What changed in this filing

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Item 1. Financial Statements

2022-08-15 compared with 2022-05-16 · 235 added, 161 removed, 523 unchanged (43% of the section changed)

15 unchanged sentences

Accrued expenses

Lease liability - current portion

Lease liability, current

Total current liabilities

Long-term debt

Lease liability - non-current portion

Lease liability, non-current

Other non-current liabilities

Total liabilities

2 unchanged sentences

Common stock $ 0.001 par value;

350,000,000 shares authorized, 215,950,561 shares issued and outstanding at March 31, 2022 and 350,000,000 shares authorized, 216,127,443 shares issued and outstanding at December 31, 2021

420,000,000 shares authorized, 216,174,542 shares issued and outstanding at June 30, 2022 and 350,000,000 shares authorized, 216,127,443 shares issued and outstanding at December 31, 2021

Additional paid-in capital

6 unchanged sentences

(in thousands, except share and per share data)

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Operating expenses:

1 unchanged sentence

General and administrative

Gain on lease modification

Total operating expenses

Loss from operations

Interest expense

Other income (expense), net

1 unchanged sentence

Basic and diluted net loss per share

Weighted average number of common shares outstanding used to compute basic and diluted net loss per share

Weighted average common shares outstanding, basic and diluted

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

2 unchanged sentences

(in thousands, except share and per share data)

For the Three Months Ended June 30, 2022

Additional Paid in Capital

1 unchanged sentence

Total Stockholders' Equity

Balance at March 31, 2022

Stock-based compensation

Restricted stock awards

Cancelled restricted common stock

Balance at June 30, 2022

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

For the Six Months Ended June 30, 2022

Additional Paid in Capital

Accumulated Deficit

Total Stockholders' Equity

Balance at December 31, 2021

Stock-based compensation

Exercise of employee stock options

Restricted stock awards

Cancelled restricted common stock

Balance at June 30, 2022

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

For the Three Months Ended June 30, 2021

Additional Paid in Capital

Accumulated Deficit

Total Stockholders' Equity

Balance at March 31, 2021

Stock-based compensation

Exercise of employee stock options

Restricted stock awards

Cancelled restricted common stock

Balance at June 30, 2021

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

For the Six Months Ended June 30, 2021

Additional Paid in Capital

Accumulated Deficit

Total Stockholders' Equity

Balance at December 31, 2020

Stock-based compensation

Exercise of employee stock options

Restricted stock awards

Cancelled restricted common stock

Balance at March 31, 2022

Balance at June 30, 2021

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

2 unchanged sentences

(in thousands)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation

Reduction in the carrying amount of right-of-use assets

Gain on lease modification

(Increase) decrease in:

Prepaid expenses and other current assets

Right-of-use asset

Other noncurrent assets

Other non-current assets

Increase (decrease) in:

2 unchanged sentences

Lease liabilities

Other non-current liabilities

Net cash used in operating activities

26 unchanged sentences

The Company has operated at a loss since its inception in 2003 and has no recurring revenue from operations. The Company anticipates that losses will continue for the foreseeable future.

As of March 31, 2022, the Company had approximately $ 68.3  million of cash and cash equivalents.

The Company’s accumulated deficit at March 31, 2022 was approximately $ 852.6  million. Given its current development plans and cash management efforts, the Company anticipates cash resources will be sufficient to fund operations into the second quarter of 2023. The Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given.

As of June 30, 2022, the Company had approximately $ 60.0  million of cash and cash equivalents.

The Company’s accumulated deficit at June 30, 2022 was approximately $ 862.6  million. Given its current development plans and cash management efforts, the Company anticipates cash resources will be sufficient to fund operations into the second quarter of 2023. The Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given.

Cash requirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments.

1 unchanged sentence

Based on the current cash forecast, management has determined that the Company's present capital resources will not be sufficient to fund its planned operations for at least one year from the issuance date of the financial statements, which raises substantial doubt as to the Company's ability to continue as a going concern.

This forecast of cash resource is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors.

As of March 31, 2022, there were 215,950,561 shares of common stock outstanding and an additional 33,891,996 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants.

This forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors.

As of June 30, 2022, there were 216,174,542 shares of common stock outstanding and an additional 33,008,978 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants.

Basis of Presentation

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The unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 30, 2022, or the Annual Report.

The results disclosed in the statements of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full fiscal year 2022.

The results disclosed in the statements of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year 2022.

Use of Estimates

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Changes in estimates are recorded in the period in which they become known.

The Company’s most significant estimates and judgments used in the preparation of its financial statements are:

Clinical trial expenses and other research and development expenses;

Collaboration agreements;

Fair value measurements of stock-based compensation;

Income taxes.

Impact of COVID-19 Pandemic

5 unchanged sentences

2021 Loan and Security Agreement

On August 6, 2021, the Company entered into a Loan and Security Agreement with Silicon Valley Bank and affiliates of Silicon Valley Bank (collectively, "SVB") (the "Loan and Security Agreement").

The Loan and Security Agreement provided for an initial term loan of $ 25.0 million funded at the closing ("Term A Tranche"), with an additional tranche of $ 25.0 million available if certain funding and clinical milestones were met by August 31, 2022 ("Term B Tranche").

On August 6, 2021, the Company entered into a Loan and Security Agreement (the "Loan and Security Agreement") with Silicon Valley Bank and affiliates of Silicon Valley Bank (collectively, "SVB").

The Loan and Security Agreement provided for an initial term loan of $ 25.0 million funded at the closing (the "Term A Tranche"), with an additional tranche of $ 25.0 million available if certain funding and clinical milestones were met by August 31, 2022 (the "Term B Tranche").

Effective December 28, 2021, the Company, entered into a First Amendment (the “Amendment”) to the Loan and Security Agreement (as so amended, the "Amended Loan and Security Agreement").

The Amended Loan and Security Agreement extends the interest-only period through August 31, 2022, and provides for an automatic extension through August 31, 2023, if the Amended Milestones (as defined below) are met by August 31, 2022.

The Amended Loan and Security Agreement extends the interest-only period through August 31, 2022 and provides for an automatic extension of the interest-only period through August 31, 2023, if the Amended Milestones (as defined below) are met by August 31, 2022.

The Amendment eliminated the Term B Tranche, which remained unfunded, leaving only the Term A Tranche (the "SVB Facility").

6 unchanged sentences

The carrying values of the Company's debt obligation were as follows:

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

($ in thousands)

3 unchanged sentences

Long-term debt

As of March 31, 2022, the SVB Facility was fully drawn in the amount of $ 25.0 million.

As of June 30, 2022, the SVB Facility was fully drawn in the amount of $ 25.0 million.

The SVB Facility bears interest at a floating rate per annum on outstanding loans, payable monthly, at the greater of (a) 7.75 % and (b) the current published U.S.

prime rate, plus a margin of 4.5 % .

As of March 31, 2022, interest on the outstanding loans was 8.00 %.

The Amended Loan and Security Agreement provides for an interest-only period which extends through August 31, 2022 and may be automatically extended through August 31, 2023 if, on or prior to August 31, 2022, SVB receives evidence satisfactory to it, confirming that the Company has (i) received at least $ 50.0 million in net cash proceeds from the sale of the Company’s equity securities after the date of the Amended Loan and Security Agreement, on terms and conditions acceptable to SVB, and (ii) achieved positive data in the first cohort of the Library TCR-T Trial endorsed by an independent safety monitoring committee as a safe dose to proceed (together, the “Amended Milestones”).

As of June 30, 2022, interest on the outstanding loans was 9.25 %.

