Applied Molecular Transport Inc. - Quarter Report: 2022 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2022

OR

For the transition period from to

Commission File Number: 001-39306

APPLIED MOLECULAR TRANSPORT INC.

(Exact Name of Registrant as Specified in its Charter)

Registrant’s telephone number, including area code: 650-392-0420

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

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

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

As of October 31, 2022, the registrant had 38,943,097 shares of common stock, $0.0001 par value per share, outstanding.

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Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information regarding our expectations on the timing of clinical study initiation and results and the timing and success of future development of our product candidates, potential regulatory approval of our product candidates, our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment, potential growth opportunities, reliance on third parties, financing needs, the sufficiency of the Company’s existing cash and cash equivalents, our ability to protect our intellectual property position, the impact on our business of certain geo-political events, the development of macroeconomic conditions, the impact of the COVID-19 pandemic on our business, and impact of the Affordable Care Act and other legislation and regulation, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons. Actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

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PART I—FINANCIAL INFORMATION

Item 1. Condensed Financial Statements (Unaudited)

Applied Molecular Transport Inc.

Condensed Balance Sheets

(unaudited)

(in thousands, except share and per share data)

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

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Applied Molecular Transport Inc.

Condensed Statements of Operations and Comprehensive Loss

(unaudited)

(in thousands, except share and per share data)

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

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Applied Molecular Transport Inc.

Condensed Statements of Stockholders’ Equity

(unaudited)

(in thousands, except share data)

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

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Applied Molecular Transport Inc.

Condensed Statements of Stockholders’ Equity (continued)

(unaudited)

(in thousands, except share data)

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

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Applied Molecular Transport Inc.

Condensed Statements of Cash Flows

(unaudited)

(in thousands)

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

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Applied Molecular Transport Inc.

Notes to the Condensed Financial Statements

(unaudited)

1. Business and Principal Activities

Description of Business

Applied Molecular Transport Inc. (the Company) is a clinical-stage biopharmaceutical company leveraging its proprietary technology platform to design and develop a pipeline of novel oral and respiratory biologic product candidates to treat autoimmune, inflammatory, metabolic, and other diseases. The Company’s principal operations are in the United States with its headquarters in South San Francisco, California.

Since the date of incorporation in Delaware on November 21, 2016, the Company has devoted substantially all of its resources to research and development activities, including research activities such as drug discovery, preclinical studies, and clinical trials as well as development activities such as the manufacturing of clinical and research material, establishing and maintaining an intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.

Liquidity and Capital Resources

Management believes that its existing cash and cash equivalents as of September 30, 2022 will be sufficient to allow the Company to fund its current operating plan through at least 12 months from the date that this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (SEC).

The Company has incurred significant losses and negative cash flows from operations since its inception. As of September 30, 2022, the Company had an accumulated deficit of $343.4 million and does not expect positive cash flows from operations in the foreseeable future. The Company expects to incur significant and increasing losses until regulatory approval is granted and successful commercialization is achieved for any of its product candidates. Regulatory approval is not guaranteed and may never be obtained. The Company has historically financed its operations primarily through private placements of its convertible preferred stock and sale of common stock upon the completion of the Initial Public Offering (IPO) and follow-on equity offering. In addition, on January 27, 2022, the Company entered into a Sales Agreement with SVB Securities LLC and JMP Securities LLC, as the Company’s sales agents (Agents), pursuant to which the Company may offer and sell from time to time through the Agents up to $150.0 million in shares of the Company’s common stock through an “at-the-market” program (ATM facility). As of September 30, 2022, the Company had not yet sold any shares of common stock under the ATM facility. The Company may seek to raise additional capital through debt financings, private or public equity financings, license agreements, collaborative agreements or other arrangements with other companies, or other sources of financing. There can be no assurance that such financing will be available or will be at terms acceptable to the Company.

Strategic Plan Announcement

In May 2022, the Company implemented a strategic plan to focus the business on its clinical program for AMT-101 (Strategic Plan). The Strategic Plan is intended to preserve capital, ensuring that the Company is appropriately resourced to advance AMT-101 through key development milestones.

Employment Related Agreements

Under the Strategic Plan, the Company reduced its workforce by approximately 40%. Impacted employees received notice that their positions were eliminated on May 16, 2022. Impacted employees were eligible to receive severance benefits and Company funded COBRA premiums, contingent upon an impacted employee’s execution (and non-revocation) of a customary separation agreement, which included a general release of claims against the Company. For certain employees, the Company accelerated vesting of restricted stock units (“RSUs”) to May 16, 2022 from the original vesting date of June 1, 2022.

In connection with the Strategic Plan, the Company recognized restructuring charges of approximately $3.8 million in the nine months ended September 30, 2022. These restructuring charges were primarily related to severance payments and other employee-related separation costs of $3.3 million, contract termination fees of $0.5 million, a lease termination fee of $0.3 million, impairment of property and equipment of $0.1 million and insignificant legal expenses, partially offset by a $0.4 million reduction in stock-based compensation expense as a result of applying modification accounting for accelerated vesting of RSUs. As of September 30, 2022, accrued contract termination fees of $0.4 million remained unpaid and are expected to be paid within one year.

