UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended March 31,September 30, 2019

OR

Commission File Number001-33038

ZIOPHARM Oncology, Inc.

(Exact name of registrant as specified in its charter)

One First Avenue, Parris Building 34, Navy Yard Plaza

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

Boston, Massachusetts 02129

(617)259-1970

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

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

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes:  ☒☑    No:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-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.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes:  ☐    No:  ☒☑

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

The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of April 30,October 31, 2019, was 162,394,494181,030,020 shares.

ZIOPHARM Oncology, Inc.

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form10-Q contains forward-looking statements that are based on our current beliefs and expectations. These forward-looking statements may be accompanied by such words as “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “target,” “will” and other words and terms of similar meaning. Reference is made in particular to forward-looking statements regarding:

These forward-looking statements involve risks and uncertainties, including those that are described in the “Risk Factors” section of this report and elsewhere within this report that could cause actual results to differ materially from those reflected in such statements. You should not place undue reliance on these statements. Forward-looking statements speak only as of the date of this report. We do not undertake any obligation to publicly update any forward-looking statements.

NOTE REGARDING COMPANY REFERENCES

Throughout this Quarterly Report on Form10-Q, “Ziopharm,” the “Company,” “we,” “us” and “our” refer to ZIOPHARM Oncology, Inc. and its subsidiaries.

NOTE REGARDING TRADEMARKS

All trademarks, trade names and service marks appearing in this Quarterly Report on Form10-Q are the property of their respective owners.

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ZIOPHARM Oncology, Inc.

Table of Contents

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Part I - I—Financial Information

Item 1. Financial Statements

ZIOPHARM Oncology, Inc.

BALANCE SHEETS

(unaudited)

(in thousands, except share and per share data)

The accompanying notes are an integral part of the unaudited interim financial statements.

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ZIOPHARM Oncology, Inc.

STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except share and per share data)

The accompanying notes are an integral part of the unaudited interim financial statements.

5

ZIOPHARM Oncology, Inc.

STATEMENTS OF CHANGES IN PREFERRED STOCK AND STOCKHOLDERS’ EquityEQUITY (DEFICIT)

For the Three monthsand Nine Months Ended March 31,September 30, 2018

(unaudited)

(in thousands, except share and per share data)

For the Three Months Ended September 30, 2018

The accompanying notes are an integral part of the unaudited interim financial statements.

ZIOPHARM Oncology, Inc.

STATEMENTS OF CHANGES IN PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three and Nine Months Ended September 30, 2019

(unaudited)

(in thousands, except share and per share data)

The accompanying notes are an integral part of the unaudited interim financial statements.

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ZIOPHARM Oncology, Inc.

STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

The accompanying notes are an integral part of the unaudited interim financial statements.

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS

(unaudited)

1. Business

Overview

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

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

The Company has operated at a loss since its inception in 2003 and has no recurring revenues from operations. The Company anticipates that losses will continue for the foreseeable future. As of March 31,September 30, 2019, the Company had approximately $51.5$88.4 million of cash and cash equivalents and the Company’s accumulated deficit was approximately $579.8$668.4 million. Given its current development plans, the Company anticipates cash resources will be sufficient to fund operations into the second quarterfirst half of 2020.2021. The Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. If adequate additional funds are not available when required, or if the Company is unsuccessful in entering into partnership agreements for further development of its product candidates, management may need to curtail its development efforts and planned operations to conserve cash.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with the instructions to Form10-Q pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC. Certain information and note disclosures required by generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations.

It is management’s opinion that the accompanying unaudited interim financial statements reflect all adjustments (which are normal and recurring) that are necessary for a fair statement of the results for the interim periods. The unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2018 filed with the SEC on March 5, 2019, or the Form10-K.

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

The results disclosed in the statements of operations for the three and nine months ended March 31,September 30, 2019 are not necessarily indicative of the results to be expected for the full fiscal year.

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

1. Business – (continued)

Use of Estimates

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

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

Subsequent Events

The Company evaluated all events and transactions that occurred after the balance sheet date through the date of this filing. Except as disclosed below, the Company did not have any material subsequent events that impacted its financial statements or disclosures.

On December 18, 2018, ZiopharmOctober 22, 2019, the Company entered into the 2019 Research and TriArm Therapeutics, Ltd. (“TriArm”) announced thatDevelopment Agreement, or the companies plan2019 Agreement, with The University of Texas M.D. Anderson Cancer Center, or MD Anderson, pursuant to launch Eden BioCell, Ltd. (“Eden BioCell”)which the parties agreed to lead clinical development and commercialization ofcollaborate with respect to the Company’sSleeping Beauty-generatedCAR-T therapies immunotherapy program, which uses non-viral gene transfer to stably express and clinically evaluate neoantigen-specific TCRs in T cells. Under the 2019 Agreement, the parties will, among other things, collaborate on programs to expand the Company’s TCR library and conduct clinical trials.

The Company will own all intellectual property developed under the 2019 Agreement and will retain all rights to intellectual property for oncology products manufactured using non-viral gene transfer technologies under the Agreement, including the Company’sSleeping Beauty technology. The Company has granted MD Anderson an exclusive license for such intellectual property outside the field of oncology and to develop and commercialize autologous TCR products manufactured using viral gene transfer technologies, and a non-exclusive license for allogeneic TCR products manufactured using viral-based technologies.

The Company has agreed, beginning on January 1, 2021, to reimburse MD Anderson up to a total of $20.0 million for development costs under the 2019 Agreement. In addition, the Company will pay MD Anderson royalties on net sales of its TCR products at rates in the People’s Republiclow single digits. The Company is required to make performance-based payments upon the successful completion of China (including Macauclinical and Hong Kong), Taiwan and Korea. TriArm is a cell therapy company with operations in Germany, China and the United States.

For the territoryregulatory benchmarks relating to its TCR products. The aggregate potential benchmark payments are $36.5 million, of China, Taiwan and Korea, Ziopharm will license the rights to Eden BioCell for third-generationSleeping Beauty-generatedCAR-T therapies targeting the CD19 antigen. Eden BioCellwhich only $3.0 million will be jointly-owneddue prior to the first marketing approval of the Company’s TCR products. The royalty rates and benchmark payments owed to MD Anderson may be reduced upon the occurrence of certain events. The Company also agreed that it will sell the Company’s TCR products to MD Anderson at preferential prices and will sell its TCR products in Texas exclusively to MD Anderson for a limited period of time following the first commercial sale of the Company’s TCR products.

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

1. Business – (continued)

The 2019 Agreement will terminate on December 31, 2026 and either party may terminate the 2019 Agreement following written notice of a material breach. The 2019 Agreement also contains customary provisions related to indemnification obligations, confidentiality and other matters. In connection with the execution of the 2019 Agreement, on October 22, 2019, the Company issued MD Anderson a warrant to purchase 3,333,333 shares of our common stock, or the Warrant. The Warrant has an initial exercise price of $0.001 per share, expires on December 31, 2026 and vests upon the occurrence of certain clinical milestones.

