UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, ~~2021~~

2022


☐o			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: 001-40631

Caribou Biosciences, Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware						45-3728228
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

2929 7th Street,, Suite 105 Berkeley,, California						94710
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (~~510~~) (510) 982-6030

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

CRBU

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 ~~Yes~~x ☒ 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 ~~Yes~~x ☒ 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. ☐o

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

As of November ~~5, 2021,~~3, 2022, the registrant had ~~60,192,061~~61,001,561 shares of common stock, $0.0001 par value per share, outstanding.

~~Table of Contents~~

Table of Contents

PART I—~~FINANCIAL~~FINANCIAL INFORMATION

Item 1. Financial Statements.

CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share amounts)

September 30,

December 31,

2021

2020

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$
435,310

$
15,953

Accounts receivable

578

150

Contract assets ($0 and $250 from related party, respectively)

1,853

1,328

Other receivables

5,354

3,682

Prepaid expenses and other current assets

5,952

3,193

Total current assets

449,047

24,306

INVESTMENTS IN EQUITY SECURITIES

7,626

7,626

PROPERTY AND EQUIPMENT—NET

4,477

3,502

OTHER ASSETS

810

612

TOTAL ASSETS

$
461,960

$
36,046

LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)

CURRENT LIABILITIES:

Accounts payable ($0 and $500 to related party, respectively)

$
3,482

$
2,601

Accrued expenses and other current liabilities

13,930

8,973

Promissory note — PPP Loan

—

654

Deferred revenue

8,746

161

Total current liabilities

26,158

12,389

LONG-TERM LIABILITIES

Deferred revenue, net of current portion ($100 and $50 from related party)

23,022

937

Deferred rent and lease incentive liability

1,833

925

Promissory note — PPP Loan, net of current portion

—

924

MSKCC success payments liability

6,238

2,654

Other liabilities

153

176

Deferred tax liabilities

155

155

Total liabilities

57,559

18,160

COMMITMENTS AND CONTINGENCIES (Note 9)

CONVERTIBLE PREFERRED STOCK, par value $0.0001 per share; 0 shares authorized, issued, and outstanding at September 30, 2021; 7,766,582 shares authorized, issued, and outstanding at December 31, 2020

—

41,323

STOCKHOLDERS’ EQUITY (DEFICIT)

Common stock, par value $0.0001 per share 300,000,000 and 28,933,380 shares authorized at September 30, 2021 and December 31, 2020, respectively; 60,021,319 and 9,710,830 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

6

1

Additional paid-in-capital

483,710

7,433

Accumulated deficit

(79,315
)

(30,871
)
Total stockholders’ equity (deficit)

404,401

(23,437
)
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)

$
461,960

$
36,046


	September 30, 2022		December 31, 2021
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	82,085	$	240,420
Marketable securities, short-term	211,284		135,412
Accounts receivable	397		1,153
Contract assets	1,899		1,488
Other receivables	2,699		5,483
Prepaid expenses and other current assets	8,558		7,236
Total current assets	306,922		391,192
NON-CURRENT ASSETS
Investments in equity securities	7,759		7,626
Marketable securities, long-term	49,221		37,676
Property and equipment, net	8,959		4,887
Operating lease, right of use assets	24,626		—
Other assets	1,336		975
TOTAL ASSETS	$	398,823	$	442,356
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	1,228	$	3,990
Accrued expenses and other current liabilities	14,638		13,136
Lease liabilities, current	912		—
Deferred revenue ($150 and $0 from related party, respectively)	12,036		8,703
Total current liabilities	28,814		25,829
LONG-TERM LIABILITIES
Deferred revenue, net of current portion ($0 and $100 from related party, respectively)	15,423		22,032
Deferred rent and lease incentive liability	—		2,097
MSKCC success payments liability	3,039		4,080
Lease liabilities, non-current	26,958		—
Other liabilities	—		17
Deferred tax liabilities	475		476
Total liabilities	74,709		54,531
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY
Preferred stock, par value $0.0001 per share, 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	—		—
Common stock, par value $0.0001 per share, 300,000,000 shares authorized at September 30, 2022 and December 31, 2021, respectively; 60,986,936 and 60,263,158 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	6		6
Additional paid-in-capital	496,369		485,748
Accumulated other comprehensive loss	(2,035)		(135)
Accumulated deficit	(170,226)		(97,794)
Total stockholders’ equity	324,114		387,825
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	398,823	$	442,356

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

Table of Contents

CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share amounts)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Licensing and collaboration revenue (including $7,500 for nine months ended September 2020 from related party, and 0ne for all other periods)

$
3,977

$
1,198

$
7,039

$
11,377

Operating expenses:

Research and development

15,833

6,180

37,144

22,401

General and administrative

6,760

3,247

16,469

9,887

Total operating expenses

22,593

9,427

53,613

32,288

Loss from operations

(18,616
)

(8,229
)

(46,574
)

(20,911
)
Other income (expense):

Interest income

22

4

72

157

Interest expense

0

(6
)

(8
)

(14
)
Change in fair value of equity securities

—

—

—

(733
)
Change in fair value of the MSKCC success payments liability

(2,403
)

—

(3,584
)

—

Gain on extinguishment of PPP Loan

—

—

1,584

—

Other income

23

85

66

431

Total other income (expense)

(2,358
)

83

(1,870
)

(159
)
Net loss before provision for income taxes

(20,974
)

(8,146
)

(48,444
)

(21,070
)
Benefit from income taxes

—

213

—

1,465

Net loss and comprehensive loss

$
(20,974
)

$
(7,933
)

$
(48,444
)

$
(19,605
)
Net loss per share, basic and diluted

$
(0.46
)

$
(0.93
)

$
(2.20
)

$
(2.31
)
Weighted-average common shares outstanding, basic and diluted

45,889,646

8,537,965

22,052,944

8,470,019


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Licensing and collaboration revenue	$	3,303	$	3,977	$	10,159	$	7,039
Operating expenses:
Research and development	19,991		15,833		56,494		37,144
General and administrative	9,849		6,760		29,486		16,469
Total operating expenses	29,840		22,593		85,980		53,613
Loss from operations	(26,537)		(18,616)		(75,821)		(46,574)
Other income (expense):
Change in fair value of equity securities	31		—		(73)		—
Change in fair value of the MSKCC success payments liability	(1,607)		(2,403)		1,041		(3,584)
Gain on extinguishment of PPP Loan	—		—		—		1,584
Other income, net	1,466		45		2,421		130
Total other income (expense)	(110)		(2,358)		3,389		(1,870)
Net loss	(26,647)		(20,974)		(72,432)		(48,444)
Other comprehensive loss:
Net unrealized loss on available-for-sale marketable securities, net of tax	(454)		—		(1,900)		—
Net comprehensive loss	$	(27,101)	$	(20,974)	$	(74,332)	$	(48,444)
Net loss per share, basic and diluted	$	(0.44)	$	(0.46)	$	(1.19)	$	(2.20)
Weighted-average common shares outstanding, basic and diluted	60,886,921		45,889,646		60,731,520		22,052,944

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

Table of Contents

CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share amounts)

Retained

Total

Additional

Earnings

Stockholders’

Convertible Preferred Stock

Common Stock

Paid-In

(Accumulated

Equity

Shares

Amount

Shares

Amount

Capital

Deficit)

(Deficit)

BALANCE—December 31, 2020

7,766,582

$
41,323

9,710,830

$
1

$
7,433

$
(30,871
)

$
(23,437
)
Issuance of Series C convertible preferred stock, net of issuance costs of $6.2 million

6,663,940

108,827

—

—

—

—

—

Issuance of common stock on exercise of options

—

—

584,614

—

564

—

564

Stock-based compensation expense

—

—

—

—

343

—

343

Net loss and comprehensive loss

—

—

—

—

—

(13,159
)

(13,159
)
BALANCE—March 31, 2021

14,430,522

$
150,150

10,295,444

$
1

$
8,340

$
(44,030
)

$
(35,689
)
Stock-based compensation expense

—

—

—

—

593

—

593

Repayment of loan issued by stockholder

—

—

—

—

1,150

—

1,150

Issuance of common stock on exercise of options

—

—

1,037,979

—

566

—

566

Net loss and comprehensive loss

—

—

—

—

-

(14,311
)

(14,311
)
BALANCE—June 30, 2021

14,430,522

$
150,150

11,333,423

$
1

$
10,649

$
(58,341
)

$
(47,691
)
Stock-based compensation expense

—

—

—

—

935

—

935

Conversion of convertible preferred stock into common stock

(14,430,522
)

(150,150
)

26,234,654

3

150,147

—

150,150

Issuance of common stock upon initial public offering, net of issuance costs of $28.6 million

—

—

21,850,000

2

321,018

—

321,020

Issuance of common stock on exercise of options

—

—

603,246

—

961

—

961

Net loss and comprehensive loss

—

—

—

—

—

(20,974
)

(20,974
)
BALANCE—September 30, 2021

0

$
0

60,021,323

$
6

$
483,710

$
(79,315
)

$
404,401

BALANCE—December 31, 2019

7,766,582

$
41,323

8,839,205

$
1

$
4,025

$
3,437

$
7,463

Stock-based compensation expense

—

—

—

—

237

—

237

Net loss and comprehensive loss

—

—

—

—

—

(9,800
)

(9,800
)
BALANCE—March 31, 2020

7,766,582

$
41,323

8,839,205

$
1

$
4,262

$
(6,363
)

$
(2,100
)
Stock-based compensation expense

—

—

—

—

286

—

286

Issuance of restricted stock awards

—

—

4,545

—

—

—

—

Issuance of common stock on exercise of options

—

—

50,358

—

21

—

21

Net loss and comprehensive loss

—

—

—

—

—

(1,872
)

(1,872
)
BALANCE—June 30, 2020

7,766,582

$
41,323

8,894,108

$
1

$
4,569

$
(8,235
)

$
(3,665
)
Stock-based compensation expense

—

—

—

—

248

—

248

Issuance of common stock on exercise of options

—

—

75,468

—

139

—

139

Net loss and comprehensive loss

—

—

—

—

—

(7,933
)

(7,933
)
BALANCE—September 30, 2020

7,766,582

$
41,323

8,969,576

$
1

$
4,956

$
(16,168
)

$
(11,211
)


	Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount
BALANCE—December 31, 2021	—	$	—	60,263,158	$	6	$	485,748	$	(135)	$	(97,794)	$	387,825
Issuance of common stock under employee stock plans	—	—		36,596	—		361		—		—		361
Issuance of common stock on exercise of options	—	—		389,855	—		629		—		—		629
Stock-based compensation expense	—	—		—	—		3,024		—		—		3,024
Net loss	—	—		—	—		—		—		(19,088)		(19,088)
Other comprehensive loss	—	—		—	—		—		(954)		—		(954)
BALANCE—March 31, 2022	—	$	—	60,689,609	$	6	$	489,762	$	(1,089)	$	(116,882)	$	371,797
Issuance of common stock on exercise of options	—	—		148,761	—		363		—		—		363
Stock-based compensation expense	—	—		—	—		2,918		—		—		2,918
Net loss	—	—		—	—		—		—		(26,697)		(26,697)
Other comprehensive loss	—	—		—	—		—		(492)		—		(492)
BALANCE—June 30, 2022	—	$	—	60,838,370	$	6	$	493,043	$	(1,581)	$	(143,579)	$	347,889
Issuance of common stock on exercise of options	—	—		148,566	—		654		—		—		654
Stock-based compensation expense	—	—		—	—		2,672		—		—		2,672
Net loss	—	—		—	—		—		—		(26,647)		(26,647)
Other comprehensive loss	—	—		—	—		—		(454)		—		(454)
BALANCE—September 30, 2022	—	$	—	60,986,936	$	6	$	496,369	$	(2,035)	$	(170,226)	$	324,114

BALANCE—December 31, 2020	7,766,582	$	41,323	9,710,830	$	1	$	7,433	$	—	$	(30,871)	$	(23,437)
Issuance of Series C convertible preferred stock, net of issuance costs of $6.2 million	6,663,940	108,827		—	—		—		—		—		—
Issuance of common stock on exercise of options	—	—		584,614	—		564		—		—		564
Stock-based compensation expense	—	—		—	—		343		—		—		343
Net loss	—	—		—	—		—		—		(13,159)		(13,159)
BALANCE—March 31, 2021	14,430,522	$	150,150	10,295,444	$	1	$	8,340	$	—	$	(44,030)	$	(35,689)
Repayment of promissory note	—	—		—	—		1,150		—		—		1,150
Issuance of common stock on exercise of options	—	—		1,037,979	—		566		—		—		566
Stock-based compensation expense	—	—		—	—		593		—		—		593
Net loss	—	—		—	—		—		—		(14,311)		(14,311)
BALANCE—June 30, 2021	14,430,522	$	150,150	11,333,423	$	1	$	10,649	$	—	$	(58,341)	$	(47,691)
Conversion of convertible preferred stock into common stock	-14,430,522	(150,150)		26,234,654	3		150,147		—		—		150,150
Issuance of common stock upon initial public offering, net of issuance costs of $28.6 million	—	—		21,850,000	2		321,018		—		—		321,020
Issuance of common stock on exercise of options	—	—		603,246	—		961		—		—		961
Stock-based compensation expense	—	—		—	—		935		—		—		935
Net loss	—	—		—	—		—		—		(20,974)		(20,974)
BALANCE—September 30, 2021	—	$	—	60,021,323	$	6	$	483,710	$	—	$	(79,315)	$	404,401

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

Table of Contents

CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Nine Months Ended September 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$
(48,444
)

$
(19,605
)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

711

680

Loss on disposal of fixed assets

3

70

Change in fair value of equity securities

—

733

Non-cash consideration for licensing and collaboration revenue ($0 and $7,500 from related party, respectively)

—

(7,580
)
Stock-based compensation expense

1,871

771

Change in fair value of MSKCC success payments liability

3,584

—

Acquired in-process research and development

1,000

425

Extinguishment of PPP Loan

(1,578
)

—

Changes in operating assets and liabilities:

Accounts receivable

(428
)

4

Contract assets

(525
)

170

Other receivables

(1,673
)

147

Prepaid expenses and other current assets

(2,759
)

1,487

Other assets

(151
)

(19
)
Accounts payable

848

(1,907
)
Accrued expenses and other current liabilities

4,855

1,112

Deferred revenue, current and long-term

30,669

(667
)
Deferred rent and lease incentive liability

909

23

Other liabilities

(22
)

(431
)
Deferred tax liabilities

—

(552
)
Net cash used in operating activities

(11,130
)

(25,139
)
CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sale of equity securities

—

7,668

Purchases of property and equipment

(1,436
)

(290
)
Proceeds from sale of property and equipment

—

10

Payments to acquire in-process research and development

(1,000
)

(425
)
Net cash provided by (used in) investing activities

(2,436
)

6,963

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from initial public offering of common stock, net of offering costs

321,020

—

Proceeds from issuance of Series C convertible preferred stock, net of issuance costs

108,827

—

Proceeds from exercise of stock options

2,091

160

Repayment of promissory note

1,150

—

Payments on capital lease

(119
)

(81
)
Proceeds from PPP Loan

0

1,574

Net cash provided by financing activities

432,969

1,653

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

419,403

(16,523
)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — BEGINNING OF PERIOD

15,953

41,070

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — END OF PERIOD

$
435,356

$
24,547

RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Cash and cash equivalents

$
435,310

$
24,547

Restricted cash

46

—

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH ON THE BALANCE SHEET

$
435,356

$
24,547

SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for income taxes

$
11

$
11

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Acquisition of property and equipment included in accrued expenses and other current liabilities

$
268

$
27

Extinguishment of PPP Loan

$
1,578

$
—

Non-cash consideration in exchange for licensing and collaboration revenue

$
—

$
7,580

Conversion of convertible preferred stock to common stock at closing of initial public offering

$
150,150

$
—


	Nine Months Ended September 30,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(72,432)	$	(48,444)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,116		711
Loss on disposal of fixed assets	—		3
Non-cash consideration for licensing and collaboration revenue	(205)		—
Change in fair value of equity securities	73		—
Stock-based compensation expense	8,615		1,871
Change in fair value of MSKCC success payments liability	(1,041)		3,584
Acquired in-process research and development	300		1,000
Extinguishment of PPP Loan	—		(1,578)
Amortization of investment premiums	106		—
Non-cash lease expense	1,622		—
Changes in operating assets and liabilities:
Accounts receivable	756		(428)
Contract assets	(411)		(525)
Other receivables	2,783		(1,673)
Prepaid expenses and other current assets	(1,613)		(2,759)
Other assets	(361)		(151)
Accounts payable	(2,568)		848
Accrued expenses and other current liabilities	909		4,855
Deferred revenue, current and long-term	(3,277)		30,669
Deferred rent and lease incentive liability	—		909
Operating lease liabilities	(279)		(22)
Other liabilities	(15)		—
Net cash used in operating activities	(65,922)		(11,130)
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of marketable securities	163,130		—
Purchases of marketable securities	(252,552)		—
Purchases of property and equipment	(4,697)		(1,436)
Payments to acquire in-process research and development	(300)		(1,000)
Net cash used in investing activities	(94,419)		(2,436)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial public offering of common stock, net of offering costs	—		321,020
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs	—		108,827
Proceeds from exercise of stock options and purchases of common stock under employee stock purchase plan	2,006		2,091
Repayment of promissory note	—		1,150
Payments on capital lease	—		(119)
Net cash provided by financing activities	2,006		432,969
NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(158,335)		419,403
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — BEGINNING OF PERIOD	240,466		15,953
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH — END OF PERIOD	$	82,131	$	435,356
RECONCILIATION OF CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
Cash and cash equivalents	$	82,085	$	435,310
Restricted cash	46		46
TOTAL CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	$	82,131	$	435,356

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes	$	—	$	11

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of property and equipment included in accrued expenses and other current liabilities	$	757	$	268
Acquired in-process research and development accrued	$	—	$	—
Extinguishment of PPP Loan	$	—	$	1,578
Conversion of convertible preferred stock to common stock at closing of initial public offering	$	—	$	150,150
Right-of-use-assets obtained in exchange for new operating lease liabilities	$	26,249	$	—

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

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CARIBOU BIOSCIENCES, INC. AND ITS SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of the Business, Organization, and Liquidity

Business and Organization

Caribou Biosciences, Inc. (the “Company” or “we”) is a clinical-stage CRISPR genome-editing ~~biotechnology company.~~biopharmaceutical company dedicated to developing innovative, transformative therapies for patients with devastating diseases. CRISPR is an acronym for Clustered Regularly Interspaced Short Palindromic Repeats. Our novel CRISPR platform, CRISPR hybrid RNA-DNA(“chRDNA,” pronounced “chardonnay”), enables high genome-editing precision to develop cell therapies that are specifically engineered to target cancer and are armored for enhanced persistence. We are ~~developing an internal~~advancing a pipeline of allogeneic, or off-the-shelf, chimeric antigen receptor (“CAR”) ~~T cell~~-T (“CAR-T”) and CAR-natural killer ~~cell~~ (“CAR-NK”) ~~therapies. The Company was~~cell therapies for the treatment of patients with hematologic malignancies and solid tumors.

We incorporated in October 2011 as a Delaware corporation and isare headquartered in Berkeley, California. ~~The Company has~~We have four ~~wholly-owned~~wholly owned subsidiaries: Antler Holdco, LLC, incorporated in Delaware in April 2019; Microbe Holdco, LLC, incorporated in Delaware in June 2020; Arboreal Holdco, LLC, incorporated in Delaware in November 2020; and Biloba Holdco, LLC, incorporated in Delaware in April 2021. ~~Another subsidiary, Caribou Therapeutics Holdco, LLC, was incorporated in Delaware in July 2014 and dissolved in December 2020. The Company’s wholly-owned~~Our wholly owned subsidiaries hold interests in our equity investments and do not have operating activities.

~~Initial Public Offering~~

On July 22, 2021, the Company’s registration statement on Form S-1 (File No. 333-257604) relating to its initial public offering (“IPO”) of common stock became effective. The IPO closed on July 27, 2021, at which time we issued ~~19,000,000~~ ~~shares of our common stock at a price of $16.00~~ ~~per share. On August 9, 2021, we issued and sold an additional~~ ~~2,850,000~~ ~~shares of our common stock to the IPO underwriters~~ ~~pursuant to the full exercise of their over-allotment option to purchase additional shares at the public offering price of $16.00~~ ~~per share. We received an aggregate of $349.6~~ ~~million in gross proceeds and approximately $321.0~~ million in net proceeds from the IPO after deducting underwriting discounts and commissions and offering costs. Upon closing of the IPO, all outstanding shares of our convertible preferred stock converted into ~~26,234,654~~ ~~shares of our common stock.~~

~~In connection with the completion of our IPO, on July 27, 2021, our Certificate of Incorporation was amended and restated to provide for~~ ~~300,000,000~~ ~~authorized shares of common stock with a par value of $0.0001~~ ~~per share and~~ ~~10,000,000~~ ~~authorized shares of preferred stock with a par value of $0.0001~~ ~~per share.~~

~~Forward Stock Split~~

In July 2021, our board of directors (the “Board”) and stockholders approved an amendment to our Certificate of Incorporation to effect a forward split of the shares of our outstanding common stock at a ratio of ~~1.818~~-for-1 (the “Forward Stock Split”) effective as of July 15, 2021. The number of authorized shares was increased as a result of the Forward Stock Split, but the par values of the common stock and preferred stock were not adjusted. All references to common stock, options to purchase common stock, common stock share data, per share data, and related information contained in the financial statements have been retrospectively adjusted to reflect the effect of the Forward Stock Split for all periods presented.