The Amended Loan and Security Agreement

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

provides for an interest-only period which extends through August 31, 2022 and may be automatically extended through August 31, 2023 if, on or prior to August 31, 2022, SVB receives evidence satisfactory to it, confirming that the Company has (i) received at least $ 50.0 million in net cash proceeds from the sale of the Company’s equity securities after the date of the Amended Loan and Security Agreement, on terms acceptable to SVB, and (ii) achieved positive data in the first cohort of the Library TCR-T Trial endorsed by an independent safety monitoring committee as a safe dose to proceed (together, the “Amended Milestones”).

After the interest-only payment period, aggregate outstanding borrowings are payable in twelve consecutive, equal monthly installments of principal plus accrued interest.

2 unchanged sentences

In addition to the payment of the outstanding principal plus accrued interest due, the Company will also owe SVB 5.75 % of the original principal amounts borrowed as a final payment (the "Final Payment").

The Company is permitted to make up to two prepayments, subject to the prepayment premium, of the SVB Facility, each payment of at least $ 5.0 million.

The Company is permitted to make up to two prepayments, subject to a prepayment premium, of the SVB Facility, each such payment to be at least $ 5.0 million.

Such prepayment premium would be 3.00 % of the principal amount of the SVB Facility if prepaid prior to the first anniversary of the effective date, 2.00 % of the principal amount of the SVB Facility if prepaid on or after the first anniversary of the effective date but prior to the second anniversary of the effective date and 1.00 % of the principal amount of the SVB Facility if prepaid on or after the second anniversary of the effective date but prior to the maturity date.

1 unchanged sentence

The Amended Loan and Security Agreement requires the Company to cash collateralize half of the sum of the then-outstanding principal amount of the SVB Facility, plus an amount equal to 5.75 % of the original principal amount of the SVB Facility if the Company does not achieve the Amended Milestones on or prior to August 31, 2022.

In the event a cash collateralization were to occur, so long as no event of default has occurred, $ 2.5 million will be released from the collateral account following the eighth scheduled payment of principal and interest, and a further $ 4.0 million will be released following the tenth scheduled payment of principal and interest on the SVB Facility, in each case, so long as (i) after subtracting such scheduled payment, the sum of (a) the aggregate outstanding principal, (b) accrued and unpaid interest and (c) the Final Payment is less than $ 9,770,933 and $ 5,604,167 , respectively and (ii) the balance in the collateral account after the release would equal or exceed $ 10.0 million and $ 6.0 million, respectively.

In the event a cash collateralization were to occur, so long as no event of default has occurred, $ 2.5 million will be released from the collateral account following the eighth scheduled payment of principal and interest, and a further $ 4.0 million will be released following the tenth scheduled payment of principal and interest, in each case, so long as (i) after subtracting such scheduled payment, the sum of (a) the aggregate outstanding principal, (b) accrued and unpaid interest and (c) the Final Payment is less than $ 9,770,933 and $ 5,604,167 , respectively and (ii) the balance in the collateral account after the release would equal or exceed $ 10.0 million and $ 6.0 million, respectively.

The SVB Facility and related obligations under the Amended Loan and Security Agreement are secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property (which is subject to a negative pledge under the Amended Loan and Security Agreement).

5 unchanged sentences

The issuance costs for the Loan and Security Agreement, including the Amended Loan and Security Agreement, were approximately $ 1.2 million and primarily related to the SVB Warrants, which will be amortized into interest expense over the period to August 1, 2023 .

Interest expense was $ 0.7 million for the three months ended March 31, 2022.

The fair value of the Amended Loan and Security Agreement as of March 31, 2022 approximates its face value due to proximity to the transaction.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

Interest expense was $ 0.7 million for the three months ended June 30, 2022 and was $ 1.4 million for the six months ended June 30, 2022.

The fair value of the Amended Loan and Security Agreement as of June 30, 2022 approximates its face value due to proximity to the transaction.

Fair Value Measurements

4 unchanged sentences

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities measured at fair value on a recurring and nonrecurring basis as of March 31, 2022 and 2021 are as follows:

Assets and liabilities measured at fair value on a recurring and nonrecurring basis as of June 30, 2022 and December 31, 2021 are as follows:

($ in thousands)

18 unchanged sentences

The Company’s potentially dilutive shares, which include outstanding common stock options, inducement stock options, unvested restricted stock and warrants, have not been included in the computation of diluted net loss per share for any of the periods presented as the result would be anti-dilutive.

Such potentially dilutive shares of common stock consisted of the following as of March 31, 2022 and 2021, respectively:

Such potentially dilutive shares of common stock consisted of the following as of June 30, 2022 and 2021, respectively:

Common stock options

3 unchanged sentences

Collaboration with Vineti Inc.

On July 9, 2020, the Company entered into a master service agreement and statement of work with Vineti, Inc., ("Vineti").

Pursuant to the agreements, Vineti has been developing a software platform to coordinate and orchestrate the order, cell collection and manufacturing process for the Company’s T-cell therapy, or TCR-T, clinical programs.

On July 9, 2020, the Company entered into a master service agreement and statement of work with Vineti, Inc.

Pursuant to the agreement, Vineti has been developing a software platform to coordinate and orchestrate the order, cell collection and manufacturing process for the Company’s T-cell therapy, or TCR-T, clinical programs.

Heidi Hagen, who became a director of the Company in June 2019 and resigned November 2, 2021 and the Company's Interim Chief Executive Officer on February 25, 2021 and resigned on August 30, 2021, is a co-founder and former officer of Vineti.

During the three months ended March 31, 2022, the Company recorded no expenses for Vineti, compared to $ 0.2 million of expenses for the three months ended March 31, 2021.

During the three and six months ended June 30, 2022, the Company recorded no expenses for Vineti, compared to $ 0.1 million of expenses for the three and six months ended June 30, 2021.

Alaunos Therapeutics, Inc.

19 unchanged sentences

He also serves as a member of Eden BioCell’s board of directors.

For the three months ended March 31, 2022, Eden BioCell incurred a net loss and the Company continues to have no commitment to fund its operations.

For the three and six months ended June 30, 2022, Eden BioCell incurred a net loss and the Company continues to have no commitment to fund its operations.

In September 2021, TriArm and Alaunos mutually agreed to dissolve the Eden BioCell joint venture.

Refer to Note 12 - Joint Venture , for further details.

In the second quarter of 2022, the Company modified its real estate lease agreement executed on December 15, 2020 with MD Anderson, which reduced the Company's leased space for 18,111 square feet to 3,228 square feet.

As a result, the associated lease liability and right-of-use asset were remeasured to $ 0.4 million based on revised lease payments.

A gain of $ 0.1 million was recorded on the lease modification during the three months ended June 30, 2022.

Commitments and Contingencies

7 unchanged sentences

In consideration of the licenses and other rights granted by PGEN, the Company will pay PGEN an annual license fee of $ 0.1 million and the Company has agreed to reimburse PGEN for certain historical costs of the licensed programs up to $ 1.0 million, which was fully paid during the year ended December 31, 2019.

The Company will make milestone payments totaling up to an additional $ 52.5 million for each exclusively licensed program upon the initiation of later stage clinical trials and upon the approval of exclusively licensed products in various jurisdictions.

In addition, the Company will pay PGEN tiered royalties ranging from low-single digit to high-single digit on the net sales derived from the sales of any approved IL-12 products and CAR products.

The Company will also pay PGEN royalties ranging from low-single digit to mid-single digit on the net sales derived from the sales of any approved TCR products, up to a maximum royalty amount of $ 100.0 million in the aggregate.

