10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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 March 31, 2022

OR

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: 001-40629

 

CANDEL THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

52-2214851

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

117 Kendrick St, Suite 450
Needham, MA

02494

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 916-5445

 

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 $0.01 per share

 

CADL

 

The 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, 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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No

As of May 4, 2022, the registrant had 28,693,151 shares of common stock, $0.01 par value per share, outstanding.

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or Form 10-Q, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by these forward-looking statements. Forward-looking statements in this Form 10-Q may include, but are not limited to, statements about:

the timing and the success of preclinical studies and clinical trials of CAN-2409 and CAN-3110 and any other product candidates;
the initiation of any clinical trials of CAN-2409 and CAN-3110 and any other product candidates;
our need to raise additional funding before we can expect to generate any revenues from product sales;
our ability to conduct successful clinical trials or obtain regulatory approval for CAN-2409 and CAN-3110 or any other product candidates that we may identify or develop;
the ability of our research to generate and advance additional product candidates;
the effect of the ongoing COVID-19 pandemic, including mitigation efforts and economic effects, on any of the foregoing or other aspects of our business operations;
our ability to establish an adequate safety or efficacy profile for CAN-2409, CAN-3110 or any other product candidates that we may pursue;
our ability to manufacture CAN-2409, CAN-3110 or any other product candidate in conformity with our specifications and the U.S. Food and Drug Administration’s (FDA) requirements and to scale up manufacturing of our product candidates to commercial scale, if approved;
the implementation of our strategic plans for our business, any product candidates we may develop and any companion diagnostics;
our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates any companion diagnostics;
the rate and degree of market acceptance and clinical utility for any product candidates we may develop;
estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
the period we estimate to be funded by our existing financial resources;
our ability to establish and maintain collaborations;
the potential benefits with the continued existence of our license agreement with Mass General Brigham (MGB);
our financial performance;
our ability to effectively manage our anticipated growth;
developments relating to our competitors and our industry, including the impact of government regulation; and
our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;
other risks and uncertainties, including those discussed in Part II, Item 1A - Risk Factors in this Form 10-Q.

 

In some cases, forward-looking statements can be identified by terminology such as “will,” “may,” “should,” “could,” “expects,” “intends,” “plans,” “aims,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under the section entitled “Risk Factors” and elsewhere in this Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those expressed or implied by the forward-looking statements. No forward-looking statement is a promise or a guarantee of future performance.

The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.

This Form 10-Q may include statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified the information contained in such sources.


 

SUMMARY OF THE MATERIAL AND OTHER RISKS ASSOCIATED WITH OUR BUSINESS

Our ability to implement our business strategy is subject to numerous risks that you should be aware of before making an investment decision. These risks are described more fully in Part II, Item 1A - Risk Factors in this Form 10-Q. These risks include, among others:

