UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

 
(Mark One)
 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2023
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: 001-39743

KINNATE BIOPHARMA INC.
(Exact name of registrant as specified in its charter)


Delaware
 
82-4566526
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification Number)
103 Montgomery Street, Suite 150
The Presidio of San Francisco
San Francisco, CA
 
94129
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (858) 299-4699



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 $0.0001 per share
 
KNTE
 
The Nasdaq Global Select Market



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes ☒    No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒   No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company

Emerging growth company


 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒
 
As of May 8, 2023, the Registrant had 46,572,594 shares of common stock, $0.0001 par value per share, outstanding.
 


TABLE OF CONTENTS

   
Page
PART I—FINANCIAL INFORMATION
 
Item 1.
1
     
 
1
     
 
2
     
 
3
     
 
4
     
 
5
     
Item 2.
16
     
Item 3.
27
     
Item 4.
27
     
PART II—OTHER INFORMATION
 
Item 1.
28
     
Item 1A.
28
     
Item 2.
100
     
Item 3.
100
     
Item 4.
100
     
Item 5.
100
     
Item 6.
101
     
  102

-i-

Special Note Regarding Forward-Looking Statements
 
This Quarterly Report on Form 10‑Q contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10‑Q, including statements regarding our future results of operations and financial position, business strategy, development plans, ongoing and planned future preclinical studies and clinical trials, future results of ongoing and planned future clinical trials, expected research and development costs, regulatory strategy, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. In some cases, investors can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10‑Q include, but are not limited to, statements about:
 

the ability of our ongoing and planned future preclinical studies and clinical trials to demonstrate safety and efficacy of our product candidates, and other positive results;
 

the timing, progress and results of ongoing and planned future preclinical studies and clinical trials for our current product candidates, and other product candidates we may develop, including statements regarding the timing of initiation and completion of preclinical studies or clinical trials and related preparatory work, the period during which the results of the preclinical studies or clinical trials will become available, and our research and development programs;
 

the timing, scope and likelihood of regulatory filings and approvals, including timing of investigational new drug applications (INDs) and final approval by the U.S. Food and Drug Administration (FDA) of our current product candidates and any other future product candidates;
 

the timing, scope or likelihood of foreign regulatory filings and approvals;
 

our ability to develop and advance our current product candidates and programs into, and successfully complete, clinical trials;
 

our manufacturing, commercialization, and marketing capabilities and strategy;
 

our plans relating to commercializing our product candidates, if approved, including the geographic areas of focus and sales strategy;
 

the need to hire additional personnel and our ability to attract and retain such personnel;
 

the size of the market opportunity for our product candidates, including our estimates of the number of patients who suffer from the diseases we are targeting;
 

our expectations regarding the approval and use of our product candidates in combination with other drugs;
 

our competitive position and the success of competing therapies that are or may become available;
 

our estimates of the number of patients that we will enroll in our clinical trials;
 

the beneficial characteristics, and the potential safety, efficacy and therapeutic effects of our product candidates;
 

our ability to obtain and maintain regulatory approval of our product candidates;
 
-ii-


our plans relating to the further development of our product candidates, including additional indications we may pursue;
 

existing regulations and regulatory developments in the United States, Europe and other jurisdictions;
 

our expectations regarding the impact of COVID, supply chain disruptions, inflation and other drivers of macroeconomic volatility on our business;
 

our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our current product candidates and other future product candidates we may develop, including the extensions of existing patent terms where available, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;
 

our continued reliance on third parties to conduct ongoing and planned future preclinical studies and clinical trials of our product candidates, and for the manufacture of our product candidates for preclinical studies and clinical trials;
 

our ability to obtain, and negotiate favorable terms of, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize our product candidates;
 

the pricing and reimbursement of our current product candidates and other product candidates we may develop, if approved;
 

the rate and degree of market acceptance and clinical utility of our current product candidates and other product candidates we may develop;
 

our estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
 

our financial performance;
 

the period over which we estimate our existing cash and cash equivalents will be sufficient to fund our future operating expenses and capital expenditure requirements;
 

the impact of laws and regulations;
 

our expectations regarding the period during which we will remain an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (JOBS Act); and
 

our anticipated use of our existing resources.
 
We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10‑Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10‑Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, investors should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise.
 
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10‑Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

PART I—FINANCIAL INFORMATION
 
Item 1.
Financial Statements.