The Company will also pay PGEN twenty percent of any sublicensing

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

income received by us relating to the licensed products.

In addition, the Company will pay PGEN tiered royalties ranging from low-single digits to high-single digits on the net sales derived from the sale of any approved IL-12 products and CAR products.

The Company will also pay PGEN royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of any approved TCR products, up to a maximum royalty amount of $ 100.0 million in the aggregate.

The Company will also pay PGEN twenty percent of any sublicensing income received by us relating to the licensed products.

The Company is responsible for all development costs associated with each of the licensed products.

19 unchanged sentences

Under the 2019 R&D Agreement, the parties will, among other things, collaborate on programs to expand the Company's TCR library and conduct clinical trials.

The activities under the 2019 R&D Agreement are directed by a joint steering committee comprised of two members from the Company and one member from MD Anderson.

The Company will own all inventions and intellectual property developed under the 2019 R&D Agreement and the Company will retain all rights to intellectual property for oncology products manufactured using non-viral gene transfer technologies under the 2019 R&D Agreement, including the Company's Sleeping Beauty technology.

The Company has granted MD Anderson an exclusive license for such intellectual property outside the field of oncology and to develop and commercialize TCR products manufactured

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

using viral gene transfer technologies limited to autologous products if used for cancer treatment or prevention, and a non-exclusive license for allogenic anti-tumor TCR products manufactured using viral-based technologies.

activities under the 2019 R&D Agreement are directed by a joint steering committee comprised of two members from the Company and one member from MD Anderson.

The Company has granted MD Anderson an exclusive license for such intellectual property outside the field of oncology and to develop and commercialize TCR products manufactured using viral gene transfer technologies limited to autologous products if used for cancer treatment or prevention, and a non-exclusive license for allogenic anti-tumor TCR products manufactured using viral-based technologies.

Under the 2019 R&D Agreement, the Company agreed, beginning on January 1, 2021, to reimburse MD Anderson up to a total of $ 20.0 million for development costs under the 2019 R&D Agreement, after the funds from the 2015 R&D Agreement are exhausted.

In addition, the Company will pay MD Anderson royalties on net sales of its TCR products at rates in the low single digits.

In addition, the Company will pay MD Anderson royalties on net sales of its TCR products.

The Company is required to make performance-based payments upon the successful completion of clinical and regulatory benchmarks relating to its TCR products.

2 unchanged sentences

The Company also agreed to sell its TCR products to MD Anderson at preferential prices and will sell the Company's TCR products in Texas exclusively to MD Anderson for a limited period of time following the first commercial sale of the Company's TCR products.

For the three months ended March 31, 2022, the Company incurred expenses of $ 0.4 million related to this agreement compared to $ 0 for the three months ended March 31, 2021.

For the three months ended June 30, 2022, the Company incurred expenses of $ 0.6 million from MD Anderson related to this agreement compared to $ 0 for the three months ended June 30, 2021.

For the six months ended June 30, 2022, the Company incurred expenses of $ 1.0 million from MD Anderson related to this agreement compared to $ 0 for the six months ended June 30, 2021.

The 2019 R&D Agreement will terminate on December 31, 2026 and either party may terminate the 2019 R&D Agreement following written notice of a material breach.

3 unchanged sentences

The MD Anderson Warrant has an initial exercise price of $ 0.001 per share, expires on December 31, 2026 , and vests upon the occurrence of certain clinical milestones.

As of December 31, 2021, none of the milestones have been met.

As of June 30, 2022, the milestones have not been met.

License Agreement with the NCI

On May 28, 2019, the Company entered into a patent license agreement, or the Patent License, with the National Cancer Institute, or NCI.

On May 28, 2019, the Company entered into a patent license agreement, or the Patent License, with the National Cancer Institute, or the NCI.

Pursuant to the Patent License, the Company holds an exclusive, worldwide license to certain intellectual property to develop and commercialize patient-derived (autologous), peripheral blood T-cell therapy products engineered by transposon-mediated gene transfer to express TCRs reactive to mutated KRAS, TP53 and EGFR neoantigens.

5 unchanged sentences

The first benchmark payment of $ 0.1 million will be due upon the initiation of the Company's first sponsored Phase 1 clinical trial of a licensed product or licensed process in the field of use licensed under the Patent License.

The Company paid the first benchmark payment during the three months ended June 30, 2022.

In addition, the Company is required to pay the NCI one-time benchmark payments following aggregate net sales of licensed products at certain aggregate net sales ranging from $ 250.0 million to $ 1.0 billion.

1 unchanged sentence

The Company must also pay the NCI royalties on net sales of products covered by the Patent License at rates in the low to mid-single digits depending upon the technology included in a licensed product.

To the extent the Company enters into a sublicensing agreement relating to a licensed product, the Company is required to pay the NCI a percentage of all consideration received from a sublicensee, which percentage will decrease based on the stage of development of the licensed product at the time of the sublicense.

To the extent the Company enters

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

into a sublicensing agreement relating to a licensed product, the Company is required to pay the NCI a percentage of all consideration received from a sublicensee, which percentage will decrease based on the stage of development of the licensed product at the time of the sublicense.

The Patent License will expire upon expiration of the last patent contained in the licensed patent rights, unless terminated earlier.

3 unchanged sentences

In addition, the NCI has the right to:

(i) require the Company to sublicense the rights to the product candidates covered by the Patent License upon certain conditions, including if the Company is not

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

reasonably satisfying required health and safety needs and (ii) terminate or modify the Patent License, including if the Company is not satisfying requirements for public use as specified by federal regulations.

For the three months ended March 31, 2022 and March 31, 2021, the Company recognized $ 0.3 million in license payments to the NCI under this agreement.

(i) require the Company to sublicense the rights to the product candidates covered by the Patent License upon certain conditions, including if the Company is not reasonably satisfying required health and safety needs and (ii) terminate or modify the Patent License, including if the Company is not satisfying requirements for public use as specified by federal regulations.

For the three months ended June 30, 2022, the Company recognized $ 0.2 million in license payments to the NCI under this agreement, compared to $ 0.1 million for the three months ended June 30, 2021.

For the six months ended June 30, 2022, the Company recognized $ 0.5 million in license payments to the NCI under this agreement, compared to $ 0.5 million for the six months ended June 30, 2021.

Cooperative Research and Development Agreement (CRADA) with the NCI

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The purpose of this collaboration was to advance a personalized TCR-T approach for the treatment of solid tumors.

Using the Company's Sleeping Beauty technology, NCI would analyze a patient’s own cancer cells, identify their unique neoantigens and TCRs reactive against those neoantigens and then use the Company's Sleeping Beauty technology to transpose one or more TCRs into T cells for re-infusion.

Using the Company's Sleeping Beauty technology, the NCI would analyze a patient’s own cancer cells, identify their unique neoantigens and TCRs reactive against those neoantigens and then use the Company's Sleeping Beauty technology to transpose one or more TCRs into T cells for re-infusion.

Research conducted under the CRADA will be at the direction of Steven A.

Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI, in collaboration with the Company's researchers.

The Company is responsible for providing NCI with the test materials necessary for them to conduct their studies, and eventually, clinical trials pursuant to the CRADA.

The Company is responsible for providing the NCI with the test materials necessary for them to conduct their studies, and eventually, clinical trials pursuant to the CRADA.

Inventions, data and materials discovered or produced in connection with performance of the research plan under the CRADA will remain the sole property of the party who produced the discovery.

