NKARTA, INC. Management’s discussion and analysis of financial condition and results of operations. (Form 10-Q)

You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and
with the audited financial statements and the related notes included in our
Annual Report on Form 10-K filed with the Securities and Exchange Commission
(the "SEC"), on March 17, 2022 for the fiscal year ended December 31, 2021,
including information with respect to our plans and strategy for our business
and related financing. The discussion and analysis below includes
forward-looking statements that involve risks and uncertainties, including those
risks and uncertainties set forth in the sections titled "Risk Factors" of this
Quarterly Report on Form 10-Q, which may cause our actual results to differ
materially from the results described in or implied by the forward-looking
statements contained in the following discussion and analysis. See "Cautionary
Note Regarding Forward-Looking Statements" above. Unless the context otherwise
requires, the terms "Company," "Nkarta, Inc.," "we," "us" or "our" refer to
Nkarta, Inc. We do not have any subsidiaries.

Insight

We are a biopharmaceutical company focused on the discovery, development and
commercialization of allogeneic, off-the-shelf engineered natural killer ("NK")
cell therapies to treat cancer. We currently have co-lead product candidates,
NKX101, a CAR-NK product candidate targeting cells that display NKG2D ligands,
and NKX019, a CAR-NK product candidate targeting the CD19 antigen, in ongoing
Phase 1 clinical trials. Both product candidates incorporate proprietary
technologies that enable us to generate an abundant supply of NK cells, improve
the persistence of these cells for sustained activity in the body, engineer
enhanced NK cell recognition of tumor targets, enhance cell fitness and tumor
microenvironment evasion, and freeze, store and thaw our engineered NK cells for
the treatment of cancer. Our product candidates are designed to be allogeneic
and off-the-shelf, which means they are produced using cells from a different
person than the patient treated, and they are produced in quantity, then frozen
and therefore available for treating patients without delay, unlike autologous
cell therapies, which are derived from a patient's own cells. Based on published
data from clinical trials of certain NK cell therapies, we believe that
engineered NK cells have the potential to be an effective cancer therapy, be
well tolerated, and avoid some of the toxicities observed with other cell
therapies.

Our modular NK cell engineering platform is designed to address the limitations
and challenges of current technologies for engineering T cells and NK cells and
is a result of our internal expertise and deep understanding of NK cell biology.
Our platform includes proprietary technologies for NK cell expansion,
persistence, targeting and cryopreservation. All of our product candidates
incorporate each of the four components of our technology platform, which we
believe provides the best opportunity for achieving clinically meaningful
results in our development program.

NKX101 is currently being studied in a multi-center Phase 1 clinical trial in
the U.S. for the treatment of relapsed/refractory acute myeloid leukemia ("AML")
and higher-risk myelodysplastic syndromes ("MDS"). This ongoing first-in-human
study evaluates the safety, pharmacokinetics, and preliminary anti-tumor
activity of NKX101 when administered after lymphodepleting chemotherapy. The
clinical trial consists of dose-finding followed by dose-expansion and is
designed to identify the recommended Phase 2 dose.

NKX019 is currently being studied in a multi-center Phase 1 clinical trial in
the U.S. and Australia for the treatment of a variety of B-cell malignancies by
targeting the CD19 antigen that is found on these types of cancerous cells and
where CD19-targeted engineered NK cells, T cells and monoclonal antibodies have
demonstrated clinical activity. This ongoing first-in-human study evaluates the
safety, pharmacokinetics, and preliminary anti-tumor activity of NKX019 when
administered after lymphodepleting chemotherapy. The clinical trial consists of
dose-finding followed by dose-expansion and is designed to identify the
recommended Phase 2 dose.

Under the Company's research collaboration agreement with CRISPR Therapeutics AG
("CRISPR") entered into in May 2021 (as amended, the "CRISPR Agreement"), we are
collaboratively designing and advancing up to two allogeneic, gene-edited NK
cell therapies, one of which is the engineered CAR-NK product candidate
targeting the CD70 tumor antigen, and one allogeneic, gene-edited NK+T cell
therapy.