Liquidity

We have incurred net ~~operating~~ losses and negative cash flows from operations since our inception and we had an accumulated deficit of $~~79.3~~$170.2 million as of September 30, ~~2021.~~2022. During the nine months ended September 30, ~~2021,~~2022, we incurred a net loss of $~~48.4~~$72.4 million and used $~~11.1~~$65.9 million of cash in operating activities. We expect to continue to incur substantial losses, and our ability to achieve and sustain profitability will depend on the successful development, approval, and commercialization of our product candidates and on our achievement of sufficient revenue to support our cost structure. We may never achieve profitability and, unless and until we do, we will need to continue to raise additional capital. Our management expects that existing cash, ~~and~~ cash equivalents, and marketable securities of $~~435.3~~$342.6 million as of September 30, ~~2021, including the IPO net proceeds of $321.0~~ ~~million,~~2022, will be sufficient to fund our current operating plan for at least the next 12 months from the date of issuance of our condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

There have been no changes to the significant accounting policies disclosed in Note 2 to the annual consolidated financial statements for the ~~years~~year ended December 31, ~~2019 and 2020~~2021 included in our ~~final prospectus for~~Annual Report on Form 10-K, other than changes to our ~~IPO~~leasing policy described below in connection with the adoption of the guidance under the Accounting Standards Codification (“~~Final Prospectus”~~ASC”) ~~except as set forth below.~~

842, Leases.

Basis of Presentation and Principles of Consolidation

The ~~accompanying~~ condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and include the accounts of Caribou Biosciences, Inc. and its ~~wholly-owned subsidiaries~~wholly owned subsidiaries. All intercompany accounts and ~~have been prepared~~transactions are eliminated in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the requirements of the SEC for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP may be condensed or omitted. Our condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements included in our Final Prospectus, except as noted below.

In the opinion of our management, the information furnished in our condensed consolidated financial statements reflects all adjustments, all of which are of a normal and recurring nature, necessary for a fair presentation of the financial position and results of operations for the reported interim periods. We consider events or transactions that occur after the balance sheet date but before the financial statements are issued to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. The results of operations for interim periods are not necessarily indicative of results to be expected for the full year or any other interim period.

consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities; the disclosure of contingent assets and liabilities at the date of our condensed consolidated financial statements; and the reported amounts of revenue, income, and expenses during the applicable reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those related to revenue recognition, common stock valuation, stock-based compensation expense, accrued expenses related to research and development activities, valuation of the ~~MSKCC~~Memorial Sloan Kettering Cancer Center (“MSKCC”) success payments liability, and income taxes. Our management bases its estimates on historical experience and on various other assumptions that they believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from those estimates.

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Segments

We operate and manage our business as 1one reportable ~~and~~ operating segment, which is the business of developing ~~an internal~~a pipeline of ~~off-the-shelf~~allogeneic CAR-T and CAR-NK cell therapies. Our president and chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating resources and evaluating financial performance. All long-lived assets are maintained in the United States.

Concentrations of Credit Risk and Other Uncertainties

Financial instruments that potentially subject us to concentration of credit risk consist of cash and cash equivalents, accounts receivable, contract assets, other receivables, and investments in marketable securities and equity securities. Substantially all of our cash and cash equivalents ~~were~~are deposited in accounts at ~~one~~two financial ~~institution,~~institutions, and account balances may at times exceed federally insured limits. We ~~believe~~mitigate the risks by investing in high-grade instruments, limiting our exposure to one issuer, and we monitor the ongoing creditworthiness of the financial ~~institution~~institutions and issuers. We believe these financial institutions to be of high credit quality.

Licensees that represent 10% or more of our revenue and accounts receivable and contract assets were as follows:

Revenue

Revenue

Accounts Receivable and
Contract Assets

Three Months Ended

Nine Months Ended

As of

As of

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

September 30, 2021

December 31, 2020

Licensee A

14.0
%

38.8
%

23.2
%

10.5
%

23.1
%

40.6
%
Licensee B

*

*

*

*

*

13.2
%
Licensee C, related party

*

*

*

*

*

16.9
%
Licensee D

*

*

*

*

*

10.1
%
Licensee E

57.2
%

*

39.5
%

*

50.4
%

*
Licensee F, related party

*

*

*

65.9
%

*

*
Licensee G

*

24.0
%

*

*

*

*
Licensee H

*

20.4
%

*

*

*

*
Total

71.2
%

83.2
%

62.7
%

76.4
%

73.5
%

80.8
%


	Revenue				Revenue				Accounts Receivable and Contract Assets
	Three Months Ended				Nine Months Ended				As of September 30, 2022		As of December 31, 2021
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Licensee A	17.2	%	14.0	%	16.4	%	23.2	%	24.2	%	24.6	%
Licensee B	51.7	%	57.2	%	54.2	%	39.5	%	33.7	%	45.1	%
Licensee C	*		*		*		*		12.0	%	*
Total	68.9	%	71.2	%	70.6	%	62.7	%	69.9	%	69.7	%

*Less than 10%

We monitor economic conditions to identify facts or circumstances that may indicate if any of our accounts receivable are not collectible or if the contract assets should be impaired. ~~NaN~~No allowance for doubtful accounts or contract asset impairment was recorded as of September 30, ~~2021~~2022 or December 31, ~~2020.~~

~~Restricted Cash~~

2021.

Property and Equipment, Net

Property and equipment are recorded at cost, net of accumulated depreciation and amortization. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets. The useful lives of property and equipment are as follows:


Computers			3 years
Furniture and fixtures			5 years
Laboratory equipment			5 years
Leasehold improvements			Shorter of remaining lease term or estimated useful life

Upon retirement or sale of the assets, the cost and related accumulated depreciation and amortization are removed from the balance sheet and the resulting gain or loss is recorded in the statements of operations. Repairs and maintenance are expensed as incurred.

Leases

We ~~define restricted cash as cash and cash equivalents that cannot be withdrawn or used for general operating activities. Our restricted cash consists of a letter of credit~~adopted the guidance under ASC 842 on January 1, 2022 using the modified retrospective approach with a ~~financial institution related~~cumulative-effect adjustment as of January 1, 2022 in accordance with the Accounting Standard Update (“ASU”) 2016-02, Leases (Topic 842). We determine whether an arrangement is or contains a lease at the inception of the arrangement and whether such a lease is classified as a finance lease or operating lease at the commencement date of the lease. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities, and long-term lease liabilities. We elected not to ~~our workers’ compensation insurance, which renews annually.~~recognize the right-of-use assets and lease liabilities for leases with lease terms of 12 months or less (short-term leases). Lease liabilities and their corresponding right-of-use assets are recorded based on the present

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value of lease payments over the expected lease term. As ~~of September 30, 2021, we had less than $0.1~~ ~~million of restricted cash, which was recorded in other assets~~the interest rate implicit in our ~~condensed consolidated balance sheets.~~ lease contracts is not readily determinable, we utilize a collateralized incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments. Certain adjustments to the right-of-use assets may be required for items such as initial direct costs paid or incentives received and impairment charges if we determine the right-of-use assets are impaired. There was no cumulative-effect adjustment recorded to retained earnings on January 1, 2022.

We ~~did~~ 0tconsider the lease term to be the noncancellable period that we have the right to use the underlying asset, together with any ~~restricted cash as of December 31, 2020.~~

~~Patent Costs~~

~~We expense costs as incurred for filing, prosecuting, and maintaining patents and patent applications, including~~periods where it is reasonably certain we will exercise an option to extend (or not terminate) the lease. Periods covered by an option to extend (or not terminate) the lease in which the exercise of the ~~patents~~option is controlled by the lessor are included in the lease term.

Rent expense for operating leases is recognized on a straight-line basis over the lease term and ~~patent applications that we license from third parties. We classify such costs as general and administrative~~is presented in operating expenses ~~in our condensed consolidated~~on the statements of operations and comprehensive loss. ~~In addition,~~We have elected to not separate lease and non-lease components for our facilities leases and leases of electroporation devices and, instead, we account for each separate lease component and the non-lease components associated with that lease component as a single lease component. Variable lease payments are ~~entitled to receive reimbursement from third parties for a portion of the filing, prosecution, and maintenance costs for certain patents and patent applications. We accrue for these reimbursements~~recognized as ~~the respective expenses are~~ incurred and ~~we classify such reimbursements as a reduction~~are presented in operating expenses on the statements of ~~general~~operations and ~~administrative expenses. During each~~comprehensive loss.

As of ~~the three months ended~~ September 30, 2022 and December 31, 2021, we had no finance leases. See Note 9 to our condensed consolidated financial statements included elsewhere in this Form 10-Q for additional information about the impact of adoption and ~~2020, we incurred gross patent costs of $2.8~~ ~~million. During the nine months ended September 30, 2021 and 2020, we incurred gross patent costs of $10.3~~ ~~million and $7.3~~ ~~million, respectively. During the three months ended September 30, 2021 and 2020, we recorded $1.6~~ ~~million and $1.5~~ ~~million, respectively, of patent cost reimbursements as a credit to general and administrative expenses. During the nine months ended September 30, 2021 and 2020, we recorded $6.1~~ ~~million and $3.7~~ ~~million, respectively, of patent cost reimbursements as a credit to general and administrative expenses.~~

disclosures on our leases.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the “~~FASB”~~“FASB”) or other standard-setting bodies and are adopted by us as of the specified effective date.

~~New Accounting Pronouncements Not Yet Adopted~~

In February 2016, the FASB issued ~~Accounting Standards Update (“ASU”)~~ASU No. 2016-02, Leases (Topic 842). This ASU requires a lessee to recognize in its statement of financial position a liability to make lease payments (the lease liability) and a ~~right-to-use~~right-of-use asset representing its right to use the underlying asset for the lease term. We may elect not to apply Topic 842 to short-term leases with a term of 12 months or less. This ASU is effective for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. We are in the process of completing a qualitative and quantitative assessment of our lease portfolio and implementing new processes and controls to account for leases in accordance withadopted the new ~~standard.~~standard as of January 1, 2022, using the modified retrospective approach. Comparative periods were not adjusted and continue to be presented under the previous accounting guidance. We ~~believe~~elected the ~~most significant changes~~package of practical expedients permitted under the transition guidance, which allows us to ~~our financial statements will relate~~carry forward the historical lease classification of contracts entered into prior to January 1, 2022.

Our adoption of the ~~recognition~~new standard impacted the condensed consolidated balance sheets as follows (in thousands):


	January 1, 2022
	Pre-ASC 842 Balance		ASC 842 Adoption Impact		Post-ASC 842 Balance
Operating lease right-of-use assets	$	—	$	22,818	$	22,818
Prepaid rent	$	291	$	(291)	$	—
Accrued expenses and other current liabilities*	$	13,136	$	683	$	13,819
Long-term operating lease liabilities	$	—	$	23,941	$	23,941
Deferred rent and lease incentive liability	$	2,097	$	(2,097)	$	—

*Adjustment represents the current portion of ~~right-of-use assets and offsetting~~operating lease liabilities ~~for~~of $0.8 million and reclassification of the current portion of the lease incentive liability of $0.1 million to reduce the operating ~~leases in the consolidated balance sheet. We do not expect the standard to have a material impact on cash flows or results of operations.~~

lease right-of-use assets.

New Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial ~~Instruments—~~Instruments–Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326). This ASU provides guidance on the measurement of credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment approach with a methodology to reflect expected credit losses and requires consideration of a broader range of reasonable and supportable information to explain credit loss estimates. This ASU is to be applied on a modified retrospective approach and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, and interim reporting periods within fiscal years beginning after December 15,

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2023. Early adoption is permitted for all entities for fiscal years beginning after December 15, 2018, and interim periods therein. We are currently evaluating the impact of adoption of ~~this~~ ASU 2016-13 on our condensed consolidated financial ~~statements.~~

statements and related disclosures.

3. Fair Value Measurements and Fair Value of Financial Instruments

The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

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

Level 2—Observable inputs other than Level 1 prices, 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 are classified in their entireties based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires our management to make judgments and consider factors specific to the asset or liability.

Our financial instruments consist of Level 1, Level 2, and Level 3 financial instruments. We generally classify our marketable securities as Level 2. Instruments are classified as Level 2 when observable market prices for identical securities that are traded in less active markets are used. When observable market prices for identical securities are not available, such instruments are priced using benchmark curves, benchmarking of like securities, sector groupings, matrix pricing, and valuation models. These valuation models are proprietary to the pricing providers or brokers and incorporate a number of inputs, including in approximate order of priority: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. For certain security types, additional inputs may be used, or some of the standard inputs may not be applicable. Evaluators may prioritize inputs differently on any given day for any security based on market conditions, and not all inputs listed are available for use in the evaluation process for each security evaluation on any given day. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs. No such transfers occurred during the three and nine months ended September 30, 2022. Level 1 financial instruments are comprised of money market ~~mutual funds.~~fund investments and U.S. Treasury bills. Level 32 financial instruments are comprised of commercial paper, corporate debt securities, and U.S. government agency bonds. Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Level 3 financial instruments consist of the MSKCC success payments ~~liability related to the Exclusive License Agreement (the “MSKCC Agreement”), dated November 13, 2020, by and between us and Memorial Sloan Kettering Cancer Center (“MSKCC”).~~liability.

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The following table sets forth our financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

Fair Value Measurements as of September 30, 2021

Total

Level 1

Level 2

Level 3

Assets:

Money market investments (included in cash and cash equivalents)

$
435,310

$
435,310

$
-

$
-

Total

$
435,310

$
435,310

$
-

$
-

Liabilities:

MSKCC success payments liability

$
6,238

$
-

$
-

$
6,238

Total

$
6,238

$
-

$
-

$
6,238

Fair Value Measurements as of December 31, 2020

Total

Level 1

Level 2

Level 3

Assets:

Money market investments (included in cash and cash equivalents)

$
15,953

$
15,953

$
-

$
-

Total

$
15,953

$
15,953

$
-

$
-

Liabilities:

MSKCC success payments liability

$
2,654

$
-

$
-

$
2,654

Total

$
2,654

$
-

$
-

$
2,654

Fair Value Measurements as of September 30, 2022
Total Level 1 Level 2 Level 3
Assets:
Commercial paper ($52,821 included in cash and cash equivalents) $ 149,970 $ — $ 149,970 $ —
U.S. Treasury bills 87,863 87,863 — —
Corporate debt securities 46,635 — 46,635 —
Money market fund investments (included in cash and cash equivalents) 29,264 29,264 — —
U.S. government agency bonds 28,858 — 28,858 —
Total fair value of assets $ 342,590 $ 117,127 $ 225,463 $ —
Liabilities:
MSKCC success payments liability $ 3,039 $ — $ — $ 3,039
Total fair value of liabilities $ 3,039 $ — $ — $ 3,039


	Fair Value Measurements as of December 31, 2021
	Total		Level 1		Level 2		Level 3
Assets:
Money market fund investments (included in cash and cash equivalents)	$	181,528	$	181,528	$	—	$	—
Commercial paper ($58,892 included in cash and cash equivalents)	141,676		—		141,676		—
Corporate debt securities	38,649		—		38,649		—
U.S. Treasury bills	26,590		26,590		—		—
U.S. government agency bonds	25,065		—		25,065		—
Total fair value of assets	$	413,508	$	208,118	$	205,390	$	—
Liabilities:
MSKCC success payments liability	$	4,080	$	—	$	—	$	4,080
Total fair value of liabilities	$	4,080	$	—	$	—	$	4,080

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The fair value and amortized cost of cash equivalents and available-for-sale marketable securities by major security type as of September 30, 2022 and December 31, 2021 are presented in the following tables (in thousands):


	As of September 30, 2022
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Commercial paper ($52,821 included in cash and cash equivalents)	$	150,135	$	—	$	(165)	$	149,970
U.S. Treasury bills	89,027		—		(1,164)		87,863
Corporate debt securities	47,022		—		(387)		46,635
Money market investments (included in cash equivalents)	29,264		—		—		29,264
U.S. government agency bonds	29,178		1		(321)		28,858
Total cash equivalents and marketable securities	$	344,626	$	1	$	(2,037)	$	342,590

Classified as:
Cash and cash equivalents							$	82,085
Marketable securities, short-term							211,284
Marketable securities, long-term							49,221
Total cash equivalents and marketable securities							$	342,590


	As of December 31, 2021
	Amortized Cost Basis		Unrealized Gains		Unrealized Losses		Estimated Fair Value
Money market investments (included in cash equivalents)	$	181,528	$	—	$	—	$	181,528
Commercial paper ($58,892 included in cash equivalents)	141,726		1		(51)		141,676
U.S. government agency bonds	25,102		—		(37)		25,065
Corporate debt securities	38,661		4		(16)		38,649
U.S. Treasury bills	26,626		1		(37)		26,590
Total cash equivalents and marketable securities	$	413,643	$	6	$	(141)	$	413,508

Classified as:
Cash and cash equivalents							$	240,420
Marketable securities, short-term							135,412
Marketable securities, long-term							37,676
Total cash equivalents and marketable securities							$	413,508

The following table sets forth a summary of the changes in the fair value of our Level 3 financial liability (in thousands):

MSKCC Success Payments
Liability

Balance at December 31, 2020

$
2,654

Change in fair value

3,584

Balance at September 30, 2021

$
6,238

~~We recorded a $2.4~~ ~~million change and a $3.6~~ million change in fair value of the MSKCC success payments liability in other income (expense) in our condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2021, respectively.


	MSKCC Success Payments Liability
Balance at December 31, 2021	$	4,080
Change in fair value	(1,041)
Balance at September 30, 2022	$	3,039

Our liability for the MSKCC success payments is carried at fair value and changes are recognized as expense or income as part of ~~“other~~other income (expense)” until the success payments liability is paid or expires (Note 4). We recorded a

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$1.6 million and $2.4 million change in fair value of the MSKCC success payments liability as a loss in other income (expense) in our condensed consolidated statements of operations and comprehensive loss for the three months ended September 30, 2022 and 2021, respectively. We recorded a $1.0 million and $3.6 million change in fair value of the MSKCC success payments liability as a gain and a loss, respectively, in other income (expense) and research and development expense in our condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2022 and 2021, respectively.

We utilize a Monte Carlo simulation model that models the future movement of stock prices based on several key variables. This model requires significant estimates and assumptions in determining the estimated fair value of the MSKCC success payments liability ~~under the MSKCC Agreement and associated expense or income~~ at each balance sheet ~~date based on changes in the estimated success payments liability.~~date. The assumptions used to calculate the fair value of the MSKCC success payments are subject to a significant amount of judgment including the expected volatility that was estimated using available information about the historical volatility of stocks of publicly traded companies that are similar to us, the estimated term, and the estimated number and timing of valuation measurement dates. The table below summarizes key assumptions used in the valuation of MSKCC success payments liability:


	As of September 30, 2021			As of December 31, 2020				As of September 30, 2022		As of December 31, 2021
Fair value of common stock	$	23.870		$	5.462		Fair value of common stock	$	10.55	$	15.09
Risk-free interest rate		1.52	%		0.93	%	Risk-free interest rate	3.83%		1.52%
Expected volatility		80	%		80	%	Expected volatility	81%		75%
Probability	11.9% to 26.7%			4.4% to 13.4%
Probability of achieving multiple of Initial Share Price							Probability of achieving multiple of Initial Share Price	5.7% to 17.9%		7.0% to 20.9%
Expected term (years)	4.0 to 4.8			4.7 to 5.7			Expected term (years)	3.9 to 5.3		4.2 to 5.5

The computation of expected volatility ~~was~~is estimated using a combination of available information about the historical volatility of stocks of similar publicly traded companies for a period matching the expected term assumption and the historical and implied volatility of our stock. The risk-free interest rate, expected volatility, and expected term assumptions depend on the estimated timing of our phase 1 clinical trial for our CB-012 product candidate utilizing the know-how, biological materials, and intellectual property licensed under the MSKCC Agreement and the estimated timing of marketing approval for this product candidate from the U.S. Food and Drug Administration (“FDA”) ~~approval of one of our product candidates.~~. In addition, we incorporated the estimated number and timing of valuation measurement dates in the calculation of the MSKCC success payments liability.

A small change in the assumptions and other inputs, such as the fair value of our common stock, may have a relatively large change in the estimated valuation and associated liability and expense or income.

The carrying value of the promissory note pursuant to the Paycheck Protection Program (“PPP”) administered by the Small Business Administration (the “SBA”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) approximates its fair value (Note 8).

4. Significant Agreements

The Regents of the University of ~~California/~~California and the University of Vienna

We entered into an Exclusive License Agreement, dated April 16, 2013 as(as amended, ~~(the~~the “UC/Vienna Agreement”) with The Regents of the University of California (“UC”) and the University of Vienna (“Vienna”) (together, “UC/Vienna”) wherein UC/Vienna granted us an exclusive worldwide license, with the right to sublicense, in all fields to the foundational CRISPR-Cas9 patent family co-owned by UC, Vienna, and Dr. Emmanuelle Charpentier (the “CVC IP”). Dr. Charpentier has not granted us any rights, either directly or indirectly. The UC/Vienna Agreement continues until the last-to-expire patent or last-to-be-abandoned patent application within the CVC IP; provided, however, that UC/Vienna may terminate the UC/Vienna Agreement upon the occurrence of certain events and we may terminate the UC/Vienna Agreement at our sole discretion upon written notice. Without patent term adjustment or patent term extension, the CVC IP will expire in 2033. The UC/Vienna Agreement includes certain diligence milestones that we must meet. For products and services sold by us that are covered by the CVC IP, we will owe low- to mid-single-digit percent royalties on net sales, subject to a minimum annual royalty. Prior to the time that we are selling products, we owe UC/Vienna an annual license maintenance fee. We may owe UC/Vienna up to $~~3.4~~$3.4 million in certain regulatory and clinical milestone payments in the field of human therapeutics and diagnostics for products that are covered by the CVC IP and developed by us, an affiliate, or a sublicensee. Additionally, we pay UC/Vienna a specified percentage of sublicensing revenue, including cash and equity, we receive from sublicensing the CVC IP, subject to certain exceptions. If we include intellectual property owned or controlled by us in a sublicense to the CVC IP, we pay UC/Vienna a low double-digit percentage of sublicensing revenues received under the sublicense. If we do not include intellectual property owned or controlled by us in a sublicense to the CVC IP, we pay UC/Vienna 50% of sublicensing revenues received under the sublicense. To date, we have entered

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into over 2025 sublicensing agreements in a variety of fields such as human therapeutics, forestry, agriculture, research reagents, transgenic animals, certain livestock targets, internal research,

bioproduction, cell lines, and microbial applications that include the CVC IP as well as other Cas9 intellectual property owned or controlled by us. We are obligated to reimburse UC for its prosecution and maintenance costs of the CVC IP.

