Close

Form 10-Q LEAP THERAPEUTICS, INC. For: Jun 30

August 12, 2022 6:51 AM EDT

Get instant alerts when news breaks on your stocks. Claim your 1-week free trial to StreetInsider Premium here.
0.150.120.240.24113248937763895251132489377638407711324893776389525113248937763840770.150.120.240.240001509745--12-312022Q2falseP3Y88318454883184546090000001509745us-gaap:CommonStockMember2021-04-012021-06-300001509745us-gaap:SubsequentEventMember2022-08-012022-08-310001509745us-gaap:SubsequentEventMember2022-07-012022-07-310001509745lptx:WarrantsSeptember2021Memberus-gaap:CommonStockMemberus-gaap:OverAllotmentOptionMember2021-09-242021-09-240001509745lptx:WarrantsJune2020Memberus-gaap:CommonStockMember2020-06-222020-06-220001509745lptx:WarrantsMarch2020Memberus-gaap:SeriesBPreferredStockMember2020-01-032020-01-030001509745lptx:WarrantsMarch2020Memberus-gaap:SeriesAPreferredStockMember2020-01-032020-01-030001509745us-gaap:CommonStockMember2021-01-012021-06-300001509745us-gaap:RetainedEarningsMember2022-06-300001509745us-gaap:AdditionalPaidInCapitalMember2022-06-300001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001509745us-gaap:RetainedEarningsMember2022-03-310001509745us-gaap:AdditionalPaidInCapitalMember2022-03-310001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100015097452022-03-310001509745us-gaap:RetainedEarningsMember2021-12-310001509745us-gaap:AdditionalPaidInCapitalMember2021-12-310001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001509745us-gaap:RetainedEarningsMember2021-06-300001509745us-gaap:AdditionalPaidInCapitalMember2021-06-300001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001509745us-gaap:RetainedEarningsMember2021-03-310001509745us-gaap:AdditionalPaidInCapitalMember2021-03-310001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-3100015097452021-03-310001509745us-gaap:RetainedEarningsMember2020-12-310001509745us-gaap:AdditionalPaidInCapitalMember2020-12-310001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001509745us-gaap:CommonStockMember2022-06-300001509745us-gaap:CommonStockMember2022-03-310001509745us-gaap:CommonStockMember2021-12-310001509745us-gaap:CommonStockMember2021-06-300001509745us-gaap:CommonStockMember2021-03-310001509745us-gaap:CommonStockMember2020-12-310001509745lptx:WarrantsSeptember2021Memberus-gaap:CommonStockMember2021-09-240001509745lptx:WarrantsJune2020Memberus-gaap:CommonStockMember2020-06-220001509745lptx:WarrantsMarch2020Memberus-gaap:SeriesBPreferredStockMember2020-01-030001509745lptx:WarrantsMarch2020Memberus-gaap:SeriesAPreferredStockMember2020-01-030001509745lptx:EquityIncentivePlan2016Member2022-06-300001509745lptx:EquityIncentivePlan2022Member2022-06-160001509745us-gaap:RestrictedStockUnitsRSUMemberlptx:EquityIncentivePlan2016Member2022-06-300001509745us-gaap:RestrictedStockUnitsRSUMemberlptx:EquityIncentivePlan2016Member2021-12-310001509745us-gaap:RestrictedStockUnitsRSUMemberlptx:EquityIncentivePlan2016Member2022-01-012022-06-300001509745srt:ExecutiveOfficerMemberus-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001509745srt:ExecutiveOfficerMemberus-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001509745srt:MinimumMember2022-01-012022-06-300001509745srt:MaximumMember2022-01-012022-06-300001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-06-300001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001509745us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-06-300001509745srt:RestatementAdjustmentMemberus-gaap:AccountingStandardsUpdate201602Member2022-06-300001509745us-gaap:RetainedEarningsMember2022-04-012022-06-300001509745us-gaap:RetainedEarningsMember2022-01-012022-06-300001509745us-gaap:RetainedEarningsMember2021-04-012021-06-300001509745us-gaap:RetainedEarningsMember2021-01-012021-06-300001509745us-gaap:RestrictedStockUnitsRSUMember2022-06-300001509745us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001509745lptx:WarrantsMarch2020Memberus-gaap:SeriesBPreferredStockMember2020-03-052020-03-050001509745us-gaap:LicenseMember2022-04-012022-06-300001509745us-gaap:RoyaltyMember2022-01-012022-06-300001509745us-gaap:LicenseMember2022-01-012022-06-300001509745us-gaap:LicenseMember2021-04-012021-06-300001509745us-gaap:RoyaltyMember2021-01-012021-06-300001509745us-gaap:LicenseMember2021-01-012021-06-300001509745lptx:PreFundedWarrantsMemberus-gaap:SubsequentEventMember2022-08-310001509745lptx:PreFundedWarrantsMemberus-gaap:SubsequentEventMember2022-07-310001509745lptx:WarrantsSeptember2021Member2022-06-300001509745lptx:WarrantsMarch2020TwoMember2022-06-300001509745lptx:WarrantsMarch2020OneMember2022-06-300001509745lptx:WarrantsJune2020Member2022-06-300001509745lptx:WarrantsExercisableOn23rdJanuary2017Member2022-06-300001509745lptx:Warrants2017Member2022-06-300001509745lptx:Feb2019warrantsMember2022-06-300001509745lptx:WarrantsSeptember2021Member2021-09-240001509745lptx:WarrantsJune2020Member2020-06-220001509745lptx:WarrantsMarch2020Memberus-gaap:SeriesBPreferredStockMember2020-03-050001509745lptx:WarrantsMarch2020Memberus-gaap:SeriesAPreferredStockMember2020-03-050001509745lptx:Feb2019warrantsMember2019-02-0500015097452021-06-300001509745lptx:ExclusiveOptionAndLicenseAgreementMember2020-01-030001509745lptx:ExclusiveOptionAndLicenseAgreementMember2020-01-030001509745us-gaap:FairValueInputsLevel1Member2022-06-300001509745us-gaap:FairValueInputsLevel1Member2021-12-310001509745us-gaap:RestrictedStockUnitsRSUMember2022-04-012022-06-300001509745us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001509745lptx:WarrantsToPurchaseCommonStockMember2022-04-012022-06-300001509745us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001509745us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001509745lptx:WarrantsToPurchaseCommonStockMember2022-01-012022-06-300001509745us-gaap:RestrictedStockUnitsRSUMember2021-04-012021-06-300001509745us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001509745lptx:WarrantsToPurchaseCommonStockMember2021-04-012021-06-300001509745us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-06-300001509745us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001509745lptx:WarrantsToPurchaseCommonStockMember2021-01-012021-06-300001509745us-gaap:EmployeeStockOptionMemberus-gaap:ResearchAndDevelopmentExpenseMember2022-04-012022-06-300001509745us-gaap:EmployeeStockOptionMemberus-gaap:GeneralAndAdministrativeExpenseMember2022-04-012022-06-300001509745us-gaap:EmployeeStockOptionMember2022-04-012022-06-300001509745us-gaap:EmployeeStockOptionMemberus-gaap:ResearchAndDevelopmentExpenseMember2022-01-012022-06-300001509745us-gaap:EmployeeStockOptionMemberus-gaap:GeneralAndAdministrativeExpenseMember2022-01-012022-06-300001509745us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001509745us-gaap:EmployeeStockOptionMemberus-gaap:ResearchAndDevelopmentExpenseMember2021-04-012021-06-300001509745us-gaap:EmployeeStockOptionMemberus-gaap:GeneralAndAdministrativeExpenseMember2021-04-012021-06-300001509745us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001509745us-gaap:EmployeeStockOptionMemberus-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-06-300001509745us-gaap:EmployeeStockOptionMemberus-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-06-300001509745us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001509745us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-300001509745us-gaap:AdditionalPaidInCapitalMember2022-01-012022-06-300001509745us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001509745us-gaap:AdditionalPaidInCapitalMember2021-01-012021-06-300001509745us-gaap:LicensingAgreementsMember2022-06-300001509745lptx:LicenseAndServiceAgreementsMember2022-06-300001509745lptx:WarrantsSeptember2021Memberus-gaap:CommonStockMember2021-09-242021-09-240001509745lptx:EquityIncentivePlan2016Member2017-01-202017-01-2000015097452020-12-3100015097452022-04-012022-06-3000015097452021-04-012021-06-3000015097452021-01-012021-12-3100015097452021-01-012021-06-3000015097452022-06-3000015097452021-12-3100015097452022-08-1000015097452022-01-012022-06-30xbrli:sharesiso4217:USDxbrli:purelptx:itemiso4217:USDxbrli:shares

