hook_Current_Folio_10Q

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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 March 31, 2019

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: 001‑38869

 

HOOKIPA PHARMA INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

 

 

Delaware

81‑5395687

( State or other jurisdiction of
incorporation or organization)

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

 

 

350 Fifth Avenue, 72nd Floor, Suite 7240
New York, New York

10118

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: +43 1 890 63 60

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

 

 

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

 

  

Small 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 Act).    Yes      No  

 

 

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

HOOK

The Nasdaq Global Select Market

 

As of May 20, 2019, the registrant had 21,588,756 shares of common stock and 3,819,732 shares of Class A common stock outstanding, each $0.0001 par value per share.

 

 

 

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10‑Q contains forward-looking statements which are made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:

·

the success, cost and timing of our product development activities and clinical trials;

·

the timing, scope or likelihood of regulatory filings and approvals, including timing of Investigational New Drug Application and Biological Licensing Application filings for our current and future product candidates, and final U.S. Food and Drug Administration, European Medicines Agency or other foreign regulatory authority approval of our current and future product candidates;

·

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

·

our manufacturing, commercialization and marketing capabilities and strategy;

·

the potential benefits of and our ability to maintain our collaboration with Gilead Sciences, Inc., and establish or maintain future collaborations or strategic relationships or obtain additional funding;

·

the rate and degree of market acceptance and clinical utility of our current and future product candidates;

·

our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rights covering our VaxWave and TheraT technologies and the product candidates based on these technologies, the validity of intellectual property rights held by third parties, and our ability not to infringe, misappropriate or otherwise violate any third-party intellectual property rights;

·

future agreements with third parties in connection with the commercialization of our product candidates and any other approved product;

·

regulatory developments in the United States and foreign countries;

·

competitive companies, technologies and our industry and the success of competing therapies that are or may become available;

·

our ability to attract and retain key scientific or management personnel;

·

our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates;

·

the accuracy of our estimates of our annual total addressable market, future revenue, expenses, capital requirements and needs for additional financing;

·

our expectations about market trends; and

 

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·

our expectations regarding the period during which we qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012, as amended.

All of our forward-looking statements are as of the date of this Quarterly Report on Form 10‑Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of or any material adverse change in one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10‑Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the Securities and Exchange Commission could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10‑Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10‑Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10‑Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10‑Q.

 

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Page

 

 

 

PART I. 

FINANCIAL INFORMATION

1

Item 1. 

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018

1

 

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2019 and 2018

2

 

Condensed Consolidated Statements of Comprehensive Loss

2

 

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit

3

 

Condensed Consolidated Statements of Cash Flows

4

 

Notes to Condensed Consolidated Financial Statements

5

Item 2. 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 3. 

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4. 

Controls and Procedures

32

 

 

 

PART II. 

OTHER INFORMATION

34

Item 1. 

Legal Proceedings

34

Item 1A. 

Risk Factors

34

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

82

Item 3. 

Defaults Upon Senior Securities

82

Item 4. 

Mine Safety Disclosures

82

Item 5. 

Other Information

82

Item 6. 

Exhibits

83

Signatures 

84

 

 

 

 

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PART I—FINANCIAL INFORMATION

Item 1.      Financial Statements.

HOOKIPA PHARMA INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2019

 

2018

 

 

 

 

 

 

 

Assets

 

 

  

 

 

  

Current assets:

 

 

  

 

 

  

Cash and cash equivalents

 

$

70,508

 

$

48,580

Accounts receivable

 

 

1,328

 

 

4,919

Prepaid expenses and other current assets

 

 

13,067

 

 

8,812

Total current assets

 

 

84,903

 

 

62,311

Non-current assets:

 

 

  

 

 

  

Property and equipment, net

 

 

4,512

 

 

4,337

Operating lease assets

 

 

8,920

 

 

 —

Other non-current assets

 

 

3,645

 

 

1,603

Total non-current assets

 

 

17,077

 

 

5,940

 

 

 

 

 

 

 

Total assets

 

$

101,980

 

$

68,251

 

 

 

 

 

 

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

 

 

  

 

 

  

Current liabilities

 

 

  

 

 

  

Accounts payable

 

$

3,298

 

$

3,656

Deferred revenues

 

 

6,368

 

 

6,619

Accrued expenses and other current liabilities

 

 

5,428

 

 

4,420

Total current liabilities

 

 

15,094

 

 

14,695

Non-current liabilities

 

 

  

 

 

  

Loans payable, non-current

 

 

4,499

 

 

4,392

Operating lease liabilities, non-current

 

 

6,311

 

 

 —

Deferred revenues, non-current

 

 

823

 

 

1,663

Other non-current liabilities

 

 

3,262

 

 

3,102

Total non-current liabilities

 

 

14,895

 

 

9,157

Total liabilities

 

 

29,989

 

 

23,852

 

 

 

 

 

 

 

Commitments and contingencies (Note 11)

 

 

  

 

 

  