We are a biopharmaceutical company with a limited operating history and we have not generated any revenue from product sales. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years and may never achieve or maintain profitability. Our net loss was $874,000 and $4.5 million for the three months ended March 31, 2022 and 2021, respectively.
We will need to raise substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate some of our product development programs or commercialization efforts.
Our business is dependent on the success of our lead product candidate, CAN-2409, as well as CAN-3110 and any other product candidates that we advance into the clinic. All of our product candidates will require additional development before we may be able to seek regulatory approval for and launch a product commercially.
Our preclinical studies and clinical trials may fail to demonstrate adequately the safety and efficacy of any of our product candidates, which would prevent or delay development, regulatory approval, and commercialization.
Our product candidates are based on a novel approach to the treatment of cancer, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval, if at all.
Even if we receive marketing approval for our current or future product candidates, our current or future product candidates may not achieve broad market acceptance, which would limit the revenue that we generate from their sales.
The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are not able to obtain, or experience delays in obtaining, required regulatory approvals, we will not be able to commercialize CAN-2409, CAN-3110 and future product candidates as expected, and our ability to generate revenue may be materially impaired.
The FDA’s agreement to a Special Protocol Assessment with respect to the study design of our Phase 3 clinical trial of CAN-2409 in newly diagnosed localized prostate cancer in intermediate and high risk patients does not guarantee any particular outcome from regulatory review, including ultimate approval, and may not lead to a successful review or approval process.
Some of our product candidates are being and may continue to be studied in third-party research and clinical trials sponsored by organizations or agencies other than us, or in investigator-initiated clinical trials, which means we will have minimal or no control over the conduct of such trials and which may adversely affect our ability to obtain marketing approval or certain regulatory exclusivities.
Changes in product candidate manufacturing or formulation may result in additional costs or delay.
The ongoing COVID-19 pandemic, which began in late 2019 and has spread worldwide, may affect our ability to complete our ongoing clinical trials and initiate and complete other preclinical studies, planned clinical trials or future clinical trials, disrupt regulatory activities, disrupt our manufacturing and supply chain, or have other adverse effects on our business and operations. In addition, the ongoing COVID-19 pandemic has caused substantial disruption in the financial markets and may adversely impact economies worldwide, both of which could result in adverse effects on our business, operations and ability to raise capital.
If the government or third-party payors fail to provide adequate coverage, reimbursement and payment rates for our product candidates, or if health maintenance organizations or long-term care facilities choose to use therapies that are less expensive or considered a better value, our revenue and prospects for profitability will be limited.
If the manufacturers upon which we may rely fail to produce our product candidates in the volumes that we require on a timely basis, or fail to comply with stringent regulations applicable to biopharmaceutical manufacturers, we may face delays in the development and commercialization of, or be unable to meet demand for, our product candidates and may lose potential revenues.
The transition of our manufacturing operations to a third-party contract manufacturer may result in further delays or expenses, and we may not experience the anticipated operating efficiencies.

 

Our rights to develop and commercialize certain of our product candidates are subject and may in the future be subject, in part, to the terms and conditions of licenses granted to us by third parties. If we fail to comply with our obligations under our current or future intellectual property license agreements or otherwise experience disruptions to our business relationships with our current or any future licensors, we could lose intellectual property rights that are important to our business.

 

NOTE REGARDING COMPANY REFERENCES

 

Unless the context otherwise requires, the terms “Candel Therapeutics,” “the Company,” “we,” “us,” and “our” in this Form 10-Q refer to Candel Therapeutics, Inc. and its consolidated subsidiary.

 

NOTE REGARDING TRADEMARKS

 

We own or have rights to various trademarks, service marks and trade names that are used in connection with the operation of our business, including our company name, Candel Therapeutics, our logo, and the names of our CAN-2409™ and CAN-3110™ product candidates. This Form 10-Q may also contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this quarterly report on Form 10-Q is not intended to and does not imply a relationship with, or endorsement or sponsorship by, us. Solely for convenience, the trademarks, service marks and trade names referred to in this quarterly report on Form 10-Q may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.

i


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Stockholders’ Equity

3

 

Condensed Consolidated Statements of Cash Flows

5

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

Item 2.

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

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

34

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

83

Item 3.

Defaults Upon Senior Securities

83

Item 4.

Mine Safety Disclosures

83

Item 5.

Other Information

83

Item 6.

Exhibits

84

Signatures

86

 

ii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Candel Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

MARCH 31,
2022

 

 

DECEMBER 31,
2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

94,321

 

 

$

82,642

 

Prepaid expenses and other current assets

 

 

1,325

 

 

 

2,303

 

Total current assets

 

 

95,646

 

 

 

84,945

 

Fixed assets, net

 

 

4,264

 

 

 

3,836

 

Lease right of use assets

 

 

1,215

 

 

 

 

Restricted cash

 

 

437

 

 

 

424

 

Total assets

 

$

101,562

 

 

$

89,205

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,386

 

 

$

1,590

 

Accrued expenses

 

 

3,563

 

 

 

3,438

 

Current portion of lease liability

 

 

429

 

 

 

 

Other current liabilities

 

 

94

 

 

 

334

 

Total current liabilities

 

 

5,472

 

 

 

5,362

 

Deferred rent

 

 

 

 

 

894

 

Term loan payable to a bank

 

 

19,943

 

 

 

 

Other long-term debt

 

 

582

 

 

 

560

 

Lease liability, net of current portion

 

 

1,838

 

 

 

 

Warrant liability

 

 

9,965

 

 

 

18,252

 

Total liabilities

 

 

37,800

 

 

 

25,068

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value; 10,000,000 shares authorized at
March 31, 2022 and December 31, 2021,
no shares issued or outstanding at March 31, 2022 and December 31, 2021, respectively.