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Risks and Uncertainties

The COVID-19 virus has spread extensively throughout the world, resulting in the World Health Organization characterizing COVID-19 as a pandemic. While significant progress in addressing the pandemic has been made with multiple vaccines and treatment options now available, the emergence of highly transmissible variants of the virus have resulted in periodic surges in infection rates around the world and a cycle of fluctuating public health restrictions designed to mitigate the spread of the virus. The extent to which the COVID-19 pandemic impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted, such as the spread or emergence of new variants, the duration and severity of surges in outbreaks, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain and treat the disease and to address its impact, including on financial markets or otherwise. The Company continues to have a hybrid work environment with a majority of the Company’s workforce either working exclusively from home or working from home for part of their work week. The Company’s financial results could be affected by the COVID-19 pandemic in various ways. As a result of the COVID-19 pandemic, the Company has experienced and could experience disruptions that could severely impact the Company’s business, current and planned critical trials and preclinical studies. For example, the COVID-19 pandemic could result in delays to the Company’s clinical trials and preclinical studies for numerous reasons including difficulties in enrolling patients or healthy volunteers, diversion of healthcare resources away from the conduct of clinical trials, delays in receiving regulatory authorities to initiate clinical trials, and delays in receiving supplies to conduct clinical trials and preclinical studies. There has also been an increase in infections from COVID-19 variants which has impacted patient recruitment at certain of the Company’s clinical trial sites and could result in increased costs and delays. In addition, as a result of ongoing COVID-19 research and the current global supply chain issues, there is currently limited availability for certain resources required to conduct some of the Company’s preclinical studies and clinical trials, which may result in longer lead times, increased costs, and delays in completing preclinical studies and clinical trials. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trial and other related business activities. The Company is carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on the Company’s financial condition and results of operations as of September 30, 2022.

In addition, currently there is a conflict involving Russia and Ukraine. The Company’s AMT-101 Phase 2 LOMBARD trial currently includes clinical trial sites located in Ukraine, Russia, and other Eastern European countries. The Board of Directors of the Company (Board of Directors) is receiving management reports and discusses with management at board meetings macro-economic and geopolitical developments, including the Russia/Ukraine conflict and the impact on the Company’s personnel, cybersecurity, sanctions and the Company’s clinical trial sites located in the region so that the Company can be prepared to react to new developments as they arise. This conflict has and may continue to impact the Company’s ability to conduct certain of our trials in Ukraine, Russia and other Eastern European countries, and may prevent the Company from obtaining data on patients already enrolled at sites in these countries. This could negatively impact the completion of the Company’s clinical trials and/or analyses of clinical results or result in increased costs, all of which could materially harm the Company’s business. The Board of Directors is monitoring and continues to assess and monitor risks related to the Russia/Ukraine conflict.

The extent of the ongoing impact of macroeconomic events on the Company’s business and on global economic activity is uncertain and the related financial impact cannot be reasonably estimated with any certainty at this time, although the impacts are expected to continue and may significantly affect the Company’s business. The Company expects that the impacts on its business will continue through this period of economic uncertainty as supply chain issues, inflation and other factors continue to worsen or emerge. Accordingly, management is carefully evaluating its liquidity position, communicating with and monitoring the actions of its suppliers and continuing to review its near-term operating expenses as the uncertainty related to these factors continues to unfold. The risks related to the Company’s business, including further discussion of the impact and possible future impacts of the COVID-19 pandemic and current economic conditions on the Company’s business, are further described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.  

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2. Summary of Significant Accounting Policies

Condensed Financial Statements (Unaudited)

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and applicable rules and regulations of the SEC for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. The interim condensed financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the Company’s results for the interim periods presented. The condensed balance sheet as of December 31, 2021 was derived from the Company’s audited financial statements. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim periods or future years.

The accompanying interim unaudited condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K, originally filed with the SEC on February 24, 2022, as amended by Form 10-K/A (Amendment No. 1) filed on March 25, 2022.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company bases its estimates on historical experience and market-specific or other relevant assumptions that it believes are reasonable under the circumstances. Assets and liabilities reported in the Company’s condensed balance sheets and expenses and income reported are affected by estimates and assumptions, which are used for, but are not limited to, recording research and development expenses and related accruals, and determining the fair value of stock options for stock-based compensation expense. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of the COVID-19 pandemic. Actual results could differ from such estimates or assumptions.

Concentration of Credit Risk and Other Risks and Uncertainties

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, and investments. From time to time, the Company invests in U.S. Treasury securities. The Company maintains bank deposits in federally insured financial institutions and these deposits may exceed federally insured limits. The Company is exposed to credit risk in the event of default by the financial institutions holding its cash, cash equivalents, and investments to the extent recorded in the condensed balance sheets. The Company has not experienced any losses on its deposits of cash, cash equivalents, and investments. The Company is subject to a number of risks similar to other clinical-stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of current or future preclinical studies or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain regulatory and marketing approvals for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, protection of its proprietary technology, and the need to secure and maintain adequate manufacturing arrangements with third parties or develop internal manufacturing capabilities. The Company’s product candidates will require approval from the U.S. Food and Drug Administration (FDA) and/or comparable foreign regulatory agencies prior to commercialization in their respective jurisdictions. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability.

Operating Segment

The Company operates and manages its business as one reportable and operating segment, which is the business of designing and developing a pipeline of novel oral and respiratory biologic product candidates to treat autoimmune, inflammatory, metabolic, and other diseases. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance.

Cash and Cash Equivalents

Cash and cash equivalents are held in accounts at financial institutions. Such deposits have and will continue to exceed federally insured limits in the foreseeable future. The Company considers all highly liquid investments purchased with original maturities of 90 days or less from the purchase date to be cash equivalents. Cash equivalents consist of amounts invested in money market funds exclusively composed of U.S. government obligations.

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Restricted Cash

As of September 30, 2022, the Company had $0.9 million in restricted cash, which was classified as long-term on the Company’s condensed balance sheets. The restricted cash was attributable to a letter of credit issued by the Company in connection with the operating lease for the Company’s headquarters (See Note 5). The letter of credit will expire 90 days after the expiration of the lease in 2029.