Redeemable convertible preferred stock (series A, B, C and D), $0.0001 par value; 1,666,961 shares and 1,323,506 shares authorized, issued and outstanding at March 31, 2019 and December 31, 2018, respectively; aggregate liquidation preference of $137.1 million and $99.7 million at March 31, 2019 and December 31, 2018, respectively

 

 

142,048

 

 

104,774

 

 

 

 

 

 

 

Stockholders’ equity (deficit):

 

 

  

 

 

  

Common stock, $0.0001 par value; 25,614,706 and 18,454,860 shares authorized at March 31, 2019 and December 31, 2018, respectively; 1,006,595 shares issued and outstanding at March 31, 2019 and December 31, 2018

 

 

 0

 

 

 0

Class A common stock, $0.0001 par value; 19,006,880 and 0 shares authorized at March 31, 2019 and December 31, 2018, respectively; 0 shares issued and outstanding at March 31, 2019 and December 31, 2018

 

 

 —

 

 

 —

Additional paid-in capital

 

 

3,710

 

 

3,327

Accumulated other comprehensive loss

 

 

(4,457)

 

 

(3,720)

Accumulated deficit

 

 

(69,310)

 

 

(59,982)

Total stockholders’ equity (deficit)

 

 

(70,057)

 

 

(60,375)

 

 

 

 

 

 

 

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

 

$

101,980

 

$

68,251

 

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

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HOOKIPA PHARMA INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

(In thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

    

Three months ended March 31, 

 

 

2019

    

2018

 

 

 

 

 

 

 

Revenue from collaboration and licensing

 

$

2,235

 

$

 —

Operating expenses:

 

 

  

 

 

  

Research and development

 

 

(10,179)

 

 

(4,969)

General and administrative

 

 

(2,711)

 

 

(1,480)

Total operating expenses

 

 

(12,890)

 

 

(6,449)

Loss from operations

 

 

(10,655)

 

 

(6,449)

Other income (expense):

 

 

  

 

 

  

Grant income

 

$

1,192

 

$

2,071

Interest income

 

 

64

 

 

 —

Interest expense

 

 

(213)

 

 

(193)

Other income and expenses, net

 

 

283

 

 

22

 

 

 

 

 

 

 

Total other income (expense), net

 

 

1,326

 

 

1,900

 

 

 

 

 

 

 

Net loss before tax

 

 

(9,329)

 

 

(4,549)

 

 

 

 

 

 

 

Income tax expense

 

 

(0)

 

 

(24)

 

 

 

 

 

 

 

Net loss

 

 

(9,329)

 

 

(4,573)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss:

 

 

  

 

 

  

Foreign currency translation (loss) gain, net of tax

 

 

(736)

 

 

1,539

Comprehensive loss

 

$

(10,065)

 

$

(3,034)

 

 

 

 

 

 

 

Net loss per share—basic and diluted

 

$

(9.27)

 

$

(5.02)

 

 

 

 

 

 

 

Weighted average common shares outstanding — basic and diluted

 

 

1,006,595

 

 

911,777

 

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

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HOOKIPA PHARMA INC.

CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (UNAUDITED)

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

 

Total

 

 

Preferred Stock

 

 

Common Stock

 

Paid-in

 

Comprehensive

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Deficit

Balances as of December 31, 2018

 

1,323,506

 

 

104,774

 

 

1,006,595

 

 

 0

 

 

3,327

 

 

(3,720)

 

 

(59,982)

 

 

(60,375)

Issuance of Series D preferred stock, net of issuance costs of $158

 

257,000

 

 

37,274

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Foreign currency translation adjustment, net of tax

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(736)

 

 

 —

 

 

(736)

Stock-based compensation expense

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

383

 

 

 —

 

 

 —

 

 

383

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(9,329)

 

 

(9,329)

Balances as of March 31, 2019

 

1,580,506

 

$

142,048

 

 

1,006,595

 

$

 0

 

$

3,710

 

$

(4,456)

 

$

(69,311)

 

$

(70,057)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

 

Total

 

 

Preferred Stock

 

 

Common Stock

 

Paid-in

 

Comprehensive

 

Accumulated

 

Stockholders’

 

    

Shares

    

Amount

  

  

Shares

    

Amount

    

Capital

    

Income (Loss)

    

Deficit

    

Deficit

Balances as of December 31, 2017

 

1,323,506

 

 

104,774

 

 

911,777

 

 

 0

 

 

2,451

 

 

(1,362)

 

 

(43,745)

 

 

(42,656)

Foreign currency translation adjustment, net of tax

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

1,539

 

 

 —

 

 

1,539

Stock-based compensation expense

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

206

 

 

 —

 

 

 —

 

 

206

Net loss

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(4,573)

 

 

(4,573)

Balances as of March 31, 2018

 

1,323,506

 

$

104,774

 

 

911,777

 

$

 0

 

$

2,657

 

$

177

 

$

(48,318)

 

$

(45,484)

 

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

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HOOKIPA PHARMA INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

 

 

 

 

 

 

 

