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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended September 30, 2021

OR

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

For the transition period from ___________________ to ___________________

Commission File Number: 001-40384

 

TALARIS THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

83-2377352

( State or other jurisdiction of

incorporation or organization)

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

570 S. Preston St

Louisville, KY

40202

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (502398-9250

 

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

 

TALS

 

The Nasdaq Global Market

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  ☒    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

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

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

As of November 1, 2021, the registrant had 41,354,643 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets

1

 

Condensed Consolidated Statements of Operations

2

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

32

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

80

Item 3.

Defaults Upon Senior Securities

80

Item 4.

Mine Safety Disclosures

80

Item 5.

Other Information

80

Item 6.

Exhibits

81

Signatures

82

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TALARIS THERAPEUTICS, INC.

BALANCE SHEETS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

September 30, 2021

 

 

December 31, 2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

27,311

 

 

$

17,589

 

Marketable securities

 

 

227,423

 

 

 

131,899

 

Prepaid and other current assets

 

 

3,493

 

 

 

1,263

 

Total current assets

 

 

258,227

 

 

 

150,751

 

Property and equipment, net

 

 

2,994

 

 

 

2,013

 

Other assets

 

 

104

 

 

 

14

 

Total assets

 

$

261,325

 

 

$

152,778

 

Liabilities and Stockholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,182

 

 

$

767

 

Accrued expenses

 

 

3,800

 

 

 

2,637

 

Total current liabilities

 

 

4,982

 

 

 

3,404

 

Share repurchase liability

 

 

694

 

 

 

996

 

Contingent stock liability

 

 

 

 

 

373

 

Total liabilities

 

 

5,676

 

 

 

4,774

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

Convertible preferred stock

 

 

 

 

 

 

 

 

Series A convertible preferred stock, $0.0001 par value, no shares authorized, issued

   and outstanding as of September 30, 2021 and 40,000,000 shares authorized, issued and

   outstanding (liquidation preference of $40,000) as of December 31, 2020

 

 

 

 

 

37,383

 

Series A-1 convertible preferred stock, $0.0001 par value, no shares authorized, issued

   and outstanding as of September 30, 2021 and 28,000,000 shares authorized, issued and

   outstanding (liquidation preference of $35,000) as of December 31, 2020

 

 

 

 

 

34,272

 

Series B convertible preferred stock, $0.0001 par value, no shares authorized, issued

   and outstanding as of September 30, 2021 and 62,499,993 shares authorized, issued

   and outstanding (liquidation preference of $114,994) as of December 31, 2020

 

 

 

 

 

114,496

 

Total convertible preferred stock

 

 

 

 

 

186,151

 

Stockholders’ deficit

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 140,000,000 voting shares authorized

   and 39,562,723 shares issued and outstanding and 10,000,000 non-voting shares

   authorized and 1,150,000 issued and outstanding as of September 30, 2021

   and 36,366,101 shares authorized and 7,087,130 issued and outstanding

   as of December 31, 2020

 

 

4

 

 

 

1

 

Additional paid-in-capital

 

 

332,222

 

 

 

4,879

 

Accumulated deficit

 

 

(76,606

)

 

 

(43,014

)

Accumulated other comprehensive income (loss)

 

 

29

 

 

 

(13

)

Total stockholders’ equity (deficit)

 

 

255,649

 

 

 

(38,147

)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

 

$

261,325

 

 

$

152,778

 

 

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

 

1


 

TALARIS THERAPEUTICS, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

9,183

 

 

$

3,956

 

 

$

23,655

 

 

$

10,896

 

General and administrative

 

 

3,874

 

 

 

2,182

 

 

 

9,464

 

 

 

4,953

 

Total operating expenses

 

 

13,057

 

 

 

6,138

 

 

 

33,119

 

 

 

15,849

 

Loss from operations

 

 

(13,057

)

 

 

(6,138

)

 

 

(33,119

)

 

 

(15,849

)

Interest and other income (expense), net

 

 

116

 

 

 

(279

)

 

 

(473

)

 

 

(79

)

Net loss

 

$

(12,941

)

 

$

(6,417

)

 

$

(33,592

)

 

$

(15,928

)

Unrealized (loss) gain on marketable securities

 

 

(5

)

 

 

(12

)

 

 

42

 

 

 

8

 

Total other comprehensive loss

 

 

(12,946

)

 

 

(6,429

)

 

 

(33,550

)

 

 

(15,920

)

Total comprehensive loss

 

$

(12,946

)

 

$

(6,429

)

 

$

(33,550

)

 

$

(15,920

)

Net loss attributable to common stockholders

 

$

(12,941

)

 

$

(6,417

)

 

$

(33,592

)

 

$

(15,928

)

Net loss per common share, basic and diluted

 

$

(0.32

)

 

$

(0.94

)

 

$

(1.33

)

 

$

(2.44

)

Weighted average number of common shares outstanding used in computation of net loss per common share, basic and diluted

 

 

40,669,412

 

 

 

6,823,163

 

 

 

25,190,479

 

 

 

6,537,820

 

 

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

 

2


 

TALARIS THERAPEUTICS, INC.

STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

(unaudited)

 

 

 

Series A

Convertible

Preferred Stock

 

 

Series A-1

Convertible Preferred

Stock

 

 

Series B

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Accumulated

Other

 

 

Total

 

 

 

Outstanding

Shares

 

 

Amount

 

 

Outstanding

Shares

 

 

Amount

 

 

Outstanding

Shares

 

 

Amount

 

 

 

Outstanding

Shares

 

 

Amount

 

 

Paid-in

Capital

 

 

Accumulated

Deficit

 

 

Comprehensive

Income (Loss)

 

 

Stockholders’

Equity

(Deficit)

 

Balance at December 31, 2019

 

 

40,000,000

 

 

$

37,383

 

 

 

16,000,000

 

 

$

19,307

 

 

 

 

 

$

 

 

 

 

6,390,137

 

 

$

1

 

 

$

3,204

 

 

$

(20,307

)

 

$

 

 

$

(17,102

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

123

 

 

 

 

 

 

 

 

 

123

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,848

)

 

 

 

 

 

(4,848

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13

 

 

 

13

 

Balance at March 31, 2020

 

 

40,000,000

 

 

$

37,383

 

 

 

16,000,000

 

 

$

19,307

 

 

 

 

 

$

 

 

 

 

6,390,137

 

 

$

1

 

 

$

3,327

 

 

$

(25,155

)

 

$

13

 

 

$

(21,814

)

Issuance of common stock upon exercise

   of stock options

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

26,530

 

 

$

 

 

$

25

 

 

$

 

 

$

 

 

$

25

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

119

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,663

)

 

 

 

 

 

(4,663

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

 

7

 

Balance at June 30, 2020

 

 

40,000,000

 

 

$

37,383

 

 

 

16,000,000

 

 

$

19,307

 

 

 

 

 

$

 

 

 

 

6,416,667

 

 

$

1

 

 

$

3,471

 

 

$

(29,818

)

 

$

20

 

 

$

(26,326

)

Issuance of common stock upon exercise

   of stock options

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

569,261

 

 

$

 

 

$

526

 

 

$

 

 

$

 

 

$

526

 

Issuance of Preferred Stock A-1 upon exercise

   of stock options, net of issuance costs of $31

 

 

 

 

 

 

 

 

12,000,000

 

 

 

14,969

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Preferred Stock B upon exercise

   of stock options, net of issuance costs of $476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,499,993

 

 

 

114,496

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

187

 

 

 

 

 

 

 

 

 

187

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(6,417

)

 

 

 

 

 

(6,417

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

(12

)

Balance at September 30, 2020

 

 

40,000,000

 

 

$

37,383

 

 

 

28,000,000

 

 

$

34,276

 

 

 

62,499,993

 

 

$

114,496

 

 

 

 

6,985,928

 

 

$

1

 

 

$

4,184

 

 

$

(36,235

)

 

$

8

 

 

$

(32,042

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

40,000,000

 

 

$

37,383

 

 

 

28,000,000

 

 

$

34,272

 

 

 

62,499,993

 

 

$

114,496

 

 

 

 

7,087,130

 

 

$

1

 

 

$

4,879

 

 

$

(43,014

)

 

$

(13

)

 

$

(38,147

)

Issuance of common stock upon exercise

   of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

117,181

 

 

 

 

 

 

123

 

 

 

 

 

 

 

 

 

123

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

835

 

 

 

 

 

 

 

 

 

835

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,299

)

 

 

 

 

 

(9,299

)

Unrealized loss on marketable securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22

 

 

 

22

 

Balance at March 31, 2021

 

 

40,000,000

 

 

$

37,383

 

 

 

28,000,000

 

 

$

34,272

 

 

 

62,499,993

 

 

$

114,496

 

 

 

 

7,204,311

 

 

$

1

 

 

$

5,837

 

 

$

(52,313

)

 

$

9

 

 

$

(46,466

)

Issuance of common stock, net of underwriting

   discounts and issuance costs of $12,858,764

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,825,000

 

 

$

1

 

 

$

137,165

 

 

$

 

 

$

 

 

$

137,166

 

Conversion of convertible preferred stock to

   common stock

 

 

(40,000,000

)

 

 

(37,383

)

 

 

(28,000,000

)

 

 

(34,272

)

 

 

(62,499,993

)

 

 

(114,496

)

 

 

 

24,392,498

 

 

 

2