 

 

 

 

 

 

Common stock, $0.01 par value; 150,000,000 shares authorized at March 31, 2022 and December 31, 2021.
Shares issued and outstanding
28,693,151 and 28,689,842 at March 31,
2022 and December 31, 2021, respectively.

 

 

287

 

 

 

286

 

Additional paid-in capital

 

 

144,644

 

 

 

144,146

 

Accumulated deficit

 

 

(81,169

)

 

 

(80,295

)

Total stockholders’ equity

 

 

63,762

 

 

 

64,137

 

Total liabilities and stockholders’ equity

 

$

101,562

 

 

$

89,205

 

 

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

1


 

Candel Therapeutics, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

THREE MONTHS ENDED
MARCH 31,

 

 

 

2022

 

 

2021

 

Research and development service revenue,
   related party

 

$

31

 

 

$

31

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

 

5,417

 

 

 

2,753

 

General and administrative

 

 

3,600

 

 

 

1,935

 

Total operating expenses

 

 

9,017

 

 

 

4,688

 

Loss from operations

 

 

(8,986

)

 

 

(4,657

)

Other income (expense):

 

 

 

 

 

 

Grant income

 

 

 

 

 

191

 

Interest, dividend and investment income (expense), net

 

 

(175

)

 

 

(12

)

Change in fair value of warrant liability

 

 

8,287

 

 

 

 

Total other income (expense), net

 

 

8,112

 

 

 

179

 

Net loss

 

$

(874

)

 

$

(4,478

)

Net loss per share attributable to common stockholders,
   basic and diluted

 

$

(0.03

)

 

$

(0.38

)

Weighted-average shares used in computing net loss
   per share attributable to common stockholders,
   basic and diluted

 

 

28,690,511

 

 

 

11,647,789

 

 

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

2


 

Candel ThErapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

COMMON STOCK

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED

 

 

STOCKHOLDERS’

 

 

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

DEFICIT

 

 

EQUITY

 

Balance, December 31, 2021

 

 

28,689,842

 

 

$

286

 

 

$

144,146

 

 

$

(80,295

)

 

$

64,137

 

Options exercised

 

 

3,309

 

 

 

1

 

 

 

5

 

 

 

 

 

 

6

 

Stock-based compensation

 

 

 

 

 

 

 

 

828

 

 

 

 

 

 

828

 

Change in fair value of
   NC Ohio Trust Warrants

 

 

 

 

 

 

 

 

(335

)

 

 

 

 

 

(335

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(874

)

 

 

(874

)

Balance, March 31, 2022

 

 

28,693,151

 

 

$

287

 

 

$

144,644

 

 

$

(81,169

)

 

$

63,762

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

3


 

Candel ThErapeutics, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except share and per share amounts)

(unaudited)

 

 

 

SERIES B
CONVERTIBLE
PREFERRED STOCK

 

 

SERIES C
CONVERTIBLE
PREFERRED STOCK

 

 

COMMON STOCK

 

 

ADDITIONAL
PAID-IN

 

 

ACCUMULATED

 

 

STOCKHOLDERS’

 

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

SHARES

 

 

AMOUNT

 

 

CAPITAL

 

 

DEFICIT

 

 

EQUITY (DEFICIT)

 

Balance, December 31, 2020

 

 

11,155,506

 

 

$

26,560

 

 

 

6,032,170

 

 

$

22,500

 

 

 

11,635,094

 

 

$

116

 

 

$

20,493

 

 

$

(44,171

)

 

$

(23,562

)

Options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24,410

 

 

 

 

 

 

35

 

 

 

 

 

$

35

 

Warrants exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,631

 

 

 

1

 

 

 

76

 

 

 

 

 

$

77

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

431

 

 

 

 

 

$

431

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,478

)

 

$

(4,478

)

Balance, March 31, 2021

 

 

11,155,506

 

 

$

26,560

 

 

 

6,032,170

 

 

$

22,500

 

 

 

11,673,135

 

 

$

117

 

 

$

21,035

 

 

$

(48,649

)

 