 

 

Three months ended March 31, 

 

    

2019

    

2018

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

Net loss

 

$

(9,329)

 

$

(4,573)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

383

 

 

206

Depreciation expense

 

 

566

 

 

140

Other non-cash items

 

 

54

 

 

 7

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

3,509

 

 

(1)

Prepaid expenses and other current assets

 

 

(3,711)

 

 

(889)

Other non-current assets

 

 

(6,069)

 

 

(1)

Accounts payable

 

 

(958)

 

 

622

Deferred revenues

 

 

(935)

 

 

(0)

Accrued expenses and other liabilities

 

 

4,434

 

 

(483)

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(12,056)

 

 

(4,972)

 

 

 

 

 

 

 

Investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(400)

 

 

(262)

 

 

 

 

 

 

 

Net cash used in investing activities

 

 

(400)

 

 

(262)

 

 

 

 

 

 

 

Financing activities:

 

 

 

 

 

 

Payments related to finance leases

 

 

(1,395)

 

 

 —

Proceeds from issuance of redeemable convertible preferred stock

 

 

37,274

 

 

6,439

Payments of deferred offering costs

 

 

(722)

 

 

 —

Proceeds from borrowings

 

 

 —

 

 

440

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

35,157

 

 

6,879

 

 

 

 

 

 

 

Net decrease / increase in cash and cash equivalents

 

 

22,701

 

 

1,645

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

48,580

 

 

61,362

Effect of exchange rate changes on cash and cash equivalents

 

 

(773)

 

 

1,750

Cash and cash equivalents at end of period

 

$

70,508

 

$

64,757

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid for interest

 

$

 —

 

$

 —

Cash paid for income taxes

 

$

(0)

 

$

(1)

 

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

 

 

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Nature of the business and organization

HOOKIPA Pharma Inc. ("HOOKIPA" or the "Company") is a clinical stage biopharmaceutical company developing a new class of immunotherapeutics targeting infectious diseases and cancers based on its proprietary arenavirus platform that is designed to reprogram the body’s immune system.

The Company was incorporated under the name of Hookipa Biotech, Inc. under the laws of the State of Delaware in February 2017 as a fully-owned subsidiary of Hookipa Biotech AG. In June 2018, the Company changed its name from Hookipa Biotech, Inc. to HOOKIPA Pharma Inc. and in order to effectuate the change of the jurisdiction of incorporation, the Company acquired all of the shares of Hookipa Biotech AG, now Hookipa Biotech GmbH. HOOKIPA is headquartered in New York, with European research and preclinical development operations headquartered in Vienna, Austria. In April 2019, the Company closed its initial public offering (“IPO”) and its shares started trading on the Nasdaq Global Select Market under the ticker symbol “HOOK”.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, the ability to establish clinical- and commercial-scale manufacturing processes and the ability to secure additional capital to fund operations. Product candidates currently under development will require significant additional research and development efforts, including extensive preclinical and clinical testing and regulatory approval prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities and may not ultimately lead to a marketing approval and commercialization of a product. Even if the Company’s drug development efforts are successful, it is uncertain if and when the Company will realize significant revenue from product sales.

 

2. Summary of significant accounting policies

Basis of presentation

The Company’s condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP"). The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.

The accompanying condensed consolidated balance sheets as of March 31, 2019, the condensed consolidated statements of operations and comprehensive loss and of cash flows for the three months ended March 31, 2019 and 2018, and the condensed consolidated statement of redeemable convertible preferred stock and stockholders’ deficit for the three months ended March 31, 2019 are unaudited.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements, except for the accounting of lease agreements that have been reported in accordance with ASC 842 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement for interim reporting. Certain information and footnote disclosures typically included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements as of and for the year ended December 31, 2018, which are included in the Company’s prospectus related to the Company’s IPO, filed April 19, 2019 (File No. 333-230451) with the Securities and Exchange Commission ("SEC”), pursuant to Rule 424 (b) under the Securities Act of 1933, as amended. The results for any interim period are not necessarily indicative of results for any future period.

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Stock split

On April 5, 2019, the Company effected a 11.643‑for-one stock split of its issued and outstanding shares of common stock. The par value of the common stock was not adjusted as a result of the split. All issued and outstanding share and per share amounts of common stock and options included in the accompanying condensed consolidated financial statements have been adjusted to reflect this stock split for all periods presented. The conversion ratios for each series of the Company’s redeemable convertible preferred stock (see Note 7) have been adjusted proportionally.

Going concern

Since inception, the Company’s activities have consisted primarily of performing research and development to advance its technologies. The Company is still in the development phase and has not been marketing its technologies to date. Through March 31, 2019, the Company has funded its operations with proceeds from sales of redeemable convertible preferred stock, collaboration and licensing agreements, grants and borrowings under various agreements with foreign public funding agencies. Since inception, the Company has incurred recurring losses, including net losses of $9.3 million and $4.6 million for the three months ended March 31, 2019 and 2018, respectively. As of March 31, 2019, the Company had an accumulated deficit of $69.3 million. The Company expects to continue to generate operating losses in the  foreseeable future. As of May 20, 2019, the filing date of this Quarterly Report on Form 10‑Q, the Company expected that its cash and cash equivalents would be sufficient to fund its operating expenses, capital expenditure requirements and debt service payments through at least 12 months from the issuance date of the condensed consolidated financial statements.