Since the commencement of our operations in 2015, we have devoted substantially
all of our resources in support of our product development efforts, hiring
personnel, raising capital to support and expand such activities and providing
general and administrative support for these operations. We have not generated
any revenue from product sales and have funded our operations primarily from our
initial public offering ("IPO") completed in July 2020, the issuance of
convertible promissory notes, private placements of our preferred stock, the
secondary offering of our common stock completed in April 2022, and with
proceeds from our previous collaboration. We incurred a net loss of $86.1
million and $91.4 million during the years ended December 31, 2021 and 2020,
respectively, and $81.3 million and $63.3 million during the nine months ended
September 30, 2022 and 2021, respectively, and we expect to continue to incur
significant losses for the foreseeable future. As of September 30, 2022, we had
an accumulated deficit of $285.4 million. At September 30, 2022, we had cash,
cash equivalents, restricted cash and short-term investments of $395.1 million.

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We expect our operating expenses to significantly increase as we continue to
develop and seek regulatory approvals for our product candidates, engage in
other research and development activities to expand our pipeline of product
candidates, maintain and expand our intellectual property portfolio, and
ultimately establish a commercial organization. We have also incurred increased
operating expenses since becoming a public company, which we expect will further
increase when we are no longer able to rely on certain "emerging growth company"
exemptions we are afforded under the Jumpstart Our Business Startups Act (the
"JOBS Act") as further described under "-JOBS Act" below. Our net losses may
fluctuate significantly from quarter-to-quarter and year-to-year, depending on
the timing of our clinical trials, and our expenditures on other research and
development activities.

On April 28, 2022, we issued and sold 15,333,334 shares of our common stock in
an underwritten public offering, including 2,000,000 shares associated with the
full exercise of the underwriters' option to purchase additional shares, at a
price to the public of $15.00 per share. The total net proceeds from the
offering were approximately $215.3 million, after deducting underwriting
discounts and commissions and offering expenses.

In the nine months ended September 30, 2022we issued and sold 113,213 common shares under the ATM offering program, generating net proceeds of approximately $1.6 millionafter deduction of offer costs.

Update on COVID-19, Macroeconomic Conditions and Supply Disruptions

Our operations have been and may in the future be affected by the COVID-19 pandemic, as well as global and national economic and market conditions generally.

The COVID-19 pandemic has caused and may in the future cause disruptions in the
conduct and enrollment of current and future clinical trials due to, among other
things, bed shortages and staffing challenges at our treating hospitals.
Hospitals may experience staffing challenges as a result of employee turnover
and attrition, the current labor shortage, and/or personnel being pulled off
clinical trials to care for patients with COVID-19. In addition, the COVID-19
pandemic has resulted in a significant increase in FDA workload, as well as the
need to reprioritize the projects under review. As a result, we may experience
delays in FDA timelines along the course of the regulatory process.

The continuing disruptions in the global supply chain have also resulted in
limited disruptions in the supply of our product candidates, as well as global
supply shortages of certain materials that we and our contract development and
manufacturing organization ("CDMO") partners use for research and current good
manufacturing practice manufacturing, such as certain raw materials, cell
culture media, disposable plastics, and equipment. To the extent there is a
subsequent outbreak of COVID-19, or if it begins to significantly impact
essential distribution systems or our third-party manufacturers, contractors or
suppliers, we may experience further disruptions in our supply chain and
operations with associated delays in the manufacturing and supply of our product
candidates.

In addition, we could in the future experience delays in the construction of our
commercial-scale good manufacturing practice ("GMP") manufacturing facility and
future headquarters due to the COVID-19 pandemic and current macroeconomic
conditions. We have seen significant inflation in construction costs in the last
six months, which has negatively affected the costs of constructing our new
facility. In addition, global supply chain disruptions, including procurement
delays and long lead times on certain materials, could adversely impact the
scheduled completion and/or costs of constructing our new facility.

