UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Amendment No. 1)
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
|
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
|
|
The |
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.
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).
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 |
|
☐ |
|
|
|
|
|||
|
☒ |
|
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
As of August 4, 2023 there were
EXPLANATORY NOTE
Except as expressly set forth herein, this Form 10-Q/A does not reflect events occurring after the date of the Form 10-Q filing or modify or update any of the other disclosures contained therein in any way other than as required to reflect the amendments discussed above. Other than the changes in exhibits referred to above, all other information in the Form 10-Q remains unchanged.
i
FINCH THERAPEUTICS, INC.
FORM 10-Q
For the quarterly period ended June 30, 2023
Table of Contents
|
|
Page |
|
|
|
|
iii |
|
|
iv |
|
|
iv |
|
|
|
|
PART I. |
1 |
|
Item 1. |
1 |
|
|
Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 |
1 |
|
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 |
2 |
|
Condensed Consolidated Statements of Stockholders' Equity for the Three and Six Months Ended June 30, 2023 and 2022 |
3 |
|
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 |
4 |
|
5 |
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
25 |
|
Item 4. |
26 |
|
PART II. |
27 |
|
Item 1. |
27 |
|
Item 1A. |
27 |
|
Item 5. |
28 |
|
Item 6. |
28 |
|
|
30 |
ii
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” or “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
These forward-looking statements are based on our management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions and are not guarantees of future performance or development. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, and in any other reports we file with the Securities and Exchange Commission, including this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
iii
You should read this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in our forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this report to conform these statements to new information, actual results or changes in our expectations, except as required by law. We qualify all of our forward-looking statements by these cautionary statements.
SPECIAL NOTE REGARDING COMPANY REFERENCES
Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to “FTG,” the “Company,” “we,” “us” and “our” refer to Finch Therapeutics Group, Inc., and its subsidiaries.
SPECIAL NOTE REGARDING TRADEMARKS
All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
iv
PART I—FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements.
FINCH THERAPEUTICS GROUP, INC.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except share and per share data)
|
|
JUNE 30, |
|
|
DECEMBER 31, |
|
||
ASSETS |
|
|
|
|
|
|
||
CURRENT ASSETS: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Accounts receivable |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total current assets |
|
|
|
|
|
|
||
Property and equipment, net |
|
|
|
|
|
|
||
Operating right-of-use assets |
|
|
|
|
|
|
||
In-process research and development |
|
|
|
|
|
|
||
Restricted cash, non-current |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
TOTAL ASSETS |
|
$ |
|
|
$ |
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
CURRENT LIABILITIES: |
|
|
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued expenses and other current liabilities |
|
|
|
|
|
|
||
Operating lease liabilities, current |
|
|
|
|
|
|
||
Total current liabilities |
|
|
|
|
|
|
||
Deferred tax liability |
|
|
|
|
|
|
||
Loan payable, non-current |
|
|
|
|
|
|
||
Operating lease liabilities, non-current |
|
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Preferred stock (undesignated), $ |
|
|
|
|
|
|
||
STOCKHOLDERS’ EQUITY: |
|
|
|
|
|
|
||
Common stock, $ |
|
|
|
|
|
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total stockholders’ equity |
|
|
|
|
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
$ |
|
|
$ |
|
||
* Adjusted for the 1-for-30 reverse stock split
See notes to unaudited condensed consolidated financial statements.
1
FINCH THERAPEUTICS GROUP, INC.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except share and per share data)
|
|
THREE MONTHS ENDED |
|
|
SIX MONTHS ENDED |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Collaboration revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Total revenue |
|
|
|
|
|
|
|
|
|
|
|
|
||||
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of in-process research and development |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Impairment of long-lived assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Restructuring |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss from operations |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
OTHER INCOME (EXPENSE), NET: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest income (expense), net |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Gain on lease termination |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss on loan extinguishment |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Gain (loss) on sale and disposal of fixed assets, net |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Sublease and other income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total other income (expense), net |
|
|
|
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Income tax benefit |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to common stockholders—basic and diluted (Note 15) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share attributable to common stockholders—basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average common stock outstanding—basic and diluted * |
|
|
|
|
|
|
|
|
|
|
|
|
||||
* Adjusted for the 1-for-30 reverse stock split
See notes to unaudited condensed consolidated financial statements.
2
FINCH THERAPEUTICS GROUP, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited, in thousands, except share and per share data)
|
|
COMMON STOCK |
|
ADDITIONAL |
|
ACCUMULATED |
|
TOTAL |
|
|||||||
|
|
SHARES* |
|
AMOUNT |
|
CAPITAL |
|
DEFICIT |
|
EQUITY |
|
|||||
BALANCE, January 1, 2022 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||
Exercise of common stock options |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||
Stock-based compensation |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
BALANCE, March 31, 2022 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||
Exercise of common stock options |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||
Issuance of common stock under employee stock purchase plan |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|||
Stock-based compensation |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
BALANCE, June 30, 2022 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||
|
|
COMMON STOCK |
|
ADDITIONAL |
|
ACCUMULATED |
|
TOTAL |
|
|||||||
|
|
SHARES* |
|
AMOUNT |
|
CAPITAL |
|
DEFICIT |
|
EQUITY |
|
|||||
BALANCE, January 1, 2023 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||
Vesting of restricted stock units |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Stock-based compensation |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
BALANCE, March 31, 2023 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||
Stock-based compensation |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
|
||
Net loss |
|
|
— |
|
|
— |
|
|
— |
|
|
( |
) |
|
( |
) |
BALANCE, June 30, 2023 |
|
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
||||
* Adjusted for the 1-for-30 reverse stock split
See notes to unaudited condensed consolidated financial statements.
3
FINCH THERAPEUTICS GROUP, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
|
|
SIX MONTHS ENDED |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
CASH FLOWS USED IN OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
|
|
|
|
|
||
Stock-based compensation expense |
|
|
|
|
|
|
||
Impairment of in-process research and development |
|
|
|
|
|
|
||
Loss on loan extinguishment |
|
|
|
|
|
|
||
Impairment of long-lived assets |
|
|
|
|
|
|
||
Gain on lease termination |
|
|
( |
) |
|
|
|
|
(Gain) loss on sale and disposal of property and equipment |
|
|
( |
) |
|
|
|
|
Non-cash operating lease and interest cost |
|
|
|
|
|
|
||
Benefit for deferred income taxes |
|
|
( |
) |
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
|
|
|
|
||
Prepaid expenses and other current assets |
|
|
|
|
|
( |
) |
|
Other non-current assets |
|
|
|
|
|
|
||
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other current liabilities |
|
|
( |
) |
|
|
( |
) |
Other non-current liabilities |
|
|
( |
) |
|
|
|
|
Operating lease liabilities |
|
|
( |
) |
|
|
|
|
Net cash used in operating activities |
|
|
( |
) |
|
|
( |
) |
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds on sale of property and equipment |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from exercise of stock options, net |
|
|
|
|
|
|
||
Proceeds from borrowings under loan agreement, net |
|
|
|
|
|
|
||
Repayment of loan |
|
|
( |
) |
|
|
|
|
Payment of loan terminal fee obligation and prepayment fee |
|
|
( |
) |
|
|
|
|
Principal payments on finance lease obligation |
|
|
|
|
|
( |
) |
|
Payment of deferred offering costs |
|
|
|
|
|
( |
) |
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
( |
) |
|
|
( |
) |
Cash, cash equivalents and restricted cash at beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents and restricted cash at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Property and equipment in accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
Right-of-use assets obtained in exchange for new operating lease liability |
|
$ |
|
|
$ |
|
||
Prepaid rent reclassified to right-of-use assets |
|
$ |
|
|
$ |
|
||
The following table provides a reconciliation of the cash, cash equivalents and restricted cash as of each of the periods shown above:
|
|
AS OF JUNE 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash, cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
See notes to unaudited condensed consolidated financial statements.
4
FINCH THERAPEUTICS GROUP, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Business
Finch Therapeutics Group, Inc. (the “Company” or “FTG”) was incorporated in 2017 as a Delaware corporation. The Company was formed as a result of a merger and recapitalization of Finch Therapeutics, Inc. (“Finch”) and Crestovo Holdings LLC (“Crestovo”) in September 2017 (the “Merger”), in which the former owners of Finch and Crestovo were issued equivalent stakes in the newly formed company, FTG. Crestovo was renamed Finch Therapeutics Holdings LLC in November 2020 (“Finch Holdings”). Finch and Finch Holdings are both wholly-owned subsidiaries of FTG.
The Company is a microbiome technology company with a portfolio of intellectual property and microbiome assets. In January 2023, the Company announced the decision to wind down its development efforts and focus on realizing the value of its intellectual property estate and other assets.
Liquidity and Capital Resources
Management believes that the Company’s cash and cash equivalents of $
The Company does not currently expect to progress any product candidate through clinical trials or commercial approval and it does not currently expect to generate any revenue from product sales. The Company may never succeed in realizing the value of its intellectual property estate and other assets and, even if it does, it may never generate revenue that is significant or large enough to achieve profitability.
The Company has significantly scaled back its expenses by winding down its development efforts, including by liquidating certain of its assets, terminating vendor contracts and reducing headcount. The Company may need additional funding to support its operating activities as it seeks to realize value from its intellectual property estate and other assets. Until such time, if ever, that the Company can generate substantial revenue, the Company expects to finance its cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, the Company may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. If the Company is unable to obtain funding as needed, it may decide to pursue a dissolution and liquidation.
Reverse Stock Split
On June 9, 2023, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of the Company’s issued and outstanding common stock, par value $
5
Reclassifications
Certain reclassifications have been made to conform the prior period consolidated financial statements to the current period.
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared by the Company in conformity with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and, pursuant to the rules and regulations of Article 10 of Regulation S-X of the Securities Act of 1933, as amended, published by the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes the disclosures are adequate. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 23, 2023.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments that are necessary for a fair presentation of the Company’s condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022, condensed consolidated statements of operations for the three and six months ended June 30, 2023 and 2022, condensed consolidated statements of stockholders’ equity (deficit) for the three and six months ended June 30, 2023 and 2022, and condensed consolidated cash flows for the six months ended June 30, 2023 and 2022. Such adjustments are of a normal and recurring nature. The results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2023. The consolidated balance sheet as of December 31, 2022 has been derived from the audited consolidated financial statements of the Company but does not include all disclosures required by U.S. GAAP.
2
Significant Accounting Policies
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other accounting standard setting bodies that the Company adopts as of the specified effective date. Unless otherwise discussed below, the Company does not believe that the adoption of recently issued standards have or may have a material impact on the condensed consolidated statements or disclosures.
The significant accounting policies and estimates used in preparation of the unaudited interim condensed consolidated financial statements are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 23, 2023. There have been no material changes to the Company’s significant accounting policies during the six months ended June 30, 2023.
Goodwill and Acquired In-Process Research and Development
Goodwill and in-process research and development (“IPR&D”) are evaluated annually for impairment on October 1, or more frequently if events or changes in circumstances indicate that the asset might be impaired. To conduct impairment tests of goodwill, the fair value of the Company’s single reporting unit is compared to its carrying value. If the reporting unit’s carrying value exceeds its fair value, the Company records an impairment loss to the extent that the carrying value of goodwill exceeds its fair value.
To conduct impairment tests of IPR&D, the fair value of the IPR&D asset is compared to its carrying value. If the carrying value exceeds its fair value, we record an impairment loss to the extent that the carrying value of the IPR&D asset exceeds its fair value. We estimate the fair value for our IPR&D asset using discounted cash flow valuation models, which require the use of significant estimates and assumptions, including, but not limited to, estimating the timing of and expected costs to complete in-process projects, projecting regulatory approvals, estimating future cash flows from product sales resulting from completed projects and in-process projects, and developing appropriate discount rates.
6
In January 2023, the Company made the decision to wind down its development efforts, which management concluded was an impairment indicator requiring the Company to perform an interim impairment test of IPR&D. Management's assessment for the impairment of IPR&D indicated that there are no future cash flow projections associated with its IPR&D asset and the fair value of the IPR&D asset was zero. This resulted in an impairment charge of $
Recently Issued Accounting Pronouncements
On January 1, 2023, the Company adopted Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the Financial Accounting Standards Board (“FASB”) issued clarification to ASU 2016-13 within ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, or ASU 2016-13. The guidance is effective for fiscal years beginning after December 15, 2022. The adoption of the standard was immaterial to the accompanying condensed consolidated financial statements.
3. ADJUSTMENT TO PRIOR INTERIM UNAUDITED FINANCIAL STATEMENTS
During the preparation of the second quarter financial statements of fiscal year 2023, the Company identified an error in the accrual of certain costs for the fiscal quarter ended March 31, 2023, which resulted in an overstatement of accounts payable and research and development expenses for that quarter. The correction of this error impacted the unaudited condensed consolidated financial statements for the first quarter of fiscal year 2023. The Company assessed the applicable guidance issued by the SEC and the FASB and concluded this misstatement was not material, individually or in the aggregate, to its unaudited condensed consolidated financial statements for the aforementioned interim period. In the table below, the Company adjusted its previously issued first quarter unaudited condensed consolidated financial information to correct the error by decreasing accounts payable and research and development expenses by $
Accumulated deficit as of March 31, 2023 in the accompanying statement of stockholders’ equity for the quarter ended June 30, 2023 was made smaller by $
|
|
As Previously Reported |
|
|
As Revised |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
Total operating expenses |
|
|
( |
) |
|
|
( |
) |
Net loss from operations |
|
|
( |
) |
|
|
( |
) |
Loss before income taxes |
|
|
( |
) |
|
|
( |
) |
Net loss |
|
|
( |
) |
|
|
( |
) |
Net loss per share attributable to common stockholders—basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
7
4
The Company has
DESCRIPTION |
|
JUNE 30, |
|
|
QUOTED |
|
|
SIGNIFICANT |
|
|
SIGNIFICANT |
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
DESCRIPTION |
|
DECEMBER 31, |
|
|
QUOTED |
|
|
SIGNIFICANT |
|
|
SIGNIFICANT |
|
||||
Money market funds |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
||
There were
5
Property and equipment, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):
|
|
JUNE 30, |
|
|
DECEMBER 31, |
|
||
Lab equipment |
|
$ |
|
|
$ |
|
||
Office furniture and fixtures |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction work-in-progress |
|
|
|
|
|
|
||
Software |
|
|
|
|
|
|
||
Computer equipment |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Less: Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
8
6
Inner Belt Road Lease
In December 2015, the Company entered into a
The Inner Belt Road Lease terminated and the Company’s rent obligations ended on June 30, 2023. The landlord agreed to refund the Company for the full amount of the Company’s security deposit, which is included in prepaid expenses and other current assets on the condensed consolidated balance sheet.
