What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-15 · 257 added, 216 removed, 542 unchanged (47% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

Cash and cash equivalents

Restricted cash

Prepaid expenses and other current assets

17 unchanged sentences

Common stock $ 0.001 par value;

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

420,000,000 shares authorized, 216,182,042 shares issued and outstanding at September 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 June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Collaboration revenue

Operating expenses:

4 unchanged sentences

Loss from operations

Other income (expense):

Interest expense

Other income (expense), net

Net loss applicable to common stockholders

Other income (expense), net

Basic and diluted net loss per share

4 unchanged sentences

(in thousands, except share and per share data)

For the Three Months Ended June 30, 2022

For the Three Months Ended September 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

Stock-based compensation

Exercise of employee stock options

Repurchase of common stock

Balance at September 30, 2022

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

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

Additional Paid in Capital

5 unchanged sentences

Cancelled restricted common stock

Balance at June 30, 2022

Exercise of employee stock options

Repurchase of common stock

Balance at September 30, 2022

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

For the Three Months Ended June 30, 2021

For the Three Months Ended September 30, 2021

Additional Paid in Capital

1 unchanged sentence

Total Stockholders' Equity

Balance at March 31, 2021

Balance at June 30, 2021

Stock-based compensation

Exercise of employee stock options

Restricted stock awards

Cancelled restricted common stock

Balance at June 30, 2021

Issuance of warrants

Balance at September 30, 2021

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

For the Six Months Ended June 30, 2021

For the Nine Months Ended September 30, 2021

Additional Paid in Capital

6 unchanged sentences

Cancelled restricted common stock

Balance at June 30, 2021

Issuance of warrants

Balance at September 30, 2021

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

2 unchanged sentences

(in thousands)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities:

2 unchanged sentences

Stock-based compensation

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

Decrease (increase) in the carrying amount of right-of-use assets

Gain on lease modification

12 unchanged sentences

Cash flows from financing activities:

Proceeds from long-term debt borrowing

Debt issuance costs

Proceeds from the exercise of stock options

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Repurchase of common stock

Repayment of long-term debt

Net cash provided by (used in) financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

Cash, cash equivalents and restricted cash, end of period

Supplementary disclosure of cash flow information:

9 unchanged sentences

to Alaunos Therapeutics, Inc.

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

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

The Company’s operations to date have consisted primarily of conducting research and development and raising capital to fund those efforts.

4 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 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.

As of September 30, 2022, the Company had approximately $ 37.8  million of cash and cash equivalents and $ 13.9 million of restricted cash related to the Company's debt agreement (see Note 4).

The Company’s accumulated deficit at September 30, 2022 was approximately $ 871.5  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, 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.

2 unchanged sentences

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.

As of September 30, 2022, there were 216,182,042 shares of common stock outstanding and an additional 33,545,557 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants.

Basis of Presentation

3 unchanged sentences

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 and six months ended June 30, 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 nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Although the Company regularly assesses

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

these estimates, actual results could differ from those estimates.

statements and the reported amounts of revenues and expenses during the reporting period.

Although the Company regularly assesses these estimates, actual results could differ from those estimates.

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

Impact of COVID-19 Pandemic

With the ongoing COVID-19 pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its business and operations.

The Company continues to evaluate the impact of the COVID-19 global pandemic on patients, healthcare providers and its employees, as well as its operations and the operations of its business partners and healthcare communities.

In response to the COVID-19 pandemic, the Company has implemented policies at its locations to mitigate the risk of exposure to COVID-19 by its personnel.

The extent to which the COVID-19 pandemic impacts the Company’s business, clinical development and regulatory efforts and the value of its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements, the result of vaccination efforts and the effectiveness of any other actions taken globally to contain and treat the disease.

The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the COVID-19 pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

2021 Loan and Security Agreement

2 unchanged sentences

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 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").

The Amended Loan and Security Agreement extended the interest-only period through August 31, 2022.

The Amended Milestones (as defined below) were not met by the Company on or prior to August 31, 2022, and therefore, the interest-only period was not extended beyond August 31, 2022.