Also, in connection with the execution of the 2019 Agreement, on October 22, 2019, the Company and MD Anderson entered into the Fifth Amendment to the Research and Development Agreement, or, the Fifth Amendment, which amended the Research and Development Agreement, dated August 17, 2015 by Ziopharm and TriArm. TriArm has committed up to $35.0 million to this joint venture. Underbetween the Company and MD Anderson, or, the 2015 Agreement. The 2015 Agreement governed the research and development activities of the parties for the Company’s chimeric antigen receptor (CAR-T) program. The Fifth Amendment extended the term of the 2015 Agreement until December 31, 2026 and amended the terms of the agreement, Eden BioCell has rights in2015 Agreement to allow cash resources on hand at MD Anderson under the region2015 Agreement toCAR-T cells very rapidly manufactured in two days or less using now be used for development costs under theSleeping Beauty platform to express a CD19-specific CAR and membrane-bound interleukin 15, or mbIL15, along with a kill switch. Each party will share decision-making authority. TriArm will manage all clinical development to execute trials in China for Eden BioCell. On January 3, 2019 Eden BioCell was incorporated in Hong Kong. The definitive agreements are expected to be executed in the first half of 2019.

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Agreement.

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

2. Financings

At-the-Market Offering

During the three and nine months ended September 30, 2019, the Company sold an aggregate of 639,442 shares of its common stock. The offering was made pursuant to the Company’s effective registration statement on Form S-3ASR (Registration Statement No. 333-232283) previously filed with the SEC, and a prospectus supplement thereunder. The net proceeds from the offering were approximately $3.0 million after deducting underwriting discounts and estimated offering expenses payable by the Company.

November 2018 Private Placement and 2019 Inducement Warrants

On November 11, 2018, the Company entered into a securities purchase agreement with certain institutional and accredited investors pursuant to which it sold an aggregate of 18,939,394 immediately separable units at a price per unit of $2.64 to such investors, for net proceeds of approximately $47.1 million. Each unit was comprised of (i) one share of our common stock, par value $0.001 per share and (ii) a warrant to purchase one share of common stock. The securities issued by the Company pursuant to the securities purchase agreement and to be issued upon exercise of the warrants were not registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. When issuing the units, the Company relied on the private placement exemption from registration provided by Section 4(a)(2) of the Securities Act and by Rule 506 of Registration D, promulgated thereunder and on similar exemptions under applicable state laws and filed a Form D with the SEC on November 19, 2018. On February 7, 2019, the Company filed a registration statement on Form S-3 registering the resale of shares issued pursuant to the securities purchase agreement and the resale of shares that may be issued upon exercise of the warrants.

On July 26, 2019 and September 12, 2019, the Company entered into agreements for the exercise of the warrants issued in November 2018 to purchase common stock in a private placement. Pursuant to the terms of the agreements, investors exercised warrants for an aggregate of 17,803,031 shares of common stock, at an exercise price of $3.01 per share. The Company issued new warrants to purchase up to 17,803,031 additional shares of common stock as an inducement for warrant holders to exercise their 2018 warrants early. The new warrants will become exercisable six months following the date of issuance, will expire on the fifth anniversary of the initial exercise date, and have an exercise price of $7.00 (Note 14). Proceeds from the exercise of the warrants, before deducting placement agent fees and other related expenses of $1.1 million were approximately $52.5 million.

3. Summary of Significant Accounting Policies

The Company’s significant accounting policies were identified in the Company’s Form10-K. There have been no material changes in those policies since the filing of its Form10-K except as noted below with respect to the Company’s revenue recognition.below.

Leases

In February 2016, the FASB issued ASU2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by requiring the recognition of aright-of-use assets and lease liabilities for most lease arrangements on the balance sheet. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The new standard is effective for fiscal years beginning after December 15, 2018, and the Company adopted the standard on January 1, 2019.

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

3. Summary of Significant Accounting Policies (continued)

The standard permits two transition methods, (1) to apply the new lease requirements at the beginning of the earliest period presented, or (2) to apply the new lease requirements at the effective date. Under both transition methods there is a cumulative effect adjustment. The Company adopted Topic 842 as of January 1, 2019 using the effective date method, in which it did not restate prior periods. Upon adoption, the Company elected the package of practical expedients permitted under the transition guidance within Topic 842 which, among other things, allowed it to carry forward the historical lease classification.

The adoption of Topic 842 on January 1, 2019 resulted in recognition of approximately $1.6 million ofright-of-use assets and $1.6 million of lease liabilities on the Company’s balance sheets. The adoption did not have a material impact on the Company’s statements of operations or accumulated deficit. The Company has implemented changes to related processes, controls and disclosures in connection with the adoption of Topic 842 (Note 8).

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

3.4. Fair Value Measurements

The Company accounts for its financial assets and liabilities using fair value measurements. The authoritative accounting guidance defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows:

Assets and liabilities measured at fair value on a recurring basis as of March 31,September 30, 2019 and December 31, 2018 were as follows:

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

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

3. Fair Value Measurements - (continued)

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

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

5.6. Revenue Recognition (continued)

The Company recognizes collaboration revenue under certain of the Company’s license or collaboration agreements that are within the scope of ASC 606. The Company’s contracts with customers typically include promises related to licenses to intellectual property, research and development services and options to purchase additional goods and/or services. If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue fromnon-refundable,up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue fromnon-refundable,up-front fees. Contracts that include an option to acquire additional goods and/or services are evaluated to determine if such option provides a material right to the customer that it would not have received without entering into the contract. If so, the option is accounted for as a separate performance obligation. If not, the option is considered a marketing offer which would be accounted for as a separate contract upon the customer’s election.

The terms of the Company’s arrangements with customers typically include the payment of one or more of the following:(i) non-refundable,up-front payment, (ii) development, regulatory and commercial milestone payments, (iii) future options and (iv) royalties on net sales of licensed products. Accordingly, the transaction price is generally comprised of a fixed fee due at contract inception and variable consideration in the form of milestone payments due upon the achievement of specified events and tiered royalties earned when customers recognize net sales of licensed products. The Company measures the transaction price based on the amount of consideration to which it expects to be entitled in exchange for transferring the promised goods and/or services to the customer. The Company utilizes the most likely amount method to estimate the amount of variable consideration, to predict the amount of consideration to which it will be entitled for its one open contract. Amounts of variable consideration are included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. At the inception of each arrangement that includes development and regulatory milestone payments, the Company evaluates whether the associated event is considered probable of achievement and estimates the amount to be included in the transaction price using the most likely amount method. Milestone payments that are not within the control of the Company or the licensee, such as those dependent upon receipt of regulatory approval, are not considered to be probable of achievement until the triggering event occurs. At the end of each reporting period, the Company reevaluates the probability of achievement of each milestone and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulativecatch-up basis, which would affect revenue and net loss in the period of adjustment. For arrangements that include sales-based royalties, including milestone payments based upon the achievement of a certain level of product sales, the Company recognizes revenue upon the later of: (i) when the related sales occur or (ii) when the performance obligation to which some or all of the payment has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any development, regulatory or commercial milestones or royalty revenue resulting from any of its collaboration arrangements. Consideration that would be received for optional goods and/or services is excluded from the transaction price at contract inception.

