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Item 7. Management’s Discussion and Analysis

2023-03-22 compared with 2022-03-17 · 129 added, 100 removed, 197 unchanged (54% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition, changes in financial condition, plan of operations and results of operations should be read in conjunction with (i) our audited consolidated financial statements as at December 31, 2021 and December 31, 2020 and (ii) the section entitled “Business”, included in this annual report.

The following discussion of our financial condition, changes in financial condition, plan of operations and results of operations should be read in conjunction with (i) our audited consolidated financial statements as of December 31, 2022 and December 31, 2021 and (ii) the section entitled “Business”, included in this annual report.

The discussion contains forward-looking statements that involve risks, uncertainties and assumptions.

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Company Overview

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 are a clinical-stage immuno-oncology company specializing in the development and commercialization of novel T cell-based immunotherapies 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 manufacture of non-engineered, tumor-specific T cells that recognize multiple tumor associated antigens, or TAAs.

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● 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

● MT-601 for the treatment of pancreatic cancer, for which we have a cleared IND from the FDA to initiate a Phase 1 trial in the fourth quarter of 2023

● MT-601 for the treatment of lymphoma, for which we have a cleared IND from the FDA and initiated a Phase 1 trial in the first quarter of 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 have positioned ourselves to be in full control of our research and development and clinical manufacturing needs by establishing a fully validated, FDA registered, 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.

Reverse Stock Split

On May 24, 2022, we held our annual meeting of stockholders at which our stockholders approved a proposal to effect an amendment to our certificate of incorporation, as amended, to implement a reverse stock split at a ratio within a range between and including one-for three (1:3) and one-for-twelve (1:12) and a corresponding reduction in the total number of authorized shares of our common stock.

On January 24, 2023, our board of directors approved the filing of a certificate of amendment to our amended and restated certificate of incorporation (the “Amendment”) with the Secretary of State of the State of Delaware to affect the one-for-ten (1:10) Reverse Stock Split of our outstanding common stock and a reduction in the total number of authorized shares of our common stock from 300,000,000 to 30,000,000 (the “Shares Reduction”).

The Amendment became effective at 5:00 p.m.

Eastern Time on January 26, 2023.

Pursuant to the Amendment, at the effective time of the Amendment, every ten (10) shares of our issued and outstanding common stock was automatically combined into one (1) issued and outstanding share of common stock and the authorized shares of our common stock was reduce from 300,000,000 to 30,000,000, without any change in par value per share.

The Reverse Stock Split affected all shares of our common stock outstanding immediately prior to the effective time of the Amendment.

No fractional shares were issued as a result of the Reverse Stock Split.

Stockholders of record who would otherwise be entitled to receive a fractional share received a cash payment in lieu thereof.

As a result of the Reverse Stock Split, proportionate adjustments were made to the per share exercise price and/or the number of shares issuable upon the exercise or vesting of all stock options and warrants issued by us and outstanding immediately prior to the effective time of the Amendment, which resulted in a proportionate decrease in the number of shares of our common stock reserved for issuance upon exercise or vesting of such stock options and warrants and a proportionate increase in the exercise price of all such stock options and warrants.

In addition, the number of shares reserved for issuance under our equity compensation plans immediately prior to the effective time of the Amendment were reduced proportionately.

All share and per share amounts of common stock presented in this Annual Report on Form 10-K have been retroactively adjusted to reflect the one-for-10 (1:10) Reverse Stock Split.

Financial Overview

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Other Income (Expense)

Other income (expense), net consists of interest income and change in fair value of warrant liabilities.

Other income (expense), net consists of interest income and arbitration settlement expenses.

Results of Operations For the Years Ended December 31, 2022 and 2021

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For the Years Ended

Related party service revenue

Total revenues

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Other income (expense):

Change in fair value of warrant liabilities

Loss on settlement

Arbitration settlement

Interest income

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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 years ended December 31, 2022 and 2021, respectively, we recognized $3.4 million and $1.2 million of revenue associated with the CPRIT grant.

On September 13, 2022, we received notice from the FDA that we had been awarded a $2.0 million grant from the FDA’s Orphan Products Grant program to support our Phase 2 clinical trial of MT-401 for the treatment of post-transplant AML.

During the year ended December 31, 2022, we recognized $0.1 million of revenue associated with the FDA grant.

In April 2022, we entered into a binding services agreement, or the Service Agreement, with Wilson Wolf.

Pursuant to the Services Agreement, Wilson Wolf made a cash payment to us in the amount of $8.0 million, as consideration for certain training and research services.

During the year ended December 31, 2022, we recognized $5.5 million of revenue associated with the Services agreement.

Operating Expenses

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Research and Development Expense

Research and development expenses increased by 47% to $27.8 million for the year ended December 31, 2021, compared to $18.9 million for the year ended December 31, 2020.