KINNATE BIOPHARMA INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands, except share and par value amounts)

   
March 31, 2023
   
December 31, 2022
 
Assets
           
Current assets:
           
Cash and cash equivalents
 
$
73,570
   
$
29,261
 
Cash at consolidated joint venture
    -       25,725  
Short-term investments
   
127,411
     
172,214
 
Prepaid expenses and other current assets
   
4,307
     
3,637
 
Total current assets
   
205,288
     
230,837
 
Property and equipment, net
   
2,877
     
3,071
 
Right-of-use lease assets
    3,170       3,377  
Long-term investments
   
30,203
     
39,139
 
Restricted cash
    371       371  
Other non-current assets
    1,971       2,031  
Total assets
 
$
243,880
   
$
278,826
 
                 
Liabilities, Redeemable Convertible Noncontrolling Interests and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable
 
$
4,451
   
$
2,970
 
Accrued expenses
   
12,721
     
13,206
 
Current portion of operating lease liabilities     983       991  
Total current liabilities
   
18,155
      17,167  
Operating lease liabilities, long-term     2,963       3,191  
Total liabilities
    21,118       20,358  
Commitments and contingencies (See Note 12)
           
Redeemable convertible noncontrolling interests     -       35,000  
Stockholders’ equity:
               
Preferred stock, $0.0001 par value; 200,000,000 shares authorized at March 31, 2023 and December 31, 2022; 0 shares outstanding at March 31, 2023 and December 31, 2022
   
-
     
-
 
Common stock, $0.0001 par value; 1,000,000,000 shares authorized at March 31, 2023 and December 31, 2022; 46,569,648 and 44,342,292 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
   
5
     
4
 
Additional paid-in capital
   
515,524
     
484,237
 
Accumulated other comprehensive loss
   
(464
)
   
(1,410
)
Accumulated deficit
   
(292,303
)
   
(259,363
)
Total stockholders’ equity
   
222,762
     
223,468
 
Total liabilities, redeemable convertible noncontrolling interests and stockholders’ equity
 
$
243,880
   
$
278,826
 

See accompanying notes to condensed consolidated financial statements.

KINNATE BIOPHARMA INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(in thousands, except share and per share amounts)

   
Three Months Ended March 31,
 
   
2023
   
2022
 

           
Operating expenses:
           
Research and development
 
$
26,559
   
$
19,647
 
General and administrative
   
8,094
     
7,412
 
Total operating expenses
   
34,653
     
27,059
 
Loss from operations
   
(34,653
)
   
(27,059
)
Other income, net
    1,713       157  
Net loss   $
(32,940 )   $
(26,902 )
                 
Weighted-average shares outstanding, basic and diluted
    45,409,572       43,882,920  
Net loss per share, basic and diluted
  $ (0.73 )   $ (0.61 )
                 
Comprehensive loss:                
Net loss   $ (32,940 )   $ (26,902 )
Other comprehensive loss:
               
Unrealized gain (loss) on investments
    946     (1,656 )
Total comprehensive loss   $
(31,994 )   $
(28,558 )

See accompanying notes to condensed consolidated financial statements.

KINNATE BIOPHARMA INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(in thousands, except share amounts)


 
Common Stock
   
Additional
Paid-in
   
Accumulated Other Comprehensive
   
Accumulated
   
Total
Stockholders’
   
Redeemable Convertible Noncontrolling
 
 
 
Shares
   
Amount
   
Capital
   
Loss
   
Deficit
   
Equity
   
Interests
 
 
                                         
Balance at December 31, 2022
   
44,342,292
   
$
4
   
$
484,237
   
$
(1,410
)
 
$
(259,363
)
 
$
223,468
   
$
35,000
 
Stock-based compensation expense
   
-
     
-
     
5,404
     
-
     
-
     
5,404
     
-
 
Acquisition of redeemable convertible noncontrolling interests
    2,200,000       1       25,866       -       -       25,867       (35,000 )
Shares issued under equity incentive plans
    27,356       -       17       -       -       17       -  
Net loss
   
-
     
-
     
-
     
-
     
(32,940
)
   
(32,940
)
   
-
 
Other comprehensive gain
   
-
     
-
     
-
     
946
     
-
     
946
     
-
 
Balance at March 31, 2023
   
46,569,648
   
$
5
   
$
515,524
   
$
(464
)
 
$
(292,303
)
 