The Company allocates the transaction price to each performance obligation identified in the contract on a relative standalone selling price basis. However, certain components of variable consideration are allocated specifically to one or more particular performance obligations in a contact to the extent both of the following criteria are met: (i) the terms of the payment relate specifically to the efforts to satisfy the performance obligation or transfer the distinct good or service and (ii) allocating the variable amount of consideration entirely to the performance obligation or the distinct good or service is consistent with the allocation objective of the standard whereby the amount allocated depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services. The Company develops assumptions that require judgment to determine the standalone selling price for each performance obligation identified in each contract. The key assumptions utilized in determining the standalone selling price for each performance obligation may include forecasted revenues, development timelines, estimated research and development costs, discount rates, likelihood of exercise and probabilities of technical and regulatory success.

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

5.6. Revenue Recognition (continued)

Revenue is recognized based on the amount of the transaction price that is allocated to each respective performance obligation when or as the performance obligation is satisfied by transferring a promised good and/or service to the customer. For performance obligations that are satisfied over time, the Company recognizes revenue by measuring the progress toward complete satisfaction of the performance obligation using a single method of measuring progress which depicts the performance in transferring control of the associated goods and/or services to the customer. The Company uses input methods to measure the progress toward the complete satisfaction of performance obligations satisfied over time. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Any such adjustments are recorded on a cumulativecatch-up basis, which would affect revenue and net loss in the period of adjustment.

As it relates to the Ares Trading Agreement (Note 6), the Company recognized the upfront payment associated with its one open contract as a contract liability upon receipt of payment as it requires deferral of revenue recognition to a future period until the Company performs its obligations under the arrangement. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date are classified in current liabilities. Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date are classified as contract liabilities, net of current portion. The Company determined that there were three performance obligations; the first performance obligation consists of the license and research development services and the other two performance obligations are material rights as it relates to potential future targets that have not yet been identified. As described above, the transaction price of $57.5 million was allocated to the performance obligations based on their relative standalone selling prices (see Note(Note 6).

There are multiple distinct performance obligations, including material rights; thus, the Company allocates the transaction price to each distinct performance obligation based on its relative standalone selling price. The standalone selling price is generally determined based on the prices charged to customers or using expected cost-plus margin. Revenue is recognized by measuring the progress toward complete satisfaction of the performance obligations using an input measure. Furthermore, the Company has not capitalized any contract costs under the guidance in ASC340-40,Other Assets and Deferred Costs: Contracts with Customers.

The Company doesdid not believe that any variable consideration should be included in the transaction price at the date of adoption of ASC 606 on January 1, 2018. Such assessment considered the application of the constraint to ensure that estimates of variable consideration would be included in the transaction price only to the extent the Company had a high degree of confidence that revenue would not be reversed in a subsequent reporting period. The Company willre-evaluatere-evaluated the transaction price, including the estimated variable consideration included in the transaction price and all constrained amounts, in each reporting period andsince adoption, as other changes in circumstances occur.applicable.

On October 5, 2018, the Company entered into the license agreement with Precigen.Precigen (Note 7). As between the Company and Precigen, the terms of the License Agreement replace the terms of: (a) the Channel Agreement previously entered into with Intrexon Corporation, (the “Channel Agreement”),of the Channel Agreement, including all amendments to the Channel Agreement; (b) certain rights and obligations pursuant to the Ares Trading Agreement; (c) the MD Anderson License (Note 6)7); and (d) that certain Research and Development Agreement between the Company, Intrexon and The University of Texas MD Anderson Cancer Center, or MD Anderson, with an effective date of August 17, 2015 or the Research and Development Agreement and any amendments or statements of work thereto.

In partial consideration of the Company entering into the License Agreement, Precigen is required to use diligent good faith efforts to transfer the Company’s rights and obligations under the Ares Trading Agreement to Intrexon (or it’sits affiliate). As a result, the Company has very limited remaining obligations under the Ares Trading Agreement, and following the Company’s entry into the License Agreement, will not be recognizing any additional revenue under the Ares Trading Agreement.

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

6.7. Commitments and Contingencies

License Agreements

Exclusive License Agreement with Precigen, Inc.

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

Pursuant to the terms of the License Agreement, Precigen has granted the Company an exclusive, worldwide, royalty-bearing,sub-licensable license to research, develop and commercialize (i) products utilizing Precigen’s RheoSwitch®RheoSwitch^® gene switch, or RTS, for the treatment of cancer, referred to asIL-12 Products, (ii) CAR products directed to (A) CD19 for the treatment of cancer, referred to as CD19 Products, and (B) a second target, subject to the rights of Merck to pursue such target under the Ares Trading Agreement, and (iii) TCR products designed for neoantigens for the treatment of cancer. Precigen has also granted the Company an exclusive, worldwide, royalty-bearing,sub-licensable license for certain patents relating to theSleeping Beauty technology to research, develop and commercialize TCR products for both neoantigens and shared antigens for the treatment of cancer, referred to as TCR Products.

The Company will be solely responsible for all aspects of the research, development and commercialization of the exclusively licensed products for the treatment of cancer. The Company is required to use commercially reasonable efforts to develop and commercializeIL-12 products and CD19 products and after atwo-year period, the TCR Products.

Precigen has also granted the Company an exclusive, worldwide, royalty-bearing,sub-licensable license to research, develop and commercialize products utilizing an additional construct that expresses RTSIL-12 for the treatment of cancer, referred to as GorillaIL-12 Products.

In consideration of the licenses and other rights granted by Precigen, the Company will pay Precigen an annual license fee of $0.1 million and has agreed to reimburse Precigen for certain historical costs of the licensed programs up to $1.0 million, payable quarterly.

The Company will make milestone payments totaling up to an additional $52.5 million for each exclusively licensed program upon the initiation of later stage clinical trials and upon the approval of exclusively licensed products in various jurisdictions. In addition, the Company will pay Precigen tiered royalties ranging fromlow-single digit to high-single digit on the net sales derived from the sales of any approvedIL-12 products and CAR products. The Company will also pay Precigen royalties ranging fromlow-single digit tomid-single digit on the net sales derived from the sales of any approved TCR Products, up to a maximum royalty amount of $100.0 million in the aggregate. The Company will also pay Precigen 20% of any sublicensing income received by the Company relating to the licensed products.

The Company is responsible for all development costs associated with each of the licensed products, other than GorillaIL-12 products. The Company and Precigen will share the development costs and operating profits for GorillaIL-12 products, with the Company responsible for 80% of the development costs and receiving 80% of the operating profits, and Precigen responsible for the remaining 20% of the development costs and receiving 20% of the operating profits.

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

6.7. Commitments and Contingencies (Continued)

Precigen will pay the Company royalties ranging fromlow-single digits tomid-single digits on the net sales derived from the sale of Precigen’s CAR products, up to $50.0 million. There have been no royalties from net sales under the License Agreement for the three and nine months ended September 30, 2019.