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

Under the Amended Loan and Security Agreement, the SVB Facility will mature on August 1, 2023.

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

Please refer to Note 4 - Debt, for further discussion of the Loan and Security Agreement and the Amended Loan and Security Agreement.

2022 Equity Distribution Agreement

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 $ 50.0 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 Distribution Agreement.

During the three and nine months ended September 30, 2022, there have been no sales of the Company's common stock under the Equity Distribution Agreement.

Summary of Significant Accounting Policies

2 unchanged sentences

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

September 30,

($ in thousands)

1 unchanged sentence

Unamortized discount on Loan and Security Agreement

current portion of long-term debt

Long-term debt

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

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

The Amended Loan and Security Agreement

As of September 30, 2022, interest on the outstanding loans was 10.75 %.

The Amended Loan and Security Agreement provided for an interest-only period through August 31, 2022.

On or prior to August 31, 2022, the Company had not (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, nor (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”), and, therefore, the interest-only period was not extended beyond August 31, 2022.

Commencing on September 1, 2022, aggregate outstanding borrowings are payable in twelve consecutive, equal monthly installments of principal plus accrued interest.

All outstanding obligations under the Amended Loan and Security Agreement are due and payable on August 1, 2023 .

The Company will also owe SVB 5.75 % of the original principal amounts borrowed as a final payment (the "Final Payment").

The Company is

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.

All outstanding principal and accrued and unpaid interest under the SVB Facility and all other outstanding obligations under the Amended Loan and Security Agreement are due and payable on August 1, 2023 ;

however, if the Company achieves the Amended Milestones on or prior to August 31, 2022, then the maturity will be automatically extended to August 1, 2024 .

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 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.

No amount that has been repaid may be reborrowed.

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, 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.

permitted to make up to two prepayments, subject to a prepayment premium of the amount being prepaid, ranging from 1.00 % to 2.00 %, of the SVB Facility, each such prepayment to be at least $ 5.0 million plus all accrued and unpaid interest on the portion being prepaid.

As a result of not achieving the Amended Milestones on or prior to August 31, 2022, the Amended Loan and Security Agreement required 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.

As of September 30, 2022, the Company has collateralized $ 13.9 million, which is classified as restricted cash on the balance sheet.

So long as no event of default has occurred and subject to certain other terms related to the remaining outstanding balance under the SVB Facility being satisfied, $ 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.

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).

In addition, the Amended Loan and Security Agreement contains customary representations, warranties, events of default and covenants.

In connection with its entry into the Loan and Security Agreement, the Company issued to SVB warrants to purchase (i) up to 432,844 shares of the Company’s common stock, in the aggregate, and (ii) up to an additional 432,842 shares of common stock, in the aggregate, in the event the Company achieves certain clinical milestones, in each case at an exercise price per share of $ 2.22 .

In connection with its entry into the Loan and Security Agreement, the Company issued to SVB warrants to purchase (i) up to 432,844 shares of the Company’s common stock, in the aggregate, and (ii) up to an additional 432,842 shares of common stock, in the aggregate, in the event the Company achieved certain clinical milestones, in each case at an exercise price per share of $ 2.22 .

In connection with its entry into the Amendment, the Company amended and restated the warrants issued to SVB.

2 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 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.

Interest expense was $ 0.8 million for the three months ended September 30, 2022 and was $ 2.3 million for the nine months ended September 30, 2022, compared to $ 0.4 million for the three and nine months ended September 30, 2021.

The fair value of the Amended Loan and Security Agreement as of September 30, 2022 approximates its face value.

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 June 30, 2022 and December 31, 2021 are as follows:

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

($ in thousands)

1 unchanged sentence

Balance as of

September 30,

Quoted Prices in

11 unchanged sentences

Cash equivalents

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

The cash equivalents represent demand deposit accounts and deposits in a short-term United States treasury money market mutual fund quoted in an active market and classified as a Level 1 asset.

There have been no changes to the valuation methods during the nine months ended September 30, 2022.

We had no financial assets or liabilities that were classified as Level 2 or Level 3 during the nine months ended September 30, 2022.