For each of the ~~three months~~three-month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, we incurred $~~0.3~~$0.3 million ~~and $0.1~~ ~~million, respectively,~~ for payments we owe to UC related to sublicensing revenues, which ~~were~~we recorded in research and development expenses in our condensed consolidated statements of operations and comprehensive loss. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we incurred $~~1.3~~$0.8 million and $~~0.6~~$1.3 million, respectively, for payments we owe to UC related to sublicensing revenues, which ~~were~~we recorded in research and development expenses in our condensed consolidated statements of operations and comprehensive loss.

For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we reimbursed UC $~~2.4~~$1.4 million and $~~2.3~~$2.4 million, respectively, for prosecution and maintenance costs of the CVC IP, which were recorded in general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we reimbursed UC $~~8.9~~$4.7 million and $~~6.0~~$8.9 million, respectively, for prosecution and maintenance costs of the CVC IP, which were recorded in general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss.

On December 15, 2016, we entered into a Consent to Assignments, Licensing and Common Ownership and Invention Management Agreement (“IMA”) relating to the CVC IP. Under the IMA, CRISPR Therapeutics AG (“CRISPR”) reimburses us 50%50% of the amounts we reimburse UC for patent prosecution and maintenance costs of the CVC IP. For the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, CRISPR reimbursed us $~~1.2~~$0.7 million and $~~1.1~~$1.2 million, respectively, which ~~were~~we recorded as reductions of general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. For the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, CRISPR reimbursed us $~~4.4~~$2.4 million and $~~2.6~~$4.4 million, respectively, which ~~were~~we recorded as reductions of general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss.

Memorial Sloan Kettering Cancer Center

~~Under the~~

On November 13, 2020, we entered into an Exclusive License Agreement with MSKCC ~~Agreement,~~(the “MSKCC Agreement”), under which we exclusively licensed know-how, biological materials, and ~~intellectual property~~patent families relating to ~~humanized~~fully-human single-chain variable fragments targeting ~~CD371~~C-type lectin-like molecule-1 (CLL-1; also known as CD371) for use in T cells, NK cells, and genome-edited induced pluripotent stem cells (“iPSCs”) for allogeneic ~~CD371-targeted~~CLL-1-targeted cell ~~therapy~~therapies (currently used in our CB-012 product candidate). We paid MSKCC an upfront payment of $~~0.5~~$0.5 million in cash and $~~2.1~~$2.1 million in stock. For each licensed ~~CD371~~CLL-1 product, we may owe potential clinical, regulatory, and commercial milestone payments totaling $~~112.0~~$112.0 million. In addition, in the event we, our affiliates, or sublicensees, receive regulatory approval for a licensed ~~CD371~~CLL-1 product, we will owe low- to mid-single-digit percent royalties on net sales by us, our affiliates, and our sublicensees. Our license from MSKCC includes the right to sublicense through multiple tiers and we will owe MSKCC a percentage of upfront cash or equity received from our sublicensees. The percentage owed decreases as our licensed ~~CD371~~CLL-1 product candidate moves through development, starting at a low-double-digit percentage if clinical trials have not yet begun and decreasing to a mid-single-digit percentage if our licensed ~~CD371~~CLL-1 product candidate is in later clinical trial stages. We are also responsible for paying a percentage of licensed patent costs. The MSKCC Agreement includes certain diligence milestones that we must meet by specified dates, which ~~dates~~ may be extended upon payment of additional fees.

MSKCC is entitled to certain success payments if our common stock fair value increases by certain multiples of increasing value based on a comparison of the fair market value of our common stock ~~with the split-adjusted initial stock price of our Series B convertible preferred stock financing of $5.1914~~to $5.1914 per share, as adjusted for any future stock splits (the “Initial Share Price”), during a specified time ~~interval.~~period. Under the MSKCC Agreement, as a publicly traded company, our common stock fair value is determined by any given 45-day ~~volume-weighted average~~volume weighted-average trading price. At our option, success payments to MSKCC may be made in cash or common stock. The relevant time ~~interval~~period commences when the first patient is dosed with a licensed ~~CD371~~CLL-1 product candidate in the first phase 1 clinical trial and ends upon the earlier of the third anniversary from the approval of our, or our affiliate’s, or sublicensee’s biologics license application (“BLA”) by the FDA or 10 years from the date the first patient was dosed with a licensed ~~CD371~~CLL-1 product candidate in the first phase 1 clinical trial. The aggregate success payments will not exceed $~~35.0~~$35.0 million. Additionally, if we undergo a change of control during the specified time ~~interval,~~period, we may owe a change of control payment, depending upon the increase in our stock price due to the change of control and also to what extent success payments have already been paid by us to MSKCC. In no event will the combination of success payments and the change of control payment owed to MSKCC exceed $$35.0 million.

Table of Contents~~35.0~~ ~~million.~~

The following table summarizes the amounts of the MSKCC success payments:


Multiple of Initial Share Price giving rise to a success payment	5x		10x		15x
MSKCC success payments (in millions)	$	10.0	$	10.0	$	15.0

We may terminate the MSKCC Agreement upon 90 calendar days’ prior written notice to MSKCC. MSKCC may terminate the MSKCC Agreement in the event of our uncured material breach, bankruptcy, or criminal activity. ~~In the event that~~If MSKCC materially breaches the MSKCC Agreement in certain circumstances (~~e.g~~.(e.g., granting a third party a license in our field) then, during the time of such uncured breach, MSKCC will not be entitled to receive any success payments or any change of control payment.

As of September 30, ~~2021,~~2022, the estimated fair value of the total success payments obligation to MSKCC was $~~6.2~~$3.0 million, which was included in long-term liabilities in our condensed consolidated balance sheets. For the three ~~and nine~~ months ended September 30, 2022 and 2021, we recognized $~~2.4~~a $1.6 million and $~~3.6~~$2.4 million, respectively, of change in fair value of the MSKCC success payments liability, which ~~were~~was recorded as a loss in other income (expense) in our condensed consolidated statements of operations and comprehensive loss.

For the nine months ended September 30, 2022 and 2021, we recognized a $1.0 million and $3.6 million, respectively, change in fair value of the MSKCC success payments liability, which was recorded as a gain and a loss, respectively, in other income (expense) and research and development expense in our condensed consolidated statements of operations and comprehensive loss.

Intellia Therapeutics, Inc.

On July 16, 2014, we entered into a License Agreement as(as amended, ~~(the~~the “Intellia License Agreement”) ~~and a Services Agreement~~ with Intellia, LLC, to which Intellia Therapeutics, Inc. (“Intellia”) is a successor in interest. Under the Intellia License Agreement, we granted Intellia an exclusive worldwide license, with the right to sublicense, to certain CRISPR-Cas9 technology for a defined field of human ~~therapeutics, including a license to certain of our future CRISPR-Cas9 intellectual property until our direct or indirect percentage of Intellia’s common stock dropped below~~ 10~~% (the “IP Cut-off Date”).~~therapeutics. Intellia granted us an exclusive worldwide license, with the right to sublicense, to certain of its CRISPR-Cas9 technology for all fields outside of the defined field of human therapeutics, including a license to certain of Intellia’s future CRISPR-Cas9 intellectual property until the IP Cut-off Date. Each party had the right to opt-in to any licenses in its field of use entered into by the other party prior to the IP Cut-off Date, subject to the terms and conditions of such license. The IP Cut-off Date occurred on January 30, 2018.therapeutics. Under the Intellia License Agreement, each party is responsible for 30%30% of the other party’s expenses for prosecution and maintenance of the licensed intellectual property. ~~For~~

During each of the ~~three~~three- and ~~nine months~~nine-month periods ended September 30, 2022 and 2021, ~~and 2020,~~ we ~~reimbursed Intellia~~recognized less than $~~0.1~~$0.1 million of expenses in reimbursable patent prosecution and maintenance costs, which ~~was~~were recorded as general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. During ~~each of~~ the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, Intellia reimbursed us $~~0.4~~$0.2 million and $0.4 million, respectively (including reimbursement for a portion of the patent prosecution and maintenance costs of the CVC IP paid to UC), which ~~was~~were recorded as reductions of general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, Intellia reimbursed us $~~1.7~~$0.7 million and $~~1.1~~$1.7 million, respectively (including reimbursement for a portion of the patent prosecution and maintenance costs of the CVC IP paid to UC), which were recorded as reductions of general and administrative expenses in our condensed consolidated statements of operations and comprehensive loss. The term of the Intellia License Agreement continues for the life of the licensed patents and patent applications; provided, however, either party may terminate the agreement upon the occurrence of certain events.

On June 16, 2021, we ~~and Intellia~~ entered into a leaseback agreement with Intellia (the “Leaseback Agreement”)~~, which resolved the arbitration dispute between the parties (Note 9)~~. Pursuant to the Leaseback Agreement, in exchange for Intellia’s grant to us of an exclusive license to certain intellectual property relating to CRISPR-Cas9, including Cas9 chRDNAs, for use solely in the manufacture of our CB-010 product candidate, we ~~agreed to make certain payments to~~paid Intellia ~~including $1.0~~an upfront cash payment of $1.0 million ~~paid to Intellia in July 2021. We are also obligated to~~and will pay up to $~~23.0~~$23.0 million in potential future regulatory and sales ~~milestones for our CB-010 product candidate if and when such milestones are achieved. We~~milestones. Additionally, we will ~~also pay~~owe Intellia low- to mid-single-digit percent royalties on net sales of our CB-010 product candidate ~~sold~~ by us, our affiliates, and sublicensees until the expiration, abandonment, or invalidation of the last patent within the intellectual property relating to ~~certain~~ CRISPR-Cas9, including ~~those~~that relating to Cas9 ~~chRDNAs.~~

chRDNAs (i.e., 2036, without patent term adjustment or patent term extension).

Pioneer Hi-Bred International, Inc. (now Corteva Agriscience)

On July 13, 2015, we and Pioneer Hi-Bred International, Inc. (“Pioneer”) (now Corteva Agriscience), then a DuPont company (“DuPont”), entered into an Amended and Restated Collaboration and License Agreement, as amended (the “Pioneer Agreement”). Under the terms of the Pioneer Agreement, we and Pioneer ~~cross-licensed~~cross licensed CRISPR intellectual property portfolios. Pioneer granted us an exclusive worldwide license, with the right to sublicense, to its CRISPR intellectual property in the field of research tools, as well as a non-exclusive worldwide license to such intellectual property

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in human and animal therapeutics, industrial biotechnology, certain agriculture segments, and other fields; and we granted Pioneer an exclusive worldwide license, with the right to sublicense, to our CRISPR intellectual property, including the CVC IP, in a defined field of agriculture relating to specified row crops, as well as a non-exclusive worldwide license to ~~such~~the intellectual property in other agricultural applications, industrial biotechnology, nutrition and health, and other fields. The Pioneer Agreement continues until the expiration, abandonment, or invalidation of the last patent or patent application within the licensed intellectual property; provided, however, that the parties may terminate the Pioneer Agreement by mutual consent or either party may unilaterally terminate the Pioneer Agreement in the event of an uncured breach of a payment obligation, bankruptcy, or failure to maintain or own licensed intellectual property by the other party inif the ~~event the~~

non-breaching party is materially adversely affected by ~~such~~the failure. We are obligated to pay low-single-digit percent royalties to Pioneer for the sales of our products in the research tools field as well as certain sublicensing revenues in that field. We are eligible to receive milestone payments from Pioneer ~~in the event~~if certain regulatory and commercial milestones are met related to specified row crops, for a total of up to $~~22.4~~$22.4 million, as well as to receive low-single-digit percent royalties for sales of defined agricultural products and certain sublicensing revenues in that field. In March 2021, we received a milestone payment of $~~0.3~~$0.3 million from Pioneer. ~~Under the Pioneer Agreement, we and Pioneer also entered into a~~ ~~three-year~~ ~~collaboration, funded by Pioneer, which ended in 2016.~~ Initially, Pioneer owned the patents and patent applications developed under the collaboration, including the chRDNA patent family, and granted us an exclusive license to these patents and patent applications in the fields of research tools and therapeutics.

In December 2020, we and Pioneer entered into an amendment to the Pioneer Agreement under which Pioneer assigned to us the chRDNA patent family developed under the research collaboration, and we paid Pioneer an upfront payment of $~~0.5~~$0.5 million. We considered the payment to Pioneer in accordance with revenue recognition guidance and accounted for it as a reduction of the licensing and collaboration revenue in our condensed consolidated statements of operations and comprehensive loss. In addition to the upfront payment, we are now obligated to pay all patent prosecution and maintenance costs for the chRDNA patent family; up to $~~2.8~~$2.8 million in regulatory milestone payments for therapeutic products developed by us, our affiliates, or licensees that are covered by the chRDNA patent family; up to $~~20.0~~$20.0 million in sales milestones over a total of four therapeutics products sold by us, our affiliates, or licensees that are covered by the chRDNA patent family; and a low-single-digit percentage of licensing ~~revenues received by us~~revenue we receive for licensing the chRDNA patent family after December 2020.

~~During~~

For the three and nine months ended September 30, 2022, and for the three months ended September 30, 2021, we did not incur any expenses for payments we owe to Pioneer related to licensing revenues. For the nine months ended September 30, 2021, we incurred $~~0.8~~$0.8 million for payments we ~~owe~~owed to Pioneer related to licensing revenues, which were recorded as a research and development expense in our condensed consolidated statements of operations and comprehensive loss.~~NaN~~ ~~licensing fees payments were incurred to Pioneer during the three months ended September 30, 2021~~ 0~~r during the three and nine months ended September 30, 2020.~~

~~Genus plc~~

On May 12, 2016, we entered into a Research Collaboration and License Agreement, as amended (the “Genus Agreement”) with Genus plc (“Genus”) under which we granted Genus an exclusive worldwide license to certain CRISPR-Cas9 technology for the introduction of genetic traits into cattle and pigs raised to produce protein primarily for human consumption; provided, however, that at the end of the ~~four-year~~ research collaboration, Genus was required to select a specified number of licensed products and our license to Genus is now limited to those particular products. The Genus Agreement continues until the expiration, abandonment, or invalidation of the last patent or patent application within the licensed patent rights; provided, however, that each party may terminate the Genus Agreement upon the occurrence of certain events, and Genus may terminate the Genus Agreement at its sole discretion upon written notice to us. In addition to an upfront payment we received, we are eligible to receive milestone payments from Genus in the event certain regulatory and commercial milestones are met, for the selected licensed products, up to a total of $~~10.0~~ ~~million. We will also be eligible to receive either low- to mid-single-digit percent royalties or low-single to low-double-digit percent royalties on net sales of the licensed products.~~

~~Under the Genus Agreement, we and Genus entered into a~~ ~~four-year~~ ~~research collaboration, which was funded by Genus. The collaboration ended in May 2020. We did~~ 0~~t recognize any revenue in connection with the Genus Agreement for the three and nine months ended September 30, 2021. During the three months ended September 30, 2020, we did~~ 0~~t recognize any revenue related to the Genus Agreement. During the nine months ended September 30, 2020, we recognized revenue of $0.8~~ ~~million related to the Genus Agreement.~~

~~Related Party Private Company~~

On May 15, 2020, we entered into an Exclusive License Agreement, as amended, with a related party private company (the “Private Company License Agreement”), under which we granted the private company an exclusive worldwide license to certain CRISPR intellectual property rights and know-how in a defined field.

We are eligible to receive milestone payments for licensed products following the first commercial sale of each licensed product in each of the United States and the first European country in which each licensed product is sold by the private company. The private company may select one of several milestone payment amounts for each licensed product, which selection then dictates the applicable royalty rate for net sales of licensed products. We are also eligible to receive a percentage of sublicensing revenues in the event the private company sublicenses the CRISPR intellectual property that we licensed to the private company.

The Private Company License Agreement will continue in force and effect until the expiration, abandonment, or invalidation of the last patent or patent application within the licensed patent rights. The Private Company License Agreement may be terminated during the term by either party for an uncured material breach or bankruptcy. Additionally, the private company may terminate the Private Company License Agreement upon 90 days’ written notice to us.

~~As consideration for the exclusive license, the private company issued to us~~ ~~7,500,000~~ ~~shares of convertible preferred stock with an estimated fair value of $7.5~~ million, which was the price paid for similar shares by another investor, and which was an arm’s length transaction. We accounted for the grant of the license as a contract with a customer under Accounting Standards Codification (“ASC”) 606 and recognized $~~7.5~~ ~~million as license and collaboration revenue in our condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2020. We did~~ 0~~t recognize any revenue in connection with the Private Company License Agreement for the three and nine months ended September 30, 2021 nor for the three months ended September 30, 2020.~~

~~On May 15, 2020, we entered into a separate option agreement under which we granted the same private company a~~ ~~three-year~~ option to negotiate an exclusive, royalty-bearing, worldwide license in a defined field to the CVC IP and certain other CRISPR-Cas9 patent rights controlled by us. Through September 2021, we received a total of $~~100,000~~ in upfront option payments and may receive an additional annual option fee and an option exercise fee. We recorded the upfront payments received in long-term deferred revenue in our condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

AbbVie Manufacturing Management Unlimited Company

On February 9, 2021, we entered into a Collaboration and License Agreement (the “AbbVie Agreement”) with AbbVie Manufacturing Management Unlimited Company (“AbbVie”). Pursuant to the AbbVie Agreement, AbbVie selects one target or, for a dual CAR-T cell product, two targets (each selection, a “Program Slot”) to develop collaboration CAR-T cell products (and corresponding licensed products). For each of AbbVie’s two Program Slots (or up to four Program Slots, if AbbVie elects to expand the number as set forth below), we ~~will collaborate~~are collaborating to develop one or more collaboration allogeneic CAR-T cell products directed toward the single cancer target or target combination chosen by AbbVie as described in an applicable research plan, utilizing our Cas12a chRDNA genome-editing and cell therapy technologies. We granted AbbVie an exclusive (even as to us), royalty-bearing, worldwide license, with the right to grant sublicenses, under our Cas12a chRDNA and cell therapy intellectual property, as well as certain genome-editing technology that we may gain rights to in the future and intellectual property that may be developed under the collaboration, solely for AbbVie to develop, commercialize, manufacture, and otherwise exploit the collaboration CAR-T cell products in the field of human diagnostics, prophylactics, and therapeutics. Under the terms of the AbbVie Agreement, we ~~will~~ conduct certain preclinical research, development, and manufacturing activities under the collaboration, including certain activities for the manufacture and supply of licensed product for AbbVie’s phase 1 clinical ~~studies.~~trials. AbbVie ~~will reimburse~~reimburses us for all such activities, including reimbursement for time spent by employees at a designated FTE rate. The duration of the collaboration is not fixed. Under the terms of the AbbVie Agreement, AbbVie has selected its initial Program Slot and has reserved six additional targets, which AbbVie may choose to be used or substituted into the two Program Slots or used for the third or fourth Program Slots if AbbVie expands the number of Program Slots during the collaboration.

During the collaboration, AbbVie may expand from two Program Slots to a total of four Program Slots by paying us an additional $~~15.0~~$15.0 million for each Program Slot, provided that AbbVie must make such payment within the earlier of (a) 60 calendar days following completion of the phase 1 clinical ~~studies~~trials for the initial collaboration CAR-T cell product and (b) December 31, 2025. Under the terms of the AbbVie Agreement, we are eligible to receive up to $~~150.0~~$150.0 million in future

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developmental and regulatory milestone paymentsfor each Program Slot and up to $~~200.0~~$200.0 million in sales-based milestones for each Program Slot. We are also eligible to receive global royalties on net sales of licensed products sold by AbbVie, its affiliates, and sublicensees in the high-single-digit to low-teens percent range, subject, in certain instances, to various reductions.

The term of the AbbVie Agreement ~~will continue~~continues in force and effect until the date of expiration of the last royalty term of the last country in which a licensed product is exploited. On a licensed product-by-licensed product and country-by-country basis, the royalty term is the period of time beginning on the first commercial sale of a licensed product in a country and ending on the latest of the following three dates: (a) the expiration, invalidation, revocation, cancellation, or abandonment date of the last patent that includes a valid claim to either (i) the collaboration CAR-T cell product in the licensed product or (ii) the method of making the collaboration CAR-T cell product in the licensed product in such country (in the case of (ii), only for so long as no biosimilar product is commercially available in such country); (b) 10 years from the date of the first commercial sale of such licensed product in such country; and (c) the expiration date of regulatory exclusivity for such licensed product in such country. The AbbVie Agreement may be terminated during the term by either party for an uncured material breach or bankruptcy by the other party. Additionally, AbbVie may terminate the AbbVie Agreement, in its entirety or on a licensed product-by-licensed product basis, effective immediately upon written notice to us,

if AbbVie in good faith believes that it is not advisable for AbbVie to continue to exploit the collaboration CAR-T cell products or licensed products as a result of a perceived serious safety issue. AbbVie may also terminate the AbbVie Agreement in its entirety at its sole discretion upon 90 days’ prior written notice to us.

The transaction price we received under the AbbVie Agreement associated with the first two Program Slots consisted of ~~the $30.0~~a $30.0 million upfront cash payment and the estimated variable consideration related to our performance of preclinical, development, and manufacturing activities under the collaboration and the developmental and regulatory milestone payments. We constrain the estimated variable consideration if we assess that it is probable that a significant reversal in the amount of cumulative revenue recognized may occur in future periods. We constrained all developmental and regulatory milestone payments as of September 30, ~~2021.~~2022. The transaction price ~~will be~~is reevaluated inat the end of each reporting period and as changes in circumstances occur. We determined that the licenses we granted to AbbVie and our participation in the joint governance committee are not capable of being distinct from the preclinical research, development, and manufacturing activities and therefore are combined into one performance obligation. We recognize revenue based on the measure of progress using an estimated cost-based input method each reporting period.