In consideration of entering into the License Agreement, Intrexon has forfeited and returned to the Company all shares of Series 1 preferred stock held by or payable to Intrexon as of the date of the License Agreement (Note 7)9).

License Agreement—The University of Texas MD Anderson Cancer Center

On January 13, 2015, the Company, together with Intrexon, entered into the MD Anderson License with MD Anderson (which Intrexon subsequently assigned to Precigen). Pursuant to the MD Anderson License, the Company, together with Precigen, holds an exclusive, worldwide license to certain technologies owned and licensed by MD Anderson including technologies relating to novel CART-cell therapies,non-viral gene transfer systems, genetic modification and/or propagation of immune cells and other cellular therapy approaches, Natural Killer, or NK Cells, and TCRs, arising from the laboratory of Laurence Cooper, M.D., Ph.D., who became the Company’s Chief Executive Officer in May 2015 and was formerly a tenured professor of pediatrics at MD Anderson and is now currently a visiting scientist under that institution’s policies.

On August 17, 2015, the Company, Precigen and MD Anderson entered into the Research and Development2015 Agreement to formalize the scope and process for the transfer by MD Anderson, pursuant to the terms of the MD Anderson License, of certain existing research programs and related technology rights, as well as the terms and conditions for future collaborative research and development of new and ongoing research programs.

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

6.7. Commitments and Contingencies (Continued)

Pursuant to the Research and Development2015 Agreement, the Company, Precigen and MD Anderson formed a joint steering committee to oversee and manage the new and ongoing research programs. Under the License Agreement with Precigen, the Company and Precigen agreed that Precigen would no longer participate on the joint steering committee after the date of the License Agreement. As provided under the MD Anderson License, the Company provided funding for research and development activities in support of the research programs under the Research and Development2015 Agreement for a period of three years and in an amount of no less than $15.0 million and no greater than $20.0 million per year. On November 14, 2017,October 22, 2019, the Company entered into an amendmentthe Fifth Amendment, which extended the term of the 2015 Agreement until December 31, 2026 and amended the terms of the 2015 Agreement to allow cash resources on hand at MD Anderson under the Research and Development2015 Agreement extending its term until April 15, 2021.to now be used for development costs under the 2019 Agreement. During the threenine months ended March 31,September 30, 2019 and 2018, the Company expensed approximately $1.4$4.7 million and $4.0 million, respectively, for its research programs being conducted in Houston. The net balance of cash resources on hand at MD Anderson available to offset expenses and future costs is $26.4$21.5 million which is classified under prepaid expenses and other current assets on the balance sheet at September 30, 2019. At December 31, 2018, the net balance of cash resources on hand at MD Anderson available to offset expenses and future costs was $27.8 million, of which $19.8$18.4 million iswas included in prepaid expenses and other current assets and the remaining $6.6$9.4 million iswas included innon-current assets at March 31, 2019. assets.

The term of the MD Anderson License expires on the last to occur of (a) the expiration of all patents licensed thereunder, or (b) the twentieth anniversary of the date of the MD Anderson License; provided, however, that following the expiration of the term of the MD Anderson License, the Company, together with Precigen, shall then have a fully-paid up, royalty free, perpetual, irrevocable and sublicensable license to use the licensed intellectual property thereunder. After ten years from the date of the MD Anderson License and subject to a90-day cure period, MD Anderson will have the right to convert the MD Anderson License into anon-exclusive license if the Company and Precigen are not using commercially reasonable efforts to commercialize the licensed intellectual property on acase-by-case basis. After five years from the date of the MD Anderson License and subject to a180-day cure period, MD Anderson will have the right to terminate the MD Anderson License with respect to specific technology(ies) funded by the government or subject to a third-party contract if the Company and Precigen are not meeting the diligence requirements in such funding agreement or contract, as applicable. MD Anderson may also terminate the agreement with written notice upon material breach by the Company and Precigen, if such breach has not been cured within 60 days of receiving such notice. In addition, the MD Anderson License will terminate upon the occurrence of certain insolvency events for both the Company and Precigen and may be terminated by the mutual written agreement of the Company, Precigen, and MD Anderson.

License Agreement with the National Cancer Institute

On May 28, 2019, the Company entered into a patent license agreement, or the Patent License, with the National Cancer Institute, or the NCI. Pursuant to the Patent License, the Company holds an exclusive, worldwide license to certain intellectual property to develop and commercialize patient-derived (autologous), peripheral blood T-cell therapy products engineered by transposon-mediated gene transfer to express TCRs reactive to mutated KRAS, p53 and EGFR. In addition, pursuant to the Patent License, the Company holds an exclusive, worldwide license to certain intellectual property for manufacturing technologies to develop and commercialize autologous, peripheral blood T-cell therapy products engineered by non-viral gene transfer to express TCRs, as well as a non-exclusive, worldwide license to certain additional manufacturing technologies.

Pursuant to the terms of the Patent License, the Company is required to pay the NCI a cash payment in the aggregate amount of $1.5 million payable in $0.5 million installments within sixty days, six-months, and the twelve-month anniversary of the effective date of the agreement for the Patent License. The Company also agreed to reimburse the NCI for past patent expenses in the aggregate amount of approximately $46 thousand. During the three and nine months ended September 30, 2019, the Company made payments under the Patent License for $0.5 million. At September 30, 2019, the Company included the remaining $1.0 million for the Patent License as current liabilities on the Company’s balance sheet.

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

7. Commitments and Contingencies (Continued)

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

The Company is also required to make performance-based payments upon successful completion of clinical and regulatory benchmarks relating to the licensed products. The aggregate potential benchmark payments are $4.3 million, of which aggregate payments of $3.0 million are due only after marketing approval in the United States or in Europe, Japan, Australia, China or India. The first benchmark payment of $0.1 million will be due upon the initiation of the Company’s first sponsored phase 1 clinical trial of a licensed product or licensed process in the field of use licensed under the Patent License.

In addition, the Company is required to pay the NCI one-time benchmark payments following aggregate net sales of licensed products at certain net sales up to $1.0 billion. The aggregate potential amount of these benchmark payments is $12.0 million. The Company must also pay the NCI royalties on net sales of products covered by the Patent License at rates in the low to mid-single digits depending upon the technology included in a licensed product. To the extent the Company enters into a sublicensing agreement relating to a licensed product, the Company is required to pay the NCI a percentage of all consideration received from a sublicensee, which percentage will decrease based on the stage of development of the licensed product at the time of the sublicense.

The Patent License will expire upon expiration of the last patent contained in the licensed patent rights, unless terminated earlier. The NCI may terminate or modify the Patent License in the event of a material breach, including if the Company does not meet certain milestones by certain dates, or upon certain insolvency events that remain uncured following the date that is 90 days following written notice of such breach or insolvency event. The Company may terminate the Patent License, or any portion thereof, in the Company’s sole discretion at any time upon 60 days’ written notice to the NCI. In addition, the NCI has the right to: (i) require the Company to sublicense the rights to the product candidates covered by the Patent License upon certain conditions, including if the Company is not reasonably satisfying required health and safety needs and (ii) terminate or modify the Patent License, including if the Company is not satisfying requirements for public use as specified by federal regulations.