Net loss per share

1 unchanged sentence

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 June 30, 2022 and 2021, respectively:

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

September 30,

Common stock options

6 unchanged sentences

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 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.

NOTES TO FINANCIAL STATEMENTS

During the three and nine months ended September 30, 2022, the Company recorded no expenses for Vineti, compared to $ 0.1 million of expenses for the three months ended September 30, 2021 and $ 0.4 million for the nine months ended September 30, 2021.

WaterMill Settlement Agreement

14 unchanged sentences

TriArm also manages all clinical development in the territory pursuant to a master services agreement between TriArm and Eden BioCell.

James Huang was the founder and serves as managing partner of Panacea Venture, which is an investor in TriArm.

James Huang was the founder and serves as managing

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

partner of Panacea Venture, which is an investor in TriArm.

Huang is the Chair of the Company's board of directors and has been a director since July 2020.

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

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.

For the three and nine months ended September 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.

In April 2022, the Company modified its real estate lease agreement executed on December 15, 2020 with MD Anderson for office space in Houston, which 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 recorded on the lease modification during the three months ended June 30, 2022.

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

In June 2022, the Company executed an agreement to sub-sublease 4,772 square feet of subleased office space in Boston.

The term of the sub-sublease is from July 1, 2022 to June 30, 2025 and provides the sub-subtenant with an option to extend through to July 31, 2026 .

For the three and nine months ended September 30, 2022, the Company recognized $ 44 thousand in lease income, which is classified within other income (expense), net in the statement of operations.

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.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

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.

5 unchanged sentences

In October 2020, the Company entered into an amendment to the License Agreement relating to the transfer of certain materials and PGEN’s obligations to provide transition assistance relating to the IL-12 products.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

License Agreement and 2015 Research and Development Agreement —The University of Texas MD Anderson Cancer Center

16 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.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

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 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.

3 unchanged sentences

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

The aggregate potential benchmark payments are $ 36.5 million, of which only $ 3.0 million will be due prior to the first marketing approval of the Company's TCR products.

The aggregate potential benchmark payments are $ 36.5 million, of which only $ 3.0 million will be due prior to the first marketing

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

approval of the Company's TCR products.

The royalty rates and benchmark payments owed to MD Anderson may be reduced upon the occurrence of certain events.

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 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.

For the three months ended September 30, 2022, the Company incurred clinical expenses of $ 0.3 million from MD Anderson related to this agreement compared to $ 0 for the three months ended September 30, 2021.

For the nine months ended September 30, 2022, the Company incurred clinical expenses of $ 0.7 million from MD Anderson related to this agreement compared to $ 0 for the nine months ended September 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 June 30, 2022, the milestones have not been met.

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

License Agreement with the NCI

6 unchanged sentences

Of such payments, the aggregate potential benchmark payments are $ 4.3 million, of which aggregate payments of $ 3.0 million are due only after marketing approval in the United States or in Europe, Japan, Australia, China or India.

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.

The first benchmark payment of $ 0.1 million was 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 nine months ended September 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

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.

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.

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

4 unchanged sentences

(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.

For the three months ended September 30, 2022, the Company recognized $ 0.1 million in license payments to the NCI under this agreement, compared to $ 0.3 million for the three months ended September 30, 2021.

For the nine months ended September 30, 2022,

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

the Company recognized $ 0.5 million in license payments to the NCI under this agreement, compared to $ 0.6 million for the nine months ended September 30, 2021.

Cooperative Research and Development Agreement (CRADA) with the NCI

23 unchanged sentences

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

The Company did no t record expenses under the CRADA for the three and nine months ended September 30, 2022, as compared to $ 0 for the three months ended September 30, 2021 and $ 1.3 million for the nine months ended September 30, 2021.

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

3 unchanged sentences

The class of water-based organic arsenicals includes darinaparsin.

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.

Under the terms of the agreement, the Company may be required to make additional payments to the Licensors upon achievement of certain 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 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.

During the three and nine months ended September 30, 2022, $ 2.5 million was expensed as a one-time milestone payment under the terms of the agreement, compared to $ 0.1 million for the three and nine months ended September 30, 2021.

