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

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

Delaware		84-1475642
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		ZIOP		The Nasdaq Stock Market LLC

Large Accelerated Filer		☒		Accelerated Filer		☐
Non-Accelerated Filer		☐		Smaller Reporting Company		☐
				Emerging Growth Company		☐

•

our ability to raise substantial additional capital to fund our planned operations in the near term;

•

estimates regarding our expenses, use of cash, timing of future cash needs and anticipated capital requirements;

•

the development of our product candidates, including statements regarding the initiation, timing, progress and results of our preclinical clinical studies, clinical trials and research and development programs;

•

our ability to advance our product candidates through various stages of development, especially through pivotal safety and efficacy trials;

•

the risk that final trial data may not support interim analysis of the viability of our product candidates;

•

our expectation regarding the safety and efficacy of our product candidates;

•

the timing, scope or likelihood of regulatory filings and approvals from the U.S. Food and Drug Administration or equivalent foreign regulatory agencies for our product candidates and for which indications;

•

our ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existing license agreements;

•

our ability to enter into partnerships or strategic collaboration agreements, our ability to achieve the results contemplated and the potential benefits to be derived from relationships with collaborators;

•

our ability to maintain and establish collaborations and licenses; developments and projections relating to competition from other pharmaceutical and biotechnology companies or our industry;

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our estimates regarding the potential market opportunity for our product candidates;

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the anticipated rate and degree of commercial scope and potential, as well as market acceptance of our product candidates for any indication, if approved;

•

the anticipated amount, timing and accounting of contract liability (formerly deferred revenue), milestones and other payments under licensing, collaboration or acquisition agreements, research and development costs and other expenses;

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our intellectual property position, including the strength and enforceability of our intellectual property rights;

•

our ability to attract, hire, and retain qualified employees and key personnel;

•

the impact of government laws and regulations in the United States and foreign countries;

•

our expectations regarding the impact of the ongoing coronavirus disease 2019, or COVID-19, pandemic, included the expected duration of disruption and immediate and long-term impact and effect on our business and operations;

•

the diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

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the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic; and

•

other risks and uncertainties, including those listed under Part II, Item 1A, “Risk Factors”.

•

Our business, operations and clinical development plans and timelines could be adversely affected by the effects of health epidemics, including the COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our contract manufacturers, clinical research organizations, or CROs, shippers and others.

•

We will require substantial additional financial resources to continue ongoing development of our product candidates and pursue our business objectives; if we are unable to obtain these additional resources when needed, we may be forced to delay or discontinue our planned operations, including clinical testing of our product candidates.

•

Our plans to develop and commercialize non-viral and viral adoptive cellular therapies based on engineered cytokines and CAR T-cell as well as TCR therapies can be considered as new approaches to cancer treatment, the successful development of which is subject to significant challenges.

•

Our current product candidates are based on novel technologies and are supported by limited clinical data and we cannot assure you that our current and planned clinical trials will produce data that supports regulatory approval of one or more of these product candidates.

•

If we are unable to obtain the necessary U.S. or worldwide regulatory approvals to commercialize any product candidate, our business will suffer.

•

Our product candidates are in various stages of clinical trials, which are very expensive and time-consuming. We cannot be certain when we will be able to submit a BLA to the FDA and any failure or delay in completing clinical trials for our product candidates could harm our business.

•

Our cell-based and gene therapy immuno-oncology products rely on the availability of reagents, specialized equipment, and other specialty materials and infrastructure, which may not be available to us on acceptable terms or at all. For some of these reagents, equipment, and materials, we rely or may rely on sole source vendors or a limited number of vendors, which could impair our ability to manufacture and supply our products.

•

Our immuno-oncology product candidates are based on a novel technology, which makes it difficult to predict the time and cost of product candidate development and subsequently obtaining regulatory approval. Currently, few gene therapy and cell therapy products have been approved in the United States and Europe.

•

Our reliance on third parties to formulate and manufacture our product candidates exposes us to a number of risks that may delay the development, regulatory approval and commercialization of our products or result in higher product costs.

•

If we are unable either to create sales, marketing and distribution capabilities or enter into agreements with third parties to perform these functions, we will be unable to commercialize our product candidates successfully.

•

Our immuno-oncology product candidates may face competition in the future from biosimilars.

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If we or our licensors fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish and our ability to successfully commercialize our products may be impaired.

•

Our stock price has been, and may continue to be, volatile.

•

We previously identified a material weakness in our internal control over financial reporting for the year ended December 31, 2019, which we believe has been fully remediated as of December 31, 2020. If we have inadequately remediated this material weakness, or we otherwise fail to develop, implement and maintain an effective system of internal controls in future periods, our ability to report our financial condition or results of operations could be adversely affected and may result in material misstatements of our financial statements or could have a material adverse effect on our business and trading price of our securities.

				Page
Part I - Financial Information
Item 1.		Financial Statements
		Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020			5
		Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited)			6
		Statement of Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)			7
		Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)			9
		Notes to Financial Statements (unaudited)			10
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3.		Quantitative and Qualitative Disclosures about Market Risk			36
Item 4.		Controls and Procedures			37
Part II - Other Information
Item 1.		Legal Proceedings			38
Item 1A.		Risk Factors			38
Item 2.		Unregistered Sale of Equity Securities and Use of Proceeds			71
Item 3.		Defaults upon Senior Securities			71
Item 4.		Mine Safety Disclosures			71
Item 5.		Other Information			71
Item 6.		Exhibits			72

		March 31, 2021				December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents		$	100,056			$	115,069
Receivables			5,006				4,665
Prepaid expenses and other current assets			7,648				10,855
Total current assets			112,710				130,589
Property and equipment, net			11,090				10,231
Right of use asset			4,357				4,650
Deposits			130				130
Other non-current assets			185				745
Total assets		$	128,472			$	146,345
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	4,190			$	960
Accrued expenses			14,012				16,589
Lease liability - current portion			759				819
Total current liabilities			18,961				18,368
Lease liability - noncurrent portion			3,870				3,995
Total liabilities			22,831				22,363
Commitments and contingencies (Note 7)
Preferred stock, $0.001 par value, 30,000,000 shares authorized
Stockholders’ equity:
Common stock, $0.001 par value; 250,000,000 shares authorized; 215,257,674 and 214,591,906 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively			215				215
Additional paid-in capital			891,081				887,868
Accumulated deficit			(785,655	)			(764,101	)
Total stockholders’ equity			105,641				123,982
Total liabilities and stockholders’ equity		$	128,472			$	146,345

Table of Contents 

		For the Three Months Ended March 31,
		2021				2020
Operating expenses:
Research and development		$	13,336			$	12,706
General and administrative			8,227				5,954
Total operating expenses			21,563				18,660
Loss from operations			(21,563	)			(18,660	)
Other income, net			9				367
Net loss		$	(21,554	)		$	(18,293	)
Basic and diluted net loss per share		$	(0.10	)		$	(0.09	)
Weighted average common shares outstanding used to compute basic and diluted net loss per share			213,954,665				199,814,768