1 unchanged sentence

The owner of any invention under the CRADA will make the decision to file a patent covering the invention, or in the case of a jointly owned invention, the Company will have the first opportunity to file a patent covering the invention.

If the Company fails to provide timely notice of its decision to NCI or decide not to file a patent covering the joint invention, NCI has the right to make the filing.

For any invention solely owned by NCI or jointly made by NCI and the Company for which a patent application was filed, the U.S.

If the Company fails to provide timely notice of its decision to the NCI or decide not to file a patent covering the joint invention, the NCI has the right to make the filing.

For any invention solely owned by the NCI or jointly made by the NCI and the Company for which a patent application was filed, the U.S.

Public Health service grants the Company an exclusive option to elect an exclusive or non-exclusive commercialization license.

For inventions owned solely by NCI or jointly owned by NCI and the Company, which are licensed according to the terms described above, the Company agreed to grant to the U.S.

For inventions owned solely by the NCI or jointly owned by the NCI and the Company, which are licensed according to the terms described above, the Company agreed to grant to the U.S.

government a non-exclusive, non-transferable, irrevocable and paid up license to practice the invention or have the invention practiced on its behalf throughout the world.

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In March 2022, the Company entered into an amendment to the CRADA that is retroactive, effective January 9, 2022 to extend the term of the CRADA until January 9, 2023.

The Company did no t record expenses under the CRADA for the three months ended March 31, 2022, as compared to $ 0.6 million for the three months ended March 31, 2021.

In June 2022, the Company entered into the Fourth Amendment to the CRADA (the "CRADA Fourth Amendment") which, among other things, extended the term of the CRADA until January 9, 2025.

In connection with the CRADA Fourth Amendment, the Company agreed to contribute $ 1.0 million per year, payable on a quarterly basis, beginning in the first quarter of 2023.

The Company did no t record expenses under the CRADA for the three and six months ended June 30, 2022, as compared to $ 0.6 million for the three months ended June 30, 2021 and $ 1.3 million for the six months ended June 30, 2021.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

Patent and Technology License Agreement—The University of Texas MD Anderson Cancer Center and the Texas A&M University System

4 unchanged sentences

Under the terms of the agreement, the Company may be required to make additional payments to the Licensors upon achievement of certain other milestones in varying amounts which, on a cumulative basis could total up to an additional $ 4.5 million.

In addition, the Licensors are entitled to receive single digit percentage royalty payments on sales from a licensed product and will also be entitled to receive a portion of any fees that the Company may receive from a possible sublicense under certain circumstances.

During the three months ended March 31, 2022 and March 31, 2021, no amounts were expensed or paid under the terms of the agreement.

In addition, the Licensors are entitled to receive royalty payments on sales from a licensed product and will also be entitled to receive a portion of any fees that the Company may receive from a possible sublicense under certain circumstances.

During the three and six months ended June 30, 2022 and June 30, 2021, no amounts were expensed or paid under the terms of the agreement.

Collaboration Agreement with Solasia Pharma K.K.

On March 7, 2011, the Company entered into a License and Collaboration Agreement with Solasia Pharma K.

("Solasia"), which was amended on July 31, 2014 to include an exclusive worldwide license.

Pursuant to the License and Collaboration Agreement, the

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

Company granted Solasia an exclusive license to develop and commercialize darinaparsin in both intravenous and oral forms and related organic arsenic molecules, in all indications for human use.

("Solasia"), which was amended on July 31, 2014 to include an exclusive worldwide license and amended on October 14, 2021 to revise certain payment schedule details.

Pursuant to the License and Collaboration Agreement, the Company granted Solasia an exclusive license to develop and commercialize darinaparsin in both intravenous and oral forms and related organic arsenic molecules, in all indications for human use.

As consideration for the license, the Company is eligible to receive from Solasia development- and sales-based milestones, a royalty on net sales of darinaparsin, once commercialized, and a percentage of any sublicense revenue generated by Solasia.

1 unchanged sentence

The Company’s licensors, as defined in the agreement, will receive a portion of all milestone and royalty payments made by Solasia to the Company in accordance with the terms of the license agreement with the licensors.

During the three months ended March 31, 2022 and March 31, 2021, the Company did no t record collaboration revenue under the collaboration agreement with Solasia.

During the three and six months ended June 30, 2022 and June 30, 2021, the Company did no t record collaboration revenue under the collaboration agreement with Solasia.

Stock-Based Compensation

The Company recognized stock-based compensation expense on all employee and non-employee awards as follows:

For the Three Months Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(in thousands)

2 unchanged sentences

Stock-based compensation expense

The Company granted an aggregate of 2,690,000 stock options during the three months ended March 31, 2022, with a weighted-average grant date fair value of $ 0.47 per share.

The Company granted an aggregate of 4,314,438 stock options during the three months ended March 31, 2021, with a weighted-average grant date fair value of $ 2.43 per share.

For the three months ended March 31, 2022 and 2021, the fair value of stock options was estimated on the date of grant using a Black-Scholes option valuation model with the following assumptions:

For the Three Months Ended March 31,

The Company granted an aggregate of 692,500 stock options during the three months ended June 30, 2022, with a weighted-average grant date fair value of $ 0.55 per share, and granted an aggregate of 3,382,500 stock options during the six months ended June 30, 2022, with a weighted-average grant date fair value of $ 0.48 per share.

The Company granted an aggregate of 41,500 stock options during the three months ended June 30, 2021, with a weighted-average grant date fair value of $ 2.27 per share, and granted an aggregate of 4,395,438 stock options during the six months ended June 30, 2021, with a weighted-average grant date fair value of $ 2.44 per share.

For the three and six months ended June 30, 2022 and 2021, the fair value of stock options was estimated on the date of grant using a Black-Scholes option valuation model with the following assumptions:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Risk-free interest rate

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1.63 –

0.09 –

Expected life in years

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74.49 - 82.97 %

72.92 - 74.80 %

Expected dividend yield

Stock option activity under the Company’s stock option plans for the three months ended March 31, 2022 is as follows:

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

Stock option activity under the Company’s stock option plans for the six months ended June 30, 2022 is as follows:

(in thousands, except share and per share data)

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Outstanding, December 31, 2021

Outstanding, March 31, 2022

Options exercisable, March 31, 2022

Outstanding, June 30, 2022

Options exercisable, June 30, 2022

Options exercisable, December 31, 2021

Options available for future grant

At March 31, 2022, total unrecognized compensation costs related to unvested stock options outstanding amounted to $ 7.5 million.

At June 30, 2022, total unrecognized compensation costs related to unvested stock options outstanding amounted to $ 6.1 million.

The cost is expected to be recognized over a weighted-average period of 1.95 years.

A summary of the status of unvested restricted stock for the three months ended March 31, 2022 is as follows:

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

A summary of the status of unvested restricted stock for the six months ended June 30, 2022 is as follows:

Number of Shares

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Unvested, December 31, 2021

Unvested, March 31, 2022

At March 31, 2022, total unrecognized compensation costs related to unvested restricted stock outstanding amounted to $ 1.5 million.

Unvested, June 30, 2022

At June 30, 2022, total unrecognized compensation costs related to unvested restricted stock outstanding amounted to $ 1.4 million.

The cost is expected to be recognized over a weighted-average period of 1.92 years.

In connection with the Company’s November 2018 private placement which provided net proceeds of approximately $ 47.1 million, the Company issued warrants to purchase an aggregate of 18,939,394 shares of common stock which became exercisable six months after the closing of the private placement (the "November 2018 Warrants").