$

(27,497

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

4


 

Candel Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

THREE MONTHS ENDED
MARCH 31,

 

 

 

2022

 

 

2021

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

Net loss

 

$

(874

)

 

$

(4,478

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

165

 

 

 

26

 

Non-cash stock compensation expense

 

 

492

 

 

 

431

 

Non-cash lease expense

 

 

50

 

 

 

 

Non-cash interest expense

 

 

22

 

 

 

20

 

Change in fair value of warrant liability

 

 

(8,287

)

 

 

 

Accretion of debt discount

 

 

32

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

979

 

 

 

(225

)

Accounts payable

 

 

(579

)

 

 

173

 

Accrued expenses

 

 

90

 

 

 

(1,275

)

Deferred revenue

 

 

(31

)

 

 

(31

)

Deferred rent

 

 

 

 

 

9

 

Lease liability

 

 

(112

)

 

 

 

Other long term assets

 

 

 

 

 

(277

)

Net cash used in operating activities

 

 

(8,053

)

 

 

(5,627

)

Cash Flows from Investing Activities:

 

 

 

 

 

 

Purchase of fixed assets

 

 

(171

)

 

 

(229

)

Net cash used in investing activities

 

 

(171

)

 

 

(229

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

Net proceeds from bank term loan

 

 

19,910

 

 

 

 

Proceeds from warrant exercises

 

 

 

 

 

77

 

Proceeds from option exercises

 

 

6

 

 

 

35

 

Net cash provided by financing activities

 

 

19,916

 

 

 

112

 

Net increase (decrease) in cash

 

 

11,692

 

 

 

(5,744

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

83,066

 

 

 

35,319

 

Cash, cash equivalents and restricted cash at end of period

 

$

94,758

 

 

$

29,575

 

Supplemental cash flow information:

 

 

 

 

 

 

Cash paid for taxes

 

$

85

 

 

$

6

 

Cash paid for interest

 

$

117

 

 

$

-

 

Supplemental disclosures of non-cash information:

 

 

 

 

 

 

Lease liability arising from obtaining right-of-use assets

 

$

2,368

 

 

$

-

 

Capital expenditures in accounts payable and accrued expenses

 

$

421

 

 

$

1,850

 

 

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

5


 

Candel Therapeutics, Inc.

Notes to Condensed Consolidated financial statements

(Amounts in thousands, except share and per share amounts)

(Unaudited)

 

1. Organization and basis of presentation

Candel Therapeutics, Inc., formerly known as Advantagene, Inc. (the “Company”) is a late clinical stage biotechnology company that was incorporated in Delaware in June 2003. On November 30, 2020, the Company changed its name to Candel Therapeutics, Inc. The Company is focused on helping patients fight cancer with oncolytic viral immunotherapies. The Company’s engineered viruses are designed to induce immunogenic cell death through direct viral – mediated cytotoxicity in cancer cells, thus releasing tumor neo-antigens and creating a pro-inflammatory microenvironment at the site of injection. The Company has established two oncolytic viral immunotherapy platforms and its two product candidates, CAN-2409 and CAN-3110, are in clinical trials for a number of tumor types.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

The Company has funded its operations primarily with proceeds from the sale of its capital stock and convertible notes. The Company has incurred recurring losses since its inception, including a net loss of $874 and $4,478 for the three months ended March 31, 2022 and 2021, respectively. In addition, as of March 31, 2022, the Company had an accumulated deficit of $81,169. The Company expects to continue to generate operating losses for the foreseeable future. On July 29, 2021, the Company completed its initial public offering of common stock, or the IPO, at which time the Company issued 9,000,000 shares of its common stock at a price to the public of $8.00 per share, and on August 13, 2021, the Company issued an additional 887,994 shares of common stock at $8.00 per share as a partial exercise of the underwriters’ option to purchase additional shares, resulting in net proceeds to the Company of $71,335, after deducting underwriting discounts and commissions and offering expenses. Upon closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 7,066,398 shares of common stock.

The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurances that additional funding will be available on terms acceptable to the Company, or at all. The Company believes that existing resources will fund planned operations for at least 12 months from the date that these consolidated financial statements were available to be issued.

Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

2. Summary of significant accounting policies

Basis of presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board ("FASB"). The FASB sets generally accepted accounting principles ("GAAP") that the Company follows to ensure its financial condition, results of operations, and cash flows are consistently reported. References to GAAP issued by the FASB in these notes to the financial statements are to the FASB Accounting Standards Codification ("ASC").

Principles of consolidation

The condensed consolidated financial statements include the accounts of Candel Therapeutics, Inc. and its wholly owned subsidiary Candel Therapeutics Securities Corporation. All intercompany transactions and balances have been eliminated.

Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision-maker in deciding how to allocate resources and assess performance. The Company

6


 

and the Company's chief operating decision maker, the Company's chief executive officer, views the Company's operations and manages its business as a single operating segment. The Company only operates in the United States.

Emerging growth company

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “Jobs Act”). Under the Jobs Act emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the Jobs Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that is (i) no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the Jobs Act. As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Unaudited Interim Financial Information

The accompanying condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of stockholders’ equity (deficit) for the three months ended March 31, 2022 and 2021, the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021, and the related interim disclosures are unaudited. These unaudited condensed consolidated financial statements include all adjustments necessary, consisting of only normal recurring adjustments, to fairly state the financial position and the results of the Company’s operations and cash flows for interim periods in accordance with U.S. GAAP. Interim period results are not necessarily indicative of results of operations or cash flows for a full year or any subsequent interim period. The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K ("Form 10-K") on file with the SEC.

Use of estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, the Company’s management evaluates its estimates, which include but are not limited to management’s judgments of accrued expenses, valuation of stock-based option awards, valuations of warrants, and income taxes. Actual results could differ from those estimates.

Prior to the IPO, the Company utilized significant estimates and assumptions in determining the fair value of its common stock. The Company has utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation (the "Practice Aid"), to estimate the fair value of its common stock and warrants. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to the Company’s common stock at the time of, and the likelihood of, achieving a liquidity event, such as an initial public offering or sale. Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date.

Cash and cash equivalents

The Company considers all highly liquid investments purchased with original final maturities of 90 days or less from the date of purchase to be cash equivalents. Cash and cash equivalents comprise marketable securities with maturities of less than 90 days when purchased. Cash equivalents are reported at fair value.

Restricted cash

The Company has $437 and $424 of restricted cash as of March 31, 2022 and December 31, 2021 which represents cash held in a restricted bank account under the terms of the Company’s Needham, Massachusetts facility lease and as security for the Company credit card.

Fair value measurements

Certain assets and liabilities of the Company 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

7


 

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 that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying values of cash and cash equivalents, accounts payable, and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. The Company’s warrant liability is carried at fair value and is classified as Level 3 measurement.

Property and equipment

Property and equipment consist of lab and manufacturing equipment, networking and computer equipment, furniture and fixtures and leasehold improvements. Property and equipment are recorded at cost, and depreciated using the straight-line method over the estimated useful lives of the respective assets:

 

ASSET

 

ESTIMATED USEFUL LIFE

Networking and computer equipment

 

5 years

Laboratory equipment

 

5 years

Manufacturing equipment

 

5 years

Furniture and fixtures

 

5 years

Leasehold improvements

 

Shorter of the useful life or remaining lease term

 

Leases

The Company adopted ASC 842 as of January 1, 2022 and elected the transition method under ASU 2016-02 whereby the Company records a right-to-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. The Company also elected to apply the practical expedients intended to ease transition. Accordingly, the Company has only applied ASC 842 to leases existing as of January 1, 2022. The Company determines if an arrangement is, or contains, a lease at inception.

Lease right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Lease right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments to be made over the lease term. The lease right of use asset is equal to the lease liability and adjusted for prepaid rent, initial direct costs, and incentives. As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. The Company has elected to not apply the recognition requirements of ASC 842 for short-term leases, which is defined as a lease that, at the lease commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

For real estate lease agreements entered into or modified after the adoption of ASC 842 that include lease and non-lease components, the Company has elected to account for the lease and non-lease components, such as common area maintenance charges, as a single lease component term.

Concentrations of credit risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and marketable securities. Periodically, the Company maintains deposits and investments in accredited financial institutions in-excess of the federally insured limits. The Company deposits its cash in financial institutions with a high credit quality and has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal risk associated with commercial banking relationships.