We received an upfront cash payment of $~~30.0~~$30.0 million from AbbVie ~~on March 11,~~during the year ended December 31, 2021. We recognized short-term deferred revenue in the amount of $~~8.3~~$11.5 million and long-term deferred revenue in the amount of $~~20.1~~$12.7 million related to this upfront cash payment in our condensed consolidated balance sheets as of September 30, ~~2021.~~2022. We recognized $~~2.3~~short-term deferred revenue in the amount of $8.3 million and $~~2.8~~long-term deferred revenue in the amount of $19.1 million related to these payments in our consolidated balance sheets as of December 31, 2021.

We recognized $1.7 million and $2.3 million in revenue for the three months ended September 30, 2022 and 2021, respectively, relating to the AbbVie Agreement. We recognized $5.5 million and $2.8 million in revenue for the nine months ended September 30, 2022 and 2021, respectively, ~~in relation~~relating to the AbbVie Agreement.

As of September 30, 2022, we did not record anything in accounts receivable and as of December 31, 2021, we recorded $1.0 million in accounts receivable, respectively, and $0.8 million and $0.2 million, respectively, in contract assets in our condensed consolidated balance sheets.

5. Revenue

Disaggregation of Revenue

We disaggregate revenue by geographical market based on the location of research and development activities of our licensees and collaborators. The following is a summary of revenue by geographic location for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
United States	$	2,966	$	3,507	$	9,761	$	6,483
Rest of world	337		470		398		556
Total	$	3,303	$	3,977	$	10,159	$	7,039

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Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

United States

$
3,507

$
953

$
6,483

$
10,946

Rest of world

470

245

556

431

Total

$
3,977

$
1,198

$
7,039

$
11,377

During the three months ended September 30, ~~2021,~~2022, we recognized $~~1.7~~$1.6 million of revenue related to performance obligations satisfied at a point in time, and we recognized $~~2.3~~$1.7 million of revenue related to performance obligations satisfied over time.

During the three months ended September 30, ~~2020, we recognized $1.2~~ ~~million of revenue related to performance obligations satisfied at a point in time, and we did~~ 0~~t recognize any revenue related to performance obligations satisfied over time.~~

~~During the nine months ended September 30,~~ 2021, we recognized $~~4.2~~$1.7 million of revenue related to performance obligations satisfied at a point in time, and we recognized $~~2.8~~$2.3 million of revenue related to performance obligations satisfied over time.

During the nine months ended September 30, ~~2020,~~2022, we recognized $~~10.5~~$4.7 million of revenue related to performance obligations satisfied at a point in time, and we recognized $~~0.9~~$5.5 million of revenue related to performance obligations satisfied over time.

During the nine months ended September 30, 2021, we recognized $4.2 million of revenue related to performance obligations satisfied at a point in time, and we recognized $2.8 million of revenue related to performance obligations satisfied over time.

Contract Balances

Accounts receivable relate to our right to consideration for performance obligations completed (or partially completed) for which we have an unconditional right to consideration. Our accounts receivable balances represent amounts that we billed to our licensees with invoices outstanding as of the ~~period end.~~

end of a reporting period.

Contract assets are rights to consideration in exchange for a license that we have granted to a licensee when ~~such~~the right is conditional on something other than the passage of time. Our contract asset balances represent royalties, milestone payments, and research costs related to the AbbVie Agreement that are unbilled as of the ~~period end.~~

end of a reporting period.

Contract liabilities consist of deferred revenue and relate to amounts invoiced to, or advance consideration received from, licensees ~~which~~that precede our satisfaction of the associated performance obligations. Our deferred revenue primarily results from the upfront ~~payments~~payment received relating to the performance ~~obligations~~obligation that ~~are~~is satisfied over time under the AbbVie Agreement. The remaining deferred revenue relates to upfront payments received under license agreements that also include non-refundable annual license fees, which are accounted for as material rights for license renewals and are recognized at the point in time ~~the~~ annual license ~~fee is~~fees are paid by the ~~licensee~~licensees and the renewal ~~period begins.~~

periods begin.

The following table presents changes in our contract assets and liabilities during the nine months ended September 30, ~~2021~~2022 (in thousands):

Balance as of
December 31,
2020

Additions

Deductions

Balance as of
September 30,
2021

Accounts receivable

$
150

$
7,220

$
(6,792
)

$
578

Contract assets:

Unbilled accounts receivable

$
1,328

$
3,656

$
(3,131
)

$
1,853

Contract liabilities:

Deferred revenue, current and long-term

$
1,098

$
34,826

$
(4,156
)

$
31,768


	Balance as of December 31, 2021		Additions		Deductions		Balance as of September 30, 2022
Accounts receivable	$	1,153	$	6,271	$	(7,027)	$	397

Contract assets:
Unbilled accounts receivable	$	1,488	$	5,486	$	(5,075)	$	1,899

Contract liabilities:
Deferred revenue, current and long-term	$	30,735	$	3,514	$	(6,791)	$	27,458

Unbilled accounts receivable increased $0.4 million during the nine months ended September 30, ~~2021,~~2022, primarily due to the increase in unbilled research costs under the AbbVie ~~Agreement in the amount of $1.0~~ ~~million.~~

Agreement.

Deferred revenue ~~increased~~decreased during the nine months ended September 30, ~~2021,~~2022, primarily due to ~~recognition~~a higher amount of $~~30.0~~ ~~million in deferred~~ revenue ~~related~~recognized compared to the ~~AbbVie Agreement (Note 4).~~

amount of additional billings during the nine months ended September 30, 2022.

During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recognized $~~0.1~~$3.4 million and $~~1.0~~$0.1 million of revenue, respectively, which were included in the opening contract liabilities balances as of December 31, 2021 and 2020, ~~and 2019,~~ respectively.

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Transaction Prices Allocated to ~~the~~ Remaining Performance Obligations

Remaining ~~unsatisfied~~ performance obligations represent in aggregate the amount of a transaction price that has been allocated to performance obligations not ~~delivered, or only partially~~ delivered as of the end of a reporting period. The value of transaction prices allocated to remaining unsatisfied performance obligations as of September 30, ~~2021~~2022 was approximately $~~54.0~~$43.4 million. We expect to recognize approximately $~~8.7~~$12.0 million of remaining performance obligations as revenue in the next 12 months, and to recognize the remainder thereafter.

Capitalized Contract Acquisition Costs and Fulfillment Costs

We did not incur any expenses to obtain license and collaboration agreements, and costs to fulfill those contracts do not generate or enhance our resources. As such, no costs to obtain or fulfill a contract have been capitalized in any period.

6. Balance Sheet Items

Other receivables consisted of the following ~~as of September 30, 2021 and December 31, 2020, respectively~~ (in thousands):

September 30,
2021

December 31,
2020

Patent cost reimbursements

$
4,890

$
3,672

Other

464

10

Total

$
5,354

$
3,682

September 30,
2022 December 31,
2021
Patent cost reimbursements $ 2,197 $ 4,702
Accrued interest on marketable securities 499 226
Other 3 555
Total $ 2,699 $ 5,483

Prepaid expenses and other current assets consisted of the following ~~as of September 30, 2021 and December 31, 2020, respectively~~ (in thousands):

September 30,
2021

December 31,
2020

Prepaid income taxes

$
1,490

$
1,479

Prepaid insurance

2,646

-

Prepaid contract manufacturing and clinical costs

609

954

Prepaid rent

444

337

Other

763

423

Total

$
5,952

$
3,193

September 30,
2022 December 31,
2021
Prepaid contract manufacturing and clinical costs $ 4,789 $ 2,714
Prepaid insurance 2,228 1,897
Prepaid income taxes 438 1,486
Prepaid rent — 468
Other 1,103 671
Total $ 8,558 $ 7,236

Property and equipment, net, consisted of the following ~~as of September 30, 2021 and December 31, 2020, respectively~~ (in thousands):

September 30,
2021

December 31,
2020

Furniture and equipment

$
128

$
117

Computer equipment

273

263

Lab equipment

6,245

5,038

Leasehold improvements

1,636

1,180

Total property and equipment, gross

8,282

6,598

Less: accumulated depreciation and amortization

(3,805
)

(3,096
)
Property and equipment, net

$
4,477

$
3,502


	September 30, 2022		December 31, 2021
Lab equipment	$	10,782	$	6,848
Leasehold improvements	1,836		1,701
Computer equipment	614		273
Furniture and equipment	161		133
Construction in progress	747		9
Total property and equipment, gross	14,140		8,964
Less: accumulated depreciation and amortization	(5,181)		(4,077)
Property and equipment, net	$	8,959	$	4,887

Depreciation and amortization expenses related to property and equipment were $~~0.3~~$0.4 million and $0.3 million, respectively, for ~~each of~~ the three months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Depreciation and amortization expenses related to property and equipment were $~~0.7~~$1.1 million and $0.7 million for ~~each of~~ the nine months ended September 30, 2022 and 2021, ~~and 2020.~~respectively.

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Accrued expenses and other current liabilities consisted of the following ~~as of September 30, 2021 and December 31, 2020, respectively~~ (in thousands):

September 30,
2021

December 31,
2020

Accrued patent expenses

$
5,633

$
5,087

Accrued employee compensation and related expenses

2,948

2,081

Accrued research and development expenses

2,822

581

Credit card liability

871

193

Accrued sublicensing fees

478

402

Accrued legal expenses

407

-

Other

771

629

Total

$
13,930

$
8,973


	September 30, 2022		December 31, 2021
Accrued employee compensation and related expenses	$	4,631	$	4,225
Accrued research and development expenses	5,717		4,065
Accrued patent expenses	1,877		3,213
Accrued expenses related to sublicensing revenues	528		586
Credit card liability	—		259
Other	1,885		788
Total	$	14,638	$	13,136

7. Related Party Transactions

Private Company, Related Party ~~Private Company~~

On May 15, 2020, we ~~received~~ entered into an Exclusive License Agreement, as amended, with a private company, related party (the “Private Company License Agreement”), under which we granted the private company an exclusive worldwide license to certain CRISPR intellectual property rights and know-how in a defined field. As consideration for the exclusive license, the private company issued to us 7,500,000 shares of convertible preferred stock with an estimated fair value of $~~7.5~~$7.5 million, ~~as consideration~~which was the price paid for ~~the Private Company License Agreement (Note 4).~~similar shares by another investor, and which was an arm’s length transaction. This represents a material voting interest in the private company and entitles us to hold one of the four private company’s board of director seats and to jointly vote with another stockholder on a second board of director’s seat. ~~To date,~~As of September 30, 2022, we have appointed one of the ~~three~~four directors onof the private ~~company board of directors.~~company. We concluded that the private company is a variable interest entity and that we are not its primary beneficiary based on our representation on its board of directors. As the private company’s convertible preferred stock is not in substance common stock, we record this investment using the measurement alternative in accordance with ASC ~~321.~~321, Investments–Equity Securities. Under the measurement alternative, our investment in the private company’s convertible preferred stock was initially recorded at its estimated fair value, but the carrying value may be adjusted through earnings upon an impairment or when there is an observable price change involving the same or a similar investment with the private company. As of each of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the carrying value of the investment was $~~7.5~~$7.5 million. There have been no changes to the carrying value of the investment during the ~~nine~~three months ended September 30, ~~2021.~~

~~Amended and Restated Collaboration and~~2022. We did not recognize any revenue in connection with the Private Company License Agreement ~~with Pioneer~~

Asfor each of the three- and nine-month periods ended September 30, ~~2020, DuPont held a greater than~~ 10~~% voting interest in the Company~~2022 and ~~Pioneer, then a DuPont company, was considered a related party (Note 4).~~

2021.

Scientific Advisory Board Payments

Dr. Jennifer A. Doudna, a co-founder and ~~significant~~ stockholder of the Company, receives compensation for participating on our scientific advisory board (the “SAB”). During each of the ~~three~~three- and ~~nine months~~nine-month periods ended September 30, ~~2021~~2022 and ~~2020,~~2021, we paid Dr. Doudna less than $~~0.1~~$0.1 million for her participation on our SAB.

Loan to our President and Chief Executive Officer ~~Promissory Note~~

In November 2018, our president and chief executive officer entered into a promissory note with us for $~~1.1~~$1.1 million, as a means to provide liquidity without triggering a taxable event. The note bore interest at a rate of ~~3.04~~%3.04%, compounded annually, and was payable in five ~~year~~s,years, together with principal and accrued interest. The promissory note was secured by 409,795 shares of our common stock owned by our president and chief executive officer and was determined to be non-recourse for accounting purposes. As such, the issuance of the promissory note was effectively the grant of a new share option. ~~A one-time stock compensation charge of $0.7~~ ~~million was recorded as a general and administrative expenses during the year ended December 31, 2018.~~ The promissory note was repaid in full amount in June 2021 by our president and chief executive officer and recognized as an increase in additional paid in capital of $~~1.2~~$1.2 million.

8. Paycheck Protection Program Loan

On May 6, 2020, we entered into a promissory note with WebBank (the “Lender”) pursuant to the Paycheck Protection Program for a total amount of $~~1.6~~$1.6 million (the “PPP Loan”).

Our PPP Loan had a two-year term and bore interest at a stated rate of ~~1.0~~%1.0% per annum, accrued monthly, beginning on the date our PPP Loan was issued by the Lender. No monthly principal and interest payments were required under our PPP Loan.

We did not provide any collateral or guarantees for our PPP Loan, nor did we pay any facility charge to obtain our PPP Loan. Our PPP Loan provided for customary events of default, including those relating to failure to make payment, bankruptcy, breaches of representations,

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and material adverse effects. We could have prepaid the principal of our PPP Loan at any time without incurring any prepayment charges.

A PPP loan can be partially or fully forgiven if a borrower complies with the provisions of the CARES Act, including the use of PPP loan proceeds for payroll costs, rent, utilities, and certain other expenses, and at least 60~~% of the PPP loan proceeds must be used for payroll costs as defined by the CARES Act. Any forgiveness of a PPP loan is subject to approval by the SBA.~~

On May 22, 2021, our PPP Loan was forgiven in full by the SBA and, at that time, we recognized a PPP Loan extinguishment gain of $~~1.6~~$1.6 million in our condensed consolidated statements of operations and comprehensive loss.

9. Commitments and Contingencies

Facility Lease Agreements

We lease laboratory and office space under ~~non-cancellable~~noncancellable operating agreements. OnIn March ~~31,~~ 2021, we entered into a ten-year lease agreement, which superseded and replaced our prior lease, as amended, for our corporate headquarters and the new lease included additional office and laboratory space located within the same building in Berkeley, California. ~~Our~~This lease agreement contains a renewal option for an additional term offive ~~year~~s. ~~Monthly~~years. In addition to base rent, ~~under~~we pay our share of operating expenses and taxes.

In January 2022, we entered into a ten-and-a-half-year lease agreement ~~amounts~~for approximately 10,000 square feet of office and laboratory space in Berkeley, California, near our current corporate headquarters. In connection with signing this lease, we paid a deposit in the amount of $0.4 million to $~~0.3~~ ~~million, subject~~the lessor. This lease agreement contains an escalation clause for increased base rent over the term and a renewal option for an additional term of five years. In addition to ~~annual escalation from~~ ~~3.1~~%base rent, we pay our share of operating expenses and taxes. To complete certain leasehold improvements, the lessor has agreed to ~~3.5~~%.

~~We record rent expense~~provide us a tenant improvement allowance of $1.8 million. The leasehold improvements constructed are presented under property and equipment on our condensed consolidated balance sheets and are depreciated on a straight-line basis over the ~~term~~remaining lease term.

The components of ~~our leases. For tenant improvement allowances funded by landlord incentives, we record a deferred~~ lease ~~incentive liability~~costs, which are included in ~~accrued expenses and other liabilities and amortize the deferred lease incentive liability as a reduction to rent expense on~~ our ~~condensed consolidated~~ statements of operations and comprehensive loss, ~~over the term of the applicable lease. As of September 30, 2021 and December 31, 2020, we recorded $0.8~~ ~~million and $0.6~~ ~~million, respectively, related to the required security deposits in other assets, long-term, in our condensed consolidated balance sheets.~~

~~As of September 30, 2021, future minimum lease payments under the leases were~~are as follows (in thousands):

Remainder of 2021

$
845

2022

3,485

2023

3,596

2024

3,708

2025

3,627

Thereafter

27,379

Total

$
42,640

~~Rent expense was $2.9~~


	Three Months Ended September 30, 2022		Nine Months Ended September 30, 2022
Operating lease cost(1)	$	1,822	$	5,443
Short-term lease cost	—		83
Total lease cost	$	1,822	$	5,526

(1) Includes $0.6 million and $~~2.2~~$1.6 million of variable lease cost related to operating expenses and taxes for the three and nine months ended September 30, ~~2021~~2022, respectively.

Supplemental information related to our leases is as follows (in thousands):


	Nine Months Ended September 30, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,454

As of September 30, 2022, the weighted-average remaining lease term was 8.6 years for our corporate office and ~~2020, respectively.~~laboratory leases, and the weighted-average discount rate was 11.29%.

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The following table summarizes a maturity analysis of our operating lease liabilities showing the aggregate lease payments as of September 30, 2022 (in thousands):


Remainder of 2022(1)	$	681
2023(2)	3,197
2024(3)	4,353
2025	4,475
2026	5,720
Thereafter	28,037
Total undiscounted lease payments	46,463
Less: imputed interest	(18,593)
Total discounted lease payments	27,870
Less: current portion of lease liability	(912)
Noncurrent portion of lease liability	$	26,958

(1) Reflects an offset of $0.1 million related to incentives expected to be received in 2022.

(2) Reflects an offset of $1.5 million related to incentives expected to be received in 2023.

(3) Reflects an offset of $0.2 million related to incentives expected to be received in 2024.

Capital Lease

We accounted for certain leased equipment as a capital lease due to the ownership of such equipment transferring to us at the end of the lease term. As of ~~September 30,~~December 31, 2021, the capital lease obligation was repaid in full and we do 0tnot have any remaining future minimum lease payments related to this capital lease. ~~As of December 31, 2020, the total capital lease obligation amounted to $0.1~~ million, which was included in the current portion of the capital lease obligation in the accrued expenses and other current liabilities and the non-current portion of the capital lease in other liabilities in our condensed consolidated balance sheets.

Research and Development Agreements

We enter into various agreements in the ordinary course of business, such as those with suppliers, contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), clinical trial sites, and the like. These agreements provide for termination at the request of either party, generally with less than one-year notice and are, therefore, cancellable contracts and, if cancelled, are not anticipated to have a material effect on our condensed consolidated financial condition, results of operations, or cash flows.

Guarantees and Indemnifications

In the normal course of business, we enter into agreements that contain a variety of representations and warranties and provide for certain indemnifications by us. Our exposure under these agreements is unknown because claims may be made against us in the future. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. As of ~~each of~~ September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, we did not have any material indemnification claims that were probable or reasonably possible, and consequently, we have not recorded related liabilities.

~~Intellia Arbitration~~

~~On October 16, 2018, Intellia initiated an arbitration proceeding with JAMS, asserting~~

Litigation

From time to time, we may become involved in legal proceedings arising in the ordinary course of business. We record a liability for such matters when it is probable that ~~we had violated the terms~~future losses will be incurred and ~~conditions of the Intellia License Agreement (the “Intellia Arbitration”). The Intellia Arbitration involved whether two patent families controlled~~if such losses can be reasonably estimated. Significant judgment by us is required to determine both probability and ~~respectively,~~the estimated amount. We are not currently subject to ~~CRISPR-Cas9 chRDNAs~~any material legal proceedings, and ~~Cas9 scaffolds~~we are ~~included~~not aware of any unasserted claims pending that could, individually or in the Intellia License Agreement. On September 19, 2019, the parties received an interim award from the arbitration panel ruling that the two patent families are included in the Intellia License Agreement, but the arbitration panel granted us an exclusive leaseback to Cas9 chRDNAs under economic terms to be negotiated by the parties. On February 6, 2020, the arbitration panel clarified that the leaseback relates solely toaggregate, have a material adverse effect on our ~~CB-010 program and instructed the parties to negotiate economic terms based on a leaseback~~results of that scope (Note 4). On June 16, 2021, the parties entered into the Leaseback Agreement, which resolved the dispute and, on July 21, 2021, the arbitration panel dismissed the Intellia Arbitration with prejudice.

operations or financial condition.

~~10. Convertible Preferred Stock~~

~~The authorized, issued, and outstanding shares~~Table of ~~our convertible preferred stock and liquidation preferences as of December 31, 2020 were as follows (in thousands, except for share amounts):~~Contents

Series

Authorized
Shares

Outstanding
Shares

Liquidation
Preference

Carrying
Value

Series A

1,576,342

1,576,342

$
3,550

$
3,452

Series A-1

3,004,124

3,004,124

8,000

7,901

Series B

3,186,116

3,186,116

30,070

29,970

7,766,582

7,766,582

$
41,620

$
41,323

Upon the closing of our IPO on July 27, 2021, all outstanding shares of convertible preferred stock, including the Series C preferred stock issued in March 2021, were converted into shares of common stock. Our Amended and Restated Certificate of Incorporation, which was approved by our Board and stockholders in connection with the IPO, authorizes the issuance of ~~10,000,000~~ ~~shares of preferred stock upon the closing of the IPO,~~ 0~~ne of which was issued and outstanding as of September 30, 2021.~~

~~11.~~10. Common Stock

Common stock reserved for future issuance ~~on an as converted basis,~~ consists of the following:


	As of September 30, 2022	As of December 31, 2021
Stock options, issued and outstanding	6,649,892	6,757,591
Stock options, authorized for future issuance	5,955,761	3,749,339
Stock available under our employee stock purchase plan	1,044,518	511,000
Unvested restricted stock units and performance-based restricted stock units	259,769	—
	13,909,940	11,017,930

Shelf Registration Statement

On August 9, 2022, we filed a shelf registration statement on Form S-3 (“Shelf Registration Statement”) with the U.S. Securities and Exchange Commission (“SEC”). The Shelf Registration Statement allows us to sell from time to time up to $400.0 million of common stock, preferred stock, debt securities, warrants, rights, or units comprised of any combination of these securities, for our own account in one or more offerings (including the $100.0 million of common stock reserved for our at-the-market equity offering program described below). The SEC declared the Shelf Registration Statement effective on August 16, 2022. The terms of any offering under the Shelf Registration Statement will be established at the time of such offering and will be described in a prospectus supplement to the Shelf Registration Statement filed with the SEC prior to the completion of any such offering.