In connection with the Company’s November 2018 private placement that provided net proceeds of approximately $ 47.1 million, the Company issued warrants to purchase an aggregate of 18,939,394 shares of common stock, which became exercisable six months after the closing of the private placement (the "November 2018 Warrants").

The November 2018 Warrants had an exercise price of $ 3.01 per share and have a five-year term.

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The Company will recognize expense on the MD Anderson Warrant in the same manner as if the Company paid cash for services to be rendered.

For the three months ended March 31, 2022 and March 31, 2021, the Company did not recognize any expense related to the MD Anderson Warrant as no clinical milestones had been achieved.

For the three and six months ended June 30, 2022 and June 30, 2021, the Company did not recognize any expense related to the MD Anderson Warrant as the clinical milestones had not been achieved.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

On August 6, 2021, the Company entered into the Loan and Security Agreement with SVB.

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In connection with the Loan and Security Agreement, the Company issued SVB warrants to purchase 432,844 shares of common stock with an exercise price of $2.22 per share.

The warrants have a ten-year life and are fully vested upon issuance.

The warrants have a ten-year life and were fully vested upon issuance.

The fair value of the warrants was estimated at $ 0.8 million using a Black-Scholes model with the following assumptions:

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On December 28, 2021, the Company entered into the Amendment, as described in Note 4 - Debt, in connection with which, the original warrants issued to SVB were amended and restated.

As amended and restated, the warrants are for up to 649,615 shares of common stock, in the aggregate, at an exercise price per share of $1.16 .

The amended and restated warrants expire on August 6, 2031 and were fully vested upon issuance.

Using a Black-Scholes model with an expected volatility of 81 %, risk free interest rate of 1.49 %, expected life of 10 years and no dividends, the Company recorded a $ 0.2 million increase in the fair value of the warrants due to the modification of the warrants.

The Company assessed whether the warrants require accounting as derivatives.

The Company determined that the warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’

As amended and restated, the SVB Warrants are for up to 649,615 shares of common stock, in the aggregate, at an exercise price per share of $1.16 .

The SVB Warrants expire on August 6, 2031 and were fully vested upon issuance.

The Company assessed whether the SVB Warrants require accounting as derivatives.

The Company determined that the SVB Warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’

equity in accordance with FASB Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging .

As such, the Company has concluded the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’

As such, the Company has concluded the SVB Warrants meet the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’

Joint Venture

On December 18, 2018, the Company entered into a Framework Agreement with TriArm whereby the parties will launch Eden BioCell, to lead clinical development and commercialization of certain Sleeping Beauty -generated CAR-T therapies as set forth in a separate license agreement.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

On December 18, 2018, the Company entered into a Framework Agreement with TriArm whereby the parties agreed to launch Eden BioCell, to lead clinical development and commercialization of certain Sleeping Beauty -generated CAR-T therapies as set forth in a separate license agreement.

On January 3, 2019, Eden BioCell was incorporated in Hong Kong as a private company.

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In September 2021, TriArm and the Company mutually agreed to dissolve the joint venture.

For the three months ended March 31, 2022 and 2021, Eden BioCell incurred a net loss.

For the three and six months ended June 30, 2022 and June 30, 2021, Eden BioCell incurred a net loss.

The Company continues to have no commitment to fund its operations.

Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through the date on which these financial statements were issued.

The Company did not have any material subsequent events that impacted its financial statements or disclosures.

On August 12, 2022, the Company entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co.

(“Piper Sandler”), pursuant to which the Company can offer and sell, from time to time at its sole discretion, shares of its common stock having an aggregate offering price of up to $ 50 million through Piper Sandler as its sales agent in an “at the market offering.”

Piper Sandler will receive a commission of 3.0 % of the gross proceeds of any common stock sold under the Equity

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

Distribution Agreement.

As of the date of this Quarterly Report on Form 10-Q, there have been no offers or sales of the Company’s common stock under the Equity Distribution Agreement.

In connection with entering into the Equity Distribution Agreement, the Company concurrently terminated, effective August 12, 2022, the Open Market Sale Agreement with Jefferies LLC, dated June 21, 2019, governing its former "at the market offering" program.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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We are leveraging our cancer hotspot mutation TCR library and our proprietary, non-viral Sleeping Beauty gene transfer platform to design and manufacture patient-specific cell therapies that target neoantigens arising from shared tumor-specific mutations in key oncogenic genes, including KRAS , TP53 and EGFR .

In collaboration with the MD Anderson Cancer Center, or MD Anderson, we are currently enrolling patients for a Phase 1/2 clinical trial evaluating ten TCRs reactive to mutated KRAS, TP53 , and EGFR from our TCR library for the investigational treatment of non-small cell lung, colorectal, endometrial, pancreatic, ovarian, and bile duct, which we refer to as our TCR-T Library Phase 1/2 Trial.

In collaboration with the MD Anderson Cancer Center, or MD Anderson, we are currently enrolling patients for a Phase 1/2 clinical trial evaluating ten TCRs reactive to mutated KRAS, TP53 and EGFR from our TCR library for the investigational treatment of non-small cell lung, colorectal, endometrial, pancreatic, ovarian and bile duct cancers, which we refer to as our TCR-T Library Phase 1/2 Trial.

On May 2, 2022, we announced that we treated our first patient in this trial;

we anticipate reporting interim data in the second half of 2022.

we anticipate reporting early data in the third quarter of 2022.

We have not generated any product revenue and have incurred significant net losses in each year since our inception.

For the three months ended March 31, 2022, we had a net loss of $9.8 million, and as of March 31, 2022, we have incurred approximately $852.6 million of accumulated deficit since our inception in 2003.

For the six months ended June 30, 2022, we had a net loss of $19.7 million, and as of June 30, 2022, we have incurred approximately $862.6 million of accumulated deficit since our inception in 2003.

We expect to continue to incur significant operating expenditures and net losses.

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Recent Developments

On September 27, 2021, we announced a restructuring designed to enable us to focus on and advance our TCR program.

As a result of the restructuring, approximately 60 positions were eliminated, and we were able to extend our anticipated cash runway.

Given our current development plans and cash management efforts, we anticipate cash resources will be sufficient to fund operations into the second quarter of 2023.

The ongoing COVID-19 global pandemic has presented a significant health and economic challenge around the world and may affect our employees, partners and business operations.

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition will depend on future developments that are highly uncertain and cannot be accurately predicted.

Supply chain disruptions caused by the pandemic may negatively impact productivity, disrupt our business and delay our clinical programs and timelines.

The severity of negative impacts will depend, in part, on the length and magnitude of the disruptions.

These and perhaps more severe disruptions in our operations could negatively impact our business, operating results and financial condition.

We continue to work with our partners to mitigate the impact the COVID-19 pandemic is having on our business.

On May 2, 2022, we announced dosing of the first patient in our TCR-T Library Phase 1/2 trial being conducted at MD Anderson.

The TCR-T cell product was successfully manufactured in Alaunos’

cGMP facility in Houston, Texas.

On May 2, 2022, we announced dosing of the first patient in our TCR-T Library Phase 1/2 trial being conducted at MD Anderson at dose level 1, or 5x10 9 .

The patient has non-small cell lung cancer and was treated with TCR-T cells targeting a KRAS G12D mutation.

Following a safety review by the safety review committee at MD Anderson, we are moving ahead at the second dose level of 4x10 10 TCR-T cells.

We continue to enroll patients in the trial at dose levels according to the clinical protocol.

We expect to present interim data at an appropriate scientific or medical conference in the second half of 2022.