The Company's lease expense under the Inner Belt Road Lease was $
Hood Lease
On August 3, 2021, Finch entered into a
Finch posted a customary letter of credit in the amount of approximately $
In the third quarter of 2022, Finch entered into a sublease agreement to sublet approximately one third of its leased space under the Hood Lease, which commenced on August 10, 2022, for an initial term of
The following table presents the classification of right-of-use assets and operating lease liabilities as of June 30, 2023 and December 31, 2022 (in thousands):
|
BALANCE SHEET CLASSIFICATION |
|
JUNE 30, 2023 |
|
|
DECEMBER 31, 2022 |
|
||
ASSETS: |
|
|
|
|
|
|
|
||
Operating lease assets |
Operating right-of-use assets |
|
$ |
|
|
$ |
|
||
LIABILITIES: |
|
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
|
|
|
|
|
||
Current |
Operating lease liabilities, current |
|
$ |
|
|
$ |
|
||
Noncurrent |
Operating lease liabilities, non-current |
|
|
|
|
|
|
||
Total lease liabilities |
|
|
$ |
|
|
$ |
|
||
9
The following table represents the components of operating lease cost, which are included in general and administrative and research and development expense, and sublease income, which is included in other income on the statement of operations for the three and six months ended June 30, 2023 and 2022 (in thousands):
|
|
THREE MONTHS ENDED JUNE 30, |
SIX MONTHS ENDED JUNE 30, |
|
||||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Operating lease cost |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Short-term lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Variable lease cost |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Sublease income |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
|
||
Total lease cost, net |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The weighted-average remaining operating lease term and discount rate as of June 30, 2023 and December 31, 2022 were as follows (in thousands):
|
|
JUNE 30, 2023 |
|
|
DECEMBER 31, 2022 |
|
||
Weighted-average remaining lease term (years) |
|
|
|
|
|
|
||
Weighted-average discount rate |
|
|
% |
|
|
% |
||
Supplemental disclosure of cash flow information related to operating leases for the six months ended June 30, 2023 and 2022 was as follows (in thousands):
|
|
Six Months Ended June 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Cash paid (received) for amounts included in measurement of lease liabilities |
|
$ |
|
|
$ |
( |
) |
|
The following table represents a summary of the Company’s future operating lease payments required as of June 30, 2023 (in thousands):
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
|
|
Total future minimum lease payments |
|
|
|
|
Less: amount representing interest |
|
|
( |
) |
Present value of future minimum lease payments |
|
$ |
|
7
Accrued expenses and other current liabilities consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):
|
|
JUNE 30, |
|
|
DECEMBER 31, |
|
||
Accrued research and development |
|
$ |
|
|
$ |
|
||
Accrued legal and professional fees |
|
|
|
|
|
|
||
Accrued compensation and benefits |
|
|
|
|
|
|
||
Accrued other |
|
|
|
|
|
|
||
Total accrued expenses and other current liabilities |
|
$ |
|
|
$ |
|
||
10
8
Hercules Loan and Security Agreement
On May 11, 2022, the Company entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc., providing for a term loan with aggregate maximum borrowings of up to $
9
During the three and six months ended June 30, 2023, the Company recognized restructuring charges of $
The following table summarizes the restructuring accrual activity for the six months ended June 30, 2023 (in thousands):
|
|
|
|
|
Accrued restructuring liability as of December 31, 2022 |
|
$ |
|
|
Restructuring charges |
|
|
|
|
Cash payments |
|
|
( |
) |
Accrued restructuring liability as of June 30, 2023 |
|
$ |
|
|
10. INCOME TAXES
During the six months ended June 30, 2023 and the year ended December 31, 2022, the Company recorded a full valuation allowance on federal and state deferred tax assets since management does not forecast the Company to be in a profitable position in the near future. There were no material changes in the Company’s tax position in the six months ended June 30, 2023 as compared to the year ended December 31, 2022. The benefit for the six months ended June 30, 2023 reflects the full removal of the deferred tax liability on the IPR&D that was written off during the first quarter of 2023 and treated as a discrete item in the tax provision.
11
11. COMMITMENTS AND CONTINGENCIES
Legal Contingencies
On December 1, 2021, Rebiotix Inc. and Ferring Pharmaceuticals Inc. (collectively, “Rebiotix”) filed a complaint against the Company in the U.S. District Court for the District of Delaware (the “Court”). The complaint seeks a declaratory judgment of non-infringement and invalidity with respect to seven United States Patents owned by the Company: U.S. Patent Nos. 10,675,309 (the “’309 Patent”); 10,463,702 (the “’702 Patent”); 10,328,107 (the “’107 Patent”); 10,064,899; 10,022,406 (the “’406 Patent”); 9,962,413 (the “’413 Patent”); and 9,308,226. On February 7, 2022, the Company filed an answer and counterclaims against Rebiotix for infringement of the ’107, ’702, and ’309 Patents. In June 2022, Finch alleged infringement of the ’406 and ’413 Patents by Rebiotix. On March 7, 2022, the Company filed an amended answer and counterclaims, in which the Company, together with the Regents of the University of Minnesota (“UMN”), alleged infringement by Rebiotix of three U.S. Patents owned by UMN and exclusively licensed to the Company: U.S. Patent Nos. 10,251,914, 10,286,011, and 10,286,012, (collectively, the “UMN Patents”). On April 4, 2022, Rebiotix filed counterclaims for declaratory judgment of non-infringement and invalidity of the UMN Patents. On May 2, 2022, the Company and UMN responded, denying such counterclaims. The Court set a trial date for a five-day trial beginning on May 20, 2024. On January 23, 2023, the Company filed a second amended answer and counterclaims, in which the Company alleged infringement by Rebiotix of two additional U.S. Patents owned by Finch: U.S. Patent Nos. 11,541,080 (the “’080 Patent”) and 11,491,193 (the “’193 Patent”). On February 7, 2023, Rebiotix filed counterclaims for declaratory judgment of non-infringement and invalidity of the ’080 and ’193 patents. The Court issued a claim construction order on February 28, 2023. On July 6, 2023, Rebiotix filed a motion to dismiss certain counts of our second amended answer and counterclaims based on the assertion that Finch lacks standing to sue as to ’107 Patent, ’702 Patent, ’309 Patent, ’406 Patent, ’413 Patent, ’193 Patent, and ’080 Patent. Rebiotix specifically alleges that the sole named inventor on these patents, Thomas J. Borody, did not assign his rights in those patents to Finch, and as a result, Finch does not own them and therefore does not have standing to assert them. Briefing on this motion is complete.
The pending lawsuit is subject to inherent uncertainties, and the actual legal fees and costs will depend upon many unknown factors. The outcome of the pending lawsuit cannot be predicted with certainty. The Company has determined that there is no probable or estimable loss contingency that is required to be recorded as of June 30, 2023.
License and Royalty Payments
The Company is party to license and other agreements under which it is obligated to make milestone and royalty payments and incur annual maintenance fees. The Company owes a nominal annual maintenance fee under its license agreement with UMN, (the “UMN Agreement”), as well as escalating minimum royalty amounts. The minimum payments continue in perpetuity for the University of Minnesota until the agreement is terminated. On April 12, 2023, the Company amended its agreement with UMN to, among other things, allow the Company to satisfy certain performance milestones through sublicensing agreements.
The Company is party to an agreement with OpenBiome requiring the Company to pay certain milestones of up to $
12
12. STOCKHOLDERS’ EQUITY
On February 24, 2021, the board of directors of the Company (the “Board”) and the Company’s stockholders approved the Company’s Amended and Restated Certificate of Incorporation. The certificate authorized the issuance of up to
As of June 30, 2023 and December 31, 2022 the Company has reserved the following shares of common stock for the exercise of stock options, common stock warrants, vesting of restricted stock and shares issuable under the employee stock purchase plan:
|
|
JUNE 30, |
|
|
DECEMBER 31, |
|
||
Options to purchase common stock |
|
|
|
|
|
|
||
Unvested restricted stock units |
|
|
|
|
|
|
||
Shares issuable under employee stock purchase plan |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
13. STOCK-BASED COMPENSATION
2021 Equity Incentive Plan
In March 2021, the Board adopted, and the stockholders approved, the 2021 Equity Incentive Plan (the “2021 Plan”).The 2021 Plan was amended and restated as of June 8, 2023 to reflect the stock split. The 2021 Plan provides for the grant of incentive stock options to employees, including employees of any parent or subsidiary of the Company, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance awards and other forms of awards to employees, directors and consultants, including employees and consultants of the Company’s affiliates.
The number of shares of common stock reserved for issuance under the Company's 2021 Plan automatically increases on January 1 of each calendar year through January 1, 2031, in an amount equal to (i)
On January 1, 2023, the number of shares of common stock reserved and available for issuance under the 2021 Plan automatically increased by
13
2021 Employee Stock Purchase Plan
In March 2021, the Board adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). The 2021 ESPP was amended and restated as of June 8, 2023 to reflect the stock split. The 2021 ESPP is administered by the Board or by a committee appointed by the Board. The 2021 ESPP provides participating employees with the opportunity to purchase shares of common stock. The occurrence and duration of offering periods under the 2021 ESPP are subject to the determinations of the compensation committee of the Board. Annually the common stock reserved and available for issuance under the 2021 ESPP automatically increases and on January 1, 2023, increased by
Stock Options
The following table summarizes the activity of the Company’s stock options under the 2017 Plan and 2021 Plan for the six months ended June 30, 2023:
|
|
SHARES |
|
|
WEIGHTED- |
|
|
WEIGHTED- |
|
|
AGGREGATE |
|
||||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Cancelled or forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
$ |
|
|
|
|
|
|
|
|||
Outstanding as of June 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options exercisable as of June 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Options vested or expected to vest as of June 30, 2023 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
As of June 30, 2023, there was approximately $
Restricted Stock Unit Awards
In June 2022, the Company issued RSU awards with time-based vesting conditions to employees. The fair value of an RSU award is equal to the fair market value of the Company's ordinary shares on the date of grant and the expense is recognized on a straight-line basis over the requisite service period. The RSUs primarily vest over one year from the grant date.
The following table summarizes the activity of the Company’s RSUs under the 2021 Plan for the six months ended June 30, 2023:
|
|
RSUs |
|
|
WEIGHTED- |
|
|
AGGREGATE |
|
|||
Outstanding as of December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|||
Vested and distributed |
|
|
( |
) |
|
$ |
|
|
|
|
||
Forfeited |
|
|
( |
) |
|
$ |
|
|
|
|
||
Unvested as of June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|||
14
Stock-Based Compensation Expense
Total stock-based compensation expense recorded as research and development and general and administrative expenses, respectively, for employees, directors and non-employees for the periods presented is as follows (in thousands):
|
|
THREE MONTHS ENDED JUNE 30, |
|
|
SIX MONTHS ENDED JUNE 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Research and development |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
14. RETIREMENT PLAN
The Company has adopted a defined contribution plan intended to qualify under Section 401(k) of the Internal Revenue Code covering all eligible employees of the Company. All employees are eligible to become participants of the plan at their hire date. Each active employee may elect, voluntarily, to contribute a percentage of their compensation to the plan each year, subject to certain limitations. The Company reserves the right to make additional contributions to this plan. The Company made contributions to the plan of $
15. LOSS PER SHARE
Basic and diluted loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding (in thousands, except share and per share data):
|
|
FOR THE THREE MONTHS |
|
|
FOR THE SIX MONTHS |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss attributable to |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted-average common |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share attributable |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The Company’s potentially dilutive securities, which include stock options, warrants, RSU awards and shares issuable under the employee stock purchase plan have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.
|
|
SIX MONTHS ENDED JUNE 30, |
|
|||||||
|
|
2023 |
|
|
|
2022 |
|
|||
Options to purchase common stock |
|
|
|
|
|
|
|
|||
Unvested restricted stock units |
|
|
|
|
— |
|
|
|
||
Shares issuable under employee stock purchase plan |
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|||
15
16. SUBSEQUENT EVENTS
Except as discussed in Note 11, there have no subsequent events through the date of these financial statements.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with (1) our condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and the related notes and management’s discussion and analysis of financial condition and results of operations for the fiscal year ended December 31, 2022 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission, or SEC, on March 23, 2023, which we refer to as the 2022 10-K.
Overview
We are a microbiome technology company with a portfolio of intellectual property and microbiome assets. We have significantly scaled back our expenses by winding down our development efforts, including liquidating certain of our assets, terminating vendor contracts and reducing headcount, and we now focus on realizing the value of our intellectual property and other assets (the “Recent Business Initiatives”). This decision came after an assessment by our management team and board of directors of multiple factors, including our outlook for identifying a commercial partner, slower than anticipated enrollment in the PRISM4 trial, the harmful impact of what we believe is the ongoing unauthorized use of our intellectual property, and broader sector trends in the biotechnology industry.
We were previously developing CP101 as an orally administered complete microbiome therapeutic designed for the prevention of recurrent C. difficile infection, or CDI. Although we announced our decision to discontinue our Phase 3 clinical trial of CP101 for the prevention of recurrent CDI, or the PRISM4 trial, we believe that CP101 has therapeutic potential in both CDI and other indications.
We do not currently expect to be able to progress any product candidate through clinical trials or commercial approval, and we do not currently expect to generate any revenue from product sales. In April 2023, we announced the termination of employment, without cause, of our former chief executive officer and chief operating officer and the appointment of Matthew Blischak and Lance Thibault as our new chief executive officer and chief financial officer, respectively, effective May 16, 2023.
Since our inception, we have funded our operations primarily with proceeds from our March 2021 initial public offering (the ”IPO”), the sale of convertible preferred stock, our loan agreement with Hercules Capital and from collaboration revenue. Although we believe strongly in the value of our pioneering intellectual property portfolio and the merits of our current litigation activities relating to those assets, we may never succeed in realizing the value of our intellectual property estate and other assets and, even if we do, we may never generate revenue that is significant or large enough to achieve profitability.
As a result, we may need additional funding to support our operating activities as we seek to realize value from our intellectual property estate and other assets. Until such time, if ever, that we can generate substantial revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. If we are unable to obtain funding as needed, we may decide to pursue a dissolution and liquidation.
We believe that our existing cash and cash equivalents of $34.1 million as of June 30, 2023 will be sufficient to fund our operations into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.”
On June 9, 2023, we completed a reverse stock split of our outstanding shares of common stock at a ratio of one-for-thirty. All share and per share amounts of the common stock included in this Quarterly Report on Form 10-Q, including in the accompanying financial statements, have been retrospectively adjusted to give effect to the reverse stock split for all periods presented, including reclassifying an amount equal to the reduction in par value to additional paid-in capital.
17
Components of Our Results of Operations
Revenue
We have no products approved for commercial sale. We have not generated any revenue from product sales for the three months ended June 30, 2023 and do not expect to generate any revenue from the sale of licensed products for the foreseeable future. Our revenue to date has been generated primarily through collaboration and license agreements. We recognized revenue over our expected performance period under each agreement. We expect that our revenue for the next several years, if any, will be derived from enforcement and out-licensing of our intellectual property estate.
Takeda Agreement
In January 2017, we entered into a research collaboration and exclusive license agreement with Takeda, or as amended and restated, (“the Takeda Agreement”), pursuant to which we granted Takeda a worldwide, exclusive license, with the right to grant sublicenses, under our rights in certain patents, patent applications and know-how to develop, have developed, manufacture, have manufactured, make, have made, use, have used, offer for sale, sell, have sold, commercialize, have commercialized and import our microbiome therapeutic candidate FIN-524, for the prevention, diagnosis, theragnosis or treatment of diseases in humans.
In August 2022, we received written notice from Takeda that, following a review of its pipeline, Takeda had elected to exercise its right to terminate the Takeda Agreement. In accordance with the terms of the Takeda Agreement, the termination became effective on November 17, 2022. Pursuant to a further amendment to the Takeda Agreement, dated October 19, 2022, we transitioned activities under the Takeda Agreement. As of November 17, 2022, the license rights granted to Takeda terminated and Takeda ceased to accrue any financial obligations to us. Revenue earned under the Takeda Agreement was recorded as collaboration revenue on our consolidated statement of operations.
OpenBiome Agreement
On November 19, 2020, we entered into a License Agreement with OpenBiome (“the LMIC Agreement”) pursuant to which we granted OpenBiome a non-exclusive royalty-bearing license, with the right to grant sublicenses, under certain patents, patent applications, and know-how that are reasonably necessary or useful for the exploitation of products manufactured directly from stool from a stool donor source without the use of culturing or replication, or certain natural products. The only consideration from the LMIC Agreement is in the form of future royalties on certain net sales. We are entitled to receive tiered royalties on net sales of certain products, ranging from mid-single digit to low second decile digits on a product-by-product and country-by-country basis. We did not recognize any revenue related to the LMIC Agreement for the six months ended June 30, 2023 and 2022, as there are currently no products available for sale.
