c
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30,March 31, 20222023
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________________ to ___________________
Commission File Number: 001-39894
GreenLight Biosciences Holdings, PBC
(Exact Name of Registrant as Specified in its Charter)
Delaware | 85-1914700 |
(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: (617) 616-8188
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, par value $0.0001 per share | GRNA | Nasdaq Global Market | ||
Warrants, each exercisable for one share of Common Stock for $11.50 per share | GRNAW | Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of November 4, 2022,May 8, 2023, the registrant had 151,552,065151,681,314 shares of common stock, $0.0001 par value per share, outstanding.
Table of Contents
Page | ||
PART I. | FINANCIAL INFORMATION | |
Item 1. |
| |
| ||
| ||
5 | ||
6 | ||
7 | ||
Notes to Unaudited Condensed Consolidated Financial Statements | 8 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. |
| |
Item 4. |
| |
PART II. | OTHER INFORMATION | |
Item 1. |
| |
Item 1A. |
| |
Item 2. |
| |
Item 3. |
| |
Item 4. |
| |
Item 5. |
| |
Item 6. |
| |
| ||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (this “Report”) includes forward-looking statements regarding, among other things, the business and financial plans, strategies, and prospects of GreenLight Biosciences Holdings, PBC (“we,” “us,” “our,” the “Company” or “New GreenLight”). These statements are based on the beliefs and assumptions of the management of the Company. Although the Company believes that the plans, intentions, and expectations reflected in or suggested by these forward-looking statements are reasonable, it cannot assure you that it will achieve or realize these plans, intentions, or expectations. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes”, “estimates”, “expects”, “projects”, “forecasts”, “may”, “might”, “will”, “should”, “seeks”, “plans”, “scheduled”, “possible”, “anticipates”, “intends”, “aims”, “works”, “focuses”, “aspires”, “strives” or “sets out” or similar expressions. Forward-looking statements are not guarantees of performance. Forward-looking statements involve a number of risks, uncertainties (many of which are beyond the Company’s control) or other factors that may cause actual results or performance to differ materially from those expressed or implied by these forward-looking statements. You should not place undue reliance on these statements, which speak only as of the date these statements were made. These risks and uncertainties include, but are not limited to, the following risks, uncertainties (some of which are beyond the Company’s control) or other factors:
The risks described above are not exhaustive. New risk factors emerge from time to time, and it is not possible to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its 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. All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. Some of these risks and uncertainties may in the future be amplified by the COVID-19 pandemic,ongoing macroeconomic conditions, and there may be additional risks that the Company considers immaterial or which are unknown. The Company does not undertake any obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
TRADEMARKS
This document contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this Reportquarterly report on Form 10-Q may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable owner will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. The Company doesWe do not intend itsour use or display of other companies’ trademarks, trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of the Companyus by, any other companies.
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except share and per share data)
|
| SEPTEMBER 30, |
|
| DECEMBER 31, |
|
| MARCH 31, |
|
| DECEMBER 31, |
| ||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 98,353 |
|
| $ | 31,446 |
|
| $ | 32,350 |
|
| $ | 68,097 |
|
Prepaid expenses |
|
| 10,954 |
|
|
| 2,331 |
| ||||||||
Prepaid expenses and other current assets |
|
| 5,347 |
|
|
| 3,214 |
| ||||||||
Total Current Assets |
|
| 109,307 |
|
|
| 33,777 |
|
|
| 37,697 |
|
|
| 71,311 |
|
Restricted cash |
|
| 1,321 |
|
|
| 362 |
|
|
| 1,411 |
|
|
| 1,321 |
|
Property and equipment, net |
|
| 38,954 |
|
|
| 23,399 |
|
|
| 40,441 |
|
|
| 41,365 |
|
Deferred offering costs |
|
| — |
|
|
| 4,099 |
| ||||||||
Operating lease right-of-use assets |
|
| 32,740 |
|
|
| 32,766 |
| ||||||||
Other assets |
|
| 1,836 |
|
|
| 1,420 |
|
|
| 1,400 |
|
|
| 1,835 |
|
TOTAL ASSETS |
| $ | 151,418 |
|
| $ | 63,058 |
|
| $ | 113,689 |
|
| $ | 148,598 |
|
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK |
|
|
|
|
|
| ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
| ||||||||||
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
| $ | 3,027 |
|
| $ | 7,551 |
|
| $ | 1,073 |
|
| $ | 839 |
|
Accrued expenses |
|
| 8,814 |
|
|
| 14,624 |
|
|
| 11,478 |
|
|
| 13,544 |
|
Convertible debt |
|
| — |
|
|
| 31,691 |
| ||||||||
Operating lease liabilities, current portion |
|
| 4,083 |
|
|
| 3,358 |
| ||||||||
Long-term debt, current portion |
|
| 12,907 |
|
|
| 7,234 |
|
|
| 13,782 |
|
|
| 13,229 |
|
Deferred revenue, current portion |
|
| 7,363 |
|
|
| 963 |
| ||||||||
Deferred revenue |
|
| 47 |
|
|
| 3,866 |
| ||||||||
Other current liabilities |
|
| 305 |
|
|
| 278 |
|
|
| 724 |
|
|
| 724 |
|
Total Current Liabilities |
|
| 32,416 |
|
|
| 62,341 |
|
|
| 31,187 |
|
|
| 35,560 |
|
Warrant liabilities |
|
| 470 |
|
|
| 2,105 |
|
|
| 15 |
|
|
| 242 |
|
Operating lease liabilities, net of current portion |
|
| 48,702 |
|
|
| 49,569 |
| ||||||||
Long-term debt, net of current portion |
|
| 16,774 |
|
|
| 27,152 |
|
|
| 10,858 |
|
|
| 14,326 |
|
Other liabilities |
|
| 17,343 |
|
|
| 1,435 |
|
|
| 991 |
|
|
| 839 |
|
TOTAL LIABILITIES |
|
| 67,003 |
|
|
| 93,033 |
|
|
| 91,753 |
|
|
| 100,536 |
|
COMMITMENTS AND CONTINGENCIES (Note 16) |
|
|
|
|
|
| ||||||||||
LEGACY REDEEMABLE CONVERTIBLE PREFERRED STOCK (Note 12) |
|
| — |
|
|
| — |
| ||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) |
|
|
|
|
|
| ||||||||||
Common stock, $0.0001 par value; 500,000,000 shares authorized, 151,465,425 and 96,575,107 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively |
|
| 15 |
|
|
| 10 |
| ||||||||
Preferred Stock, $0.0001 par value; 10,000,000 shares authorized, no shares issues and outstanding at September 30, 2022 and December 31, 2021, respectively |
|
| — |
|
|
| — |
| ||||||||
COMMITMENTS AND CONTINGENCIES (Note 17) |
|
|
|
|
|
| ||||||||||
STOCKHOLDERS’ EQUITY |
|
|
|
|
|
| ||||||||||
Common stock, $0.0001 par value; 500,000,000 shares authorized, 151,681,314 and 151,587,165 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively |
|
| 15 |
|
|
| 15 |
| ||||||||
Preferred Stock, $0.0001 par value; 10,000,000 shares authorized, no shares issues and outstanding at March 31, 2023 and December 31, 2022, respectively |
|
| — |
|
|
| — |
| ||||||||
Additional paid-in capital |
|
| 466,274 |
|
|
| 223,584 |
|
|
| 471,028 |
|
|
| 468,685 |
|
Accumulated deficit |
|
| (381,874 | ) |
|
| (253,569 | ) |
|
| (449,107 | ) |
|
| (420,638 | ) |
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT) |
|
| 84,415 |
|
|
| (29,975 | ) | ||||||||
TOTAL LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED |
| $ | 151,418 |
|
| $ | 63,058 |
| ||||||||
TOTAL STOCKHOLDERS’ EQUITY |
|
| 21,936 |
|
|
| 48,062 |
| ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
| $ | 113,689 |
|
| $ | 148,598 |
| ||||||||
See notes to condensed consolidated financial statements.