A shortage of fludarabine, an agent commonly used in oncology, including in
lymphodepletion, has recently been reported. Fludarabine is used in our NKX101
an NKX019 clinical trials prior to treatment with our product candidates.
Certain of our clinical trial sites have indicated that they are experiencing a
shortage of fludarabine. Although we and our clinical sites are taking steps to
try to mitigate any impact of the shortage on our clinical trials, enrollment
has been delayed at certain of our clinical trial sites, and we could continue
to experience enrollment delays due to the fludarabine shortage in the future.

We continuously monitor the effects of domestic and global events, including but
not limited to the current and expected impact of the COVID-19 pandemic,
inflation, labor shortages, and supply chain matters on our operations,
including continued enrollment in the NKX101 and NKX019 clinical trials, as well
as on our contract research organizations ("CROs"), CDMOs, and clinical trial
sites, to ensure that we remain responsive and adaptable to the dynamic changes
in our operating environment.

Overview of financial operations

Functionnary costs

Research and development

Research and development expenses primarily include expenses incurred for the discovery and clinical development of our drug candidates, which include:

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personnel-related expenses, including salaries, benefits, travel expenses and stock-based compensation expenses for employees engaged in research and development functions;

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expenses incurred in connection with research, laboratory consumables, sponsored research and preclinical studies;

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expenses incurred in connection with the conduct of clinical trials, including investigator grants and site payments for time and transfer expenses and expenses incurred under agreements with CROs, other vendors or central laboratories and service providers engaged to conduct our testing;

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the cost of consultants engaged in research and development related services;

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the cost of manufacturing drug candidates to be used in our preclinical studies and clinical trials;

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facilities, depreciation and other expenses, which include allocated expenses for rent and maintenance of facilities, insurance and supplies;

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regulatory compliance costs; and

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the cost of annual license fees.

We typically have various early-stage research and drug discovery projects as
well as various product candidates undergoing clinical trials. Our internal
resources, employees and infrastructure are not directly tied to any one
research or drug discovery project and are typically deployed across multiple
projects. As such, we do not maintain information regarding the costs incurred
for these early-stage research and drug discovery programs on a project-specific
basis.

We expense research and development costs as they are incurred. Nonrefundable
advance payments for goods or services to be received in the future for use in
research and development activities are recorded as prepaid expenses. The
prepaid amounts are expensed as the related goods are delivered or the services
are performed.

The following table summarizes our research and development expenses for the
three and nine months ended September 30, 2022 and 2021. The direct external
development program expenses reflect external costs attributable to our clinical
development candidates and preclinical candidates selected for further
development. Such expenses include third-party contract costs relating to
manufacturing, clinical trial activities, translational medicine and toxicology
activities. The partner cost sharing represents reimbursable research and
development expenses from the CRISPR Agreement. The unallocated internal
research and development costs include personnel, facility costs, laboratory
consumables and discovery and research related activities associated with our
pipeline.

                                            Three Months Ended           Nine Months Ended
                                              September 30,                September 30,
                                            2022          2021           2022          2021
                                              (in thousands)               (in thousands)
Direct external development program
expenses:
NKX101                                   $    5,626     $   3,525     $   13,884     $   8,600
NKX019                                        2,472         2,828          7,704         5,302
CD70                                            559            63            990           427
NK+T                                             65           147            141           499
Program 5                                       118             -            174             -
Partner cost sharing                         (1,048 )        (852 )       (2,823 )      (1,210 )
Unallocated internal research and
development costs:
Personnel related (including
share-based compensation)                     9,022         7,584         25,654        21,829
Others                                        6,621         3,321         

18,329 10,664 Total research and development expenses $23,435 $16,616 $64,053 $46,111




Research and development activities are central to our business model. There are
numerous factors associated with the successful commercialization of any of our
drug candidates, including future trial design and various regulatory
requirements, many of which cannot be determined with accuracy at this time
based on our stage of development. In addition, future regulatory factors beyond
our control may impact our clinical development programs. Drug candidates in
later stages of clinical development generally have higher development costs
than those in earlier stages of clinical development, primarily due to the
increased size and duration of later-stage clinical trials. At this time, we
cannot reasonably estimate or know the nature, timing and costs of the efforts
that will be necessary to complete the preclinical and clinical development of
any of our drug candidates. However, we expect that our research and development
expenses will increase substantially in connection with our planned preclinical
and clinical development activities in the near term and in the future.