We entered into an Asset Purchase Agreement with Microbiome Health Research Institute, Inc (“OpenBiome”), also dated November 19, 2020 (“ the OpenBiome Agreement”). Under this agreement we will continue to earn royalties based on sales of fecal microbiota transplantation, or FMT, materials, which we receive as reimbursement for the payment of third-party license fees. The OpenBiome Agreement effectively terminated certain existing agreements with OpenBiome and internalized certain functions for which we previously relied on OpenBiome. Pursuant to the OpenBiome Agreement, we acquired certain biological samples and obtained a license to certain OpenBiome technology, and, upon closing of the transaction, which occurred on March 1, 2021, we acquired certain additional assets, including biological samples, a commercial lease, intellectual property, capital equipment and contracts. In accordance with the OpenBiome Agreement we have made payments of $5.0 million, which is the full amount agreed upon. We are also required to pay certain milestones up to $26.0 million upon the occurrence of certain research and development events, regulatory approvals, and commercial sales, and low single digit royalties on net sales of products on a product-by-product and country-by-country basis, as well as a mid-single digit royalties on sublicensing revenue related to such products.
18
Operating Expenses
Research and Development Expenses
Until January 2023, research and development activities were central to our business model. As a result of our Recent Business Initiatives, we do not currently expect to be able to progress any product candidate through clinical trials or commercial approval.
Research and development expenses have primarily consisted of costs incurred for research activities, including discovery and development efforts. We expense research and development costs as incurred, which include:
Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated financial statements as prepaid or accrued research and development expenses. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and expensed as the related goods are delivered or the services are performed. We do not allocate certain employee-related costs, external costs directly related to our Human First Discovery platform, and other indirect costs to specific research and development programs because these costs are deployed across multiple product programs and, as such, are classified as costs of our platform research.
General and Administrative Expenses
We expect that our general and administrative expenses will continue to decrease primarily due to our reduced headcount. We expect to continue to incur expenses associated with being a public company, including costs related to consulting, accounting, audit, legal, regulatory and tax compliance services, and director and officer insurance costs.
General and administrative expenses have primarily consisted of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.
Impairment of Goodwill and IPR&D
Goodwill and IPR&D intangibles were evaluated for impairment annually on October 1, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Factors we consider important, on an overall company basis, that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in our use of the acquired asset or the strategy for its overall business, significant negative industry or economic trends, a significant decline in the Company’s stock price for a sustained period, or a reduction of its market capitalization relative to net book value.
To conduct impairment tests of goodwill, the fair value of the Company’s single reporting unit is compared to its carrying value. If the reporting unit’s carrying value exceeds its fair value, the Company records an impairment loss to the extent that the carrying value of goodwill exceeds its fair value.
19
To conduct impairment tests of IPR&D intangible assets, the fair value of the asset is compared to its carrying value. If the carrying value exceeds its fair value, the excess is recorded an impairment loss. We estimated the fair value for our IPR&D asset using discounted cash flow valuation models, which required the use of significant estimates and assumptions, including, but not limited to, estimating the timing of and expected costs to complete in-process projects, projecting regulatory approvals, estimating future cash flows from product sales resulting from completed projects and in-process projects, and developing appropriate discount rates.
Impairment of Long-Lived Assets
Impairment of long-lived assets consists of costs attributable to the cease of use of laboratory equipment, leasehold improvements, and software associated with program development, as it was determined that certain long-lived assets would no longer be used due to our Recent Business Initiatives, which discontinued the Company's Phase 3 clinical trial in CP101.
Restructuring Expense
Restructuring expense consists of costs directly incurred as a result of restructuring initiatives, and includes one-time severance payments, healthcare coverage, outplacement services and related expenses as well as contract cancellation costs.
Total Other Income (Expense), Net
Total other income (expense), net primarily consists of sublease income, gain on lease termination, gain (loss) on disposal of fixed assets, interest income (expense) and loss on loan extinguishment.
Income Tax Benefit
The income tax benefit reflects the full removal of the deferred tax liability associated with the IPR&D that was written off during the first fiscal quarter of 2023 and treated as a discrete item in the tax provision.
Results of Operations
Comparison of the Three Months Ended June 30, 2023 and 2022
The following table summarizes our results of operations for the three months ended June 30, 2023 and 2022 (in thousands):
|
|
THREE MONTHS ENDED |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
REVENUE: |
|
|
|
|
|
|
||
Collaboration revenue |
|
$ |
— |
|
|
$ |
361 |
|
Total revenue |
|
|
— |
|
|
|
361 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
||
Research and development |
|
|
203 |
|
|
|
13,923 |
|
General and administrative |
|
|
8,877 |
|
|
|
8,164 |
|
Restructuring expense |
|
|
801 |
|
|
|
903 |
|
Total operating expenses |
|
|
9,881 |
|
|
|
22,990 |
|
Net operating loss |
|
|
(9,881 |
) |
|
|
(22,629 |
) |
OTHER INCOME (EXPENSE), NET: |
|
|
|
|
|
|
||
Interest income (expense), net |
|
|
420 |
|
|
|
(65 |
) |
Gain on lease termination |
|
|
752 |
|
|
|
— |
|
Gain (loss) on sale and disposal of fixed assets, net |
|
|
754 |
|
|
|
(6 |
) |
Sublease and other income |
|
|
1,005 |
|
|
|
— |
|
Total other income (expense), net |
|
|
2,931 |
|
|
|
(71 |
) |
Net loss |
|
$ |
(6,950 |
) |
|
$ |
(22,700 |
) |
20
Revenue
There was no revenue for the three months ended June 30, 2023 . Revenue of $0.4 million for the three months ended June 30, 2022 primarily consisted of collaboration revenue earned under the Takeda Agreement. Collaboration revenue decreased due to Takeda terminating our collaboration agreement in November 2022.
Research and Development Expenses
The following table summarizes our research and development expenses for the three months ended June 30, 2023 and 2022 (in thousands):
|
|
THREE MONTHS ENDED JUNE 30, |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Increase |
|
|||
CDI |
|
$ |
— |
|
|
$ |
4,066 |
|
|
$ |
(4,066 |
) |
Autism Spectrum Disorder (ASD) |
|
|
— |
|
|
|
1,409 |
|
|
|
(1,409 |
) |
Platform |
|
|
— |
|
|
|
7,002 |
|
|
|
(7,002 |
) |
Other |
|
|
203 |
|
|
|
1,446 |
|
|
|
(1,243 |
) |
|
|
$ |
203 |
|
|
$ |
13,923 |
|
|
$ |
(13,720 |
) |
Research and development expenses for the three months ended June 30, 2023 were $0.2 million, compared to $13.9 million for the three months ended June 30, 2022. The decrease was driven by our decision to significantly scale back our expenses by winding down our development efforts, including by liquidating certain of our assets, terminating vendor contracts and reducing headcount and now focus on realizing the value of our intellectual property and other assets.
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the three months ended June 30, 2023 and 2022 (in thousands):
|
|
THREE MONTHS ENDED JUNE 30, |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Increase (Decrease) |
|
|||
Personnel expenses (including stock-based compensation) |
|
$ |
780 |
|
|
$ |
3,233 |
|
|
$ |
(2,453 |
) |
Facilities and supplies |
|
|
1,796 |
|
|
|
443 |
|
|
|
1,353 |
|
Professional fees |
|
|
5,476 |
|
|
|
3,032 |
|
|
|
2,444 |
|
Other expenses |
|
|
825 |
|
|
|
1,456 |
|
|
|
(631 |
) |
|
|
$ |
8,877 |
|
|
$ |
8,164 |
|
|
$ |
713 |
|
General and administrative expenses were $8.9 million for the three months ended June 30, 2023, compared to $8.2 million for the three months ended June 30, 2022. The increase of $0.7 million was partially due to a $2.4 million increase in professional fees primarily related to legal expenses. There was also a $1.4 million increase in facilities and supplies primarily due to the increase in rent expense related to the commencement of the 10-year lease agreement with Hood Park LLC in May of 2022. These increases were partially offset by a $2.6 million decrease in personnel expenses due to the significant reduction of personnel.
Restructuring Expense
Restructuring expense for the three months ended June 30, 2023 was $0.4 million, compared to $0.9 million for the three months ended June 30, 2022. The decrease is primarily due to more costs associated with the first implementation of certain expense reduction measures, which occurred in the second quarter of 2022 compared to the expense reductions in the second quarter of 2023.
Other Income (Expense), Net
Total other income, net for the three months ended June 30, 2023 was $2.9 million compared to nominal expense for the three months ended June 30, 2022. The change to other income (expense) was primarily driven by the 2023 sublease income of $1.0 million, $0.8 million gain on the termination of our Inner Belt Road Lease, $0.8 million gain on the sale of fixed assets and interest income of $0.4 million earned on our cash equivalents due to higher interest rates.
21
Comparison of the Six Months Ended June 30, 2023 and 2022
The following table summarizes our results of operations for the six months ended June 30, 2023 and 2022 (in thousands):
|
|
SIX MONTHS ENDED |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
REVENUE: |
|
|
|
|
|
|
||
Collaboration revenue |
|
$ |
107 |
|
|
$ |
715 |
|
Total revenue |
|
|
107 |
|
|
|
715 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
||
Research and development |
|
|
7,199 |
|
|
|
29,453 |
|
General and administrative |
|
|
18,494 |
|
|
|
17,568 |
|
Impairment of IPR&D |
|
|
32,900 |
|
|
|
— |
|
Impairment of long-lived assets |
|
|
13,141 |
|
|
|
— |
|
Restructuring expense |
|
|
4,037 |
|
|
|
903 |
|
Total operating expenses |
|
|
75,771 |
|
|
|
47,924 |
|
Net operating loss |
|
|
(75,664 |
) |
|
|
(47,209 |
) |
OTHER INCOME (EXPENSE), NET: |
|
|
|
|
|
|
||
Interest (expense) income, net |
|
|
845 |
|
|
|
(52 |
) |
Gain on lease termination |
|
|
752 |
|
|
|
— |
|
Loss on loan extinguishment |
|
|
(1,366 |
) |
|
|
— |
|
Gain (loss) on sale and disposal of fixed assets, net |
|
|
617 |
|
|
|
(6 |
) |
Sublease and other income |
|
|
2,058 |
|
|
|
— |
|
Total other income (expense), net |
|
|
2,906 |
|
|
|
(58 |
) |
Loss before income taxes |
|
|
(72,758 |
) |
|
|
(47,267 |
) |
Income tax bebefit |
|
|
3,461 |
|
|
|
- |
|
Net loss |
|
$ |
(69,297 |
) |
|
$ |
(47,267 |
) |
Revenue
Revenue of $0.1 million and $0.7 million for the six months ended June 30, 2023 and 2022, respectively, primarily consisted of collaboration revenue earned under the Takeda Agreement. Our collaboration revenue decreased by $0.6 million due to Takeda terminating our collaberation agreement in November 2022.
Research and Development Expenses
The following table summarizes our research and development expenses for six months ended June 30, 2023 and 2022 (in thousands):
|
|
SIX MONTHS ENDED JUNE 30, |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Increase |
|
|||
CDI |
|
$ |
3,972 |
|
|
$ |
7,596 |
|
|
$ |
(3,624 |
) |
Autism Spectrum Disorder (ASD) |
|
|
71 |
|
|
|
3,275 |
|
|
|
(3,204 |
) |
Platform |
|
|
489 |
|
|
|
15,146 |
|
|
|
(14,657 |
) |
Other |
|
|
2,667 |
|
|
|
3,436 |
|
|
|
(769 |
) |
|
|
$ |
7,199 |
|
|
$ |
29,453 |
|
|
$ |
(22,254 |
) |
Research and development expenses for the six months ended June 30, 2023 were $7.2 million compared to $29.5 million for the six months ended June 30, 2022. The $22.3 million decrease was driven by our decision to significantly scale back our expenses by winding down our development efforts, including by liquidating certain of our assets, terminating vendor contracts and reducing headcount and now focus on realizing the value of our intellectual property and other assets.
22
General and Administrative Expenses
The following table summarizes our general and administrative expenses for the six months ended June 30, 2023 and 2022 (in thousands):
|
|
SIX MONTHS ENDED JUNE 30, |
|
|||||||||
|
|
2023 |
|
|
2022 |
|
|
Increase |
|
|||
Personnel expenses (including stock-based compensation) |
|
$ |
2,868 |
|
|
$ |
6,891 |
|
|
$ |
(4,023 |
) |
Facilities and supplies |
|
|
3,636 |
|
|
|
661 |
|
|
|
2,975 |
|
Professional fees |
|
|
9,874 |
|
|
|
6,286 |
|
|
|
3,588 |
|
Other expenses |
|
|
2,116 |
|
|
|
3,730 |
|
|
|
(1,614 |
) |
|
|
$ |
18,494 |
|
|
$ |
17,568 |
|
|
$ |
926 |
|
General and administrative expenses were $18.4 million for the six months ended June 30, 2023, compared to $17.6 million for the six months ended June 30, 2022. The increase of $0.8 million was partially due to a $3.6 million increase in professional fees primarily related to legal expenses. There was also a $3.0 million increase in facilities and supplies primarily due to the increase in rent expense related to the commencement of the 10-year lease agreement with Hood Park LLC in May of 2022. These increases were partially offset by a $4.2 million decrease in personnel expenses due to the significant reduction of personnel as well as a $1.6 million decrease in other expenses.
Impairment of IPR&D
There was no IPR&D impairment charge for the six months ended June 30, 2022. We recognized an IPR&D impairment charge of $32.9 million for the six months ended June 30, 2023 as the IPR&D asset was deemed to have no value.
Impairment of Long-Lived Assets
There was no impairment long-lived assets for the six months ended June 30, 2022. We recognized an impairment charge to long-lived assets of $13.1 million for the six months ended June 30, 2023, as it was determined that certain equipment, leasehold improvements, and software associated with program development would no longer be used.
Restructuring Expense
Restructuring expense for the six months ended June 30, 2023 was $3.6 million, compared to $0.9 million for the six months ended June 30, 2022. The increase is due to the costs associated with the implementation of certain expense reduction measures in January 2023 being higher than expenses associated with expense reduction measures, which occurred in the second quarter of 2022. Refer to Note 9 within the condensed consolidated financial statements for further information.
Other Income (Expense), Net
Total other income (expense), net for the six months ended June 30, 2023 was income of $2.9 million compared to a nominal loss for the six months ended June 30, 2022. The change to other income (expense) was driven by the 2023 sublease income of $2.1 million, interest income of $0.8 million earned on our cash equivalents due to higher interest rates, $0.8 million gain on the termination of our Inner Belt Road Lease, and $0.6 million gain on the sale of fixed assets. These increases were partially offset by realized loss on loan extinguishment of $1.4 million.
Income Tax Benefit
The income tax benefit for the six months ended June 30, 2023 reflects the full removal of the deferred tax liability associated with the IPR&D that was written off and treated as a discrete item in the tax provision. No income tax benefit was recorded for the six months ended June 30, 2022.
23
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not recognized any product revenue and have incurred operating losses and negative cash flows from our operations. We do not currently expect to progress any product candidate through clinical trials or commercial approval and we do not currently expect to generate any revenue from product sales. We expect that our revenue for the next several years, if any, will be derived from enforcement and out-licensing of our intellectual property estate. We have funded our operations primarily through equity financings, the Loan Agreement, and from collaboration revenue. We have raised an aggregate of $118.8 million in net proceeds from our IPO, approximately $177.0 million from the sale of convertible preferred stock and $14.0 million in collaboration revenue from the upfront payment and milestone payments received under our collaboration agreement with Takeda, which was terminated in 2022. In May 2022, we borrowed $15.0 million under the Loan Agreement, and subsequently, in January 2023, we voluntarily paid off all outstanding amounts under the Loan Agreement.