34
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Condensed Consolidated Statements of Operations (unaudited)
(In thousands, except share and per share data)
|
| THREE MONTHS ENDED |
|
| NINE MONTHS ENDED |
|
| THREE MONTHS ENDED |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
REVENUE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
License and collaboration revenue |
| $ | 1,689 |
|
| $ | — |
|
| $ | 3,437 |
|
| $ | — |
|
| $ | 3,820 |
|
| $ | — |
|
Grant revenue |
|
| 43 |
|
|
| 362 |
|
|
| 320 |
|
|
| 1,180 |
|
|
| — |
|
|
| 257 |
|
Total revenue |
|
| 1,732 |
|
|
| 362 |
|
|
| 3,757 |
|
|
| 1,180 |
|
|
| 3,820 |
|
|
| 257 |
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Research and development |
|
| 29,944 |
|
|
| 22,661 |
|
|
| 101,376 |
|
|
| 62,081 |
|
|
| 23,168 |
|
|
| 27,281 |
|
General and administrative |
|
| 8,025 |
|
|
| 5,112 |
|
|
| 27,357 |
|
|
| 13,943 |
|
|
| 8,944 |
|
|
| 9,755 |
|
Total operating expenses |
|
| 37,969 |
|
|
| 27,773 |
|
|
| 128,733 |
|
|
| 76,024 |
|
|
| 32,112 |
|
|
| 37,036 |
|
LOSS FROM OPERATIONS |
|
| (36,237 | ) |
|
| (27,411 | ) |
|
| (124,976 | ) |
|
| (74,844 | ) |
|
| (28,292 | ) |
|
| (36,779 | ) |
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Interest income |
|
| 240 |
|
|
| 4 |
|
|
| 301 |
|
|
| 20 |
| ||||||||
Interest and other expense |
|
| (1,069 | ) |
|
| (631 | ) |
|
| (3,480 | ) |
|
| (1,471 | ) | ||||||||
OTHER INCOME (EXPENSE): |
|
|
|
|
|
| ||||||||||||||||||
Interest and other income (expense), net |
|
| 603 |
|
|
| 4 |
| ||||||||||||||||
Interest expense |
|
| (1,007 | ) |
|
| (1,073 | ) | ||||||||||||||||
Change in fair value of warrant liabilities |
|
| — |
|
|
| (1,143 | ) |
|
| 956 |
|
|
| (1,343 | ) |
|
| 227 |
|
|
| (359 | ) |
Total other income (expense), net |
|
| (829 | ) |
|
| (1,770 | ) |
|
| (2,223 | ) |
|
| (2,794 | ) |
|
| (177 | ) |
|
| (1,428 | ) |
Net loss before income tax |
|
| (37,066 | ) |
|
| (29,181 | ) |
|
| (127,199 | ) |
|
| (77,638 | ) | ||||||||
Income tax expense |
|
| 1,092 |
|
|
| — |
|
|
| 1,092 |
|
|
| — |
| ||||||||
Net loss |
| $ | (38,158 | ) |
| $ | (29,181 | ) |
| $ | (128,291 | ) |
| $ | (77,638 | ) |
| $ | (28,469 | ) |
| $ | (38,207 | ) |
Net loss per share — basic and diluted |
| $ | (0.27 | ) |
| $ | (0.30 | ) |
| $ | (1.02 | ) |
| $ | (0.81 | ) |
| $ | (0.19 | ) |
| $ | (0.34 | ) |
Weighted-average common stock outstanding — basic and diluted |
|
| 139,061,906 |
|
|
| 96,424,182 |
|
|
| 125,385,422 |
|
|
| 96,351,247 |
|
|
| 151,614,008 |
|
|
| 113,558,404 |
|
See notes to condensed consolidated financial statements.
45
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited)
(In thousands, except share and per share data)
|
| $0.001 PAR VALUE |
|
| COMMON STOCK |
|
| ADDITIONAL |
|
| ACCUMULATED |
|
| TOTAL |
|
| COMMON STOCK |
|
| ADDITIONAL |
|
| ACCUMULATED |
|
| TOTAL |
| |||||||||||||||||||||
|
| SHARES |
|
| AMOUNT |
|
| SHARES |
|
| AMOUNT |
|
| CAPITAL |
|
| DEFICIT |
|
| EQUITY (DEFICIT) |
|
| SHARES |
|
| AMOUNT |
|
| CAPITAL |
|
| DEFICIT |
|
| EQUITY |
| ||||||||||||
Balance at January 1, 2022 |
|
| 134,972,944 |
|
| $ | 218,790 |
|
|
| 3,663,894 |
|
| $ | 4 |
|
| $ | 4,800 |
|
| $ | (253,569 | ) |
| $ | (248,765 | ) | ||||||||||||||||||||
Retroactive application of business combination |
|
| (134,972,944 | ) |
|
| (218,790 | ) |
|
| 92,911,213 |
|
|
| 6 |
|
|
| 218,784 |
|
|
| - |
|
|
| 218,790 |
| ||||||||||||||||||||
Adjusted balance, beginning of period |
|
| - |
|
|
| - |
|
|
| 96,575,107 |
|
|
| 10 |
|
|
| 223,584 |
|
|
| (253,569 | ) |
|
| (29,975 | ) | ||||||||||||||||||||
Balances at January 1, 2023 |
|
| 151,587,165 |
|
| $ | 15 |
|
| $ | 468,685 |
|
| $ | (420,638 | ) |
| $ | 48,062 |
| ||||||||||||||||||||||||||||
Exercise of common stock options |
|
| 94,149 |
|
|
| — |
|
|
| 35 |
|
|
| — |
|
|
| 35 |
| ||||||||||||||||||||||||||||
Stock-based compensation expense |
|
| — |
|
|
| — |
|
|
| 2,308 |
|
|
| — |
|
|
| 2,308 |
| ||||||||||||||||||||||||||||
Net loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (28,469 | ) |
|
| (28,469 | ) | ||||||||||||||||||||||||||||
Balance at March 31, 2023 |
|
| 151,681,314 |
|
| $ | 15 |
|
| $ | 471,028 |
|
| $ | (449,107 | ) |
| $ | 21,936 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||
| COMMON STOCK |
|
| ADDITIONAL |
|
| ACCUMULATED |
|
| TOTAL |
| |||||||||||||||||||||||||||||||||||||
| SHARES |
|
| AMOUNT |
|
| CAPITAL |
|
| DEFICIT |
|
| EQUITY (DEFICIT) |
| ||||||||||||||||||||||||||||||||||
Balances at January 1, 2022 |
|
| 96,575,107 |
|
| $ | 10 |
|
| $ | 223,584 |
|
| $ | (253,569 | ) |
| $ | (29,975 | ) | ||||||||||||||||||||||||||||
Cashless exercise of Legacy GreenLight preferred stock warrants |
|
| - |
|
|
| - |
|
|
| 490,031 |
|
|
| - |
|
|
| 460 |
|
|
| - |
|
|
| 460 |
|
|
| 490,031 |
|
|
| — |
|
|
| 460 |
|
|
| — |
|
|
| 460 |
|
Cashless exercise of Legacy GreenLight common stock warrants |
|
| - |
|
|
| - |
|
|
| 170,981 |
|
|
| - |
|
|
| 1,183 |
|
|
| - |
|
|
| 1,183 |
|
|
| 170,981 |
|
|
| — |
|
|
| 1,183 |
|
|
| — |
|
|
| 1,183 |
|
Reclassification of Legacy GreenLight common stock warrants to equity |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 352 |
|
|
| - |
|
|
| 352 |
|
|
| — |
|
|
| — |
|
|
| 352 |
|
|
| — |
|
|
| 352 |
|
Conversion of convertible notes |
|
| - |
|
|
| - |
|
|
| 6,719,116 |
|
|
| 1 |
|
|
| 18,290 |
|
|
| - |
|
|
| 18,291 |
|
|
| 6,719,116 |
|
|
| 1 |
|
|
| 18,290 |
|
|
| — |
|
|
| 18,291 |
|
Conversion of convertible notes - PIPE Investors |
|
| - |
|
|
| - |
|
|
| 3,525,000 |
|
|
| - |
|
|
| 35,250 |
|
|
| - |
|
|
| 35,250 |
|
|
| 3,525,000 |
|
|
| — |
|
|
| 35,250 |
|
|
| — |
|
|
| 35,250 |
|
Business Combination transaction, net of transaction costs of $26.7 million |
|
| - |
|
|
| - |
|
|
| 15,285,374 |
|
|
| 2 |
|
|
| 72,987 |
|
|
| - |
|
|
| 72,989 |
|
|
| 15,285,374 |
