# LENZ Therapeutics, Inc.: Form 10-Q for the period ended Sep 30, 2023 - Company: [LENZ Therapeutics, Inc.](/companies/lenz.md) (CIK 1815776) - Form: 10-Q - Filed: 2023-11-13 - Accepted by EDGAR: Nov 13, 2023, 16:10 ET - Period: 2023-09-30 - Accession: 0000950170-23-062942 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1815776/000095017023062942/grph-20230930.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1815776/000095017023062942/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2023-09-30. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Research and development | 3 months, 2023-07-01 to 2023-09-30 | $2.4m | us-gaap:ResearchAndDevelopmentExpense | | Research and development | 9 months, 2023-01-01 to 2023-09-30 | $32.1m | us-gaap:ResearchAndDevelopmentExpense | | Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$25.0m | us-gaap:OperatingIncomeLoss | | Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$109.6m | us-gaap:OperatingIncomeLoss | | Net income | 3 months, 2023-07-01 to 2023-09-30 | −$22.5m | us-gaap:NetIncomeLoss | | Net income | 9 months, 2023-01-01 to 2023-09-30 | −$101.7m | us-gaap:NetIncomeLoss | | Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.39 | us-gaap:EarningsPerShareDiluted | | Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.79 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.39 | us-gaap:EarningsPerShareBasic | | Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$1.79 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 57,257,241 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 56,748,995 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$44.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $10.8m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment | | Cash and equivalents | at 2023-09-30 | $183.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2023-09-30 | $238.8m | us-gaap:AssetsCurrent | | Total assets | at 2023-09-30 | $266.2m | us-gaap:Assets | | Current liabilities | at 2023-09-30 | $12.5m | us-gaap:LiabilitiesCurrent | | Total liabilities | at 2023-09-30 | $62.2m | us-gaap:Liabilities | | Shareholders' equity | at 2023-09-30 | $204.0m | us-gaap:StockholdersEquity | ## Management's discussion and analysis As filed, 61,111 characters. *You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q, and the financial statements and accompanying notes, as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2022. Certain of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the section entitled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. You should carefully read the section entitled “Risk Factors” to gain an understanding of the material and other risks that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking Statements.”* ### Overview We have historically been a clinical-stage, next-generation gene editing company. In January 2023, we announced a voluntary pause of our Phase 1/2 CEDAR study of nulabeglogene autogedtemcel (nula-cel), for sickle cell disease ("SCD") due to a serious adverse event in the first patient dosed, which we concluded is likely related to study treatment. Nula-cel was being developed as a highly differentiated approach to treating SCD, with the potential to directly correct the mutation that causes SCD and restore normal adult hemoglobin expression. In February 2023, we announced our decision to discontinue the development of nula-cel and initiate a process to explore strategic alternatives. As a result of this decision, we announced a corporate restructuring that resulted in an approximately 71.2% reduction in our workforce. We also disclosed our intention to continue research activities associated with our pre-clinical non-genotoxic conditioning program, with the goal of advancing toward one or more potential development candidates. As part of the corporate restructuring, we also elected not to utilize the portion of our facilities space subject to our lease agreement with Bayside Area Development for purposes of our own operations and intend to sublease the vacant space to recover a portion of the total cost. In August 2023, we entered into a license and option agreement (the “LOA”), pursuant to which we granted a third-party an option to acquire certain of our technology and intellectual property related to our nula-cel program and related pre-clinical platform assets. We also entered into an asset purchase agreement pursuant to which we transferred to another third-party our pre-clinical non-genotoxic conditioning program, including technology and intellectual property, while we continued to explore strategic alternatives. On September 12, 2023, we entered into an amendment to the LOA with such counterparty, under which we agreed to assign certain contracts to such counterparty prior to exercise of the option. In October 2023, we entered into a sublease for a portion of the facility leased to us by Bayside Area Development, as well as an amendment to the master lease, which provided for an accelerated termination of the lease and a release of liabilities under the lease and the new sublease upon payment of a lump sum at the time of signing. Following this transaction, we are no longer obligated for any rent payments under our lease with Bayside Area Development. We continue to explore strategic alternatives, but there can be no assurance that the strategic review process will result in us pursuing such a transaction(s), or that any transaction(s), if pursued, will be completed on terms favorable to us and our stockholders in the existing entity or any possible entity that results from a combination of entities. If the strategic review process is unsuccessful, our board of directors may decide to pursue a dissolution and liquidation. We were incorporated in Ontario, Canada in June 2017 as Longbow Therapeutics Inc. and were reincorporated in the State of Delaware in October 2019. In February 2020, we changed our name to Integral Medicines, Inc. and in August 2020, we changed our name to Graphite Bio, Inc. Research and development of our initial technology ceased at the end of 2018 and we did not have any significant operations or any research and development activities in 2019. In March 2020, we identified new gene editing technology which we sought to further develop, and we licensed the related intellectual property rights from The Board of Trustees of the Leland Stanford Junior University (Stanford) in December 2020. Since our inception in June 2017, we have devoted substantially all of our resources to performing research and development, enabling manufacturing activities in support of our product development efforts, hiring personnel, acquiring and developing our technology and product candidates, organizing and staffing our Company, performing business planning, establishing our intellectual property portfolio, raising capital and providing general and administrative support for these activities. We have had one product candidate that has an accepted IND, which has been transferred to a third party in connection with our execution of the LOA. All of our other product candidates were in preclinical development, and we do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations primarily with an aggregate of $197.7 million in aggregate gross proceeds from the sales of our redeemable convertible preferred stock and the issuance of