Cash Flows
The following table summarizes our cash flows for the six months ended June 30, 2023 and 2022 (in thousands):
|
|
SIX MONTHS ENDED |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net cash used in operating activities |
|
$ |
(22,538 |
) |
|
$ |
(41,485 |
) |
Net cash provided by (used in) investing activities |
|
|
1,256 |
|
|
|
(1,803 |
) |
Net cash (used in) provided by financing activities |
|
|
(16,155 |
) |
|
|
14,780 |
|
Net decrease in cash and cash equivalents, and restricted cash |
|
$ |
(37,437 |
) |
|
$ |
(28,508 |
) |
Operating Activities
During the six months ended June 30, 2023, cash used in operating activities was $22.5 million compared to $41.5 million in 2022. The decrease in cash used in operating activities is primarily due to significantly scaling back our expenses by winding down our development efforts, terminating vendor contracts and reducing headcount. During the six months ended June 30, 2022, cash used in operating activities was primarily related to employee compensation expenses, utilizing consultants as well as legal and other professional services. During the six months ended June 30, 2023, significantly less cash was used for employee compensation expenses as well as other research and development expenses compared to the 2022 period.
Investing Activities
During the six months ended June 30, 2023, net cash provided by investing activities of $1.3 million was primarily due to selling certain property and equipment as a result of winding down our development efforts and reducing headcount. In contrast, during the six months ended June 30, 2022, we used $1.8 million as we were purchasing property and equipment.
Financing Activities
During the six months ended June 30, 2023, net cash used in financing activities of $16.2 million was primarily due to repaying the outstanding balance borrowed under the the Loan Agreement as well as related prepayment fees. Obtaining this financing during the six months ended June 30, 2022 resulted in the $14.8 million of net cash provided by financing activities in the previous year.
Funding Requirements
As of June 30, 2023, our cash and cash equivalents were $34.1 million. We believe that our existing cash on hand will enable us to fund our operating expenses and capital expenditure requirements into 2025. We have based this estimate on assumptions that may prove to be wrong, and we could expend our capital resources sooner than we expect. We expect to continue to incur significant losses for the foreseeable future as we attempt to realize the value of our intellectual property estate and other assets.
24
Material Cash Requirements
During the six months ended June 30, 2023, there were no other material changes to our material cash requirements from those described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” discussed in the 2022 10-K.
Critical Accounting Policies and Significant Judgments and Estimates
Our unaudited interim condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our unaudited interim condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our condensed financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis, and our actual results may differ from these estimates under different assumptions or conditions.
There have been no significant changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in the 2022 10-K.
Recently Issued Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.
Emerging Growth Company Status and Smaller Reporting Company Status
We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We expect to use the extended transition period for any other new or revised accounting standards during the period in which we remain an emerging growth company and, as a result, we will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
We will remain an emerging growth company until December 31, 2026 or, if earlier, (i) the last day of our first fiscal year in which we have total annual gross revenues of at least $1.235 billion, (ii) the date on which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of interest rate sensitivities.
Interest Rate Sensitivity
As of June 30, 2023 and December 31, 2022, we had cash and cash equivalents of $34.1 million and $71.0 million, respectively. Our exposure to interest rate sensitivity is impacted by changes in the underlying U.S. bank interest rates. Our surplus cash has been invested in money market fund accounts as well as interest-bearing savings accounts from time to time. We have not entered into investments for trading or speculative purposes. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation of investments with short-term maturities, we do not believe an immediate one percentage point change in interest rates would have a material effect on the fair market value of our portfolio, and therefore, we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.
25
We have been affected by market risk exposure primarily through the effect of changes in interest rates on amounts payable under the Loan Agreement. On January 25, 2023, we voluntarily prepaid all outstanding principal, accrued and unpaid interest, fees, costs and expenses under the Loan Agreement.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2023. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosures, and is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Based on the evaluation of our disclosure controls and procedures as of June 30, 2023, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting that occurred (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the six months ended June 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving the desired control objectives. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. Similarly, an evaluation of controls cannot provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected.
26
PART II—OTHER INFORMATION
Item 1. Legal Proceedings
On December 1, 2021, Rebiotix Inc. and Ferring Pharmaceuticals Inc., or, collectively, Rebiotix, filed a complaint against us in the U.S. District Court for the District of Delaware (the “Court”). The complaint seeks a declaratory judgment of non-infringement and invalidity with respect to seven United States Patents owned by us: U.S. Patent Nos. 10,675,309, or the ’309 Patent; 10,463,702, or the ’702 Patent; 10,328,107, or the ’107 Patent; 10,064,899; 10,022,406, or the ’406 Patent; 9,962,413, or the ’413 Patent; and 9,308,226. On February 7, 2022, we filed an answer and counterclaims against Rebiotix for infringement of the ’107 Patent, the ’702 Patent, and the ’309 Patent. In June 2022, we alleged infringement of the ’406 Patent and ’413 Patent by Rebiotix. On March 7, 2022, we filed an amended answer and counterclaims, in which we, together with the Regents of the University of Minnesota, or UMN, alleged infringement by Rebiotix of three U.S. Patents owned by UMN and exclusively licensed to us: U.S. Patent Nos. 10,251,914, 10,286,011, and 10,286,012, or, collectively, the UMN Patents. On April 4, 2022, Rebiotix filed counterclaims for declaratory judgment of non-infringement and invalidity of the UMN Patents. On May 2, 2022, we and UMN responded, denying such counterclaims. The Court set a trial date for a five-day trial beginning on May 20, 2024. On January 23, 2023, we filed a second amended answer and counterclaims, in which we alleged infringement by Rebiotix of two additional U.S. Patents owned by us: U.S. Patent Nos. 11,541,080, or the ’080 Patent, and 11,491,193, or the ’193 Patent. On February 7, 2023 Rebiotix filed counterclaims for declaratory judgment of non-infringement and invalidity of the ’080 and ’193 patents. The Court issued a claim construction order on February 28, 2023. On July 6, 2023, Rebiotix filed a motion to dismiss certain counts of our second amended answer and counterclaims based on the assertion that Finch lacks standing to sue as to ’107 Patent, ’702 Patent, ’309 Patent, ’406 Patent, ’413 Patent, ’193 Patent, and ’080 Patent. Rebiotix specifically alleges that the sole named inventor on these patents, Thomas J. Borody, did not assign his rights in those patents to Finch, and as a result, Finch does not own them and therefore does not have standing to assert them. Briefing on this motion is complete.
The pending lawsuit is subject to inherent uncertainties, and the actual legal fees and costs will depend upon many unknown factors. The outcome of the pending lawsuit cannot be predicted with certainty.
We may also be a party to litigation and subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as supplemented by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 23, 2023, as supplemented by our Quarterly Report on Form 10-Q for the quarter ended March 31, 2023.
27
Item 5. Other Information
None.
Item 6. Exhibits
|
|
|
|
Incorporated by Reference |
||||||
Exhibit Number |
|
Description |
|
Schedule Form |
|
File Number |
|
Exhibit |
|
Filing Date |
|
|
|
|
|
|
|
|
|
|
|
3.1 |
|
Amended and Restated Certificate of Incorporation of Finch Therapeutics Group, Inc. |
|
8-K |
|
001-40227 |
|
3.1 |
|
March 23, 2021 |
3.2 |
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation. |
|
8-K |
|
001-40227 |
|
3.1 |
|
June 9, 2023 |
3.3 |
|
Amended and Restated Bylaws of Finch Therapeutics Group, Inc. |
|
8-K |
|
001-40227 |
|
3.2 |
|
March 23, 2021 |
10.1*# |
|
|
|
|
|
|
|
|
|
|
10.2 |
|
|
8-K |
|
001-40227 |
|
10.1 |
|
April 25, 2023 |
|
10.3 |
|
|
8-K |
|
001-40227 |
|
10.2 |
|
April 23, 2023 |
|
10.4 |
|
|
8-K |
|
001-40227 |
|
10.1 |
|
May18, 2023 |
|
10.5*† |
|
2017 Equity Incentive Plan, as amended, and the forms of agreements thereunder. |
|
|
|
|
|
|
|
|
10.6*† |
|
2021 Equity Incentive Plan, as amended, and the forms of agreements thereunder. |
|
|
|
|
|
|
|
|
10.7*† |
|
|
|
|
|
|
|
|
|
|
31.1* |
|
|
|
|
|
|
|
|
|
|
31.2* |
|
|
|
|
|
|
|
|
|
|
32.1+ |
|
|
|
|
|
|
|
|
|
|
101.INS* |
|
Inline XBRL Instance Document |
|
|
|
|
|
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
|
|
|
|
|
28
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
|
|
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
|
|
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
|
|
|
|
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
|
|
|
|
|
* Filed herewith.
# Certain confidential portions of this exhibit were omitted by means of marking such portions with brackets [***] because the identified confidential portions (i) are not material and (ii) is the type of information the Registrant treats as private or confidential.
† Indicates management contract or compensatory plan.
+ This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
FINCH THERAPEUTICS GROUP, INC. |
|
|
|
|
|
Date: August 11, 2023 |
|
By: |
/s/ Matthew P. Blischak |
|
|
|
Matthew P. Blischak |
|
|
|
President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
Date: August 11, 2023 |
|
By: |
/s/ Lance Thibault |
|
|
|
Lance Thibault |
|
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
30
DocuSign Envelope ID: C23403EF-A3D5-465F-8315-7AD59052E3C4
Agreement #: A20120373
EXHIBIT 10.1
Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) is the type of information that the registrant treats as private or confidential. Triple asterisks denote omissions.
FIRST AMENDMENT TO EXCLUSIVE LICENSE AGREEMENT
THIS FIRST AMENDMENT (this “Amendment”) to the EXCLUSIVE LICENSE AGREEMENT effective as of January 28, 2022 (the “Agreement”) is made as of the date of last signature below (“Amendment Date”) by and between Finch Therapeutics Holdings LLC, a Delaware limited liability company (“Licensee”), and the Regents of the University of Minnesota, a constitutional corporation under the laws of the state of Minnesota (“University”).
WHEREAS, the parties desire to make certain amendments to the Agreement as set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and promises contained in this Amendment, the parties hereby agree as follows:
Provided that a Regulatory Authority does not recommend or require unanticipated studies or prerequisites, including, without limitation, detailed characterization of control material for clinical trial use, as part of the regulatory approval process for obtaining a Licensed Product, Licensee (directly or indirectly by way of sublicense) shall achieve the following milestones. If the Regulatory Authority does recommend or require such unanticipated studies or prerequisites, the parties will negotiate in good faith extensions to the milestones to reflect additional time that may be needed to achieve the following:
1
DocuSign Envelope ID: C23403EF-A3D5-465F-8315-7AD59052E3C4
Agreement #: A20120373
[***].
“Regulatory Authority” means, with respect to a Licensed Product, any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity in the Territory, with authority over (a) the distribution, importation, exportation, manufacture, production, use, storage, transport, clinical testing or sale of the Licensed Product, including the United States Food and Drug Administration (“FDA”), European Medicines Agency, Therapeutic Goods Administration (Australia), Health Canada, and National Medical Products Administration (China), or (b) setting the price and/or reimbursement for the Licensed Product.
10.1 (University’s Right to Terminate for Breach) of the General Terms of the Agreement is hereby amended to replace “FDA” with “Regulatory Authority”.
2
DocuSign Envelope ID: C23403EF-A3D5-465F-8315-7AD59052E3C4
Agreement #: A20120373
THE PARTIES HEREBY EXECUTE THIS AMENDMENT
Regents of the University of Minnesota |
Finch Therapeutics Holdings LLC
|
||
By: |
/s/ Rick Heubsch |
By: |
/s/ Mark Smith |
Name: |
Rich Huebsch |
Name: |
Mark Smith |
Title: |
Executive Director |
Title: |
CEO |
Date: |
April 11, 2023
|
Date: |
April 12, 2023 |
3
EXHIBIT 10.5
FINCH THERAPEUTICS GROUP, INC.
2017 EQUITY INCENTIVE PLAN
AMENDED AND RESTATED AS OF: JUNE 8, 2023
As used in this 2017 Equity Incentive Plan, the following terms shall have the respective meanings set out below, unless the context clearly requires otherwise:
This Plan is intended to encourage ownership of Common Stock by employees, consultants, officers and directors of the Company and its Affiliates and to provide additional incentive for them to promote the success of the Company’s business. The Plan is intended to be an incentive stock option plan within the meaning of Section 422 of the Code but not all Awards granted hereunder are required to be Incentive Options.
Unless the Plan shall have been earlier terminated by the Board, Awards may be granted under this Plan at any time in the period commencing upon the date of approval of the Plan by the Board and ending immediately prior to the tenth anniversary of the earlier of the adoption of the Plan by the Board and the approval of the Plan by the Company’s stockholders. Awards granted pursuant to the Plan within such period shall not expire solely by reason of the termination of the Plan. Awards of Incentive Options granted prior to stockholder approval of the Plan are hereby expressly conditioned upon such approval, but in the event of the failure of the stockholders to approve the Plan shall thereafter and for all purposes be deemed to constitute Non-statutory Options.
Subject to adjustment as provided in Section 8.1, at no time shall the number of shares of Common Stock issued pursuant to or subject to outstanding Awards under the Plan exceed Seven Hundred Fifty-Two Thousand Two Hundred Ninety (752,290) shares of Common Stock. For purposes of applying the foregoing limitation, (a) if any Option expires, terminates, or is cancelled for any reason without having been exercised in full, or if any Award of Restricted Stock or Restricted Stock Units is forfeited by a Participant, the shares of Common Stock not purchased upon exercise of such Option and/or any such Award of Restricted Stock or Restricted Stock Units so forfeited shall again be available for Awards thereafter to be granted under the Plan, and (b) if any Option is exercised by delivering previously owned shares of Common Stock in payment of the exercise price therefor, only the net number of shares, that is, the number of shares issued minus the number received by the Company in payment of the exercise price, shall be considered to have been issued pursuant to an Award granted under the Plan. Shares of Common Stock issued pursuant to the Plan may be either authorized but unissued shares or shares held by the Company in its treasury.
Subject to adjustment as provided in Section 8.1, the maximum number of shares of Common Stock which may be issued pursuant to Incentive Options under the Plan shall not exceed Seven Hundred Fifty Two Thousand Two Hundred Ninety (752,290) shares.
The Plan shall be administered by the Committee by action thereof which shall require the affirmative vote at least one Board member designated by the Former Crestovo Holders and one Board member designated by the Former Finch Holders; provided, however, that at any time and on any one or more occasions the Board may itself exercise any of the powers and responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee’s exercise of its authorities
hereunder; and provided further that the Committee may delegate to an executive officer or officers the authority to grant Awards hereunder to employees who are not officers, and to consultants, in accordance with such guidelines as the Committee shall set forth at any time or from time to time. Subject to the provisions of the Plan and the Ancillary Agreements, the Committee shall have complete authority, in its discretion, to make or to select the manner of making all determinations with respect to each Award to be granted by the Company under the Plan in addition to any other determination allowed the Committee under the Plan including, without limitation: (a) the employee, consultant, officer or director to receive the Award; (b) the form of Award; (c) whether an Option (if granted to an employee) will be an Incentive Option or a Non-statutory Option; (d) the time of granting an Award; (e) the number of shares subject to an Award; (f) the exercise price of an Option or purchase price, if any, for shares of Restricted Stock or for a Stock Grant and the method of payment of such exercise price or such purchase price; (g) the term of an Option; (h) the Restricted Period and the Risk of Forfeiture applicable to any Award of Restricted Stock or Restricted Stock Units as well as the Acceleration, if any, of such Restricted Period and Risk of Forfeiture; (i) the exercise date or dates of an Option as well as the Acceleration, if any, of such exercise date or dates; and (j) the effect of termination of any employment, consulting, officership or Board member relationship with the Company or any of its Affiliates on the subsequent exercisability of an Option or on the Risk of Forfeiture of Restricted Stock or Restricted Stock Units. In making such determinations, the Committee may take into account the nature of the services rendered by the respective employees, consultants, officers and directors, their present and potential contributions to the success of the Company and its Affiliates, and such other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of the Plan and the Ancillary Agreements, the Committee shall also have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective Award Agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan. The Committee’s determinations made in good faith on matters referred to in this Plan shall be final, binding and conclusive on all persons having or claiming any interest under the Plan or an Award made pursuant hereto.