|
|
| 2 |
|
|
| 72,987 |
|
|
| — |
|
|
| 72,989 |
|
Vesting of restricted stock awards |
|
| - |
|
|
| - |
|
|
| 1,567 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,567 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Exercise of common stock options |
|
| - |
|
|
| - |
|
|
| 79,055 |
|
|
| - |
|
|
| 22 |
|
|
| - |
|
|
| 22 |
|
|
| 79,055 |
|
|
| — |
|
|
| 22 |
|
|
| — |
|
|
| 22 |
|
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,187 |
|
|
| - |
|
|
| 2,187 |
|
|
| — |
|
|
| — |
|
|
| 2,187 |
|
|
| — |
|
|
| 2,187 |
|
Exercise of public warrants |
|
| - |
|
|
| - |
|
|
| 105,120 |
|
|
| - |
|
|
| 1,209 |
|
|
| - |
|
|
| 1,209 |
|
|
| 105,120 |
|
|
| — |
|
|
| 1,209 |
|
|
| — |
|
|
| 1,209 |
|
Other |
|
| - |
|
|
| - |
|
|
| 29,154 |
|
|
| - |
|
|
| 79 |
|
|
| (14 | ) |
|
| 65 |
|
|
| 29,154 |
|
|
| — |
|
|
| 79 |
|
|
| (14 | ) |
|
| 65 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (38,207 | ) |
|
| (38,207 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (38,207 | ) |
|
| (38,207 | ) |
Balance at March 31, 2022 |
|
| - |
|
|
| - |
|
|
| 122,980,505 |
|
|
| 13 |
|
|
| 355,603 |
|
|
| (291,790 | ) |
|
| 63,826 |
| ||||||||||||||||||||
Reclassification of common stock warrants to equity |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 35 |
|
|
| - |
|
|
| 35 |
| ||||||||||||||||||||
Vesting of restricted stock awards |
|
| - |
|
|
| - |
|
|
| 1,331 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| ||||||||||||||||||||
Exercise of common stock options |
|
| - |
|
|
| - |
|
|
| 681,479 |
|
|
| - |
|
|
| 314 |
|
|
| - |
|
|
| 314 |
| ||||||||||||||||||||
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 1,634 |
|
|
| - |
|
|
| 1,634 |
| ||||||||||||||||||||
Other |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (158 | ) |
|
| - |
|
|
| (158 | ) | ||||||||||||||||||||
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (51,926 | ) |
|
| (51,926 | ) | ||||||||||||||||||||
Balance at June 30, 2022 |
|
| - |
|
|
| - |
|
|
| 123,663,315 |
|
|
| 13 |
|
|
| 357,428 |
|
|
| (343,716 | ) |
|
| 13,725 |
| ||||||||||||||||||||
Vesting of restricted stock awards |
|
| - |
|
|
| - |
|
|
| 1,333 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| ||||||||||||||||||||
Common stock issued pursuant to PIPE financing, net of transactions costs of $2.3 million |
|
| - |
|
|
| - |
|
|
| 27,640,301 |
|
|
| 2 |
|
|
| 106,049 |
|
|
| - |
|
|
| 106,051 |
| ||||||||||||||||||||
Exercise of common stock options |
|
| - |
|
|
| - |
|
|
| 160,476 |
|
|
| - |
|
|
| 97 |
|
|
| - |
|
|
| 97 |
| ||||||||||||||||||||
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 2,700 |
|
|
| - |
|
|
| 2,700 |
| ||||||||||||||||||||
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (38,158 | ) |
|
| (38,158 | ) | ||||||||||||||||||||
Balance at September 30, 2022 |
|
| - |
|
| $ | - |
|
|
| 151,465,425 |
|
| $ | 15 |
|
| $ | 466,274 |
|
| $ | (381,874 | ) |
| $ | 84,415 |
| ||||||||||||||||||||
Balances at March 31, 2022 |
|
| 122,980,505 |
|
| $ | 13 |
|
| $ | 355,603 |
|
| $ | (291,790 | ) |
| $ | 63,826 |
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||||||||
See notes to condensed consolidated financial statements.
5
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) (unaudited)
(In thousands, except share and per share data)
|
| $0.001 PAR VALUE |
|
| COMMON STOCK |
|
| ADDITIONAL |
|
| ACCUMULATED |
|
| TOTAL |
| |||||||||||||
|
| SHARES |
|
| AMOUNT |
|
| SHARES |
|
| AMOUNT |
|
| CAPITAL |
|
| DEFICIT |
|
| EQUITY (DEFICIT) |
| |||||||
Balance at January 1, 2021 |
|
| 134,952,637 |
|
| $ | 218,787 |
|
| 3,252,636 |
|
| $ | 3 |
|
| $ | 2,434 |
|
| $ | (141,259 | ) |
| $ | (138,822 | ) | |
Retroactive application of business combination |
|
| (134,952,637 | ) |
|
| (218,787 | ) |
|
| 93,031,647 |
|
|
| 7 |
|
|
| 218,780 |
|
|
| - |
|
|
| 218,787 |
|
Adjusted balance, January 1, 2021 |
|
| - |
|
|
| - |
|
|
| 96,284,283 |
|
|
| 10 |
|
|
| 221,214 |
|
|
| (141,259 | ) |
|
| 79,965 |
|
Vesting of restricted stock awards |
| - |
|
| - |
|
|
| 7,271 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| ||
Stock-based compensation expense |
| - |
|
| - |
|
| - |
|
|
| - |
|
|
| 348 |
|
| - |
|
|
| 348 |
| ||||
Exercise of common stock options |
| - |
|
| - |
|
|
| 24,582 |
|
|
| - |
|
|
| 6 |
|
| - |
|
|
| 6 |
| |||
Net loss |
| - |
|
| - |
|
| - |
|
|
| - |
|
| - |
|
|
| (21,283 | ) |
|
| (21,283 | ) | ||||
Balance at March 31, 2021 |
|
| - |
|
| - |
|
|
| 96,316,136 |
|
|
| 10 |
|
|
| 221,568 |
|
|
| (162,542 | ) |
|
| 59,036 |
| |
Vesting of restricted stock awards |
| - |
|
| - |
|
|
| 6,171 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
| ||
Exercise of common stock options |
|
| - |
|
|
| - |
|
|
| 53,398 |
|
|
| - |
|
|
| 24 |
|
|
| - |
|
|
| 24 |
|
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 407 |
|
|
| - |
|
|
| 407 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (27,174 | ) |
|
| (27,174 | ) |
Balance at June 30, 2021 |
|
| - |
|
| - |
|
|
| 96,375,705 |
|
|
| 10 |
|
|
| 221,999 |
|
|
| (189,716 | ) |
|
| 32,293 |
| |
Vesting of restricted stock awards |
|
| - |
|
|
| - |
|
|
| 26,434 |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Warrants issued in connection with debt |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 231 |
|
|
| - |
|
|
| 231 |
|
Exercise of common stock options |
|
| - |
|
|
| - |
|
|
| 102,238 |
|
|
| - |
|
|
| 75 |
|
|
| - |
|
|
| 75 |
|
Stock-based compensation expense |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| 537 |
|
|
| - |
|
|
| 537 |
|
Net loss |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| (29,181 | ) |
|
| (29,181 | ) |
Balance at September 30, 2021 |
|
| - |
|
| $ | - |
|
|
| 96,504,377 |
|
| $ | 10 |
|
| $ | 222,842 |
|
| $ | (218,897 | ) |
| $ | 3,955 |
|
See notes to condensed consolidated financial statements.