Table of Contents 

For the Three Months Ended March 31, 2020
		Common Stock								Additional Paid In Capital				Accumulated Deficit				Total Stockholders’ Equity
		Shares				Amount
Balance at December 31, 2019			181,803,320			$	182			$	778,953			$	(684,125	)			95,010
Stock-based compensation			—				—				1,940				—				1,940
Exercise of employee stock options			2,333				—				4				—				4
Issuance of restricted common stock			555,900				1				(1	)			—				—
Issuance of common stock in connection with a public offering, net of commissions and expenses of $5.9 million			29,110,111				29				88,632				—				88,661
Issuance of common stock in connection with an at the market offering, net of commissions and expenses of $0.4 million			2,814,673				2				13,013				—				13,015
and expenses of $2.7 million			—				—				—				—				—
Net loss			—				—				—				(18,293	)			(18,293	)
Balance at March 31, 2020			214,286,337			$	214			$	882,541			$	(702,418	)		$	180,337

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For the Three Months Ended March 31, 2021
		Common Stock								Additional Paid In Capital				Accumulated Deficit				Total Stockholders’ Equity
		Shares				Amount
Balance at December 31, 2020			214,591,906			$	215			$	887,868			$	(764,101	)			123,982
Stock-based compensation			—				—				2,197				—				2,197
Exercise of employee stock options			352,442				—				1,016				—				1,016
Restricted stock awards			313,326				—				—				—				—
Net loss			—				—				—				(21,554	)			(21,554	)
Balance at March 31, 2021			215,257,674			$	215			$	891,081			$	(785,655	)		$	105,641

Table of Contents 

 

		For the Three Months Ended March 31,
		2021				2020
Cash flows from operating activities:
Net loss		$	(21,554	)		$	(18,293	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			540				142
Stock-based compensation			2,197				1,940
Change in operating assets and liabilities
(Increase) decrease in:
Receivables			(340	)			2,548
Prepaid expenses and other current assets			3,207				2,585
Right of use asset			292				193
Other noncurrent assets			559				(556	)
Increase (decrease) in:
Accounts payable			2,654				(510	)
Accrued expenses			(2,684	)			2,206
Lease liabilities			(184	)			(161	)
Net cash used in operating activities			(15,313	)			(9,906	)
Cash flows from investing activities:
Purchases of property and equipment			(717	)			(513	)
Net cash used in investing activities			(717	)			(513	)
Cash flows from financing activities:
Proceeds from exercise of stock options			1,017				4
Issuance of common stock in connection with a public offering, net			—				88,661
Issuance of common stock in connection with at the market offerings, net			—				13,015
Net cash provided by financing activities			1,017				101,680
Net increase in cash and cash equivalents, and restricted cash			(15,013	)			91,261
Cash and cash equivalents, and restricted cash, beginning of period			115,069				79,741
Cash and cash equivalents, and restricted cash, end of period		$	100,056			$	171,002
Supplementary disclosure of cash flow information:
Accounts included in accrued expenses and accounts payable related to property and equipment		$	682			$	2,303

1. Business

Overview

ZIOPHARM Oncology, Inc., which is referred to herein as “ZIOPHARM,” or the “Company,” is a biopharmaceutical company seeking to develop, acquire, and commercialize, on its own or with partners, a diverse portfolio of immuno-oncology therapies.

The Company’s operations to date have consisted primarily of conducting research and development and raising capital to fund those efforts. The Company’s fiscal year ends on December 31.

The Company has operated at a loss since its inception in 2003 and has no recurring revenues from operations. The Company anticipates that losses will continue for the foreseeable future. As of March 31, 2021, the Company had approximately $100.1 million of cash and cash equivalents and the Company’s accumulated deficit was approximately $785.7 

million. Given its current development plans, the Company anticipates cash resources will be sufficient to fund operations into the second quarter of 2022. The Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, or if the Company is unsuccessful in entering into partnership agreements for further development of its product candidates, management may need to curtail its development efforts and planned operations to conserve cash. 

The Company’s amended and restated certificate of incorporation authorizes it to issue 250,000,000 shares of common stock. As of April 30, 202

1

, there were 215,525,411 shares of common stock outstanding and an additional 33,965,938 shares of common stock reserved for issuance pursuant to outstanding stock options and warrants

.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form

10-Q

pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and note disclosures required by generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations.

It is management’s opinion that the accompanying unaudited interim financial statements reflect all adjustments (which are normal and recurring) that are necessary for a fair statement of the results for the interim periods. The unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2020, included in the Company’s Annual Report on Form

10-K

for the fiscal year ended December 31, 2020 filed with the SEC on March 1, 2021, or the Annual Report.

The

year-end

balance sheet data was derived from the audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States.

The results disclosed in the statements of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the full fiscal year 202

1

.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although the Company regularly assesses these estimates, actual results could differ from those estimates. Changes in estimates are recorded in the period in which they become known.

The Company’s most significant estimates and judgments used in the preparation of its financial statements are:

 

•

Clinical trial expenses and other research and development expenses;

 

•

Collaboration agreements;

 

•

Fair value measurements of stock-based compensation; and

 

•

Income taxes.

Impact of

COVID-19 Pandemic

With the ongoing

COVID-19

pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the

COVID-19

pandemic on its business and operations. The Company continues to evaluate the impact of the

COVID-19

global pandemic on patients, healthcare providers and its employees, as well as its operations and the operations of its business partners and healthcare communities. In response to the

COVID-19

pandemic, the Company has implemented policies at its locations to mitigate the risk of exposure to

COVID-19

by its personnel, including restrictions on the number of staff in any given research and development laboratory and a work-from-home policy applicable to the majority of its personnel, along with encouraging voluntary vaccination and voluntary sharing of vaccination data. The extent to which the

COVID-19

pandemic impacts the Company’s business, clinical development and regulatory efforts and the value of its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the

COVID-19

pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

Subsequent Events

On May 6,2021, the Company announced its commitment to a plan to realign its research and development resources to wind down the clinical trials of its Controlled IL-12 program as part of the Company’s decision to allocate an increasing amount of its resources and capital to its Sleeping Beauty TCR program. See Note 12.

Organizational Changes

On February 25, 2021, the Company announced that Heidi Hagen, formerly Lead Independent Director, was appointed Interim Chief Executive Officer, replacing Dr. Laurence Cooper, MD., Ph.D. Ms. Hagen is remaining as a member of the Board of Directors. Dr. Cooper also stepped down from his seat on the Board of Directors and will be continuing with the Company in a scientific advisory consulting role to support the Company’s programs.

2. Financings

February 2020 Public Offering

On February 5, 2020, the Company entered into an underwriting agreement with Jefferies, as representative of the several underwriters named therein, relating to the issuance and sale of 27,826,086 shares of its common stock. The price to the public in the offering was $3.25 per share, and the underwriters agreed to purchase the shares from the Company pursuant to the underwriting agreement at a purchase price of $3.055 per share.