The Committee may grant from time to time and at any time prior to the termination of the Plan one or more Awards, either alone or in combination with any other Awards, to any employee of, or consultant to, one or more of the Company and its Affiliates or to any non-employee officer or member of the Board or of any board of directors (or similar governing authority) of any Affiliate. However, only employees of the Company or of any parent or subsidiary corporations of the Company, as defined in Sections 424(e) and (f), respectively, of the Code, shall be eligible for the grant of an Incentive Option.
Each grant of an Award shall be subject to all applicable terms and conditions of the Plan (including but not limited to any specific terms and conditions applicable to that type of Award set out in Section 7 below), and such other terms and conditions, not inconsistent with the terms of the Plan, as the Committee may prescribe. Except with respect to Options received pursuant to the Merger Agreement, no prospective Participant shall have any rights with respect to an Award, unless and until such Participant has executed an agreement evidencing the Award (or the transfer thereof to such Participant), delivered a fully executed copy thereof to the Company, and otherwise complied with the applicable terms and conditions of such Award.
The transferability of this certificate and the shares represented by this certificate are subject to the terms and conditions of the Finch Therapeutics Group, Inc. Equity Incentive Plan and an Award Agreement entered into by the record owner of such shares and Finch Therapeutics Group, Inc., in each case as the same may be amended. Copies of such Plan and Award Agreement are on file in the offices of Finch Therapeutics Group, Inc.
The transferability of this certificate and the shares represented by this certificate are subject to the terms and conditions of the Finch Therapeutics Group, Inc. 2017 Equity Incentive Plan, as the same may be amended. A copy of such Plan is on file in the offices of Finch Therapeutics Group, Inc.
The Company shall at all times during the term of the Plan and any outstanding Options granted hereunder reserve or otherwise keep available such number of shares of Common Stock as will be sufficient to satisfy the requirements of the Plan (if then in effect) and such Options and shall pay all fees and expenses necessarily incurred by the Company in connection therewith.
Nothing contained in the Plan or in any Award Agreement shall confer upon any recipient of an Award any right with respect to the continuation of his or her employment, consulting, officer or Board member relationship or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment, consulting, officer or Board member agreement or provision of law or corporate articles or by-laws to the contrary, at any time to terminate such employment, consulting, officer or Board member agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the recipient’s employment, consulting or Board member relationship or other association with the Company and its Affiliates.
Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including without limitation, the granting of stock options, restricted stock and stock grants other than under the Plan, and such arrangements may be either applicable generally or only in specific cases.
The Board, which shall include the affirmative vote of at least one Board member designated by the Former Crestovo Holders and one Board member designated by the Former Finch Holders, may at any time terminate the Plan or make such amendments or modifications of the Plan as it shall deem advisable. In the event of the termination of the Plan, the terms of the Plan shall survive any such termination with respect to any Award that is outstanding on the date of such termination, unless the holder of such Award agrees in writing to terminate
such Award or to terminate all or any of the provisions of the Plan that apply to such Award. Unless the Board otherwise expressly provides, any amendment or modification of the Plan shall affect the terms of any Award outstanding on the date of such amendment or modification as well as the terms of any Award made from and after the date of such amendment or modification; provided, however, that except to the extent otherwise provided in the last sentence of this paragraph, (i) no amendment or modification of the Plan shall apply to any Award that is outstanding on the date of such amendment or modification if such amendment or modification would reduce the number of shares subject to such Award, increase the purchase price applicable to shares subject to such Award or materially adversely affect the provisions applicable to such Award that relate to the vesting or exercisability of such Award or of the shares subject to such Award, (ii) no amendment or modification of the Plan shall apply to any Incentive Option that is outstanding on the date of such amendment or modification if such amendment or modification would result in such Incentive Option no longer being treated as an “incentive stock option” within the meaning of Section 422 of the Code and (iii) no amendment or modification of the Plan shall apply to any Award that is outstanding on the date of such amendment or modification unless such amendment or modification of the Plan shall also apply to all other Awards outstanding on the date of such amendment or modification (except for those Awards to whom such amendment or modification is not applicable by virtue of the provisions of the foregoing clause (ii) hereof). In the event of any amendment or modification of the Plan that is described in clause (i), (ii) or (iii) of the foregoing proviso, such amendment or modification of the Plan shall apply to any Award outstanding on the date of such amendment or modification only if the recipient of such Award consents in writing thereto.
The Committee, which shall include the affirmative vote of at least one Board member designated by the Former Crestovo Holders and one Board member designated by the Former Finch Holders, may amend or modify, prospectively or retroactively, the terms of any outstanding Award without amending or modifying the terms of the Plan itself, provided that as amended or modified such Award is consistent with the terms of the Plan as in effect at the time of the amendment or modification of such Award, but no such amendment or modification of such Award shall, without the written consent of the recipient of such Award, reduce the number of shares subject to such Award, increase the purchase price applicable to shares subject to such Award, adversely affect the provisions applicable to such Award that relate to the vesting or exercisability of such Award or of the shares subject to such Award, or otherwise materially adversely affect the terms of such Award (except for amendments or modifications to the terms of such Award or of the stock subject to such Award that are expressly permitted by the terms of the Plan or that result from any amendment or modification of the Plan in accordance with the provisions of the first paragraph of this Section 13 or that are permitted by the provisions set forth below in this Section 13), or, if such Award is an Incentive Option, result in such Incentive Option no longer being treated as an “incentive stock option” within the meaning of Section 422 of the Code. Notwithstanding any of the foregoing provisions of this paragraph to the contrary, the Committee, which shall include the affirmative vote of at least one Board member designated by the Former Crestovo Holders and one Board member designated by the Former Finch Holders, is expressly authorized to amend any or all outstanding Options to effect a repricing thereof by lowering the purchase price applicable to the shares of Common Stock subject to such Option or Options without the approval of the stockholders of the Company or the holder or holders of such Option or Options, and, in connection with such repricing, to amend or modify any of the other terms of the Option or Options so repriced, including, without limitation, for purposes of reducing the number of shares subject to such Option or Options or for purposes of adversely affecting the provisions applicable to such Option or Options that relate to the vesting or exercisability thereof, in each case without the approval of stockholders of the Company or the holder or holders of such Option or Options.
In addition, notwithstanding anything express or implied in any of the foregoing provisions of this Section 13 to the contrary, the Committee may amend or modify, prospectively or retroactively, the terms of any outstanding Award to the extent the Committee reasonably determines necessary or appropriate to conform such Award to the requirements of Section 409A of the Code (concerning non-qualified deferred compensation), if applicable.
In the event of any conflict between the provisions of this Plan and the provisions of any Ancillary Agreement, the provisions of the Ancillary Agreement shall control. In the event of any conflict between the provisions of this Plan and the provisions of any applicable Award Agreement, the provisions of this Plan shall control,
except if and to the extent that the conflicting provision in such Award Agreement was authorized and approved by the Committee, which shall include the affirmative vote of at least one Board member designated by the Former Crestovo Holders and one Board member designated by the Former Finch Holders, at the time of the grant of the Award evidenced by such Award Agreement or is ratified by the Committee, which shall include the affirmative vote of at least one Board member designated by the Former Crestovo Holders and one Board member designated by the Former Finch Holders, at any time subsequent to the grant of such Award, in which case the conflicting provision in such Award Agreement shall control. Without limiting the generality of the foregoing provisions of this Section 14, insofar as possible the provisions of the Plan and such Award Agreement shall be construed so as to give full force and effect to all such provisions. In the event of any conflict between the provisions of this Plan and the provisions of any applicable Stockholder Agreement (other than any of the Ancillary Agreements) or other agreement between the Company and the applicable Participant, the provisions of such Stockholder Agreement or other agreement shall control except as required to fulfill the intention that this Plan constitute an incentive stock option plan within the meaning of Section 422 of the Code, but insofar as possible the provisions of the Plan and any such Stockholder Agreement or other agreement shall be construed so as to give full force and effect to all such provisions.
Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class mail or overnight courier, postage prepaid, or telecopied with a confirmation copy by first class mail or overnight courier, addressed or telecopied, as the case may be, (i) if to the recipient of an Award, at his or her residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Chief Executive Officer, or to such other address or telecopier number, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, five (5) days after having been sent by first class mail, postage prepaid; (iii) in the case of overnight courier, one (1) business day after deposit with a nationally recognized overnight courier, freight prepaid, specifying next business day delivery; and (iv) in the case of facsimile transmission, when sent and confirmed by facsimile machine report, if sent by facsimile transmission during normal business hours of the recipient, and if not sent during normal business hours, then on the recipient’s next business day.
The Plan and all Award Agreements and actions taken thereunder shall be governed, interpreted and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof.
This 2017 Equity Incentive Plan was originally approved and adopted as of September 21, 2017, by the Board of Directors and as of September 21, 2017, by the Stockholders.
[The remainder of this page is intentionally left blank.]
ATTACHMENT A
TO
2017 EQUITY INCENTIVE PLAN
Provisions Applicable to Award Recipients
Resident in California
Until such time as the Company’s Common Stock has been effectively registered under the Securities Act and if required by any applicable law, the following additional terms shall apply to Awards, and Stock issued pursuant to such Awards, granted under the Plan to persons resident in California as of the date of grant of the Award (each such person, a “California Recipient”). Capitalized terms not defined in this Attachment shall have the respective meanings set forth in the Plan.
1. No Option or other right to acquire Stock pursuant to an Award issued to any California Recipient, that is otherwise transferable pursuant to the terms of the Plan, shall be transferable other than by gift or domestic relations order to an immediate family member as that term is defined under applicable California and Federal securities law or to a revocable trust (or by will or the laws of descent and distribution).
2. No Option may have an exercise period of more than 10 years from the Grant Date of the Option.
3. The following limitations shall apply to the early expiration of Options granted California Recipients on account of termination of employment (unless employment is terminated for cause as defined by applicable law):
(a) Subject to Section 2(b) below, in the event the employment or other association with the Company and its Affiliates of an Optionee who is a California Resident is terminated, whether voluntary or otherwise and including on account of an entity ceasing to be an Affiliate of the Company, such California Recipient shall have at least thirty (30) days after the date of such termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) to exercise such Option to the extent exercisable as of the date of such termination.
(b) In the event that the employment or association with the Company and its Affiliates of an Optionee who is a California Resident is terminated as a result of death or disability, such California Recipient shall have at least six (6) months after the date of such termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement) to exercise such Option to the extent exercisable as of the date of such termination.
4. The Plan must be approved by a majority of the outstanding securities entitled to vote within twelve (12) months before or after the later of (i) the date the Plan is adopted by the Company and (ii) the date on which any Option or other Award is granted to a California Recipient.
5. Notwithstanding anything to the contrary in Section 8.1 of the Plan, the Committee shall in any event make adjustments to the number of shares and the purchase price of Awards as may be required by Section 25102(o) of the California Corporations Code.
FINCH THERAPEUTICS GROUP, INC.
2017 EQUITY INCENTIVE PLAN
EXERCISE NOTICE
Finch Therapeutics Group, Inc.
200 Inner Belt Road
Somerville, MA 02143
To: |
Finch Therapeutics Groups, Inc. |
|
Re: |
Exercise of the Option(s) |
1. Exercise of Option. Effective as of today, , , the undersigned (“Participant”) hereby irrevocably elects to exercise Participant’s option (the “Option”) to purchase ________________ shares of the Common Stock (the “Shares”) of Finch Therapeutics Group, Inc. (the “Company”) under and pursuant to the Company’s 2017 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement dated ______________, _ (the “Option Agreement”). Capitalized terms used but not otherwise defined herein shall have the meaning as defined in the Plan.
2. Delivery of Payment. Participant herewith delivers to the Company the full purchase price of the Shares, as set forth in the Option Agreement, and any and all withholding taxes due in connection with the exercise of the Option.
3. Representations of Participant. Participant acknowledges that Participant has received, read and understood the Plan, the Option Agreement and agrees to abide by and be bound by their terms and conditions. In particular, the Participant acknowledges that: (i) the ability to sell or otherwise transfer the shares of Company Common Stock subject to the Option (the “Option Shares”) is substantially limited; (ii) any Option Shares that are still subject to Risk of Forfeiture shall be forfeited or subject to return to or repurchase by the Company (or its designee) in the event of a termination of any employment, consulting, officership or Board membership with the Company or any of its Affiliates; and (iii) the Option Shares may be subject to call rights and draft along rights of the Company.
4. Rights as Stockholder. Until the issuance of the Shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Common Stock subject to an Award, notwithstanding the exercise of the Option. The Shares shall be issued to Participant as soon as practicable after the Option is exercised in accordance with the Option Agreement.
5. Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of Participant’s purchase or disposition of the Shares. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of the Shares and that Participant is not relying on the Company for any tax advice.
6. Successors and Assigns. The Company may assign any of its rights under this Exercise Notice to single or multiple assignees, and this Exercise Notice shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Exercise Notice shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.
7. Interpretation. Any dispute regarding the interpretation of this Exercise Notice shall be submitted by Participant or by the Company forthwith to the Committee, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Committee shall be final and binding on all parties.
8. Governing Law; Severability. This Exercise Notice is governed by the internal substantive laws, but not the choice of law rules, of the Commonwealth of Massachusetts. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Exercise Notice shall continue in full force and effect.
9. Entire Agreement. The Plan and Option Agreement are incorporated herein by reference. This Exercise Notice, the Plan, the Option Agreement, the Voting Agreement and the Investment Representation Statement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Participant with respect to the subject matter hereof, and may not be modified adversely to the Participant’s interest except by means of a writing signed by the Company and Participant.
|
|
|
Submitted by: PARTICIPANT Signature Print Name Address: |
|
Accepted by: FINCH THERAPEUTICS GROUP, INC. By Print Name Title Address: Date Received |
FINCH THERAPEUTICS GROUP, INC.
STOCK OPTION AGREEMENT
1. Grant of Option. Finch Therapeutics Group, Inc., a Delaware corporation (the “Company”), hereby grants to Optionee, as of the Grant Date, an Option to purchase up to the number of Option Shares specified in the Grant Notice. The Option Shares shall be purchasable from time to time during the Option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. The Option shall have a term of ten (10) years measured from the Grant Date and shall accordingly expire at the close of business on the Expiration Date, unless sooner terminated in accordance with the Company’s 2017 Equity Incentive Plan (the “Plan”) (including, without limitation, Section 7.1(e) of the Plan pursuant to which, except in certain circumstances specified in such Section 7.1(e), the Option shall cease to be exercisable and terminate [According to Carta] days after Optionee’s service with the Company ends for any reason or no reason).
3. Limited Transferability. The Option shall be neither transferable nor assignable by Optionee other than by will or the laws of inheritance following Optionee’s death and may be exercised, during Optionee’s lifetime, only by Optionee.
4. Dates of Exercise. The Option shall become exercisable in one or more installments as specified in Grant Notice. As the Option becomes exercisable for such installments, those installments shall accumulate and the Option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the Option term under the Plan.
5. Stockholder Rights. The holder of the Option shall not have any stockholder rights with respect to the Option Shares until such person shall have exercised the Option, paid the Exercise Price and become the record holder of the purchased shares.
6. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of any successor or assign of the Company and any executor, administrator, trustee, guardian, or other legal representative of the Optionee.
7. Construction. This Agreement and the Option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan, including, but not limited to, the limitations set forth in Section 9 of the Plan on the Company’s obligation to deliver Option Shares upon exercise of the Option.