6
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
|
| NINE MONTHS ENDED SEPTEMBER 30, |
|
| THREE MONTHS ENDED MARCH 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (in thousands) |
|
| (in thousands) |
| ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | (128,291 | ) |
| $ | (77,638 | ) |
| $ | (28,469 | ) |
| $ | (38,207 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation and amortization expense |
|
| 5,877 |
|
|
| 3,675 |
|
|
| 2,334 |
|
|
| 2,096 |
|
Loss (gain) on disposal of property and equipment |
|
| 477 |
|
|
| (5 | ) | ||||||||
Gain on disposal of property and equipment |
|
| — |
|
|
| (9 | ) | ||||||||
Stock-based compensation expense |
|
| 6,521 |
|
|
| 1,292 |
|
|
| 2,308 |
|
|
| 2,187 |
|
Non-cash interest expense |
|
| — |
|
|
| 738 |
|
|
| 109 |
|
|
| 335 |
|
Change in fair value of warrant liabilities |
|
| (956 | ) |
|
| 1,343 |
|
|
| (227 | ) |
|
| 359 |
|
Amortization of deferred finance costs |
|
| 701 |
|
|
| — |
| ||||||||
Change in operating lease right of use asset |
|
| 1,031 |
|
|
| 1,631 |
| ||||||||
Changes in operating assets and liabilities |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Prepaid expenses and other assets |
|
| (9,039 | ) |
|
| (919 | ) |
|
| (1,842 | ) |
|
| (6,259 | ) |
Accounts receivable |
|
| — |
|
|
| (5,000 | ) | ||||||||
Accounts payable |
|
| (4,002 | ) |
|
| 1,276 |
|
|
| 233 |
|
|
| (1,952 | ) |
Accrued expenses and other liabilities |
|
| 8,192 |
|
|
| 3,349 |
| ||||||||
Deferred rent |
|
| 1,978 |
|
|
| (68 | ) | ||||||||
Accrued expenses, lease liabilities and other liabilities |
|
| (2,718 | ) |
|
| (9,435 | ) | ||||||||
Deferred revenue |
|
| 6,400 |
|
|
| (284 | ) |
|
| (3,819 | ) |
|
| 4,743 |
|
Net cash used in operating activities |
|
| (112,142 | ) |
|
| (67,241 | ) |
|
| (31,060 | ) |
|
| (49,511 | ) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from sale of property and equipment |
|
| 37 |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
Purchases of property and equipment |
|
| (22,944 | ) |
|
| (11,362 | ) |
|
| (1,608 | ) |
|
| (287 | ) |
Net cash used in investing activities |
|
| (22,907 | ) |
|
| (11,362 | ) |
|
| (1,608 | ) |
|
| (250 | ) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Proceeds from business combination, net of transaction costs |
|
| 78,543 |
|
|
| — |
|
|
| — |
|
|
| 80,491 |
|
Proceeds from issuance of convertible debt - PIPE Investors |
|
| 21,750 |
|
|
| — |
|
|
| — |
|
|
| 21,750 |
|
Proceeds from the issuance of common stock pursuant to PIPE Financing, net of transaction costs |
|
| 106,339 |
|
|
| — |
| ||||||||
Proceeds from stock option exercises |
|
| 433 |
|
|
| 105 |
|
|
| 35 |
|
|
| 22 |
|
Proceeds from secured debt, net of issuance costs and security deposits |
|
| — |
|
|
| 20,321 |
| ||||||||
Principal payments on debt |
|
| (4,630 | ) |
|
| (1,558 | ) |
|
| (2,941 | ) |
|
| (815 | ) |
Exercise of public warrants |
|
| 1,209 |
|
|
| — |
|
|
| — |
|
|
| 1,209 |
|
Repayments of tenant improvement allowance |
|
| (230 | ) |
|
| — |
| ||||||||
Payments of deferred offering costs |
|
| — |
|
|
| (492 | ) | ||||||||
Principal payments on capital lease obligations |
|
| (499 | ) |
|
| — |
| ||||||||
Principal payments on finance lease obligations |
|
| (83 | ) |
|
| (160 | ) | ||||||||
Net cash provided by financing activities |
|
| 202,915 |
|
|
| 18,376 |
|
|
| (2,989 | ) |
|
| 102,497 |
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
| 67,866 |
|
|
| (60,227 | ) |
|
| (35,657 | ) |
|
| 52,736 |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
| 31,808 |
|
|
| 95,148 |
|
|
| 69,418 |
|
|
| 31,808 |
|
Cash, cash equivalents and restricted cash, end of period |
| $ | 99,674 |
|
| $ | 34,921 |
|
| $ | 33,761 |
|
| $ | 84,544 |
|
SUPPLEMENTAL DISCLOSURE OF CASH-FLOW INFORMATION |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash paid for interest |
| $ | 2,041 |
|
| $ | 551 |
|
| $ | 744 |
|
| $ | 620 |
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Property and equipment included in accrued expenses and accounts payable |
| $ | 147 |
|
| $ | 1,296 |
|
| $ | 396 |
|
| $ | 1,313 |
|
Property and equipment acquired through capital lease |
| $ | 71 |
|
| $ | — |
| ||||||||
Conversion of convertible debt to equity |
| $ | 53,541 |
|
| $ | — |
|
| $ | — |
|
| $ | 53,541 |
|
Legacy GreenLight cashless warrant exercises |
| $ | 1,643 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,643 |
|
Warrant liabilities assumed in the Business Combination |
| $ | 1,341 |
|
| $ | — |
|
| $ | — |
|
| $ | 1,341 |
|
Debt issuance costs included in accrued expenses and accounts payable |
| $ | — |
|
| $ | 141 |
| ||||||||
Deferred financing costs in accrued expenses and accounts payable |
| $ | 288 |
|
| $ | 2,097 |
|
| $ | — |
|
| $ | 1,948 |
|
Non-cash equipment financing issuance costs |
| $ | — |
|
| $ | 370 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
| NINE MONTHS ENDED SEPTEMBER 30, |
|
| THREE MONTHS ENDED MARCH 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Reconciliation of cash, cash equivalents and restricted cash |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 98,353 |
|
| $ | 34,754 |
|
| $ | 32,350 |
|
| $ | 83,223 |
|
Restricted cash |
|
| 1,321 |
|
|
| 167 |
|
|
| 1,411 |
|
|
| 1,321 |
|
Total cash, cash equivalents and restricted cash |
| $ | 99,674 |
|
| $ | 34,921 |
|
| $ | 33,761 |
|
| $ | 84,544 |
|
See notes to condensed consolidated financial statements.