During the nine months ended September 30, 2022, the Company collected its $0.1 million letter of credit associated with the expiration of an operating lease.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed statements of cash flows (in thousands):

Property and Equipment, Net

Property and equipment are presented at cost, net of accumulated depreciation. Depreciation is recorded using the straight-line method. Depreciation begins at the time the asset is placed in service. Maintenance and repairs are charged to expense as incurred and costs of major replacement or improvement are capitalized. The Company’s estimated useful lives of its property and equipment are as follows:

Impairment of Long-Lived Assets

The Company evaluates the carrying amount of its long-lived assets whenever events or changes in circumstances indicate that the assets may not be recoverable. An impairment loss is recognized when the remaining book value of an asset is not recoverable. The Company recorded impairment charges of $0.1 million related to laboratory and manufacturing equipment in connection with the Strategic Plan during the nine months ended September 30, 2022. There was no other impairment to the Company’s long-lived assets during the nine months ended September 30, 2021.

Leases

In February 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standard Update (ASU) No. 2016-02, Leases (ASC 842), and its associated amendments, that establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months and disclose key information about leasing arrangements. The Company adopted ASC 842 on January 1, 2021 using the modified retrospective approach. Leases have been classified as either finance or operating, with classification affecting the pattern and classification of expense recognition in the condensed statements of operations and comprehensive loss.

At the inception of an arrangement, the Company determines if an arrangement is, or contains, a lease based on the facts and circumstances present in that arrangement. Lease classification, recognition, and measurement are then determined at the lease commencement date. For arrangements that contain a lease, the Company (i) identifies lease and non-lease components, (ii) determines the consideration in the contract, (iii) determines whether the lease is an operating or finance lease; and (iv) recognizes lease ROU assets and liabilities. Lease liabilities and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. Accordingly, the Company uses the incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments

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in a similar economic environment. Building improvements continue to be capitalized as leasehold improvements and are included in property and equipment, net in the condensed balance sheets.

Most leases include options to renew and/or terminate the lease, which can impact the lease term. The exercise of these options is at the Company’s discretion. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The Company has operating leases for its corporate offices, laboratory, and manufacturing and warehouse facilities. Fixed lease payments on operating leases are recognized as lease expense over the expected term of the lease on a straight-line basis. The Company’s real estate operating leases require payment of common area maintenance, real estate taxes, and insurance. These components are recognized as variable lease expense in the period in which the obligation is incurred. As these costs are generally variable in nature, they are not included in the measurement of the operating lease ROU asset and related lease liability. Fixed and variable lease expense on operating leases is recognized within operating expenses within the Company’s condensed statements of operations and comprehensive loss. Sublease income is recognized on a straight-line basis over the sublease term and is recorded net against the head lease expense.

The Company has various finance leases for laboratory and manufacturing equipment. Interest expense from fixed payments on finance leases is recognized using the effective interest method. Finance lease ROU asset amortization and interest expense are recorded within operating expenses and interest income, net, respectively, within the Company’s condensed statements of operations and comprehensive loss.

The Company has elected the short-term lease exemption and, therefore, does not recognize an ROU asset or corresponding liability for lease arrangements with an original term of 12 months or less.

Research and Development Expenses

Research and development expenses are expensed as incurred. Research and development expenses include personnel costs related to research and development activities, materials costs, external clinical product candidate manufacturing and clinical trial costs, outside services costs, repair, maintenance and depreciation costs for research and development equipment, as well as facility costs for laboratory space used for research and development activities.

Accrued Research and Development Expenses

The Company accrues for estimated costs of research, preclinical studies, clinical trials, and manufacturing development services performed but not yet invoiced and such accruals are included within accrued expenses which are significant components of research and development expenses. A substantial portion of the Company’s ongoing research and development activities is conducted by third-party service providers including contract research organizations (CROs) and contract development and manufacturing organizations (CDMOs). The Company’s contracts, amendments thereto, statements of work and change orders with the CROs and CDMOs generally include fees such as initiation fees, reservation fees, costs related to animal studies and safety tests, verification run costs, materials and reagents expenses, and taxes. Payments made to third parties under these arrangements in advance of the performance of the related services are recorded as prepaid expenses and are expensed as services are rendered. The financial terms of these arrangements are subject to negotiations, which vary from contract to contract and may result in the timing of payments that do not match the periods over which materials or services are provided to the Company under such contracts. The Company accrues the costs incurred under agreements with these third parties and/or adjusts the prepaid expenses based on estimates of work completed in accordance with the respective agreements. The Company determines the estimated costs through information obtained from third-party providers as to the progress, stage of completion or actual timeline (start-date and end-date) of the services and the agreed-upon fees to be paid for such services and corroboration with internal personnel responsible for the oversight of the research and development activities.

If the actual timing of the performance of services or the level of effort varies from the estimate, the Company adjusts accrued expenses or prepaid expenses accordingly, which impact research and development expenses. Although the Company does not expect its estimates to be materially different from amounts actually incurred, the Company’s understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in reporting amounts that are too high or too low in any particular period. To date, there have not been any material adjustments to the Company’s prior estimates of research and development expenses.

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Stock-Based Compensation Expense

The Company maintains both an equity incentive plan and an employee stock purchase plan (ESPP) as long-term incentives for its employees, consultants, and non-employee directors. Under the equity incentive plan, the Company is authorized to grant various equity-based incentives including stock options and restricted stock units (RSUs). The ESPP provides for 24-month offering periods and each offering period may contain up to four six-month purchase periods. The ESPP allows employees to purchase shares of the Company’s common stock each purchase period based on a percentage of their compensation subject to certain limits.