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

On January 10, 2017, the Company announced the signing of a Cooperative Research and Development Agreement, or CRADA, with the National Cancer Institute, or NCI for the development of adoptive cell transfer, or ACT,-based immunotherapies genetically modified using theSleeping Beauty transposon/transposase system to express TCRs for the treatment of solid tumors. The principal goal of the CRADA is to develop and evaluate ACT for patients with advanced cancers using autologous peripheral blood lymphocytes, or PBL, genetically modified using thenon-viralSleeping Beautysystem to express TCRs that recognize neoantigens expressed within a patient’s cancer. Research conducted under the CRADA will be at the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI, in collaboration with the Company’s researchers.

In February 2019, the Company extended the CRADA with the NCI for two years, committing an additional $5.0 million to this program through January 2022. The remaining obligation, as of March 31,September 30, 2019, to the NCI under the CRADA is $6.9$5.6 million over the next two years, payable in $625 thousand$0.6 million payments on a quarterly basis. The Company made one paymentpayments of $625 thousand,$0.6 million and $1.9 million, during the three and nine months ended March 31,September 30, 2019 and 2018, respectively.

Exclusive Channel Partner Agreement with Precigen for the Cancer Programs

From 2011 to 2018, the Company was party to various arrangements with Intrexon (now Precigen) in which the Company used Precigen’s technology to research and develop cancer treatments in return for various future profit sharing and royalty arrangements. These agreements were modified or terminated by the License Agreement described in Note 7.

19

9.

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

6.7. Commitments and Contingencies (Continued)

Ares Trading License and Collaboration Agreement

On March 27, 2015, the Company, together with Intrexon (now Precigen), signed the Ares Trading Agreement, with Ares Trading, through which the parties established a collaboration for the research and development and commercialization of certain products for the prophylactic, therapeutic, palliative or diagnostic use for cancer in humans.

Precigen was entitled to receive $5.0 million, from Ares Trading, payable in equal quarterly installments over two years for each identified product candidate, which will be used to fund discovery work. The Company was responsible for costs exceeding the quarterly installments and all other costs of the preclinical research and development. For the three and nine months ended March 31,September 30, 2018, the Company expensed $1.6 million$36 thousand under the Ares Trading Agreement. The Company did not incur any costs under the agreement for the threenine months ended March 31,September 30, 2019 as there are no continuing obligations to reimburse Precigen for expenses under the Ares Trading Agreement followingunder the October 2018 license.terms of the License Agreement with Precigen.

Ares Trading paid anon-refundable upfront fee of $115.0 million to Intrexon as consideration for entry into the Ares Trading Agreement. Pursuant to the Third Amendment to Exclusive Channel Partner Agreement, or the 2016 ECP Amendment, the Company was entitled to receive 50% of the upfront fee, or $57.5 million, which was received from Intrexon in July 2015.

Under the License Agreement, Precigen agreed to perform all future obligations of the Company under the Ares Trading Agreement other than certain payment obligations. Accordingly, the Company recognized the remaining deferred revenue as part of the settlement of a related party relationshipsrelationship as described in Note 7.

20

9.

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

6.7. Commitments and Contingencies (Continued)

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

On August 24, 2004, the Company entered into a patent and technology license agreement with MD Anderson and the Texas A&M University System, which the Company refers to, collectively, as the Licensors. Under this agreement, the Company was granted an exclusive, worldwide license to rights (including rights to U.S. and foreign patent and patent applications and related improvements andknow-how) for the manufacture and commercialization of two classes of organic arsenicals (water- and lipid-based) for human and animal use. The class of water-based organic arsenicals includes darinaparsin.

The Company issued options to purchase 50,222 shares outside of its stock option plans. The options vested upon completion of certain clinical milestones, all of which have occurred andUnder the options are now fully vested. An expense of $87 thousand was charged to research and development expense for the final vesting event which occurred in March 2016 upon enrollmentterms of the first patient in a multi-center pivotal clinical triali.e. a human clinical trial intended to provide the substantial evidence of efficacy necessary to support the filing of an approvable New Drug Application, or NDA. This trial was initiated by Solasia Pharma K.K., or Solasia, on March 28, 2016 and triggered a $1.0 million milestone payment to the Company from Solasia which was received in May 2016. An equivalent $1.0 million milestone payment was subsequently made to MD Anderson and reported net. In addition,agreement, the Company may be required to make additional payments to the Licensors upon achievement of certain other milestones in varying amounts which, on a cumulative basis could total up to an additional $4.5 million. In addition, the Licensors are entitled to receive single digit percentage royalty payments on sales from a licensed product and will also be entitled to receive a portion of any fees that the Company may receive from a possible sublicense under certain circumstances.

Collaboration Agreement with Solasia Pharma K.K.

On March 7, 2011, the Company entered into a License and Collaboration Agreement with Solasia.Solasia which was amended on July 31, 2014 to include an exclusive worldwide license. Pursuant to the License and Collaboration Agreement, the Company granted Solasia an exclusive license to develop and commercialize darinaparsin in both intravenous and oral forms and related organic arsenic molecules, in all indications for human use in apan-Asian/Pacific territory comprising Japan, China, Hong Kong, Macau, Republic of Korea, Taiwan, Singapore, Australia, New Zealand, Malaysia, Indonesia, Philippines and Thailand.

As consideration for the license, the Company received an upfront payment of $5.0 million to be used exclusively for further clinical development of darinaparsin outside of thepan-Asian/Pacific territory and will be entitled to receive additional payments of up to $32.5 million in development-based milestones and up to $53.5 million in sales-based milestones. The Company will also be entitled to receive double digit royalty payments from Solasia based upon net sales of licensed products in the applicable territories, once commercialized, and a percentage of sublicense revenues generated by Solasia. The $5.0 million upfront payment received in March 2011 was amortized over the period of the research and development effort, which was completed in March 2016.

On July 31, 2014, the Company entered into an amendment and restatement of the License and Collaboration Agreement granting Solasia an exclusive worldwide license to develop and commercialize darinaparsin, and related organoarsenic molecules, in both intravenous and oral forms in all indications for human use. In exchange, the Company will beis eligible to receive from Solasia development- and sales-based milestones, a royalty on net sales of darinaparsin, once commercialized, and a percentage of any sublicense revenues generated by Solasia.

21

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

6.7. Commitments and Contingencies (Continued)

Solasia will be responsible for all costs related to the development, manufacturing and commercialization of darinaparsin. The Company’s Licensors, as defined in the agreement, will receive a portion of all milestone and royalty payments made by Solasia to the Company in accordance with the terms of the license agreement with the Licensors.

On March 28, 2016, Solasia initiated a multi-center pivotal clinical trial intended to provide substantial evidence of efficacy necessary to support the filing of an application for an NDA for darinaparsin in certain of the territories assigned to Solasia. The initiation of the trial on March 28, 2016 triggered a $1.0 million milestone payment from Solasia to the Company which was received in May 2016. The Company subsequently made an equivalent payment to MD Anderson as the ultimate licensor of darinaparsin (see above).