7
GREENLIGHT BIOSCIENCES HOLDINGS, PBC
Notes to Unaudited Condensed Consolidated Financial Statements
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Organization
GreenLight Biosciences Holdings, PBC (formerly known as Environmental Impact Acquisition Corp.) (“New GreenLight,” “ENVI” or the “Company”) was incorporated in Delaware on July 2, 2020. The Company has developed technology to create high-performing, natural ribonucleic acid (“RNA”) products to address global sustainability challenges and promote healthier plants, foods, and people.
The Company is located and headquartered in Medford,Lexington, Massachusetts. The Company has additional lab and office space in Durham, North Carolina, additional lab and office space in Woburn, Massachusetts, additional lab and office space in Lexington,Medford, Massachusetts, a research station in Spain, and a manufacturing facility in Rochester, New York. The Company’s revenues and expenses are primarily derived from operations in the United States. Since its inception, the Company has devoted substantially all of its efforts to research and development activities, including the development of the Company’s cell-free RNA production process. The Company does not currently generate revenue from sales of any products.
On August 9, 2021, ENVI entered into the business combination agreement (“Business Combination Agreement”) with its wholly owned subsidiary, Honey Bee Merger Sub, Inc. (“Merger Sub”) and GreenLight Biosciences, Inc. ("Greenlight"), which was incorporated in Delaware in 2008. Pursuant to the Business Combination Agreement, on February 2, 2022 (the "Closing Date"), Merger Sub merged with and into GreenLight (the “Merger”), with GreenLight surviving the Merger as a wholly owned subsidiary of ENVI (the Merger, together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”). In connection with the consummation of the Merger on the Closing Date, ENVI changed its name to GreenLight Biosciences Holdings, PBC (“New GreenLight”) and became a public benefit corporation. References to “Legacy GreenLight” refer to GreenLight Biosciences, Inc. prior to the consummation of the Business Combination.
Although New GreenLight was the legal acquirer of GreenLight in the Business Combination, GreenLight is deemed to be the accounting acquirer, and the historical financial statements of GreenLight became the basis for the historical financial statements of New GreenLight upon the closing of the Business Combination. New GreenLight, together with its wholly owned subsidiaries, GreenLight Biosciences, Inc., GreenLight Pandemic Response, Inc. (“GLPRI”), GreenLight Security Corporation (“GLSC”), and GreenLight Biosciences España, S.L. ("GLESP") is referred to on a consolidated basis as the “Company”.
Upon the closing of the Business Combination, each share of Legacy GreenLight stock was exchanged for shares of Class A common stock in an amount determined by application of the exchange ratio of approximately 0.6656 (the “Exchange Ratio”). In connection with the Business Combination, the Company entered into subscription agreements with subscribers who agreed to purchase an aggregate of 12,425,000 shares of Class A common stock for a purchase price of $124.3 million (the “PIPE”), all of which were issued on the effective date. Of the total $124.3 million of PIPE proceeds, $13.5 million was received in December 2021 and $21.8 million was received in January 2022 in the form of convertible notes. Upon the closing of the Business Combination, these convertible notes converted into Class A common stock.
In total, the Company received proceeds of $136.4 million inclusive of the PIPE and after redemptions which provided the Company with cash of $109.7 million, which is net of transaction costs of $26.7 million consisting of equity underwriting, legal, and other professional fees, all of which were recorded to additional paid‐in capital as a reduction of proceeds. Further, the Company assumed the outstanding Public Warrants to purchase 10,350,000 shares of the Company’s common stock at $11.50 per share and the outstanding Private Placement Warrants to purchase 2,062,500 shares of the Company’s Class A common stock at $11.50 per share. The Public and Private Placement Warrants expire five years after the completion of the Business Combination. Both the Private Placement Warrants and Public Warrants are further described in the Business Combination Agreement.
Legacy GreenLight was deemed to be the accounting acquirer in the Business Combination. The determination was primarily based on Legacy GreenLight's stockholders having a majority of the voting power in the combined Company, Legacy GreenLight having the ability to appoint a majority of the Board of Directors of the Company, Legacy GreenLight’s existing management team comprising the senior management of the combined Company, Legacy GreenLight comprising the ongoing operations of the combined Company and the combined Company assuming GreenLight’s name. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy GreenLight issuing stock for the net assets of ENVI, accompanied by a recapitalization. The net assets of ENVI are stated at historical cost, with no goodwill or other intangible assets recorded.
Futhermore, the historical financial statements of Legacy GreenLight became the historical financial statements of the combined Company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of Legacy GreenLight prior to the Business Combination; (ii) the combined results of ENVI and Legacy GreenLight following the close of the Business Combination; (iii) the assets and liabilities of Legacy GreenLight at their historical cost;
8
and (iv) the Legacy GreenLight’s equity structure for all periods presented, as affected by the recapitalization presentation after completion of the Business Combination.
In accordance with guidance applicable to these circumstances, the equity structure has been restated in all comparable periods up to February 2, 2022, to reflect the number of shares of the Company’s common stock, $0.0001 par value per share, issued to Legacy GreenLight’s stockholders in connection with the Business Combination. As such, the shares and corresponding capital amounts and earnings per share related to Legacy GreenLight’s outstanding convertible preferred stock and Legacy GreenLight's common stock prior to the Business Combination have been retroactively restated as shares reflecting the exchange ratio of 0.6656 established in the Business Combination. Legacy GreenLight’s convertible preferred stock previously classified as temporary equity was retroactively adjusted, converted into common stock and reclassified to permanent equity as a result of the reverse recapitalization. See Note 3 - Business Combination for further details of the Business Combination.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") and applicable rules and regulations of the U.S. Securities and Exchange Commission ("SEC") regarding interim financial reporting. Any reference in these notes to applicable guidance is meant to refer to the authoritative United States generally accepted accounting principles as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”). All intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated balance sheet as of December 31, 2021 included herein, was derived from the audited annual consolidated financial statements as of that date, but does not include all disclosures including certain notes required by GAAP on an annual reporting basis and also give effect to the reverse recapitalization described above. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been condensed consolidated or omitted pursuant to such rules and regulations. The year-end condensed consolidated balance sheet data presented for comparative purposes was derived from our audited financial statements but does not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements as of December 31, 2021 and 2020 and the years then ended, and the related notes thereto, which are included as Exhibit 99.1 to the Company’s Currentour Annual Report on Form 8-K, filed with10-K for the SEC on Marchyear ended December 31, 2022.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, and cash flows for the interim periods presented. The results for the three and nine months ended September 30, 2022March 31, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter, the fiscal year ending December 31, 2022,2023, or any other period.
Liquidity and Going Concern
Since its inception, the Company has devoted substantially all of its resources to building its platform and advancing development of its portfolio of programs, establishing, and protecting its intellectual property, conducting research and development activities, organizing, and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, technical risks associated with the successful research, development and manufacturing of product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Current and future programs will require significant research and development efforts, including extensive field trials, preclinical and clinical trials, and regulatory approvals prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure. Even if the Company’s development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.
As presented in the financial statements, the Company has incurred substantial losses since inception and incurred net losses of approximately $128.328.5 million and $77.638.2 million for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively. As of September 30, 2022,March 31, 2023, the Company had an accumulated deficit of approximately $381.9449.1 million and cash and cash equivalents of approximately $98.432.4 million. Cash used in operating activities totaled approximately $112.131.1 million and $67.249.5 million for ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future.