The Company accounts for stock-based compensation expense by measuring and recognizing compensation expense for all share-based payments made to employees and non-employees based on estimated grant-date fair values. The grant-date fair values for options are recorded as stock-based compensation expense on a straight-line basis over each recipient’s requisite service period, which is generally the vesting period. The grant-date fair values for purchase rights granted under the ESPP are recorded as stock-based compensation expense on a straight-line basis over the applicable offering period. Actual forfeitures of unvested equity awards are recognized as they occur by reversing any expense previously recorded for the award.

The Company estimates the fair value of stock options granted to employees and non-employees using the Black-Scholes model. The Company estimates the fair value of purchase rights granted under the ESPP for an offering period using the Black-Scholes model. The Black-Scholes model requires the input of subjective assumptions, including expected volatility, expected dividend yield, expected term and the risk-free rate of return.

Fair Value Measurements

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. Fair value measurement establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

The Company determined the fair value of financial assets and liabilities using the fair value hierarchy that describes three levels of inputs that may be used to measure fair value, as follows:

Financial instruments consist of cash and cash equivalents, restricted cash, other current assets, accounts payable and accrued expenses. As of September 30, 2022 and December 31, 2021, the Company’s financial instruments carried at fair value on a recurring basis consists of money market funds, which are included in cash and cash equivalents. Other financial instruments are recorded at carrying amounts that approximate their fair value due to their short-term nature.

Comprehensive Loss

Comprehensive loss includes net loss and other comprehensive income (loss) for the period. Other comprehensive income (loss) represents unrealized gains on investments and amounts recognized for net realized gain included in net loss.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded if and when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

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Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective may not have a material impact on the Company’s financial position or results of operations upon adoption.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) that requires a lessee to recognize leases of greater than 12 months on the balance sheet and disclose key information about leasing arrangements.

The Company adopted the new standard on January 1, 2021 using the modified retrospective approach. The Company has elected to apply the transition method that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the condensed financial statements and recognize a cumulative-effect adjustment to the opening balance of accumulated deficit on the date of adoption. The Company has lease agreements that contain both lease components (for example fixed rent payments) and non-lease components (for example, common-area maintenance costs), and has elected to combine lease and non-lease components for all classes of assets. The Company also elected the “package of practical expedients”, which permits the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. Lastly, the Company elected a practical expedient to use hindsight in determining the lease term for all its leases.

Results for reporting periods beginning after January 1, 2021 are presented under the new standard, while prior period amounts have not been adjusted and continue to be reported under the accounting standards in effect for the prior period. Upon adoption of the new lease standard on January 1, 2021, the Company capitalized operating lease ROU assets of $6.0 million, with opening adjustments of $0.5 million related to deferred rent existing as of the transition date, and $6.5 million of operating lease liabilities, within the Company’s condensed balance sheets. There was no impact to the finance lease ROU asset and the finance lease liabilities upon adoption. In connection with operating and finance leases, there was no impact to the accumulated deficit upon the adoption of the new standard on January 1, 2021.

3. Fair Value Measurements

The Company follows guidance provided in ASC 820, Fair Value Measurement, for valuation of financial assets and financial liabilities and for nonfinancial items that are recognized or disclosed at fair value in the financial statements on a recurring basis. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This guidance also establishes a framework for measuring fair value and expands disclosures about fair value measurements.

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

The following tables summarize the Company’s financial assets measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

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The fair values of money market funds were based on quoted prices in active markets and has been classified as Level 1 financial instruments.

4. Balance Sheet Components

Prepaid Expenses

Prepaid clinical expenses were $1.2 million and $5.2 million as of September 30, 2022 and December 31, 2021, respectively. Other prepaid expenses as of September 30, 2022 and December 31, 2021 included prepaid amounts for insurance and other services.

Property and Equipment, Net

Property and equipment, net, consisted of the following (in thousands):

Depreciation was $0.6 million and $0.8 million during the three months ended September 30, 2022 and 2021, respectively. Depreciation was $2.3 million and $2.3 million during the nine months ended September 30, 2022 and 2021, respectively.

There were no disposals during the nine months ended September 30, 2022 and 2021, respectively.

Right-of-Use Assets, Net

Right-of-use assets, net consisted of the following as of September 30, 2022 (in thousands):

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Accrued Expenses

Accrued expenses consisted of the following (in thousands):

Accrued research and development expenses were primarily related to clinical trials, preclinical studies, contract manufacturing and materials.

5. Leases

Operating Leases

The Company has operating leases for its corporate offices, laboratory, and manufacturing and warehouse facilities. The leases include renewal options to extend the lease term, which were not included in the measurement of the right-of-use asset and the associated lease liability as it was not reasonably certain that the Company would exercise the options.

In February 2021, the Company entered into an operating lease for its headquarters comprising 84,321 of rentable square feet of office, laboratory and manufacturing space in South San Francisco, California (HQ Lease), delivered in two phases. In July 2021, the Company began occupying a portion of the building and in October 2021, the Company occupied the remaining portion. The lease expires in October 2029 with options to renew for two five-year terms each. The HQ Lease has escalating rent payments and includes an abatement period in which the Company was not required to remit monthly rent payments until October 2021. Under the terms of the HQ Lease, the Company was required to provide the landlord with a letter of credit in the amount of $0.9 million (See Note 2).