At-the-market Equity Offering Program

On August 9, 2022, we also entered into an Open Market Sale Agreement

SM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) with respect to an at-the-market (“ATM”) equity offering program, pursuant to which, through Jefferies as sales agent, we may from time to time, sell shares of our common stock having an aggregate offering price of up to $100.0 million in gross proceeds under the Shelf Registration Statement. As of September 30, 2022, there have been no sales under the ATM equity offering program and, as of September 30, 2022, the full capacity remained available for issuance.

As of
September 30, 2021

As of
December 31, 2020

Preferred stock, issued and outstanding

0

14,119,631

Stock options, issued and outstanding

4,965,952

4,520,551

Stock options, authorized for future issuance

5,782,814

582,340

Stock available under the Employee Stock Purchase Plan

511,000

0

Restricted stock awards

0

5,999

11,259,766

19,228,521

~~12. Stock Option~~11. Stock-Based Compensation

Equity Incentive Plans

In July 2021, our ~~Board~~board of directors adopted and our stockholders approved the 2021 Equity Incentive Plan (the “2021 ~~Plan“~~Plan”) that became effective on July 22, 2021. We reserved 5,200,000 shares of common stock for issuance under the 2021 Plan. In addition, 934,562 shares available for issuance under the 2013 Equity Incentive Plan, adopted in 2013 and amended and restated in 2019, were transferred into the 2021 Plan. ~~Furthermore,~~In addition, any shares subject to awards under the 2013 Plan that terminate, expire, or lapse for any reason without the delivery of shares, or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, ~~are~~will be added to the 2021 Plan. The 2021 Plan also provides that the number of shares initially reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2022 and ending inon January 1, 2031, by 5%an amount equal to the lesser of (a) 5% of the ~~outstanding number of~~ shares of ~~our~~ common stock ~~as of~~outstanding on the last day of the immediately preceding fiscal year orand (b) such ~~lesser~~smaller number of shares of stock as determined by our Board. No more than 56,000,000 shares of stock may be issued upon the exercise of incentive stock options under the 2021 ~~Plan~~. Plan. Options under the 2021 Plan may be granted for periods of up to 10 years at exercise prices no less than the fair market value of our common stock on the date of grant; provided, however, that the exercise price of an incentive stock option granted to a 10%10% stockholder may not be less than ~~110~~%110% of the fair market value of the shares on the date of grant and such option may not be exercisable after the expiration of five years from the date of grant. The grant date fair market value of all awards made under ~~our~~the 2021 Plan and all cash compensation paid by us to any non-employee director for services as a director in any fiscal year may not exceed $~~750,000~~,$750,000, increased to $~~1,000,000~~$1,000,000 in the fiscal year of their initial service as a non-employee director. As of September 30, ~~2021,~~2022, we had ~~5,782,814~~5,955,761 shares available for issuance under ~~our~~the 2021 Plan.

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The following table summarizes stock option activity under our equity incentive plans during the nine months ended September 30, ~~2021:~~

Shares Available
to Grant

Stock Options

Weighted-
Average
Exercise Price

Weighted-
Average
Remaining
Contractual
Term (years)

Aggregate
Intrinsic Value (in thousands)
(a)

Outstanding at December 31, 2020

582,340

4,520,551

$
1.64

5.3

$
6,929

Addition to option pool

7,871,714

Options granted

(2,809,660
)

2,809,660

$
6.99

9.6

Options exercised

-

(2,225,839
)

$
0.94

4.0

Options cancelled or forfeited

138,420

(138,420
)

$
2.07

-

Exercisable at September 30, 2021

5,782,814

4,965,952

$
4.97

8.3

$
94,075

Vested and expected to vest at September 30, 2021

4,965,952

$
4.97

8.3

$
94,075

2022:

~~(a)~~


	Stock Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)*

Outstanding at December 31, 2021	6,757,591	$	8.57	8.7	$	50,085
Options granted	1,206,750	8.88
Options exercised	(654,665)	2.09
Options cancelled or forfeited	(659,784)	9.74
Outstanding at September 30, 2022	6,649,892	$	9.14	8.5	$	24,431
Exercisable at September 30, 2022	2,207,115	$	6.13	7.4	$	12,416
Vested and expected to vest at September 30, 2022	6,649,892	$	9.14	8.5	$	24,431

*The aggregate intrinsic value is calculated as the difference between the stock option exercise price and the estimated fair value of the underlying common stock asat the end of ~~September 30, 2021.~~each reporting period referenced above.

Grant Date Fair Value

During the three months ended September 30, ~~2021,~~2022, we granted ~~351,750~~372,600 stock options to employees (0(no stock options were granted to non-employees) with a weighted average grant date fair value of $~~16.64~~.$6.43. During the nine months ended September 30, ~~2021,~~2022, we granted ~~2,809,660~~1,206,750 stock options to employees and non-employees with a weighted average grant date fair value of $~~4.70~~.

$5.84.

During the three months ended September 30, ~~2020,~~ 02021, we granted 351,750 stock options to employees (no stock options were granted to ~~employees or non-employees.~~non-employees) with a weighted average grant date fair value of $16.64. During the nine months ended September 30, ~~2020,~~2021, we granted ~~379,761~~2,809,660 stock options to employees and non-employees with a weighted average grant date fair value of $~~1.82~~.

$4.70.

We estimated the fair value of each employee and non-employee stock option award on the grant date using the Black-Scholes option-pricing model based on the following ~~assumptions for the three and nine months ended September 30, 2021 and 2020:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020
Volatility

74.8%

N/A

74.8% to 76.5%

74.9% to 77.4%
Expected term (in years)

7

N/A

5.5 to 7.0

5.5 to 6.0
Risk-free interest rate

1.1%

N/A

0.9% to 1.2%

0.4% to 0.7%
Expected dividend yield

0.0%

N/A

0.0%

0.0%
assumptions:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Volatility	74.2%	74.8%	71.7% to 74.2%	74.8% to 76.5%
Expected term (in years)	6.0	7.0	5.5 to 6.0	5.5 to 7.0
Risk-free interest rate	3.1% to 3.7%	1.1%	1.7% to 3.7%	0.9% to 1.2%
Expected dividend yield	0.0%	0.0%	0.0%	0.0%

As of September 30, ~~2021,~~2022, there was $~~7.7~~$29.2 million of unrecognized stock-based compensation expense related to employee and non-employee stock options that is expected to be recognized over a weighted-average period of 2.8 years.

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Restricted Stock Units

~~9.3~~During the nine months ended September 30, 2022, we granted 200,058 restricted stock units (“RSUs”) ~~years.~~

and 59,781 performance-based RSUs (“PSUs”)

under the 2021 Plan. A summary of the status of and change in unvested RSUs and PSUs as of September 30, 2022 was as follows:


	Number of Shares Underlying Outstanding RSUs and PSUs	Weighted-Average Grant Date Fair Value per RSU and PSU
Unvested, January 1, 2022	—	$	—
Granted	259,839	10.07
Forfeited	(70)	9.90
Unvested, September 30, 2022	259,769	$	10.07

The PSUs were granted to our executive officers and will vest if and when a certain milestone is reached within a specific time period, contingent upon the executive officer remaining an employee at that time. As of September 30, 2022, the achievement of this milestone was not considered probable and, therefore, no stock-based compensation was recorded.

As of September 30, 2022, the total unrecognized stock-based compensation expense related to unvested RSUs was $1.8 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.3 years. As of September 30, 2022, there was approximately $0.6 million of unrecognized stock-based compensation expense related to unvested PSUs.

Employee Stock Purchase Plan

(“ESPP”)

In July 2021, our ~~Board~~board of directors adopted and our stockholders approved the ~~2021 Employee Stock Purchase Plan (“2021 ESPP”),~~ESPP, which became effective on July 22, 2021. The ~~2021~~ ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended (~~“Tax~~(the “Tax Code”). We reserved 511,000 shares of our common stock for ~~employees’~~employee purchases under the ~~2021~~ ESPP. The number of shares of common stock reserved for issuance under the ~~2021~~ ESPP will be automatically increased each ~~year for ten calendar years~~January 1, beginning inon January 1, 2022 and ending on January 1, 2031 by ~~the number of shares~~an amount equal to 1%the lesser of (a) 1% of the ~~total number of~~ shares of common stock outstanding ~~as of~~on the last day of the immediately preceding fiscal ~~year;~~year and (b) such smaller number of shares of stock as determined by our Board; provided that the maximum number of shares that may be issued under the ESPP is 10,000,000 shares. The ~~2021~~ ESPP allows an eligible employee to purchase shares of our common stock at a discount through payroll deductions of up to 15%15% of the employee’s eligible compensation. At the end of each ~~offering~~purchase period, employees are able to purchase shares at 85%85% of the lower of the fair market value of our common stock at the beginning of the offering period or at the end of each applicable offering period. The first offering period commenced on August 16, 2021 and ~~will end~~ended on February 15, 2022. We have issued 36,596 shares of common stock under the ESPP as of September 30, 2022. We recorded $~~0.1~~$0.1 million in accrued liabilities related to ~~the amounts~~contributions withheld as of September 30, ~~2021.~~

2022.

Stock-Based Compensation Expense

We recorded stock-based compensation expense related to employee and non-employee ~~stock options~~equity-based awards grants in our condensed consolidated statements of operations and comprehensive loss ~~for the three and nine months ended September 30, 2021 and 2020~~ as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Research and development

$
484

$
173

$
970

$
526

General and administrative

451

75

901

245

Total

$
935

$
248

$
1,871

$
771

Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Research and development $ 1,072 $ 484 $ 3,139 $ 970
General and administrative 1,601 451 5,476 901
Total $ 2,673 $ 935 $ 8,615 $ 1,871

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The above stock-based compensation expense related to the following equity-based awards (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Stock options

$
894

$
248

$
1,830

$
771

ESPP

41

-

41

-

Total

$
935

$
248

$
1,871

$
771


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Stock options	$	2,479	$	894	$	8,190	$	1,830
ESPP	80		41		209		41
RSUs	114		—		216		—
Total	$	2,673	$	935	$	8,615	$	1,871

Stock-based compensation expense related to employees was $~~0.9~~$2.7 million and $~~0.2~~$0.9 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Stock-based compensation expense related to employees was $~~1.9~~$8.5 million and $~~0.8~~$1.9 million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Stock-based compensation expense related to non-employees was less than $~~0.1~~$0.1 million for ~~each of~~ the three months ended September 30, 2022 and 2021, respectively. Stock-based compensation expense related to non-employees was $0.1 million and less than $0.1 million for the nine months ended September 30, 2022 and 2021, ~~and 2020.~~

respectively.

~~13.~~

12. 401(k) Savings Plan

In 2017, we established a defined-contribution savings plan under Section 401(k) of the Tax Code. Our 401(k) plan is available to all employees and allows participants to defer a portion of their annual compensation on a pretax basis subject to applicable laws. We also provide a 4%4% match for employee contributions up to a certain limit. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we contributed $~~0.3~~$0.6 million and $~~0.2~~$0.3 million, respectively, to our 401(k) plan.

~~14.~~

13. Income Taxes

~~NaN~~

No income tax ~~benefit~~expense was recorded during each of the ~~three~~three- and ~~nine months~~nine-month periods ended September 30, 2022 and 2021 due to our operating losses. ~~During the three and nine months ended September 30, 2020, we recorded income tax benefit of $0.2~~ ~~million and $1.5~~ million, respectively. The income tax benefit was primarily related to the recognition of net operating loss carrybacks under the CARES Act, which generated a refund of taxes paid for the year ended December 31, 2018.

~~15.~~

14. Net Loss Per Share

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
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Numerator:

Net loss

$
(20,974
)

$
(7,933
)

$
(48,444
)

$
(19,605
)
Denominator:

Weighted-average common shares outstanding used to compute net loss per share, basic and diluted

45,889,646

8,537,965

22,052,944

8,470,019

Net loss per share, basic and diluted

$
(0.46
)

$
(0.93
)

$
(2.20
)

$
(2.31
)

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Numerator:
Net loss $ (26,647) $ (20,974) $ (72,432) $ (48,444)
Denominator:
Weighted-average common shares outstanding used to compute net loss per share, basic and diluted 60,886,921 45,889,646 60,731,520 22,052,944
Net loss per share, basic and diluted $ (0.44) $ (0.46) $ (1.19) $ (2.20)

Because we were in a net loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods, as the inclusion of all common stock equivalents outstanding would have been anti-dilutive.

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Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as ~~of September 30, 2021 and September 30, 2020, as~~ follows:

As of
September 30,
2021

As of
September 30,
2020

Convertible preferred stock

-

14,119,631

Stock options outstanding

4,965,952

4,759,953

Shares committed under ESPP

18,804

-

Common shares subject to nonrecourse notes

-

409,795

4,984,756

19,289,379


	As of September 30, 2022	As of September 30, 2021
Convertible preferred stock	—	—
Stock options outstanding	6,649,892	4,965,952
RSUs and PSUs issued and outstanding	259,769	—
Shares committed under ESPP	49,109	18,804
	6,958,770	4,984,756

~~16.~~

15. Subsequent Events

~~The Company~~

We did not have any subsequent events as of the filing date of this Quarterly Report on Form 10-Q.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1, ~~of Part I~~ of this Quarterly Report on Form 10-Q ~~(this “Quarterly Report”~~(“Form 10-Q”) and with the audited consolidated financial statements and the related notes for the fiscal year ended December 31, ~~2020~~2021 included in our ~~final prospectus (the “Final Prospectus”~~Annual Report on Form 10-K (“Form 10-K”) filed with the U.S. Securities and Exchange Commission ~~(the “SEC”~~(“SEC”) on ~~July 22, 2021 pursuant to Rule 424(b)(4)of the Securities Act of 1933, as amended (the “Securities Act”).~~

March 21, 2022.

Special Note Regarding Forward-Looking Statements

This ~~Quarterly Report~~Form 10-Q contains forward-looking statements. All statements other than statements of historical facts contained in this ~~Quarterly Report,~~Form 10-Q, including statements regarding our business strategy, plans, and objectives; expectations regarding our clinical and preclinical development programs, including our timing expectations with respect to such programs and the expected timing of disclosure of clinical data from such programs; future regulatory filings; our results of operations and financial position, future revenue, business strategy, prospects, product candidates, planned and ongoing preclinical studies and clinical trials, results of preclinical studies and clinical trials, research and development costs, regulatory approvals, timing and likelihood of success, as well asposition; plans and objectives of management for future ~~operations,~~operations; and the like, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions, although not all forward-looking statements contain these words.

As a result of many factors, including but not limited to risks related to our limited operating history, history of net operating losses, financial position and our ability to raise additional capital as needed to fund our operations and product candidate development; risks associated with the initiation, cost, timing, progress, and results of current and future research and development programs, preclinical studies, and clinical trials; the risk that initial or interim clinical trial data will not ultimately be predictive of the safety and efficacy of our product candidates or that clinical outcomes may differ as more clinical data becomes available; risks related to our ability to obtain and maintain regulatory approval for our product candidates; risks that our product candidates, if approved, may not gain market acceptance due to negative public opinion and increased regulatory scrutiny of cell therapies involving genome editing; risks related to our ability to meet future regulatory standards with respect to our products; risks related to our ability to establish and/or maintain intellectual property rights covering our product candidates and genome-editing technology; risks of third parties asserting that our product candidates infringe their patents; risks related to developments of our competitors and our industry; risks related to our reliance on third parties to conduct our clinical trials and manufacture our product candidates; risks caused by the impact of COVID-19 or geopolitical events on our business and operations; and other risks described in greater detail in the section of ~~the Final Prospectus~~our Form 10-K titled “Risk Factors,” and in other filings we make with the SEC, the events and circumstances reflected in our forward-looking statements may not be achieved or may not occur, and actual results could differ materially from those described in or implied by the forward-looking statements contained in the following discussion and analysis. As a result of these risks, you should not place undue reliance on these forward-looking statements. We assume no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Overview

We are a clinical-stage CRISPR genome-editing biopharmaceutical company dedicated to ~~transforming~~developing innovative, transformative therapies for patients with devastating diseases. CRISPR is an acronym for Clustered Regularly Interspaced Short Palindromic Repeats. We are advancing a pipeline of allogeneic, or off-the-shelf, chimeric antigen receptor (“CAR”)-T (“CAR-T”) and CAR-natural killer (“CAR-NK”) cell therapies for the ~~lives~~treatment of patients with ~~devastating diseases by applying our novel CRISPR platform,~~ C~~RISPR~~ h~~ybrid~~ R~~NA-DNA~~ ~~(“chRDNA,” pronounced “chardonnay”), toward the development of next-generation, genome-edited cell therapies.~~hematologic malignancies and solid tumors. Our renowned founders, including a Nobel Prize laureate, are pioneers in the field of CRISPR genome editing. Our novel CRISPR platform, CRISPR hybrid RNA-DNA (“chRDNA,” pronounced “chardonnay”) genome-editing technology, has demonstrated superior specificity and high efficiency in preclinical studies ~~which~~and enables us to perform multiple, precise ~~genome~~genomic edits, while maintaining genomic integrity.

We believe that our technology has broad potential to generate gene and cell therapies in oncology and in therapeutic areas beyond oncology, including immune cell therapies, cell therapies derived from genome-edited induced pluripotent stem cells (“iPSCs”), and ~~in vivo~~ ~~genome-editing therapies.~~

The genome-editing technologies currently used in the allogeneic cell therapy field generally have limited efficiency, specificity, and versatility for performing the multiple, precise genome edits necessary to address insufficient persistence. Our chRDNA technology is designed to address these genome-editing limitations and improve cell therapy activity. By applying this approach to allogeneic cell therapies, we believe we can unlock their full potential by improving upon their effectiveness and durability.

We are initially focused on advancing multiple proprietary allogeneic cell therapies for the treatment of both hematologic malignancies and solid tumors against cell surface targets for which autologous chimeric antigen receptor T cell (“CAR-T”) therapeutics have previously demonstrated clinical proof of concept, including both CD19 and B cell maturation antigen (“BCMA”), as well as new emerging targets. We use our chRDNA technology to enhance, or armor, our cell therapies by creating additional genome edits to improve persistence of antitumor activity.

Our lead product candidate, CB-010, ~~is,~~ to our knowledge, is the first clinical-stage allogeneic anti-CD19 CAR-T cell therapy with programmed cell death protein 1 (“PD-1”) removed from the CAR-T cell surface by a genome-edited knockout of the PDCD1 gene. We have demonstrated in preclinical models that the PD-1 knockout improves the persistence of antitumor activity by disrupting a pathway that leads to rapid T cell exhaustion. ~~Our~~CB-010 is being evaluated in our ANTLER phase 1 clinical trial ~~for CB-010 is a study~~ in patients with relapsed or refractory B cell non-Hodgkin lymphoma ~~with~~(“r/r B-NHL”). We presented initial clinical data ~~expected to be disclosed~~from cohort 1 at dose level 1 (40x106 CAR-T cells) from our ANTLER trial in ~~2022. We announced in July 2021 that we had dosed~~June 2022 at the ~~first patient in this clinical trial,~~European Hematology Association 2022 Congress, and we ~~continue~~expect to ~~enroll~~share additional clinical data from cohort 1 by the end of 2022. The ANTLER trial is currently enrolling patients ~~in our ANTLER phase 1 clinical trial for CB-010.~~at dose level 2 (80x10

6 CAR-T cells).

Table of Contents

Our CB-011 product candidate is an allogeneic CAR-T cell ~~therapy~~product candidate that ~~is, to~~targets B cell maturation antigen (“BCMA”). To our knowledge, it is the first anti-BCMA CAR-T cell therapy incorporating an immune cloaking approach that includes both the removal of the endogenous ~~beta-2-microglobulin~~beta-2 microglobulin (“B2M”) protein by a genome-edited knockout of the B2M gene and insertion of a ~~beta-2-microglobulin–~~B2M–human-leukocyte-antigen-E–peptide ~~transgene.~~transgene (“B2M–HLA-E”), enabling expression of HLA-E on the CAR-T cell surface. This strategy is designed to blunt CAR-T cell rejection by both patient T cells and natural killer (“NK”) cells to enable more durable antitumor activity. CB-011 is in preclinical development for relapsed or refractory multiple myeloma ~~with an~~(“r/r MM”). We submitted our investigational new drug (“IND”) ~~filing expected~~application to the U.S. Food and Drug Administration (“FDA”) for CB-011 in r/r MM in the fourth quarter of 2022.

~~Our~~

CB-012 ~~program~~ is anour allogeneic armored CAR-T cell ~~therapy~~product candidate targeting ~~CD371,~~CLL-1 (also known as CD371), currently in preclinical development for the treatment of relapsed or refractory acute myeloid leukemia (“r/r AML”)~~, with an IND filing expected in 2023. CD371~~. CLL-1 is an attractive target for AML due to its expression on myeloid cancer cells, its enrichment onin leukemic stem cells, and its absence on hematopoietic stem cells.

We expect to submit an IND application to the FDA for CB-012 in r/r AML in 2023.

We are also developing allogeneic CAR-NK cell therapies derived from genome-edited ~~iPSCs~~induced pluripotent stem cells (“iPSCs”) for the treatment of solid tumors. CB-020 is our first CAR-NK product candidate from our CAR-NK platform and it will contain genome edits designed to overcome some of the challenges of targeting solid tumors, ~~including~~such as trafficking, tumor infiltration, heterogeneity, and the immunosuppressive tumor microenvironment.