The offering was made pursuant to the Company’s effective registration statement on Form

S-3ASR

(File

No. 333-232283)

previously filed with the SEC, and a prospectus supplement thereunder. The underwriters purchased the 27,826,086 shares on February 5, 2020. The net proceeds from the offering were approximately $84.8 million after deducting underwriting discounts and offering expenses paid by the Company.

On March 10, 2020, the underwriters exercised their option to purchase an additional 1,284,025 shares. The net proceeds were approximately $3.9 million after deducting underwriting discounts and offering expenses paid by the Company.

At-the-Market

Facility

In June 2019, the Company entered into an Open Market Sale Agreement, or sales agreement, with Jefferies LLC, as agent, or Jefferies, pursuant to which the Company may offer and sell, from time to time through Jefferies, shares of its common stock having an aggregate offering price of up to $100.0 million. Shares will be sold pursuant to the Company’s effective registration statement on Form S-3ASR (File No. 333-232283), as previously filed with the SEC. 

During the three months ended March 31, 2020, the Company sold an aggregate of 2,814,673

shares of its common stock at an average price of $4.77 per share under the ATM program. The net proceeds from sales under the ATM program 

were approximately $13.0 million after deducting underwriting discounts.

During the three months ended March 31, 2021, there were no

 sales under the Company’s ATM program. 

3. Summary of Significant Accounting Policies

The Company’s significant accounting policies were identified in the Company’s Annual Report. There have been no material changes in those policies since the filing of its Annual Report except as noted below.

New Accounting Pronouncements

In December 2019, the FASB issued ASU

2019-12,

Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes

, which is intended to simplify various aspects related to accounting for income taxes. ASU

2019-12

removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for public entities for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years. The adoption did not have a material impact on the Company’s financial statements.

4. Fair Value Measurements

The Company accounts for its financial assets and liabilities using fair value measurements. The authoritative accounting guidance defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. 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. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

 

•

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

•

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

•

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities, measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 were as follows:

 

($ in thousands)						Fair Value Measurements at Reporting Date Using
Description		Balance as of March 31, 2021				Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents		$	79,775			$	79,775			$	—			$	—

 

($ in thousands)						Fair Value Measurements at Reporting Date Using
Description		Balance as of December 31, 2020				Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents		$	75,990			$	75,990			$	—			$	—

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

5. Net Loss per Share

Basic net loss per share is computed by

dividing

net loss by the weighted

average

number of shares of common stock outstanding for the period. The Company’s potentially dilutive shares, which include outstanding common stock options, inducement stock options, unvested restricted stock and warrants, have not been included in the computation of diluted net loss per share for any of the periods presented as the result would be anti-dilutive.

Such potentially dilutive shares of common stock consisted of the following as of March 31, 2021 and 2020, respectively: 

 

		March 31,
		2021				2020
Stock options			10,738,378				6,676,879
Inducement stock options			463,333				1,030,000
Unvested restricted stock			1,074,606				1,495,536
Warrants			22,272,727				22,272,727
			34,549,044				31,475,142

Collaboration with PGEN and MD Anderson

On January 13, 2015, the Company, together with Precigen, entered into the MD Anderson License with MD Anderson (which Precigen subsequently assigned to PGEN). Pursuant to the MD Anderson License, the

C

ompany, together with PGEN, hold an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CAR

T-cell

therapies,

non-viral

gene transfer systems, genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs, arising from the laboratory of Laurence Cooper, M.D., Ph.D., who served as the Company’s Chief Executive Officer from May 2015 to February 2021 and was formerly a tenured professor of pediatrics at MD Anderson. In partial consideration for entering into the MD Anderson License, the Company issued MD Anderson an aggregate of 11,722,163 shares of common stock for which the Company incurred a $67.3 million charge recorded in 2015.

During the three months ended March 31, 2021 and year ending December 31, 2020, the Company did not make any payments to MD Anderson, and the total aggregate payments made in connection with this agreement

have been

 $41.9 million. The net balance of cash resources on hand at MD Anderson available to offset expenses and future costs is $5.1 million, which is included in prepaid expenses and other current assets. The classification is based on management’s current estimate of plans to utilize the prepaid balance and is subject to revision on a quarterly basis.

Collaboration with Vineti Inc.

On July 9, 2020, the Company entered into a master service agreement and statement of work with Vineti, Inc., or Vineti. Pursuant to the agreements, Vineti is developing a software platform to coordinate and orchestrate the order, cell collection and manufacturing process for the Company’s

TCR-T

clinical programs. Heidi Hagen, who became a director of the Company in June 2019 and our Interim Chief Executive Officer on February 25, 2021, is a

co-founder

and former officer, of Vineti. During the three months ended March 31, 2021, the Company recorded expenses of approximately $0.2 million for services performed by Vineti.

Joint Venture with TriArm Therapeutics/Eden Biocell

On December 18, 2018, the Company entered into a Framework Agreement with TriArm Therapeutics, Ltd., or TriArm, pursuant to which the parties agreed to launch Eden BioCell, Ltd., or Eden BioCell, to lead clinical development and

commercialization of certain

Sleeping Beauty-

generated

CAR-T therapies as set forth in a separate license agreement. Eden BioCell is a joint venture in the People’s Republic of China (including Macau and Hong Kong), Taiwan and Korea. The Company licensed to Eden BioCell the rights in Greater China for its third-generation Sleeping Beauty-generated CAR-T therapies targeting the CD19 antigen. Eden BioCell is owned equally by the Company and TriArm and the parties share decision-making authority.

TriArm has contributed $10.0 million to Eden BioCell and has committed up to an additional $25.0 million to this joint venture. TriArm also manages all clinical development in the territory pursuant to a Master Services Agreement between TriArm and Eden BioCell. James Huang, who became a director of the Company in July 2020, Chairman of the Board of Directors in January 2021 and Executive Chairman in February 2021, was the founder and serves as managing partner of Panacea

Venture, which is an investor in TriArm. Mr. Huang also serves as a member of Eden BioCell’s Board of Directors.

For the three months ended March 31, 2021 and 2020, Eden Biocell incurred a net loss and the Company continues to have no commitment to fund its operations.