On August 11, 2022, the Company entered into Securities Subscription Agreements (the “Subscription Agreements”) with certain accredited investors (collectively, the “Purchasers”), providing for the sale by the Company of 27,640,301 shares (the “Shares”) of its common stock (the “Common Stock”) at a purchase price of $3.92 per share, in a private placement (the “Private Placement”). The Shares were issued (the “Closing”) simultaneously with the execution and delivery of the Subscription Agreements.
9
As of the issuance date of the Company's unaudited interim condensed consolidated financial statements as of September 30, 2022March 31, 2023 and for the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, the Company estimates that its existing cash and cash equivalents of approximately $98.432.4 million as of September 30, 2022March 31, 2023 will last through the second quarter of 2023 but will not be sufficient to fund its operations for twelve months from the date these interim financial statements are issued. The Company is evaluating a range of opportunities to extend its cash runway, including management of program spending, platform licensing collaborations and potential financing activity. See Note 17 - Subsequent Events for information regarding the restructuring plan announced by the Company on October 12, 2022 to extend its cash runway.
The Company will not generate any revenue from product sales unless and until it successfully completes development and obtains regulatory approval for one or more of its product candidates. If the Company obtains regulatory approval for any of its product
9
candidates, it expects to incur significant expenses related to developing its internal commercialization capability to support product sales, marketing, and distribution.
As a result, the Company will need substantial additional funding to support its operating activities as it advances its product candidates through development, seeks regulatory approval and prepares for and, if any of its product candidates are approved, proceeds to commercialization. Until such time as the Company can generate significant revenue from product sales, if ever, the Company expects to finance its operating activities through a combination of equity offerings, debt financings, and license and development agreements in connection with any future collaborations. Adequate funding may not be available to the Company on acceptable terms, or at all. As described below in Item 2 of this Form 10-Q, the Company received a non-binding indication of interest from Fall Line Endurance Fund, L.P. to acquire all of the outstanding capital stock of the Company. The terms of any potential agreement between GreenLight and Fall Line would be contingent on certain conditions, including completion of due diligence review and negotiation of definitive transaction documents, as well as certain to be identified Company stockholders agreeing to roll their existing equity in connection with the Proposed Transaction. GreenLight’s Board of Directors through a Special Committee thereof is carefully evaluating Fall Line’s indication of interest within the context of the ongoing review of various alternatives and in consultation with its retained financial and legal advisors. No assurance can be given that a definitive transaction with respect to Fall Line’s indication of interest or any other potential transaction will eventually be consummated.
If the Company is unable to obtain funding or if the funding it does obtain is insufficient to support its current operational plans, the Company will be forced to delay, reduce, or eliminate some or all of its research and development programs, product portfolio expansion or commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. In the event the Company is unable to secure additional outside capital to fund our obligations when they become due over the next 12 months, the Company will be required to seek other strategic alternatives, which may include, among others, scaling back or discontinuing certain or all operations to reduce costs, closure of operations, sale of certain of our assets, a sale of the entire company to strategic or financial investors, and/or seeking protection under the U.S. bankruptcy laws.
Although management continues to pursue these plans to raise additional funding, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
Based on its recurring losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and need to raise additional capital to finance its future operations, the Company has concluded that there is substantial doubt about its ability to continue as a going concern within one year after the issuance date of these condensed consolidated financial statements.
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments that might result from the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Emerging Growth Company and Smaller Reporting Company Status
FollowingThe Company’s significant accounting policies are described in Note 2 to the Business Combination, the Company qualifies as an emerging growth company (‘‘EGC’’) as defined in the Jumpstart our Business Startups (‘‘JOBS’’) Act. The JOBS Act permits companies with EGC status to take advantage of an extended transition period to comply with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company intends to use this extended transition period to enable the Company to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date the Company (i) is no longer an EGC or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, the Company's condensedCompany’s consolidated financial statements may not be comparable to companies that comply with the new or revised accounting standards as of public company effective dates.
In addition, the Company intend to rely on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forthincluded in the JOBS Act, as an EGC,2022 Form 10-K. There have been no material changes to the Company is not required to, among other things: (i) provide an auditor’s attestation report on our system of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; (ii) provide all of the compensation disclosures that may be required of non-EGCs under the Dodd-Frank Wall Street Reform and Consumer Protection Act; (iii) comply with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor’s report on the consolidated financial statements (auditor discussion and analysis); and (iv) disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer’s compensation to median employee compensation.
The Company will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of ENVI’s initial public offering, (b) in which the Company has total annual gross revenue of at least $1.1
10
billion, or (c) in which the Company is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700.0 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which the Company has issued more than $1.0 billion in non-convertible debt securitiesCompany’s significant accounting policies during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.three months ended March 31, 2023.
The Company is also a “smaller reporting company” as defined in the Exchange Act. The Company may continue to be a smaller reporting company even after the Company is no longer an emerging growth company. The Company may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of the Company's voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of the Company's second fiscal quarter, or the Company's annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of the Company's voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of the Company's second fiscal quarter.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities as of and during the reporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, the accrual of research and development costs, acquisitionthe fair values of in-process research and development assets,common stock (as defined below), useful lives assigned to property and equipment, and the fair value of warrant liabilities. The Company assesses estimates on an ongoing basis; however, actual results could materially differ from those estimates.
Operating Segments
Operating segments are identified as components of an enterprise about which separate discrete financial information is made available for evaluation by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The CODM is the Company’s Chief Executive Officer. The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Investments qualifying as cash equivalents primarily consist of money market funds. The Company’s cash and cash equivalents in the condensed consolidated balance sheets at September 30, 2022 and December 31, 2021, were approximately $98.4 million and $31.4 million, respectively.
Restricted Cash
The Company maintains letters of credit in conjunction with the Company’s lease agreements. As of September 30, 2022 and December 31, 2021, the underlying cash balance securing these letters of credit of approximately $1.3 million and $0.4 million, respectively, was classified as a noncurrent asset in the condensed consolidated balance sheets based on the terms of the respective lease agreements.
Accounts Receivable
We had no accounts receivable as of September 30, 2022. When relevant, we extend credit to a customer based on our evaluation of the customer’s financial condition. Any accounts receivable are stated at amounts due net of applicable prompt pay discounts and other adjustments. When relevant, we assess the need for an allowance for doubtful accounts by considering a number of factors, including the length of time trade accounts receivable are past due and the customer’s ability to pay its obligation.
Concentrations of Credit Risk
10
The Company has no significant off-balance sheet credit risk. Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash, cash equivalents, restricted cash and when relevant, accounts receivable. The Company maintains deposits in accredited financial institutions in excess of federally insured limits. The Company deposits its cash and cash equivalents in financial institutions that it believes have high credit quality, has not experienced any losses on such accounts and does not believe it is exposed to any unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
11
Concentration of credit risk with respect to prior accounts receivable wasis limited to customers with whom the Company hadhas entered into collaboration agreements. The
On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and SVB was subsequently transferred into a new entity, Silicon Valley Bridge Bank, N.A (“SVB Bridge Bank”). On March 12, 2023, the U.S. Treasury Department, the Federal Reserve and the FDIC jointly announced enabling actions that fully protect all SVB depositors’ insured and uninsured deposits, and that such depositors would have access to all of their funds starting March 13, 2023. On March 13, 2023, the Company was able to access its full deposits with SVB Bridge Bank. On March 27, 2023, First Citizens Bank & Trust Company assumed all of SVB's deposits and loans. In light of the foregoing, the Company does not believe that it has exposure to loss as a result of SVB's receivership. As of March 31, 2023, the Company held $18.6 million in SVB and has not written offexperienced any accounts receivable to date. To control credit risk, when relevant, the Company performs regular credit evaluationslosses on its deposits of its customers’ financial condition.cash, cash equivalents and restricted cash.