Impairment of long-lived assets

Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations,

8


 

significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows. Long-lived assets consist of fixed assets and operating lease assets.

In the fourth quarter of 2021, the Company recorded an impairment charge of approximately $553 related to manufacturing equipment that the Company does not plan to use for its intended use and recorded a reserve to reduce the carrying value to its estimated realizable value. The Company has not recorded any additional impairment losses on such long-lived assets.

Revenue recognition

The Company applies Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, (ASC 606). 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 ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which 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 ASC 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 ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations, and then assesses whether or not 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.

Research and development costs and accruals

Research and development expenses include salaries and benefits, materials and supplies, preclinical and clinical trial expenses, stock-based compensation expense, depreciation of equipment, contract services and other outside expenses. The Company has entered into various research and development-related contracts with clinical and research institutions, contract research organizations, and other companies. These agreements are generally cancelable, and related payments are recorded as research and development expenses as incurred. Costs of certain development activities, such as manufacturing, pre-clinical and clinical trial expenses, are recognized based on an evaluation of the progress to completion of specific tasks. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in the financial statements as prepaid or accrued research and development costs. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed. Costs incurred in obtaining technology licenses and intellectual property are charged to research and development expenses as acquired in-process research and development if the technology licensed or intellectual property acquired has not reached technological feasibility and has no alternative future use.

Patent costs

All patent-related costs incurred in connection with preparing, filing, maintaining and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified in general and administrative expenses.

Stock-based compensation

The Company accounts for its stock-based compensation in accordance with ASC Topic 718, Compensation—Stock Compensation (ASC 718). ASC 718 requires all share-based payments to employees and directors to be recognized as expense in the consolidated statements of operations based on their grant date fair values. In addition, in accordance with FASB Accounting Standards Update ("ASU") 2016-09 which identifies areas for simplification of several areas of share-based payment transactions, the Company treats non-employee grants the same as employee grants. The Company estimates the fair value of options granted using the Black-Scholes option pricing model for stock option grants to both employees and non-employees. The Company believes the fair value of the stock options granted to non-employees is more reliably determinable than the fair value of the services provided.

The Black-Scholes option pricing model requires inputs based on certain subjective assumptions, including (a) the expected stock price volatility, (b) the expected term of the award, (c) the risk-free interest rate and (d) expected dividends. Due to a lack

9


 

of company-specific historical and implied volatility data, the Company has based its computation of expected volatility on the historical volatility of a representative group of public companies with similar characteristics to the Company, including stage of product development and life science industry focus. The historical volatility is calculated based on a period of time commensurate with the expected term assumption. The Company uses the simplified method as prescribed by the SEC Staff Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The expected term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population. For options granted to non-employees, the Company utilizes the contractual term of the share-based payment as the basis for the expected term assumption. The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected term of the stock options. The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

Prior to the IPO, there were significant judgments and estimates inherent in the determination of the fair value of the Company’s common stock. These estimates and assumptions included a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to its common stock at the time of, and the likelihood of, achieving a liquidity event, such as an initial public offering or sale.

The Company expenses the fair value of its share-based compensation awards to employees and non-employees on a straight-line basis over the requisite service period, which is generally the vesting period.

Government grants

The Company has applied for grants for the reimbursement of expenditures with the National Institutes of Health ("NIH") for certain qualified operating expenditures. The Company recognizes government grants when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received.

Government grants for research and development efforts are recorded as grant income and classified in other income in the statements of operations. The Company recognized government grants of $0 and $191 for the three months ended March 31, 2022 and 2021, respectively, as a component of other income/(expense), net in the condensed consolidated statements of operations. The Company's grant with the NIH was completed at the end of 2021.

Income taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC Topic 740, Income Taxes (ASC 740) which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies. At March 31, 2022 and December 31, 2021, the Company has concluded that a full valuation allowance is necessary for its deferred tax assets (see Note 12).

The Company accounts for uncertainty in income taxes by applying the two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax is then assessed as the amount of benefits to be recognized in the consolidated financial statements. The amount of benefits that may be used are the largest amounts that have a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves or unrecognized tax benefits that are considered appropriate, as well as the related net interest and received.