The Company will seek additional funding in order to reach its development and commercialization objectives. The Company will seek funds through further equity financings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. The Company may not be able to obtain financing on acceptable terms, or at all, and the Company may not be able to enter into collaborations or other arrangements. The terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders. If the Company is unable to obtain funding, the Company could be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The condensed consolidated financial statements do not reflect any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as a going concern.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue, income and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the recognition of revenue and income, the accrual of research and development expenses, the valuation of common and preferred stock, the valuation of stock-based awards and the valuation of liabilities. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results may differ from those estimates or assumptions.

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Concentrations of credit risk and of significant suppliers

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, cash equivalents and short-term bank deposits. As of December 31, 2018 and March 31, 2019, the Company’s cash and cash equivalents included substantial amounts of cash balances held in euros on accounts with European banks in excess of publicly insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

The Company relies, and expects to continue to rely, on a small number of vendors to manufacture supplies and raw materials for its development programs. These programs could be adversely affected by a significant interruption in these manufacturing services or the availability of raw materials.

Deferred offering costs

The Company capitalizes certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, these costs are recorded in stockholders’ equity as a reduction of the additional paid-in capital generated as a result of the offering. Should the in-process equity financing be abandoned, the deferred offering costs would be expensed immediately as a charge to operating expenses in the condensed consolidated statements of operations and comprehensive loss. As of March 31, 2019 and December 31, 2018, the Company recorded deferred offering costs of $2.3 million and $1.5 million, respectively, in prepaid expenses and other current assets.

Property and equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset as follows:

 

 

 

 

 

    

Estimated useful life

Leasehold improvements (1)

 

5 years

Laboratory equipment

 

3 - 10 years

Furniture and fixtures

 

3 - 10 years

Computer equipment and software

 

3 - 4 years


(1)

In the course of the application of ASC 842, the economic useful lives of the leasehold improvements were adjusted to the lease terms.

Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service. Expenditures for repairs and maintenance are charged to expense as incurred.

Redeemable convertible preferred stock

The Company has applied the guidance in ASC 480‑10‑S99‑3A, SEC Staff Announcement: Classification and Measurement of Redeemable Securities and has therefore classified the Series A, Series B, Series C and Series D redeemable convertible preferred stock as mezzanine equity. The redeemable convertible preferred stock is recorded outside of stockholders’ equity because, in the event of certain deemed liquidation events considered not solely within the Company’s control, such as a merger, acquisition and sale of all or substantially all of the Company’s assets, the convertible preferred stock will become redeemable at the option of the holders. In the event of a change of control of the Company, proceeds received from the sale of such shares will be distributed in accordance with the liquidation preferences set forth in the Company’s Preferred Stock agreements. The Company has determined not to adjust the

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

carrying values of the redeemable convertible preferred stock to the liquidation preferences of such shares because of the uncertainty of whether or when such an event would occur.

Recent accounting pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that the Company adopts as of the specified effective date.

Adopted as of current period

In February 2016, the FASB issued ASU No. 2016‑02, Leases (Topic 842) ("ASU 2016‑02"), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether cost of the lease is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification.

The FASB subsequently issued the following amendments to ASU 2016‑02 that have the same effective date and transition date: ASU No. 2018-01, Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842, ASU No. 2018‑10, Codification Improvements to Topic 842, Leases, ASU No. 2018‑11, Leases (Topic 842): Targeted Improvements, ASU No. 2018‑20, Narrow-Scope Improvement for Lessors, and ASU No. 2019‑01, Leases (Topic 842): Codification Improvements. The Company adopted these amendments with ASU 2016‑02 (collectively, the new leasing standards) effective January 1, 2019. The new leasing standards were adopted using the modified retrospective transition approach, as of January 1, 2019, with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, the Company elected the package of transition practical expedients, which allowed the Company to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. The Company also elected the practical expedient to not reassess certain land easements, elected to use hindsight in determining the lease term and made an accounting policy election to not recognize leases with an initial term of 12 months or less within the condensed consolidated balance sheets and to recognize those lease payments on a straight-line basis in the condensed consolidated statements of operations over the lease term. Upon adoption of the new leasing standards an operating lease asset of $3.3 million and a corresponding operating lease liability of $3.3 million were recorded in the condensed consolidated balance sheets. The adoption of the new leasing standards did not have an impact on the Company’s condensed consolidated statements of operations.