During the three and nine months ended September 30, 2022 and 2021, the Company did no t incur royalty expenses on sales under this agreement.

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

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 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.

("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 (as so amended, the "Solasia License and Collaboration Agreement").

Pursuant to the Solasia 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.

Solasia will be responsible for all costs related to the development, manufacturing and commercialization of darinaparsin.

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 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.

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

In June 2022, Solasia announced that darinaparsin had been approved from relapsed or refractory Peripheral T-Cell Lymphoma by the Ministry of Health, Labor and Welfare in Japan.

During the three and nine months ended September 30, 2022, the Company recorded $2.9 million of collaboration revenue under the Solasia License and Collaboration Agreement primarily related to Solasia's achievement of certain sales-based milestones in Japan.

During the three and nine months ended September 30, 2021, the Company recorded $ 0.4 million of collaboration revenue under the Solasia License and Collaboration Agreement.

During the three and nine months ended September 30, 2022 and 2021, the Company did no t record royalty revenues on net sales of darinaparsin under this agreement.

Stock-Based Compensation

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

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(in thousands)

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Stock-based compensation expense

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,

The Company granted an aggregate of 1,275,000 stock options during the three months ended September 30, 2022, with a weighted-average grant date fair value of $ 1.52 per share, and granted an aggregate of 4,667,500 stock options during the nine months ended September 30, 2022, with a weighted-average grant date fair value of $ 0.67 per share.

The Company granted an aggregate of 2,755,000 stock options during the three months ended September 30, 2021, with a weighted-average grant date fair value of $ 1.08 per share, and granted an aggregate of 7,150,438 stock options during the nine months ended September 30, 2021, with a weighted-average grant date fair value of $ 1.91 per share.

For the three and nine months ended September 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 September 30,

For the Nine Months Ended September 30,

Risk-free interest rate

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1.63 –

0.50 –

Expected life in years

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74.49 - 85.89 %

72.53 - 74.80 %

Expected dividend yield

Stock option activity under the Company’s stock option plans for the nine months ended September 30, 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, June 30, 2022

Options exercisable, June 30, 2022

Outstanding, September 30, 2022

Options exercisable, September 30, 2022

Options exercisable, December 31, 2021

Options available for future grant

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

Options available for future grant, September 30, 2022

At September 30, 2022, total unrecognized compensation costs related to unvested stock options outstanding amounted to $ 7.1 million.

The cost is expected to be recognized over a weighted-average period of 2.01 years.

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

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

Number of Shares

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Unvested, December 31, 2021

Unvested, June 30, 2022

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

Unvested, September 30, 2022

At September 30, 2022, total unrecognized compensation costs related to unvested restricted stock outstanding amounted to $ 1.2 million.

The cost is expected to be recognized over a weighted-average period of 1.83 years.

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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 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

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

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

Refer to Note 4 - Debt .

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.

In connection with the Loan and Security Agreement, the Company issued SVB warrants to purchase 432,844 shares of common stock with an exercise

Alaunos Therapeutics, Inc.

NOTES TO FINANCIAL STATEMENTS

price of $2.22 per share.

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

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

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

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

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

Subsequent Events

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.

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.

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 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 early data in the third quarter of 2022.

In collaboration with the MD Anderson Cancer Center, or MD Anderson, we are currently enrolling and treating patients for a Phase 1/2 clinical trial evaluating 10 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.

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

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.

For the nine months ended September 30, 2022, we had a net loss of $28.6 million, and as of September 30, 2022, we have incurred approximately $871.5 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 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 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.

Our mbIL-15 program is designed to augment the function of TCR-T cells by co-expression of a proprietary potentially more potent mbIL-15.

In this preclinical study, we observed that mbIL-15 TCR-T cells specifically targeted and killed tumors expressing matching neoantigen and HLAs with negligible off-target effects.

Importantly, mbIL-15 seems to enhance the survival and persistence of TCR-T cells cultured in the absence of exogenous cytokine support.

The persisting mbIL-15 TCR-T cells were observed to exhibit a preponderance of long-lived T stem-cell memory cells that were capable to giving rise to effector T cell subsets upon in vitro restimulation.