In connection with implementing the Strategic Plan to preserve capital, in July 2022, the Company entered into an agreement to sublease approximately 22,000 rentable square feet of space in its headquarters. The sublease agreement has a term of 30 months from the commencement date of August 1, 2022 and provides that the Company will receive monthly base rent amounts escalating over the term of the sublease plus reimbursement of the subtenant’s proportionate share of operating expenses. The subtenant was not provided any renewal or extension options. The Company’s future sublease income exceeded the amount required to be paid to the Company’s landlord for the subleased space for the term of the sublease. As such, no impairment of the related ROU asset or leasehold improvements was warranted.

In December 2016, the Company entered into an operating lease for approximately 18,748 rentable square feet of office and laboratory space in South San Francisco, California, which previously served as the Company’s headquarters. The lease expires in August 2024 with options to renew for two three-year terms each. In September 2021, the Company entered into a sublease of its former headquarters facility in which the rental period was co-terminus with the term of the head lease. The subtenant was not provided any renewal or extension options. The Company received a security deposit of approximately $0.2 million which was classified as non-current other assets on the condensed balance sheets. The Company’s future sublease income exceeded the amount required to be paid to the Company’s landlord for the subleased space and no impairment of the related ROU asset or leasehold improvements was warranted.

In September 2020, the Company entered into an operating lease for approximately 4,000 rentable square feet of warehouse space in South San Francisco, California, which was amended to approximately 20,000 rentable square feet in July 2021. The lease expires in July 2029 with an option to renew for an additional two-year term. The landlord provided the Company with a tenant improvement allowance of up to $0.3 million, which was received in September 2022. The Company included the landlord incentive in the measurement of the initial operating lease liability, which was also reflected as a reduction to the initial ROU asset.

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Finance Leases

The Company has various finance lease agreements for laboratory and manufacturing equipment. The terms of the Company’s finance leases generally range from three to five years and are typically secured by the underlying equipment. The portion of the future payments designated as principal repayments were classified as finance lease liabilities on the Company’s condensed balance sheet.

The following table summarizes total lease expense for the three and nine months ended September 30, 2022 and 2021 (in thousands):

The following table summarizes supplemental cash flow information for the nine months ended September 30, 2022 and 2021 (in thousands):

The following table summarizes maturities of lease liabilities and sublease income as of September 30, 2022 (in thousands):

The following table summarizes remaining lease terms and discount rates as of September 30, 2022:

6. Commitments and Contingencies

Contingencies

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From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. The Company was not subject to any material legal proceedings as of September 30, 2022 and December 31, 2021, and no material legal proceedings are currently pending or threatened.

Indemnification

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. As permitted under Delaware law and in accordance with its bylaws, the Company indemnifies its officers and directors for certain events or occurrences while the officer or director is or was serving in such capacity. The Company is also party to indemnification agreements with its officers and directors. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments that the Company could be required to make under these provisions is not determinable. The Company also maintains director and officer insurance, which may cover certain liabilities arising from the Company’s obligation to indemnify directors and officers. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification provisions and is not currently aware of any indemnification claims.

7. Common Stock

As of September 30, 2022 and December 31, 2021, the Company was authorized to issue 450,000,000 shares of $0.0001 par value common stock. Common stockholders are entitled to dividends if and when declared by the Board of Directors. The holder of each share of common stock is entitled to one vote. The Company has never declared or paid dividends on its common stock.

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

On January 27, 2022, the Company entered into a Sales Agreement with SVB Securities LLC and JMP Securities LLC, as the Company’s sales agents (Agents), pursuant to which the Company may offer and sell from time to time through the Agents up to $150.0 million in shares (Shares) of the Company’s common stock through the ATM facility. As of September 30, 2022, the Company had not yet sold any shares of common stock under the ATM facility.

The Shares will be offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-263501) and the final prospectus supplement, which was filed on March 11, 2022.

8. Stock-Based Compensation Expense

2020 Equity Incentive Plan

The Company’s 2020 Equity Incentive Plan (2020 Plan) provides for the granting of incentive stock options (ISO), nonstatutory stock options (NSO), restricted stock, restricted stock units, stock appreciation rights, performance units, and performance shares to employees, directors, and consultants. The Company initially reserved for issuance 3,768,075 shares of common stock pursuant to the 2020 Plan. The shares reserved for issuance under the 2020 Plan automatically increases on January 1 of each year, starting on January 1, 2021 by the lesser of (i) 3,140,062 shares, (ii) 5% of the shares of the Company’s common stock outstanding on the last day of its immediately preceding fiscal year, or (iii) such other amount as determined by the Company’s Board of Directors. Accordingly, effective January 1, 2022 and 2021, the number of shares in the 2020 Plan increased by 1,930,997 and 1,756,068 shares, respectively, each representing 5% of the prior year end’s common stock outstanding. As of September 30, 2022, 2,893,649 shares of common stock remained available for future issuance under the 2020 Plan.

The Company utilizes stock options and RSUs for equity compensation. Generally, these awards vest over a four year period, subject to continuing service.

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Options under the 2020 Plan may be granted for periods of up to 10 years and at prices no less than 100% of the estimated fair value of the underlying shares of common stock on the date of grant as determined by the Board of Directors provided that the exercise price of an ISO and NSO granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. The 2020 Plan requires that options be exercised no later than 10 years after the grant. .

The Company’s previous 2015 Equity Incentive Plan (2015 Plan) and 2016 Equity Incentive Plan (2016 Plan) were terminated in accordance with the Company’s IPO in June 2020. Shares subject to awards granted under the 2015 Plan and 2016 Plan that are later repurchased by, or forfeited to, the Company will be available for issuance under the 2020 Plan.

