing expectations related to the progress of our programs, we expect that our cash, cash equivalents and restricted cash as of December 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2023.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Furthermore, our operating plan may change, and we may need additional funds sooner than planned in order to meet operational needs and capital requirements for product development and commercialization.

Furthermore, our

operating plan may change, and we may need additional funds sooner than planned in order to meet operational needs and capital requirements for product development and commercialization.

Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials.

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seek regulatory approvals for our product candidates if they successfully complete clinical trials;

● continue development of our manufacturing capabilities and our manufacturing facility;

● establish sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any product candidates that may receive regulatory approval;

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Until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.

During fiscal 2020, we entered into agreements to buildout a manufacturing facility, to lease a research lab and to expand our corporate headquarters in Houston, Texas.

We plan to continue to fund our operations and capital funding needs through equity and/or debt financing.

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Aspire Common Stock Purchase Agreement

In February 2020, we entered into a common stock purchase agreement, or the Purchase Agreement, with Aspire Capital Fund, LLC, or Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of shares of our common stock over the 30-month term of the Purchase Agreement.

committed to purchase up to an aggregate of $30.0 million of shares of our common stock over the 30-month term of the Purchase Agreement.

As of December 31, 2021, Aspire Capital had purchased 4,113,440 shares under the Purchase Agreement, providing aggregate proceeds to the Company of approximately $6.2 million.

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We are not required or permitted to issue any shares of common stock under the Purchase Agreement if such issuance would breach our obligations under the rules or regulations of the Nasdaq Global Market.

ATM Agreement

In August 2021, we entered into a Controlled Equity Offering SM Sales Agreement, or the ATM Agreement, with Cantor Fitzgerald & Co.

and RBC Capital Markets, LLC, or the Sales Agents, pursuant to which we can offer and sell, from time to time at our sole discretion through the Sales Agents, shares of our common stock having an aggregate offering price of up to $75.0 million.

Any shares of our common stock sold will be issued pursuant to our shelf registration statement on Form S-3 (File No.

333-258687), which the SEC declared effective on August 19, 2021.

The Sales Agents will be entitled to compensation under the Sales Agreement at a commission rate equal to 3.0% of the gross sales price per share sold under the ATM Agreement, and we have provided each of the Sales Agents with indemnification and contribution rights.

To date, we have not sold any shares of our common stock under the ATM Agreement.

Going Concern

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As outlined above, our ability to pursue our planned business activities is dependent upon our successful efforts to raise additional capital.

While these factors raise substantial doubt regarding our ability to continue as a going concern.

These factors raise substantial doubt regarding our ability to continue as a going concern.

Our consolidated financial statements have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business.

Our financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in conformity with U.S.

On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses and stock-based compensation.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under

the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the reported amounts of expenses that are not readily apparent from other sources.

Actual results could differ from those estimates, particularly given the significant social and economic disruptions and uncertainties associated with the ongoing coronavirus pandemic and the COVID-19 control responses.

Prior Period Reclassification

Certain reclassifications have been made to reclass certain non-cash capital expenditures on the consolidated statements of cash flows from a cash outflow from investing activity to a non-cash investing activity.

The Company has evaluated the materiality of this correction and concluded it was not material to the previously issued consolidated financial statements and had no impact to the reported consolidated balance sheets, consolidated statements of operations or net loss per share.

For the year ended December 31, 2020, this immaterial adjustment had the effect of increasing net cash used in operating activities and decreasing net cash used in investing activities by $1.2 million from what was previously reported.

Property and Equipment

Leasehold improvements, furniture, equipment and software are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets, which range from three to five years.

Leasehold improvements are amortized over the shorter of the estimated useful life or the remaining lease term.

Property and equipment - Construction in Progress

In June 2020, the Company entered into a lease for a manufacturing facility in Houston, Texas.

In connection with the manufacturing facility, the Company has incurred costs pursuant to an agreement with a vendor to design, engineer, build and install modular cleanrooms in a manufacturing facility.

The facility’s construction was completed during December 2020, and a certificate of occupancy was delivered to the Company in January 2021, and as such was placed into service in January 2021.

All costs associated with the buildout will be recorded as either manufacturing equipment and/or leasehold improvements and amortized over the estimated useful life of the asset and/or leasehold lease.

During the third and fourth quarters of 2021, and in connection with the Company’s manufacturing facility in Houston, Texas, the Company incurred $2.2 million of costs pursuant to an agreement with a vendor to build and eventually install a second modular cleanroom.

Such costs were recorded in fixed assets – construction in progress on the balance sheet as of December 31, 2021.

Upon completion and installation of the modular cleanroom, all costs associated with the buildout will be recorded as manufacturing equipment and amortized over the estimated useful life.

Stock-Based Compensation

The Company incurs stock-based compensation expense related to the issuance of common stock and stock options.

The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model.

The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable.

In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility and expected option life:

Expected Term — The expected life of stock options was estimated using the “simplified method,” as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock options grants.

The simplified method is based on the average of the vesting tranches and the contractual life of each grant.

Expected Volatility — The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Risk-Free Interest Rate — The Company bases the risk-free interest rate on the implied yield available on U.

Treasury zero-coupon issues with an equivalent remaining term.

Expected Dividend — The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

The Company amortizes the fair value of the awards expected to vest on a straight-line basis over the requisite service period of the awards.

The Company recognizes fair value of stock options granted to nonemployees as stock-based compensation expense over the period in which the related services are received as if the Company had paid cash for those services.

Forfeitures are accounted for as incurred.

The Company recognizes grant income in accordance with the terms stipulated under the grant awarded to the Company’s collaborators at the Mayo Foundation from the U.

Department of Defense.

In various situations, the Company receives certain payments from the Mayo Foundation for reimbursement of clinical supplies.

These payments are non-refundable and are not dependent on the Company’s ongoing future performance.

The Company has adopted a policy of recognizing these payments when received and as revenue in accordance with Accounting Standards Update No.

2014 09, “Revenue from Contracts with Customers (Topic 606)” issued by the Financial Accounting Standards Board (“FASB”).

In August 2021, we received notice of a Product Development Research award totaling approximately $13.1 million from CPRIT to support our Phase 2 clinical trial of MT-401.

In accordance with ASC 730-20-25-8, the extent the financial risk associated with the research and development has been transferred to CPRIT, because repayment of the grant depends solely on the results of research and development having future economic benefit, the Company accounts for this obligation as a contract to perform research and development for others.

The funds received from CPRIT will initially be recorded as a deferred credit in the Company’s balance sheet.

Cash received from grants in advance of incurring qualifying costs is recorded as deferred revenue and recognized as revenue when qualifying costs are incurred.

During the fourth quarter of 2021, the Company received $2.4 million advancement of funds in relation to the CPRIT grant.

The Company recorded $1.2 million of grant income related to CPRIT grant as revenue for the year ended December 31, 2021.

At December 31, 2021 approximately $1.1 million was recorded as deferred revenue on the Company’s consolidated financial statements.

Off-Balance Sheet Arrangements

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

What changed 10-K

Item 7. Management’s Discussion and Analysis