Fair Value MeasurementsLeases
ASC 820, Fair Value MeasurementsThe Company determines if an arrangement is a lease or contains a lease at inception. Our lease agreements are generally for office and Disclosures (“ASC 820”), establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs)laboratory facilities under operating leases and the Company’s own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liabilitycertain equipment under financing leases, and are developed based on the best information available in the circumstances.
ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:
Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degreewhether such agreements contain leases generally does not require significant estimates or judgments. Our leases may also contain non-lease components such as payments of judgment exercised bymaintenance, utilities, and taxes, which we have elected to account for separately, as these amounts are readily determinable. For leases with terms greater than 12 months, the Company in determining fairrecords a related right-of-use (“ROU”) asset and lease liability at the present value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Property and Equipment
Property and equipment are recorded at cost and depreciatedlease payments over the estimated useful lives ofterm, discounted using our incremental borrowing rate (“IBR”) over the related assets usinglease term (or, if readily determinable, the straight-line method. Maintenance and repairs to an asset that do not improve or extend its life are expensedrate implicit in the period incurred. Expenditures made to improve lease). Many leases include fixed rental escalation clauses, renewal options and/or extendtermination options that are factored into the lifedetermination of property and equipment are capitalized. Leasehold improvements are depreciated over the shorter of the useful life of the improvements or the remaining term of the associated lease. lease payments when appropriate. The estimated useful lives of property and equipment are as follows:
| ||
|
| |
|
| |
|
| |
|
| |
|
|
Property and equipment subject to a capital lease are depreciated over the shorter of the useful life or the term of the lease. Construction in progressright-of-use asset is statedmeasured at cost, which includes the initial measurement of the lease liability and initial direct costs attributable to the setup or construction of the related asset. When assets are retired or otherwise disposed of, the assetsincurred and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is reflected in the Company’s statement of operations.
Internal-Use Software and Cloud Computing Arrangements
The Company capitalizes certain implementation costs for internal-use software incurred in a cloud computing arrangement that is a service contract in accordance with ASC Topic 350, Intangibles - Goodwill and Other, ("ASC 350"). For such cloud computing service contracts, the Company capitalizes certain implementation costs such as the configuration, coding and customization of the software. Capitalizable cloud computing arrangement costs are generally consistent with those incurred during the application development stage for internal-use software, however, these costs are capitalized as other assets in the Company’s condensed consolidated balance sheets.excludes lease incentives.
12
As of September 30, 2022, the Company capitalized implementationThe lease term used to measure right-of-use lease assets and lease liabilities may include renewal options which are deemed reasonably certain to be exercised. Operating lease costs of approximately $0.4 million. There were no implementation costs capitalized as of December 31, 2021.
The Company amortizes these costsare recognized on a straight-line basis over the estimated useful life of the software, which is three years, beginning when the asset is substantially ready for use. There was no amortization expense recorded for the three and nine months ended September 30, 2022 as the asset was not substantially ready for use. The amortization of capitalized software development costs is reflected in general and administrative expenses.
Acquired In-process Research and Development
The Company measures and recognizes acquisitions that are not deemed to be business combinations as acquisitions of assets based on the cost to acquire the assets, which includes transaction costs, and the consideration is allocated to the items acquired based on a relative fair value methodology. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire in-process research and development with no alternative future use is charged to research and development expense at the acquisition date. At the time of acquisition, the Company determines if a transaction should be accounted for as a business combination or acquisition of assets.
Impairment of Long-lived Assets
The Company evaluates its long-lived assets, which consist primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Such events and circumstances include, but are not limited to, significant decreases in the market value of an asset, adverse changes in the extent or manner in which the asset is being used, or significant changes in business climate. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the nine months ended September 30, 2022 and 2021, no impairment indicators were identified and no impairments were recorded.
Warrants
The Company applies relevant accounting guidance for warrants to purchase the Company’s stock based on the nature of the relationship with the counterparty. For warrants issued to investors or lenders in exchange for cash or other financial assets, the Company follows guidance issued within ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), and ASC 815, Derivatives and Hedging (“ASC 815”), to assist in the determination of whether the warrants should be classified as liabilities or equity. Warrants that are determined to require liability classification are measured at fair value upon issuance and are subsequently remeasured to their then fair value at each subsequent reporting period with changes in fair value recorded in current earnings. Warrants that are determined to require equity classification are measured at fair value upon issuance and are not subsequently remeasured unless they are required to be reclassified.
For warrants issued to nonemployees for goods or services, or to customers as non-cash consideration, the Company follows guidance issued within ASC 718, Compensation – Stock Compensation (“ASC 718”), to determine whether the share-basedlease term. Variable lease payments are equity or liability classified. Such warrants are measured at fair value on the grant date. The related expense or reduction in transaction price is recognized in the same period and in the same manner as if the Company had paid cash for the goods or services, or in the same manner that transfer of control of the related performance obligations occurs.
Contract Revenue
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), which provides a five-step model for recognizing revenue from contracts with customers as follows:
13
Under ASC 606, an entity recognizes revenue when or as its customer obtains control of distinct promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services.
Our customer arrangements primarily consist of a license, rights to our intellectual property, and research and developments services. Performance obligations are promises in a contract to transfer a distinct good or service to the customer and are considered distinct when (i) the customer can benefit from the good or service on its own or together with other readily available resources and (ii) the promised good or service is separately identifiable from other promises in the contract. In assessing whether promised goods or services are distinct, we consider factors such as the stage of development of the underlying intellectual property, the capabilities of the customer to develop the intellectual property on its own, or whether the required expertise is readily available and whether the goods or services are integral or dependent to other goods or services in the contract.
The Company estimates the transaction price based on the amount expected to be received for transferring the promised goods or services in the contract. The consideration may include fixed consideration or variable consideration. At the inception of each arrangement that includes variable consideration, the Company evaluates the amount of potential payments and the likelihood that the payments will be received. The Company utilizes either the most likely amount method or expected amount method to estimate the amount expected to be received based on which method best predicts the amount expected to be received. The amount of variable consideration, which is included in the transaction price, may be constrained and is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized will not occur in a future period when the variability is resolved.
For revenue related to sales-based royalties received from licensees, including milestone payments based on the level of sales, where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
The Company allocates the transaction price based on the estimated stand-alone selling price of each of the performance obligations and develops assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in a contract with a customer. The Company utilizes key assumptions to determine the stand-alone selling price for service obligations, which may include other comparable transactions, pricing considered in negotiating the transaction, and the estimated costs. Any variable consideration is allocated specifically to one or more performance obligations in a contract when the terms of the variable consideration relate to the satisfaction of the performance obligation and the resulting amounts allocated are consistent with the amounts we would expect to receive for the satisfaction of each performance obligation.
The consideration allocated to each performance obligation is recognized as revenue when control is transferred for the related goods or services, which is either over time or at a point in time. Revenue is recognized over time if either (i) the customer simultaneously receive and consumes the benefits provided by the entity’s performance, (ii) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (iii) the entity’s performance does not create an asset with an alternative use to the Company and the Company has an enforceable right to payment for performance completed to date. If the entity does not satisfy a performance obligation over time, the related performance obligation is satisfied at a point in time by transferring the control of a promised good or service to the customer.