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to                          

Commission file number: 001-37990

LEAP THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware
State or other jurisdiction of
incorporation or organization

    

27-4412575
(I.R.S. Employer
Identification No.)

47 Thorndike St, Suite B1-1, Cambridge, MA
Address of Principal Executive Offices

02141
Zip Code

(617) 714-0360

Registrant’s Telephone Number, Including Area Code

N/A

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Common Stock, par value $0.001 per share

LPTX

Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

    

Accelerated filer 

Non-accelerated filer 

 

Smaller reporting company 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes     No

As of August 10, 2022 there were 99,021,376 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements which reflect our current views with respect to, among other things, our operations and financial performance. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” or the negative of such terms or any other comparable terminology. Forward-looking statements appear in a number of places throughout this Quarterly Report and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, that the initiation, conduct, and completion of clinical trials, laboratory operations, manufacturing campaigns, and other studies may be delayed, adversely affected, or impacted by COVID-19 related issues; our ability and plan to develop and commercialize DKN-01; status, timing and results of preclinical studies and clinical trials; the potential benefits of DKN-01; the timing of our development programs and seeking regulatory approval of DKN-01; our ability to obtain and maintain regulatory approval; our estimates of expenses and future revenues and profitability; our estimates regarding our capital requirements and our needs for additional financing; our estimates of the size of the potential markets for DKN-01; the benefits to be derived from our agreement with BeiGene, Ltd. (“BeiGene”) or any other collaborations, license agreements, or other acquisition efforts, including those relating to the development and commercialization of DKN-01; sources of revenues and anticipated revenues, including contributions from our agreement with BeiGene or any other collaborations or license agreements for the development and commercialization of products; our ability to create an effective sales and marketing infrastructure if we elect to market and sell DKN-01 directly; the rate and degree of market acceptance of DKN-01; the timing and amount of reimbursement for DKN-01; the success of other competing therapies that may become available; the manufacturing capacity for DKN-01; our intellectual property position; our ability to maintain and protect our intellectual property rights; our results of operations, financial condition, liquidity, prospects, growth and strategies; the industry in which we operate; and the trends that may affect the industry or us.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change, and depend on economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Quarterly Report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report, they may not be predictive of results or developments in future periods. You should carefully read this Quarterly Report and any documents that we have filed as exhibits to this Quarterly Report completely.

You should refer to Part II, Item 1A, Risk Factors in this Quarterly Report and Part I, Item 1A, Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on March 11, 2022 for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard any such statement as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. Any forward-looking statement that we make in this Quarterly Report speaks only as of the date of such statement, and, except to the extent required by applicable law, we undertake no obligation to update such statements to reflect events or circumstances after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

DKN-01 is an investigational drug undergoing clinical development and has not been approved by the U.S. Food and Drug Administration (the “FDA”), nor has it been submitted to the FDA for approval. DKN-01 has not been, and may never be, approved by any regulatory agency or marketed anywhere in the world. Statements contained in this Quarterly Report should not be deemed to be promotional.