The successful development of our drug candidates is highly uncertain. A change
in the outcome of any of a number of variables with respect to the development
of our drug candidates may significantly impact the costs and timing associated
with the development of our drug candidates. A discussion of the risks and
uncertainties that we face in the development and commercialization of our drug

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candidates can be found under Part II, Item 1A, "Risk Factors" in this Quarterly
Report on Form 10-Q. We may never succeed in obtaining regulatory approval for
any of our drug candidates.

General and Administrative

General and administrative expenses consist primarily of salaries and
employee-related costs, including share-based compensation, for personnel in
executive, finance and other administrative functions. Other significant costs
include legal fees relating to intellectual property and corporate matters,
professional fees for accounting and consulting services and facility-related
costs.

We expect our general and administrative expenses will increase for the
foreseeable future to support our increased research and development activities
and to reflect increased costs associated with operating as a public company.
These increased costs will likely include increased expenses related to audit,
legal, regulatory and tax-related services associated with maintaining
compliance with exchange listing and SEC requirements, director and officer
insurance premiums and investor relations costs.

Other income (expenses)

interest income

Interest income includes interest earned on our cash, cash equivalents and short-term investments as well as adjustments related to the amortization of purchase premiums and increased discounts on short-term investments.

Operating results

The following table summarizes our results of operations for the periods indicated (in thousands):


                           Three Months Ended September 30,              

Nine month period ended September 30,

                          2022             2021         Change          2022            2021         Change
Operating expenses:
Research and
development           $     23,435       $  16,616     $   6,819     $    64,053      $  46,111     $  17,942
General and
administrative               6,827           5,812         1,015          19,919         17,431         2,488
Total operating
expenses                    30,262          22,428         7,834          83,972         63,542        20,430
Loss from
operations                 (30,262 )       (22,428 )      (7,834 )       (83,972 )      (63,542 )     (20,430 )
Other income
(expense), net:
Interest income              1,900              81         1,819           2,698            295         2,403
Other income
(expense), net                  17              (6 )          23              19            (14 )          33
Total other income,
net                          1,917              75         1,842           2,717            281         2,436
Net loss              $    (28,345 )     $ (22,353 )   $  (5,992 )   $   (81,255 )    $ (63,261 )   $ (17,994 )



Comparison of the three and nine month periods ended September 30, 2022 and 2021

Research and development expenses. Research and development expenses were $23.4
million and $16.6 million for the three months ended September 30, 2022 and
2021, respectively. The increase of $6.8 million was primarily due to an
increase in personnel costs of $1.4 million as a result of continued growth in
headcount, an increase of $1.7 million in program costs primarily relating to
NKX101 and NKX019 and an increase of $3.3 million in other internal research
costs, primarily consisting of research and laboratory supplies and facilities
expenses.

Research and development expenses were $64.1 million and $46.1 million for the
nine months ended September 30, 2022 and 2021, respectively. The increase of
$17.9 million was primarily due to an increase in personnel costs of $3.8
million as a result of continued growth in headcount, an increase of $7.7
million in program costs primarily relating to NKX101 and NKX019 and an increase
of $7.7 million in other internal research costs, primarily consisting of
research and laboratory supplies and facilities expenses.

The increase in program costs relating to NKX101 and NKX019, in both the three
and nine months ended September 30, 2022, was primarily due to additional
clinical development activities compared to the prior year period. We expect our
research and development expenses will continue to increase in future periods as
we progress our product candidates and conduct our clinical trials and
development activities.