We expect to present early data at an appropriate scientific or medical conference in the third quarter of 2022.

The TCR-T cell product was successfully manufactured in Alaunos' state-of-the-art good manufacturing practice ("cGMP") facility in Houston, Texas.

We are executing a multi-prong strategy to expand our manufacturing capabilities, including implementing standard operating procedures that allow for simultaneous production of multiple products, hiring additional staff to support multiple shifts and evaluating physical expansion of the cGMP footprint.

On May 16, 2022, we presented preclinical data in poster M-234 on Stem-cell memory TCR-T cells targeting hotspot EGFR , KRAS and TP53 neoantigens generated through co-expression of membrane-bound Interleukin-15, or mbIL-15, at the 25th Annual Meeting of the American Society of Gene and Cell Therapy.

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These preclinical observations suggest that our proprietary mbIL-15 technology has the potential to establish long-lived tumor-specific TCR-T cells that may have the potential to survive in circulation and in the suppressive tumor microenvironment.

In June 2022, Solasia Pharma K.

("Solasia") announced that darinaparsin has been approved for relapsed or refractory Peripheral T-Cell Lymphoma by the Ministry of Health, Labor and Welfare in Japan.

As a part of our license agreement with Solasia, we are eligible for sales-based milestones and a percentage of any sublicense revenue generated by Solasia.

Solasia will continue to be responsible for all costs related manufacturing and commercialization.

On June 24, 2022, we entered into the Fourth Amendment (the "CRADA Fourth Amendment") to a Cooperative Research and Development Agreement, dated January 9, 2017, by and among the National Cancer Institute and the Company, as amended (the "CRADA").

Under the CRADA, the National Cancer Institute will work to generate proof of concept utilizing our Sleeping Beauty platform for personalized TCR-T therapies.

The CRADA Fourth Amendment, among other things, extended the term of the CRADA until January 9, 2025.

In connection with the CRADA Fourth Amendment, we agreed to contribute $1.0 million per year, payable on a quarterly basis, beginning in the first quarter of 2023.

We have continued advancing our hunTR discovery engine to discover new TCRs which may potentially be added to our TCR library.

We are working to increase output and reduce screening costs and currently anticipate sharing data from the hunTR discovery engine in the fourth quarter of 2022.

Financial Overview

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As we obtain results from trials, we may elect to discontinue or delay clinical trials for certain products in order to focus our resources on more promising products or indications.

Completion of clinical trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and intended use of a product.

Completion of clinical trials may take several years or more, and the length of time generally varies substantially according to the type, complexity, novelty and

intended use of a product.

It is not unusual for preclinical and clinical development of each of these types of products to require the expenditure of substantial resources.

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Overview of Results of Operations

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Three and Six Months Ended June 30, 2022 Compared to Three and Six Months Ended June 30, 2021

Research and Development Expenses

Research and development expenses during the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended March 31,

Research and development expenses during the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

Research and development expenses

Research and development expenses for the three months ended March 31, 2022 decreased by $7.8 million, or 58%, when compared to the three months ended March 31, 2021 primarily due to a decrease in program-related costs of $2.8 million as a result of the winding down of our IL-12 and CAR-T programs, a $4.7 million decrease in employee related expenses due to our reduced headcount following our restructuring in the third quarter of 2021, and a $0.3 million decrease in consulting expenses due to a decreased reliance on consultants.

For the three months ended March 31, 2022, our clinical stage projects included our TCR-T Library Phase 1/2 trial evaluating TCRs from our library for the investigational treatment of non-small cell lung, colorectal, endometrial, pancreatic, ovarian, and bile duct cancers.

Research and development expenses for the three months ended June 30, 2022 decreased by $7.6 million when compared to the three months ended June 30, 2021 primarily due to a decrease in program-related costs of $2.0 million as a result of the winding down of our IL-12 and CAR-T programs, a $5.2 million decrease in employee related expenses due to our reduced headcount following our restructuring in the third quarter of 2021, and a $0.3 million decrease in consulting expenses due to reduced use of consultants.

Research and development expenses for the six months ended June 30, 2022 decreased by $15.4 million when compared to the six months ended June 30, 2021 primarily due to a decrease in program-related costs of $4.9 million as a result of the winding down of our IL-12 and CAR-T programs, a $9.8 million decrease in employee related expenses due to our reduced headcount following our restructuring in the third quarter of 2021, and a $0.6 million decrease in consulting expenses due to reduced use of consultants.

For the three and six months ended June 30, 2022, our clinical stage projects included our TCR-T Library Phase 1/2 trial evaluating TCRs from our library for the investigational treatment of non-small cell lung, colorectal, endometrial, pancreatic, ovarian and bile duct cancers.

General and administrative expenses

General and administrative expenses during the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended March 31,

General and administrative expenses during the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

General and administrative expenses

General and administrative expenses for the three months ended March 31, 2022 decreased by $4.7 million as compared to the three months ended March 31, 2021, primarily due to a $3.6 million decrease in employee related expenses due to our reduced headcount following our restructuring in the third quarter of 2021, a $0.8 million decrease in consulting and professional services expenses due to lower legal costs and a decreased use of consultants, and a $0.2 million decrease in facilities and other expenses .

General and administrative expenses for the three months ended June 30, 2022 decreased by $5.6 million as compared to the three months ended June 30, 2021, primarily due to a $5.4 million decrease in employee related expenses due to our reduced headcount following our restructuring in the third quarter of 2021 and a $0.2 million decrease in consulting and professional services expenses due to lower legal costs and a decreased use of consultants.

General and administrative expenses for the six months ended June 30, 2022 decreased by $10.4 million as compared to the six months ended June 30, 2021, primarily due to a $9.2 million decrease in employee related expenses due to our reduced headcount following our restructuring in the third quarter of 2021, a $1.0 million decrease in consulting and professional services expenses due to lower legal costs and a decreased use of consultants, and a $0.1 million decrease in facilities-related costs.

Gain on lease modification

Gains on lease modifications during the three and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

Gain on lease modification

Gain on lease modification during the three and six months ended June 30, 2022 was $0.1 million compared to $0 during the three and six months ended June 30, 2021.

As a result of a real estate lease modification during the second quarter of 2022, the associated lease liability and right-of-use asset were remeasured based on the revised lease payments, resulting in a gain of $0.1 million.

Other income (expense), net

Other income (expense), net during the three months ended March 31, 2022 and 2021 was as follows:

Three Months Ended March 31,

Other income (expense), net during the three and six months ended June 30, 2022 and 2021 was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

($ in thousands)

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Other income (expense), net

Other expense, net for the three months ended March 31, 2022 increased by $0.7 million as compared to the three months ended March 31, 2021, primarily due to $0.7 million of interest expense associated with our Amended Loan and Security Agreement, as defined below.

Other expense, net for the three months ended June 30, 2022 increased by $0.7 million as compared to the three months ended June 30, 2021, primarily due to $0.7 million of interest expense associated with our Amended Loan and Security Agreement, as defined below.

Other expense, net for the six months ended June 30, 2022 increased by $1.4 million as compared to the six months ended June 30, 2021, primarily due to $1.4 million of interest expense associated with our Amended Loan and Security Agreement.

Liquidity and Capital Resources

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To date, we have financed our operations primarily through public offerings of our common stock, private placements of our convertible equity securities, term debt and collaborations.

Through March 31, 2022, we have received an aggregate of $714.1 million from issuances of equity and $25.0 million from our Amended Loan and Security Agreement, as defined below.