3

INTRODUCTORY COMMENT

References to Leap

Throughout this Quarterly Report on Form 10-Q, the “Company,” “Leap,” “Leap Therapeutics,” “we,” “us,” and “our,” except where the context requires otherwise, refer to Leap Therapeutics, Inc. and its consolidated subsidiaries, and “our board of directors” refers to the board of directors of Leap Therapeutics, Inc.

4

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

LEAP THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

June 30, 

December 31, 

    

2022

    

2021

(Unaudited)

Assets

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

90,883

$

114,916

Research and development incentive receivable

 

1,130

 

1,189

Prepaid expenses and other current assets

 

428

 

769

Total current assets

 

92,441

 

116,874

Property and equipment, net

 

28

 

36

Right-of-use assets, net

863

459

Research and development incentive receivable, net of current portion

610

Deferred tax assets

150

159

Other long term assets

60

90

Deposits

 

51

 

293

Total assets

$

94,203

$

117,911

Liabilities and Stockholders’ Equity

 

 

  

Current liabilities:

 

 

  

Accounts payable

$

7,553

$

4,189

Accrued expenses

 

2,463

 

5,366

Lease liability - current portion

395

432

Total current liabilities

10,411

9,987

Non current liabilities:

Lease liability, net of current portion

474

37

Total liabilities

10,885

10,024

 

 

  

Stockholders’ equity:

Common stock, $0.001 par value; 240,000,000 shares authorized; 88,318,454 shares issued and outstanding

 

88

 

88

Additional paid-in capital

 

374,108

 

371,638

Accumulated other comprehensive income (loss)

 

94

 

(267)

Accumulated deficit

 

(290,972)

 

(263,572)

Total stockholders’ equity

 

83,318

 

107,887

Total liabilities and stockholders’ equity

$

94,203

$

117,911

See notes to condensed consolidated financial statements.

5

LEAP THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share amounts)

(Unaudited)

Three Months Ended June 30, 

 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

License revenue

$

$

375

$

$

750

Operating expenses:

Research and development

14,045

7,206

21,829

14,013

General and administrative

 

2,855

 

2,795

 

5,703

 

5,535

Total operating expenses

 

16,900

 

10,001

 

27,532

 

19,548

Loss from operations

 

(16,900)

 

(9,626)

 

(27,532)

 

(18,798)

Interest income

 

39

 

1

 

44

 

3

Interest expense

(17)

(16)

(38)

(30)

Australian research and development incentives

 

587

 

244

 

624

 

315

Foreign currency loss

(733)

(129)

(498)

(150)

Net loss attributable to common stockholders

$

(17,024)

$

(9,526)

$

(27,400)

$

(18,660)

Net loss per share

Basic & diluted

$

(0.15)

$

(0.12)

$

(0.24)

$

(0.24)

Weighted average common shares outstanding

Basic & diluted

113,248,937

76,389,525

113,248,937

76,384,077

See notes to condensed consolidated financial statements.

6

LEAP THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(Unaudited)

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021

Net loss

$

(17,024)

$

(9,526)

$

(27,400)

$

(18,660)

Other comprehensive income:

 

 

Foreign currency translation adjustments

519

 

115

361

 

130

Comprehensive loss

$

(16,505)

$

(9,411)

$

(27,039)

$

(18,530)

See notes to condensed consolidated financial statements.

7

LEAP THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three and Six Months Ended June 30, 2021

(In thousands, except share amounts)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Equity

Balances at March 31, 2021

 

59,669,722

$

60

$

271,002

$

(564)

$

(232,119)

$

38,379

Issuance of common stock upon exercise of stock options

 

2,292

 

 

4

 

 

 

4

Foreign currency translation adjustment

 

 

 

 

115

 

 

115

Stock-based compensation

 

 

 

912

 

 

 

912

Net loss

 

 

 

 

 

(9,526)

 

(9,526)

Balances at June 30, 2021

 

59,672,014

$

60

$

271,918

$

(449)

$

(241,645)

$

29,884

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Loss

    

Deficit

    

Equity

Balances at December 31, 2020

 

59,657,742

$

60

$

270,155

$

(579)

$

(222,985)

$

46,651

Issuance of common stock upon exercise of warrants

 

11,980

 

 

14

 

 

 

14

Issuance of common stock upon exercise of stock options

2,292

4

4

Foreign currency translation adjustment

 

 

 

 

130

 

 

130

Stock-based compensation

 

 

 

1,745

 

 

 

1,745

Net loss

 

 

 

 

 

(18,660)

 

(18,660)

Balances at June 30, 2021

 

59,672,014

$

60

$

271,918

$

(449)

$

(241,645)

$

29,884

See notes to condensed consolidated financial statements.

8

LEAP THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three and Six Months Ended June 30, 2022

(In thousands, except share amounts)

(Unaudited)

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

Shares

Amount

Capital

Income (Loss)

    

Deficit

Equity

Balances at March 31, 2022

 

88,318,454

$

88

$

372,842

$

(425)

$

(273,948)

$

98,557

Foreign currency translation adjustment

 

 

 

 

519

 

 

519

Stock-based compensation

 

 

 

1,266

 

 

 

1,266

Net loss

 

 

 

 

 

(17,024)

 

(17,024)

Balances at June 30, 2022

 

88,318,454

$

88

$

374,108

$

94

$

(290,972)

$

83,318

Accumulated

Additional

Other

Total

Common Stock

Paid-in

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Equity

Balances at December 31, 2021

 

88,318,454

$

88

$

371,638

$

(267)

$

(263,572)

$

107,887

Foreign currency translation adjustment

 

 

 

 

361

 

 

361

Stock-based compensation

 

 

 

2,470

 

 

 

2,470

Net loss

 

 

 

 

 

(27,400)

 

(27,400)

Balances at June 30, 2022

 

88,318,454

$

88

$

374,108

$

94

$

(290,972)

$

83,318

See notes to condensed consolidated financial statements.