2022 Inducement Equity Incentive Plan

The Company’s 2022 Inducement Equity Incentive Plan (2022 Inducement Plan) adopted in March 2022 reserved 1,000,000 shares of the Company’s common stock pursuant to equity awards granted under the 2022 Inducement Plan. The Inducement Plan provides for the grant of equity-based awards, including nonstatutory stock options, restricted stock units, restricted stock, stock appreciation rights, performance shares and performance stock units, and its terms are substantially similar to the Company’s 2020 Plan. In accordance with the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company, or, to the extent permitted by the Nasdaq Listing Rules, in connection with a merger or acquisition. As of September 30, 2022, 1,000,000 shares of common stock remained available for future issuance under the 2022 Inducement Plan.

Stock-Based Compensation Expense

The following table summarizes the components of stock-based compensation expense recognized in the Company’s condensed statements of operations and comprehensive loss during the three and nine months ended September 30, 2022 and 2021 (in thousands):

Stock Options

The following summarizes stock option activity (in thousands, except share, per share, and year amounts):

Weighted-average grant-date fair value of the options granted during the three and nine months ended September 30, 2022 was $1.66 per share and $5.67 per share, respectively. The intrinsic value of options exercised during the three and nine months ended September 30, 2022 was insignificant and $0.3 million, respectively.

As of September 30, 2022, the total unrecognized stock-based compensation expense related to stock options was $40.2 million, which is expected to be recognized over a weighted-average period of approximately 2.62 years.

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Restricted Stock Units

The following summarizes restricted stock unit activity:

As of September 30, 2022, the total unrecognized stock-based compensation expense related to unvested restricted stock units and awards was $6.2 million, which is expected to be recognized over a weighted-average period of approximately 2.21 years.

Strategic Plan Accelerated RSU Vesting

In connection with the Strategic Plan, the Company accelerated vesting from the original vesting date of June 1, 2022 to May 16, 2022 for certain employees. Vesting was accelerated for a total of 43,711 RSUs for 30 grantees. The Company considers the acceleration of vesting to be a Type III (improbable-to-probable) modification as the RSUs were not expected to vest under the original terms of the award. As a result of the modification, the Company reversed previously recognized stock-based compensation expense and recognized compensation cost for the modified award based on the modification date fair value of the awards, which was lower than the original grant date fair value. This resulted in a reduction in stock-based compensation of $0.4 million for the nine months ended September 30, 2022.

2020 Employee Stock Purchase Plan

Under the ESPP, employees can purchase shares of the Company’s common stock each purchase period based on a percentage of their compensation, subject to certain limits. The purchase price per share is equal to the lower of 85% of the fair market value of the Company’s common stock on the enrollment date or the purchase date. The ESPP offers a six-month look-back feature as well as an automatic rollover feature that provides for the offering period to be reset to a new lower-priced offering price if the market price of the stock at the purchase date is lower than the stock price at the initial enrollment date. In that case, the offering period is immediately cancelled after that purchase date, and a new two-year offering period is established using the then-current stock price as the base purchase price.

The shares authorized for the ESPP increase annually by the lesser of (i) 628,012 shares, (ii) 1% of the Company’s common stock shares outstanding on the last day of its immediately preceding fiscal year, or (iii) such other amount as determined by the Company’s Board of Directors. Accordingly, effective January 1, 2022 and 2021, the number of shares in the ESPP increased by 386,199 and 351,214 shares, respectively, each representing 1% of the prior year end’s common stock issued and outstanding. As of September 30, 2022, 956,664 shares of common stock remained available for future issuance under the ESPP.

The Company began recording stock-based compensation expense for its ESPP on January 1, 2021. During the three and nine months ended September 30, 2022, the Company recorded $0.1 million and $0.3 million, respectively, of stock-based compensation expense related to the ESPP. During the three and nine months ended September 30, 2021, the Company recorded $0.1 million and $0.2 million, respectively, of stock-based compensation expense related to the ESPP.

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9. Net Loss Per Share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock is computed by giving effect to all potential dilutive shares of common stock, including options and RSUs. Basic and diluted net loss per share were the same for all periods presented as the impact of all potentially dilutive securities outstanding was anti-dilutive.

The following table sets forth the computation of the basic and diluted net loss per share (in thousands except share and per share data):

The Company’s basic net loss per share was the same as its diluted net loss per share for all the periods presented as the inclusion of all common stock equivalents outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows:

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

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. This discussion contains forward-looking statements that involve risks and uncertainties, including those described in the section titled “Special Note Regarding Forward-Looking Statements.” Our actual results and the timing of selected events could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those set forth under the section titled “Risk Factors” included elsewhere in this report.