Through June 30, 2022, we have received an aggregate of $714.1 million from issuances of equity and $25.0 million from our Amended Loan and Security Agreement, as defined below.

We follow the guidance of Accounting Standards Codification ("ASC") Topic 205-40, Presentation of Financial Statements - Going Concern , in order to determine whether there is substantial doubt about our ability to continue as a going concern for one year after the date our financial statements are issued.

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This forecast of cash resources and planned operations is forward-looking information that involves risks and uncertainties, and the actual amount of expenses could vary materially and adversely as a result of a number of factors.

2022 Equity Distribution Agreement

On August 12, 2022, we entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co.

(“Piper Sandler”), pursuant to which we can offer and sell, from time to time at our sole discretion, shares of our common stock having an aggregate offering price of up to $50 million through Piper Sandler as our sales agent in an “at the market offering.”

Piper Sandler will receive a commission of 3.0% of the gross proceeds of any common stock sold under the Equity Distribution Agreement.

As of the date of this Quarterly Report on Form 10-Q, there have been no offers or sales of our common stock under the Equity Distribution Agreement.

In connection with entering into the Equity Distribution Agreement, we concurrently terminated, effective August 12, 2022, the Open Market Sale Agreement with Jefferies LLC, dated June 21, 2019, governing our former “at the market offering”

2021 Loan and Security Agreement

On August 6, 2021, we entered into a Loan and Security Agreement with Silicon Valley Bank and affiliates of Silicon Valley Bank (collectively, "SVB") (the "Loan and Security Agreement").

The Loan and Security Agreement provided for an initial term loan of $25.0 million funded at the closing ("Term A Tranche"), with an additional tranche of $25.0 million available if certain funding and clinical milestones were met by August 31, 2022 ("Term B Tranche").

On August 6, 2021, we entered into a Loan and Security Agreement (the "Loan and Security Agreement") with Silicon Valley Bank and affiliates of Silicon Valley Bank (collectively, "SVB").

The Loan and Security Agreement provided for an initial term loan of $25.0 million funded at the closing (the "Term A Tranche"), with an additional tranche of $25.0 million available if certain funding and clinical milestones were met by August 31, 2022 (the "Term B Tranche").

Effective December 28, 2021, we entered into a First Amendment (the "Amendment") to the Loan and Security Agreement (as so amended, the "Amended Loan and Security Agreement").

The Amended Loan and Security Agreement extends the interest-only period through August 31, 2022, and provides for an automatic extension of the interest-only period through August 31, 2023, if the Amended Milestones (as defined below) are met by August 31, 2022.

The Amendment eliminated the Term B Tranche, which remained unfunded, leaving only the Term A Tranche (the "SVB Facility").

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however, if we achieve the Amended Milestones on or prior to August 31, 2022, then the maturity will automatically extend to August 1, 2024.

As of March 31, 2022, the SVB Facility was fully drawn in the amount of $25.0 million.

As of June 30, 2022, the SVB Facility was fully drawn in the amount of $25.0 million.

The SVB Facility bears interest at a floating rate per annum on the outstanding loans, payable monthly, at the greater of (a) 7.75% and (b) the current published U.S.

prime rate, plus a margin of 4.5%.

conditions acceptable to SVB, and (ii) achieved positive data in the first cohort of the TCR-T Library Phase 1/2 Trial endorsed by an independent safety monitoring committee as a safe dose to proceed (together, the “Amended Milestones”).

The Amended Loan and Security Agreement provides for an interest-only period which extends through August 31, 2022, as compared to March 31, 2022 in the Loan and Security Agreement, and may be automatically extended through August 31, 2023, if, on or prior to August 31, 2022, SVB receives evidence, satisfactory to it, confirming that we have (i) received at least $50.0 million in net cash proceeds from the sale of our equity securities after the date of the Amended Loan and Security Agreement, on terms acceptable to SVB, and (ii) achieved positive data in the first cohort of the TCR-T Library Phase 1/2 Trial endorsed by an independent safety monitoring committee as a safe dose to proceed (together, the “Amended Milestones”).

After the interest-only payment period, aggregate outstanding borrowings are repayable in twelve consecutive, equal monthly installments of principal plus accrued interest.

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In addition to the payment of the outstanding principal plus accrued interest due, we will also owe SVB 5.75% of the original principal amounts borrowed as a final payment (the "Final Payment").

We are permitted to make up to two prepayments, each payment of at least $5.0 million, subject to the prepayment premium of the SVB Facility.

Such prepayment premium would be 3.00% of the principal amount of the SVB Facility if prepaid prior to the first anniversary of the effective date, 2.00% of the principal amount of the SVB Facility if prepaid on or after the first anniversary of the effective date but prior to the second anniversary of the effective date and 1.00% of the principal amount of the SVB Facility if prepaid on or after the second anniversary of the effective date but prior to maturity date.

We are permitted to make up to two prepayments, each such payment to be at least $5.0 million, subject to a prepayment premium of the SVB Facility.

Such prepayment premium would be 3.00% of the principal amount of the SVB Facility if prepaid prior to the first anniversary of the effective date, 2.00% of the principal amount of the SVB Facility if prepaid on or after the first anniversary of the effective date but prior to the second anniversary of the effective date and 1.00% of the principal

amount of the SVB Facility if prepaid on or after the second anniversary of the effective date but prior to maturity date.

No amount that has been repaid may be reborrowed.

The Amended Loan and Security Agreement requires us to cash collateralize half of the sum of the then-outstanding principal amount of the SVB Facility, plus an amount equal to 5.75% of the original principal amount of the SVB Facility if we do not achieve the Amended Milestones on or prior to August 31, 2022.

In the event a cash collateralization were to occur, so long as no event of default has occurred, $2.5 million will be released from the collateral account following the eighth scheduled payment of principal and interest, and a further $4.0 million will be released following the tenth scheduled payment of principal and interest on the SVB facility, in each case, so long as (i) after subtracting such scheduled payment, the sum of (a) the aggregate outstanding principal, (b) accrued and unpaid interest and (c) the Final Payment is less than $9,770,933 and $5,604,167, respectively and (ii) the balance in the collateral account after the release would equal or exceed $10.0 million and $6.0 million, respectively.

In the event a cash collateralization were to occur, so long as no event of default has occurred, $2.5 million will be released from the collateral account following the eighth scheduled payment of principal and interest, and a further $4.0 million will be released following the tenth scheduled payment of principal and interest, in each case, so long as (i) after subtracting such scheduled payment, the sum of (a) the aggregate outstanding principal, (b) accrued and unpaid interest and (c) the Final Payment is less than $9,770,933 and $5,604,167, respectively and (ii) the balance in the collateral account after the release would equal or exceed $10.0 million and $6.0 million, respectively.

The SVB Facility and related obligations under the Amended Loan and Security Agreement are secured by substantially all of our properties, rights and assets, except for its intellectual property (which is subject to a negative pledge under the Amended Loan and Security Agreement).

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The issuance costs for the Loan and Security Agreement, including the Amended Loan and Security Agreement, were approximately $1.2 million and primarily related to the SVB Warrants, which will be amortized into interest expense over the period to August 1, 2023.

Interest expense was $0.7 million for the three months ended March 31, 2022.

The fair value of the Amended Loan and Security Agreement as of March 31, 2022 approximates its face value due to proximity to the transaction.

The following table summarizes our net decrease in cash and cash equivalents for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

Interest expense was $0.7 million for the three months ended June 30, 2022 and was $1.4 million for the six months ended June 30, 2022.

The fair value of the Amended Loan and Security Agreement as of June 30, 2022 approximates its face value due to proximity to the transaction.