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General and administrative expenses. General and administrative expenses were
$6.8 million and $5.8 million for the three months ended September 30, 2022 and
2021, respectively. The increase of $1.0 million was primarily due to an
increase in personnel costs of $0.7 million, including an increase of $0.4
million in share-based compensation expense as a result of continued growth in
headcount, and an increase of $0.2 million in other general and administrative
expenses that included insurance, rent, depreciation expense and other
facilities expense.

General and administrative expenses were $19.9 million and $17.4 million for the
nine months ended September 30, 2022 and 2021, respectively. The increase of
$2.5 million was primarily due to an increase in personnel costs of $2.3
million, including an increase of $1.3 million in share-based compensation
expense as a result of continued growth in headcount, and an increase of $0.8
million in other general and administrative expenses that included insurance,
rent, depreciation expense and other facilities expense.

We have incurred and expect to continue to incur additional expenses as a result
of being a public company, which we expect will further increase when we no
longer qualify as an "emerging growth company" under the JOBS Act. In addition,
we have incurred and expect to continue to incur increased expenses related to
additional insurance, investor relations and other expenses related to the need
for additional human resources and professional services associated with being a
public company.

Interest income. Interest income was $1.9 million and $0.1 million for the three
months ended September 30, 2022 and 2021, respectively. Interest income was due
to interest earned from short-term investments, partially offset by amortization
of purchase premiums and accretion of discounts of short-term investments.

Interest income was $2.7 million and $0.3 million for the nine months ended
September 30, 2022 and 2021, respectively. Interest income was due to interest
earned from short-term investments, partially offset by amortization of purchase
premiums and accretion of discounts of short-term investments.

Cash and capital resources

Sources of liquidity

From September 30, 2022we had cash, cash equivalents, restricted cash and short-term investments of $395.1 million. As part of our IPO which closed on July 14, 2020we received $265.1 million as net proceeds, after deducting underwriting discounts and commissions and other offering costs.

On August 12, 2021, we filed a Registration Statement on Form S-3 (the "Shelf
Registration Statement"), covering the offer and sale from time to time,
pursuant to Rule 415 of the Securities Act of 1933, as amended (the "Securities
Act"), of up to $500.0 million in aggregate offering price of shares of our
common stock, shares of our preferred stock, debt securities, warrants, and
rights and units. The Shelf Registration Statement was declared effective by the
SEC on September 2, 2021. The Shelf Registration Statement included a prospectus
covering the offer and sale from time to time of up to $150.0 million in
aggregate offering price of shares of the Company's common stock through an
"at-the-market" equity offering program under the Securities Act (the "ATM
Offering Program") with Cowen and Company, LLC, as sales agent. During the nine
months ended September 30, 2022, we issued and sold 113,213 shares of our common
stock pursuant to the ATM Offering Program, resulting in net proceeds of
approximately $1.6 million, after deducting offering expenses.

On April 28, 2022, we issued and sold 15,333,334 shares of our common stock in
an underwritten public offering, including 2,000,000 shares associated with the
full exercise of the underwriters' option to purchase additional shares, at a
price to the public of $15.00 per share. The total net proceeds from the
offering were approximately $215.3 million, after deducting underwriting
discounts and commissions and offering expenses.

We have incurred net losses and negative cash flows from operations since our
inception and anticipate that we will continue to incur net losses for the
foreseeable future. We expect to incur substantial expenditures as we develop
our product pipeline and advance our drug candidates through clinical
development, undergo the regulatory approval process and, if approved, launch
commercial activities. Specifically, in the near term we expect to incur
substantial expenses relating to initiating and completing our clinical trials,
the development and validation of our manufacturing processes, and other
development activities. Furthermore, we expect to incur additional costs
associated with operating as a public company, including significant legal,
accounting, investor relations and other expenses that we did not incur as a
private company.