The increase of $8.9 million in 2021 was primarily attributable to the following:

Research and development expenses decreased by 6% to $26.1 million for the year ended December 31, 2022, compared to $27.8 million for the year ended December 31, 2021.

The decrease of $1.7 million in 2022 was primarily attributable to the following:

o decrease of $1.7 million in sponsored research and consulting expenses from BCM agreements,

o decrease of $1.4 million in process development expenses,

o decrease of $0.6 million in technology licensing fees due to termination of Mayo license agreements, described below,

o decrease of $0.3 million in consulting expenses,

o decrease of $0.2 million in stock-based compensation expenses, offset by

o increase of $1.5 million in headcount-related expenses as we increased the number of research and development personnel,

o increase of $1.4 million in process development expenses,

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

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.

o increase of $0.7 million in depreciation expense due to increased capital investments, and

o increase of $0.3 million in vaccine-based clinical trial expenses related to the termination of the Mayo license agreements, described below.

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

In November 2018 and February 2020, we entered in Sponsored Research Agreements with BCM, which provided for the conduct of research for us by credentialed personnel at BCM’s Center for Cell and Gene Therapy.

During the years ended December 31, 2021 and 2020, we incurred $0.03 million and $0.3 million of expenses related to these agreements, respectively.

During the years ended December 31, 2022 and 2021, we incurred $0 and $0.03 million of expenses related to these agreements, respectively.

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.

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

During the years ended December 31, 2022 and 2021, we incurred $0 and $0.5 million related to this agreement, respectively.

In October 2022, we and Mayo Foundation for Medical Education and Research, or Mayo, mutually agreed to terminate the (i) Patent and Know-How License Agreement dated March 25, 2012, the (ii) License and Assignment Agreement dated July 21, 2015, and the (iii) License and Assignment Agreement effective May 4, 2016, which we collectively refer to as the License Agreements, in accordance with and subject to the terms of those agreements, pursuant to which Mayo granted the Company license grants to patent rights, know-how and materials in each of the License Agreements (as defined therein) that were directed to our peptide-based immunotherapeutic vaccine programs.

Under the terms of the termination, the License Agreements are of no further force or effect.

All license grants under the License Agreements are terminated and all rights therein revert to Mayo.

We also will assign Mayo all of the INDs covered under the License Agreements, including any interest in any clinical trials relating to any IND.

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 $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 $0.4 million in rent and utility expenses,

o increase of $0.2 million in insurance expenses,

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.

General and administrative expenses decreased by 1% to $12.8 million for the year ended December 31, 2022 from $12.9 million during the prior period.

The decrease in general and administrative expenses of $0.1 million mainly comprised the following:

o increase of $0.6 million in severance expense related to headcount reductions,

o increase of $0.5 million in advisory and professional fees,

o increase of $0.1 million in other general and administrative expenses, offset by

o decrease of $0.1 million in other headcount-related expenses,

o decrease of $0.5 million in stock-based compensation,

o decrease of $0.4 million in rent and utility expenses, in part due to the termination of our office lease at 3200 Southwest Freeway, Suite 2500 in Houston, and

o decrease of $0.3 million in recruiting expenses.

In August 2022, we implemented changes to our organizational structure as part of an operational cost reduction plan to conserve our available capital by reducing headcount in our general and administrative function by approximately 23.5%, including the separation of the Company’s Chief Financial Officer.

Other Income /(Expense)

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.

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.

As of December 31, 2021, we recorded an accrual of $2.4 million in accrued liabilities on our consolidated balance sheet and a $2.4 million charge to other expenses.

On September 17, 2021, the broker filed a petition to confirm the FINRA arbitration award in the Supreme Court of New York for the County of New York.

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.

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

Post judgment interest accrued at 1.02% until the judgment was paid.

We paid the $2.5 million judgment on March 24, 2022.

On January 4, 2023, we were notified that the broker was awarded an additional $0.1 million in attorneys’ fees, which we recorded to other expenses during fiscal year ending December 31, 2022.

We paid the $0.1 million on January 9, 2023.

Interest Income

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.

Interest income was $0.2 million and $6,000 for the years ended December 31, 2022 and 2021, respectively, and was attributable to interest income relating to funds that are held in U.S.

Treasury notes and U.S.

government agency-backed securities.

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%.

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.

The decrease in our net loss during the year ended December 31, 2022 compared to the year ended December 31, 2021 was due to higher grant income and related party service revenue, cost reductions in our research and development activities and moderate stabilization of our clinical trial activities.

We anticipate that we will continue to incur net losses in the future as we continue to invest in research and development activities, including clinical development of our multiTAA T cell product candidates.

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Financing activities

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

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

Operating Activities

Net cash used in operating activities during the year ended December 31, 2022 was $27.0 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.