7. Commitments and Contingencies

License Agreements

Exclusive License Agreement with PGEN Therapeutics

On October 5, 2018, the Company entered into an exclusive license agreement, or the License Agreement, with PGEN. As between the Company and PGEN, the terms of the License Agreement replace and supersede the terms of: (a) that certain Exclusive Channel Partner Agreement by and between the Company and Precigen, dated January 6, 2011, as amended by the First Amendment to Exclusive Channel Partner Agreement effective September 13, 2011, the Second Amendment to the Exclusive Channel Partner Agreement effective March 27, 2015, and the Third Amendment to Exclusive Channel Partner Agreement effective June 29, 2016, which was subsequently assigned by Precigen to PGEN; (b) certain rights and obligations pursuant to that certain License and Collaboration Agreement effective March 27, 2015 between ZIOPHARM, Precigen and ARES TRADING S.A., or Ares Trading, a subsidiary of Merck KGaA, or Merck, as assigned by Precigen to PGEN, or the Ares Trading Agreement; (c) that certain License Agreement between the Company, Precigen, and MD Anderson, with an effective date of January 13, 2015, or the MD Anderson License, which was subsequently assigned by Precigen and assumed by PGEN effective as of January 1, 2018; and (d) that certain Research and Development Agreement between the Company, Precigen and MD Anderson with an effective date of August 17, 2015, or the Research and Development Agreement, and any amendments or statements of work thereto.

 

Pursuant to the terms of the License Agreement, PGEN has granted the Company exclusive, worldwide rights to research, develop and commercialize (i) products utilizing PGEN’s RheoSwitch

®

gene switch, or RTS

®

, for the treatment of cancer, referred to as

IL-12

Products, (ii) CAR products directed to (A) CD19 for the treatment of cancer, referred to as CD19 Products, and (B) a second target for the treatment of cancer, subject to the rights of Ares Trading to pursue such target under the Ares Trading Agreement, and

(iii) T-cell

receptor, or TCR, products designed for neoantigens for the treatment of cancer. PGEN has also granted the Company an exclusive, worldwide, royalty-bearing,

sub-licensable

license for certain patents relating to the

Sleeping Beauty

technology to research, develop and commercialize TCR products for both neoantigens and shared antigens for the treatment of cancer, referred to as TCR Products.

The Company is solely responsible for all aspects of the research, development and commercialization of the exclusively licensed products for the treatment of cancer. The Company is required to use commercially reasonable efforts to develop and commercialize

IL-12

Products, CD19 Products and TCR Products.

In consideration of the licenses and other rights granted by PGEN, the Company pays PGEN an annual license fee of $0.1 million. The Company did not have any annual license expenses for the three months ended March 31, 2021 and 2020.

The Company will also make milestone payments totaling up to an additional $52.5 million for each exclusively licensed program upon the initiation of later stage clinical trials and upon the approval of exclusively licensed products in various jurisdictions. In addition, the Company will pay PGEN tiered royalties ranging from

low-single

digit to high-single digit on the net sales derived from the sales of any approved

IL-12

Products and CAR Products. The Company will also pay PGEN royalties ranging from

low-single

digit to

mid-single

digit on the net sales derived from the sales of any approved TCR Products, up to a maximum royalty amount of $100.0 million in the aggregate. The Company will also pay PGEN 20% of any sublicensing income received by the Company relating to the licensed products.

PGEN will pay the Company royalties ranging from

low-single

digits to

mid-single

digits on the net sales derived from the sale of PGEN’s CAR products, up to $50.0 million

.

During the three months ended March 31, 2021 there were $0.1 million of expenses for services performed by PGEN and no expenses incurred during the three months ended March 31, 2020. As of March 31, 2021 and December 31, 2020, the Company had

$0.1 

million, respectively, in accrued expenses related to services for amounts due to PGEN.

 

License Agreement—The University of Texas MD Anderson Cancer Center

On January 13, 2015, the Company, together with Precigen, entered into the MD Anderson License with MD Anderson (which Precigen subsequently assigned to PGEN). Pursuant to the MD Anderson License, the Company, together with Precigen, holds an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CAR

T-cell

therapies,

non-viral

gene transfer systems, genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs, arising from the laboratory of Laurence Cooper, M.D., Ph.D., who was the Company’s Chief Executive Officer from May 2015

to February 2021 and was formerly a tenured professor of pediatrics at MD Anderson and is now currently a visiting scientist under that institution’s policies.

The term of the MD Anderson License expires on the later of (a) the expiration of all patents licensed thereunder, or (b) the twentieth anniversary of the date of the MD Anderson License; provided, however, that following the expiration of the term of the MD Anderson License, the Company, together with PGEN, shall have a fully-paid up, royalty free, perpetual, irrevocable and sublicensable license to use the licensed intellectual property thereunder. After ten years from the date of the MD Anderson License and subject to a

90-day

cure period, MD Anderson will have the right to convert the MD Anderson License into a

non-exclusive

license if ZIOPHARM and PGEN are not using commercially reasonable efforts to commercialize the licensed intellectual property on a

case-by-case

basis. After five years from the date of the MD Anderson License and subject to a

180-day

cure period, MD Anderson will had the right to terminate the MD Anderson License with respect to specific technology(ies) funded by the government or subject to a third-party contract if the Company and PGEN did not meet the diligence requirements in such funding agreement or contract, as applicable. MD Anderson may also terminate the agreement with written notice upon material breach by us and PGEN, if such breach has not been cured within 60 days of receiving such notice. In addition, the MD Anderson License will terminate upon the occurrence of certain insolvency events for both the Company and PGEN and may be terminated by the mutual written agreement of the Company, PGEN, and MD Anderson.

On August 17, 2015, the Company, Precigen and MD Anderson entered into the Research and Development, or the 2015 Agreement, to formalize the scope and process for the transfer by MD Anderson, pursuant to the terms of the MD Anderson License, of certain existing research programs and related technology rights, as well as the terms and conditions for future collaborative research and development of new and ongoing research programs.

Pursuant to the 2015 Agreement, the Company, Precigen and MD Anderson formed a joint steering committee to oversee and manage the new and ongoing research programs. Under the License Agreement with PGEN, the Company and PGEN agreed that PGEN would no longer participate on the joint steering committee after the date of the License Agreement. As provided under the MD Anderson License, the Company provided funding for research and development activities in support of the research programs under the Research and Development Agreement for a period of three years and in an amount of no less than $15.0 million and no greater than $20.0 million per year. On October 22, 2019, the Company entered into an amendment to the Research and Development Agreement extending its term until December 31, 2026.

During the three months ended March 31, 2021 and 2020, the Company made no payments to MD Anderson. The net balance of cash resources on hand at MD Anderson available to offset expenses and future costs is $5.1 million, which is included in prepaid expenses and other current assets on the Company’s balance sheet at March 31, 2021.

On October 22, 2019, the Company entered into the 2019 Research and Development Agreement, or the 2019 Agreement, with MD Anderson, pursuant to which the parties agreed to collaborate with respect to the Company’s

Sleeping Beauty

immunotherapy program, which uses

non-viral

gene transfer to stably express and clinically evaluate neoantigen-specific TCRs in T cells. Under the 2019 Agreement, the parties will, among other things, collaborate on programs to expand the Company’s TCR library and conduct clinical trials.

 

The Company will own all intellectual property developed under the 2019 Agreement and will retain all rights to intellectual property for oncology products manufactured using

non-viral

gene transfer technologies under the Agreement, including the Company’s

Sleeping Beauty

technology. The Company has granted MD Anderson an exclusive license for such intellectual property outside the field of oncology and to develop and commercialize autologous TCR products manufactured using viral gene transfer technologies, and a

non-exclusive

license for allogeneic TCR products manufactured using viral-based technologies.