7.8. Related Party Transactions

Collaborations with Intrexon/ Precigen

During the three and nine months ended March 31,September 30, 2018, the Company issued an aggregate of 3,6243,847 and 11,205 shares of Series 1 preferred stock to Intrexon, the holder of all of the outstanding shares of the Company’s Series 1 preferred stock, as monthly dividend payments.payments, respectively. At March 31,September 30, 2018, the Company recorded such shares of Series 1 preferred stock at a fair value of $5.1$6.1 million which is a component of temporary equity. During the threenine months ended March 31,September 30, 2018, the Company recorded a gain on the change of the derivative liabilities in the amount of $28 thousand.$0.2 million (Note 12).

During the threenine months ended March 31,September 30, 2019 and 2018, the Company expensed $1.2$1.7 million and $2.8$6.7 million, respectively, for services performed by Precigen. As of March 31,September 30, 2019 and December 31, 2018, the Company recorded $0.9$0.8 million and $2.8$1.9 million, respectively, in current liabilities on its balance sheet for amounts due to Precigen.

As discussed further in Note 1, onOn October 5, 2018, the Company entered into the License Agreement, the terms of which replaced the terms of the Channel Agreement.

22

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

9. Settlement of a Related Party Relationship

Exclusive License Agreement with Precigen

On October 5, 2018, the Company entered into the license agreement with Precigen. As between the Company and Precigen, the terms of the License Agreement replace the terms of: (a) the Channel Agreement, including all amendments to the Channel Agreement; (b) certain rights and obligations pursuant to the Ares Trading Agreement; (c) the MD Anderson License; and (d) the Research and Development2015 Agreement, and any amendments or statements of work thereto.

Pursuant to the terms of the License Agreement, Precigen has granted the Company an exclusive, worldwide, royalty-bearing,sub-licensable license to research, develop and commercialize (i) products utilizing Precigen’s RheoSwitch^® gene switch, or RTS, for the treatment of cancer, referred to asIL-12 Products, (ii) CAR products directed to (A) CD19 for the treatment of cancer, referred to as CD19 Products, and (B) a second target, subject to the rightsterms of Ares Trading (now Intrexon) to pursue such target under the Ares Trading Agreement, and (iii) TCR Products designed for neoantigens for the treatment of cancer. Precigen has also granted the Company an exclusive, worldwide, royalty-bearing,sub-licensable license for certain patents relating to theSleeping Beauty technology to research, develop and commercialize TCR Products.

23

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

9. Settlement of a Related Party Relationship (continued)

In consideration of the Company entering into the License Agreement, Intrexon forfeited and returned to the Company all shares of the Company’s Series 1 preferred stock held by or payable to Intrexon as of the date of the License Agreement. In addition, Precigen is required to transfer all of Ziopharm’s rights and obligations under the Ares Trading Agreement to Intrexon (or its affiliate). As a result, Ziopharm shall not be responsibleSee Note 7 for anyfurther information regarding the Company’s remaining obligations under the Ares Trading Agreement.

The Company determined that this transaction represented a capital transaction between related parties. The Company calculated the fair value of the preferred stock and the derivative liability on the date of the transaction, noting a total fair value of $163.3 million. The relinquishment of the Company’s obligation under the Ares Trading Agreement was also considered part of the overall capital transaction. The Company recognized an additional credit to accumulated deficit of $49.5 million as a result of the relief of the obligation under the Ares Trading Agreement (Note 8)7). The total amount of the settlement was $212.8 million.

The Company incurred approximately $7.4 million of transaction advisory costs with third-party vendors, of which $5.4 million was considered a direct cost associated with the Series 1 preferred stock extinguishment and is also included as part of the consideration transferred. The remaining $2.0 million of transaction costs were recognized as an expense during the year ended December 31, 2018.

The Company recognized a net credit to accumulated deficit of $207.3 million, calculated as the difference in the carrying value of the Series 1 preferred stock, derivative liability, and contract liability, and the consideration transferred of $5.4 million, in connection with the transaction. This amount is included in net income available to common shareholders in the calculation of earnings per share (Note 3)5).

24

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

10. Leases (continued)

On January 30, 2018, the Company entered into a lease agreement for office space in Houston at MD Anderson. Under the terms of the Houston lease agreement, the Company leases approximately two hundred and ten square feet and are required to make rental payments at an average monthly rate of approximately $1 thousand through April 2021. All future rent expense incurred in Houston, will be deducted from the Company’s prepayments at MD Anderson.

On March 12, 2019, the Company entered into a lease agreement for office space in Houston. Under the terms of the Houston lease agreement, the Company leases approximately one thousand and thirty-eight square feet and is required to make rental payments at an average monthly rate of approximately $2 thousand through April 2021. As of March 31, 2019, a total security deposit of $2 thousand is included in deposits on the balance sheet.

The components of lease expense were as follows:

Cash paid for amounts included in the measurement of the lease liabilities were $178 thousand$0.5 million for the quarternine months ended March 31,September 30, 2019.

25

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

9.11. Stock-Based Compensation

The Company recognized stock-based compensation expense on all employee andnon-employee awards as follows:

The Company granted an aggregate of 1,496,333140,000 and 1,835,755 stock options during the three and nine months ended March 31,September 30, 2019 with a weighted-average grant date fair value of $1.62$3.05 and $1.90 per share.share, respectively. The Company granted an aggregate of 7,500300,500 and 506,000 stock options during the three and nine months ended March 31,September 30, 2018 with a weighted-averageweighted average grant date fair value of $3.00$2.11 and $2.49 per share.share, respectively.

TheOn January 6, 2019, the Company recognizes forfeitures as they occur.paid an accrued annual performance bonus by issuing 446,428 shares of common stock.

On June 13, 2019 the Company extended the contractual life of 52,500 fully vested stock options held by a director of the Company. Additionally, on June 13, 2019, the Company accelerated the vesting and extended the contractual life of 126,700 stock options held by a director. These extensions and acceleration of vesting resulted in additional stock compensation expense of $0 and $0.4 million in the three and nine months ended September 30, 2019.

On February 15, 2018, the Company extended the contractual life of 751,667 fully vested stock options held by an officer of the Company by an additional nine months. Additionally, on March 12, 2018, the Company extended the contractual life of 117,500 fully vested stock options held by a director. These extensions did not result in additional stock compensation expense for the three months ended September 30, 2018. Additional stock compensation expense of $0.5 million was recorded for the nine months ended September 30, 2018.

For the three months ended March 31,September 30, 2019 and 2018, the fair value of stock options was estimated on the date of grant using a Black-Scholes option valuation model with the following assumptions:

27

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

9.11. Stock-Based Compensation – (continued)

Stock option activity under the Company’s stock option plan for the threenine months ended March 31,September 30, 2019 is as follows:

At March 31,September 30, 2019, total unrecognized compensation costs related to unvested stock options outstanding amounted to $6.2$6.7 million. The cost is expected to be recognized over a weighted-average period of 1.611.78 years.