8. Code 409A Waiver and Release.
(a) Optionee hereby agrees and acknowledges that the Board has taken reasonable steps to value the Company’s common stock and to set the Exercise Price at the fair market value per share of common stock on the Grant Date so that the Option will not be treated as an item of deferred compensation subject to Code Section 409A. However, because the common stock is not readily tradable on an established securities market, there can be no assurance that the Exercise Price is at least equal to the fair market value per share of common stock on the Grant Date. Were the Internal Revenue Service to conclude that the Exercise Price is in fact less than such fair market value and that the Option is accordingly subject to Code Section 409A, then Optionee would be subject to the following adverse tax consequences:
(i) As the Option vests and becomes exercisable, Optionee would immediately recognize taxable income for federal income tax purposes equal to the amount by which the fair market value of the Option Shares which vest at that time exceeds the Exercise Price payable for those shares. The Company would also have to collect from Optionee the federal income and employment taxes which must be withheld on that income. Taxation would occur in this manner even though the Option remains unexercised.
(ii) Optionee may also be subject to additional income taxation and withholding taxes on any subsequent increases to the fair market value of the Option Shares purchasable under the vested Option until the Option is exercised or cancelled as to those Option Shares.
(iii) In addition to normal income taxes payable as the Option vests, Optionee would also be subject to an additional tax penalty equal to 20% of the amount of income Optionee recognizes under Code Section 409A when the Option vests and may also be subject to such penalty as the underlying Option Shares subsequently increase in fair market value over the period the Option continues to remain outstanding.
(iv) There will also be interest penalties if the resulting taxes are not paid on a timely basis.
(b) Optionee hereby further agrees and acknowledges that Optionee may incur the same or similar tax consequences, including (without limitation) a second penalty tax, under state income tax laws. Optionee accepts the risk of any unfavorable tax consequences under applicable state laws to options granted with an Exercise Price less than the fair market value of the Option Shares on the Grant Date.
(c) Optionee hereby agrees to bear the entire risk of such adverse federal and state tax consequences in the event the Option is deemed to be subject to Code Section 409A and hereby knowingly and voluntarily, in consideration for the grant of the Option, waives and releases any and all claims or causes of action that Optionee might otherwise have against the Company and/or its Board, officers, employees or stockholders arising from or relating to the tax treatment of the Option under Code Section 409A and the corresponding provisions of any applicable state income tax laws and shall not seek any indemnification or other recovery of damages against the Company and/or its Board, officers, employees or stockholders with respect to any adverse federal and state tax consequences or other related costs and expenses Optionee may in fact incur under Code Section 409A (or the corresponding provisions of state income tax laws) as a result of the Option.
9. Definitions. The following definitions shall be in effect under the Agreement; any term not defined hereunder shall have the meaning assigned to such term in the Grant Notice or the Plan.
(a) Agreement shall mean this Stock Option Agreement.
(b) Code shall mean the Internal Revenue Code of 1986, as amended.
(c) Exercise Price shall mean the exercise price payable per Option Share as specified in the Grant Notice.
(d) Expiration Date shall mean the date on which the Option expires as specified in the Grant Notice.
(e) Grant Date shall mean the date of grant of the Option as specified in the Grant Notice.
(f) Grant Notice shall mean the Notice of Grant of Stock Option accompanying the Agreement, pursuant to which Optionee has been informed of the basic terms of the Option evidenced hereby.
(g) Option Shares shall mean the number of shares of common stock subject to the Option.
(h) Optionee shall mean the person to whom the Option is granted as specified in the Grant Notice.
10. Miscellaneous. This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof and shall be binding upon and inure to the benefit of any successor or assign of the Company and any executor, administrator, trustee, guardian, or other legal representative of you. Capitalized terms used but not defined herein shall have the meaning assigned under the Plan. This Agreement may be executed in one or more counterparts all of which together shall constitute but one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as a sealed instrument as of the date first above written.
FINCH THERAPEUTICS GROUP, INC.
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Print Name of Optionee |
||
|
|
|
|
|||
By: |
|
|
|
|
|
|
Name: |
|
|
|
Signature of Optionee |
||
Title: |
|
|
|
|
||
|
|
|
|
|
||
|
|
|
|
|
|
Optionee’s Address: |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
Optionee’s Email: |
|
|
|
|
|||
|
|
|
|
|
|
|
EXHIBIT 10.6
FINCH THERAPEUTICS GROUP, INC.
2021 EQUITY INCENTIVE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: MARCH 11, 2021
APPROVED BY THE STOCKHOLDERS: MARCH 11, 2021
IPO DATE: MARCH 18, 2021
AMENDED AND RESTATED AS OF: JUNE 8, 2023
Each Option and SAR will have such terms and conditions as determined by the Board. Each Option will be designated in writing as an Incentive Stock Option or Nonstatutory Stock Option at the time of grant; provided, however, that if an Option is not so designated, or if such Nonstatutory Stock Option fails to qualify as an Incentive Stock Option, then such Option will be a Nonstatutory Stock Option, and the shares purchased upon exercise of each type of Option will be separately accounted for. Each SAR will be denominated in shares of Common Stock equivalents. The terms and conditions of separate Options and SARs need not be identical; provided, however, that each Option Agreement and SAR Agreement will conform (through incorporation of provisions hereof by reference in the Award Agreement or otherwise) to the substance of each of the following provisions:
Following the date of such termination, to the extent the Participant does not exercise such Award within the applicable Post-Termination Exercise Period (or, if earlier, prior to the expiration of the maximum term of such Award), such unexercised portion of the Award will terminate, and the Participant will have no further right, title or interest in terminated Award, the shares of Common Stock subject to the terminated Award, or any consideration in respect of the terminated Award.
If all or any part of the Plan or any Award Agreement is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of the Plan or such Award Agreement not declared to be unlawful or invalid. Any Section of the Plan or any Award Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
The Board may suspend or terminate the Plan at any time. No Incentive Stock Options may be granted after the tenth anniversary of the earlier of: (i) the Adoption Date, or (ii) the date the Plan is approved by the Company’s stockholders. No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
Notwithstanding the foregoing or any other provision of this Plan, (A) the term Change in Control shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply, and (C) with respect to any nonqualified deferred compensation that becomes payable on account of the Change in Control, the transaction or event
described in clause (i), (ii), (iii), or (iv) also constitutes a Section 409A Change in Control if required in order for the payment not to violate Section 409A of the Code.
Notwithstanding the foregoing, a leave of absence will be treated as Continuous Service for purposes of vesting in an Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law. In addition, to the extent required for exemption from or compliance with Section 409A, the determination of whether there has been a termination of Continuous Service will be made, and such term will be construed, in a manner that is consistent with the definition of “separation from service” as defined
under U.S. Treasury Regulation Section 1.409A-1(h) (without regard to any alternative definition thereunder).
Notwithstanding the foregoing or any other provision of this Plan, (A) the term Corporate Transaction shall not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, (B) the definition of Corporate Transaction (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant shall supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Corporate Transaction or any analogous term is set forth in such an individual written agreement, the foregoing definition shall apply, and (C) with respect to any nonqualified deferred compensation that becomes payable on account of the Corporate Transaction, the transaction or event described in clause (i), (ii), (iii), or (iv) also constitutes a Section 409A Change in Control if required in order for the payment not to violate Section 409A of the Code.
FINCH THERAPEUTICS GROUP, INC.
GLOBAL STOCK OPTION GRANT NOTICE
(2021 EQUITY INCENTIVE PLAN)
Finch Therapeutics Group, Inc. (the “Company”), pursuant to its 2021 Equity Incentive Plan (the “Plan”), has granted to you (“Optionholder”) an option to purchase the number of shares of the Common Stock set forth below (the “Option”). Your Option is subject to all of the terms and conditions as set forth herein and in the Plan and the Global Stock Option Agreement, including any additional terms and conditions for your country set forth in the appendix thereto (the “Appendix and, together with the Global Stock Option Agreement, the “Agreement”), all of which are attached hereto and incorporated herein in their entirety. Capitalized terms not explicitly defined herein but defined in the Plan or the Agreement shall have the meanings set forth in the Plan or the Agreement, as applicable.
|
|
|
|
|
|
|
Optionholder: |
|
|
|
|
Date of Grant: |
|
|
|
|
Vesting Commencement Date: |
|
|
|
|
Number of Shares of Common Stock Subject to Option: |
|
|
|
|
Exercise Price (Per Share): |
|
|
|
|
Total Exercise Price: |
|
|
|
|
Expiration Date: |
|
|
|
|
|
Type of Grant: |
|
[Incentive Stock Option] OR [Nonstatutory Stock Option] |
|
|
|
Exercise and Vesting Schedule: |
|
Subject to the Optionholder’s Continuous Service through each applicable vesting date, the Option will vest as follows: |
|
|
|
|
|
[__________] |
Optionholder Acknowledgements: By your signature below or by electronic acceptance or authentication in a form authorized by the Company, you understand and agree that:
|
• |
|
The Option is governed by this Global Stock Option Grant Notice, (the “Grant Notice”) and the provisions of the Plan and the Agreement, all of which are made a part of this document. Unless otherwise provided in the Plan, this Grant Notice and the Agreement (together, the “Option Agreement”) may not be modified, amended or revised except in a writing signed by you and a duly authorized officer of the Company. |
|
• |
|
If the Option is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options granted to you) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year. Any excess over $100,000 is a Nonstatutory Stock Option. |
|
• |
|
You consent to receive this Grant Notice, the Agreement, the Plan, the Prospectus and any other Plan-related documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company. |
|
• |
|
You have read and are familiar with the provisions of the Plan, the Agreement, and the Prospectus. In the event of any conflict between the provisions in this Grant Notice, the Agreement, or the Prospectus and the terms of the Plan, the terms of the Plan shall control. |
|
• |
|
The Option Agreement sets forth the entire understanding between you and the Company regarding the acquisition of Common Stock and supersedes all prior oral and written agreements, promises and/or representations on that subject with the exception of other equity awards previously granted to you and any written employment agreement, offer letter, severance agreement, written severance plan or policy, or other written agreement between the Company and you in each case that specifies the terms that should govern this Option. |
|
• |
|
Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other |
|
|
|
transmission method and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes. |
|
|
|
|
|
|
|
|
|
FINCH THERAPEUTICS GROUP, INC. |
|
|
|
OPTIONHOLDER: |
||||
|
|
|
|
|||||
By: |
|
|
|
|
|
|
||
|
|
Signature |
|
|
|
Signature |
||
Title: |
|
|
|
|
|
Date: |
|
|
|
|
|
|
|
||||
Date: |
|
|
|
|
|
|
|
|
FINCH THERAPEUTICS GROUP, INC.
2021 EQUITY INCENTIVE PLAN
GLOBAL STOCK OPTION AGREEMENT
As reflected by your Global Stock Option Grant Notice (“Grant Notice”) Finch Therapeutics Group, Inc. (the “Company”) has granted you an option under its 2021 Equity Incentive Plan (the “Plan”) to purchase a number of shares of Common Stock at the exercise price indicated in your Grant Notice (the “Option”). The terms of your Option as specified in the Grant Notice and this Global Stock Option Agreement, including any additional terms and conditions for your country set forth in the appendix hereto (the “Appendix” and, together with the Global Stock Option Agreement, the “Agreement”), constitute your Option Agreement. Capitalized terms not explicitly defined in this Agreement but defined in the Grant Notice or the Plan shall have the meanings set forth in the Grant Notice or Plan, as applicable.
The general terms and conditions applicable to your Option are as follows:
1. GOVERNING PLAN DOCUMENT. Your Option is subject to all the provisions of the Plan. Your Option is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the Option Agreement and the provisions of the Plan, the provisions of the Plan shall control.
2. EXERCISE.
a. You may generally exercise the vested portion of your Option for whole shares of Common Stock at any time during its term by delivery of payment of the exercise price and applicable withholding taxes and other required documentation to the Plan Administrator in accordance with the exercise procedures established by the Plan Administrator, which may include an electronic submission. Please review the Plan, which may restrict or prohibit your ability to exercise your Option during certain periods.
b. To the extent permitted by Applicable Law, you may pay your Option exercise price as follows:
1) cash, check, bank draft or money order;
2) subject to Applicable Law and Company and/or Committee consent at the time of exercise, pursuant to a “cashless exercise” program as further described in the Plan if at the time of exercise the Common Stock is publicly traded;
3) subject to Company and/or Committee consent at the time of exercise, by delivery of previously owned shares of Common Stock as further described in the Plan; or
4) subject to Applicable Law and Company and/or Committee consent at the time of exercise, if the Option is a Nonstatutory Stock Option, by a “net exercise” arrangement as further described in the Plan.
3. TERM. You may not exercise your Option before the commencement of its term or after its term expires. The term of your option commences on the Date of Grant and expires upon the earliest of the following:
a. immediately upon the termination of your Continuous Service for Cause;
b. three months after the termination of your Continuous Service for any reason other than Cause, Disability or death;
c. 12 months after the termination of your Continuous Service due to your Disability;
d. 18 months after your death if you die during your Continuous Service;
e. immediately upon a Corporate Transaction if the Board has determined that the Option will terminate in connection with a Corporate Transaction,
f. the Expiration Date indicated in your Grant Notice; or
g. the day before the 10th anniversary of the Date of Grant.
Notwithstanding the foregoing, if you die during the period provided in Section 3(b) or 3(c) above, the term of your Option shall not expire until the earlier of (i) eighteen months after your death, (ii) upon any termination of the Option in connection with a Corporate Transaction, (iii) the Expiration Date indicated in your Grant Notice, or (iv) the day before the tenth anniversary of the Date of Grant. Additionally, the Post-Termination Exercise Period of your Option may be extended as provided in the Plan.
To obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the date of grant of your Option and ending on the day three months before the date of your Option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability. If the Company provides for the extended exercisability of your Option under certain circumstances for your benefit, your Option will not necessarily be treated as an Incentive Stock Option if you exercise your Option more than three months after the date your employment terminates.
4. RESPONSIBILITY FOR TAXES.
a. Regardless of any action taken by the Company or, if different, the Affiliate to which you provide Continuous Service (the “Service Recipient”) with respect to any income tax, social insurance, payroll tax, fringe benefits tax, payment on account, or other tax-related items associated with the grant, vesting or exercise of the Option or sale of the underlying Common Stock or other tax-related items related to your participation in the Plan and legally applicable or deemed applicable to you (the “Tax Liability”), you hereby acknowledge and agree that the Tax Liability is your ultimate responsibility and may exceed the amount, if any, actually withheld by the Company or the Service Recipient. You further acknowledge that the Company and the Service Recipient (i) make no representations or undertakings regarding any Tax Liability in connection with any aspect of this Option, including, but not limited to, the grant, vesting or exercise of the Option, the issuance of Common Stock pursuant to such exercise, the subsequent sale of shares of Common Stock, and the payment of any dividends on the shares; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the Option to reduce or eliminate your Tax Liability or achieve a particular tax result. Further, if you are subject to Tax Liability in more than one jurisdiction, you acknowledge that the Company and/or the Service Recipient (or former service recipient, as applicable) may be required to withhold or account for Tax Liability in more than one jurisdiction.
b. Prior to any relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactory to the Company and/or the Service Recipient to satisfy all Tax Liability. As further provided in Section 8 of the Plan, you hereby authorize the Company and any applicable Service Recipient to satisfy any applicable withholding obligations with regard to the Tax Liability by one or a combination of the following methods: (i) causing you to pay any portion of the Tax Liability in cash or cash equivalent in a form acceptable to the Company and/or the Service Recipient; (ii) withholding from any compensation otherwise payable to you by the Company or the Service Recipient; (iii) withholding from the proceeds of the sale of shares of Common Stock issued upon exercise of the Option (including by means of a “cashless exercise” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company, or by means of the Company acting as your agent to sell sufficient shares of Common Stock for the proceeds to satisfy such withholding requirements, on your behalf pursuant to this authorization without further consent); (iv) withholding shares of Common Stock otherwise issuable to you upon the exercise of the Option, provided, however, that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, if applicable, such share withholding procedure will be subject to the express prior approval of the Board or the Company’s Compensation Committee; and/or (v) any other method determined by the Company to be in compliance with Applicable Law. Furthermore, you agree to pay or reimburse the Company or the Service Recipient any amount the Company or the Service Recipient may be required to withhold, collect or pay as a result of your participation in the Plan or that cannot be satisfied by the means previously described. In the event it is determined that the amount of the Tax Liability was greater than the amount withheld by the Company and/or the Service Recipient (as applicable), you agree to indemnify and hold the Company and/or the Service Recipient (as applicable) harmless from any failure by the Company or the applicable Service Recipient to withhold the proper amount.
c. The Company and/or the Service Recipient may withhold or account for your Tax Liability by considering statutory withholding amounts or other withholding rates applicable in your jurisdiction(s), including (i) maximum applicable rates in your jurisdiction(s). In the event of over-withholding, you may receive a refund of any over-withheld amount in cash from the Company or the Service Recipient (with no entitlement to the Common Stock equivalent), or if not refunded, you may seek a refund from the local tax authorities. In the event of under-withholding, you may be required to pay any Tax Liability directly to the applicable tax authority or to the Company and/or the Service Recipient. If the Tax Liability withholding obligation is satisfied by withholding shares of Common Stock, for tax purposes, you are deemed to have been issued the full number of shares of Common Stock subject to the exercised portion of the Option, notwithstanding that a number of the shares of Common Stock is held back solely for the purpose of paying such Tax Liability.
d. You acknowledge that you may not be able to exercise your Option even though the Option is vested, and that the Company shall have no obligation to issue or deliver shares of Common Stock until you have fully satisfied any applicable Tax Liability, as determined by the Company. Unless any withholding obligation for the Tax Liability is satisfied, the Company shall have no obligation to issue or deliver to you any Common Stock in respect of the Option.