convertible notes. In June and July 2021, we completed our initial public offering (“IPO”) and issued 16,100,000 shares of our common stock for $17.00 a share with a total net proceeds of approximately $251.3 million, and total underwriting costs of $19.1 million and issuance costs of $3.2 million. We will continue to require additional capital to fund our operations for the foreseeable future and ensure we have adequate personnel, pay for accounting, audit, legal, and consulting services, and pay costs associated with maintaining compliance with Nasdaq listing rules and the requirements of the SEC, director and officer liability insurance and other expenses associated with operating as a public company. Accordingly, until such time as we can generate significant revenue from product sales, if ever, we expect to finance our cash needs through public or private equity or debt financings, and collaborations, strategic alliances and licensing arrangements with third parties. We have incurred significant operating losses since inception. As of September 30, 2023, we had cash, cash equivalents and marketable securities of $234.0 million and an accumulated deficit of $344.1 million. We expect to continue to incur substantial losses for the foreseeable future, and our transition to profitability will depend upon successful development, approval and commercialization of product candidates and upon achievement of sufficient revenues to support our cost structure. We are not presently developing any product candidates, and if we resume any such development activities, we will not generate revenue from product sales unless and until we successfully complete preclinical and clinical development and obtain regulatory approval for such product candidates. We may never achieve profitability, and if we resume development of product candidates, we will need to continue to raise additional capital. Based upon our current operating plan, we estimate that our cash, cash equivalents and investments in marketable securities as of September 30, 2023 will be sufficient to fund our operating expenses and capital expenditure requirements for at least the next 12 months. We expect to continue to incur significant expenses in connection with the process of evaluating our strategic alternatives. There can be no assurance, however, that we will be able to successfully consummate any particular strategic transaction. The process of continuing to evaluate strategic transactions may be very costly, time-consuming and complex, and we have incurred, and may in the future incur, significant costs related to these processes, such as legal, accounting and advisory fees and expenses and other related charges. A considerable portion of these costs will be incurred regardless of whether any particular course of action is implemented or transaction is completed. Any such expenses will decrease the remaining cash available for use in our business. In addition, any strategic business combination or other transactions that we may consummate in the future could have a variety of negative consequences and we may implement a course of action or consummate a transaction that yields unexpected results that adversely affects our business and decreases the remaining cash available for use in our business or the execution of our strategic plan. There can be no assurances that any particular course of action, business arrangement, transaction, or series of transactions, will be pursued, successfully consummated, lead to increased stockholder value or achieve the anticipated results. Any failure of such potential transaction to achieve the anticipated results could significantly impair our ability to enter into any future strategic transactions and may significantly diminish or delay any future distributions to our stockholders. Should we resume development of product candidates, our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more product candidates. In addition, we will incur substantial research and developments costs and other expenditures to develop such product candidates, particularly as we: - advance any product candidates through preclinical studies and clinical trials; - manufacture supplies for our preclinical studies and clinical trials; - seek marketing approval for product candidates that successfully complete clinical development, if any; - maintain compliance with applicable regulatory requirements; - develop and scale up our capabilities to support preclinical activities and clinical trials for product candidates and commercialization of product candidates for which we obtain marketing approval, if any; - retain key personnel to continue our go-forward operations - operate as a public company; - explore and execute on our strategic alternative process or a potential strategic transaction; - implement and maintain operational, financial and management systems; and - obtain, maintain, expand and protect our portfolio of intellectual property rights. We have relied and may in the future rely on third parties in the conduct of our preclinical studies and clinical trials and for manufacturing and supply of our product candidates if we resume any development activities. We have no internal manufacturing capabilities, and we may continue to rely on third parties for our preclinical and clinical trial materials, of which the main suppliers are single-source suppliers. Given our stage of development, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, if we obtain regulatory approval for any future product candidates, we also expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from sales of any product for which we receive regulatory approval, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and may be forced to reduce our operations. ### Stanford Exclusive License Agreement and Option Agreement In December 2020, we entered into an exclusive license agreement (the “License Agreement”), with The Board of Trustees of the Leland Stanford Junior University (Stanford), pursuant to which Stanford granted us a worldwide license to specified technology and patent rights to develop, manufacture and commercialize human prophylactic and therapeutic products. Other than with respect to specified, broadly applicable assays and procedures and subject to retained rights by Stanford, the license is exclusive with respect to human prophylactic and therapeutic products for the treatment of SCD, XSCID and beta thalassemia. The license is non-exclusive with respect to those broadly applicable assays and procedures and with respect to all human prophylactic and therapeutic products other than for the treatment of SCD, XSCID and beta thalassemia. To date, pursuant to the License Agreement, we have paid an upfront license fee to Stanford of $50.0 thousand and issued to Stanford and its designees an aggregate of approximately 0.6 million shares of our common stock. The acquisition of the exclusive license, including patent rights and know-how, and clinical supplies was accounted for as an asset acquisition and as the acquired technology and inventories did not have an alternative use, the total consideration of $2.8 million was recorded as research and development expense in the statements of operations and comprehensive loss for the year ended December 31, 2020. We are obligated to pay Stanford an annual license