$
222,762
   
$
-
 
 
                                                       
Balance at December 31, 2021
   
43,855,944
   
$
4
   
$
463,089
   
$
(524
)
 
$
(143,092
)
 
$
319,477
   
$
35,000
 
Stock-based compensation expense
   
-
     
-
     
4,777
     
-
     
-
     
4,777
     
-
 
Shares issued under equity incentive plans
    100,105       -       125       -       -       125       -  
Net loss
   
-
     
-
     
-
     
-
     
(26,902
)
   
(26,902
)
   
-
 
Other comprehensive loss
   
-
     
-
     
-
     
(1,656
)
   
-
     
(1,656
)
   
-
 
Balance at March 31, 2022
   
43,956,049
   
$
4
   
$
467,991
   
$
(2,180
)
 
$
(169,994
)
 
$
295,821
   
$
35,000
 

See accompanying notes to condensed consolidated financial statements.

KINNATE BIOPHARMA INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
   
Three Months Ended March 31,
 
   
2023
   
2022
 
Cash flows from operating activities:
           
Net loss
 
$
(32,940
)
 
$
(26,902
)
Adjustments to reconcile net loss to net cash used in operating activities:
               
Stock-based compensation expense
   
5,404
     
4,777
 
Depreciation
   
203
     
58
 
Amortization/accretion of investments
   
(744
)
   
474
 
Changes in operating assets and liabilities:
               
Prepaid expenses and other assets
   
(610
)
   
(628
)
Operating lease right-of-use assets and liabilities, net
   
(29
)
   
618
 
Accounts payable and accrued expenses
   
996
     
516
 
Net cash used in operating activities
   
(27,720
)
   
(21,087
)
Cash flows from investing activities:
               
Purchases of short-term and long-term investments
   
(33,097
)
   
(73,577
)
Sales and maturities of short-term and long-term investments
   
88,526
     
10,963
 
Purchases of property and equipment
   
(9
)
   
(2,016
)
Net cash provided by (used in) investing activities
   
55,420
     
(64,630
)
Cash flows from financing activities:
               
Acquisition of redeemable convertible noncontrolling interests
   
(9,133
)
   
-
 
Proceeds from issuance of common stock under equity incentive plans
   
17
     
125
 
Net cash (used in) provided by financing activities
   
(9,116
)
   
125
 
Net increase (decrease) in cash, cash equivalents and restricted cash
   
18,584
     
(85,592
)
Cash, cash equivalents and restricted cash at the beginning of the period
   
55,357
     
150,060
 
Cash, cash equivalents and restricted cash at the end of the period
 
$
73,941
   
$
64,468
 
                 
Supplemental non-cash investing and financing activity:
               
Acquisition of redeemable convertible noncontrolling interests
 
$
14,907
   
$
-
 
Purchases of property and equipment in accounts payable and accrued expenses
 
$
-
   
$
299
 
Capitalized value of tenant improvement allowance
 
$
-
   
$
606
 
Operating lease liabilities arising from obtaining right-of-use assets
 
$
-
   
$
4,569
 
 
See accompanying notes to condensed consolidated financial statements.

KINNATE BIOPHARMA INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

Organization and Nature of Operations

Kinnate Biopharma Inc. (Kinnate or the Company) was incorporated in the State of Delaware in January 2018 and is headquartered in San Francisco, California. The Company is a precision oncology company focused on the discovery, design and development of small molecule kinase inhibitors for difficult-to-treat, genomically defined cancers.


Since its inception, the Company has devoted substantially all of its resources to research and development activities, business planning, establishing and maintaining its intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations. It has incurred losses and negative cash flows from operations since commencement of its operations. The Company had an accumulated deficit of $292.3 million and had cash and cash equivalents and short-term and long-term investments totaling $231.2 million as of March 31, 2023. From its inception through March 31, 2023, the Company has financed its operations primarily through issuances of common stock, including in the Company’s initial public offering (IPO), and private placements of convertible preferred stock.
 

In May 2021, the Company announced the closing of a Series A preferred stock financing of a China joint venture, Kinnjiu Biopharma Inc. (Kinnjiu), to enable the potential development and commercialization of certain targeted oncology product candidates across People’s Republic of China, Hong Kong, Taiwan, and Macau. Contributions from noncontrolling interest members totaled $35.0 million before issuance costs of $0.2 million. In February 2023, the Company acquired the noncontrolling interests in Kinnjiu previously held by Series A investors (Kinnjiu Transaction) – see Note 11. Kinnjiu is now a wholly-owned subsidiary of the Company.