Overview

We are a clinical-stage biopharmaceutical company leveraging our proprietary technology platform to design and develop a pipeline of novel oral and respiratory biologic product candidates to treat autoimmune, inflammatory, metabolic, and other diseases. Our proprietary technology platform allows us to exploit existing natural cellular trafficking pathways to facilitate the active transport of diverse therapeutic payloads across epithelial barriers, such as the intestinal epithelium (IE) and the respiratory epithelium (RE). Active transport is an efficient mechanism that uses the cell’s own machinery to transport materials across epithelial barriers. We are developing oral and respiratory biologic product candidates in patient-friendly dosage forms that are designed for either targeting local GI tissue or entering systemic circulation to precisely address the relevant pathophysiology of disease. We are building a portfolio of oral and respiratory product candidates based on our technology platform including our most advanced product candidate, AMT-101, a gastrointestinal (GI)-selective oral fusion of interleukin-10 (IL-10) and our proprietary carrier molecule. We announced top-line Phase 2 results from the MARKET combination trial for AMT-101 in biologic-naïve patients with moderate-to-severe ulcerative colitis (UC) on July 6, 2022. In the MARKET trial, patients received either once-daily oral AMT-101 3mg in combination with adalimumab (sub-cutaneous administration per the approved UC label), or adalimumab alone (with placebo). The objectives of the MARKET trial were to assess the safety and efficacy of AMT-101 in combination with anti-TNFα therapy (adalimumab) in patients with moderate-to-severe UC. The key efficacy endpoint of clinical remission was measured at 8 weeks. The clinical remission rate in the adalimumab alone arm was higher than historical anti-TNFα monotherapy benchmarks, and although the overall data from the MARKET trial did not demonstrate added clinical benefit in the combination arm compared to the adalimumab alone arm at week 8, a sub-group analysis revealed that patients with a shorter duration of UC (< 5 years) had meaningfully higher clinical remission rates in the combination arm versus the adalimumab alone arm. AMT-101 appeared safe and well-tolerated. Treatment emergent adverse events (TEAEs) were mostly mild to moderate, with one serious adverse event (SAE) observed, worsening of UC, which was determined to be unrelated to study treatment. Further evaluation and analyses of the data are ongoing. We continue to conduct Phase 2 clinical trials of AMT-101 in UC and other inflammatory indications following the completion of a Phase 1b clinical trial in patients with UC. On April 25, 2022, we announced positive Phase 2 top-line results from our FILLMORE monotherapy trial for AMT-101 in patients with chronic pouchitis. We submitted our Phase 2 chronic pouchitis data to the FDA and held an End of Phase 2 (EOP2) meeting in August 2022. We are continuing discussions with the FDA to finalize next steps for advancing AMT-101 in chronic pouchitis. On September 20, 2022, we announced completion of enrollment of our Phase 2 LOMBARD trial for AMT-101. LOMBARD is a double-blinded, placebo-controlled trial evaluating the safety and efficacy of orally administered AMT-101 over 12 weeks in patients with moderate-to-severe UC.

Our second product candidate, AMT-126, is a GI-selective oral fusion of interleukin-22 (IL-22) and our proprietary carrier molecule currently in development for diseases related to intestinal epithelial (IE) barrier function defects. We concluded a Phase 1a clinical trial for AMT-126 which was well tolerated in healthy volunteers. We are evaluating next steps for the AMT-126 clinical program. Our technology platform enables us to design and develop various oral and respiratory biologic therapeutic modalities, such as peptides, proteins, full-length antibodies, antibody fragments, and RNA therapeutics, with potentially significant advantages over existing marketed and development-stage drugs.

Since the date of our incorporation in Delaware on November 21, 2016, we have devoted substantial resources to research and development activities, including research activities such as drug discovery, preclinical studies, and clinical trials as well as development activities such as the manufacturing of clinical and research material, establishing and maintaining our intellectual property portfolio, hiring personnel, raising capital, and providing general and administrative support for these operations.

We do not currently have any products approved for sale, and we have not generated any revenue from product sales. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development of one or more of our product candidates which we expect will take a number of years. Given our stage of development, we have not yet established a commercial organization or distribution capabilities. We intend to build a commercial infrastructure to support sales of our product candidates. We expect to manage sales, marketing and distribution through internal resources and third-party relationships. While we may commit significant financial and management resources to commercial activities, we may also consider collaborating with one or more pharmaceutical companies to enhance our commercial capabilities.

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Manufacturing of protein therapeutics is a complex process and represents a critical path to creating biologic therapeutics and a key component of our long-term success. We manufacture clinical supply at a facility located in South San Francisco. While we have successfully manufactured clinical supply at our internal facility, we may need to scale our manufacturing operations to manufacture sufficient quantity needed to advance any of our product candidates in preclinical studies and clinical trials. We have spent significant resources and plan to continue to spend significant resources to develop our current manufacturing capabilities, processes and know-how to produce sufficient supply of our product candidates and optimize functionality. Our efforts to scale our internal manufacturing capabilities are subject to risks.

In addition, although we have developed internal manufacturing capabilities, we expect to continue to rely on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates obtain marketing approval. We also rely, and expect to continue to rely, on third parties to package, label, store and distribute our product candidates, as well as for our commercial products if marketing approval is obtained. We believe that this strategy allows us to maintain more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our product candidates.

Since the date of our incorporation, we have incurred significant losses and negative cash flows from operations. During the nine months ended September 30, 2022, we incurred a net loss of $103.7 million and used $79.1 million of cash in operations. As of September 30, 2022, we had an accumulated deficit of $343.4 million and do not expect positive cash flows from operations in the foreseeable future. We expect to continue to incur significant and increasing losses for the foreseeable future, and our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities.

To date, we have financed our operations primarily through the private placements of convertible preferred stock and the issuance of common stock upon the completion of our IPO. We completed our IPO in June 2020 and received net proceeds of approximately $160.6 million after deducting underwriting discounts and commissions and offering costs, net of offering costs of $0.2 million paid in 2019. On April 6, 2021, we completed a follow-on offering and received net proceeds of approximately $112.8 million after deducting underwriting discounts and commissions and offering costs. In addition, on January 27, 2022, we entered into a Sales Agreement with SVB Securities LLC and JMP Securities LLC, as our sales agents (Agents), pursuant to which we may offer and sell from time to time through the Agents up to $150.0 million in shares of our common stock through an “at-the-market” program (ATM facility).