maintenance fee on each anniversary of the effective date of the License Agreement. The annual license maintenance fee initially is $5.0 thousand and will increase to $50.0 thousand in three increments over the first seven anniversaries of the effective date of the License Agreement. After the first commercial sale of a product falling within the scope of the license (the “Licensed Product”), the annual license maintenance fee is $200.0 thousand. In May 2021, we issued 640,861 shares of our common stock in connection with the License Agreement. Subsequently, in June 2021, related to the License Agreement, we repurchased 624,845 shares of our common stock from investors and founders. We are required to share with Stanford a portion of any non-royalty income we receive from sublicensing the licensed patent rights or technology, subject to specified exclusions. With respect to sublicenses granted to products for the treatment of SCD, XSCID and beta thalassemia, the portion of sublicense income we must share with Stanford varies by indication and declines from between a mid-teen to a second quartile double-digit percentage prior to the filing of an IND to between a high single-digit to very low double-digit percentage upon achievement of a specified clinical milestone. With respect to sublicenses granted under the licensed technology rights and not licensed patent rights, the portion of sublicense income shared with Stanford declines from between a mid-single-digit and very low double-digit percentage prior to the filing of an IND to a low single-digit percentage after filing of an IND. We are obligated to make payments to Stanford with respect to each Licensed Product of up to an aggregate of $12.8 million upon the achievement of certain development, regulatory and commercial milestones. Such amounts are payable only once upon the first occurrence of a particular milestone event with respect to each Licensed Product and only once with respect to each new indication covered by any of the Licensed Products. We also are obligated to pay Stanford low single-digit royalties based on worldwide annual net sales of any Licensed Product, subject to specified reductions. We will be obligated to continue to pay royalties on a Licensed Product-by-Licensed Product and country-by-country basis, until the latest of (i) the expiration of the last valid claim under the licensed patents that covers the sale or manufacture of such Licensed Product in such country, (ii) the expiration of any period of regulatory exclusivity with respect to such Licensed Product in such country or (iii) the expiration of ten years after the first commercial sale of such Licensed Product in such country. The term of the License Agreement expires on the later of (i) the expiration of the last patent or abandonment of the last patent application within the license patent rights or (ii) the expiration of all royalty terms with respect to Licensed Products. The License Agreement may be terminated by us at will or by Stanford if we remain in breach of the License Agreement following a cure period to remedy the breach. We are required to use diligent efforts to manufacture, market and sell Licensed Products for the treatment of each of SCD, XSCID and beta thalassemia. In addition, we are required to achieve specified milestones by specified dates with respect to Licensed Products for the treatment of each of SCD, XSCID and beta thalassemia. If we fail to satisfy our diligence obligations, Stanford may terminate the License Agreement for our breach. For more details on the License Agreement, please see Note 6 of the Notes to Condensed Financial Statements. In January 2021, we entered into an option agreement (the “First Option Agreement”), with Stanford, pursuant to which Stanford granted us the right to obtain a license to specified patent rights relating to human prophylactic and therapeutic products. We may exercise the option in whole or in part to obtain a license under one or more of the optioned patent rights. Subject to our exercise of the option under the First Option Agreement and our execution of an amendment to the License Agreement that incorporates the optioned patent rights and any optioned technology, we have agreed to issue to Stanford 132,137 shares of our common stock and pay a license execution fee of $10.0 thousand. The term of the First Option Agreement expires 18 months after its effective date, subject to our right to extend such expiration date by up to an additional one year upon notice to Stanford and by another additional one year upon the reasonable agreement of Stanford. The First Option Agreement will terminate if the License Agreement terminates. On June 23, 2022, we exercised the right to extend the term of the First Option Agreement for an additional year. On June 6, 2023, we agreed to extend the term of the First Option Agreement for another additional year. As of September 30, 2023, we have not exercised the option and no fees have been paid under the First Option Agreement. In April 2021, we entered into an option agreement (the “Second Option Agreement”) with Stanford to negotiate the license for additional technologies from Stanford. Pursuant to the Second Option Agreement, we agreed to pay Stanford option fees in an aggregate amount of $30.0 thousand over the term of the option. On April 13, 2022, we entered into an amendment to the Second Option Agreement which extended the term for an additional year. On March 8, 2023, we terminated the Second Option Agreement without exercising the option to negotiate a license for additional technologies from Stanford. ### LCGM Service Agreement On August 30, 2021, we entered into a Master Manufacturing and Service Agreement with the Laboratory for Cell & Gene Medicine (“LCGM”) at Stanford (“LCGM MSA”). Pursuant to the LCGM MSA, LCGM will conduct clinical manufacturing, release testing, and product release for nula-cel in our Phase 1/2 CEDAR clinical trial to treat SCD. During 2021, we entered into various statements of work under the LCGM MSA under which we received technology transfer and related services for HBB Beta-Globin Gene Variant for SCD, manufacturing engineer test runs, the exclusive use of a manufacturing suite at the LCGM facility, and Phase 1/2 CEDAR clinical development and manufacturing of the HBB Variant for SCD. During the three months ended September 30, 2023, we did not recognize any research and development expense in connection with the LCGM MSA. We recognized $1.1 million during the nine months ended September 30, 2023. We recognized $1.3 million and $2.8 million during the three and nine months ended September 30, 2022, respectively, in research and development expense in connection with the LCGM MSA. As of September 30, 2023, we do not expect to incur any additional expenses associated with the LCGM MSA. ### IDT License Agreement On June 7, 2021, we entered into a License Agreement (the “IDT License Agreement”) with Integrated DNA Technologies, Inc. (IDT). Pursuant to the IDT License Agreement, IDT granted us and our affiliates a worldwide, non-exclusive, sublicensable license to research and develop products incorporating HiFi Cas9 protein variants for use in human therapeutic applications for SCD, XSCID and Gaucher disease (the “Field”) and a worldwide, exclusive, sublicensable license to commercialize such