As the Company continues to pursue its business plan, it expects to finance its operations through the sale of equity, debt financings or other capital resources, which could include income from collaborations, strategic partnerships or marketing, distribution, licensing or other strategic arrangements with third parties, or from grants. However, there can be no assurance that any additional financing or strategic transactions will be available to the Company on acceptable terms, if at all. If events or circumstances occur such that the Company does not obtain additional funding, it may need to delay, reduce or eliminate its product development or future commercialization efforts, which could have a material adverse effect on the Company’s business, results of operations or financial condition. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company were unable to continue as a going concern. Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (SEC).


Basis of Presentation


The Company’s condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, since they are interim statements, the accompanying condensed consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements.


The accompanying unaudited interim condensed consolidated financial statements include all known adjustments which, in the opinion of management, are necessary for a fair presentation of the results as required by GAAP. These adjustments consist primarily of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Operating results presented in these unaudited condensed consolidated financial statements are not necessarily indicative of future results. The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited financial statements at that date, but does not include all information and footnotes required by GAAP for complete financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 15, 2023.

The condensed consolidated financial statements include the accounts of the Company’s wholly-owned subsidiary, Kinnjiu. All intercompany transactions and balances have been eliminated in consolidation.

 

Prior to the completion of the Kinnjiu Transaction, the Company evaluated its ownership, contractual and other interests in entities that were not wholly-owned to determine if any of these entities was a variable interest entity (VIE), and, if so, whether the Company was the primary beneficiary of the VIE. In determining whether the Company was the primary beneficiary of a VIE and therefore required to consolidate the VIE, the Company applied a qualitative approach that determined whether the Company had both (1) the power to direct the activities of the VIE that most significantly impacted the VIE’s economic performance and (2) the obligation to absorb losses of, or the rights to receive benefits from, the VIE that could potentially be significant to that VIE. As of December 31, 2022, the Company held an approximately 58% equity interest in Kinnjiu. Based on the Company’s assessment, the Company concluded that Kinnjiu was a VIE and the Company was the primary beneficiary. See Note 11 with respect to Kinnjiu Transaction.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Accounting estimates and management judgments reflected in the financial statements include: normal recurring accruals, including the accrual of research and development expenses; fair value of investments; valuation of deferred tax assets; and stock-based compensation. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may materially differ from these estimates and assumptions. The Company uses the best information available to update its critical accounting estimates.

Redeemable Convertible Noncontrolling Interests

Prior to the Kinnjiu Transaction, the shares third parties owned in Kinnjiu represented an interest in the equity the Company did not control. The redeemable convertible noncontrolling interests attributable to other owners was classified in temporary equity on the condensed consolidated balance sheets as the preferred stock was redeemable by the noncontrolling interests.

Since the preferred stock held at Kinnjiu did not represent a residual equity interest, net losses of Kinnjiu were not allocated to the preferred shares. As a result, the balance of the preferred stock classified as a redeemable convertible noncontrolling interest equaled its carrying value. Additionally, net losses of Kinnjiu were not allocated to the noncontrolling interest related to ordinary shares held by a third party as the amounts to be allocated were immaterial. Accordingly, for the three months ended March 31, 2022, no losses were allocated to the noncontrolling interest.


Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, the Company’s common stock options are considered to be potentially dilutive securities. As the Company has reported a net loss for all periods presented, diluted net loss per common share is the same as basic net loss per common share for those periods.
 
The following table sets forth the computation of the basic and diluted net loss per share (in thousands, except share and per share amounts):

   
Three Months Ended March 31,
 
   
2023
   
2022
 
Numerator
           
Net loss
 
$
(32,940
)
 
$
(26,902
)
Denominator
               
Weighted-average shares outstanding used in computing net loss per share, basic and diluted
   
45,409,572
     
43,882,920
 
Net loss per share, basic and diluted
 
$
(0.73
)
 
$
(0.61
)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share for the periods presented because including them would have been anti-dilutive:


   
Three Months Ended March 31,
 
   
2023
   
2022
 
Options to purchase common stock
   
11,691,658
     
9,235,652
 
Non-vested restricted stock units
    444,705       -  
Total
    12,136,363       9,235,652  