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.

TCR-T Library Phase 1/2 Trial

We have seen encouraging early clinical safety, persistence and efficacy data in our first-in-human Sleeping Beauty TCR-T Library Phase 1/2 Trial that is actively enrolling patients with solid tumor cancers at MD Anderson Cancer Center.

We presented information on the first two patients treated in September 2022 at the CRI-ENCI-AACR International Cancer Immunotherapy Conference, or CICON.

We continue to perform translational assessments to assess the biological activity of our TCR-T cells in the first two patients.

We believe that these data provide early clinical validation of the potential of Sleeping Beauty TCR-T cell therapy in high value indications with significant unmet need.

Key takeaways from the clinical experience to date are:

Patients 1 and 2 demonstrated manageable safety profiles with no dose limiting toxicities (DLTs) or immune effector cell-associated neurotoxicity syndrome (ICANS);

Persistence of the TCR-T cells were evident in both patients.

Patient 1 had persistence at 24 weeks with approximately 30% of the patient's total CD3+ T cells comprising TCR-T cells in peripheral blood after treatment with KRAS-G12D/HLA-A*11:01 mutation-specific TCR-T cells at dose level 1 (9x10 9 cells).

Patient 2 had persistence at 12 weeks with approximately 20% of the patient's total CD3+ T cells comprising TCR-T cells in peripheral blood after treatment with TP53-R175H/HLA-A*02:01 mutation-specific TCR-T cells at dose level 2 (64x10 9 cells);

Demonstrating six month progression-free survival, Patient 1 had best overall response of objective, partial response with regression of greater than 50% of target lesions at 12 weeks post-cell therapy.

Patient 2 had best overall response of stable disease at six weeks with 12 week progression-free survival.

Progressive disease was observed in Patient 1 and Patient 2 at week 24 and week 12, respectively, and each patient subsequently went off study;

The targeted mutations, KRAS-G12D and TP53-R175H, were detected in progressing tumor biopsies suggesting no antigen loss;

Tumor homing was observed in Patient 1 with infiltration of both CD4 and CD8 TCR-T cells six months post-TCR-T cell therapy.

To our knowledge, achievement of an objective clinical response resulting from treatment with KRAS-G12D and HLA-A*11:01 specific TCR-T cells has not been reported until Patient 1 in our TCR-T Library Phase 1/2 Trial.

Patient 1’s infusion product was high quality with 97.3% viability, 99.7% CD3+ purity and 95.2% TCR positivity.

Patient 1’s target lesions were reduced compared to baseline by 46% at six weeks, 51% at 12 weeks and 46% at 24 weeks.

At six months following treatment, an elective tumor biopsy of non-measurable disease in the right lung showed continued presence of tumor cells, KRAS-G12D mutation and HLA-A*11:01 allele which was corroborated by another elective scan at seven months.

Patient 1 is now off study.

Scans of Patient 1’s target lesions suggest the depth of the clinical response with evidence of durable and complete resolution of the right lower lobe target lesion (red circle) and non-measurable lymphogenic spread (orange circle) through week 24 (Image A) and reduction in the size of the three target lesions.

Similar sustained reduction of the right upper lobe lesion (red circle) was observed through week 24 (Image B).

The hilar lymph node (red circles) and non-measurable right lung disease (orange circle) appear to have reduced in size at week 24 compared to baseline measurements (Image C).

Measurements of Patient 1's lesions are provided at Table D.

Patient 2's treatment was the first-in-human Sleeping Beauty TCR-T cell therapy targeting TP53 hotspot mutations and was well tolerated.

The TCR-T cells demonstrated persistence and the patient showed signs of clinical efficacy.

The same TCR used by the NCI to treat breast cancer, which resulted in a 6-month confirmed, objective partial response, was used to treat Patient 2.

Patient 2 received highly pure TCR-T cells (92.5% viability, 99% CD3+ purity, and 92% TCR positivity).

Reduction of target lesions by 15% from baseline was observed at six weeks post-infusion, but we observed 21.8% growth of lesions from the week six measurements and appearance of new liver and lung metastases at week 12 signaled progressive disease in Patient 2, who is now off study.