products in the Field. We have also been granted the right to expand the licensed Field to include human therapeutic applications in the additional fields of beta thalassemia disorder and lysosomal storage disorders upon the payment of an exercise fee in the amount of $0.5 million per additional field or $1.0 million for both additional fields. In consideration of the licenses and rights granted to us under the IDT License Agreement, we agreed to pay to IDT an upfront payment in the amount of $3.0 million and up to $5.3 million (or $8.8 million if we elect to expand the Field as described above to include both the beta thalassemia and lysosomal storage disorders fields) in total regulatory milestone payments. Each regulatory milestone payment is payable once on an indication-by-indication basis. In addition, we have agreed to pay IDT a low single-digit royalty on the net sales of products, subject to reductions in specified circumstances. The acquisition of the license was accounted for as an asset acquisition and as the acquired technology did not have an alternative use, the total consideration of $3.0 million was recorded as research and development expense in the statement of operations and comprehensive loss for the year ended December 31, 2021. During the nine months ended September 30, 2023, we have not recognized any research and development expense in connection with the IDT License Agreement. There are no milestones probable as of September 30, 2023; therefore, no milestone payments have been recognized in the nine months ended September 30, 2023. The IDT License Agreement remains in effect on a country-by-country and product-by-product basis until the expiration of the royalty term for such product in such jurisdiction. We and IDT each have the right to terminate the IDT License Agreement for the other party’s material breach of its obligations under the IDT License Agreement, subject to specified rights to cure. Additionally, we may terminate the IDT License Agreement for any reason upon written notice. As of September 30, 2023, we do not expect to incur any additional expenses associated with the IDT License Agreement. ### Sale of Non-Genotoxic Targeted Conditioning Technology Assets On August 1, 2023, we entered into an asset purchase agreement (the “APA”) with a third party pursuant to which we sold to the counterparty, concurrently with the execution of the APA, certain assets related to our non-genotoxic conditioning technology in exchange for upfront consideration of $0.5 million. Additional consideration included certain contingent milestone payments totaling up to approximately $1.0 million in the aggregate as well as royalties on net sales by the acquirer of certain products incorporating the acquired technology, potential fees upon the completion of certain transactions by the acquirer. The APA also provided for reimbursement of certain research and development amounts incurred prior to closing of approximately $0.6 million. The disposal of certain assets sold pursuant to the APA was accounted for as a deconsolidation of a subsidiary or group of assets in accordance with ASC 810. During the three and nine months ended September 30, 2023, we recognized a loss on disposal of $0.1 million, which was recorded in other income. We will record amounts related to the contingent milestone payments, royalties, and potential transaction fees when contingencies are resolved and amounts are due in accordance with ASC 450. No contingencies were resolved and recorded as of September 30, 2023. ### License and Option to Acquire Nula-Cel Assets On August 4, 2023, we entered into an LOA with a third party pursuant to which we exclusively licensed to the counterparty, and granted the counterparty, an option to acquire certain intellectual property and materials related to the Company’s nula-cel program and related pre-clinical platform assets. Exercise of the option is contingent on the counterparty timely achieving a financing milestone, and all rights to the intellectual property and materials will revert to us if the milestone is not achieved or if the counterparty elects not to exercise the option. In return for this license and option, we received an equity interest in the counterparty representing 20% of all outstanding shares on a fully diluted basis. As a result of the 20% equity interest, we have the ability to exert significant influence over the counterparty and account for the interest as an equity method investment. We record our proportionate share of investee’s equity in earnings or losses based on the most recently available financial information. The 20% equity interest in the counterparty had minimal value upon execution of the LOA and we did not record any amount related to the equity interest as of September 30, 2023. As of September 30, 2023, the counterparty has not achieved the financial milestone and does not have the right to exercise the option. ### Initial Public Offering In June and July 2021, we completed an initial public offering of our common stock. As part of the IPO, we issued and sold 16,100,000 shares of our common stock at a public offering price of $17.00 per share. In June and July 2021, we received net proceeds of approximately $251.3 million from the IPO, after deducting underwriting discounts and commissions of $19.1 million and offering costs of approximately $3.2 million. ### Components of Results of Operations ### Operating Expenses #### Research and Development Research and development costs consist primarily of external and internal costs incurred for our research activities and the development of our gene editing platform and associated rights which we licensed in December 2020. External costs include: - costs incurred under agreements with third-party CROs, CMOs and other third parties that conduct preclinical and clinical activities on our behalf and manufacture our product candidates; - costs associated with acquiring technology and intellectual property licenses that have no alternative future uses; and - other costs associated with our research and development programs, including laboratory materials and supplies and consulting fees. Internal costs include: - employee-related costs, including salaries, benefits and stock-based compensation expense, for our research and development personnel; and - facilities and other expenses incurred in connection with our research and development programs, including expenses for allocated rent and facilities maintenance, and depreciation and amortization. Research and development costs are expensed as incurred. Since inception, we have not tracked our internal indirect costs and external research and development costs by program. The intellectual property we licensed in late 2020 is fundamental to our platform and we did not focus on any specific programs. In the future, we expect to track research and development costs on a program by program basis as we identify the specific programs and product candidates to develop. During 2022 and 2021, we were eligible for a research and development tax credit. The tax incentive was available to us based on research and development activity within the United States and California during that year. These research and development tax incentives are recognized as a reduction to payroll tax expense when the right to receive has been