9

LEAP THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended June 30, 

    

2022

    

2021

Cash flows from operating activities:

 

  

 

  

Net loss

$

(27,400)

$

(18,660)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Depreciation expense

 

8

 

14

Amortization of contract asset

68

Change in right-of-use asset

206

191

Stock-based compensation expense

 

2,470

 

1,745

Foreign currency loss

498

150

Change in fair value of restricted stock liability

(204)

Changes in operating assets and liabilities:

 

 

Prepaid expenses and other assets

 

336

 

(134)

Research and development incentive receivable

 

(638)

 

(258)

Deferred offering costs

209

Accounts payable and accrued expenses

 

679

 

1,488

Deferred revenue

(750)

Lease liability

(208)

(198)

Other assets

272

Net cash used in operating activities

 

(23,777)

 

(16,339)

Cash flows from financing activities:

 

 

Proceeds from the exercise of common stock warrants

 

 

14

Proceeds from the exercise of stock options

 

 

4

Payment of deferred costs

 

(210)

 

Net cash provided by (used in) financing activities

 

(210)

 

18

Effect of exchange rate changes on cash and cash equivalents

 

(46)

 

(16)

Net decrease in cash and cash equivalents

 

(24,033)

 

(16,337)

Cash and cash equivalents at beginning of period

 

114,916

 

52,071

Cash and cash equivalents at end of period

$

90,883

$

35,734

Supplemental disclosure of non-cash investing and financing activities:

Remeasurement of right-of-use asset and lease liability

$

609

$

See notes to condensed consolidated financial statements.

10

Leap Therapeutics, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

(Unaudited)

1. Nature of Business, Basis of Presentation and Liquidity

Nature of Business

Leap Therapeutics, Inc. was incorporated in the state of Delaware on January 3, 2011. During 2015, HealthCare Pharmaceuticals Pty Ltd. (“HCP Australia”) was formed and is a wholly owned subsidiary of the Company. On December 15, 2021, Leap Securities Corp. was formed and is a wholly owned subsidiary of the Company.

The Company is a biopharmaceutical company acquiring and developing novel therapeutics at the leading edge of cancer biology. The Company’s approach is designed to target compelling tumor-promoting and immuno-oncology pathways to generate durable clinical benefit and enhanced outcomes for patients. The Company’s programs are monoclonal antibodies that target key cellular pathways that enable cancer to grow and spread and specific mechanisms that activate the body’s immune system to identify and attack cancer.

Basis of Presentation

The accompanying condensed consolidated financial statements as of June 30, 2022 and for the three and six months ended June 30, 2022 and 2021 have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the SEC on March 11, 2022.

The condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments which are necessary for the fair presentation of the Company’s financial position as of June 30, 2022, statements of operations and statements of comprehensive loss for the three and six months ended June 30, 2022 and 2021 and statements of cash flows for the six months ended June 30, 2022 and 2021. Such adjustments are of a normal and recurring nature. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2022.

Liquidity

Since inception, the Company has been engaged in organizational activities, including raising capital, and research and development activities. The Company does not yet have a product that has been approved by the Food and Drug Administration (the “FDA”), has not generated any product sales revenues and has not yet achieved profitable operations, nor has it ever generated positive cash flows from operations. There is no assurance that profitable operations, if achieved, could be sustained on a continuing basis. Further, the Company’s future operations are dependent on the success of the Company’s efforts to raise additional capital, its research and commercialization efforts, regulatory approval, and, ultimately, the market acceptance of the Company’s products.

In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. As of June 30, 2022, the Company had cash and cash equivalents of $90,883. Additionally, the Company had an accumulated deficit of $290,972 at June 30, 2022, and during the six months ended June 30, 2022, the Company incurred a net loss of $27,400. The Company expects to continue to generate operating losses for the foreseeable future. The Company believes that its cash and cash equivalents of $90,883 as of June 30, 2022 will be sufficient to fund its operating expenses for at least the next 12 months from issuance of these financial statements.

11

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions are eliminated upon consolidation.

Use of Estimates

The presentation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Research and development incentive income and receivable

The Company recognizes other income from Australian research and development incentives when there is reasonable assurance that the income will be received, the relevant expenditure has been incurred, and the consideration can be reliably measured. The research and development incentive is one of the key elements of the Australian Government’s support for Australia’s innovation system and is supported by legislative law primarily in the form of the Australian Income Tax Assessment Act 1997, as long as eligibility criteria are met.

Management has assessed the Company’s research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the research and development incentive regime described above. At each period end, management estimates the refundable tax offset available to the Company based on available information at the time.

Under the program, a percentage of eligible research and development expenses incurred by the Company through its subsidiary in Australia are reimbursed. The percentage was 43.5% for the year ended December 31, 2021 and for the six months ended June 30, 2022.

The research and development incentive receivable represents an amount due in connection with the above program. The Company recorded a research and development incentive receivable of $1,740 and $1,189 as of June 30, 2022 and December 31, 2021, respectively, in the condensed consolidated balance sheets and other income from Australian research and development incentives of $587 and $244, respectively, for the three months ended June 30, 2022 and 2021, and $624 and $315 for the six months ended June 30, 2022 and 2021, respectively, in the condensed consolidated statements of operations related to refundable research and development incentive program payments in Australia.