The determination whether an arrangement was qualified as a lease was made at contract inception. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the option will be exercised. The Company uses the implicit rate when readily determinable and uses its incremental borrowing rate when the implicit rate is not readily determinable based upon the information available at the commencement date in determining the present value of the lease payments. The incremental borrowing rate is determined using a secured borrowing rate for the same currency and term as the associated lease. The lease payments used to determine operating lease assets may include lease incentives, stated rent increases and escalation clauses linked to rates of inflation when determinable and are recognized as operating lease assets on the condensed consolidated balance sheets. In addition, certain of the Company’s arrangements contain lease and non-lease components. The Company elected to generally separate lease payments from non-lease payments but applied an accounting choice to not separate lease payments from certain non-lease payments for its office and laboratory space leases and its car leases.

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Operating leases are reflected in operating lease assets, in accrued expenses and other current liabilities and in non-current operating lease liabilities in the condensed consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

In July 2018, the FASB issued ASU No. 2018‑11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) I. Accounting for Certain Financial Instruments with Down Round Features II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception ("ASU 2018‑11"). Part I applies to entities that issue financial instruments such as warrants, convertible debt or convertible preferred stock that contain down-round features. Part II replaces the indefinite deferral for certain mandatorily redeemable noncontrolling interests and mandatorily redeemable financial instruments of nonpublic entities contained within ASC Topic 480 with a scope exception and does not impact the accounting for these mandatorily redeemable instruments. For public entities, this guidance is required to be adopted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted ASU 2018‑11 as of January 1, 2019. The adoption of this ASU did not have a material impact on its consolidated loss from operations or cash flows.

Recently Issued Accounting Pronouncements

In November 2018, the FASB issued ASU 2018-18, Clarifying the Interaction Between Topic 808 and Topic 606, which clarifies when transactions between participants in a collaborative arrangement are within the scope of the FASB’s revenue standard, Topic 606. This ASU becomes effective for the Company in the year ending December 31, 2020 and early adoption is permitted. The Company is currently assessing the impact that this ASU will have on its consolidated financial statements

In August 2018, the FASB issued ASU 2018‑13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, (“ASU 2018‑13”). The new standard removes certain disclosures, modifies certain disclosures and adds additional disclosures related to fair value measurement. The new standard will be effective beginning January 1, 2020 and early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2018‑13 will have on its consolidated financial statements.

In August 2018, the FASB issued ASU 2018‑15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350‑40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract, (“ASU 2018‑15”). The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this update. The new standard will be effective beginning January 1, 2020 and early adoption is permitted. The amendments in this update should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is currently evaluating the impact that the adoption of ASU 2018‑15 will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments-Credit Losses.” The standard modifies the impairment model for most financial assets, including trade accounts receivables and loans, and will require the use of an “expected loss” model for instruments measured at amortized cost. Under this model, entities will be required to estimate the lifetime expected credit loss on such instruments and record an allowance to offset the amortized cost basis of the financial asset, resulting in a net presentation of the amount expected to be collected on the financial asset. The effective date of the standard is for fiscal years beginning after December 15, 2019 with early adoption

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

permitted. We are currently evaluating the potential impact of the adoption of this update on our consolidated financial statements.

 

3. Collaboration and Licensing Agreements

Gilead Collaboration and License Agreement

In June 2018, the Company has entered into a collaboration and license agreement (the “Gilead Agreement”) with Gilead Sciences, Inc. (“Gilead”) whereby the parties agreed to collaborate with respect to two preclinical research programs to evaluate potential vaccine products for the treatment, cure, diagnosis or prevention of the hepatitis B virus (HBV) and the human immunodeficiency virus (HIV).

Under the Gilead Agreement, the Company granted Gilead an exclusive, royalty-bearing license to the Company’s technology platforms. In June 2018, the Company has received a non-refundable $10.0 million upfront payment from Gilead of which $0.9 million was recorded as revenue from collaboration and licensing in the three months ended March 31, 2019 and $6.1 million was included as a liability in deferred revenues, current and non-current, as of March 31, 2019. Approximately 91% of the upfront payment included in deferred revenue as of March 31, 2019 is expected to be recognized in the remainder of 2019, and the remaining 9% in 2020. Gilead is also obligated to make additional payments to the Company upon the achievement of pre-clinical, development and commercial milestones. The development milestones amount to a total of $280 million. The commercial milestones amount to a total of $100 million. Additionally, Gilead is obligated to pay royalties on net sales for each program. All payments from Gilead have a 60 days payment term. In addition to the $0.9 million recognition of the upfront payment, the Company recognized $1.3 million revenue from cost reimbursements for research and development services in the three months ended March 31, 2019.

Sublicense fees payable to certain licensors of technologies upon the receipt of the non-refundable upfront payment, were capitalized as a contract asset and will be amortized over the period in which the revenue from the triggering payment is recognized. As of March 31, 2019 and December 31, 2018, the contract asset relating to the sublicense payment was $0.6 million and $0.4 million, respectively.

 

4. Leases

The Company leases real estate, including office and laboratory space and has entered into various other agreements with respect to assets used in conducting its business. The Company’s leases have remaining lease terms ranging from 2 years to 5 years. Some of the lease agreements contain rent holidays and rent escalation clauses that were included in the calculation of the right of use assets and lease liabilities.