attained and funds are collectible and are capped at $250.0 thousand per year. The process of conducting preclinical research is costly and time-consuming. We are unable to determine the duration and completion costs of our research projects or if, when and to what extent they will lead to product candidates and enter into clinical research. If we resume any development of product candidates, our future research and development costs may vary significantly based on factors such as: - the scope, rate of progress, expense and results of our clinical trials and our discovery and preclinical development activities; - the costs and timing of our CMC activities, including fulfilling GMP-related standards and compliance, and identifying and qualifying suppliers; - per patient clinical trial costs; - the number and duration of clinical trials required for approval of our product candidates; - the number of sites included in our clinical trials; - the countries in which the trials are conducted; - delays in adding a sufficient number of trial sites and recruiting suitable patients to participate in our clinical trials; - the number of patients that participate in the trials; - patient drop-out or discontinuation rates; - potential partial reimbursement from governmental agencies for our clinical activities; - potential additional safety monitoring requested by regulatory agencies; - the duration of patient participation in the trials and follow-up; - the cost and timing of manufacturing our product candidates; - the phase of development of our product candidates; - the efficacy and safety profile of our product candidates; the timing, receipt, and terms of any approvals from applicable regulatory authorities including the FDA and non-U.S. regulators; - maintaining a continued acceptable safety profile of our product candidates following approval, if any, of our product candidates; - significant and changing government regulation and regulatory guidance; - changes in the standard of care on which a clinical development plan was based, which may require new or additional trials; and - the extent to which we establish additional strategic collaborations or other arrangements. #### General and Administrative Expenses General and administrative expenses consist primarily of expenses related to employee-related costs, including salaries, benefits and stock-based compensation expense, for our executive, business development, finance and accounting, human resources and other administrative functions; legal services, including relating to intellectual property and corporate matters; accounting, auditing, consulting and tax services; insurance; and facility and other allocated costs not otherwise included in research and development expenses. We expect to continue to incur significant general and administrative expenses for the foreseeable future as we implement our restructuring plan, pursue potential strategic alternatives and conduct our operations generally. We also expect to continue to incur significant expenses associated with being a public company, including costs related to accounting, audit, legal, regulatory, and tax-related services associated with maintaining compliance with applicable Nasdaq and SEC requirements; director and officer insurance costs; and investor and public relations costs. #### Restructuring and Impairment Costs Restructuring and other charges consist primarily of costs incurred related to the corporate restructuring and the halting of research activities in the first quarter of 2023, including severance as well as lease termination, loss on disposal of property and equipment, and impairment of assets held for sale. #### Other Income (Expense), Net Interest and other income, net, consists of interest income and miscellaneous income and expense unrelated to our core operations. ### Results of Operations ### Three Months Ended September 30, 2023 and 2022 The following table summarizes our statements of operations and comprehensive loss for the respective periods (in thousands): | Operating expenses: | Three Months Ended September 30, 2023 | 2022 | | --- | ---: | ---: | | Research and development | $2,384 | $18,302 | | General and administrative | 11,294 | 7,852 | | Restructuring and impairment costs | 11,349 | — | | Total operating expenses | 25,027 | 26,154 | | Loss from operations | (25,027) | (26,154) | | Other income (expense), net: | | | | Interest income, net | 2,955 | 1,472 | | Other income, net | (413) | — | | Total other income (expense), net | 2,542 | 1,472 | | Net loss | $(22,485) | $(24,682) | | Unrealized gain (loss) on investments | 176 | (563) | | Comprehensive loss | $(22,309) | $(25,245) | ### Operating Expenses #### Research and Development Expenses Research and development expenses were $2.4 million for the three months ended September 30, 2023 compared to $18.3 million for the three months ended September 30, 2022, a decrease of $15.9 million. The decrease in research and development expenses was primarily attributable to a decrease of $8.6 million in clinical trial related activities and contract manufacturing activities for our clinical trials and drug supply, a decrease of $5.0 million in personnel costs, a decrease of $1.8 million in other research and development costs primarily related to facilities costs and lease expense, and a decrease of $0.5 million related to service agreements. #### General and Administrative Expenses General and administrative expenses were $11.3 million for the three months ended September 30, 2023 compared to $7.9 million for the three months ended September 30, 2022, an increase of $3.4 million. The increase in general and administrative expenses was comprised of an increase of $2.8 million related to facilities costs and lease expense, an increase of $0.3 million in personnel-related costs, including associated stock-based compensation expense, and an increase of $0.3 million in professional service agreements. #### Restructuring and Impairment Costs Restructuring and impairment costs for the three months ended September 30, 2023 consisted primarily of costs incurred related to the corporate restructuring, including $5.3 million related to the impairment and loss on disposal of property and equipment, $4.5 million related to severance expense incurred as part of the Restructuring Plan, and $1.4 million of non-cash impairment related to the decision not to utilize the South San Francisco lease. #### Other Income (Expense), Net The other income (expense), net for the three months ended September 30, 2023 and 2022 was comprised of income received from the asset purchase agreement, as well as interest income and income received from the sublease arrangement. ### Nine Months Ended September 30, 2023 and 2022 The following table summarizes our statements of operations and comprehensive loss for the respective periods (in thousands): | Operating expenses: | Nine Months Ended September 30, 2023 | 2022 | | --- | ---: | ---: | | Research and development | $32,136 | $54,325 | | General and administrative | 26,372 | 24,563 | | Restructuring and impairment costs | 51,128 | - | | Total operating expenses | 109,636 | 78,888 | | Loss from operations | (109,636) | (78,888) | | Other income (expense), net: | | | | Interest income, net | 8,387 | 2,435 | | Loss on disposal of assets | (71) | - | | Other income, net | (413) | - | | Total other income (expense), net | 7,903 | 2,435 | | Net loss | $(101,733) | $(76,453) | | Unrealized gain (loss) on investments | 953 | (1,596) | | Comprehensive loss | $(100,780) | $(78,049) | ### Operating Expenses #### Research and Development Expenses Research and development expenses were $32.1 million for the nine months ended September 30, 2023 compared to $54.3 million for the nine months ended September 30, 2022, a decrease of $22.2 million. The decrease in research and development expenses was primarily attributable to a decrease of $13.6 million in clinical trial related activities and contract manufacturing activities for our clinical trials and drug supply, a $6.4 million decrease in personnel costs, a $1.2 million decrease in other research and development costs related to service agreements, and $1.0 million decrease in facilities costs and associated lease expense. #### General and Administrative Expenses General and administrative expenses were $26.4 million for the nine months ended September 30, 2023 compared to $24.6 million for the nine months ended September 30, 2022, an increase of $1.8 million. The increase in general and administrative expense was comprised of an increase of $3.4 million in facilities costs, lease expense, and depreciation and amortization expense due to an increase in the allocation of general and administrative use of facilities and $0.7 million in personnel-related costs, including associated stock-based compensation expense. This was partially offset by a decrease of $2.3 million in professional service fees and expenses. #### Restructuring and Impairment Costs Restructuring and impairment costs for the nine months ended September 30, 2023 consisted primarily of costs incurred related to the corporate restructuring, including $35.0 million of non-cash impairment related to the decision not to utilize the Bayside Area Development lease, $7.9 million related to severance expense incurred as part of the Restructuring Plan, $6.8 million related to the impairment and loss on the disposal of property and equipment, and $1.4 million of non-cash impairment related to the decision not to utilize the South San Francisco lease. #### Other Income (Expense), Net The other income (expense), net for the nine months ended September 30, 2023 and 2022 was comprised of income received from the asset purchase agreement, as well as interest income and income received from the sublease arrangement. ### Liquidity and Capital Resources We have incurred losses since inception and have incurred negative cash flows from operations from inception through September 30, 2023. As of September 30, 2023, we had $234.0 million of cash, cash equivalents and marketable securities and our accumulated deficit was $344.1 million. In June and July 2021, we raised net proceeds of $251.3 million in our IPO, pursuant to which we sold an aggregate of 16,100,000 shares of common stock. Prior to our IPO, we funded our operations primarily from the sale of redeemable convertible preferred stock and issuance of convertible promissory notes. On July 21, 2022, we filed the 2022 Shelf with the SEC in relation to the registration of up to an aggregate offering price of $300.0 million of common stock, preferred stock, debt securities, warrants and units or any combination thereof. We also simultaneously entered into a Sales Agreement to provide for the offering, issuance and sale by us of up to an aggregate of $75.0 million of our common stock from time to time in “at-the-market” offerings under the 2022 Shelf and subject to the limitations thereof. We will pay to the Sales Agent cash commissions of up to 3.0 percent of the gross proceeds of sales of common stock under the Sales Agreement. We have not issued any shares or received any proceeds from any offerings under the 2022 Shelf through November 13, 2023. ### Future Funding Requirements Historically, our primary uses of cash were to fund our operations, which consisted primarily of research and development expenditures related to our programs and, to a lesser extent, general and administrative expenditures. We anticipate that we will continue to incur significant general and administrative expenses for the foreseeable future as we pursue other strategic alternatives, advance potential product candidates, maintain our corporate infrastructure, including the costs associated with being a public company, scale our laboratory and manufacturing operations, and incur marketing costs associated with potential commercialization. We are subject to all of the risks typically related to the development of new drug candidates, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. We anticipate that we will need substantial additional funding in connection with our continuing operations. Based upon our current operating plan, we believe that our existing cash, cash equivalents and marketable securities will enable us to fund our operating expenses and capital expenditure requirements for the next 12 months from the issuance date of this Form 10-Q. Until we can generate sufficient revenues from the commercialization of product candidates or from collaboration agreements with third parties, if ever, we expect to finance our future cash needs through public or private equity or debt financings, collaborations and other strategic alliances and licensing arrangements, or any combination of these approaches. The sale of equity or convertible debt securities may result in dilution to our stockholders and, in the case of preferred equity securities or convertible debt, those securities could provide for rights, preferences or privileges senior to those of our common stock. Debt financings may subject us to covenant limitations or restrictions on our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Our ability to raise additional funds may be adversely impacted by negative global economic conditions and any disruptions to and volatility in the credit and financial markets in the United States and worldwide that have resulted and may result from inflationary pressures or other factors. There can be no assurance that we will be successful in acquiring additional funding at levels sufficient to fund our operations or on terms favorable or acceptable to us. If we are unable to obtain adequate financing when needed or on terms favorable or acceptable to us, we may be forced to delay, reduce the scope of or eliminate one or more of our research and development programs. Because our resource requirements could materially change depending on the outcome of our ongoing strategic alternative review process, we are unable to estimate the exact amount of our working capital requirements. In addition to factors related to the strategic alternative review process, our future capital requirements may depend on many other factors, including: - the timing, scope, progress, results and costs of research and development, discovery, preclinical and non-clinical studies and clinical trials for our current and future product candidates; - the number, scope and duration of clinical trials required for regulatory approval of our current and future product candidates; - the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities for our product candidates, including any requirement to conduct more studies or generate additional data beyond