We ~~control~~expect to select a ~~robust patent portfolio protecting our chRDNA technology as well as certain of our allogeneic cell therapy binders.~~

In February 2021, we entered into a Collaboration and License Agreement (the “AbbVie Agreement”) with AbbVie Manufacturing Management Unlimited Company (“AbbVie”) to develop two new CAR-T cell therapies for AbbVie. We view this collaboration as an external recognition of the potentialtumor cell-surface target for our ~~chRDNA genome-editing technology~~CB-020 product candidate in the fourth quarter of 2022. Also in the fourth quarter of 2022, we expect to ~~significantly improve genome-editing specificity and efficiency.~~

~~On July 27, 2021,~~disclose armoring strategies we ~~successfully completed~~are developing for our initial public offering (“IPO”) of common stock. On that date, we issued and sold an aggregate of 19,000,000 shares of our common stock at a price to the public of $16.00 per share for approximately $304.0 million in gross proceeds and approximately $282.7 million in net proceeds, after deducting underwriting discounts and commissions and offering expenses. On August 9, 2021, we issued and sold an additional 2,850,000 shares of our common stock pursuant to the IPO underwriters’ full exercise of their over-allotment option to purchase additional shares at the public offering price of $16.00 per share. In total, we received an aggregate of approximately $349.6 million in gross proceeds from the IPO, including the exercise of the IPO underwriters’ over-allotment option, and approximately $321.0 million in net proceeds, after deducting underwriting discounts and commissions and offering expenses. In addition, in connection with the closing of our IPO, all outstanding shares of our convertible preferred stock automatically converted into 26,234,654 shares of our common stock. Subsequent to the closing of our IPO, there are no shares of convertible preferred stock outstanding.

CAR-NK platform.

Since our founding in 2011, we have devoted substantially all of our resources to organizing and staffing, business planning, raising capital, developing our genome-editing platform technologies, developing our product candidates and building our pipeline, creating and maintaining our intellectual property portfolio, and establishing arrangements with third parties for the manufacture and testing of our product candidates. We do not have any products approved for commercial sale and have not generated any revenue from product ~~sales and~~sales. We have incurred net losses since commencement of our operations.

To date, we have primarily funded our operations through revenue from our license agreements, license and collaboration agreements, and a service agreement; the sale of shares of Intellia Therapeutics, Inc. (“Intellia”) common stock that we received as consideration for ~~the~~a License Agreement ~~dated July 16, 2014, as~~(as amended, ~~between us and Intellia, LLC (now Intellia Therapeutics, Inc.) (the~~the “Intellia License Agreement”); with Intellia, LLC, to which Intellia is a successor in interest; the ~~issuance and~~ sale of our ~~Series A, Series A-1, Series B, and Series C~~ convertible preferred ~~shares;~~stock in private placements before our initial public offering (“IPO”); and the issuance and sale of common stock related to our IPO. As of September 30, 2021, we had approximately $435.3 million in cash and cash equivalents. Based on our current operating plan, we expect that our existing cash and cash equivalents, including net cash proceeds from ~~the IPO of approximately $321.0 million received in July and August of 2021, will enable us to fund~~ our ~~operating expenses and capital expenditure requirements for at least the next 12 months from the date of this Quarterly Report. See “Liquidity, Capital Resources, and Capital Requirements.”~~

IPO.

Our net losses for the three months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$21.0~~$26.6 million and ~~$7.9~~$21.0 million, respectively. Our net losses for the nine months ended September 30, 2022 and 2021 ~~and 2020~~ were ~~$48.4~~$72.4 million and ~~$19.6~~$48.4 million, respectively. We had an accumulated ~~deficits~~deficit of ~~$79.3 million and $30.9~~$170.2 million as of September 30, ~~2021 and December 31, 2020, respectively.~~2022. Our net losses and operating losses may fluctuate from quarter to quarter and year to year depending primarily on the timing of expenses associated with our clinical trials and nonclinical studies and our other research and development expenses. In addition, we ~~will incur~~are incurring increased costs associated with operating as a public company, including legal, audit, and accounting fees; ~~regulatory costs related to~~ maintaining compliance with the rules and regulations of the SEC and ~~the Nasdaq Global Select Market;~~Nasdaq; director and officer insurance premiums; ~~costs for~~ investor and public relations activities; and other accompanying compliance and governance ~~costs.~~requirements. We anticipate that our expenses will increase substantially if and as we:

•

progress our ANTLER phase 1 clinical trial for our CB-010 product candidate;

•continue our current research programs and ~~advance further~~our preclinical and clinical development of our ~~CB-010 product candidate;~~



~~continue our preclinical efforts and begin clinical development of our~~ other current product candidates, including CB-011, CB-012, and CB-020, and any other product candidates we identify and choose to develop;

•

hire additional clinical, quality control, and scientific personnel;

•

seek to identify additional research programs and additional product candidates;

•

further develop our genome-editing technologies;

•

acquire or in-license technologies;

•

expand, maintain, enforce, and defend our intellectual property portfolio;

•

seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical trials, if any;

Table of Contents

•establish and expand manufacturing capabilities and supply chain capacity for our product candidates;

•

add operational, legal, financial, and management information systems and personnel;

•

experience any delays, challenges, or other issues associated with any of the above, including the failure of clinical trials ~~to meet~~meeting endpoints, the generation of unanticipated preclinical ~~study~~ results or clinical trial data subject to differing interpretations, or the occurrence of potential safety issues or other development or regulatory challenges;

•

make royalty, milestone, or other payments under current, and any future, in-license or assignment agreements;

•

establish a sales, marketing, and distribution infrastructure to commercialize any product candidates for which we obtain marketing approval; and

•

continue to operate as a public company.

We do not own or operate any manufacturing facilities and we outsource a substantial portion of our clinical trial studies to third parties. We use multiple contract manufacturing organizations (“CMOs”) to individually manufacture, under current good manufacturing processes, ~~(“cGMP”), the plasmids,~~ chRDNA guides, Cas proteins, plasmids, and ~~AAV6~~adeno-associated virus serotype 6 vectors used in the manufacture of our CAR-T cells as well as our ~~CAR-T~~CAR-NK cell therapy product candidates. We expect to rely on our CMOs ~~in the future~~ for the manufacturing of our product candidates to expedite readiness for future clinical trials, and most of these CMOs have ~~demonstrated capability in preparation of materials~~capabilities for ~~commercialization.~~commercial manufacturing. Additionally, we may decide to build our own manufacturing facility in the future to provide us greater flexibility and control over our clinical or commercial manufacturing needs.

Because of the numerous risks and uncertainties associated with therapeutic product development, we may never achieve profitability and, unless and until we are able to develop and commercialize our product candidates, we will need to continue to raise additional capital. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through public or private equity or debt financings, collaborations, strategic alliances, and licensing arrangements with third parties. There are no assurances that we will be successful in obtaining an adequate level of financing to support our business plans ~~when~~as needed on acceptable terms, or at all. If we raise additional funds through collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish valuable rights to our intellectual property, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise capital as

and when needed or on attractive terms, we may have to significantly delay, reduce, or discontinue the development and commercialization of our product candidates or scale back or terminate our pursuit of new in-licenses and acquisitions.

Impact of the COVID-19 Pandemic

~~The~~ and Geopolitical Events

We are currently unable to predict the effect that the ongoing COVID-19 pandemic has caused governments worldwide to implement measures to slow the spread of the outbreak through travel restrictions, business shutdowns, and other measures. In response to the COVID-19 pandemic, starting on March 17, 2020, our entire workforce began working remotely pursuant to state, county, and city requirements. Since May 2020, wemay have gradually brought back on site all of our research employees whose work must be performed in the lab and most of our non-research employees are currently working partially remotely and partially on site. At this point in time, we do not know if or when we will bring our off-site functions back on site full-time. We have experienced no significant workforce reduction as a result of the COVID-19 pandemic.

~~The COVID-19 pandemic did have an impact~~ on our supply chain in the early months of the pandemic. For example, we experienced delays in receiving healthy donor cells used in the manufacture of our CB-010 product candidate. These issues have been largely alleviated in recent months and we are currently receiving adequate supplies of donor cells, however we could face similar obstaclesCompany in the future. ~~Although vaccines are now being distributed and administered across many parts of~~Furthermore, we cannot predict the ~~world, new variants of~~impact that national or international geopolitical events, such as the ~~virus~~ongoing war in Ukraine, may have ~~emerged, and may continue to emerge, that are more contagious. As a result of future developments in the COVID-19 pandemic, we and~~on our CMOs, contract research organizations (“CROs”), clinical trial sites, and other third-party vendors may face disruptions that could delay or otherwise affect our ability to initiate and complete preclinical studies or clinical trials.

Since the start of the COVID-19 pandemic, we have been and will continue to be focused on the safety of our employees. In response to the COVID-19 pandemic, we have instituted on-site protocols and procedures in accordance with guidance provided by the Centers for Disease Control and the State of California and regulations and guidelines promulgated by the County of Alameda and the City of Berkeley. As of January 1, 2022, all of our employees will be required to be fully vaccinated against COVID-19 as a condition of employment with us. Employees will be considered to be fully vaccinated two weeks after receiving both doses of a two-dose vaccine or one dose of a single-dose vaccine. Individuals who are unable to be vaccinated, due to a religious belief, a medical condition, or disability that prevents them from being vaccinated, can request a reasonable accommodation.

In May 2020, we received a Paycheck Protection Plan (“PPP”) loan from the Small Business Administration (the “SBA”) in the amount of $1.6 million (the “PPP Loan”), which we used exclusively to pay employees’ salaries. In December 2020, we submitted an application to have our PPP Loan forgiven and, on May 22, 2021, our PPP Loan was forgiven in full by the SBA.

operations. To the extent the COVID-19 pandemic or geopolitical events adversely ~~affects~~affect our business prospects, financial condition, and results of operation, itthey may also have the effect of exacerbating many of the other risks described or referenced in the section of ~~the Final Prospectus~~our Form 10-K titled “Risk Factors,” such as those relating to the supply of materials for our product candidates, and the timing and ~~results of~~possible disruptions to our ~~planned~~ongoing and future preclinical studies and clinical trials, and our ~~financing needs. See~~access to the ~~section of the Final Prospectus titled “Risk Factors” for more information regarding the potential adverse impact of the COVID-19 pandemic on our business, results of operations, and~~ financial ~~condition.~~

markets.

Components of Results of Operations

Licensing and Collaboration Revenue

We have not generated any revenue from product sales to date and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval and commercialization, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates if we succeed in obtaining regulatory approval for ~~such~~these product candidates.

To date, all of our revenue consists of licensing and collaboration revenue earned from collaboration and/or licensing agreements entered into with third parties, including related parties. Under these agreements, we license rights to certain intellectual property controlled by us. The terms of these arrangements typically include payments to us of one or more of the following: nonrefundable, upfront license fees or exclusivity fees; annual maintenance fees; regulatory and/or

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commercial milestone payments; research and development payments; and royalties on the net sales of products and/or services. Each of these payments results in licensing and collaboration revenue. Revenue under such licensing and collaboration agreements was ~~$4.0~~$3.3 million and ~~$1.2~~$4.0 million for the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively, and ~~$7.0~~$10.2 million and ~~$11.4~~$7.0 million for the nine months ended

September 30, ~~2021~~2022 and ~~2020,~~2021, respectively. See ~~Note~~Notes 4 and 5 to our condensed consolidated financial statements included elsewhere in this ~~Quarterly Report.~~

Form 10-Q.

For additional information about our revenue recognition policy related to our licensing and collaboration agreements, see Note 2 to the annual consolidated financial statements ~~for the years ended December 31, 2019 and 2020~~ included in our ~~Final Prospectus.~~

Form 10-K.

For the foreseeable future we expect substantially all of our revenue will be generated from licensing and collaboration agreements.

Operating Expenses

Research and Development Expenses

Our research and development expenses consist of internal and external expenses incurred in connection with the development of our product candidates ~~development of~~and our platform technologies, and our in-licensing and assignment agreements.

External costs include:

•

costs associated with acquiring technology and intellectual property licenses that have no alternative future ~~uses;~~uses, sublicensing revenue, and milestones;

•

costs incurred in connection with the preclinical and clinical development and manufacturing of our product candidates, including under agreements with ~~CROs and other third parties that conduct clinical trials on our behalf;~~



~~costs of supplying the components for, and the manufacturing of, our product candidates for use in our preclinical studies~~contract research organizations (“CROs”), CMOs, and clinical ~~trials;~~sites; and

•

other research and development costs, including laboratory materials and supplies, and consulting services.

Internal costs include:

•

~~employee-related~~personnel-related costs, including salaries, benefits, and share-based compensation expense, for our research and development personnel; and

•

allocated facilities and other overhead expenses, including expenses for rent, ~~and~~ facilities maintenance, and depreciation.

We expense research and development costs as incurred. Costs of certain activities are recognized based on an evaluation of the progress to completion of specific tasks. However, payments made prior to the receipt of goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses and other current assets on our condensed consolidated balance sheets. The capitalized amounts are recognized as expense as the goods are delivered or as related services are performed. Historically, we have not tracked external costs by clinical program. We intend to separately track certain external costs for each clinical program. However, we do not currently track, and do not intend to track, costs that are deployed across multiple programs.

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially for the foreseeable future as we continue to implement our business strategy; advance our CB-010 product candidate through clinical trials and later stages of development; conduct preclinical studies and clinical trials for our other product candidates; seek regulatory approvals for any product candidates that successfully complete clinical trials; expand our research and development efforts and incur expenses associated with hiring additional personnel to support our research and development efforts; and seek to identify, in-license, acquire, and/or develop additional product candidates.

The successful development of our CB-010, CB-011, CB-012, and CB-020 product candidates, as well as other potential future product candidates, is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing, and costs of the efforts that will be necessary to complete the development of ~~such~~our product candidates. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never

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succeed in achieving regulatory approval for any of our

product candidates. The duration, costs, and timing of preclinical studies, clinical trials, and development of our product candidates will depend on a variety of factors, including:

•

sufficiency of our financial and other resources;

•

acceptance of our CRISPR chRDNA genome-editing technology;

•

ability to develop differentiating features so that our products have a competitive edge;

•

completion of preclinical studies;

•

establishment, maintenance, enforcement, and defense of our patents and other intellectual property rights;

•

our ability to not infringe, misappropriate, or otherwise violate third-party intellectual property rights;

•

clearance of ~~INDs~~IND applications to initiate clinical trials on product candidates;

•

successful enrollment in, and completion of, our clinical trials on our product candidates;

•

data from our clinical trials that support an acceptable risk-benefit profile of our product candidates for the intended patient populations and that demonstrate safety and efficacy;

•

entry into collaborations to further the development of our product candidates or for the development of new product candidates;

•

successful development of our internal process development and transfer to larger-scale facilities;

•

establishment of agreements with CMOs for clinical and commercial supplies and scaling up manufacturing processes and capabilities to support our clinical trials;

•

receipt of marketing approvals from applicable regulatory authorities;

•

grant of regulatory exclusivity for our product candidates;

•

establishment of sales, marketing, and distribution capabilities ~~and commercial launch~~necessary for commercialization of our product candidates if and when approved, whether by us or in collaboration with third parties;

•

maintenance of a continued acceptable safety profile of our products post-approval;

•

acceptance of our product candidates, if and when approved by the applicable regulatory authorities, by patients, the medical community, and third-party payors;

•

ability of our products to compete with other therapies and treatment options;

•

establishment and maintenance of healthcare coverage and adequate reimbursement; and

•

expanded indications and patient populations for our products.

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The following table summarizes our research and development expenses for the ~~three and nine months ended September 30, 2021 and 2020:~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

(in thousands)

(in thousands)

External costs:

Acquisition of technology and intellectual property licenses

$
359

$
480

$
3,644

$
1,291

Services provided by third-party CROs, CMOs, and other third parties that conduct preclinical studies and clinical trials on our behalf

7,515

1,897

14,210

9,029

Other research and development expenses

2,322

862

5,981

2,869

Total external costs

10,196

3,239

23,835

13,189

Internal costs:

Payroll-related expenses

4,176

1,915

9,380

6,056

Facilities and other allocated expenses

1,461

1,026

3,929

3,156

Total external costs

5,637

2,941

13,309

9,212

Total research and development expenses

$
15,833

$
6,180

$
37,144

$
22,401

periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(in thousands)				(in thousands)
External costs:
Expenses related to licensing, sublicensing revenue, and milestones	$	439	$	359	$	1,301	$	3,644
Services provided by CROs, CMOs, clinical sites, and other third parties that conduct preclinical studies and clinical trials on our behalf	6,557		7,515		20,190		14,210
Other research and development expenses	4,627		2,322		11,957		5,981
Total external costs	11,623		10,196		33,448		23,835
Internal costs:
Personnel-related expenses	6,365		4,176		17,256		9,380
Facilities and other allocated expenses	2,003		1,461		5,790		3,929
Total internal costs	8,368		5,637		23,046		13,309
Total research and development expenses	$	19,991	$	15,833	$	56,494	$	37,144

General and Administrative Expenses

Our general and administrative expenses consist primarily of ~~payroll-related~~personnel-related costs, intellectual property costs, consulting costs, and allocated overhead, including rent, equipment depreciation, and utilities. ~~Payroll-related~~Personnel-related costs consist of salaries, benefits, and stock-based compensation for our general and administrative personnel. Intellectual property costs include expenses for filing, prosecuting, and maintaining patents and patent applications, including certain patents and patent applications that we license from third parties. We are entitled to receive reimbursement from third parties offor a portion of the costs for filing, prosecuting, and maintaining certain patents and patent applications. We accrue for these reimbursements as the respective expenses are incurred and classify such reimbursements as a reduction of general and administrative expenses. During the three months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recorded ~~$1.6~~$1.0 million and ~~$1.5~~$1.6 million, respectively, of patent cost reimbursements as a reduction to general and administrative expense. During the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, we recorded ~~$6.1~~$3.1 million and ~~$3.7~~$6.1 million, respectively, of patent cost reimbursements as a reduction to general and administrative expense.

We expect that our general and administrative expenses ~~will~~may increase ~~substantially~~ in the future as a result of expanding our operations, including hiring personnel, preparing for potential commercialization of our product candidates, and additional facility occupancy costs, as well as increased costs associated with operating as a public company (including legal, audit, and accounting fees; regulatory costs related to maintaining compliance with the rules and regulations of the SEC and the Nasdaq Global Select Market; director and officer insurance premiums; costs for investor and public relations activities; and other ~~accompanying compliance and governance costs). We also expect to increase the size of our administrative function~~expenses necessary to support the growth and operations of ~~our business.~~

a clinical-stage public company.

Other Income (Expense)

Other income (expense) consists primarily of interest income earned on cash and ~~money market funds, interest expense for our capital lease, and the promissory note related to our PPP Loan;~~marketable securities, change in the fair value of ~~Intellia common stock in 2020;~~our equity investments, change in fair value of the ~~MSKCC~~Memorial Sloan Kettering Cancer Center (“MSKCC”) success payments liability under the Exclusive License Agreement with MSKCC (the “MSKCC Agreement”)~~, dated November 13, 2020, by and between us and MSKCC; and other income from the sale~~.

Table of certain intellectual property rights. During the three and nine months ended September 30, 2021 and 2020, other income (expense) consisted primarily of interest income earned on cash and money market funds, interest expense on our capital lease, extinguishment of the promissory note related to our PPP Loan, and changes in the fair value of the MSKCC success payments liability.Contents

Results of Operations

Comparison of the Three Months Ended September 30, ~~2021~~2022 and ~~2020~~

2021

The following table summarizes our results of operations for the periods indicated:


	Three Months Ended September 30,
	2022		2021		Change
	(in thousands)
Licensing and collaboration revenue	$	3,303	$	3,977	$	(674)
Operating expenses
Research and development	19,991		15,833		4,158
General and administrative	9,849		6,760		3,089
Total operating expenses	29,840		22,593		7,247
Loss from operations	(26,537)		(18,616)		(7,921)
Other income (expense)
Change in fair value of equity securities	31		—		31
Change in fair value of the MSKCC success payments liability	(1,607)		(2,403)		796
Gain on extinguishment of PPP Loan	—		—		—
Other income, net	1,466		45		1,421
Total other income (expense)	(110)		(2,358)		2,248
Net loss	$	(26,647)	$	(20,974)	$	(5,673)

Licensing and Collaboration Revenue

Licensing and collaboration revenue decreased by $0.7 million, or 17%, to $3.3 million for the three months ended September 30, ~~2021 and 2020:~~

Three Months Ended September 30,

Change

2021

2020

$

%

(in thousands, except percentages)

Licensing and collaboration revenue

$
3,977

$
1,198

$
2,779

232
%
Operating expenses

Research and development

15,833

6,180

9,653

156
%
General and administrative

6,760

3,247

3,513

108
%
Total operating expenses

22,593

9,427

13,166

140
%
Loss from operations

(18,616
)

(8,229
)

(10,387
)

126
%
Other income (expense)

Interest income

22

4

18

450
%
Interest expense

-

(6
)

6

-100
%
Change in fair value of the MSKCC success payments liability

(2,403
)

-

(2,403
)

100
%
Other income

23

85

(62
)

-73
%
Total other income (expense)

(2,358
)

83

(2,441
)

-2941
%
Net loss before provision for income taxes

(20,974
)

(8,146
)

(12,828
)

157
%
Benefit from income taxes

-

213

(213
)

-100
%
Net loss and comprehensive loss

$
(20,974
)

$
(7,933
)

$
(13,041
)

164
%

~~Licensing and Collaboration Revenue~~

~~Licensing and collaboration revenue increased $2.8 million, or 232%, to~~2022 from $4.0 million for the three months ended September 30, ~~2021 from $1.2 million for the three months ended September 30, 2020.~~2021. This ~~increase~~decrease was primarily related to ~~increases~~a decrease of ~~$2.3~~$0.6 million related to recognition of revenue under the Collaboration and License Agreement (the “AbbVie Agreement”) with AbbVie ~~Agreement and $0.5 million related to other license agreements with various licensees.~~

Manufacturing Management Unlimited Company (“AbbVie”).