The Company has agreed, beginning on January 1, 2021, to reimburse MD Anderson up to a total of $20.0 million for development costs incurred starting after January 1, 2021 under the 2019 Agreement. In addition, the Company will pay MD Anderson royalties on net sales of its TCR products at rates in the low single digits. The Company is required to make performance-based payments upon the successful completion of clinical and regulatory benchmarks relating to its TCR products. The aggregate potential benchmark payments are $36.5 million, of which only $3.0 million will be due prior to the first marketing approval of the Company’s TCR products. The royalty rates and benchmark payments owed to MD Anderson may be reduced upon the occurrence of certain events. The Company also agreed that it will sell the Company’s TCR products to MD Anderson at preferential prices and will sell its TCR products in Texas exclusively to MD Anderson for a limited period of time following the first commercial sale of the Company’s

TCR products. No costs have been incurred under this agreement as of March 31, 2021.

In connection with the execution of the 2019 Agreement, the Company issued MD Anderson a warrant to purchase 3,333,333 shares of common stock. Refer to Note

10

–

Warrants

for further details

.

License Agreement with the National Cancer Institute

On May 28, 2019, the Company entered into a patent license agreement, or the Patent License, with the National Cancer Institute, or the NCI. Pursuant to the Patent License, the Company holds an exclusive, worldwide license to certain intellectual property to develop and commercialize patient-derived (autologous), peripheral blood

T-cell

therapy products engineered by transposon-mediated gene transfer to express TCRs reactive to mutated KRAS, TP53 and EGFR. In addition, pursuant to the Patent License, the Company holds an exclusive, worldwide license to certain intellectual property for manufacturing technologies to develop and commercialize autologous, peripheral blood

T-cell

therapy products engineered by

non-viral

gene transfer to express TCRs, as well as a

non-exclusive,

worldwide license to certain additional manufacturing technologies.

Pursuant to the terms of the Patent License, the Company is required to pay the NCI a cash payment in the aggregate amount of $1.5 million

,

payable in $0.5 million installments within sixty days,

six-months,

and the twelve-month anniversary of the effective date of the agreement of the Patent License. The $1.5 million was paid as of December 31, 2020.

On January 8, 2020, the Company entered into an amendment to the Patent License which expanded the TCR library to include additional TCRs reactive to mutated KRAS and TP53.

The terms of the Patent License also require the Company to pay the NCI minimum annual royalties in the amount of $0.3 million, which amount will be reduced to $0.1 million once the aggregate minimum annual royalties paid by the Company equals $1.5 million. The first minimum annual royalty payment is payable on the date that is eighteen months following the date of the Patent License. During the three months ended March 31, 2021, the Company recognized $0.3 

million related to royalty payments under this agreement.

 

On September 28, 2020, the Company entered into a second amendment to the patent license agreement which expanded the TCR library to include additional TCRs.

The Company is also required to make performance-based payments upon successful completion of clinical and regulatory benchmarks relating to the licensed products. The aggregate potential benchmark payments are $4.3 million, of which aggregate payments of $3.0 million are due only after marketing approval in the United States or in Europe, Japan, Australia, China or India. The first benchmark payment of $0.1 million will be due upon the initiation of the Company’s first sponsored Phase 1 clinical trial of a licensed product or licensed process in the field of use licensed under the Patent License, which has not been met at March 31, 2021.

In addition, the Company is required to pay the NCI

one-time

benchmark payments following aggregate net sales of licensed products at certain net sales up to $1.0 billion. The aggregate potential amount of these benchmark payments is $12.0 million. The Company must also pay the NCI royalties on net sales of products covered by the Patent License at rates in the low to

mid-single

digits depending upon the technology included in a licensed product. To the extent the Company enters into a sublicensing agreement relating to a licensed product, the Company is required to pay the NCI a percentage of all consideration received from a sublicensee, which percentage will decrease based on the stage of development of the licensed product at the time of the sublicense.

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

 

The NCI may terminate or modify the Patent License in the event of a material breach, including if the Company does not meet certain milestones by certain dates, or upon certain insolvency events that remain uncured following the date that is 90 days following written notice of such breach or insolvency event. The

Company may terminate the Patent License, or any portion thereof, in the Company’s sole discretion at any time upon 60 days’ written notice to the

NCI. In addition, the NCI has the right to: (i) require the Company to sublicense the rights to the product candidates covered by the Patent License upon certain conditions, including if the Company is not reasonably satisfying required health and safety needs and (ii) terminate or modify the Patent

License, including if the Company is not satisfying requirements for public use as specified by federal regulations.

 

During the three-month periods ended March 31, 2021, and 2020, the Company expensed 

$0.1

million related to the patent services under this agreement. Additionally, the Company recorded

$0.3 million in accrued expenses as of March 31, 2021 related to patent services incurred in both the prior and current year.

Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute

On January 10, 2017, the Company announced the signing of a CRADA, with the NCI for the development of adoptive cell transfer, or ACT,-based immunotherapies genetically modified using the

Sleeping Beauty

transposon/transposase system to express TCRs for the treatment of solid tumors. The principal goal of the CRADA is to develop and evaluate ACT for patients with advanced cancers using autologous peripheral blood lymphocytes, or PBL, genetically modified using the

non-viral

Sleeping Beauty

system to express TCRs that recognize neoantigens expressed within a patient’s cancer. Research conducted under the CRADA will be at the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI, in collaboration with the Company. In February 2019, the Company extended the CRADA with the NCI for two years, committing an additional $5.0 million to this program. The Company recorded $0.6

 

million of expense for both three-month periods ended March 31, 2021 and 2020.

 

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

On August 24, 2004, the Company entered into a patent and technology license agreement with MD Anderson and the Texas A&M University System, which the Company refers to, collectively, as the Licensors. Under this agreement, the Company was granted an exclusive, worldwide license to rights (including rights to U.S. and foreign patent and patent applications and related improvements and

know-how)

for the manufacture and commercialization of two classes of organic arsenicals (water- and lipid-based) for human and animal use. The class of water-based organic arsenicals includes darinaparsin.

Under the terms of the agreement, the Company may be required to make additional payments to the Licensors upon achievement of certain other milestones in varying amounts which, on a cumulative basis could total up to an additional $4.5 million. In addition, the Licensors are entitled to receive single digit percentage royalty payments on sales from a licensed product and will also be entitled to receive a portion of any fees that the Company may receive from a possible sublicense under certain

circumstances. No amounts were accrued or paid during the three months ended March 31, 2021 and 2020.

Collaboration Agreement with Solasia Pharma K.K.

On March 7, 2011, the Company entered into a License and Collaboration Agreement with Solasia Pharma K.K., or Solasia, which was amended on July 31, 2014 to include an exclusive worldwide license. Pursuant to the License and Collaboration Agreement, the Company granted Solasia an exclusive license to develop and commercialize darinaparsin in both intravenous and oral forms and related organic arsenic molecules, in all indications for human use.