Recently Issued Accounting Standards

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) (ASC 326): Measurement of Credit Losses on Financial Instruments, which introduced the expected credit losses methodology for the measurement of credit losses on financial assets measured at amortized cost basis, replacing the previous incurred loss methodology. The amendments in Update 2016-13 added Topic 326, Financial Instruments—Credit Losses, made several consequential amendments to the Codification. Update 2016-13 also modified the accounting for available-for-sale debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments— Credit Losses—Available-for-Sale Debt Securities. The guidance is effective for public business entities for annual periods beginning after December 15, 2019, including interim periods within those years. For all other entities, the standard is effective for annual periods beginning after December 15, 2022 and interim periods, therein. Early adoption is permitted. Since the Company has elected to use the extended transition period under the JOBS Act available to emerging growth companies (EGCs), the ASU is effective for the Company for fiscal years beginning after December 15, 2022. The Company adopted this standard on the required effective date of January 1, 2023. The ASU did not have a material impact on its consolidated financial statements and related disclosures.

3. Cash, cash equivalents and restricted cash

The following table provides a reconciliation of the components of cash, cash equivalents and restricted cash reported in the condensed consolidated statements of cash flows (in thousands):

   
March 31, 2023
   
December 31, 2022
 
Cash and cash equivalents
 
$
73,570
   
$
29,261
 
Cash at consolidated joint venture     -
      25,725
 
Restricted cash, non-current
   
371
     
371
 
Total cash, cash equivalents and restricted cash reported in the Consolidated Statements of Cash Flows
 
$
73,941
   
$
55,357
 

The cash at the consolidated joint venture represents cash held at Kinnjiu prior to the Kinnjiu Transaction and the use of such cash was limited to the operations of Kinnjiu (see Note 11). As a result of the Kinnjiu Transaction, such cash is no longer limited in its use and accordingly is no longer presented separately on the condensed consolidated balance sheet. The restricted cash balance relates to the Company’s office lease in San Diego, California (see Note 12).

4. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

   
March 31, 2023
   
December 31, 2022
 
Furniture and fixtures
 
$
760
   
$
760
 
Computers and equipment
   
442
     
442
 
Computer software
   
99
     
99
 
Leasehold improvements
    2,520       2,511  
Property and equipment
   
3,821
     
3,812
 
Less accumulated depreciation
   
(944
)
   
(741
)
Property and equipment, net
 
$
2,877
   
$
3,071
 

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):

   
March 31, 2023
   
December 31, 2022
 
Accrued research and development
 
$
10,208
   
$
7,884
 
Accrued compensation
   
1,758
     
4,832
 
Accrued legal fees
   
531
     
243
 
Other accruals
   
224
     
247
 
Total
 
$
12,721
   
$
13,206
 

6. Investments

The Company has invested its excess cash in marketable securities as of March 31, 2023 and December 31, 2022. The following is a summary by significant investment category (in thousands):


 
 
March 31, 2023
 
 
 
Maturity
   
Amortized
   
Unrealized
   
Unrealized
   
Estimated
 
 
 
in Years
   
Cost
   
Gains
   
Losses
   
Fair Value
 
Corporate debt securities
 
less than 1
   
$
14,089
   
$
1
   
$
(59
)
 
$
14,031
 
Commercial paper
 
less than 1
     
30,581
     
2
     
(20
)
   
30,563
 
U.S. Treasury securities
 
less than 1
     
74,522
     
36
     
(431
)
   
74,127
 
U.S. Agency bonds
 
less than 1
     
8,667
     
23
     
-
     
8,690
 
Short-term investments
       
$
127,859
   
$
62
   
$
(510
)
 
$
127,411
 
 
                                     
Corporate debt securities
 
1 - 2
   
$
1,503
   
$
6
   
$
-
   
$
1,509
 
U.S. Agency bonds
 
1 - 2
     
6,948
     
7
     
-
     
6,955
 
Asset-backed securities
 
1 - 2
     
21,769
     
26
     
(56
)
   
21,739
 
Long-term investments
       
$
30,220
   
$
39
   
$
(56
)
 
$
30,203
 

 
 
December 31, 2022
 
 
 
Maturity
   
Amortized
   
Unrealized
   
Unrealized
   
Estimated
 
 
 
in Years
   
Cost
   
Gains
   
Losses
   
Fair Value
 
Corporate debt securities
 
less than 1
   
$
9,604
   
$
2
   
$
(72
)
 