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Certain of the Company’s leases qualify as operating leases, and certain of its leases qualify as finance leases. The following table summarizes the presentation in the condensed consolidated balance sheets:

 

 

 

 

 

 

 

 

    

 

    

March 31, 

 

 

Balance sheet location

 

2019

Assets

 

  

 

 

  

Operating lease assets

 

Operating lease assets

 

$

8,920

Finance lease assets

 

Other non-current assets

 

 

1,879

Total lease assets

 

  

 

 

10,799

Liabilities

 

  

 

 

  

Current operating lease liability

 

Accrued expenses and other current liabilities

 

 

1,643

Current finance lease liability

 

Accrued expenses and other current liabilities

 

 

145

Total current lease liabilities

 

 

 

 

1,788

Non-current operating lease liability

 

Operating lease liabilities, non-current

 

 

6,311

Non-current finance lease liability

 

Other non-current liabilities

 

 

460

Total non-current lease liabilities

 

  

 

 

6,771

Total lease liabilities

 

  

 

$

8,559

 

In the three months ended March 31, 2019 the Company terminated a lease of office space and derecognized the relating right of use asset and the lease liability of $0.2 million.

 

The following table summarizes the effect of lease costs in the Company’s condensed consolidated statements of operations and comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

    

Income statement location

    

March 31, 2019

Operating lease expenses

 

Research and development expenses

 

$

202

 

 

General and administrative expenses

 

 

111

Finance lease amortization expenses

 

Research and development expenses

 

 

62

 

 

General and administrative expenses

 

 

 3

Interest on finance lease liabilities

 

Interest expenses

 

 

 3

Sublease income

 

Other income (expense)

 

 

(11)

Net lease expense

 

  

 

$

370

 

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The minimum lease payments, net of income from subleases, for the next five years and thereafter are expected to be as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019

 

    

Operating lease

    

Finance lease

    

Total

2019 (remaining nine months)

 

$

1,244

 

$

107

 

$

1,351

2020

 

 

1,757

 

 

142

 

 

1,899

2021

 

 

1,762

 

 

129

 

 

1,891

2022

 

 

1,762

 

 

122

 

 

1,884

2023

 

 

1,749

 

 

120

 

 

1,869

2024

 

 

128

 

 

10

 

 

138

Thereafter

 

 

 —

 

 

 —

 

 

 —

Total lease payments

 

 

8,402

 

 

630

 

 

9,032

Less: interest

 

 

(448)

 

 

(25)

 

 

(473)

Present value of lease liabilities

 

$

7,954

 

$

605

 

$

8,559

 

Under the prior lease guidance minimum rental commitments under non-cancelable leases for each of the next five years and total thereafter as of December 31, 2018, were as follows (in thousands):

 

 

 

 

 

Year ending December 31

    

Amount

2019

 

$

520

2020

 

 

278

2021

 

 

43

2022

 

 

43

2023

 

 

11

Thereafter

 

 

 —

Total

 

$

895

 

These annual minimum lease payments did not include the embedded lease obligations under an agreement with a contract manufacturing organization, which commenced in February 2019.

The weighted average remaining lease term and weighted average discount rate of operating leases are as follows:

 

 

 

 

 

 

    

March 31, 

 

 

 

2019

 

 

 

 

 

Weighted average remaining lease term in years

 

4.8

 

Weighted average discount rate (1)

 

2.3

%


(1)

The majority of the contracts are concluded in euros. The discount rate was determined on a currency-equivalent basis.

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

The weighted average remaining lease term and weighted average discount rate of finance leases are as follows:

 

 

 

 

 

 

    

March 31, 

 

 

 

2019

 

 

 

 

 

Weighted average remaining lease term in years

 

4.7

 

Weighted average discount rate (1)

 

1.7

%


(1)

The contracts are concluded in euros. The discount rate was determined on a currency-equivalent basis.

The Company subleases certain of its leased real estate that it does not currently utilize to a third party. The sublease has a remaining lease terms of 2 years without an option to renew and has been qualified as an operating lease. The Company recognizes sublease income as incurred in its condensed consolidated statements of operations and comprehensive loss. The Company continued to account for the head lease as it did before sublease commencement.

Supplemental disclosure of cash flow information related to our operating and finance leases included in cash flows provided by operating activities in our condensed consolidated statements of cash flows is as follows:

 

 

 

 

 

 

    

Three months ended

 

 

March 31, 2019

 

 

 

 

Cash paid for amounts included in the measurement of operating lease liabilities (1)

 

$

1,260

Cash paid for amounts included in the measurement of finance lease liabilities (1)

 

 

1,355

Operating lease assets obtained in exchange for lease obligations (2)

 

 

5,233

Finance lease assets obtained in exchange for lease obligations (2)

 

 

634


(1)

The cash paid for amounts included in the measurement of lease liabilities includes upfront payments

(2)

The lease assets reported in the cash flow information exclude upfront payments.