The following table shows the change in the research and development incentive receivable from January 1, 2021 to June 30, 2022 (in thousands):

Balance at January 1, 2021

    

73

Australian research and development incentive income, net

 

1,226

Cash received for 2020 eligible expenses

 

(111)

Foreign currency translation

 

1

Balance at December 31, 2021

$

1,189

Australian research and development incentive income, net

624

Foreign currency translation

(73)

Balance at June 30, 2022

$

1,740

12

Foreign Currency Translation

The financial statements of the Company’s Australian subsidiary are measured using the local currency as the functional currency. Assets and liabilities of this subsidiary are translated into U.S. dollars at an exchange rate as of the consolidated balance sheet date. Equity is translated at historical exchange rates. Revenues and expenses are translated into U.S. dollars at average rates of exchange in effect during the period. The resulting cumulative translation adjustments have been recorded as a separate component of stockholders’ equity. Realized and unrealized foreign currency transaction gains and losses are included in the results of operations.

Deposits

As of June 30, 2022 and December 31, 2021, there were $51 and $293, respectively, of deposits made by the Company with certain service providers that are to be applied to future payments due under the service agreements or returned to the Company if not utilized which were recorded in the condensed consolidated balance sheets.

Warrants

The Company will recognize on a prospective basis the value of the effect of the down round feature in the warrants to purchase shares of common stock that were issued in a private placement in November 2017 (the “2017 Warrants”) when it is triggered (i.e., when the exercise price is adjusted downward). This value is measured as the difference between (1) the financial instrument’s fair value (without the down round feature) using the pre-trigger exercise price and (2) the financial instrument’s fair value (with the down round feature) using the reduced exercise price. The value of the effect of the down round feature will be treated as a dividend and a reduction to income available to common stockholders in the basic EPS calculation.

Fair Value of Financial Instruments

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

13

During the periods presented, the Company did not change the manner in which it values assets and liabilities that are measured at fair value using Level 3 inputs. There were no transfers within the hierarchy during the six months ended June 30, 2022 or the year ended December 31, 2021.

A summary of the assets and liabilities carried at fair value in accordance with the hierarchy defined above is as follows (in thousands):

    

Total

    

Level 1

    

Level 2

    

Level 3

June 30, 2022

Assets:

Cash equivalents

$

88,747

$

88,747

$

$

Total assets

$

88,747

$

88,747

$

$

December 31, 2021

Assets:

Cash equivalents

$

112,726

$

112,726

$

$

Total assets

$

112,726

$

112,726

$

$

Cash equivalents of $88,747 and $112,726 as of June 30, 2022 and December 31, 2021, respectively, consisted of overnight investments and money market funds and are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

The carrying values of the research and development incentive receivable, accounts payable and accrued liabilities approximate their fair value due to the short-term nature of these assets and liabilities.

Leases

The Company accounts for leases in accordance with Accounting Standards Codification, or ASC, Topic 842, Leases.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present. Most leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected remaining lease term. The Company has determined that the rate implicit in the lease is not determinable and the Company does not have borrowings with similar terms and collateral. Therefore, the Company considered a variety of factors, including observable debt yields from comparable companies and the volatility in the debt market for securities with similar terms, in determining that 8% was reasonable to use as the incremental borrowing rate for purposes of the calculation of lease liabilities.

In accordance with the guidance in Topic 842, components of a lease should be split into three categories: lease components (e.g. land, building, etc.), non-lease components (e.g. common area maintenance, maintenance, consumables, etc.), and non-components (e.g. property taxes, insurance, etc.). Then the fixed and in-substance fixed contract consideration (including any related to non-components) must be allocated based on fair values to the lease components and non-lease components.

Although separation of lease and non-lease components is required, certain practical expedients are available. Entities may elect the practical expedient to not separate lease and non-lease components. Rather, they would account for each lease component and the related non-lease component together as a single component. The Company has elected to account for the lease and non-lease components of each of its operating leases as a single lease component and allocate all of the contract consideration to the lease component only. The lease component results in an operating right-of-use asset being recorded on the consolidated balance sheets and amortized such that lease expense is recorded on a straight line basis over the term of the lease.

14

Revenue Recognition

The Company records revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

License revenue. The Company’s performance obligations under its license agreements may include providing intellectual property licenses, performing technology transfer, performing research and development consulting services and notifying the customer of any enhancements to licensed technology or new technology that it discovers, among others. The Company determined that its performance obligations under its license agreements as evaluated at contract inception were not distinct and represented a single performance obligation. Upfront payments are amortized to revenue on a straight-line basis over the performance period. Upfront payment contract liabilities resulting from the Company’s license agreements do not represent a financing component as the payment is not financing the transfer of goods or services, and the technology underlying the licenses granted reflects research and development expenses already incurred by the Company. Generally, all amounts received or due other than sales-based milestones and royalties are classified as license revenues. Sales-based milestones and royalties under the Company’s license agreements will be recognized as royalty revenue in the period the related sale occurred. The Company generally invoices its licensees upon the completion of the effort or achievement of a milestone, based on the terms of each agreement. Deferred revenue arises from amounts received in advance of the culmination of the earnings process and is recognized as revenue in future periods as performance obligations are satisfied. Deferred revenue expected to be recognized within the next twelve months is classified as a current liability.

Research and Development Services. The promises under the Company’s license agreements may include research and development services to be performed by the Company on behalf of the customer. Payments or reimbursements resulting from the Company’s research and development efforts are recognized as the services are performed and presented on a gross basis because the Company is the principal for such efforts.

Customer Options. If an arrangement is determined to contain customer options that allow the customer to acquire additional goods or services, the goods and services underlying the customer options that are not determined to be material rights are not considered to be performance obligations at the outset of the arrangement, as they are contingent upon option exercise. The Company evaluates the customer options for material rights, or options to acquire additional goods or services for free or at a discount. If the customer options are determined to represent a material right, the material right is recognized as a separate performance obligation at the outset of the arrangement. The Company allocates the transaction price to material rights based on the relative standalone selling price, which is determined based on the identified discount and the probability that the customer will exercise the option. Amounts allocated to a material right are not recognized as revenue until (1) the option is exercised and the additional goods or services are transferred or (2) the option expires.