$
9,534
 
Commercial paper
 
less than 1
     
41,243
     
-
     
-
     
41,243
 
U.S. Treasury securities
 
less than 1
     
119,810
     
-
     
(1,254
)
   
118,556
 
U.S. Agency bonds
 
less than 1
     
2,877
     
4
     
-
     
2,881
 
Short-term investments
       
$
173,534
   
$
6
   
$
(1,326
)
 
$
172,214
 
 
                                     
Corporate debt securities
 
1 - 2
   
$
15,426
   
$
-
   
$
(60
)
 
$
15,366
 
U.S. Agency bonds
 
1 - 2
     
5,907
     
-
     
(9
)
   
5,898
 
Asset-backed securities
 
1 - 2
     
17,897
     
20
     
(42
)
   
17,875
 
Long-term investments
       
$
39,230
   
$
20
   
$
(111
)
 
$
39,139
 

The available-for-sale investments’ gross unrealized losses and fair value aggregated by classes of security and length of time that individual securities have been in a continuous loss position at March 31, 2023 and December 31, 2022 consisted of the following (in thousands):

 
 
March 31, 2023
 
 
 
Less than 12 months
   
More than 12 months
   
Total
 
 
             
Unrealized
               
Unrealized
               
Unrealized
 
 
 
Count
   
Fair Value
   
Losses
   
Count
   
Fair Value
   
Losses
   
Count
   
Fair Value
   
Losses
 
Corporate debt securities
   
4
   
$
11,936
   
$
(59
)
   
-
   
$
-
   
$
-
     
4
   
$
11,936
   
$
(59
)
Commercial paper
   
6
     
19,737
     
(20
)
   
-
     
-
     
-
     
6
     
19,737
     
(20
)
U.S. Treasury securities
   
2
     
9,890
     
(29
)
   
3
     
44,616
     
(402
)
   
5
     
54,506
     
(431
)
U.S. Agency bonds
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
Asset-backed securities
   
9
     
10,825
     
(56
)
   
-
     
-
     
-
     
9
     
10,825
     
(56
)
 
   
21
   
$
52,388
   
$
(164
)
   
3
   
$
44,616
   
$
(402
)
   
24
   
$
97,004
   
$
(566
)

 
 
December 31, 2022
 
 
 
Less than 12 months
   
More than 12 months
   
Total
 
 
             
Unrealized
               
Unrealized
               
Unrealized
 
 
 
Count
   
Fair Value
   
Losses
   
Count
   
Fair Value
   
Losses
   
Count
   
Fair Value
   
Losses
 
Corporate debt securities
   
7
   
$
22,806
   
$
(132
)
   
-
   
$
-
   
$
-
     
7
   
$
22,806
   
$
(132
)
Commercial paper
   
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
     
-
 
U.S. Treasury securities
   
3
     
14,625
     
(57
)
   
7
     
103,931
     
(1,197
)
   
10
     
118,556
     
(1,254
)
U.S. Agency bonds
   
2
     
5,898
     
(9
)
   
-
     
-
     
-
     
2
     
5,898
     
(9
)
Asset-backed securities
   
6
     
7,843
     
(42
)
   
-
     
-
     
-
     
6
     
7,843
     
(42
)
 
   
18
   
$
51,172
   
$
(240
)
   
7
   
$
103,931
   
$
(1,197
)
   
25
   
$
155,103
   
$
(1,437
)

At March 31, 2023 and December 31, 2022, the Company held securities in a total unrealized loss position of $0.6 million and $1.4 million, respectively. The Company generally does not intend to sell any investments prior to recovery of their amortized cost basis for any investment in an unrealized loss position. Further, such investments are invested in high grade securities. As such, the Company has classified these losses as temporary in nature.

The Company has determined that there were no material declines in fair value of its investments due to credit-related factors as of March 31, 2023 and December 31, 2022.
7. Fair Value Measurements

The accounting guidance defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

 Level 1: Observable inputs such as quoted prices in active markets;

 Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

 Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The carrying amounts of the Company’s prepaid expenses and other current assets, accounts payable and accrued expenses are generally considered to be representative of their fair value because of the short-term nature of these instruments. The Company’s investments, which may include money market funds and available-for-sale investment securities consisting of high-quality, marketable debt instruments of corporations and the U.S. government are measured at fair value in accordance with the fair value hierarchy.