As consideration for the license, the Company is eligible to receive from Solasia development- and sales-based milestones, a royalty on net sales of darinaparsin, once commercialized, and a percentage of any sublicense revenues generated by Solasia. Solasia will be responsible for all costs related to the development, manufacturing and commercialization of darinaparsin. The Company’s Licensors, as defined in the agreement, will receive a portion of all milestone and royalty payments made by Solasia to the Company in accordance with the terms of the license agreement with the Licensors. No amounts were accrued or received during the three months ended March 31, 2021 and 2020.

8. Leases

In June 2012, the Company entered into a master lease for the Company’s corporate office headquarters in

Boston, Massachusetts, which

 was originally set to expire in August 2016, but renewed through August 31, 2021. As of March 31, 2021 and December 31, 2020, a total security deposit of $0.1 million is included in deposits on the Company’s balance sheet. On January 30, 2018, the Company entered into a lease agreement

for office space in Houston, Texas,

at MD Anderson. Under the terms of the Houston lease agreement, the Company leased approximately

 210 square feet and were required to make rental payments at an average monthly rate of approximately 

$1 thousand. This lease was terminated effective March 31, 2020.

On January 30, 2018, the Company entered into a lease agreement, or the First Houston Lease, for office space in Houston, Texas at MD Anderson through April 2021. On March 12, 2019, the Company entered into a lease agreement, or the Second Houston Lease, for additional office

s

pace in Houston through April 2021. Under the terms of the First Houston Lease agreement, the Company leases approximately

 

1,038 square feet and is required to make rental payments at an average monthly rate of approximately $2 thousand through April 2021. 

Under the terms of the Second Houston Lease, the Company leases from MD Anderson, approximately

 

8,443 square feet and is initially required to make rental payments of approximately $17 thousand

per month

through February 2027, subject to an annual base rent increase of approximately 3.0% throughout the term. Effective April 13, 2020, the Company leased an additional 5,584 square feet from MD Anderson. The Company is initially required to make rental payments of approximately $12 thousand per month through February 2027, subject to an annual base rent increase of approximately 3.0%

throughout the term. All future rent expense incurred in Houston, will be deducted from the Company’s prepayments to MD Anderson. 

Effective December 15, 2020, the Company leased an additional

 35,482

 square feet from MD Anderson. The Company is initially required to make rental payments of approximately

$37 

thousand per month through April 2028, subject to an annual base rent increase of approximately

 

3.0%

throughout the term beginning in April 2023. Future rent expense incurred in Houston, will be deducted from the Company’s prepayments to MD Anderson.

The components of lease expense were as follows:

 

(in thousands)		Three Months Ended March 31, 2021
Operating lease cost		$	381
Total lease cost		$	381
Weighted-average remaining lease term (years)			6.21
Weighted-average discount rate			8.00	%

Effective June 1, 2020, the Company entered into a noncancelable lease for a period of less than a year with monthly payments of approximately $10 thousand that is not subject to right of use asset recognition under ASC 842. Effective September 1, 2020, the Company added additional space to the noncancelable lease for a period of less than a year with monthly payments now totaling approximately $15 thousand. The Company recorded approximately $0.1 million in rent expense under this short-term lease during the three months ended March 31, 2021

.

As of March 31, 2021, the maturities of the Company’s operating lease liabilities for the years ended December 31, were as follows (in thousands):

 

2021 (excluding the three months ended March 31, 2021)		$	879
202 2			800
202 3			820
202 4			844
202 5			869
Thereafter			1,519
Total lease payments			5,731
Less: Imputed interest and adjustments			(1,231	)
Present value of lease payments		$	4,500

9. Stock-Based Compensation

The Company recognized stock-based compensation expense on all employee and

non-employee

awards as follows:

 

		For the three months ended March 31,
(in thousands)		2021				2020
Research and development		$	733			$	530
General and administrative			1,464				1,410
Stock-based compensation expense		$	2,197			$	1,940

The Company granted an aggregate of 4,314,438 stock options during the three months ended March 31, 2021 with a weighted-average grant date fair value of $2.43 per share. The Company granted an aggregate of 896,000 stock options during the three months ended March 31, 2020 with a weighted average grant date fair value of $2.64 per share.

On March 4, 2021, the Company extended the contractual life of 216,700 fully vested stock options held by a

former

director of the

Company, in conformity with prior practice. These extensions resulted in additional stock 

compensation expense of approximately $82 thousand

during

the three months ended March 31, 2021.

For the three months ended March 31, 2021 and 2020, the fair value of stock options was estimated on the date of grant using a Black-Scholes option valuation model with the following assumptions:

 

		For the three months ended March 31,
		2021		2020
Risk-free interest rate		0.09 - 1.05%		0.36 - 0.39%
Expected life in years		5.50 -   6.25		5.75 -   6.25
Expected volatility		72.92 -   74.20%		73.59 -   74.18%
Expected dividend yield		0%		0%

At March 31, 2021, there were 463,333 stock options that

had been issued outside the 2012 Equity Incentive Plan, or the 2012 Plan and the 2020 Equity Incentive Plan, or the 2020 Plan. These options are excluded from the schedule below.

 

Stock option activity under the Company’s stock option plans for the three months ended March 31, 2021 is as follows:

 

(in thousands, except share and per share data)		Number of Shares				Weighted- Average Exercise Price				Weighted- Average Contractual Term (Years)				Aggregate Intrinsic Value
Outstanding, December 31, 2020			6,840,719			$	3.81
Granted			4,314,438				3.79
Exercised			(352,442	)			2.89
Cancelled			(84,337	)			3.53
Outstanding, March 31, 2021			10,718,378			$	3.83				13.40			$	4,926
Options exercisable, March 31, 2021			3,562,744			$	4.23				6.68			$	2,176
Options exercisable, December 31, 2020			3,596,315			$	4.17				6.90			$	598
Options available for future grant			1,267,888

At March 31, 2021, total unrecognized compensation costs related to unvested stock options outstanding amounted to $16.0 million. The cost is expected to be recognized over a weighted-average period of 1.85 years.

A summary of the status of unvested restricted stock for the three months ended March 31, 2021 is as follows:

 

		Number of Shares				Weighted-Average Grant Date Fair Value
Unvested, December 31, 202 0			786,280			$	3.08
Granted			313,326				4.31
Vested			—				—
Cancelled			—				—
Unvested, March 31, 2021			1,099,606			$	3.43

At March 31, 2021, total unrecognized compensation costs related to unvested restricted stock outstanding amounted to $2.6 million. The cost is expected to be recognized over a weighted-average period of 1.57 years.