A summary of the status of unvested restricted stock for the threenine months ended March 31,September 30, 2019 is as follows:

At March 31,September 30, 2019, total unrecognized compensation costs related to unvested restricted stock outstanding amounted to $4.1$2.8 million. The cost is expected to be recognized over a weighted-average period of 1.591.48 years.

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ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

10.12. Preferred Stock

The Company’s Board of Directors is authorized to designate any series of Preferred Stock, to fix and determine the variations in relative rights, preferences, privileges and restrictions as between and among such series.

On June 29, 2016, the Company entered into the 2016 ECP Amendment and Amendment to Exclusive Channel Collaboration Agreement, or the 2016 GvHD Amendment, with Intrexon (now Precigen) (Note 6)7). In consideration for the execution and delivery of the 2016 ECP Amendment and the 2016 GvHD Amendment, the Company issued to Intrexon 100,000 shares of its newly designated Series 1 preferred stock. Each share of the Company’s Series 1 preferred stock had a stated value of $1,200, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other recapitalization. The Series 1 preferred stock had certain rights, preferences, privileges and obligations, including dividend rights, conversion rights, consent rights with respect to certain Company actions, and rights to preferential payments in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or a change of control or sale, lease, transfer or exclusive license of all or substantially all of the Company’s assets prior to the conversion of the Series 1 preferred stock.

On October 5, 2018, the Company and Precigen entered into the License Agreement to replace all existing agreements between the companies, which provides the Company with certain exclusive andnon-exclusive rights to technology controlled by Precigen. In consideration of the Company entering into the License Agreement, Intrexon forfeited and returned to the Company all shares of the Company’s Series 1 preferred stock held by or payable to Intrexon as of the date of the License Agreement (Notes 67, 8 and 7)12).

11.13. Derivative Financial Instruments

The Company determined that certain embedded features related to the Series 1 preferred stock were derivative financial instruments. The company values the embedded derivative financial instruments related to the Series 1 preferred stock as Level 3 financial liabilities (Note 3)4).

On October 5, 2018, the Company entered into the License Agreement with Precigen. In partial consideration for the termination of the former agreements, the companiesCompany and Precigen agreed that Intrexon would forfeit all outstanding shares of the Series 1 preferred stock held by Intrexon, including any accrued dividends and related financial instruments. Thus, upon closing of the transaction, these derivative financial instruments were no longer outstanding (Note 10)9).

12.14. Warrants

The Company assesses whether an equity classified financial instrument is indexed to an entity’s own stock for purposes of determining whether a financial instrument should be treated as a derivative.

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

The Company assessed whether the warrants require accounting as derivatives. The Company determined that the warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with Financial Accounting Standards Board (FASB”(“FASB”) Accounting Standards Codification (“ASC”) Topic 815,Derivatives and Hedging. As such, the Company has concluded the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’ equity.

ZIOPHARM Oncology, Inc.

NOTES TO FINANCIAL STATEMENTS (unaudited)

14. Warrants (continued)

On July 26, 2019 and September 12, 2019, the Company entered into agreements with existing investors for the exercise of previously issued warrants to purchase common stock in a private placement. Pursuant to the terms of the agreements, investors exercised their 2018 warrants for an aggregate of 17,803,031 shares of common stock, at an exercise price of $3.01 per share. The warrants exercised were originally issued by the Company in a private placement that closed in November 2018 (Note 2). Proceeds from the warrant exercise, after deducting placement agent fees and other related expenses of $1.1 million were approximately $52.5 million. The Company issued the participating investors new warrants to purchase up to 17,803,031 additional shares of common stock as an inducement for the warrant holders to exercise their 2018 warrants early. The 2019 warrants will become exercisable six months following the date of issuance, will expire on the fifth anniversary of the initial exercise date, and have an exercise price of $7.00. The 2019 warrants were valued using a Black-Scholes valuation model and resulted in a $60.8 million non-cash charge to the Company’s statement of operations for the three and nine months ended September 30, 2019.

The Company assessed whether the 2019 warrants require accounting as derivatives. The Company determined that the warrants were (1) indexed to the Company’s own stock and (2) classified in stockholders’ equity in accordance with FASB ASC Topic 815,Derivatives and Hedging. As such, the Company has concluded the warrants meet the scope exception for determining whether the instruments require accounting as derivatives and should be classified in stockholders’ equity.

15. Joint Venture

On December 18, 2018, the Company entered into a Framework Agreement with TriArm Therapeutics, Ltd., or TriArm, whereby the parties will launch Eden BioCell, Ltd., or Eden BioCell, to lead clinical development and commercialization of certain Sleeping Beauty-generated CAR-T therapies as set forth in a separate license agreement.

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

The closing of the transaction occurred on July 5, 2019. The Framework Agreement and Share Subscription Agreements were each respectively amended to be effective as of this date. Upon consummation of the joint venture, Eden BioCell and the Company also entered into a license agreement, pursuant to which the Company licensed the rights to Eden BioCell for third-generationSleeping Beauty-generated CAR-T therapies targeting the CD19 antigen for the territory of China (including Macau and Hong Kong), Taiwan and Korea. Eden BioCell will be responsible for certain milestone and royalty payments to related to the Company’s license agreements with MD Anderson and Precigen, Inc. (Note 7). TriArm entered into a Master Services Agreement with Eden BioCell and contributed $10.0 million of cash on the closing date. TriArm also committed to contribute an additional $25.0 million to Eden BioCell over time through the achievement of specified milestones. TriArm and the Company each received a 50% equity interest in the joint venture in exchange for their contributions to Eden BioCell.

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

The Company determined that Eden BioCell was not a customer and therefore, accounted for the transaction as the transfer of nonfinancial assets to be recognized at their fair value on the contribution date. The fair value of the intellectual property contributed to Eden BioCell had a de minimis value due to the early stage of the technology and the likelihood of clinical success. Due to the de minimis fair value of the intellectual property contributed, the Company did not record a gain or loss on this transaction and recognized a value of $0 for their equity-method investment.

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

Forward Looking Statements

This Quarterly Report on Form10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “seeks,” “goals,” “estimates,” “predicts,” “potential” and “continue” or similar words. In particular, statements contained in this Quarterly Report, including but not limited to, statements regarding our ability to raise substantial additional capital to fund our planned operations; the costs and timing of our clinical trials and of the development and commercialization of our pipeline products; the sufficiency of our cash and cash flows from operations and our expected uses of cash; our ability to finance our operations and business initiatives and obtain funding for such activities; our future results of operations and financial position, business strategy and plan prospects, projected revenue or costs and objectives of management for future research, development or operations, are forward-looking statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those discussed in Part II, Item 1A. “Risk Factors” section of this Quarterly Report. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. Except as required by law, we undertake no obligation to revise or update any forward-looking statements after the date of this Quarterly Report.