The following tables present the hierarchy for assets measured at fair value on a recurring basis (in thousands):

   
Fair Value Measurements at March 31, 2023
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Money market funds
 
$
70,723
   
$
-
   
$
-
   
$
70,723
 
Corporate debt securities
   
-
     
15,540
     
-
     
15,540
 
Commercial paper
   
-
     
30,563
     
-
     
30,563
 
U.S. Treasury securities
   
-
     
74,127
     
-
     
74,127
 
U.S. Agency bonds
    -       15,645       -       15,645  
Asset-backed securities
   
-
     
21,739
     
-
     
21,739
 
Total cash equivalents and investments
 
$
70,723
   
$
157,614
   
$
-
   
$
228,337
 

   
Fair Value Measurements at December 31, 2022
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Money market funds
 
$
28,261
   
$
-
   
$
-
   
$
28,261
 
Corporate debt securities
   
-
     
24,900
     
-
     
24,900
 
Commercial paper
    -       41,243       -       41,243  
U.S. Treasury securities     -       118,556       -       118,556  
U.S. Agency bonds
    -       8,779       -       8,779  
Asset-backed securities
   
-
     
17,875
     
-
     
17,875
 
Total cash equivalents and investments
 
$
28,261
   
$
211,353
   
$
-
   
$
239,614
 

Money market funds are classified as cash and cash equivalents in the Company’s balance sheets at March 31, 2023 and December 31, 2022.

8. Stockholders’ Equity

Under its amended and restated certificate of incorporation dated December 7, 2020, the Company has a total of 1,200,000,000 shares of capital stock authorized for issuance, consisting of 1,000,000,000 shares of common stock, par value of $0.0001 per share, and 200,000,000 shares of preferred stock, par value of $0.0001 per share.
9. Equity Incentive Plans and Stock-Based Compensation

2020 Equity Incentive Plan


In December 2020, the Company adopted the 2020 Equity Incentive Plan (2020 Plan), which replaced the 2018 Equity Incentive Plan (2018 Plan). The 2020 Plan allows the Company to issue options for shares of its common stock, restricted stock units (RSUs) and other award types, up to a total of 5,218,000 shares (Equity Pool), subject to appropriate adjustments for stock splits, combinations and other similar events for issuance pursuant to awards made under the 2020 Plan. As of March 31, 2023, 1,126,442 shares of common stock remained available for future grants under the 2020 Plan.
 
The options that are granted under the 2020 and 2018 Plans are exercisable at various dates as determined upon grant and terminate within 10 years of the date of grant, unless the optionee owns 10% or more of the common shares at which point the expiration period is 5 years, or upon the employee’s termination (whereupon the terminated employee has thirty days after termination to exercise vested options from the date of termination). The vesting period generally occurs over two to four years unless there is a specific performance vesting trigger at which time those shares will vest when the performance trigger is probable to occur. RSUs granted under the 2020 Plan vest over four years from the grant date and represent share awards that, upon vesting, will deliver to the holder shares of the Company’s common stock.

Stock Options

Stock option activity is as follows:

                Weighted-        
                Average     Aggregate  
          Weighted-     Remaining     Intrinsic  
          Average     Contractual     Value  
   
Options
   
Exercise Price
   
Term (in years)
   
(in thousands)
 
Outstanding at December 31, 2022
   
9,107,467
   
$
10.81
     
7.8
   
$
11,521
 
Granted
   
2,769,060
     
6.70
                 
Exercised
   
(15,884
)
   
1.09
                 
Forfeited
   
(168,985
)
   
13.05
                 
Outstanding at March 31, 2023
   
11,691,658
   
$
9.82
     
8.0
   
$
12,139
 
Exercisable at March 31, 2023
   
4,962,884
   
$
9.48
     
6.8
   
$
9,235
 

All exercisable options are vested and all outstanding options are vested or expected to vest. Total intrinsic value of options exercised during the three months ended March 31, 2023 and 2022 was $0.1 million and $0.8 million, respectively.

Restricted Stock Units

Restricted stock unit activity is as follows:

 
       
Weighted-
   
Aggregate
 
 
 
Restricted
   
Average
   
Intrinsic
 
 
 
Stock Units
   
Grant Date
   
Value
 
 
 
Outstanding
   
Fair Value
   
(in thousands)
 
Outstanding at December 31, 2022
   
287,916