At the Company’s annual meeting held on June 29, 2020, the shareholders approved the 2020 Equity Incentive Plan, or the 2020 Plan, which is a successor to and continuation of the 2012 Plan. The 2020 Plan had

 

21 million shares authorized, plus the shares remaining for issuance under the 2012 Plan. Our ability to utilize the total shares authorized under the 2020 Plan will be limited by the total number of shares authorized in our certificate of incorporation.

As a result, as of March 31, 2021,

there are 1,287,888 shares available to grant from the 2020

P

lan. No additional awards can be granted from the 2012 Plan or the Company’s 2003 Stock Option Plan.

10. Warrants

In connection with the Company’s November 2018 private placement which provided net proceeds of approximately $47.1 million, the Company issued warrants to purchase an aggregate of 18,939,394 shares of common stock, or the 2018 warrants, which became exercisable six months after the closing of the private placement. The warrants have an exercise price of $3.01 per share and have a five-year term. The relative fair value of the warrants was estimated at $18.4 million using a Black-Scholes model with the following assumptions: expected volatility of 71%, risk free interest rate of 2.99%, expected life of five years and no dividends.

The Company assessed whether the warrants require accounting as derivatives. The Company determined that the warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with Financial Accounting Standards Board, or (FASB) Accounting Standards Codification (“ASC”) Topic 815,

Derivatives and Hedging

. As such, the Company has concluded the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’ equity.

On July 26, 2019 and September 12, 2019, the Company entered into agreements with existing investors for the exercise of previously issued warrants to purchase common stock in the private placement. Pursuant to the terms of the agreements, investors exercised their 2018 warrants for an aggregate of 17,803,031 shares of common stock, at an exercise price of $3.01 per share. Proceeds from the warrant exercise, after deducting placement agent fees and other related expenses of $1.1 million were approximately $52.5 million. The Company issued participating investors new warrants to purchase up to 17,803,031 additional shares of common stock, or the 2019 warrants, as an inducement for the warrant holders to exercise their 2018 warrants. The 2019 warrants will expire on the fifth anniversary of the initial exercise date and have an exercise price of $7.00. The 2019 warrants were valued using a Black-Scholes valuation model and resulted in a $60.8 million

non-cash

charge to the Company’s statement of operations in 2019.

On October 22, 2019, the Company entered into the 2019 Agreement with MD Anderson. Refer to Note

7

–

Commitments and Contingencies

for further details

.

In connection with the execution of the 2019 Agreement, the Company issued MD Anderson a warrant to purchase 3,333,333 shares of common stock. The warrant has an initial exercise price of $0.001 per share and grant date fair value of $14.5 million. The warrant expires on December 31, 2026 and vests upon the occurrence of certain clinical milestones.

The Company will recognize expense on the warrant in the same manner as if the Company paid cash for services to be rendered. The Company has not recognized any expense related to the warrant as of March 31, 2021, as no work towards any of the specified clinical milestones has begun. 

11. Joint Venture

On December 18, 2018, the Company entered into a Framework Agreement with TriArm pursuant to which the parties agreed to launch Eden BioCell, to lead clinical development and commercialization of certain

Sleeping Beauty-

generated

CAR-T

therapies as set forth in a separate license agreement (see Note 6).

On January 3, 2019, Eden BioCell was incorporated in Hong Kong as a private company. Eden BioCell, the Company and TriArm entered into a Share Subscription Agreement on January 23, 2019, where the Company and TriArm agreed to contribute certain intellectual property, services and cash (only with respect to TriArm) to Eden BioCell to subscribe for a certain number of newly issued ordinary shares in the share capital of Eden BioCell. On the closing date, upon the issuance and subscription of the shares, in respect of the aforementioned consideration, 10,000,000 ordinary shares were issued to the Company and 10,000,000 ordinary shares were issued to TriArm.

The closing of the transaction occurred on July 5, 2019. The Framework Agreement and Share Subscription Agreements were each respectively amended to be effective as of this date. Upon consummation of the joint venture, Eden BioCell and the Company also entered into a license agreement, pursuant to which the Company licensed the rights to Eden BioCell for third-generation

Sleeping Beauty

-generated

CAR-T

therapies targeting the CD19 antigen for the territory of China (including Macau and Hong Kong), Taiwan and Korea. Eden BioCell will be responsible for certain milestone and royalty payments related to the Company’s license agreements with MD Anderson and PGEN (see Note

7

). TriArm entered into a

m

aster

s

ervices

a

greement with Eden BioCell and contributed $10.0 million of cash on the closing date. TriArm also committed to contribute an additional $25.0 million to Eden BioCell over time through the achievement of certain specified milestones. TriArm and the Company each received a 50% equity interest in the joint venture in exchange for their contributions to Eden BioCell.

As of July 5, 2019, as a result of the design and purpose of Eden BioCell, the Company determined that Eden BioCell was considered a variable interest entity, or VIE, and concluded that it is not the primary beneficiary of the VIE as it did not have the power to direct the activities of the VIE that most significantly impact its performance. Rather, the Company accounts for the equity interest in Eden BioCell under the equity method of accounting as it has the ability to exercise significant influence over the operations of Eden BioCell

.

The Company determined that Eden BioCell was not a customer and therefore, accounted for the transaction as the transfer of nonfinancial assets to be recognized at their fair value on the contribution date. The fair value of the intellectual property contributed to Eden BioCell had a de minimis value due to the early stage of the technology and the likelihood of clinical success. Due to the de minimis fair value of the intellectual property contributed, the Company did not record a gain or loss on this transaction and recognized no value for its equity-method investment.

For the three months ended March 31, 2021 and 2020, Eden BioCell incurred a net loss and the Company continues to have no commitment to fund its operations.

12. Subsequent Events

The Company has evaluated subsequent events from the balance sheet date through the date on which these financial statements were issued. Except as disclosed below, the Company did not have any material subsequent events that impacted its financial statements or disclosures.

On May 6, 2021, the Company announced its commitment to a plan to realign its research and development resources to wind down the clinical trials of its Controlled IL-12 program as part of the Company’s decision to allocate an increasing amount of its resources and capital to its Sleeping Beauty TCR program. Pursuant to this plan, the Company will eliminate approximately 

15%

 of its existing workforce on a staggered basis over the remainder of 2021. Affected employees will be offered separation benefits, including severance payments and, in some cases, retention bonuses, along with temporary healthcare coverage assistance. Additionally, the Company is evaluating its facilities and vendor relationships utilized in the Controlled IL-12 program and the associated contractual obligations to determine the appropriate course of action and any associated charges to wind down the ongoing clinical trials. The Company estimates the severance and termination-related costs to be approximately $0.8

million and will record these charges in the second quarter of 2021.

On April 5, 2021, the Company entered into a formal separation agreement with Dr. Laurence Cooper, which resulted in the termination of Dr. Cooper’s employment as the Company’s Chief Executive Officer, effective April 9, 2021. As consideration under the separation agreement, Dr. Cooper is to receive certain severance benefits including severance pay, a restricted stock grant in lieu of Dr. Cooper’s 2020 discretionary bonus, COBRA coverage and reimbursement of legal fees. Dr. Cooper is also continuing with the Company in a scientific advisory consultant capacity to support the Company’s programs. During the three months ended March 31, 2021, the Company recorded a charge of approximately 

$0.6

million related to his separation. Additional charges related to his separation and continuing consulting costs will be incurred in subsequent quarters. 