 

5. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2019

 

2018

 

 

 

 

 

 

 

Consulting fees

 

$

1,267

 

$

1,764

Salaries and bonuses

 

 

1,009

 

 

1,404

Social security contributions

 

 

121

 

 

121

Unearned grant income (current)

 

 

856

 

 

833

Operating lease liabilities

 

 

1,643

 

 

 —

Finance lease liabilities

 

 

145

 

 

 —

Other accruals and liabilities

 

 

387

 

 

298

Total

 

$

5,428

 

$

4,420

 

 

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

6. Loans payable

As of March 31, 2019 and December 31, 2018, loans payable consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

    

March 31, 

    

December 31, 

 

 

2019

 

2018

 

 

 

 

 

 

 

Loans from FFG

 

$

8,151

 

$

8,316

Unamortized debt discount

 

 

(3,652)

 

 

(3,924)

Total Loans payable, net

 

$

4,499

 

$

4,392

 

In connection with the funding agreements with the Austrian Research Promotion Agency, (Österreichische Forschungs- förderungsgesellschaft, or “FFG”), the Company has received various loans (“FFG Loans”). The FFG Loans were made on a project-by-project basis. Amounts due under the FFG Loans bear interest at rates ranging from 0.75% to 1.0% per annum and mature at various dates between March 2021 and March 2024. Interest on amounts due under the loans is payable semi-annually in arrears, with all principal and remaining accrued interest due upon maturity.

The FFG Loans bear interest at rates that are below market rates of interest. The Company accounts for the imputed benefit arising from the difference between an estimated market rate of interest and the rate of interest charged by FFG as grant income from FFG. On the date that FFG loan proceeds are received, the Company recognizes the portion of the loan proceeds allocated to grant funding as a discount to the carrying value of the loan and as unearned income, which is recognized as grant income over the term of the funding agreement.

 

7. Redeemable convertible preferred stock

Redeemable convertible preferred stock

The Company has issued Series A redeemable convertible preferred stock (the "Series A Preferred Stock"), Series B redeemable convertible preferred stock (the "Series B Preferred Stock"), Series C redeemable convertible preferred stock (the "Series C Preferred Stock") and Series D redeemable convertible preferred stock (the "Series D Preferred Stock"). Series D Preferred Stock was issued in February 2019. The Preferred Stock has certain contingent redemption features based upon the occurrence of events that are not solely within the control of the Company and is therefore classified as mezzanine equity.

In December 2017 the Company issued and sold 693,500 shares of Series C Preferred Stock at an average price of $85.60 per share for gross proceeds of $59.4 million. An amount of $6.5 million of the gross proceeds from the issuance of Series C Preferred Stock was received on January 4, 2018. The Company incurred issuance costs in connection with the Series C Preferred Stock of $0.1 million.

In February 2019 the Company issued and sold 257,000 shares of Series D Preferred Stock at an average price of $145.65 per share for gross proceeds of $37.4 million. The Company incurred issuance costs in connection with the Series D Preferred Stock of $0.2 million.

Upon issuance of each class of Preferred Stock, the Company assessed the embedded conversion and liquidation features of the shares and determined that such features did not require the Company to separately account for these features. The Company also concluded that no beneficial conversion feature existed on the issuance date of each class of Preferred Stock.

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

As of March 31, 2019, the Preferred Stock consisted of the following (in thousands, except share amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

 

 

 

 

 

 

 

Preferred

 

shares

 

 

 

 

Common stock

 

 

shares

 

issued and

 

Carrying

 

issuable upon

 

    

authorized

    

outstanding

    

value

    

conversion

Series A Preferred Stock

 

137,814

 

137,814

 

$

0.014

 

1,604,574

Series B Preferred Stock

 

492,192

 

492,192

 

 

0.049

 

5,730,612

Series C Preferred Stock

 

693,500

 

693,500

 

 

0.069

 

8,074,447

Series D Preferred Stock

 

257,000

 

257,000

 

 

0.026

 

2,992,260

 

 

1,580,506

 

1,580,506

 

$

0.158

 

18,401,893

 

As of December 31, 2018, the Preferred Stock consisted of the following (in thousands, except share amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred

 

 

 

 

 

 

 

Preferred

 

shares

 

 

 

 

Common stock

 

 

shares

 

issued and

 

Carrying

 

issuable upon

 

    

authorized

    

outstanding

    

value

    

conversion

Series A Preferred Stock

 

137,814

 

137,814

 

$

0.014

 

1,604,574

Series B Preferred Stock

 

492,192

 

492,192

 

 

0.049

 

5,730,612

Series C Preferred Stock

 

693,500

 

693,500

 

 

0.069

 

8,074,447

 

 

1,323,506

 

1,323,506

 

$

0.132

 

15,409,633

 

Conversion

Each share of Preferred Stock was convertible, at the option of the holder, at any time, and without the payment of additional consideration, into 11.643 fully paid and non-assessable shares of common stock or non-voting Class A common stock as is determined by dividing the original issue price paid for such Preferred Shares by the applicable conversion price in effect at the time of conversion. Upon the closing of the Company’s the IPO, on April 23, 2019, all outstanding redeemable convertible preferred stock converted into shares of common stock or Class A common stock, as per election of the respective holders of preferred stock.