We will need substantial additional funding to support our continuing operations
and pursue our long-term development strategy. Until such time as we can
generate significant revenue from sales of our drug candidates, if ever, we may
seek additional funding through the issuance of our common stock, including
through our ATM Offering Program, other equity or debt financing or
collaborations or partnerships with other companies. The amount and timing of
our future funding requirements will depend on many factors, including the pace
and results of our clinical development efforts for our product candidates and
other research, development and manufacturing activities. We may not be able to
raise additional capital on terms acceptable to us, or at all. If we fail to
raise

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capital or enter into such agreements as, and when, needed, we may have to
significantly delay, scale back, or discontinue the development and
commercialization of our drug candidates or delay our efforts to expand our
product pipeline. We may also be required to sell or license to other parties'
rights to develop or commercialize our drug candidates that we would prefer to
retain.

We believe that our current cash, cash equivalents, restricted cash and
short-term investments as of September 30, 2022 will be sufficient to meet our
cash needs for at least 12 months following the issuance date of this Quarterly
Report on Form 10-Q.

Cash Flows

The following table sets forth a summary of our cash flows for the periods
indicated (in thousands):

                                                          Nine Months Ended
                                                            September 30,
                                                          2022          2021
Net cash used in operating activities                  $  (49,669 )   $ (50,355 )
Net cash (used in) provided by investing activities      (189,436 )      50,369
Net cash provided by financing activities                 218,588         

1,200

Net increase (decrease) in cash and cash equivalents ($20,517) $1,214




Operating Activities

Net cash used in operating activities was $49.7 million and $50.4 million for
the nine months ended September 30, 2022 and 2021, respectively. The net cash
used in operating activities for the nine months ended September 30, 2022 was
primarily due to our net loss of $81.3 million, adjusted for $18.3 million of
net non-cash charges consisting primarily of share-based compensation of $12.4
million, depreciation and amortization of $1.9 million, investment accretion and
amortization of $0.8 million, non-cash lease expense of $3.3 million and a $13.2
million net change in operating assets and liabilities. The net cash used in
operating activities for the nine months ended September 30, 2021 was primarily
due to our net loss of $63.3 million, adjusted for $12.9 million of net non-cash
charges consisting primarily of share-based compensation of $10.7 million,
depreciation and amortization of $1.2 million, investment accretion and
amortization of $2.4 million, and a $1.8 million net change in operating assets
and liabilities.

Investing Activities

Net cash used in investing activities was $189.4 million for the nine months
ended September 30, 2022 net cash provided by investing activities was $50.4
million for the nine months ended September 30, 2021. The net cash used in
investing activities for the nine months ended September 30, 2022 was primarily
due to purchases of short-term investments of $310.3 million and purchases of
property and equipment of $12.1 million primarily related to the construction of
our manufacturing facility, partially offset by proceeds from maturities of
short-term investments of $133.0 million. The net cash provided by investing
activities for the nine months ended September 30, 2021 was primarily due to
proceeds from maturities of short-term investments of $185.4 million, partially
offset by purchases of short-term investments of $131.1 million and purchases of
property and equipment of $3.9 million primarily related to the construction of
our manufacturing facility.

Financing Activities

Net cash provided by financing activities was $218.6 million for the nine months
ended September 30, 2022, primarily due to the proceeds of $215.6 million from
our secondary offering, net of issuance costs, $1.6 million from the ATM
Offering Program, net of issuance costs, and proceeds of $1.4 million from the
exercise of stock options. Net cash provided by financing activities was $1.2
million for the nine months ended September 30, 2021, primarily due to proceeds
from the exercise of stock options.

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Financing needs

Based upon our current operating plans, we believe that our existing cash, cash
equivalents, restricted cash and short-term investments will be sufficient to
fund our operations for at least the next 12 months from the date of this
Quarterly Report on Form 10-Q. However, our forecast of the period of time
through which our financial resources will be adequate to support our operations
is a forward-looking statement that involves risks and uncertainties, and actual
results could vary materially. We have based this estimate on assumptions that
may prove to be wrong, and we could deplete our capital resources sooner than we
expect. Additionally, the process of testing therapeutic product candidates in
clinical trials is costly, and the timing of progress and expenses in these
trials is uncertain.