Lesion measurement data for Patient 2 are available at Table E.

We anticipate treating our next patient before the end of 2022 and presenting an update on our TCR-T Library Phase 1/2 Trial in 2023.

We intend to file an IND amendment to incorporate cryopreserved TCR-T cells in our clinical protocol by the end of 2022.

This process improvement will also shorten the manufacturing time from 30 days to 26 days.

Our IND amendment will also include two new TCRs, expanding our clinical library and further increasing the addressable market.

Three of these 10 TCRs already in our clinical library have been associated with confirmed partial responses in a clinical setting, giving us great confidence in the power of TCRs to treat solid tumors.

We have also updated our standard operating procedures to allow for simultaneous manufacture of two product candidates in our cGMP suite.

We have increased our existing manufacturing capacity to produce two products simultaneously.

mbIL-15 Program

We are continuing to advance our mbIL-15 program towards an IND filing in the second half of 2023 and believe that this program has the potential to increase the survival of TCR-T cells in the harsh tumor microenvironment and deepen clinical responses.

Solasia License and Collaboration Agreement

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.

During the third quarter of 2022, the Company recorded $2.9 million of collaboration revenue under the Solasia License and Collaboration Agreement primarily related to Solasia's achievement of certain sales-based milestones in Japan.

Under the terms of a patent and technology license agreement with MD Anderson and the Texas A&M University System, following Solasia's achievement of sales-based milestones, the Company also recorded a one-time $2.5 million expense during the third quarter of 2022 to MD Anderson.

Financial Overview

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Other Income (Expense)

Other income (expense) consists primarily of interest expense associated with our Amended Loan and Security Agreement, as defined below.

Other income (expense) consists of interest expense associated with our Amended Loan and Security Agreement, as defined below, and sublease income, which started accruing on July 1, 2022.

Overview of Results of Operations

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

Three and Nine Months Ended September 30, 2022 Compared to Three and Nine Months Ended September 30, 2021

Collaboration Revenue

Collaboration revenue during the three and nine months ended September 30, 2022 and 2021 was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

($ in thousands)

Collaboration revenue

Collaboration revenue during the three and nine months ended September 30, 2022 was $2.9 million as compared to $0.4 million during the three and nine months ended September 30, 2021, due to revenue earned under the Solasia License and Collaboration Agreement.

Research and Development Expenses

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,

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

Three Months Ended September 30,

Nine Months Ended September 30,

($ in thousands)

Research and development expenses

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.

Research and development expenses for the three months ended September 30, 2022 decreased by $6.6 million when compared to the three months ended September 30, 2021 primarily due to a decrease in program-related costs of $3.6 million, mainly related to the winding down of our IL-12 and CAR-T programs, a $4.9 million decrease in employee related expenses due to our reduced headcount, including a $2.2 million restructuring charge in the third quarter of 2021, following our strategic restructuring event, a $0.4 million decrease in consulting expenses due to reduced use of consultants and a $0.2 million decrease in facilities costs due to the partial termination of one of our leases.

These decreases were partially offset by a one-time $2.5 million expense to MD Anderson under the terms of our patent and technology license agreement.

Research and development expenses for the nine months ended September 30, 2022 decreased by $22.0 million when compared to the nine months ended September 30, 2021 primarily due to a decrease in program-related costs of $8.4 million, mainly related to the winding down of our IL-12 and CAR-T programs, a $14.7 million decrease in employee related expenses due to our reduced headcount, including a $2.2 million restructuring charge in the third quarter of 2021, following our strategic restructuring event, a $1.0 million decrease in consulting expenses due to reduced use of consultants and a $0.2 million decrease in facilities costs due to the partial termination of one of our leases.

These decreases were partially offset by a one-time $2.5 million expense to MD Anderson under the terms of our patent and technology license agreement.

For the three and nine months ended September 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 and six months ended June 30, 2022 and 2021 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

($ in thousands)

General and administrative 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.