The following table summarizes our net decrease in cash and cash equivalents for the six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

($ in thousands)

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Changes in operating assets and liabilities which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in results of operations.

Net cash used in operating activities for the three months ended March 31, 2022 was $7.8 million, as compared to net cash used in operating activities of $15.3 million for the three months ended March 31, 2021.

The net cash used in operating activities for the three months ended March 31, 2022 was primarily due to our net loss of $9.8 million, adjusted for $1.7 million of non-cash items such as depreciation and stock-based compensation, and a decrease in accounts payable of $0.8 million and a $0.2 million decrease in accrued expenses, offset by a decrease in receivables of $1.1 million due to cash receipts and a decrease to prepaid expenses and other assets of $0.2 million.

Net cash used in investing activities was $29 thousand for the three months ended March 31, 2022, compared to $0.7 million for the three months ended March 31, 2021.

The decrease of $0.7 million in net cash used in investing activities was primarily a result of the decision to use available cash to expand our internal cell therapy capabilities in our Houston, Texas facilities during the first quarter of 2021.

There were no financing activities for the three months ended March 31, 2022.

Net cash provided by financing activities during the three months ended March 31, 2021 was $1.0 million, related primarily to proceeds from the exercise of stock options.

Net cash used in operating activities for the six months ended June 30, 2022 was $16.0 million, as compared to net cash used in operating activities of $36.8 million for the six months ended June 30, 2021.

The net cash used in operating activities for the six months ended June 30, 2022 was primarily due to our net loss of $19.7 million, adjusted for $5.7 million of non-cash items such as depreciation and stock-based compensation, a $2.2 million decrease in lease liabilities, a decrease in accounts payable of $0.9 million and a $0.4 million decrease in accrued expenses, offset by a decrease in receivables of $1.1 million and a decrease to prepaid expenses and other assets of $0.4 million.

Net cash used in investing activities was $0.1 million for the six months ended June 30, 2022, compared to $2.6 million for the six months ended June 30, 2021.

The decrease was primarily a result of the decision to use available cash to expand our internal cell therapy capabilities in our Houston, Texas facilities during the first half of 2021.

There were no financing activities for the six months ended June 30, 2022.

Net cash provided by financing activities during the six months ended June 30, 2021 was $1.0 million, related primarily to proceeds from the exercise of stock options.

Operating Capital and Capital Expenditure Requirements

We anticipate that losses will continue for the foreseeable future.

As of March 31, 2022, our accumulated deficit was approximately $852.6 million.

As of June 30, 2022, our accumulated deficit was approximately $862.6 million.

Our actual cash requirements may vary materially from those planned because of a number of factors, including:

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costs of filing, prosecuting, defending and enforcing any patent claims and any other intellectual property rights, or other developments.

As of March 31, 2022, we had approximately $68.3 million of cash and cash equivalents.

As of June 30, 2022, we had approximately $60.0 million of cash and cash equivalents.

Given our current development plans, we anticipate our cash resources will be sufficient to fund our operations into the second quarter of 2023.

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If adequate additional funds are not available when required, management may need to curtail its development efforts and planned operations.

Working capital as of March 31, 2022 was $48.6 million, consisting of $69.8 million in current assets and $21.2 million in current liabilities.

Working capital as of June 30, 2022 was $34.6 million, consisting of $61.4 million in current assets and $26.8 million in current liabilities.

Working capital as of December 31, 2021 was $62.8 million, consisting of $78.8 million in current assets and $16.0 million in current liabilities.

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On December 15, 2020, we entered into a second lease in Houston with MD Anderson which provided us additional office and laboratory space through April 2028.

In the second quarter of 2022, the Company modified its real estate lease agreement executed on December 15, 2020 with MD Anderson.

The modification reduced the Company's leased space from 18,111 square feet to 3,228 square feet.

As a result, the associated lease liability and right-of-use asset were remeasured to $0.4 million based on revised lease payments.

A gain of $0.1 million was also recorded on the lease modification.

Royalty and License Fees

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The terms of the Patent License require us to pay the NCI minimum annual royalties in the amount of $0.3 million, which will be reduced to $0.1 million once the aggregate minimum annual royalties paid by us equals $1.5 million.

For the three months ended March 31, 2022 and 2021, we recognized $0.3 million related to royalty payments under this agreement.

As of March 31, 2022, we have paid a total of $0.8 million in minimum annual royalty payments under this agreement.

For the three and six months ended June 30, 2022 and 2021, we recognized $0.3 million related to royalty payments under this agreement.

As of June 30, 2022, we have paid a total of $0.8 million in minimum annual royalty payments under this agreement.

Pursuant to the Patent License, we are also required to make performance-based payments contingent upon the successful completion of clinical and regulatory benchmarks relating to the licensed products.

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The first benchmark payment of $0.1 million will be due upon the initiation of our first sponsored Phase 1 clinical trial of a licensed product or licensed process in the field of use licensed under the Patent License.

In addition, we are required to pay the NCI one-time benchmark payments following aggregate net sales of licensed products at certain aggregate net sales ranging from $250.0 million to $1.0 billion.

addition, we are required to pay the NCI one-time benchmark payments following aggregate net sales of licensed products at certain aggregate net sales ranging from $250.0 million to $1.0 billion.

The aggregate potential amount of these benchmark payments is $12.0 million.

No payments were made during the three months ended March 31, 2022 and March 31, 2021.

A payment totaling $0.1 million was made during the three and six months ended June 30, 2022 related to the first benchmark payment, as compared to $0 during the three and six months ended June 30, 2021.

On October 5, 2018, we entered into an exclusive license agreement, or the License Agreement, with PGEN Therapeutics, Inc., or PGEN, a wholly owned subsidiary of Precigen Inc., or Precigen.

Under the License Agreement, we are obligated to pay PGEN an annual licensing fee of $0.1 million expected to be paid through the term of the agreement and we have also agreed to reimburse certain historical costs of PGEN up to $1.0 million.

For the three months ended March 31, 2022 and March 31, 2021, we have made licensing fee payments in accordance with the terms of the agreement.

For the three and six months ended June 30, 2022 and June 30, 2021, we have made licensing fee payments in accordance with the terms of the agreement.

Pursuant to the terms of the License Agreement, we are responsible for contingent milestone payments totaling up to an additional $52.5 million for each exclusively licensed program upon the initiation of later stage clinical trials and upon the approval of exclusively licensed products in various jurisdictions.

In addition, we will pay PGEN tiered royalties ranging from low-single digit to high-single digit on the net sales derived from the sales of any approved IL-12 products and CAR products.

We will also pay PGEN royalties ranging from low-single digit to mid-single digit on the net sales derived from the sales of any approved TCR products, up to a maximum royalty amount of $100.0 million in the aggregate.

In addition, we will pay PGEN tiered royalties ranging from low-single digits to high-single digits on the net sales derived from the sale of any approved IL-12 products and CAR products.

We will also pay PGEN royalties ranging from low-single digits to mid-single digits on the net sales derived from the sale of any approved TCR products, up to a maximum royalty amount of $100.0 million in the aggregate.

We will also pay PGEN twenty percent of any sublicensing income received by us relating to the licensed products.

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and income taxes.

We reviewed our policies and determined that those policies remain our most critical accounting policies for the three months ended March 31, 2022.

We reviewed our policies and determined that those policies remain our most critical accounting policies for the three and six months ended June 30, 2022.

Quantitative and Qualitative Disclosures about Market Risk.

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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-Q

Item 1. Financial Statements