Milestone Payments. At the inception of each arrangement that includes research or development milestone payments, the Company evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The Company evaluates factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment. There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur. At the end of each subsequent reporting period, the Company reevaluates the probability of achievement of all milestones subject to constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

15

Royalties. For arrangements that include sales-based royalties, including milestone payments upon first commercial sales and milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied. To date, the Company has not recognized any royalty revenue resulting from any of its licensing arrangements.

Collaborative Arrangements

The Company analyzes its collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (ASC 808). This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore within the scope of ASC 606. For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606. Amounts that are owed to collaboration partners are recognized as an offset to collaboration revenues as such amounts are incurred by the collaboration partner. Where amounts owed to a collaboration partner exceed the Company’s collaboration revenues in each quarterly period, such amounts are classified as research and development expense. Reimbursements from and payments to the customer that are the result of a collaborative relationship with a partner, instead of a customer relationship, such as co-development activities, are recorded as a reduction to research and development expense. For those elements of the arrangement that are accounted for pursuant to ASC 606, the Company applies the five-step model described above under ASC 606.

See Note 3 for a complete discussion of the revenue recognition for the Company’s license agreement.

Net Loss per Share

Basic net loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted average number of common shares outstanding during the period and, if dilutive, the weighted average number of potential shares of common stock, including the assumed exercise of stock options and warrants.

Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. Subsequent events have been evaluated as required.

Recent Accounting Pronouncements

For a discussion of recent accounting pronouncements please refer to Note 2, “Summary of Significant Accounting Policies”, in the Company’s previously filed Annual Report on Form 10-K for the year ended December 31, 2021.

3. BeiGene Exclusive Option and License Agreement

Terms of Agreement

On January 3, 2020, the Company entered into an exclusive option and license agreement (the BeiGene Agreement”) with BeiGene, Ltd. (BeiGene”) for the clinical development and commercialization of DKN-01, in Asia (excluding Japan), Australia, and New Zealand. The Company retains exclusive rights for the development, manufacturing, and commercialization of DKN-01 for the rest of the world.

16

Pursuant to the BeiGene Agreement, the Company received an upfront cash payment of $3,000 from BeiGene in exchange for granting BeiGene an option to an exclusive license to develop and commercialize DKN-01 in Asia (excluding Japan), Australia, and New Zealand. The Company is eligible to receive up to $132,000 in future option exercise and milestone payments, based upon the achievement of certain development, regulatory, and sales milestones, as well as tiered royalties on any product sales of DKN-01 in the licensed territory.

The Company is responsible for conducting development activities prior to the exercise of the option. After the option is exercised, BeiGene is solely responsible for the development and commercialization of DKN-01 in the territory. The BeiGene Agreement continues in effect until the earlier of: (i) 120 days after the end of the option period, if BeiGene has not exercised the option by such date; and (ii) on a country-by country and Licensed Product-by-Licensed Product (as defined in the BeiGene Agreement) basis, the expiration of the Royalty Term (as defined in the BeiGene Agreement) applicable to such licensed product in such country. At any time, BeiGene may terminate the BeiGene Agreement by providing at least 60 days written notice of termination to the Company. Upon termination of the License Agreement, all rights granted by the Company to BeiGene terminate.

Revenue Recognition

The Company evaluated the BeiGene Agreement to determine whether it is a collaborative arrangement for purposes of ASC 808. The Company concluded that because both parties were active participants and were exposed to the risks and rewards of the BeiGene Agreement, that such activities are under the scope of ASC 808. The Company concluded that BeiGene was a customer with regard to the combined license and research and development activities and as such the contract should be evaluated under ASC 606.

In determining the appropriate amount of revenue to be recognized under ASC 606 as the Company fulfills its obligations under the BeiGene Agreement, the Company performs the following steps: (i) identifies the promised goods or services in the contract; (ii) determines whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measures the transaction price, including any constraints on variable consideration; (iv) allocates the transaction price to the performance obligations; and (v) recognizes revenue when (or as) the Company satisfies each performance obligation.

The Company identified the following material promises under the BeiGene Agreement: (1) option to an exclusive license to develop and commercialize DKN-01 in Asia (excluding Japan), Australia, and New Zealand, (2) participation in a joint development committee, (3) technology transfer services and (4) pre-option research and development services. The Company determined that the option to an exclusive license in the territory does not represent a material right. Additionally, the Company determined that the participation in the joint development committee, research and development services and technology transfer services are not distinct from each other, as each has limited value without the other. As such, for the purposes of ASC 606, the Company determined that these four material promises, described above, should be combined into a single performance obligation.

The Company determined the transaction price was equal to the up-front fee of $3,000. The transaction price was fully allocated to the single performance obligation and was recognized as revenue on a straight-line basis over the performance period of the research and development services. During the three and six months ended June 30, 2021, the Company recognized $375 and $750, respectively, of license revenue related to the up-front fee received from BeiGene. During the three and six months ended June 30, 2022, the Company did not recognize any such revenue as the upfront payment was fully recognized as of December 31, 2021.

Cost of contract acquisition

The Company incurred contract acquisition costs of $270 which were capitalized under ASC 340-40 as incremental costs of obtaining the contract with BeiGene. This cost was amortized on a straight-line basis over the performance period of the research and development services. The total amount of amortization expense during the three and six months ended June 30, 2021 was $34 and $68, respectively. During the three and six months ended June 30, 2022, the Company did not recognize any such amortization expense as the contract acquisition costs were fully amortized as of December 31, 2021.