Net loss per share

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock. Diluted net loss per share is the same as basic net loss per share for the three months ended March 31, 2022 and 2021 since all potential shares of common stock instruments are anti-dilutive as a result of the loss for such periods.

10


 

The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities. In periods where the Company reports a net loss attributable to common stockholders, diluted net loss per share is the same as basic net loss per share, since dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the three months ended March 31, 2022 and 2021.

Recently adopted accounting standards

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), as amended by various subsequently issued ASUs. The standard requires lessees to recognize an operating lease with a term greater than one year on their balance sheets as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments. Lessees are required to classify leases as either finance or operating leases. If the lease is effectively a financed purchase by the lessee, it is classified as a financing lease, otherwise it is classified as an operating lease. This classification will determine the pattern of recognition of lease cost on our condensed and consolidated statement of operations over the term of the lease.

In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”), which permits entities to continue applying legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative periods presented in the year that the entity adopts the new leasing standard. The Company elected the package of practical expedients permitted under the transition guidance within the standard. Accordingly, the Company did not reassess the conclusion of whether the existing arrangements contain a lease, lease classification and initial direct costs under ASC 842.

In June 2020, the FASB also issued ASU 2020-05, Revenue from contracts with customers (Topic 606) and Leases (Topic 842): effective dates for certain entities, which deferred the effective date certain entities were required to adopt ASC 842. The update extended the effective date for adoption of ASC 842 until fiscal years beginning after December 15, 2021. As an emerging growth company we were not required to adopt ASC 842 until January 1, 2022. The Company adopted the standard on January 1, 2022 using the effective date method. As such, the condensed consolidated balance sheets and statements of operations for prior periods will not be comparable in the year of adoption of ASC 842.

As a result of the adoption of ASC 842, the Company recorded a lease right of use asset of $1,264 and a lease liability of $2,368 on the condensed consolidated balance sheets as of January 1, 2022 related to an operating lease. The Company derecognized deferred rent liabilities, which makes up the difference between the lease right of use asset and lease liability. The adoption of the standard did not have a material impact on the Company’s condensed consolidated statement of operations or condensed consolidated statement of cash flows.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40). The guidance simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuers own stock and classified in stockholders' equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share for convertible instruments by using the if-converted method. As an emerging growth company, we are not required to adopt ASU 2020-06 until January 1, 2024, however early adoption is permitted. The Company elected to early adopt the standard on January 1, 2022 and upon adoption, there was no impact to our condensed consolidated statement of operations and cash flows and our basic and diluted net loss per share amounts.

In November 2021, the FASB issued ASU 2021-10, which created Topic 832, Government Assistance, which requires business entities to disclose information about certain government assistance they receive. The ASU requires qualitative and quantitative disclosures around the nature of transactions and related accounting policy used, the line items on the balance sheet and income statement that are affected, and the significant terms and conditions of the transactions. The ASU is effective for fiscal years beginning after December 15, 2021. The Company believes its historical disclosure already met the requirements of the new standard. As such, no changes or additional disclosure was determined to be necessary.

11


 

3. Fair value of financial assets and liabilities

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

 

 

 

FAIR VALUE MEASUREMENTS AS OF
MARCH 31, 2022 USING:

 

 

 

LEVEL 1

 

 

LEVEL 2

 

 

LEVEL 3

 

 

TOTAL

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

 

 

 

 

 

 

 

9,965

 

 

 

9,965

 

Total

 

$

 

 

$

 

 

$

9,965

 

 

$

9,965

 

 

 

 

FAIR VALUE MEASUREMENTS AS OF
DECEMBER 31, 2021 USING:

 

 

 

LEVEL 1

 

 

LEVEL 2

 

 

LEVEL 3

 

 

TOTAL

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Warrant liability

 

 

 

 

 

 

 

 

18,252

 

 

 

18,252

 

Total

 

$

 

 

$

 

 

$

18,252

 

 

$

18,252

 

 

 

Valuation of warrant liability

In connection with the Series B Convertible Preferred Stock issuance, the Company issued warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet, see Note 10. The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The fair value of the warrant liability uses various valuation methods, including the Monte Carlo method, the option-pricing method, probability-weighted expected return and the hybrid method, all of which incorporate assumptions and estimates, to value the common stock warrants. The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of common stock, risk-free interest rate, expected dividend yield, expected volatility of the price of the underlying common stock, and the remaining contractual term of the warrants. The most significant assumption in the model impacting the fair value of the common stock warrants is the fair value of the Company’s common stock as of each remeasurement date. Prior to the IPO, the Company determined the fair value per share of the underlying common stock by taking into consideration the most recent sales of preferred stock, results obtained from third-party valuations and additional factors that are deemed relevant.