Our future capital requirements will depend on many factors, including:

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the type, number, scope, progress, expansions, results, costs and timing of our
clinical trials and preclinical studies for our product candidates or other
potential product candidates or indications which we are pursuing or may choose
to pursue in the future;

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the outcome, timing and costs of regulatory review of our product candidates;

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the costs and timing of manufacturing our product candidates, including commercial manufacturing and costs associated with constructing our manufacturing facilities;

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our efforts to improve operating systems and hire additional staff to meet our obligations as a public company, including enhanced internal controls over financial reporting;

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costs associated with hiring additional staff and consultants as our preclinical and clinical activities increase;

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the costs and timing of establishing or securing sales and marketing capabilities if a product candidate is approved;

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our ability to obtain sufficient market acceptance, adequate coverage and reimbursement from third-party payers, and adequate market share and revenues for all approved products;

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patients’ willingness or ability to pay out-of-pocket for any approved product in the absence of coverage and/or adequate reimbursement by third-party payers;

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the terms and timing of establishing and maintaining collaborations, licenses and other similar agreements, including payments required to meet regulatory and commercial milestones or sales-based royalties;

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the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights; and

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costs associated with any product candidate, product or technology that we may license or acquire.

Until such time as we can generate significant revenue from sales of our
therapeutic product candidates, if ever, we expect to finance our cash needs
through public or private equity, including pursuant to the ATM Offering
Program, or debt financings or other capital sources, including potential
collaborations, licenses and other similar arrangements. We may be unable to
raise additional funds or enter into such other arrangements when needed on
favorable terms or at all. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, the ownership
interest of our stockholders will be or could be diluted, and the terms of these
securities may include liquidation or other preferences that adversely affect
the rights of our common stockholders. Debt financing and equity financing, if
available, may involve agreements that include covenants limiting or restricting
our ability to take specific actions, such as incurring additional debt, making
capital expenditures or declaring dividends. If we raise funds through
collaborations, or other similar arrangements with third parties, we may have to
relinquish valuable rights to our product candidates, future revenue streams or
research programs or may have to grant licenses on terms that may not be
favorable to us and may reduce the value of our common stock. If we are unable
to raise additional funds through equity or debt financings when needed, we may
be required to delay, limit, reduce or terminate our product development or
future commercialization efforts or grant rights to develop and market our
product candidates even if we would otherwise prefer to develop and market such
product candidates ourselves.

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Material cash needs

In May 2018, we entered into a lease agreement for our corporate office and
laboratory space located in South San Francisco, California with an expiration
date in May 2025 (the "Initial Lease Agreement"). In April 2019, we executed the
first amendment to the Initial Lease Agreement for additional corporate space,
laboratory space and manufacturing capabilities and an extension to the lease
term through April 2026. The terms of the lease amendment contain a rent
abatement for the first month and rent escalation provisions. In addition to the
base rent payments, we will be obligated to pay certain customary amounts for
our share of operating expenses and tax obligations related to the facilities.

In May 2020, we executed the second amendment to the Initial Lease Agreement for
an eight-year non-cancelable lease for additional office and laboratory space in
the same building. The lease amendment for the additional space provided for
abatement of rent during the first three months of the lease and contained rent
escalations during the term of the lease. The lease amendment for this
additional space commenced in January 2021 and expires in January 2029. The
lease amendment also included an extension of the lease term of our existing
office and laboratory space through January 2029, with an option to extend the
lease for an additional seven-year term.

In January 2021, we executed the third amendment to the Initial Lease Agreement
for a three-year non-cancelable lease for additional office space in the same
building. The lease amendment for this additional space commenced in the second
quarter of 2021 and expires in March 2024.