The use of cash primarily related to our net loss of $29.9 million and a $5.8 million decrease from changes in assets and liabilities.

This was in addition to $5.3 million of

stock-based compensation, $2.8 million of depreciation expense, $0.9 million of right-of-use asset amortization and lease liability accretion and a $0.3 million gain on lease termination.

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 $41.9 million and a $5.5 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.

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.

Investing Activities

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This included the purchase of $1.5 million and $1.6 million of property and equipment as well as $3.5 million and $1.6 million for the purchase of construction in progress for the years ended December 31, 2022 and 2021 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.

Purchases of property and equipment for the year ended December 31, 2022 were predominantly comprised of laboratory equipment along with $0.1 million of computers, software and equipment and $0.1 million of furniture and fixtures.

$3.5 million of purchases in construction in progress related to a second modular cleanroom and the continued buildout of our manufacturing facility.

Purchases of property and equipment for the year ended December 31, 2021 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 a second modular cleanroom and the continued buildout 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 $0.2 million and $52.6 million during the years ended December 31, 2022 and 2021, respectively.

primarily due to the net proceeds received from sales from the ATM Agreement (as defined below) in 2022 and the underwritten public offering in 2021.

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.

On March 16, 2021, the Company issued an aggregate of 3,228,286 shares of its common stock, for net proceeds of $52.6 million, pursuant to an underwritten public offering.

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

The CPRIT award is intended to support the adjuvant arm of the Company's Phase 2 clinical trial evaluating MT-401 when given as an adjuvant therapy to patients with acute myeloid leukemia following a hematopoietic stem cell transplant.

The primary objectives of the adjuvant arm of the trial are to evaluate relapse-free survival after MT-401 treatment when compared with a randomized control group.

Through the date of this filing, the Company has received $4.8 million of funds from the CPRIT grant.

The Company recorded $3.4 million of grant income related to the CPRIT grant as revenue for the year ended December 31, 2022.

On April 21, 2022, the Company entered into a binding Services Agreement, dated April 12, 2022 (see Note 9), with Wilson Wolf.

John Wilson is a member of the Company’s board of directors and is serving as the CEO of Wilson Wolf, therefore Wilson Wolf is a related party.

Wilson Wolf is in the business of creating products and services intended to simplify and expedite the transition of cell therapies and gene-modified cell therapies to mainstream society.

Pursuant to the Services Agreement, Wilson Wolf made a cash payment to the Company in the amount of $8.0 million.

For the year ending December 31, 2022, the Company recognized $5.5 million of revenue pursuant to the Services Agreement and at December 31, 2022, the Company recorded $2.5 million of related party deferred revenue on its consolidated balance sheet.

On September 13, 2022, the Company received notice from the FDA that it had awarded the Company a $2.0 million grant from the FDA’s Orphan Products Grant program to support the Company’s Phase 2 clinical trial of MT-401 for the treatment of post-transplant AML.

The Company recorded $0.1 million of grant income related to the FDA grant as revenue for the year ended December 31, 2022 and at December 31, 2022, the Company recorded $0.1 million of grant income receivable.

On March 13, 2023, the Company received $0.1 million of funds from the FDA grant.

As of December 31, 2022, we had working capital of $8.8 million, compared to working capital of $33.1 million as of December 31, 2021.

Operating expenses incurred during the fiscal year ended December 31, 2022 were $39.0 million compared to $40.7 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.

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, 2022 will enable us to fund our operating expenses and capital expenditure requirements into the third 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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To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our existing stockholders’ common stock.

The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

our ability to conduct our business.

If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms unfavorable to us.

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However, we will continue to assess the effect of the pandemic on our operations.

The extent to which the COVID-19 pandemic will impact our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease.

While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

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.

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.

In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, the Company issued to Aspire Capital 345,357 shares of the Company’s common stock.

The Purchase Agreement provides that we and Aspire Capital shall not effect any sales under the Purchase Agreement on any purchase date where the closing sale price of our common stock is less than $0.25.

There are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of sales of our common stock to Aspire Capital.

Aspire Capital has no right to require any sales by us but is obligated to make purchases from us as directed by us on future funding, rights of first refusal, participation rights, penalties, or liquidated damages in the Purchase Agreement.

The Purchase Agreement may be terminated by us at any time, at its discretion, without any cost to us.

Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of our common stock during any time prior to the termination of the Purchase Agreement.

We expect to use any proceeds under the Purchase Agreement for working capital and general corporate purposes.

The Purchase Agreement provides that the number of shares that may be sold pursuant to the Purchase Agreement will be limited to 9,232,814 shares, including the Commitment Shares, or the Exchange Cap, which represents 19.99% of our outstanding shares of common stock as of the date of the Purchase Agreement, unless stockholder approval is obtained to issue more than 19.99%.