The following table summarizes our revenue by licensee for the periods indicated:


	Three Months Ended September 30,
	2022		2021		Change
	(in thousands)
AbbVie	$	1,709	$	2,274	$	(565)
Other licensees	1,594		1,703		(109)
Total licensing revenue	$	3,303	$	3,977	$	(674)

Research and Development Expenses

Research and development expenses increased by $4.2 million, or 26%, to $20.0 million for the three months ended September 30, ~~2021 and 2020:~~

Three Months Ended September 30,

2021

2020

(in thousands)

AbbVie

$
2,274

$
-

Other licensees

1,703

1,198

Total licensing revenue

$
3,977

$
1,198

~~Research and Development Expenses~~

~~Research and development expenses increased $9.7 million, or 156%, to~~2022 from $15.8 million for the three months ended September 30, ~~2021 from $6.2~~2021. This increase was primarily related to increases of $2.2 million in other research and development expenses to advance IND-enabling studies for CB-011 and preclinical research for additional programs, as well as other consulting services related to research and development; $2.2 million in personnel-related expenses (which include an increase in stock-based compensation expense of $0.7 million) due to incremental hiring; and $0.5 million in other facilities and allocated expenses; partially offset by a net decrease of $0.8M in external CMO and CRO activities, driven by a decrease of $2.2 million due to timing of CMO activities for our product candidates, partially offset by a $1.4 million increase in CRO activities primarily to advance our ANTLER phase 1 trial for CB-010.

General and Administrative Expenses

General and administrative expenses increased by $3.1 million, or 46%, to $9.8 million for the three months ended September 30, 2020. This increase was primarily related to increases of $5.6 million in external clinical trial-related activities and contract manufacturing activities for our product candidates, $2.3 million in payroll-related expenses, $1.5 million related to our preclinical programs, and $0.4 million in facilities and other allocated expenses, partially offset by a $0.1 million decrease in costs associated with our intellectual property license agreements.

~~General and Administrative Expenses~~

~~General and administrative expenses increased $3.5 million, or 108%, to~~2022 from $6.8 million for the three months ended September 30, ~~2021 from $3.2 million for the three months ended September 30, 2020.~~2021. This increase was primarily related

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to increases of ~~$2.1~~$1.6 million in ~~payroll-related costs, $0.6 million~~personnel-related expenses (which include an increase in ~~fees related~~stock-based compensation expense of $1.1 million) due to ~~legal and accounting services, $0.5 million in insurance expenses, and~~

~~$0.4~~incremental hiring; $0.7 million in facilities and ~~maintenance~~other allocated expenses; and $0.7 million in legal, accounting, insurance, and other expenses ~~partially offset by~~necessary to support the growth and operations of a ~~$0.1 million decrease in~~ ~~costs of prosecuting and maintaining third-party patents.~~

clinical-stage public company.

Total Other Income (Expense)

We recognized ~~expense~~a loss related to the change in the fair value of the MSKCC success payments liability in the amount of $1.6 million and $2.4 million for the three months ended September 30, ~~2021. The increase in the liability was primarily related to the increase in our common stock fair value after our IPO in July 2021. The MSKCC Agreement was entered into on November 13, 2020,~~2022 and ~~no similar expense was recorded~~2021, respectively.

Other income, net during the three months ended September 30, ~~2020.~~

~~Income Tax~~

~~No income tax benefit or expense was recognized for~~2022 increased to $1.5 million from less than $0.1 million during the three months ended September 30, ~~2021. An~~2021 primarily due to an increase in interest income ~~tax benefit~~related to increased market rates and growth of $0.2 million was recognized for the three months ended September 30, 2020, which was due primarily to the recognition of net operating loss carrybacks under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which generated a refund of taxes paid for the year ended December 31, 2018.

our marketable securities portfolio.

Comparison of the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~

2021

The following table summarizes our results of operations for the periods indicated:


	Nine Months Ended September 30,
	2022		2021		Change
	(in thousands)
Licensing and collaboration revenue	$	10,159	$	7,039	$	3,120
Operating expenses
Research and development	56,494		37,144		19,350
General and administrative	29,486		16,469		13,017
Total operating expenses	85,980		53,613		32,367
Loss from operations	(75,821)		(46,574)		(29,247)
Other income (expense)
Change in fair value of equity securities	(73)		—		(73)
Change in fair value of the MSKCC success payments liability	1,041		(3,584)		4,625
Gain on extinguishment of PPP Loan	—		1,584		(1,584)
Other income, net	2,421		130		2,291
Total other income (expense)	3,389		(1,870)		5,259
Net loss	$	(72,432)	$	(48,444)	$	(23,988)

Licensing and Collaboration Revenue

Licensing and collaboration revenue increased by $3.1 million, or 44%, to $10.2 million for the nine months ended September 30, ~~2021 and 2020:~~

Nine Months Ended September 30,

Change

2021

2020

$

%

(in thousands, except percentages)

Licensing and collaboration revenue

$
7,039

$
11,377

$
(4,338
)

-38
%
Operating expenses

Research and development

37,144

22,401

14,743

66
%
General and administrative

16,469

9,887

6,582

67
%
Total operating expenses

53,613

32,288

21,325

66
%
Loss from operations

(46,574
)

(20,911
)

(25,663
)

123
%
Other income (expense)

Interest income

72

157

(85
)

-54
%
Interest expense

(8
)

(14
)

6

-43
%
Change in fair value of equity securities

-

(733
)

733

-100
%
Change in fair value of the MSKCC success payments liability

(3,584
)

-

(3,584
)

100
%
Gain on extinguishment of PPP Loan

1,584

-

1,584

100
%
Other income

66

431

(365
)

-85
%
Total other income (expense)

(1,870
)

(159
)

(1,711
)

1076
%
Net loss before provision for income taxes

(48,444
)

(21,070
)

(27,374
)

130
%
Benefit from income taxes

-

1,465

(1,465
)

-100
%
Net loss and comprehensive loss

$
(48,444
)

$
(19,605
)

$
(28,839
)

147
%

~~Licensing and Collaboration Revenue~~

~~Licensing and collaboration revenue decreased $4.3 million, or 38%, to~~2022 from $7.0 million for the nine months ended September 30, ~~2021 from $11.4 million for the nine months ended September 30, 2020.~~2021. This ~~decrease~~increase was primarily ~~due to decreases of $7.5 million~~ related to ~~an Exclusive License Agreement, as amended, entered into with a related party private company on May 15, 2020 during the corresponding 2020 period, and $0.8~~increases of $2.7 million related ~~to completion of work under a Research Collaboration and License Agreement, as amended, with Genus plc on May 12, 2016, partially offset by increases of $2.8 million due~~ to recognition of revenue under the AbbVie Agreement and ~~$1.2~~$0.4 million related to other license agreements with various licensees.

The following table summarizes our revenue by licensee for the periods indicated:


	Nine Months Ended September 30,
	2022		2021		Change
	(in thousands)
AbbVie	$	5,506	$	2,781	$	2,725
Other licensees	4,653		4,258		395
Total licensing revenue	$	10,159	$	7,039	$	3,120

Research and Development Expenses

Research and development expenses increased by $19.4 million, or 52%, to $56.5 million for the nine months ended September 30, ~~2021 and 2020:~~

Nine Months Ended September 30,

2021

2020

(in thousands)

AbbVie

$
2,781

$
-

Genus

-

844

Related party private company

-

7,500

Other licensees

4,258

3,033

Total licensing revenue

$
7,039

$
11,377

~~Research and Development Expenses~~

~~Research and development expenses increased $14.7 million, or 66%, to~~2022 from $37.1 million for the nine months ended September 30, ~~2021 from $22.4~~2021. This increase was primarily

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related to increases of $7.8 million in personnel-related expenses (which include an increase in stock-based compensation expense of $2.3 million) due to incremental hiring; $6.4 million in external CMO and CRO activities, driven by increases of $4.6 million due to the timing of CMO activities for our product candidates, and $1.8 million in CRO activities primarily to advance our ANTLER phase 1 trial for CB-010; $5.7 million in other research and development expenses to advance IND-enabling studies for CB-011 and preclinical research for additional programs, as well as other consulting services related to research and development; and $1.8 million in other facilities and allocated expenses; partially offset by a decrease of $2.3 million in expenses related to licensing, sublicensing revenue, and milestones.

General and Administrative Expenses

General and administrative expenses increased by $13.0 million, or 79%, to $29.5 million for the nine months ended September 30, 2020. This increase was primarily related to increases of $5.2 million in external clinical trial-related activities and contract manufacturing activities for our product candidates, $3.3 million in payroll-related expenses, $3.1 million in expenses for our preclinical programs, $2.4 million in costs associated with our intellectual property license and assignment agreements, and $0.8 million in facilities and other allocated expenses.

~~General and Administrative Expenses~~

~~General and administrative expenses increased $6.6 million, or 67%, to~~2022 from $16.5 million for the nine months ended September 30, ~~2021 from $9.9 million for the nine months ended September 30, 2020.~~2021. This increase was primarily related to increases of ~~$3.5~~$8.0 million in ~~recruiting and payroll-related costs, $1.5~~personnel-related expenses (which include an increase in stock-based compensation expense of $4.5 million) due to incremental hiring; $4.0 million in ~~fees related to~~legal, accounting, ~~audit,~~insurance, and ~~investor~~other expenses associated with being a public company; and ~~public relations, $0.7~~$1.9 million in facilities and other allocated ~~expenses,~~ ~~$0.6 million in insurance expenses, and~~ ~~$0.5 million in costs of prosecuting and maintaining third-party patents,~~expenses; partially offset by a $0.9 million decrease ~~of $0.2 million~~ in ~~professional fees related to legal services.~~

patent cost reimbursements.

Total Other Income (Expense)

We recognized a $0.7 million change in fair value of our equity investment in Intellia common stock during the nine months ended September 30, 2020. We sold Intellia common shares during the three months ended March 31, 2020,gain and ~~there were no changes in fair value of other equity securities during the nine months ended September 30, 2021. We have not held any Intellia shares since March 31, 2020.~~

~~We recognized expense~~a loss related to the change in the fair value of the MSKCC success payments liability ~~under the MSKCC Agreement~~ in the amount of $1.0 million and $3.6 million, respectively, for the nine months ended September 30, ~~2021. The MSKCC Agreement was entered into on November 13, 2020~~2022 and ~~no similar expense was recorded during the nine months ended September 30, 2020.~~

~~Other income of $0.4 million for the nine months ended September 30, 2020 was related to earned sale and assignment of patents and patent applications, which was not an ordinary business activity.~~

~~Our~~2021, respectively.

The PPP Loan was forgiven in May 2021, and we recognized a gain on the ~~loan~~PPP Loan extinguishment of $1.6 million for the nine months ended September 30, 2021. No such gain was recognized for the nine months ended September 30, ~~2020.~~

~~Income Taxes~~

No2022.

Other income, ~~tax benefit or expense was recognized for~~net during the nine months ended September 30, ~~2021. We recognized an income tax benefit of $1.5~~2022 increased to $2.4 million ~~for~~from $0.1 million during the nine months ended September 30, ~~2020, which was~~2021 primarily due ~~primarily~~ to ~~the recognition~~an increase in interest income related to increased market rates and growth of ~~net operating loss carrybacks under the CARES Act, which generated a tax refund of taxes paid for the year ended December 31, 2018.~~

our marketable securities portfolio.

Liquidity, Capital Resources, and Capital Requirements

Sources of Liquidity

Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. We have funded our operations through sales of ~~Series A, A-1, B, and C~~our convertible preferred stock, ~~that~~which generated approximately $150.1 million in aggregate net proceeds, and from our IPO, ~~that~~which generated approximately $321.0 million in net proceeds. We have also received approximately $88.4 million in net proceeds from the sale of Intellia common

stock that we received under the Intellia ~~License~~ Agreement. Additionally, through September 30, ~~2021,~~2022, we received approximately ~~$77.7~~$82.3 million from licensing agreements, licensing and collaboration agreements, a service agreement, patent assignments, and government grants, including ~~$30.0~~$33.0 million that was received from AbbVie under the AbbVie Agreement.

In order to assist in funding our future operations, including our planned clinical trials, on August 9, 2022, we filed a universal shelf registration statement on Form S-3 (the “Shelf Registration Statement”) with the SEC, which allows us to, from time to time, sell up to $400.0 million of common stock, preferred stock, debt securities, warrants, rights, or units comprised of any combination thereof (including the $100.0 million of common stock reserved for our at-the-market equity offering program described below). The Shelf Registration Statement was declared effective by the SEC on August 16, 2022. We believe that our Shelf Registration Statement will provide us with the flexibility to raise additional capital to finance our operations as needed. From time to time, we may offer securities under our Shelf Registration Statement in response to market conditions or other circumstances if we believe such a plan of financing is in the best interests of our stockholders. The terms of any offering under the Shelf Registration Statement will be established at the time of such offering and will be described in a prospectus supplement to the Shelf Registration Statement filed with the SEC prior to the completion of any such offering.

On August 9, 2022, we entered into an Open Market Sale Agreement

SM (the “Sales Agreement”) with Jefferies LLC (“Jefferies”) pursuant to which we may, from time to time, in our sole discretion, issue and sell, through Jefferies, acting as sales agent, up to $100.0 million of our shares of common stock, by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended (the “Securities Act”).

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Jefferies will use commercially reasonable efforts consistent with its normal sales and trading practices to sell shares from time to time, based upon our instructions (including any price or size limits or other customary parameters or conditions we may impose). We will pay Jefferies a commission equal to 3.0% of the aggregate gross proceeds of any shares sold through Jefferies pursuant to the Sales Agreement. We are not obligated to sell any shares under the Sales Agreement. Unless otherwise terminated earlier, the Sales Agreement will continue until all shares available under the Sales Agreement have been sold. As of September 30, ~~2021,~~2022, there have been no sales under the Sales Agreement and, as of September 30, 2022, the full capacity remained available for issuance.

As of September 30, 2022, we had cash, ~~and~~ cash equivalents, and marketable securities of ~~$435.3~~$342.6 million. In March 2021, we received net proceeds of $108.8 million from our Series C convertible preferred stock financing and $30.0 million from AbbVie under the AbbVie Agreement. In July and August 2021, we received aggregate net proceeds of approximately $321.0 million from our IPO. We will continue to be dependent upon equity financing, debt financing, collaborations and licensing arrangements, and/or other forms of capital raises at least until we are able to generate significant positive cash flows from our operations. We have no current ongoing material financing commitments, such as lines of credit or guarantees, that are expected to affect our liquidity over the next five years, except for our lease commitments as described in Note 9 to our condensed consolidated financial statements included elsewhere in this ~~Quarterly Report~~.

Form 10-Q, and payments under certain of our license agreements as described in Note 4 to our condensed consolidated financial statements included elsewhere in this Form 10-Q.

Based on our current operating plan, we expect that our existing cash and cash equivalents will enable us to fund our current operating ~~expenses and capital expenditure requirements~~plan for at least the next 12 months from the date of this ~~Quarterly Report.~~Form 10-Q. We have based these estimates on our current assumptions, which may require future adjustments based on our ongoing business decisions.

Funding Requirements

Our primary use of cash is to fund operating expenses and research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses, and prepaid expenses.

Our future funding requirements will depend on many factors, including the following:

•

the initiation, progress, timing, costs, and results of preclinical studies and clinical trials for our product candidates;

•

the clinical development plans we establish for these product candidates;

•

the number and characteristics of the product candidates that we develop;

•

the increase in the number of our employees and expansion of our physical facilities to support growth initiatives;

•

the outcome, timing, and cost of meeting regulatory requirements established by the ~~U.S. Food and Drug Administration (“FDA”)~~FDA and other comparable foreign regulatory authorities;

•

whether we enter into any additional collaboration agreements and the terms of any such agreements;

•

the cost of filing and prosecuting our patent applications, and maintaining and enforcing our patents and other intellectual property rights;

•

the extent to which we acquire or in-license other product candidates and technologies;

•

the cost of defending intellectual property disputes, including patent infringement actions brought by third parties against our products ~~when~~after we ~~file for~~receive regulatory ~~approval or thereafter;~~approval;

•

the effect of competing technological and market developments;

•

the cost and timing of completion of commercial-scale outsourced manufacturing activities or the cost and timing of completion of clinical-scale and commercial-scale internal manufacturing activities;

•

the cost of establishing sales, marketing, and distribution capabilities for any product candidates for which we may receive regulatory approval in regions where we choose to commercialize our products without a partner;

•

the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval;

•

the achievement of milestones or occurrence of other developments that trigger payments by or to third parties under any collaboration or licensing agreements;

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•our implementation of various computerized informational systems and efforts to enhance operational systems;

•

the impact of the COVID-19 pandemic or geopolitical events on our clinical development or operations;

•the impact of inflationary pressures on the cost of our operations; and

•

the costs associated with being a public company.

Furthermore, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development expenditures.

If we need to raise additional capital to fund our operations, funding may not be available to us on acceptable terms, or at all. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend one or more of our preclinical studies, clinical trials, research and development programs, and/or commercialization efforts. We may seek to raise any necessary additional capital through a combination of public or private equity offerings, debt financings, collaborations, and licensing arrangements. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in dilution to our stockholders. If we raise additional capital through marketing and distribution arrangements or other collaborations, strategic alliances, or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams, or research programs or grant licenses on terms that may not be favorable to us.

Cash Flows

Comparison of the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~

2021

The following summarizes our cash flows for the periods indicated:

Nine Months Ended September 30,

2021

2020

(in thousands)

Cash used in operating activities

$
(11,130
)

$
(25,139
)
Cash provided by (used in) investing activities

(2,436
)

6,963

Cash provided by financing activities

432,969

1,653

Net increase (decrease) in cash and cash equivalents

$
419,403

$
(16,523
)


	Nine Months Ended September 30,
	2022		2021		Change
	(in thousands)
Cash used in operating activities	$	(65,922)	$	(11,130)	$	(54,792)
Cash used in investing activities	(94,419)		(2,436)		(91,983)
Cash provided by financing activities	2,006		432,969		(430,963)
Net (decrease) increase in cash and cash equivalents	$	(158,335)	$	419,403	$	(577,738)

Cash Used in Operating Activities

Net cash used in operating activities was ~~$11.1~~$65.9 million and ~~$25.1~~$11.1 million for the nine months ended September 30, 2022 and 2021, respectively.

Cash used in operating activities for the nine months ended September 30, 2022 was primarily due to our net loss of $72.4 million, adjusted by non-cash charges of $10.6 million and ~~2020, respectively.~~

net changes in our operating assets and liabilities of $4.1 million. Our non-cash charges were primarily comprised of $8.6 million of stock-based compensation, non-cash lease expense of $1.6 million, $1.1 million of depreciation and amortization expense, and acquired in-process research and development of $0.3 million, which were partially offset by the change in the fair value of the MSKCC success payments liability of $1.0 million. The changes in our operating assets and liabilities were due to increases of $1.6 million in prepaid expenses and other current assets, $0.4 million in contract assets, $0.4 million in other assets, and decreases of $2.6 million in accounts payable, $3.3 million in deferred revenue, and $0.3 million in operating lease liabilities, partially offset by decreases of $0.8 million in accounts receivable and $2.8 million in other receivables, an increase of $0.9 million in accrued expenses and other current liabilities.

Cash used in operating activities in the nine months ended September 30, 2021 was primarily due to our net loss of $48.4 million, adjusted by non-cash charges of $5.6 million and net changes in our net operating assets and liabilities of $31.7 million. Our non-cash charges consisted of a change in the fair value of the MSKCC success payments liability of $3.6 million, $1.9 million of stock-based compensation, $1.0 million of acquired in-process research development, which represents an investing activity, and $0.7 million of depreciation and amortization expense, which were offset by our PPP

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Loan extinguishment gain upon the loan forgiveness of $1.6 million. The changes in our net operating assets and liabilities were due to increases of $30.7 million in deferred revenue, $4.9 million in accrued expenses and other current liabilities, $0.9 million in deferred rent and lease incentive liability, and $0.8 million in accounts payable, partially offset by increases of $2.8 million in prepaid expenses and other current assets, $1.7 million in other receivables, $0.5 million in contract assets, $0.4 million in accounts receivable, and $0.2 million in other assets.

Cash ~~used~~Used in operating activities in the nine months ended September 30, 2020 was primarily due to our net loss for the nine months of $19.6 million, adjusted by non-cash charges of $4.9 million and net changes in our net operating assets and liabilities of $0.6 million. Our non-cash charges consisted of $0.8 million of stock-based compensation, a change in the fair value of equity securities of $0.7 million, $0.7 million of depreciation and amortization expense, and $0.4 million of acquired in-process research and development, which represents an investing activity. These were offset by receipt of non-cash consideration for licensing and collaboration revenue in the amount of $7.6 million. The changes in our net operating assets and liabilities were primarily due to decreases of $1.5 million in prepaid expenses and other current assets, $0.2 million in contract assets, $0.1 million in other receivables, and an increase of $1.1 million in accrued expenses and other current liabilities, partially offset by a decrease of $1.9

~~million in accounts payable, $0.7 million in deferred revenue, $0.6 million in deferred tax liabilities, and $0.4 million in other liabilities.~~

~~Cash Provided by (Used in)~~ Investing Activities

During the nine months ended September 30, 2022, and 2021 cash used in investing activities was $94.4 million and $2.4 ~~million. During~~million, respectively.

Cash used in investing activities for the nine months ended September 30, ~~2020, cash provided~~2022, was primarily due to purchases of marketable securities of $252.6 million, property and equipment of $4.7 million, and in-process research and development of $0.3 million, partially offset by ~~investing activities was $7.0~~the proceeds from maturities of marketable securities of $163.1 million.

Cash used in investing activities for the nine months ended September 30, 2021 was primarily due to purchases of property and equipment of $1.4 million and payments for the acquisition of in-process research and development of $1.0 million.

Cash Provided by Financing Activities

During the nine months ended September 30, 2022 and 2021, cash provided by financing activities was $2.0 million and $433.0 million, respectively.