The following table provides a roll forward of the aggregate fair values of the Company’s warrant liability, for which fair value is determined by Level 3 inputs:

 

 

 

SERIES B
WARRANT
LIABILITY

 

Balance at December 31, 2021

 

$

18,252

 

Change in fair value

 

 

(8,287

)

Balance at March 31, 2022

 

$

9,965

 

 

4. Fixed assets, net

Fixed assets, net consisted of the following:

 

 

 

MARCH 31,
2022

 

 

DECEMBER 31,
2021

 

Laboratory equipment

 

$

666

 

 

$

77

 

Manufacturing equipment

 

 

933

 

 

 

933

 

Furniture and fixtures

 

 

112

 

 

 

112

 

Networking and computer equipment

 

 

76

 

 

 

72

 

Leasehold improvements

 

 

2,994

 

 

 

2,994

 

Total fixed assets

 

$

4,781

 

 

$

4,188

 

Less accumulated depreciation

 

 

(517

)

 

 

(352

)

Fixed assets, net

 

$

4,264

 

 

$

3,836

 

 

Depreciation and amortization expense for the three months ended March 31, 2022 and 2021 was $165 and $26, respectively.

12


 

5. Accrued expenses

Accrued expenses consisted of the following:

 

 

 

MARCH 31,
2022

 

 

DECEMBER 31,
2021

 

Payroll and employee related expenses

 

$

2,224

 

 

$

2,096

 

Third-party research and development expenses

 

 

718

 

 

 

632

 

Professional fees and other

 

 

621

 

 

 

710

 

 

 

$

3,563

 

 

$

3,438

 

 

6. Term Loan payable to a Bank

On February 24, 2022, the Company entered into a loan and security agreement (the "Loan Agreement") with Silicon Valley Bank ("SVB") pursuant to which SVB has agreed to provide term loans to the Company in an aggregate principal amount of up to $25.0 million. The Company borrowed $20.0 million upon entering into the Loan Agreement. The Company can borrow up to an additional aggregate principal amount not to exceed $5.0 million, at any time on or prior to December 31, 2022, following the Company having provided evidence to SVB of (a) achievement of positive Phase 2 clinical activity data from the Company’s CAN-2409 NSCLC clinical trial, (b) dosing of its first patient in its Phase 3 CAN-2409 high grade glioma clinical trial and (c) receipt on or prior to December 31, 2022, of net cash proceeds in an amount equal to at least $75.0 million from the issuance and sale of equity securities to investors acceptable to SVB. The term loan is secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property, which is subject to a negative pledge under the Loan Agreement.

 

The term loans bear interest at a floating rate per annum equal to the greater of (A) 5.75% and (B) the prime rate (as published in the money rates section of The Wall Street Journal) plus 2.50%. The Company is required to make monthly interest payments, and commencing on February 1, 2024, 24 consecutive installments of principal plus monthly payments of accrued interest. Upon repayment in full of the term loans, the Company will be required to pay a final payment fee equal to 4.50% of the original principal amount of any funded term loan being repaid. The Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB term loans, subject to a prepayment premium of 1% to 3% based upon the timing of the repayment.

 

During the three months ended March 31, 2022, the Company recorded interest expense relating to the Loan Agreement of $149. The weighted average effective interest rate for the three months ended March 31, 2022 was 7.75%.

 

The Company incurred $90 of debt issuance costs and will incur a $900 final payment fee, which were recorded as debt discount and are being amortized over the term of the Loan Agreement. See the table below for additional details;

 

 

 

MARCH 31,
2022

 

Principal

 

$

20,000

 

Final payment fee

 

 

900

 

Less: debt discount

 

 

(989

)

Accretion of debt discount