5. INCENTIVE STOCK OPTION DISPOSITION REQUIREMENT. If your option is an Incentive Stock Option, you must notify the Company in writing within 15 days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two years after the date of your option grant or within one year after such shares of Common Stock are transferred upon exercise of your option.
6. NATURE OF GRANT. In accepting the Option, you acknowledge, understand and agree that:
a. the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
b. the grant of the Option is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options, even if Options have been granted in the past;
c. all decisions with respect to future Options or other grants, if any, will be at the sole discretion of the Company;
d. the Option and your participation in the Plan shall not create a right to employment or other service relationship with the Company;
e. the Option and your participation in the Plan shall not be interpreted as forming or amending an employment or service contract with the Company or the Service Recipient, and shall not interfere with the ability of the Company or the Service Recipient, as applicable, to terminate your Continuous Service (if any);
f. you are voluntarily participating in the Plan;
g. the Option and the shares of Common Stock subject to the Option, and the income from and value of same, are not intended to replace any pension rights or compensation;
h. the Option and the shares of Common Stock subject to the Option, and the income from and value of same, are not part of normal or expected compensation for purposes of, including but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar payments;
i. unless otherwise agreed with the Company in writing, the Option and the shares of Common Stock subject to the Option, and the income from and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of an Affiliate;
j. the future value of the underlying shares of Common Stock is unknown, indeterminable and cannot be predicted with certainty;
k. if the underlying shares of Common Stock do not increase in value after the grant date, the Option will have no value;
l. if you exercise the Option and acquire shares of Common Stock, the value of such shares of Common Stock may increase or decrease in value, even below the exercise price;
m. no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the termination of your Continuous Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are providing service or the terms of your employment or other service agreement, if any);
n. for purposes of the Option, your Continuous Service will be considered terminated as of the date you are no longer actively providing services to the Company or any Affiliate (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are providing service or the terms of your employment or other service agreement, if any), and such date will not be extended by any notice period (e.g., your period of Continuous Service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are providing service or the terms of your employment or other service agreement, if any); the Compensation Committee shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of your Option (including whether you may still be considered to be providing services while on a leave of absence); and
o. neither the Company nor the Service Recipient shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Option or of any amounts due to you pursuant to exercise of the Option or the subsequent sale of any shares of Common Stock acquired upon exercise.
7. TRANSFERABILITY. Except as otherwise provided in the Plan, your Option is not transferable, except by will or by the applicable laws of descent and distribution, and is exercisable during your life only by you.
8. CORPORATE TRANSACTION. Your Option is subject to the terms of any agreement governing a Corporate Transaction involving the Company, including, without limitation, a provision for the appointment of a stockholder representative that is authorized to act on your behalf with respect to any escrow, indemnities and any contingent consideration.
9. NO LIABILITY FOR TAXES. As a condition to accepting the Option, you hereby (a) agree to not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to any Tax Liability arising from the Option and (b) acknowledge that you were advised to consult with your own personal tax, financial and other legal advisors regarding the tax consequences of the Option and have either done so or knowingly and voluntarily declined to do so. Additionally, you acknowledge that the Option is exempt from Section 409A only if the exercise price is at least equal to the “fair market value” of the Common Stock on the date of grant as determined by the Internal Revenue Service and there is no other impermissible deferral of compensation associated with the Option. Additionally, as a condition to accepting the Option, you agree not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates in the event that the Internal Revenue Service asserts that such exercise is less than the “fair market value” of the Common Stock on the date of grant as subsequently determined by the Internal Revenue Service.
10. OBLIGATIONS; RECOUPMENT. You hereby acknowledge that the grant of your Option is additional consideration for any obligations (whether during or after employment) that you have to the Company not to compete, not to solicit its customers, clients or employees, not to disclose or misuse confidential information or similar obligations. Accordingly, if the Company reasonably determines that you breached such obligations, in addition to any other available remedy, the Company may, to the extent permitted by Applicable Law, recoup any income realized by you with respect to the exercise of your Option within two
years of such breach. In addition, to the extent permitted by Applicable Law, this right to recoupment by the Company applies in the event that your employment is terminated for Cause or if the Company reasonably determines that circumstances existed that it could have terminated your employment for Cause.
11. NO ADVICE REGARDING GRANT. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Common Stock. You should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
12. GOVERNING LAW AND VENUE. The Option and the provisions of this Agreement are governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the conflict of law principles that would result in any application of any law other than the law of the State of Delaware. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of the State of Delaware, and no other courts, where this grant is made and/or to be performed.
13. SEVERABILITY. If any part of this Option Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Option Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Option Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
14. INDEBTEDNESS TO THE COMPANY. In the event that you have any loans, draws, advances or any other indebtedness owing to the Company at the time of exercise of all or a portion of the Option, the Company may deduct and not deliver that number of shares of Common Stock with a Fair Market Value subject to the Option equal to such indebtedness to satisfy all or a portion of such indebtedness, to the extent permitted by law and in a manner consistent with Section 409A of the Code, if applicable.
15. COMPLIANCE WITH LAW. Notwithstanding any other provision of the Plan or this Agreement, unless there is an exemption from any registration, qualification or other legal requirement applicable to the shares of Common Stock, the Company shall not be required to deliver any shares issuable upon exercise of the Option prior to the completion of any registration or qualification of the shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the shares. Further, you agree that the Company shall have unilateral authority to amend the Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of shares of Common Stock.
16. LANGUAGE. You acknowledge that you are proficient in the English language, or have consulted with an advisor who is proficient in the English language, so as to enable you to understand the provisions of this Agreement and the Plan. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
17. ELECTRONIC DELIVERY AND PARTICIPATION. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.
18. SEVERABILITY. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
19. APPENDIX. Notwithstanding any provisions in this Option Agreement, the Option shall be subject to any additional terms and conditions set forth in any Appendix for your country. Moreover, if you relocate to one of the countries included in the Appendix, the additional terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
20. IMPOSITION OF OTHER REQUIREMENT. The Company reserves the right to impose other requirements on your participation in the Plan, on the Option and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
21. WAIVER. You acknowledge that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other participant.
22. INSIDER TRADING/MARKET ABUSE. You acknowledge that, depending on your or your broker’s country or where the Company shares are listed, you may be subject to insider trading restrictions and/or market abuse laws which may affect your
ability to accept, acquire, sell or otherwise dispose of shares of Common Stock, rights to shares (e.g., Options) or rights linked to the value of shares (e.g., phantom awards, futures) during such times you are considered to have “inside information” regarding the Company as defined in the laws or regulations in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before you possessed inside information. Furthermore, you could be prohibited from (i) disclosing the inside information to any third party (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities. Keep in mind third parties includes fellow employees. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable insider trading policy of the Company. You are responsible for complying with any restrictions and should speak to your personal advisor on this matter.
23. EXCHANGE CONTROL, FOREIGN ASSET/ACCOUNT AND/OR TAX REPORTING. Depending upon the country to which laws you are subject, you may have certain foreign asset/account and/or tax reporting requirements that may affect your ability to acquire or hold shares of Common Stock under the Plan or cash received from participating in the Plan (including from any dividends or sale proceeds arising from the sale of shares of Common Stock) in a brokerage or bank account outside your country of residence. Your country may require that you report such accounts, assets or transactions to the applicable authorities in your country. You also may be required to repatriate cash received from participating in the Plan to your country within a certain period of time after receipt. You are responsible for knowledge of and compliance with any such regulations and should speak with your personal tax, legal and financial advisors regarding same.
24. OTHER DOCUMENTS. You hereby acknowledge receipt of or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Prospectus. In addition, you acknowledge receipt of the Company’s Trading Policy.
25. QUESTIONS. If you have questions regarding these or any other terms and conditions applicable to your Option, including a summary of the applicable federal income tax consequences please see the Prospectus.
* * * *
FINCH THERAPEUTICS GROUP, INC.
2021 EQUITY INCENTIVE PLAN
APPENDIX
TO GLOBAL STOCK OPTION AGREEMENT
TERMS AND CONDITIONS
This Appendix forms part of the Agreement and includes additional terms and conditions that govern the Option granted to you under the Plan if you reside and/or work in one of the jurisdictions listed below. Capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or in the Global Stock Option Agreement.
If you are a citizen or resident (or are considered as such for local law purposes) of a country other than the country in which you are currently residing and/or working, or if you relocate to another country after the grant of the Option, the Company shall, in its discretion, determine to what extent the additional terms and conditions contained herein shall be applicable to you.
NOTIFICATIONS
This Appendix may also include information regarding exchange controls and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control, and other laws in effect in the respective countries as of January 2021. Such laws are often complex and change frequently. As a result, you should not rely on the information in this Appendix as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you vest in or exercise the Option, acquire shares of Common Stock, or sell shares of Common Stock acquired under the Plan.
In addition, the information contained below is general in nature and may not apply to your particular situation. You should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
If you are a citizen or resident (or are considered as such for local law purposes) of a country other than the country in which you are currently residing and/or working, or if you relocate to another country after the grant of the Option, the notifications herein may not apply to you in the same manner.
FINCH THERAPEUTICS GROUP, INC.
GLOBAL RSU AWARD GRANT NOTICE
(2021 EQUITY INCENTIVE PLAN)
Finch Therapeutics Group, Inc. (the “Company”) has awarded to you (the “Participant”) the number of restricted stock units specified and on the terms set forth below (the “RSU Award”). Your RSU Award is subject to all of the terms and conditions as set forth herein and in the Company’s 2021 Equity Incentive Plan (the “Plan”) and the Global RSU Award Agreement, including any additional terms and conditions for your country set forth in the appendix thereto (the “Appendix” and, together with the Global RSU Award Agreement, the “Agreement”), all of which are incorporated herein in their entirety. Capitalized terms not explicitly defined herein but defined in the Plan or the Agreement shall have the meanings set forth in the Plan or the Agreement, as applicable.
|
|
|
Participant: |
|
|
Date of Grant: |
|
|
Vesting Commencement Date: |
|
|
Number of Restricted Stock Units: |
|
|
|
|
|
Vesting Schedule: |
|
[__________________________________________________________________]. Notwithstanding the foregoing, except as set forth below, vesting shall terminate upon the Participant’s termination of Continuous Service, as described in Section 6(l) of the Agreement. |
|
|
|
Issuance Schedule: |
|
One share of Common Stock will be issued for each restricted stock unit which vests at the time set forth in Section 5 of the Agreement. |
Participant Acknowledgements: By your signature below or by electronic acceptance or authentication in a form authorized by the Company, you understand and agree that:
|
• |
|
The RSU Award is governed by this Global RSU Award Grant Notice (the “Grant Notice”), and the provisions of the Plan and the Agreement, all of which are made a part of this document. Unless otherwise provided in the Plan, this Grant Notice and the Agreement (together, the “RSU Award Agreement”) may not be modified, amended or revised except in a writing signed by you and a duly authorized officer of the Company. |
|
• |
|
You have read and are familiar with the provisions of the Plan, the RSU Award Agreement and the Prospectus. In the event of any conflict between the provisions in the RSU Award Agreement, or the Prospectus and the terms of the Plan, the terms of the Plan shall control. |
|
• |
|
The RSU Award Agreement sets forth the entire understanding between you and the Company regarding the acquisition of Common Stock and supersedes all prior oral and written agreements, promises and/or representations on that subject with the exception of: (i) other equity awards previously granted to you, and (ii) any written employment agreement, offer letter, severance agreement, written severance plan or policy, or other written agreement between the Company and you in each case that specifies the terms that should govern this RSU Award. |
|
|
|
|
|
|
|
|
|
FINCH THERAPEUTICS GROUP, INC. |
|
|
|
PARTICIPANT: |
||||
|
|
|
|
|||||
By: |
|
|
|
|
|
|
||
|
|
Signature |
|
|
|
Signature |
||
|
|
|
|
|
||||
Title: |
|
|
|
|
|
Date: |
|
|
|
|
|
|
|
||||
Date: |
|
|
|
|
|
|
|
|
FINCH THERAPEUTICS GROUP, INC.
2021 EQUITY INCENTIVE PLAN
GLOBAL RSU AWARD AGREEMENT
As reflected by your Global RSU Award Grant Notice (“Grant Notice”), Finch Therapeutics Group, Inc. (the “Company”) has granted you a RSU Award under its 2021 Equity Incentive Plan (the “Plan”) for the number of restricted stock units as indicated in your Grant Notice (the “RSU Award”). The terms of your RSU Award as specified in this Global RSU Award Agreement for your RSU Award, including any additional terms and conditions for your country set forth in the appendix hereto (the “Appendix” and, together with the Global RSU Award Agreement, the “Agreement”) and the Grant Notice constitute your “RSU Award Agreement”. Defined terms not explicitly defined in this Agreement but defined in the Grant Notice or the Plan shall have the same definitions as in the Grant Notice or Plan, as applicable.
The general terms applicable to your RSU Award are as follows:
1. GOVERNING PLAN DOCUMENT. Your RSU Award is subject to all the provisions of the Plan. Your RSU Award is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the RSU Award Agreement and the provisions of the Plan, the provisions of the Plan shall control.
2. GRANT OF THE RSU AWARD. This RSU Award represents your right to be issued on a future date the number of shares of the Company’s Common Stock that is equal to the number of restricted stock units indicated in the Grant Notice subject to your satisfaction of the vesting conditions set forth therein (the “Restricted Stock Units”). Any additional Restricted Stock Units that become subject to the RSU Award pursuant to Capitalization Adjustments as set forth in the Plan and the provisions of Section 3 below, if any, shall be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Restricted Stock Units covered by your RSU Award.
3. DIVIDENDS. You shall receive no benefit or adjustment to your RSU Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment as provided in the Plan; provided, however, that this sentence shall not apply with respect to any shares of Common Stock that are delivered to you in connection with your RSU Award after such shares have been delivered to you.