General and administrative expenses for the three months ended September 30, 2022 decreased by $4.9 million as compared to the three months ended September 30, 2021, primarily due to a $3.2 million decrease in employee related expenses due to our reduced headcount, including a $1.3 million restructuring charge in the third quarter of 2021, following our strategic restructuring event and a $1.7 million decrease in consulting and professional services expenses due to lower legal costs and reduced use of consultants.

General and administrative expenses for the nine months ended September 30, 2022 decreased by $15.3 million as compared to the nine months ended September 30, 2021, primarily due to a $12.4 million decrease in employee related expenses due to our reduced headcount, including a $1.3 million restructuring charge in the third quarter of 2021, following our strategic restructuring event, a $2.8 million decrease in consulting and professional services expenses due to lower legal costs and reduced use of consultants and a $0.2 million decrease in facilities-related costs due to the expiration of two of our leases during 2021.

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,

Gain on lease modifications during the three and nine months ended September 30, 2022 and 2021 was as follows:

Three Months Ended September 30,

Nine Months Ended September 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.

There was no gain on lease modification during the three months ended September 30, 2022 and 2021.

Gain on lease modification during the nine months ended September 30, 2022 was $0.1 million as compared to $0 during the nine months ended September 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 and six months ended June 30, 2022 and 2021 was as follows:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

($ in thousands)

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Other income (expense), net

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.

Other income (expense), net for the three months ended September 30, 2022 increased by $0.2 million as compared to the three months ended September 30, 2021, primarily due to $0.4 million of interest expense associated with our Amended Loan and Security Agreement, partially offset by $0.2 million of interest income.

Other income (expense), net for the nine months ended September 30, 2022 increased by $1.5 million as compared to the nine months ended September 30, 2021, primarily due to $1.8 million of interest expense associated with our Amended Loan and Security Agreement, partially offset by $0.3 million of interest income.

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 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.

Through September 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.

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.

Given our current development plans and cash management efforts, we anticipate that our cash resources will be sufficient to fund operations into the second quarter of 2023. Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing, as to which no assurances can be given.

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

Our ability to continue operations after our current cash resources are exhausted depends on our ability to obtain additional financing, as to which no assurances can be given.

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

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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”

During the three and nine months ended September 30, 2022, there were no 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, 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 (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").

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").

Under the Amended Loan and Security Agreement, the SVB Facility will mature on August 1, 2023;

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

As of September 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%.

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.

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

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 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, 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 Amended Loan and Security Agreement provided for an interest-only period which extended through August 31, 2022, as compared to March 31, 2022 in the Loan and Security Agreement.

On or prior to August 31, 2022, we had not (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, nor (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”), and therefore, the interest-only period was not extended beyond August 31, 2022.

Commencing on September 1, 2022, aggregate outstanding borrowings are repayable in twelve consecutive, equal monthly installments of principal plus accrued interest.

All outstanding obligations under the Amended Loan and Security Agreement are due and payable on August 1, 2023.

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, subject to a prepayment premium of the amount being prepaid, ranging from 1.00% to 2.00%, of the SVB Facility, each such prepayment to be at least $5.0 million plus all accrued and unpaid interest on the portion being prepaid.

As a result of not achieving the Amended Milestones on or prior to August 31, 2022, 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.

As of September 30, 2022, we have collateralized $13.9 million, which is classified as restricted cash on the balance sheet.

So long as no event of default has occurred and subject to certain other terms related to the remaining outstanding balance under the SVB Facility being satisfied, $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.

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).

In addition, the Amended Loan and Security Agreement contains customary representations, warranties, events of default and covenants.

In connection with our entry into the Loan and Security Agreement, we issued to SVB warrants to purchase (i) up to 432,844 shares of our common stock, in the aggregate, and (ii) up to an additional 432,842 shares of Common Stock, in the aggregate, in the event we achieve certain clinical milestones, in each case at an exercise price per share of $2.22.

In connection with our entry into the Loan and Security Agreement, we issued to SVB warrants to purchase (i) up to 432,844 shares of our common stock, in the aggregate, and (ii) up to an additional 432,842 shares of Common Stock, in the aggregate, in the event we achieved certain clinical milestones, in each case at an exercise price per share of $2.22.