Overview

We are a clinical-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing next generation immunotherapy platforms that leverage cell- and gene-based therapies to treat patients with cancer. We are developing two immuno-oncology platform technologies that utilize the patient’s immune system by employing novel, controlled gene expression and innovative cell engineering technologies designed to deliver safe, effective, and scalablenon-viral cell- and viral-based gene therapies for the treatment of multiple cancer types. Our first platform is referred to asSleeping Beauty and is based on the genetic engineering of immune cells using anon-viral transposon/transposase system that is intended to stably reprogram T cells outside of the body for subsequent infusion. Our second platform is termed ControlledIL-12, which is designed to stimulate expression of interleukin 12, orIL-12, a master regulator of the immune system, in a controlled and safe manner to focus the patient’s immune system to attack cancer cells. We believe these two platforms willhave the potential to provide unique and powerful solutions to address the issues associated with (1) treating solid tumors with heterogeneous and unknown antigens, and (2) providing cost-effective scalable manufacturing solutions forT-cell T cell receptorT-cell, T cell, or TCR⁺ T, and chimeric antigen receptor, or CART-cell, or CAR⁺ T, therapies for solid tumors and hematologic malignancies. We expect programs from our two platform technologies to be in the clinic in 2019.chimeric antigen receptor, or CAR T cell, or CAR⁺ T, therapies targeting CD19 on malignant B cells.

Using ourSleeping Beautyplatform, we are developing TCR⁺ T therapies initially to target solid tumors. Our T cell receptor, or TCR, program designs and manufactures T cells that are intended to target tumor-specific antigens, unique to each patient, thereby delivering truly personalized therapy that can attack an individual patient’s cancer. These antigens are referred to as neoantigens as they are only expressed by the tumor, reducing the potential for toxicity upon targeting normal cells. A minority of neoantigens are shared between patients and between classes of tumors and are referred to as “hotspots”. TheSleeping Beauty system uses DNA plasmids to reprogram T cells to express introduced TCRs on apatient-by-patient basis (addressing inter-tumor heterogeneity) and possibly to express more than one TCR for each patient (addressing intra-tumor heterogeneity). The genetic modification using theSleeping Beauty system of recipient-derived products enables us to target neoantigens in two ways. The first recognizes that most neoantigens are unique to each patient’s tumor and we plan to infuse TCR⁺T cells expressing recipient-derived (autologous) TCRs. The second is based on the finding that some neoantigens in hotspots are shared between patients and we plan to administer TCR⁺T expressing allogeneic TCRs from a library derived from third parties. We believe the scalability of our approach provides a competitive advantage to alternative viral-based approaches toT-cell T cell manufacturing. Under our Cooperative Research and Development Agreement, or CRADA, the National Cancer Institute, or the NCI, intends to initiate a Phase 1 clinical trial in patients with a variety of solid tumors using theSleeping Beautyplatform to genetically modifyT-cells to target patient-specific neoantigens inmid-2019. The clinical trial will be under the direction of Steven A. Rosenberg, M.D., Ph.D., Chief of the Surgery Branch at the NCI.

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We are also developing CAR⁺ T therapies using ourSleeping Beautyplatform. ThisOur CAR⁺ T program seeks to solve the complex and costly manufacturing limitations of existing CD19-specific CAR⁺ T therapies that we believe will continue limiting their commercial potential. We believe using DNA plasmids in theSleeping Beauty system to express a CD19-specific CAR and our proprietary membrane-bound interleukin 15, or mbIL15, in resting T cells obtained from peripheral blood will enable infused T cells to propagate within the patient to target leukemia and lymphoma, thus avoiding the need to numerically expand T cells for weeks in bioreactors before patient administration. The mbIL15 isco-expressed with a “kill switch” or “safety switch” to conditionally eliminate infused T cells. We expect the lower cost of DNA plasmids compared with the virus used by other CAR⁺ T programs, together with the avoidance of lengthyex vivo manufacturing, will reduce the cost and complexity of manufacturing CAR⁺T cells. These technologies should enable T cells to be infused within two days of gene transfer in a process we refer to as rapid personalized manufacture, or RPM. We are advancing our CAR⁺ T therapies in the United States in collaboration with The University of Texas MD Anderson Cancer Center, or MD Anderson, to target CD19 on malignant B cells. In 2019, we expect to initiate a Phase 1 clinical trial in the United States of our third-generationSleeping BeautymodifiedCAR⁺ T cells,co-expressing CAR and mbIL15, manufactured and reinfused into the patient in less than two days from gene transfer. In addition, in a joint venture with TriArm Therapeutics, Ltd., or TriArm, we are forminghave formed Eden BioCell, Ltd., or Eden BioCell, to lead clinical development and commercialization ofSleeping Beauty-generated CD19-specific RPMCAR-T therapies in the People’s Republic of China, Taiwan and Korea. Eden BioCell will beis owned equally by us and TriArm and the parties will share decision-making authority. TriArm has committed up to $35.0 million, of which $10.0 million has been paid to date, to this joint venture and will manage all clinical development to execute trials in the designated territory. We expect our joint venture with TriArm to close in the first half of 2019 and we may evaluate additional programs to pursue in this joint venture.

Our ControlledIL-12 platform uses virotherapy based on an engineered replication-incompetent adenovirus(Ad-RTS-hIL-12) plus veledimex as a gene delivery system to conditionally produceIL-12, a potent, naturally occurring anti-cancer protein, to treat patients with solid tumors where a specific target is unknown, including brain cancer. Our ControlledIL-12 platform allows us to deliverIL-12 in a tunable dose, which is critical for this potent cytokine. In a Phasephase 1 clinical trial of patients with recurrent glioblastoma multiforme, or rGBM, a subset of patients (n=6) who receivedlow-dose steroids along with 20 mg of veledimex plusAd-RTS-hIL-12, achieved 17.8 months median overall survival, or OS, compared with five to eight months OS established in historical controls.OS.Thirty-six additional patients with rGBM have been recruited into a sub study designed to encourage use oflow-dose steroids and 20 mg veledimex to further understand the potential of ControlledIL-12 as a monotherapy. We are also developing our ControlledIL-12 platform in combination with immune checkpoint inhibitors. In June 2018, we began enrolling patients with rGBM to receiveWe are studyingAd-RTS-hIL-12 plus veledimex in combination with OPDIVO^® (nivolumab) in a Phasephase 1 dose-escalation trial.trial of patients with rGBM. In November 2018, we announced a clinical supply agreement with Regeneron Pharmaceuticals, Inc., or Regeneron, to evaluateAd-RTS-hIL-12 plus veledimex in combination with Regeneron’sPD-1PD-1antibody antibody Libtayo®Libtayo^® (cemiplimab-rwlc) for the treatment of patients with rGBM. We currently expect to initiatehave initiated a Phasephase 2 clinical trial in the first half of 2019 in approximately 30 patients with rGBM to measure preliminary safety and efficacy ofevaluating ControlledIL-12(Ad-RTS-hIL-12 plus veledimex, Ad+V), in combination with Libtayo.PD-1 antibody Libtayo^® (cemiplimab-rwlc) for the treatment of recurrent or progressive glioblastoma multiforme (rGBM) in adults.