4. RESPONSIBILITY FOR TAXES.
a. Regardless of any action taken by the Company or, if different, the Affiliate to which you provide Continuous Service (the “Service Recipient”) with respect to any income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items associated with the grant or vesting of the RSU Award or sale of the underlying Common Stock or other tax-related items related to your participation in the Plan and legally applicable or deemed applicable to you (the “Tax Liability”), you hereby acknowledge and agree that the Tax Liability is your ultimate responsibility and may exceed the amount, if any, actually withheld by the Company or the Service Recipient. You further acknowledge that the Company and the Service Recipient (i) make no representations or undertakings regarding any Tax Liability in connection with any aspect of this RSU Award, including, but not limited to, the grant or vesting of the RSU Award, the issuance of Common Stock pursuant to such vesting, the subsequent sale of shares of Common Stock, and the payment of any dividends on the shares; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSU Award to reduce or eliminate your Tax Liability or achieve a particular tax result. Further, if you are subject to Tax Liability in more than one jurisdiction, you acknowledge that the Company and/or the Service Recipient (or former service recipient, as applicable) may be required to withhold or account for Tax Liability in more than one jurisdiction.
b. Prior to any relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactory to the Company and/or the Service Recipient to satisfy all Tax Liability. As further provided in Section 8 of the Plan, you hereby authorize the Company and any applicable Service Recipient to satisfy any applicable withholding obligations with regard to the Tax Liability by one or a combination of the following methods: (i) causing you to pay any portion of the Tax Liability in cash or cash equivalent in a form acceptable to the Company and/or the Service Recipient; (ii) withholding from any compensation otherwise payable to you by the Company or the Service Recipient; (iii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you in connection with the Award; provided, however, that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, if applicable, such share withholding procedure will be subject to the express prior approval of the Board or the Company’s Compensation Committee; (iv) permitting or requiring you to enter into a “same day sale” commitment, if applicable, with a broker-dealer that is a member of the Financial Industry Regulatory Authority (a “FINRA Dealer”), pursuant to this authorization and without further consent, whereby you irrevocably elect to sell a portion of the shares of Common Stock to be delivered in connection with your Restricted Stock Units to satisfy the Tax Liability and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Tax Liability directly to the Company or the Service Recipient; and/or (v) any other method determined by the Company to be in compliance with Applicable Law. Furthermore, you agree to pay or reimburse the Company or the Service Recipient any amount the Company or the Service Recipient may be required to withhold, collect or pay as a result of your participation in the Plan or that cannot be satisfied by the means previously described. In the event it is determined that the amount of the Tax Liability was greater than the amount withheld by the Company and/or the Service Recipient (as applicable), you agree to indemnify and hold
the Company and/or the Service Recipient (as applicable) harmless from any failure by the Company or the applicable Service Recipient to withhold the proper amount.
c. The Company and/or the Service Recipient may withhold or account for your Tax Liability by considering statutory withholding amounts or other withholding rates applicable in your jurisdiction(s), including (i) maximum applicable rates in your jurisdiction(s). In the event of over-withholding, you may receive a refund of any over-withheld amount in cash from the Company or the Service Recipient (with no entitlement to the Common Stock equivalent), or if not refunded, you may seek a refund from the local tax authorities. In the event of under-withholding, you may be required to pay any Tax Liability directly to the applicable tax authority or to the Company and/or the Service Recipient. If the Tax Liability withholding obligation is satisfied by withholding shares of Common Stock, for tax purposes, you are deemed to have been issued the full number of shares of Common Stock subject to the vested portion of the RSU Award, notwithstanding that a number of the shares of Common Stock is held back solely for the purpose of paying such Tax Liability.
d. You acknowledge that you may not participate in the Plan and the Company shall have no obligation to issue or deliver shares of Common Stock until you have fully satisfied any applicable Tax Liability, as determined by the Company. Unless any withholding obligation for the Tax Liability is satisfied, the Company shall have no obligation to issue or deliver to you any Common Stock in respect of the RSU Award.
5. DATE OF ISSUANCE.
a. The issuance of shares in respect of the Restricted Stock Units is intended to comply with U.S. Treasury Regulations Section 1.409A-1(b)(4) and will be construed and administered in such a manner. Subject to the satisfaction of the Tax Liability withholding obligation, if any, in the event one or more Restricted Stock Units vests, the Company shall issue to you one (1) share of Common Stock for each vested Restricted Stock Unit on the applicable vesting date. Each issuance date determined by this paragraph is referred to as an “Original Issuance Date.”
b. If the Original Issuance Date falls on a date that is not a business day, delivery shall instead occur on the next following business day. In addition, if:
1) the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in accordance with the Company’s then-effective policy on trading in Company securities, or (2) on a date when you are otherwise permitted to sell shares of Common Stock on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1 Arrangement)), and
2) either (1) a Tax Liability withholding obligation does not apply, or (2) the Company decides, prior to the Original Issuance Date, (A) not to satisfy the Tax Liability withholding obligation by withholding shares of Common Stock from the shares otherwise due, on the Original Issuance Date, to you under this Award, and (B) not to permit you to enter into a “same day sale” commitment with a broker-dealer (including but not limited to a commitment under a 10b5-1 Arrangement) and (C) not to permit you to pay your Tax Liability in cash, then the shares that would otherwise be issued to you on the Original Issuance Date will not be delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from selling shares of the Common Stock in the open public market, but in no event later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or, if and only if permitted in a manner that complies with U.S. Treasury Regulations Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the applicable year following the year in which the shares of Common Stock under this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of U.S. Treasury Regulations Section 1.409A-1(d).
6. NATURE OF GRANT. In accepting the RSU Award, you acknowledge, understand and agree that:
a. the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
b. the grant of the RSU Award is exceptional, voluntary and occasional and does not create any contractual or other right to receive future grants of Restricted Stock Units, or benefits in lieu of Restricted Stock Units, even if Restricted Stock Units have been granted in the past;
c. all decisions with respect to future RSU Awards or other grants, if any, will be at the sole discretion of the Company;
d. the RSU Award and your participation in the Plan shall not create a right to employment or other service relationship with the Company;
e. the RSU Award and your participation in the Plan shall not be interpreted as forming or amending an employment or service contract with the Company or the Service Recipient, and shall not interfere with the ability of the Company or the Service Recipient, as applicable, to terminate your Continuous Service (if any);
f. you are voluntarily participating in the Plan;
g. the RSU Award and the shares of Common Stock subject to the RSU Award, and the income from and value of same, are not intended to replace any pension rights or compensation;
h. the RSU Award and the shares of Common Stock subject to the RSU Award, and the income from and value of same, are not part of normal or expected compensation for purposes of, including but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, holiday pay, long-service awards, pension or retirement or welfare benefits or similar payments;
i. unless otherwise agreed with the Company in writing, the RSU Award and the shares of Common Stock subject to the RSU Award, and the income from and value of same, are not granted as consideration for, or in connection with, the service you may provide as a director of an Affiliate;
j. the future value of the underlying shares of Common Stock is unknown, indeterminable and cannot be predicted with certainty;
k. no claim or entitlement to compensation or damages shall arise from forfeiture of the RSU Award resulting from the termination of your Continuous Service (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are providing service or the terms of your employment or other service agreement, if any);
l. for purposes of the RSU Award, your Continuous Service will be considered terminated as of the date you are no longer actively providing services to the Company or any Affiliate (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are providing service or the terms of your employment or other service agreement, if any), and such date will not be extended by any notice period (e.g., your period of Continuous Service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are providing service or the terms of your employment or other service agreement, if any); the Compensation Committee shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of your RSU Award (including whether you may still be considered to be providing services while on a leave of absence); and
m. neither the Company nor the Service Recipient shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Restricted Stock Units or of any amounts due to you pursuant to the settlement of the RSU Award or the subsequent sale of any shares of Common Stock acquired upon settlement.
7. TRANSFERABILITY. Except as otherwise provided in the Plan, your RSU Award is not transferable, except by will or by the applicable laws of descent and distribution
8. CORPORATE TRANSACTION. Your RSU Award is subject to the terms of any agreement governing a Corporate Transaction involving the Company, including, without limitation, a provision for the appointment of a stockholder representative that is authorized to act on your behalf with respect to any escrow, indemnities and any contingent consideration.
9. NO LIABILITY FOR TAXES. As a condition to accepting the RSU Award, you hereby (a) agree to not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to any Tax Liability arising from the RSU Award and (b) acknowledge that you were advised to consult with your own personal tax, financial and other legal advisors regarding the tax consequences of the RSU Award and have either done so or knowingly and voluntarily declined to do so.
10. NO ADVICE REGARDING GRANT. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying shares of Common Stock. You should consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.
11. GOVERNING LAW AND VENUE. The RSU Award and the provisions of this Agreement are governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the conflict of law principles that would result in any application of any law other than the law of the State of Delaware. For purposes of any action, lawsuit or other proceedings brought to enforce this Agreement, relating to it, or arising from it, the parties hereby submit to and consent to the sole and exclusive jurisdiction of the courts of the State of Delaware, and no other courts, where this grant is made and/or to be performed.
12. SEVERABILITY. If any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
13. COMPLIANCE WITH LAW. Notwithstanding any other provision of the Plan or this Agreement, unless there is an exemption from any registration, qualification or other legal requirement applicable to the shares of Common Stock, the Company shall not be required to deliver any shares issuable upon settlement of the Restricted Stock Units prior to the completion of any registration or qualification of the shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the shares. Further, you agree that the Company shall have unilateral authority to amend the Agreement without your consent to the extent necessary to comply with securities or other laws applicable to issuance of shares of Common Stock.
14. LANGUAGE. You acknowledge that you are proficient in the English language, or have consulted with an advisor who is proficient in the English language, so as to enable you to understand the provisions of this Agreement and the Plan. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
15. ELECTRONIC DELIVERY AND PARTICIPATION. The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an online or electronic system established and maintained by the Company or a third party designated by the Company.
16. SEVERABILITY. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.
17. APPENDIX. Notwithstanding any provisions in this Global RSU Award Agreement, the RSU Award shall be subject to any additional terms and conditions set forth in any Appendix for your country. Moreover, if you relocate to one of the countries included in the Appendix, the additional terms and conditions for such country will apply to you, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
18. IMPOSITION OF OTHER REQUIREMENT. The Company reserves the right to impose other requirements on your participation in the Plan, on the RSU and on any shares of Common Stock acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require you to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
19. WAIVER. You acknowledge that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by you or any other participant.
20. INSIDER TRADING/MARKET ABUSE. You acknowledge that, depending on your or your broker’s country or where the Company shares are listed, you may be subject to insider trading restrictions and/or market abuse laws which may affect your ability to accept, acquire, sell or otherwise dispose of shares of Common Stock, rights to shares (e.g., Restricted Stock Units) or rights linked to the value of shares (e.g., phantom awards, futures) during such times you are considered to have “inside information” regarding the Company as defined in the laws or regulations in the applicable jurisdictions). Local insider trading laws and regulations may prohibit the cancellation or amendment of orders you placed before you possessed inside information. Furthermore, you could be prohibited from (i) disclosing the inside information to any third party (other than on a “need to know” basis) and (ii) “tipping” third parties or causing them otherwise to buy or sell securities. Keep in mind third parties includes fellow employees. Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable insider trading policy of the Company. You are responsible for complying with any restrictions and should speak to your personal advisor on this matter.
21. EXCHANGE CONTROL, FOREIGN ASSET/ACCOUNT AND/OR TAX REPORTING. Depending upon the country to which laws you are subject, you may have certain foreign asset/account and/or tax reporting requirements that may affect your ability to acquire or hold shares of Common Stock under the Plan or cash received from participating in the Plan (including from any dividends or sale proceeds arising from the sale of shares of Common Stock) in a brokerage or bank account outside your country of residence. Your country may require that you report such accounts, assets or transactions to the applicable authorities in your country. You also may be required to repatriate cash received from participating in the Plan to your country within a certain period of time after receipt. You are responsible for knowledge of and compliance with any such regulations and should speak with your personal tax, legal and financial advisors regarding same.
22. OTHER DOCUMENTS. You hereby acknowledge receipt of or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Prospectus. In addition, you acknowledge receipt of the Company’s Trading Policy.
23. QUESTIONS. If you have questions regarding these or any other terms and conditions applicable to your RSU Award, including a summary of the applicable federal income tax consequences please see the Prospectus.
FINCH THERAPEUTICS GROUP, INC.
2021 EQUITY INCENTIVE PLAN
APPENDIX
TO GLOBAL RSU AWARD AGREEMENT
TERMS AND CONDITIONS
This Appendix forms part of the Agreement and includes additional terms and conditions that govern the RSU Award granted to you under the Plan if you reside and/or work in one of the jurisdictions listed below. Capitalized terms used but not defined in this Appendix have the meanings set forth in the Plan and/or in the Global RSU Award Agreement.
If you are a citizen or resident (or are considered as such for local law purposes) of a country other than the country in which you are currently residing and/or working, or if you relocate to another country after the grant of the RSU Award, the Company shall, in its discretion, determine to what extent the additional terms and conditions contained herein shall be applicable to you.
NOTIFICATIONS
This Appendix may also include information regarding exchange controls and certain other issues of which you should be aware with respect to participation in the Plan. The information is based on the securities, exchange control, and other laws in effect in the respective countries as of January 2021. Such laws are often complex and change frequently. As a result, you should not rely on the information in this Appendix as the only source of information relating to the consequences of your participation in the Plan because the information may be out of date at the time you vest in the Restricted Stock Units, acquire shares of Common Stock, or sell shares of Common Stock acquired under the Plan.
In addition, the information contained below is general in nature and may not apply to your particular situation. You should seek appropriate professional advice as to how the relevant laws in your country may apply to your situation.
If you are a citizen or resident (or are considered as such for local law purposes) of a country other than the country in which you are currently residing and/or working, or if you relocate to another country after the grant of the RSU Award, the notifications herein may not apply to you in the same manner.
EXHIBIT 10.7
FINCH THERAPEUTICS GROUP, INC.
2021 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS: MARCH 11, 2021
APPROVED BY THE STOCKHOLDERS: MARCH 11, 2021
IPO DATE: MARCH 18, 2021
AMENDED AND RESTATED AS OF: JUNE 8, 2023
1
2
3
4
5
The Company will seek to obtain from each U.S. federal or state, foreign or other regulatory commission, agency or other Governmental Body having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder unless the Company determines, in its sole discretion, that doing so is not practical or would cause the Company to incur costs that are unreasonable. If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Stock under the
6
Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Stock upon exercise of such Purchase Rights.
Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment, suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to facilitate compliance with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Stock Purchase Plans) including without
7
limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or maintain favorable tax, listing, or regulatory treatment. To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right and/or the Plan complies with the requirements of Section 423 of the Code with respect to the 423 Component or with respect to other Applicable Laws. Notwithstanding anything in the Plan or any Offering Document to the contrary, the Board will be entitled to: (i) establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars; (ii) permit Contributions in excess of the amount designated by a Participant in order to adjust for mistakes in the Company’s processing of properly completed Contribution elections; (iii) establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond with amounts withheld from the Participant’s Contributions; (iv) amend any outstanding Purchase Rights or clarify any ambiguities regarding the terms of any Offering to enable the Purchase Rights to qualify under and/or comply with Section 423 of the Code with respect to the 423 Component; and (v) establish other limitations or procedures as the Board determines in its sole discretion advisable that are consistent with the Plan. The actions of the Board pursuant to this paragraph will not be considered to alter or impair any Purchase Rights granted under an Offering as they are part of the initial terms of each Offering and the Purchase Rights granted under each Offering.
8
The Plan became effective immediately prior to the IPO Date. No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date the Plan is, if required under Section 12(a) above, materially amended by the Board.
As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
9
10
11
12
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew P. Blischak, certify that:
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: August 11, 2023 |
|
By: |
/s/ Matthew P. Blischak |
|
|
|
Matthew Blischak |
|
|
|
President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Lance Thibault, certify that:
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
Date: August 11, 2023 |
|
By: |
/s/ Lance Thibault |
|
|
|
Lance Thibault |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of Finch Therapeutics Group, Inc. (the “Company”) for the quarter ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the company, hereby certifies, pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:
Date: August 11, 2023 |
|
By: |
/s/ Matthew P. Blischak |
|
|
|
Matthew P. Blischak |
|
|
|
President and Chief Executive Officer |
|
|
|
(Principal Executive Officer) |
Date: August 11, 2023 |
|
By: |
/s/ Lance Thibault |
|
|
|
Lance Thibault |
|
|
|
Chief Financial Officer |
|
|
|
(Principal Financial Officer and Principal Accounting Officer) |