In connection with our entry into the Amendment, we amended and restated the warrants issued to SVB.

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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 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,

Interest expense was $0.8 million for the three months ended September 30, 2022 and was $2.3 million for the nine months ended September 30, 2022.

The fair value of the Amended Loan and Security Agreement as of September 30, 2022 approximates its face value.

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

Nine Months Ended September 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 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.

Net cash used in operating activities for the nine months ended September 30, 2022 was $22.1 million, as compared to net cash used in operating activities of $46.3 million for the nine months ended September 30, 2021.

The net cash used in operating activities for the nine months ended September 30, 2022 was primarily due to our net loss of $28.6 million, adjusted for $7.5 million of non-cash items such as depreciation, stock-based compensation and a decrease in the carrying amount of right-of-use lease assets, a $2.4 million decrease in lease liabilities, a $1.8 million increase in accounts receivable, offset by an increase in accounts payable of $0.6 million, a $1.5 million increase in accrued expenses, and a decrease to prepaid expenses and other assets of $0.9 million.

Net cash used in investing activities was $0.1 million for the nine months ended September 30, 2022, compared to $3.0 million for the nine months ended September 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.

Net cash used in financing activities for the nine months ended September 30, 2022 was $2.1 million, primarily related to the repayment of long-term debt.

Net cash provided by financing activities during the nine months ended September 30, 2021 was $26.0 million, related primarily to proceeds from the issuance of long-term debt and 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 June 30, 2022, our accumulated deficit was approximately $862.6 million.

As of September 30, 2022, our accumulated deficit was approximately $871.5 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 June 30, 2022, we had approximately $60.0 million of cash and cash equivalents.

As of September 30, 2022, we had approximately $37.8 million of cash and cash equivalents and $13.9 million of restricted cash related to the Amended Loan and Security Agreement.

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

Working capital, which excludes restricted cash, as of September 30, 2022 was $8.7 million, consisting of $41.6 million in current assets and $32.9 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 21, 2015 and April 15, 2016, we renewed the sublease for our office space in Boston through August 31, 2021.

On April 22, 2021, we extended our lease for a portion of office space currently held at our office in Boston.

The renewal of the portion of our office space was originally set to expire on August 31, 2021 but was extended through August 31, 2026.

On April 22, 2021, we extended our sublease for a portion of office space at our office in Boston through August 31, 2026.

On March 12, 2019, we entered into a lease agreement for office space in Houston at MD Anderson through April 2021.

On October 15, 2019, we entered into another lease agreement for additional office and laboratory space in Houston through February 2027.

On April 7, 2020, we entered into amendments to our existing lease to lease additional office and laboratory space in Houston through February 2027.

April 7, 2020, we entered into amendments to our existing lease to lease additional office and laboratory space in Houston through February 2027.

In June and September 2020, we entered into short-term leases in Houston for additional office and laboratory space.

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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.

A gain of $0.1 million was also recorded on the lease modification in the second quarter of 2022.

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 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.

For the three months ended September 30, 2022 and 2021, we recognized $0 related to royalty payments under this agreement, and we recognized $0.3 million in royalty payments under this agreement for the nine months ended September 30, 2022 and 2021.

As of September 30, 2022, we have paid a total of $0.5 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.

Of such payments, the aggregate potential benchmark payments are $4.3 million, of which aggregate payments of $3.0 million are due only after marketing approval in the United States or in Europe, Japan, Australia, China or India.

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.

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 first benchmark payment of $0.1 million was 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.

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

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.

Payments totaling $0 and $0.1 million were made during the three and nine months ended September 30, 2022 related to the first benchmark payment, as compared to $0 during the three and nine months ended September 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 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.

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 License Agreement and we have also agreed to reimburse certain historical costs of PGEN up to $1.0 million.

For the three and nine months ended September 30, 2022 and September 30, 2021, we have made licensing fee payments in accordance with the terms of the License 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.

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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 and six months ended June 30, 2022.

We reviewed our policies and determined that those policies remain our most critical accounting policies for the three and nine months ended September 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