Royalties

As the license is deemed to be the predominant item to which sales-based royalties relate, the Company will recognize revenue when the related sales occur. No royalty revenue was recognized during the six months ended June 30, 2022 and 2021.

17

4. Accrued Expenses

Accrued expenses consist of the following:

June 30, 

    

December 31, 

    

2022

    

2021

Clinical trials

$

1,092

$

2,499

Professional fees

 

108

 

181

Payroll and related expenses

 

1,263

 

2,686

Accrued expenses

$

2,463

$

5,366

5. Leases

The Company has operating leases for real estate in the United States and does not have any finance leases. The Company’s leases may contain options to renew and extend lease terms and options to terminate leases early. Reflected in the right-of-use asset and lease liability on the Company’s consolidated balance sheets are the periods provided by renewal and extension options that the Company is reasonably certain to exercise, as well as the periods provided by termination options that the Company is reasonably certain to not exercise.

The Company’s existing lease includes variable lease and non-lease components that are not included in the right-of-use asset and lease liability and are reflected as an expense in the period incurred. Such payments primarily include common area maintenance charges and increases in rent payments that are driven by factors such as future changes in an index (e.g., the Consumer Price Index).

In calculating the present value of future lease payments, the Company utilized its incremental borrowing rate based on the lease term. The Company has elected to account for each lease component and its associated non-lease components as a single lease component and has allocated all of the contract consideration across lease components only. This will potentially result in the initial and subsequent measurement of the balances of the right-of-use asset and lease liability for leases being greater than if the policy election was not applied. The Company has existing net leases in which the non-lease components (e.g. common area maintenance, maintenance, consumables, etc.) are paid separately from rent based on actual costs incurred and therefore are not included in the right-of-use asset and lease liability and are reflected as an expense in the period incurred. During the three months ended June 30, 2022, the Company extended the term of its operating lease and recorded an additional right-of-use asset and lease liability of $609. As of June 30, 2022, a right-of-use asset of $863 and lease liability of $869 are reflected on the condensed consolidated balance sheets. The Company recorded rent expense of $112 and $105, respectively, during the three months ended June 30, 2022 and 2021, and $220 and $210, respectively, during the six months ended June 30, 2022 and 2021.

Future lease payments under non-cancelable operating leases as of June 30, 2022 are detailed as follows:

Future Operating Lease Payments

2022

    

$

222

2023

 

452

2024

268

Total Lease Payments

 

942

Less: imputed interest

 

(73)

Total operating lease liabilities

$

869

18

6. Warrants

As of June 30, 2022, outstanding warrants to purchase common stock, all of which are classified as equity warrants, consisted of the following:

June 30, 2022

Number of Shares

Description

    

Issuable

    

Exercise Price

    

Expiration Date

January 23 2017 Warrants

54,516

$

0.01

Upon M&A Event

2017 Warrants

2,502,382

$

1.055

November 2024

2019 Warrants

7,008,257

$

1.95

February 2026

March 2020

14,413,902

$

0.001

No Expiry

March 2020

25,945,035

$

2.11

Jan - March 2027

June 2020

1,690,137

$

0.001

No Expiry

September 2021

8,771,928

$

0.001

No Expiry

60,386,157

2017 Warrants

The 2017 Warrants contain full ratchet anti-dilution protection provisions. The Company will recognize on a prospective basis the value of the effect of the down round feature in the 2017 Warrants when it is triggered (i.e., when the exercise price is adjusted downward). This value is measured as the difference between (1) the financial instrument’s fair value (without the down round feature) using the pre-trigger exercise price and (2) the financial instrument’s fair value (with the down round feature) using the reduced exercise price. The value of the effect of the down round feature will be treated as a dividend and a reduction to income available to common stockholders in the basic EPS calculation.

2019 Warrants

On February 5, 2019, in connection with the 2019 Public Offering, the Company issued immediately exercisable warrants (the “2019 Warrants”) to purchase 7,557,142 shares of common stock to investors. The 2019 Warrants have an exercise price of $1.95 per share and expire on February 5, 2026. The 2019 Warrants qualify for equity classification.

March 2020 Warrants

On January 3, 2020, the Company entered into a Securities Purchase Agreement with investors, providing for a private placement transaction exempt from the Securities Act of 1933, as amended, pursuant to which the Company issued and sold 1,421,801 shares of its Series A Preferred Stock, at a purchase price of $10.54 per share, and 1,137,442 shares of its Series B Preferred Stock at a purchase price of $10.55 per share, and one (1) share of the Company’s Special Voting Stock entitling the purchaser of Series A Preferred Stock to elect one member of the Company’s board of directors.

On March 5, 2020, the Company’s stockholders approved the conversion of the Series A Preferred Stock into a pre-funded warrant to purchase 14,413,902 shares of common stock at an exercise price of $0.001 (the “March 2020 Pre-funded Warrants”) and the conversion of the Series B Preferred Stock into 11,531,133 shares of common stock. Each investor also received a warrant to purchase an equal number of shares of common stock at an exercise price of $2.11 per share (the “Coverage Warrants”). The March 2020 Pre-funded Warrants and the Coverage Warrants qualify for equity classification.

June 2020 Warrants

On June 22, 2020, the Company completed a public offering (the “2020 Public Offering”) whereby the Company issued 20,250,000 shares of its common stock, at $2.00 per share and, in lieu of common stock, offered pre-funded warrants (the “June 2020 Pre-funded Warrants”) to purchase up to 2,250,000 shares of its common stock to certain investors. The June 2020 Pre-funded Warrants have an exercise price of $0.001 per share and qualify for equity classification.

19

September 2021 Warrants

On September 24, 2021, the Company completed a public offering (the “2021 Public Offering”) whereby the Company issued 27,568,072 shares of its common stock, at $2.85 per share and, in lieu of common stock, offered pre-funded warrants (the “September 2021 Pre-funded Warrants”) to purchase up to 8,771,928 shares of its common stock to certain investors. The September 2021 Pre-funded Warrants have an exercise price of $0.001 per share and qualify for equity classification.