Our Controlled IL-12 platform is based on an engineered replication-incompetent adenovirus, referred to as Ad-RTS-hIL-12, plus veledimex as a gene delivery system to conditionally produce IL-12, a potent, naturally occurring anti-cancer protein, to treat patients with solid tumors. Our Controlled platform allows us to deliver IL-12 in a tunable dose as the cytokine is under transcriptional control of the RheoSwitch Therapeutic System (RTS ).

Research and development expenses during the three months ended March 31, 2021 and 2020 were as follows:

Research and development expenses for the three months ended March 31, 2021 increased by $0.6 million when compared to the three months ended March 31, 2020. The increase in research and development expenses for the three months ended March 31, 2021 is primarily due to a $5.0 million increase in headcount, stock compensation, and facilities costs and $0.9 million in increased cell therapy program costs offset by $5.3 million of decreased Controlled program costs.

We have not accumulated and tracked our internal historical research and development costs or our personnel and personnel-related costs on a basis. Our employee and infrastructure resources are allocated across several projects, and many of our costs are directed to broadly applicable research endeavors. As a result, we cannot state the costs incurred for each of our programs on a basis related to personnel and personnel related costs.

We do track our accumulated costs by program for costs incurred by outside vendors conducting research for our named clinical candidates. For the three months ended March 31, 2021, our clinical stage projects included a Phase 1 clinical trial with plus veledimex in progressive glioblastoma; a Phase 1 clinical trial infusing our 2nd generation CD19-specific CAR T cells in patients with advanced lymphoid malignancies; a Phase 1/2 clinical trial of with veledimex for the treatment of pediatric brain tumors; and a Phase 2 clinical trial of Ad-RTS-hIL-12 with veledimex in combination with cemiplimab-rwlc in progressive glioblastoma. The expenses incurred by us to third parties for our Phase 1 clinical trial with plus veledimex in progressive glioblastoma were $0.9 million for the three months ended March 31, 2021 and $14.7 million from the project’s inception in September 2015 through March 31, 2021. The expenses incurred by us to third parties for our Phase 1 clinical trial infusing our 2nd generation CD19-specific CAR T cells in patients with advanced lymphoid malignancies were zero for the three months ended March 31, 2021 and $6.2 million from the project’s inception in December 2015 through March 31, 2021. The expenses incurred by us to third parties for our Phase 1/2 clinical trial of with veledimex for the treatment of pediatric brain tumors were $0.4 million for the three months ended March 31, 2021 and $2.5 million from the project’s inception in October 2017 through March 31, 2021. The expense incurred by us to third parties for our Phase 2 clinical trial of with veledimex in combination with cemiplimab-rwlc in progressive glioblastoma were $1.3 million for the three months ended March 31, 2021 and $6.7 million from the projects inception in June 2019 through March 31, 2021.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our programs or when and to what extent we will receive cash inflows from the commercialization and sale of a product. Our inability to complete our programs in a timely manner or our failure to enter into appropriate collaborative agreements could significantly increase our capital requirements and could adversely impact our liquidity. These uncertainties could force us to reduce or eliminate our activities in one or more of our programs or seek additional, external sources of financing from in order to continue with our product development strategy. Our inability to raise additional capital, or to do so on terms reasonably acceptable to us, would jeopardize the future success of our business.

General and administrative expenses during the three months ended March 31, 2021 and 2020 were as follows:

Other income, net for the three months ended March 31, 2021 and 2020 was as follows:

To date, we have financed our operations primarily through public offerings of our common stock, private placements of our convertible equity securities and collaborations. Through March 31, 2021, we have received an aggregate of $714.1 from public offerings and through sales under our market” offering program.

The offering was made pursuant to our effective registration statement on Form (File previously filed with the SEC, and a prospectus supplement thereunder. The net proceeds from the offering were approximately $84.8 million after deducting underwriting discounts and offering expenses paid by us.

In June 2019, we entered into an Open Market Sale Agreement, or Sales Agreement, with Jefferies LLC, or Jefferies, as a sale agent pursuant to which we may offer and sell, from time to time through Jefferies, shares of our common stock having an aggregate offering value of up to $100.0 million. Shares will be sold pursuant to our effective registration statement on Form (File as previously filed with the Securities and Exchange Commission. Subject to the terms of the sales agreement, we are able to determine, at our sole discretion, the timing and number of shares to be sold under this ATM facility. The compensation to Jefferies for sales of our common stock pursuant to the sales agreement will be an amount equal to 3% of the gross proceeds of any shares of common stock sold under the sales agreement. During the three months ended March 31, 2020, we sold an aggregate of 2,814,673 shares of its common stock. The offering was made pursuant to the Company’s effective registration statement on Form (File previously filed with the SEC, and a prospectus supplement thereunder. The net proceeds from the offering were approximately $13.0 million after deducting underwriting discounts and offering expenses payable by the Company. We did not sell any shares of its common stock under the at-the-market facility during the three months ended March 31, 2021.

Given our current development plans, we expect that our existing cash and cash equivalents will be sufficient to fund our current operations into the second quarter of 2022. We currently do not have any committed sources of additional capital at this time. The forecast of cash resources is forward-looking information that involves risks and uncertainties, and the actual amount of our expenses could vary materially and adversely as a result of a number of factors. We have based our estimates on assumptions that may prove to be wrong, and our expenses could prove to be significantly higher than we currently anticipate. Management does not know whether additional financing will be on terms favorable or acceptable to us when needed, if at all. In addition, we have issued or reserved for future issuance shares nearing the maximum number of shares of common stock authorized by our certificate of incorporation. If we are unable to increase the total number of authorized shares, we may be unable to effectively utilize our common stock to raise capital. If adequate additional funds are not available when required, or if we are unsuccessful in entering into partnership agreements for further development of our products, management may need to curtail development efforts. The pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital when and if needed. If we are unable to obtain funding, we could be forced to delay, reduce or eliminate some or all of our research and development programs, product portfolio expansion or commercialization efforts, which would adversely affect our business prospects, or we may be unable to continue operations.

Net cash used in operating activities for the three months ended March 31, 2021 was $15.3 million, as compared to net cash used in operating activities of $9.9 million for the three months ended March 31, 2020. The net cash used in operating activities for the three months ended March 31, 2021 was primarily due to our net loss of $21.6 million, the change in prepaid and other current assets of $3.2 million primarily related to the use of our funds at MD Anderson, the change in accounts payable of $2.7 million, the change in stock-based compensation of $2.2 million, other noncurrent assets of $0.6 million, offset by the change in accrued expenses of $3.1 million and the change in receivables of $0.3 million.