In May 2022, we implemented a strategic plan to focus our business on the clinical program for AMT-101 (Strategic Plan) as described in more detail in the section entitled, “Liquidity and Capital Resources.” The Strategic Plan is intended to preserve capital, ensuring that we are appropriately resourced to advance AMT-101 through key development milestones. However, we expect our expenses will increase significantly in connection with our ongoing activities, as we:

As a result, we will require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. Until such time as we can generate sufficient revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings, debt financings, licensing arrangements, collaboration agreements or other arrangements with other companies, asset sales, or other sources of financing. We may be unable to raise additional funds or enter into such agreements or arrangements on favorable terms, or at all. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, and could force us to delay, reduce or

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eliminate our drug development or future commercialization efforts. We may also be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. The amount and timing of our future funding requirements will depend on many factors including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operations through at least the next 12 months from the date that this Quarterly Report on Form 10-Q is filed with the U.S. Securities and Exchange Commission (SEC). We have based this projection on assumptions that may be inaccurate and as a result, we may utilize our capital resources sooner than we expect.

COVID-19 and Current Economic Conditions

Our financial results could be affected by the COVID-19 pandemic in various ways. As a result of the COVID-19 pandemic, we have experienced and could experience disruptions that could severely impact our business, current and planned clinical trials and preclinical studies. For example, the COVID-19 pandemic could result in delays to our clinical trials and preclinical studies for numerous reasons including difficulties in enrolling patients or healthy volunteers, diversion of healthcare resources away from the conduct of clinical trials, delays in receiving regulatory authorities to initiate clinical trials, and delays in receiving supplies to conduct clinical trials and preclinical studies. Moreover, there has been an increase in infections from COVID-19 variants which has impacted patient recruitment at certain of our clinical trial sites and could result in increased costs and delays. In addition, as a result of ongoing COVID-19 research and the current global supply chain issues, there is currently limited availability for certain resources required to conduct some of our preclinical studies and clinical trials, which may result in longer lead times, increased costs, and delays in completing preclinical studies and clinical trials. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trial and other related business activities.

We are carefully monitoring the pandemic and the potential length and depth of the resulting economic impact on our financial condition, including our cash flows and results of operations. We intend to continue to execute on our strategic plans and operational initiatives during the COVID-19 pandemic. However, the extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted. Accordingly, management is carefully monitoring the impact of the COVID-19 pandemic on our business. As of September 30, 2022, we were not aware of any significant contingencies and no estimates were recorded on our condensed financial statements related to COVID-19.

The extent of the ongoing impact of macroeconomic events on our business and on global economic activity is uncertain and the related financial impact cannot be reasonably estimated with any certainty at this time, although the impacts are expected to continue and may significantly affect our business. We expect that the impacts on our business will continue through this period of economic uncertainty as supply chain issues, inflation and other factors continue to worsen or emerge. Accordingly, management is carefully evaluating our liquidity position, communicating with and monitoring the actions of our suppliers and continuing to review our near-term operating expenses as the uncertainty related to these factors continues to unfold. The risks related to our business, including further discussion of the impact and possible future impacts of the COVID-19 pandemic and current economic conditions on our business, are further described in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q.

Components of Results of Operations

Revenue

We have not generated any revenue from product sales or otherwise and do not expect to generate any revenue for the foreseeable future.

Operating Expenses

We classify operating expenses into two main categories: (i) research and development expenses and (ii) general and administrative expenses.

Research and Development Expenses

Our research and development expenses consist primarily of external and internal costs incurred in connection with our research activities and development programs. These expenses include, but are not limited to:

External expenses, consisting of:

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Internal expenses, consisting of:

To date, the vast majority of these expenses have been incurred to advance our most advanced product candidate, AMT-101. We expect to incur significant additional spending to progress AMT-101 through the remainder of the clinical development phases. These expenses will primarily consist of expenses for the administration of clinical studies as well as manufacturing costs for clinical material supply. In May 2022, we implemented our Strategic Plan to focus the business on our clinical program for AMT-101.

In addition, we have incurred minimal expenses in connection with our second product candidate, AMT-126, including expenses for internal animal studies and preclinical studies performed at CROs. We also concluded a Phase 1a clinical trial for AMT-126 which was well tolerated in healthy volunteers. We are evaluating next steps for the AMT-126 clinical program. We expect that significant additional spending will be required if we progress AMT-126 through additional clinical trials at some point in the future. We have also incurred minimal expenses to expand our development pipeline and for general discovery research. We expect that spending for these early-stage research and development activities may increase at some point in the future. We deploy our personnel, equipment, and facility resources across all our research and development activities.

Research and development expenses are recognized as they are incurred. Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid assets and recognized as expense in the period when the goods are consumed or the services are performed.

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We expect our research and development expenses to increase significantly in the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for any product candidates that successfully complete clinical trials, and incur expenses associated with hiring additional personnel to support our research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, the successful development of our product candidates is highly uncertain, and we may never succeed in achieving regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, benefits, and stock-based compensation expense) for personnel in executive, finance, accounting, corporate development, and other administrative functions. General and administrative expenses also include legal fees, professional fees paid for accounting, auditing, consulting, tax, and investor relations services, insurance costs, and facility costs not otherwise included in research and development expenses, and public company expenses such as costs associated with compliance with the rules and regulations of the SEC and those of The Nasdaq Stock Market LLC.

Our general and administrative expenses are expected to only increase marginally in the near future as a result of the Strategic Plan. We expect that our general and administrative expenses could increase significantly in the future if additional financing is secured and additional administrative personnel and services are required to manage these functions of a public company and as our pipeline of product candidates expands.

Interest Income, Net and Other Income (expense), Net

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Interest income, net and other income (expense), net primarily consists of interest income earned on our cash, cash equivalents, investments, realized gain and loss on investments, interest expense from finance lease liabilities, and net losses on foreign currency transactions related to third-party contracts with foreign-based vendors.

Results of Operations

Comparisons of the Three Months Ended September 30, 2022 and 2021