that which we currently expect would be required to support a marketing application; - the cost of manufacturing clinical and commercial supplies of our current and future product candidates; - the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval; - our ability to maintain existing, and establish new, strategic collaborations, licensing or other arrangements and the financial terms of any such agreements, including the timing and amount of any future milestone, royalty or other payments due under any such agreement; - any product liability or other lawsuits related to our products; - the revenue, if any, received from commercial sales of any product candidates for which we may receive marketing approval; - our ability to establish a commercially viable pricing structure and obtain approval for coverage and adequate reimbursement from third-party and government payers; - the costs to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing our patents or other intellectual property rights; - expenses needed to attract, hire and retain skilled personnel; and - the costs of operating as a public company. A change in the outcome of any of these or other variables could significantly change the costs and timing associated with the development of our product candidates. Furthermore, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such change. ### Cash Flows The following table summarizes our sources and uses of cash for the periods presented (in thousands): | | Nine Months Ended September 30, 2023 | 2022 | | --- | ---: | ---: | | Net cash used in operating activities | $(44,130) | $(65,551) | | Net cash provided by (used in) investing activities | 179,264 | (255,387) | | Net cash provided by financing activities | 124 | 353 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $135,258 | $(320,585) | #### Cash Used in Operating Activities Net cash used in operating activities was $44.1 million for the nine months ended September 30, 2023, which was primarily attributable to our net loss of $101.7 million, adjusted for net non-cash charges of $54.4 million and net changes in operating assets and liabilities of $3.3 million. Non-cash charges included $43.3 million of impairment expense, $8.3 million in stock-based compensation expense, and $3.9 million in non-cash lease expense, which is partially offset by $1.1 million in depreciation and amortization expenses. Net cash used in operating activities was $65.6 million for the nine months ended September 30, 2022, which was primarily attributable to our net loss of $76.5 million and net changes in operating assets and liabilities of $4.6 million, adjusted for net noncash charges of $15.6 million. Noncash charges included $9.9 million in stock-based compensation expense, $4.5 million in noncash lease expense, and $1.2 million in depreciation and amortization expense. #### Cash Used in Investing Activities Net cash provided by investing activities was $179.3 million for the nine months ended September 30, 2023, which was primarily attributable to cash received from the maturity of investments of $217.0 million and proceeds from sale of property and equipment of $1.2 million. This was partially offset by cash used the investment in current and non-current marketable securities of $28.1 million and the purchases of tenant improvements and lab equipment at our headquarters of $10.8 million. Net cash used in investing activities was $255.4 million for the nine months ended September 30, 2022, which was primarily attributable to the investment in current and non-current marketable securities of $339.8 million and the purchases of lab equipment for use at our headquarters of $5.6 million. This was partially offset by cash received from the maturity of investments of $90.0 million. #### Cash Provided by Financing Activities Net cash provided by financing activities for the nine months ended September 30, 2023 was $0.1 million for the nine months ended September 30, 2023, which consisted primarily of proceeds from issuance of common stock related to the employee stock purchase plan and exercise of options. This was partially offset by repurchases of unvested early exercised stock options and RSAs. Net cash provided by financing activities was $0.4 million for the nine months ended September 30, 2022, which consisted primarily of proceeds from issuance of common stock related to the employee stock purchase plan and stock grants. ### Recently Adopted Accounting Pronouncements For information on new accounting standards, see Note 2 to our condensed financial statements included elsewhere in this Quarterly Report. ### Critical Accounting Policies and Significant Judgments and Estimates Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including but not limited to those related to accrued research and development costs, the fair value of redeemable convertible preferred stock, investments in marketable securities, and common stock and stock-based compensation expense, the valuation of deferred tax assets, and uncertain income tax positions. We base our estimates on historical experience, known trends and events and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Other than the disclosures below, there have been no significant changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in Management’s Discussion and Analysis of Financial Condition and Operations included in our Annual Report on Form 10-K for the year ended December 31, 2022. ### Leases ASU No. 2016-02, Leases (Topic 842), or ASC 842, requires the recognition of the right-of-use assets and related operating and finance lease liabilities on the balance sheet. For contracts entered into on or after the effective date, at the inception of a contract, we assess whether the contract is, or contains, a lease. The assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. At inception of a lease, we allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments. Leases are classified as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: the lease transfers ownership of the asset by the end of the lease term, the lease contains an option to purchase the asset that is reasonably certain to be exercised, the lease term is for a major part of the remaining useful life of the asset or the present value of the lease payments equals or exceeds substantially all of the fair value of the asset. A lease is classified as an operating lease if it does not meet any of these criteria. For all leases at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the lease payments under the lease. The right-of-use asset is initially measured at cost, which primarily comprises the initial amount of the lease liability, plus any initial direct costs incurred, if any, less any lease incentives received. All right-of-use assets are reviewed for impairment. The lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, our secured incremental borrowing rate for the same term as the underlying lease. For real estate leases and other operating leases, we use our secured incremental borrowing rate. For finance leases, we use the rate implicit in the lease or our secured incremental borrowing rate if the implicit lease rate cannot be determined. Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early. Lease cost for operating leases consists of the lease payments plus any initial direct costs, primarily brokerage commissions and is recognized on a straight-line basis over the lease term. Included in lease cost are any variable lease payments incurred in the period that are not included in the initial lease liability and lease payments incurred in the period for any leases with an initial term of 12 months or less. Lease cost for finance leases consists of the amortization of the right-of-use asset on a straight-line basis over the lease term and interest expense determined on an amortized cost basis. The lease payments are allocated between a reduction of the lease liability and interest expense. Leasehold improvements are not unique and are retained by the lessor at the end of the lease. However, we are the accounting owner of the leasehold improvements in the case of a space designed to be suitable for our specific real estate needs if we are also responsible for cost overruns. We elected to make an accounting policy of the short-term leases exemption to leases with a remaining lease term of less than 12 months as at the date of initial adoption. ### Impairment of Long-Lived Assets We assess the impairment of long-lived assets whenever events or changes in business circumstances indicate that the carrying amounts of the assets may not be fully recoverable. In the case of property and equipment and right-of-use assets for our leases, we determine whether there has been an impairment by comparing the carrying value of the asset to the anticipated undiscounted net cash flows associated with the asset. If such cash flows are less than the carrying value, we write down the asset to its fair value, which may be measured as anticipated discounted net cash flows associated with the asset. As discussed in Note 11 to our condensed financial statements included elsewhere in this Quarterly Report, in connection with our Restructuring Plan, we have made the decision not to utilize the Bayside Area Development premises (the “Bayside lease”). We are currently seeking to sublease the vacated premises while still maintaining sufficient office and laboratory space for our normal operations. As a result, we reviewed the Bayside lease for impairment as of April 2023 when we received access to the premises and will subsequently review at each reporting date or as facts and circumstances changed. As part of our impairment evaluation of the Bayside lease, we separately compared the estimated undiscounted income to the net book value of the related long-term assets, which include right-of-use assets and certain property and equipment, primarily leasehold improvements. We estimated sublease income using market participant assumptions, including the length of time to enter into a sublease and sublease payments, which we evaluated using sublease negotiations or agreements where applicable, current real estate trends, and market conditions. If such income exceeded the net book value of the related assets, we did not record an impairment charge. Otherwise, we recorded an impairment charge by reducing the net book value of the assets to their estimated fair value, which we determined by discounting the estimated sublease cash flows using the estimated borrowing rate of a market participant subtenant. Determination of these key assumptions is complex and highly judgmental. For certain impairment charges, we used the terms of active sublease negotiations or agreements to estimate sublease income. Our estimate of future cash flows on the remaining floors, including the time to enter into a sublease and the terms of sublease payments, including estimated free rent periods, are based on current real estate trends and market conditions. Accordingly, if our estimates for the time to enter the sublease and estimated free rent periods were longer (shorter), the impairment charge would be higher (lower), and if our estimates for the rental rates were lower (higher), the impairment charge would be higher (lower). Given the current office lease market rental conditions in the Bay Area, our estimates are subject to significant uncertainty. The ultimate amount of sublease income may be significantly lower or higher than the amounts used to record our impairment charges, and we may record additional impairment charges in future periods as our estimates change or when we enter into sublease negotiations or execute a sublease agreement. ### Emerging Growth Company and Smaller Reporting Company Status We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for emerging growth companies include presentation of only two years of audited financial statements in a registration statement for an initial public offering, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. However, as described in Note 2 to our condensed financial statements included elsewhere in this Quarterly Report, we early adopted certain accounting standards, as the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies to the extent early adoption is permitted. As a result, our financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates. We will remain an emerging growth company until the earliest of (i) the last day of our first fiscal year in which we have total annual gross revenues of $1.235 billion or more, (ii) December 31, 2026, (iii) the date on which we are deemed to be a “large accelerated filer,” under the rules of the SEC, which means the market value of equity securities that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. If we are a “smaller reporting company” at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. ## Market risk As filed, 134 characters. Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information required by this item. ## Controls and procedures As filed, 3,097 characters. ### Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer, who serves as our principal executive officer and our principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report. Based upon that evaluation, our Chief Executive Officer has concluded that, as of September 30, 2023, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure. ### Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ### Inherent Limitations on Effectiveness of Controls Our management, including our Chief Executive Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. ## Risk factors As filed, 933 characters. *This Form 10-Q contains forward-looking information based on our current expectations. Because our business is subject to many risks and our actual results may differ materially from any forward-looking statements made by or on behalf of us, the discussion of our business and operations in this Form 10-Q should be read together with the risk factors contained in Item 1A of our Annual Report on Form 10-K for year ended December 31, 2022 filed with the SEC on March 20, 2023 (as amended, the “Annual Report”) and in subsequent periodic filings with the SEC, which describe various risks and uncertainties to which we are or may become subject. These risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flows, strategies, or prospects in a material and adverse manner. There are no material changes from the risk factors as previously disclosed in our Annual Report.* Filed Nov 13, 2023. Source: SEC EDGAR, the filing index for accession 0000950170-23-062942. Last ingested by Listed: Nov 3, 2026, 19:08 ET. No prices; not investment advice.