Cash provided by ~~investing~~financing activities for the nine months ended September 30, ~~2020~~2022 was ~~primarily~~ due to the ~~receipt~~exercise of ~~$7.7 million in proceeds from the sale of Intellia common stock. This was partially offset by cash paid for the acquisition of in-process research and development of $0.4 million~~stock options and purchases of ~~property and equipment~~common stock under the 2021 Employee Stock Purchase Plan of ~~$0.3~~$2.0 million.

~~Cash Provided by Financing Activities~~

~~During the nine months ended September 30, 2021 and 2020, cash provided by financing activities was $433.0 million and $1.7 million, respectively.~~

Cash provided by financing activities for the nine months ended September 30, 2021 was primarily due to the receipt of net proceeds from our IPO in the amount of $321.0 million, net proceeds from the issuance of Series C convertible preferred stock in the amount of $108.8 million, proceeds from the exercise of stock options of $2.1 million, and repayment of the promissory note issued to our president and chief executive officer in the amount of $1.2 ~~million, partially offset by principal payments for a capital lease of $0.1~~ million.

Cash provided by financing activities for the nine months ended September 30, 2020 was primarily due to our receipt of proceeds from our PPP Loan in the amount of $1.6 million and receipt of proceeds from exercise of stock options of $0.2 million, offset by principal payments for a capital lease of $0.1 million.

~~Contractual Obligations and Commitments~~

~~The following summarizes our contractual obligations as of September 30, 2021:~~

Less Than

Due by Period

More Than

1 Year

1-3 Years

3-5 Years

5 Years

Total

(in thousands)

Operating leases (1)

$
3,459

$
7,248

$
8,183

$
23,750

$
42,640

Total obligations (2)

$
3,459

$
7,248

$
8,183

$
23,750

$
42,640

~~(1)~~

The operating lease obligations are primarily related to the facility lease for our corporate headquarters and research and development facility in Berkeley, California, which was amended on March 31, 2021 to include additional office and laboratory space and to extend the lease term to March 31, 2031.

~~(2)~~

Excludes payment obligations under our in-license and assignment agreements as of September 30, 2021, which are contingent upon our achievement of predefined clinical, regulatory, and commercial milestones; in the case of the MSKCC Agreement, changes in the price of our common stock and any change in control; and our royalty payment obligations on net product sales by our licensees. See Note 4 to our condensed consolidated financial statements included elsewhere in this Quarterly Report.

~~We enter into contracts in the normal course of business with suppliers, CMOs, CROs, clinical trial sites, and the like.~~ ~~These agreements provide for termination at the request of either party generally with less than one-year notice~~ a~~nd, therefore, we believe that our non-cancelable obligations under these agreements are not material and they are not included in the table above.~~

We have not included milestones, royalty, or other payments due under our existing license agreements in the table above due to the uncertainty of the occurrence of the events requiring payment under those agreements.

Under the MSKCC Agreement, we are obligated to make success payments to MSKCC of up to $35.0 million if our stock price increases by certain multiples of increasing value based on a comparison of the fair market value of our common stock with $5.1914 per share, which is the split adjusted initial price at which our Series B convertible preferred stock was sold, as adjusted for future stock splits, during a specified time interval. The relevant time interval commences when the first patient is dosed with a licensed CD371 product candidate in the first phase 1 clinical trial and ends upon the earlier of the third anniversary of approval by the FDA of our, our affiliate’s, or licensee’s biologics license application for a licensed CD371 product or 10 years from the date the first patient was dosed with a licensed CD371 product in the first phase 1 clinical trial. Additionally, if we undergo a change of control during the specified time interval, we may owe a change of control payment, depending upon the increase in our stock price due to the change of control and also to what extent the MSKCC success payments have already been paid. In no event will the combination of the MSKCC success payments and the change of control payment exceed $35.0 million. The relevant time period during which MSKCC is eligible for success payments and a change of control payment has not yet commenced. As of September 30, 2021 and December 31, 2020, the timing and likelihood of triggering the MSKCC success payments are uncertain and therefore any related payments are not included in the tables above. See Note 4 to our condensed consolidated financial statements included elsewhere in this Quarterly Report for more information about the MSKCC success payments liability.

~~Off-Balance Sheet Arrangements~~

~~During the periods presented, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under applicable SEC rules.~~

Critical Accounting Policies and Significant Judgments and Estimates

Our critical accounting policies are disclosed in our audited consolidated financial statements for the year ended December 31, ~~2020,~~2021, and the related notes included in ~~the Final Prospectus.~~our Form 10-K. Since the date of such financial statements, there have been no material changes to our significant accounting policies other than those described in Note 2 to our condensed consolidated financial statements included elsewhere in this ~~Quarterly Report.~~

Form 10-Q. There have been no material changes to our critical accounting estimates as compared to those disclosed in our Form 10-K.

Recently Issued Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements included elsewhere in this ~~Quarterly Report~~Form 10-Q for more information regarding recently issued accounting pronouncements.

Indemnification Agreements

As permitted under Delaware General Corporation Law and in accordance with our ~~Amended~~amended and ~~Restated Bylaws,~~restated bylaws, we indemnify our executive officers and directors for certain events or occurrences while such officer or director is or was serving in such capacity. We are also party to indemnification agreements with our executive officers, directors, and controller. We believe the fair value of the indemnification rights and agreements is minimal. Accordingly, we have not recorded any liabilities for these indemnification rights and agreements as of September 30, ~~2021.~~

2022.

Emerging Growth Company Status

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (a) are no longer an emerging growth company or (b) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a

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result, our condensed consolidated financial statements may not be comparable to those of companies that comply with the new or revised accounting pronouncements as of public company effective dates.

We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company. As described in ~~“Recent Accounting Pronouncements” in~~ Note 2 to our condensed consolidated financial statements included elsewhere in this ~~Quarterly Report,~~Form 10-Q, we have early adopted ~~multiple~~certain accounting standards, because the JOBS Act does not preclude an emerging growth company from adopting a new or revised accounting standard earlier than the time that such standard applies to private companies, to the extent early adoption is allowed by the accounting standard.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

~~We are exposed~~

There have been no material changes to ~~market risks in~~ the ~~ordinary course of our business. These risks primarily include interest rate sensitivities.~~

As of September 30, 2021, we had cash and cash equivalents of $435.3 million, which consisted of bank deposits and money market mutual funds. The primary objective of our investment activities is to preserve capital to fund our operations while earning a low-risk return. Because our money market mutual funds are short-term in duration, we believe that our exposure to interest rate risk is not significant and that a hypothetical 1% change in market interest rates during any of the periods presented would not have had a significant impact on the total value of our portfolio.

~~We are not currently exposed to significant~~Company’s market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with vendors that are located outside of the United States and our operations may be subject to fluctuations in foreign currency exchange rates in the future.

Inflation generally affects us by increasing our cost of labor and research and development costs. We do not believe that inflation had a material effect on our business, results of operations, or financial condition during the ~~three and~~ nine months ended September 30, ~~2021~~2022. For a discussion of the Company’s exposure to market risk, refer to the section titled “Quantitative and ~~2020.~~

Qualitative Disclosures About Market Risk” in our Form 10-K.

Item 4. Controls and Procedures.

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) is (a) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (b) accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely decisions regarding required disclosure.

As of September 30, ~~2021,~~2022, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) ~~promulgated~~ under the Exchange Act). Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded that, based upon the evaluation described above, as of September 30, ~~2021,~~2022, our disclosure controls and procedures were ~~effective at a reasonable assurance level.~~

effective.

Changes in Internal Control over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new and more efficient systems, consolidating activities, and migrating processes. During the quarter ended September 30, 2021, we implemented an ERP system as well as hired additional experienced staff in an effort to strengthen our overall control environment. Other than these changes, there

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(f) or 15d-15(f) under the Exchange Act during the three months ended September 30, 2022 that ~~have~~ materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Regardless of the outcome, litigation can have a material adverse effect on us due to defense and settlement costs, diversion of our management resources, and other factors. We are not currently ~~a party~~subject to any material legal ~~proceeding that, we believe, the ultimate outcome of which would have a material adverse effect on our business, operating results, cash flows, or financial condition.~~

~~Intellia Arbitration~~

On October 16, 2018, Intellia initiated an arbitration proceeding with JAMS asserting that we had violated the terms and conditions of the Intellia License Agreement (the “Intellia Arbitration”). The Intellia Arbitration involved whether two patent families controlled by us and relating, respectively, to CRISPR-Cas9 chRDNA guides and Cas9 scaffolds, are included in the Intellia License Agreement. On September 19, 2019, we received an interim award from the arbitration panel determining that the two patent families are included in the Intellia License Agreement, but the panel granted us an exclusive leaseback to Cas9 chRDNA guides under economic terms to be negotiated by the parties. On February 6, 2020, the arbitration panel clarified that the leaseback relates solely to our CB-010 product candidate, and instructed the parties to negotiate economic terms based on a leaseback of that scope. On June 16, 2021, we entered into a leaseback agreement with Intellia, which resolved the dispute, and, on July 21, 2021, the arbitration panel dismissed the Intellia Arbitration with prejudice. See Note 4 to our condensed consolidated financial statements included elsewhere in this Quarterly Report.

proceedings.

Item 1A. Risk Factors.

There have been no material changes to the Risk Factors previously disclosed in ~~the Final Prospectus.~~Item 1A. to Part I of our Form 10-K. The risks described in ~~the Final Prospectus~~our Form 10-K are not the only risks facing our ~~company.~~Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities for the Three Months Ended September 30, ~~2021~~

~~On July 27, 2021, we issued 26,234,654 shares~~2022

There were no unregistered sales of ~~our common stock, at a par value of $0.0001 per share (“Common Stock”), upon~~equity securities during the conversion (the “Conversion”) of all outstanding shares of our Series A, A-1, B, and C convertible preferred stock (collectively, the “Preferred Stock”). Conversion of the Preferred Stock into shares of Common Stock occurred automatically immediately prior to the effectiveness of our Amended and Restated Certificate of Incorporation filed in connection with the closing of our IPO. The shares of Common Stock issued in the Conversion were issued in reliance on the exemptions contained in Sections 3(a)(9) and 4(a)(2) of the Securities Act.

In July 2021, we issued an aggregate of 513,698 shares of our common stock to current and former employees and consultants upon their exercise of stock options prior to our IPO for an aggregate cash consideration of approximately $0.8 million. These securities were issued in reliance on an exemption set forth in Rule 701 under the Securities Act, as transactions pursuant to compensatory benefit plans.

three months ended September 30, 2022.

Use of Proceeds from our IPO

The net proceeds from our IPO, after deducting underwriting discounts and commissions and offering expenses of $28.6 million, were $321.0 million. We are holding a significant portion of the balance of the net proceeds from our IPO in money market mutual ~~funds.~~funds, U.S. Treasury bills, corporate debt securities, and U.S. government agency bonds. There has been no material change in our planned use of the net proceeds from our IPO described in the ~~Final Prospectus.~~final prospectus for our IPO filed on July 23, 2021 with the SEC pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended.

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Item 6. Exhibits.


Exhibit Number						Description
3.1						Amended and Restated Certificate of Incorporation of Caribou Biosciences, Inc. (incorporated by reference to Exhibit 3.1 to the ~~Company’s~~ Current Report on Form 8-K filed by the Registrant with the SEC on July 28, 2021)
3.2						Amended and Restated Bylaws of Caribou Biosciences, Inc. (incorporated by reference to Exhibit 3.2 to the ~~Company’s~~ Current Report on Form 8-K filed by the Registrant with the SEC on July 28, 2021)
4.1						Description of Common Stock (incorporated by reference to Exhibit 4.1 to the Form 10-K filed by the Registrant on March 21, 2022)
10.1*+						Form of Restricted Stock ~~Option~~Unit Award Grant Notice and Restricted Stock Unit Award Agreement under the ~~2013~~2021 Equity Incentive Plan ~~as amended and restated on April 3, 2019.~~of the Registrant
10.2*						Form of Performance Stock Unit Award Grant Notice and Performance Stock Unit Award Agreement under the 2021 Equity Incentive Plan of the Registrant
10.3						Open Market Sale AgreementSM, dated August 9, 2022, by and between the Registrant and Jefferies LLC (incorporated by reference to Exhibit 1.2 to the Company’s Registration Statement on Form S-3 (File No. 333-266712) filed with the SEC on August 9, 2022)
31.1*						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**						Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**						Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*						Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
101.SCH*						Inline XBRL Taxonomy Extension Schema Document
101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*						Cover Page Interactive Data File (embedded within the Inline XBRL document)

Filed herewith.


*	~~Filed herewith.~~
**	~~Furnished herewith.~~
+	~~Indicates management contract or compensatory plan.~~

39Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			Caribou Biosciences, Inc.

Date: November 9, ~~2021~~ 8, 2022	By:	/s/ Rachel E. Haurwitz
			Rachel E. Haurwitz President and Chief Executive Officer
			(Principal Executive Officer)

Date: November ~~9, 2021~~ 8, 2022	By:	/s/ Jason V. O'Byrne
			Jason V. O’Byrne
			Chief Financial Officer (Principal Financial Officer)

	~~Page~~
~~PART I.~~		~~FINANCIAL INFORMATION~~	1Page
PART I.		FINANCIAL INFORMATION	1
Item 1.		Financial Statements (Unaudited)	1
		Condensed Consolidated Balance Sheets	1
		Condensed Consolidated Statements of Operations and Comprehensive Loss	2
		Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	3
		Condensed Consolidated Statements of Cash Flows	4
		Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	2326
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	3738
Item 4.		Controls and Procedures	3738
PART II.		OTHER INFORMATION	3839
Item 1.		Legal Proceedings	3839
Item 1A.		Risk Factors	3839
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	3839
Item 6.		Exhibits	3940
Signatures			4041


	September 30,			December 31,
	2021			2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	435,310		$	15,953
Accounts receivable		578			150
Contract assets ($0 and $250 from related party, respectively)		1,853			1,328
Other receivables		5,354			3,682
Prepaid expenses and other current assets		5,952			3,193
Total current assets		449,047			24,306
INVESTMENTS IN EQUITY SECURITIES		7,626			7,626
PROPERTY AND EQUIPMENT—NET		4,477			3,502
OTHER ASSETS		810			612
TOTAL ASSETS	$	461,960		$	36,046
LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable ($0 and $500 to related party, respectively)	$	3,482		$	2,601
Accrued expenses and other current liabilities		13,930			8,973
Promissory note — PPP Loan		—			654
Deferred revenue		8,746			161
Total current liabilities		26,158			12,389
LONG-TERM LIABILITIES
Deferred revenue, net of current portion ($100 and $50 from related party)		23,022			937
Deferred rent and lease incentive liability		1,833			925
Promissory note — PPP Loan, net of current portion		—			924
MSKCC success payments liability		6,238			2,654
Other liabilities		153			176
Deferred tax liabilities		155			155
Total liabilities		57,559			18,160
COMMITMENTS AND CONTINGENCIES (Note 9)
CONVERTIBLE PREFERRED STOCK, par value $0.0001 per share; 0 shares authorized, issued, and outstanding at September 30, 2021; 7,766,582 shares authorized, issued, and outstanding at December 31, 2020		—			41,323
STOCKHOLDERS’ EQUITY (DEFICIT)
Common stock, par value $0.0001 per share 300,000,000 and 28,933,380 shares authorized at September 30, 2021 and December 31, 2020, respectively; 60,021,319 and 9,710,830 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		6			1
Additional paid-in-capital		483,710			7,433
Accumulated deficit		(79,315	)		(30,871	)
Total stockholders’ equity (deficit)		404,401			(23,437	)
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	461,960		$	36,046


													Retained			Total
											Additional		Earnings			Stockholders’
	Convertible Preferred Stock						Common Stock				Paid-In		(Accumulated			Equity
	Shares			Amount			Shares		Amount		Capital		Deficit)			(Deficit)
BALANCE—December 31, 2020		7,766,582		$	41,323			9,710,830	$	1	$	7,433	$	(30,871	)	$	(23,437	)
Issuance of Series C convertible preferred stock, net of issuance costs of $6.2 million		6,663,940			108,827			—		—		—		—			—
Issuance of common stock on exercise of options		—			—			584,614		—		564		—			564
Stock-based compensation expense		—			—			—		—		343		—			343
Net loss and comprehensive loss		—			—			—		—		—		(13,159	)		(13,159	)
BALANCE—March 31, 2021		14,430,522		$	150,150			10,295,444	$	1	$	8,340	$	(44,030	)	$	(35,689	)
Stock-based compensation expense		—			—			—		—		593		—			593
Repayment of loan issued by stockholder		—			—			—		—		1,150		—			1,150
Issuance of common stock on exercise of options		—			—			1,037,979		—		566		—			566
Net loss and comprehensive loss		—			—			—		—		-		(14,311	)		(14,311	)
BALANCE—June 30, 2021		14,430,522		$	150,150			11,333,423	$	1	$	10,649	$	(58,341	)	$	(47,691	)
Stock-based compensation expense		—			—			—		—		935		—			935
Conversion of convertible preferred stock into common stock		(14,430,522	)		(150,150	)		26,234,654		3		150,147		—			150,150
Issuance of common stock upon initial public offering, net of issuance costs of $28.6 million		—			—			21,850,000		2		321,018		—			321,020
Issuance of common stock on exercise of options		—			—			603,246		—		961		—			961
Net loss and comprehensive loss		—			—			—		—		—		(20,974	)		(20,974	)
BALANCE—September 30, 2021		0		$	0			60,021,323	$	6	$	483,710	$	(79,315	)	$	404,401

BALANCE—December 31, 2019		7,766,582		$	41,323			8,839,205	$	1	$	4,025	$	3,437		$	7,463
Stock-based compensation expense		—			—			—		—		237		—			237
Net loss and comprehensive loss		—			—			—		—		—		(9,800	)		(9,800	)
BALANCE—March 31, 2020		7,766,582		$	41,323			8,839,205	$	1	$	4,262	$	(6,363	)	$	(2,100	)
Stock-based compensation expense		—			—			—		—		286		—			286
Issuance of restricted stock awards		—			—			4,545		—		—		—			—
Issuance of common stock on exercise of options		—			—			50,358		—		21		—			21
Net loss and comprehensive loss		—			—			—		—		—		(1,872	)		(1,872	)
BALANCE—June 30, 2020		7,766,582		$	41,323			8,894,108	$	1	$	4,569	$	(8,235	)	$	(3,665	)
Stock-based compensation expense		—			—			—		—		248		—			248
Issuance of common stock on exercise of options		—			—			75,468		—		139		—			139
Net loss and comprehensive loss		—			—			—		—		—		(7,933	)		(7,933	)
BALANCE—September 30, 2020		7,766,582		$	41,323			8,969,576	$	1	$	4,956	$	(16,168	)	$	(11,211	)


	MSKCC Success Payments Liability
Balance at December 31, 2020	$	2,654
Change in fair value		3,584
Balance at September 30, 2021	$	6,238


	Balance as of December 31, 2020		Additions		Deductions			Balance as of September 30, 2021
Accounts receivable	$	150	$	7,220	$	(6,792	)	$	578

Contract assets:
Unbilled accounts receivable	$	1,328	$	3,656	$	(3,131	)	$	1,853

Contract liabilities:
Deferred revenue, current and long-term	$	1,098	$	34,826	$	(4,156	)	$	31,768


	September 30, 2021		December 31, 2020
Patent cost reimbursements	$	4,890	$	3,672
Other		464		10
Total	$	5,354	$	3,682


	September 30, 2021		December 31, 2020
Prepaid income taxes	$	1,490	$	1,479
Prepaid insurance		2,646		-
Prepaid contract manufacturing and clinical costs		609		954
Prepaid rent		444		337
Other		763		423
Total	$	5,952	$	3,193


Remainder of 2021	$	845
2022		3,485
2023		3,596
2024		3,708
2025		3,627
Thereafter		27,379
Total	$	42,640


Series	Authorized Shares		Outstanding Shares		Liquidation Preference		Carrying Value
Series A		1,576,342		1,576,342	$	3,550	$	3,452
Series A-1		3,004,124		3,004,124		8,000		7,901
Series B		3,186,116		3,186,116		30,070		29,970
		7,766,582		7,766,582	$	41,620	$	41,323


	As of September 30, 2021		As of December 31, 2020
Preferred stock, issued and outstanding		0		14,119,631
Stock options, issued and outstanding		4,965,952		4,520,551
Stock options, authorized for future issuance		5,782,814		582,340
Stock available under the Employee Stock Purchase Plan		511,000		0
Restricted stock awards		0		5,999
		11,259,766		19,228,521


	Shares Available to Grant			Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (in thousands) (a)

Outstanding at December 31, 2020		582,340			4,520,551		$	1.64	5.3		$	6,929
Addition to option pool		7,871,714
Options granted		(2,809,660	)		2,809,660		$	6.99		9.6
Options exercised		-			(2,225,839	)	$	0.94		4.0
Options cancelled or forfeited		138,420			(138,420	)	$	2.07	-
Exercisable at September 30, 2021		5,782,814			4,965,952		$	4.97		8.3	$	94,075
Vested and expected to vest at September 30, 2021					4,965,952		$	4.97		8.3	$	94,075


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Numerator:
Net loss	$	(20,974	)	$	(7,933	)	$	(48,444	)	$	(19,605	)
Denominator:
Weighted-average common shares outstanding used to compute net loss per share, basic and diluted		45,889,646			8,537,965			22,052,944			8,470,019
Net loss per share, basic and diluted	$	(0.46	)	$	(0.93	)	$	(2.20	)	$	(2.31	)


	As of September 30, 2021		As of September 30, 2020
Convertible preferred stock		-		14,119,631
Stock options outstanding		4,965,952		4,759,953
Shares committed under ESPP		18,804		-
Common shares subject to nonrecourse notes		-		409,795
		4,984,756		19,289,379


	Less Than				Due by Period		More Than
	1 Year		1-3 Years		3-5 Years		5 Years		Total
	(in thousands)
Operating leases (1)	$	3,459	$	7,248	$	8,183	$	23,750	$	42,640
Total obligations (2)	$	3,459	$	7,248	$	8,183	$	23,750	$	42,640