This limitation will not apply if, at any time the Exchange Cap is reached and at all times thereafter, the average price paid for all shares issued under the Purchase Agreement is equal to or greater than $2.41, which was the closing price of our shares on the Nasdaq Global Market immediately preceding the execution of the Purchase Agreement.

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.

Further, the COVID-19 pandemic, decades-high inflation and concerns about an economic recession in the United States or other major markets has resulted in, among other things, volatility in the capital markets that may have the effect of reducing our ability to access capital, which could in the future negatively affect our liquidity.

In addition, a recession or market correction due to these factors could materially affect our business and the value of our common stock.

ATM Agreement

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

however, our use of the shelf registration statement on Form S-3 will be limited for so long as we are subject to General Instruction I.B.6 of Form S-3, which limits the amounts that we may sell under the registration statement and in accordance with the ATM agreement.

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.

During the year ended December 31, 2022, we sold 60,651 shares of our common stock under the ATM Agreement for net proceeds of $0.2 million.

Stock Purchase Agreement

On December 12, 2022, we entered into a purchase agreement, or the Purchase Agreement, with Lincoln Park Capital Fund, LLC, or Lincoln Park, which provides that, upon the terms and subject to the conditions of the agreement, we have the right, but not the obligation, to sell to Lincoln Park up to $25,000,000 of shares of our common stock, or the Purchase Shares, from time to time over a 24-month term, at a variable price with certain market-based terms as defined in the agreement.

The purchase agreement does not exhibit any of the characteristics for liability classification under ASC Topic 480, Distinguishing Liabilities from Equity.

During the year ended December 31, 2022, we did not sell any shares of our stock under the Purchase Agreement.

In January 2023, Lincoln Park was issued 180,410 shares of stock as a commitment fee at a value of $0.5 million.

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.

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 within one year after the date that the financial statements are issued.

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.

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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

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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.

All costs associated with the buildout were 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.

Upon completion and installation of the modular cleanroom in 2022, all costs associated with the buildout, including $1.9 million of costs incurred during the first quarter of 2022, were recorded as manufacturing equipment and amortized over the estimated useful life.

Impairment Testing of Long-Lived Assets and Right-Of-Use Assets

Management reviews long-lived assets (including property and equipment) and right-of-use assets for assets under operating leases for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

Recoverability of assets is determined by first grouping the long-lived assets at the lowest level for which there are identifiable cash flows, and then comparing the carrying value of each asset group to its forecasted undiscounted cash flows.

If the evaluation of the forecasted cash flows indicates that the carrying value of the assets is not recoverable, an impairment charge is recognized for the amount in excess of the carrying amount over its fair value.

The Company performed a test for recoverability related to its manufacturing facility in Houston, Texas at December 31, 2022 and concluded that the carrying value of its long-lived assets was recoverable.

Stock-Based Compensation

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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”).

Grant Income represents funding under cost reimbursement programs from government agencies and non-profit foundations for qualified research and development activities performed by the Company.

In applying the provisions of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we determined that grants and awards are out of the scope of ASC 606 because the funding entities do not meet the definition of a “customer”, as defined by ASC 606, as there is not considered to be a transfer of control of goods or services.

With respect to each grant or award, the Company determines if it has a collaboration in accordance with ASC Topic 808, Collaborative Arrangements (“ASC 808”).

To the extent the grant or award is within the scope of ASC 808, the Company recognizes the award upon achievement of certain milestones as credits to research and development expenses.

For grant and awards outside the scope of ASC 808, the Company applies ASC 606 by analogy, and revenue is recognized when the Company incurs expenses related to the grants for the amount the Company is entitled to under the provisions of the contract.

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.

The Company determined that the CPRIT Contract is not in the scope of ASC 808 or ASC 606.

In accordance with ASC 730-20-25-8, 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 arrangement as a contract to perform research and development for others and applies ASC 606 by analogy.

The Company recognizes grant income when amounts eligible for reimbursement are determinable and have been incurred, the applicable conditions under the grant arrangements have been met, and collectability of amounts due is reasonably assured or already received.

The classification of costs incurred related to grants is based on the nature of the activities performed by the Company.

Grant Income is recognized when the related costs are incurred.

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

Qualifying grant income earned in advance of cash received from grants is recognized as revenue and recorded as other receivable.

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.

The Company recorded $3.4 million of grant income related to the CPRIT grant as revenue for the year ended December 31, 2022.

At December 31, 2022, the Company recorded $2.3 million of grant income receivable, which represented grant income earned in advance of the next tranche of funds to be received from CPRIT.

In January 2023, the Company received $2.4 million from CPRIT.

On March 13, 2023, the Company received $0.1 million of funds from the FDA grant.

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