In October 2021, we executed the fourth amendment to the Initial Lease Agreement
for a seven-year non-cancelable lease for additional office and laboratory space
in the same building. The lease amendment for additional space provided for
abatement of rent during the first two months of the lease and contained rent
escalations during the term of the lease. The lease amendment for this
additional space is anticipated to commence in April 2022 and expires in January
2029. The Company expects to pay base rent of approximately $4.6 million over
the lease term. The lease amendment also includes this additional space in our
option to extend the lease for an additional seven-year term. The other terms of
the Initial Lease Agreement, as amended, remain unchanged.

In July 2021, we entered into a lease agreement for corporate office,
manufacturing and laboratory space located in South San Francisco, California
with an expiration date approximately twelve years after the lease's
commencement date (the "Additional Lease Agreement"). The lease for this
additional space commenced in January 2022. The Additional Lease Agreement also
provides for certain tenant improvement allowances for tenant improvements and
certain infrastructure upgrades in connection with the initial buildout of the
premises, a portion of which, if utilized, would need to be repaid by us over
the lease term.

In November 2021, we executed an amendment to the Additional Lease Agreement for
our corporate office, manufacturing and laboratory space. The amendment
expressly includes manufacturing as a permitted use at the facility, clarifies
that Silicon Valley Bank is an acceptable bank for purposes of issuing a letter
of credit under the lease, revises the letter of credit transferability terms
and replaces the form of letter of credit attached to the lease. The other terms
of the Additional Lease Agreement remain unchanged.

In August 2022we entered into amendments to the original lease agreement and the additional lease agreement.

See Note 6 to our financial statements included elsewhere in this Quarterly Report on Form 10-Q for additional information regarding our lease liability.

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 U.S. GAAP. 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 and accompanying notes. On an ongoing
basis, we evaluate our estimates and judgments, including those related to
preclinical studies and clinical trial accruals, the incremental borrowing rate
used in determining the lease liability and right-of-use asset for the
Additional Lease Agreement, and share-based compensation. We base our estimates
and assumptions on historical experience, known trends and events, and various
other factors that are believed to be reasonable and appropriate 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.

There have been no significant changes in our critical accounting policies and
estimates during the nine months ended September 30, 2022, as compared to the
critical accounting policies and estimates disclosed in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in our
Annual Report on Form 10-K.

Indemnification

As permitted under Delaware law and in accordance with our bylaws, we indemnify
our officers and directors for certain events or occurrences while the officer
or director is or was serving in such capacity. We are also party to
indemnification agreements with

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our officers and directors. We believe the fair value of the indemnification
rights and agreements is minimal. Accordingly, we have not recorded any
liabilities for these indemnification rights and agreements as of September 30,
2022 and December 31, 2021.

Segment Information

We have a single business activity and operate in a single segment to present.

Employment Act

We are an "emerging growth company" as described under the JOBS Act, and we
could have taken advantage of an extended transition period for complying with
new or revised accounting standards. This would have allowed us to delay the
adoption of certain accounting standards until those standards would otherwise
apply to private companies. We have chosen irrevocably to "opt out" of such
extended transition period, and as a result, we will comply with new or revised
accounting standards on the relevant dates on which adoption of such standards
is required for non-emerging growth companies. We intend to rely on other
exemptions provided by the JOBS Act, including without limitation, not being
required to comply with the auditor attestation requirements of Section 404(b)
of The Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act").

We will remain an emerging growth company until the earliest of (i) the last day
of the fiscal year following the fifth anniversary of the consummation of our
IPO, (ii) the last day of the fiscal year in which we have total annual gross
revenue of at least $1.235 billion, (iii) the last day of the fiscal year in
which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which would occur if the market value of our common stock held by non-affiliates
exceeded $700.0 million as of the last business day of the second fiscal quarter
of such year, or (iv) the date on which we have issued more than $1.0 billion in
non-convertible debt securities during the prior three-year period. Even after
we no longer qualify as an emerging growth company, we may still qualify as a
smaller reporting company or a non-accelerated filer, which would allow us to
take advantage of many of the same exemptions from disclosure requirements,
including not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations
regarding executive compensation in our prospectuses and in our periodic reports
and proxy statements.

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