7. Common Stock

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of the preferred stockholders. Through June 30, 2022, no dividends have been declared for shares of common stock.

Public Offering of Common Stock – September 2021

On September 24, 2021, the Company completed the 2021 Public Offering, whereby the Company issued 22,828,072 shares of its common stock at $2.85 per share and, in lieu of common stock, issued certain investors 8,771,928 of its September 2021 Pre-funded Warrants. The September 2021 Pre-funded Warrants have an exercise price of $0.001 per share and qualify for equity classification. The underwriters exercised their right to purchase 4,740,000 additional shares of the Company’s common stock at the public offering price per share of common stock, less underwriting discounts and commissions. The aggregate net proceeds received by the Company from the 2021 Public Offering were approximately $96,828 net of underwriting discounts and commissions and offering expenses payable by the Company.

8. Equity Incentive Plans

Equity Incentive Plans

In September 2012, the Company adopted the 2012 Equity Incentive Plan, as amended, which provides designated employees of the Company and its affiliates, certain consultants and advisors who perform services for the Company and its affiliates, and nonemployee members of the board of directors of the Company and its affiliates with the opportunity to receive grants of incentive stock options, nonqualified stock options and stock awards.

On January 20, 2017, the Company’s stockholders approved the 2016 Equity Incentive Plan (the “2016 Plan”). Beginning on January 1, 2018, the number of shares of common stock authorized for issuance pursuant to the 2016 Plan was increased each January 1 by an amount equal to four percent (4%) of the Company’s outstanding common stock as of the end of the immediately preceding calendar year or such other amount as determined by the compensation committee of the Company’s board of directors.

On June 16, 2022, the Company’s stockholders approved the 2022 Equity Incentive Plan (the “2022 Plan”), which provides for a total of 7,500,000 new shares of the Company’s common stock to be granted.

As of June 30, 2022, there were 7,768,193 shares available for grant under the Company’s equity incentive plans.

A summary of stock option activity under the Equity Plans is as follows:

    

    

Weighted

    

    

 

Average

 

Weighted

 

Aggregate

 

Exercise Price

 

Average Remaining

 

Intrinsic

    

Options

    

Per Share

    

Life in Years

    

Value

Outstanding at December 31, 2021

 

8,525,618

$

4.48

 

7.58

 

Granted

745,000

$

1.89

Forfeited

 

(224,198)

$

2.10

 

Outstanding at June 30, 2022

 

9,046,420

$

4.31

 

7.20

$

2

Options exercisable at June 30, 2022

 

6,499,613

$

5.20

 

6.62

$

1

Options vested and expected to vest at June 30, 2022

 

9,046,420

$

4.31

 

7.20

$

2

20

The grant date fair value of the options granted during the six months ended June 30, 2022 and 2021 was estimated at the date of grant using the Black-Scholes option valuation model. The expected life was estimated using the “simplified” method as defined by the SEC’s Staff Accounting Bulletin 107, Share-Based Payment. The expected volatility was based on the historical volatility of comparable public companies from a representative peer group selected based on industry and market capitalization data. The risk-free interest rate was based on the continuous rates provided by the U.S. Treasury with a term approximating the expected life of the option. The expected dividend yield was 0% because the Company does not expect to pay any dividends for the foreseeable future. The Company elected the straight-line attribution method in recognizing the grant date fair value of options issued over the requisite service periods of the awards, which are generally the vesting periods.

The weighted average grant date fair value for the stock options granted during the six months ended June 30, 2022 and 2021 was $1.35 and $2.21 per share, respectively.

The assumptions that the Company used to determine the grant-date fair value of stock options granted to employees and directors during the six months ended June 30, 2022 and 2021 were as follows, presented on a weighted average basis:

Six Months

Six Months

Ended June 30,

Ended June 30,

    

2022

    

2021

Expected volatility

82.70

%

66.94

%

Weighted average risk-free interest rate

1.82

%

0.8

%

Expected dividend yield

0.00

%

0.00

%

Expected term (in years)

6.44

6.86

Stock options generally vest over a three or four year period, as determined by the compensation committee of the board of directors at the time of grant. The options expire ten years from the grant date. As of June 30, 2022, there was approximately $3,151 of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a remaining weighted-average period of approximately 1.66 years.

Restricted Stock Units

During the six months ended June 30, 2022 and 2021, the Company granted 2,575,000 and 275,000, respectively, RSUs to employees that will cliff vest and will be settled after three years of continuous service, or upon a change of control of the Company, whichever is earlier, pursuant to the 2016 Plan.

The following table presents RSU activity under the 2016 Plan during the six months ended June 30, 2022:

Weighted

Average Grant

    

Number of Shares

    

Date Fair Value

Outstanding at December 31, 2021

 

935,606

$

1.76

Awarded

2,575,000

$

1.94

Outstanding at June 30, 2022

 

3,510,606

$

1.89

As of June 30, 2022, there were 3,510,606 shares outstanding covered by RSUs that are expected to vest with a weighted average grant date fair value of $1.89 per share and an aggregate grant date fair value of approximately $6,640. As of June 30, 2022, there was approximately $4,902 of unrecognized compensation costs related to RSUs granted to employees, which are expected to be recognized as expense over a remaining weighted average period of 2.43 years.

The Company recognized stock-based compensation expense related to the issuance of stock option awards and RSUs to employees and non-employees in the condensed consolidated statements of operations during the three and six months ending June 30, 2022 and 2021 as follows:

21

Stock Based Compensation Expense

Three Months Ended June 30, 

Six Months Ended June 30, 

    

2022

    

2021

    

2022

    

2021