Liquidation

In the event of any voluntary of involuntary liquidation, dissolution or winding up of the Company or certain deemed liquidation events, the holders of Preferred Shares had a right to receive, certain amounts in preference to any distribution to the holders of common stock. The liquidation preferences of the Preferred Stock were as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

March 31, 

 

December 31, 

 

    

2019

    

2018

 

 

 

 

 

 

 

Series A Preferred Stock

 

$

8,021

 

$

8,020

Series B Preferred Stock

 

 

34,365

 

 

34,367

Series C Preferred Stock

 

 

57,283

 

 

57,282

Series D Preferred Stock

 

 

37,432

 

 

 —

 

 

$

137,101

 

$

99,669

 

 

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

8. Common stock

In June 2018 the Company became the reporting entity in a transaction between entities under common control. In the accompanying condensed consolidated financial statements and notes, the common stock is retrospectively presented as if the Company had been the reporting entity for all periods during which the previous reporting entity was under common control.

As of December 31, 2018, the Company had 1,006,595 shares of common stock outstanding and issued and was authorized to issue 2,038,619 additional shares of common stock upon exercise of stock options and 15,409,633 additional shares of common stock upon conversion of Preferred Stock. As of March 31, 2019, the Company had 1,006,595 shares of common stock outstanding and issued and was authorized to issue additional 24,608,111 shares of common stock.

Holders of common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of common stock do not have any cumulative voting rights. Subject to any preferential dividend rights of any outstanding preferred stock, holders of common stock are entitled to receive ratably any dividends declared by the board of directors out of funds legally available for that purpose. Common stock has no preemptive rights, conversion rights, or other subscription rights or redemption or sinking fund provisions.

In the event of a liquidation, dissolution, or winding up of the Company, holders of common stock will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding preferred stock.

As of March 31, 2019 the Company was, in addition, authorized to issue 19,006,880 shares of a new class of non-voting Class A common Stock, convertible into one share of common stock for each share of Class A common stock at the election of its holder. As of March 31, 2019, the Company has not issued any shares of Class A common stock.

 

9. Stock-based compensation

2018 Stock Option and Grant Plan

In connection with a transaction between entities under common control by which the Company became the reporting entity in June 2018, the Board of Directors approved the 2018 Stock Option and Grant Plan, by which options granted by the previous reporting entity under the 2016 Stock Option Plan and outstanding at the time of the effectiveness of the transaction were replaced at similar commercial terms. In the accompanying condensed consolidated financial statements and notes, options issued under previous stock option plans and respective compensation expenses are retrospectively presented as if such options had been issued and outstanding under the 2018 Stock Option and Grant Plan for all periods during which the previous reporting entity was under common control.

Under the 2018 Stock Option and Grant Plan, 2,133,437 shares of common stock have been authorized and reserved for the issuance of incentive stock options or non-qualified stock options to employees, officers, directors, and consultants of the Company, of which 94,818 shares of common stock were issued upon exercise of stock options and 2,038,619 shares were still available as of March 31, 2019.

The exercise price for options granted as a replacement of the 2016 Stock Option Plan is the U.S. dollar equivalent of €0.09, except for 23,286 options granted to an US employee, for which the exercise price is $2.93 following a repricing of these options in December 2018. For any new options, the exercise price shall not be less than 100% of the fair market value of the common stock on the grant date.

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HOOKIPA PHARMA INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)

Options granted under the 2018 Stock Option and Grant Plan generally vest over four years, with 25% of the options vesting upon the first anniversary of the grant date and the remaining 75 % of the options vesting in 12 equal quarterly installments following the first anniversary of the grant date, provided the option holder continues to have an employment or service relationship with the Company on each vesting date.

2019 Stock Option and Incentive Plan

On April 1, 2019, the Company’s stockholders approved the 2019 Stock Option and Incentive Plan, which became effective as of the effectiveness of the registration statement in connection with the Company’s IPO. The maximum number of shares of the Company’s common stock that may be issued under the Company’s 2019 Stock Option and Incentive Plan is 2,608,042, which shall be cumulatively increased each year by up to 4.0% of the then outstanding number of shares.

Stock option activity

The following table summarizes the Company’s stock option activity since January 1, 2019 (in thousands, except share and per share amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

Number of

 

Exercise

 

Contractual

 

Intrinsic

 

    

Shares

    

Price

    

Term

    

Value

 

 

 

 

 

 

 

(in years)

 

 

 

Outstanding as of December 31, 2018

 

1,606,325

 

$

1.95

 

8.0

 

$

13,466

Granted

 

 —

 

 

 —

 

  

 

 

  

Exercised

 

 —

 

 

 —