For contracts that include a license of intellectual property (“IP”), the Company applies judgment to determine if the license of IP is distinct from other promises in the contract. License of IP that are determined to be distinct from other promises in the contract are recognized as revenue at a point in time when the license of IP is transferred to the customer and the customer can use and benefit from the license. For licenses of IP that are combined with other promises in a contract, the Company uses judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. Determining the revenue recognition of a license of IP requires significant judgment and is discussed further in for the Company’s license and collaboration agreements in Note 4, License Agreement.
At the inception of a contract that includes development or regulatory milestone payment, the Company evaluates the probability of reaching the milestones and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable a significant reversal of revenue would not occur in the future, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as milestone payments for regulatory approvals, are not considered probable of being achieve until those approvals are received. Therefore, related revenue associated with the milestone payment is constrained as management is unable to assert that a significant reversal or revenue would not be possible. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development and regulatory milestone payments and any constraints applied, and if necessary, adjusts its estimate of the overall transaction price. Any such
14
adjustments are generally recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment. Development or regulatory milestone payments are allocated either among the various performance obligations included in a contract on a relative standalone selling price basis, or to one or more specific performance obligations to which the milestone payment primarily relates.
For contracts that include commercial milestone payments, which are based on the achievement of future sales, and sales-based royalties, if the license is determined to be the predominant item to which the commercial milestones and royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the milestone or royalty has been allocated has been satisfied (or partially satisfied).
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates Foundation to advance research in in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and/or durable suppression of HIV in developing countries. The grant agreement with the Bill & Melinda Gates foundation provides for payments for reimbursed costs, which include general and administrative costs. As we are performing services under the agreement that are consistent with the Company’s ongoing central activities and we have determined that we are the principal in the agreement, we recognize grant revenue as we perform services under this agreement when the funding is committed, which occurs as underlying costs are incurred. Revenues and related expenses are presented gross in the condensed consolidated statements of operations as we have determined that we are the primary obligor under the agreement relative to the research and development services we perform as the lead technical expert.
Deferred Revenue
Amounts received prior to satisfying the revenue recognition criteria are recorded as deferred revenue in the Company’s condensed consolidated balance sheets. If the related performance obligation is expected to be satisfied within the next twelve months, the related deferred revenue will be classified in current liabilities.
Deferred Financing Costs
The incremental cost, including the fair value of warrants, directly associated with obtaining debt financing is capitalized as deferred financing costs upon the issuance of the debt and amortized over the term of the related debt agreement using the effective-interest method with such amortized amounts included as a component of interest expense in the condensed consolidated statement of operations. Unamortized deferred financing costs are presented on the condensed consolidated balance sheets as a direct deduction from the carrying amount of the related debt obligation.
Research and Development Costs
Research and development expenses consist primarily of costs related to discovery and research and development of products, including personnel expenses, stock-based compensation expense, allocated facility-related and depreciation expenses, third-party license fees, and external costs of outside vendors engaged to conduct field trials and clinical development activities. The Company records accruals for estimated costs relating to our field trials, preclinical studies, and manufacturing development. A portion of our field trials, preclinical studies, and manufacturing development activities are conducted by third-party service providers, including contract research organizations and contract manufacturing organizations. The financial terms of these contracts may result in payments that do not match the periods over which materials or services are provided. We accrue the costs incurred under the agreements based on an estimate of actual work completed in accordance with the agreements. In the event we make advance payments for goods or services that will be used or rendered for future research and development activities, the payments are deferred and capitalized as a prepaid expense and recognized as expense as the goods are received or the related services are rendered. Research and development costs that do not meet the requirements to be recognized as an asset as the associated future benefits are uncertain and there is no alternative future use at the time the costs were incurred are expensed as incurred.
General and Administrative Expenses
The Company expenses general and administrative costs to operations as incurred. General and administrative expenses consist primarily of compensation, benefits, and other employee-related expenses for personnel in the Company’s administrative, finance, legal, information technology, business development, communications, and human resources functions. Other costs include the legal costs incurred in connection with filing and prosecuting patent and trademark applications, general and administrative related facility costs, insurance costs and professional fees for accounting, tax, consulting, legal and other services.
15
Stock-Based Compensation Expense
The Company accounts for all stock-based payment awards granted to employees and non-employees as stock-based compensation expense at grant date fair value. The Company’s stock-based payments include stock options and grants of common stock, including common stock subject to vesting. The measurement date for employee and non-employee awards is the date of grant, and stock-based compensation costs are recognized as expense over the recipient’s requisite service period, which is the vesting period, on a straight-line basis. The Company has also issued common stock options with milestone or performance-based vesting conditions and recorded the expense for these awards if or when it was deemed probable that the milestone or performance condition would be achieved. Stock-based compensation is classified in the accompanying statements of operations based on the function to which the related services are provided. The Company recognizes stock-based compensation expense for the portion of awards that have vested. Forfeitures are accounted for as they occur.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company has historically been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The Company uses the simplified method as prescribed by the Securities and Exchange Commission StaffRecently Adopted Accounting Bulletin No. 107, Share-Based Payment, to calculate the expected term for options granted to employees and non-employees, whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the options due to its lack of sufficient historical data. The expected term of stock options granted to non-employees is determined in the same manner as stock options granted to employees. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.
Net Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed using the weighted-average number of common shares outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock. Net loss per share is calculated using the two-class method, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities.
The weighted-average number of common shares included in the computation of diluted net loss gives effect to all potentially dilutive common equivalent shares, including outstanding stock options, warrants and unvested restricted stock.
Common stock equivalent shares are excluded from the computation of diluted net loss per share if their effect is antidilutive. In periods in which the Company reports a net loss, diluted net loss per share is generally the same as basic net loss per share since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss for the three and nine months ended September 30, 2022 and 2021.
As the Merger has been accounted for as a reverse recapitalization, the condensed consolidated financial statements of the merged entity reflect the continuation of the pre-merger GreenLight financial statements; GreenLight equity has been retroactively adjusted to the earliest period presented to reflect the legal capital of the legal acquirer, ENVI. As a result, net loss per share was also retrospectively adjusted for periods ended prior to the Merger. See Note 3 - Business Combination for details and discussion of the retrospective adjustment of net loss per share.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. For the three and nine months ended September 30, 2022 and 2021, the Company had no items qualifying as other comprehensive loss; accordingly, comprehensive loss equaled net loss.
Deferred Offering Costs
As of December 31, 2021, the Company capitalized deferred offering costs of approximately $4.1 million. Deferred offering costs include certain legal, accounting, consulting and other third-party fees incurred directly related to the anticipated business combination. At the closing of the business combination during the first quarter of 2022, these previously deferred costs were recorded in stockholders’ equity as a reduction of additional paid-in capital. See Note 3 - Business Combination for further details of the Business Combination.
16
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as subsequently amended (“Topic 842”), to improve financial reporting and disclosures about leasing transactions. This ASU requires companies that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases, where the lease terms exceed 12 months. The recognition, measurement and presentation of expense and cash flows arising from a lease by a lessee will depend primarily on its classification as a finance or operating lease; both types of leases will be recognized on the balance sheet. This ASU also requires disclosures to help financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases. On June 3, 2020, the FASB issued ASU 2020-05, which amended the effective dates of Topic 842 to give immediate relief from business disruptions caused by the COVID-19 pandemic and provides a one-year deferral of the effective date for nonpublic companies. Therefore, for public companies, the effective date is still December 15, 2018, while the effective date for private companies will now be fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. As the Company qualifies as an emerging growth company, the Company will follow the annual reporting guidance as of January 1, 2022 in connection with the issuance of its annual financial statements for year ended December 31, 2022 and apply the provisions of ASC 842 in interim periods commencing after December 15, 2022. The Company will use the optional transition method to the modified retrospective approach in which Topic 842 will not be applied to comparative periods presented and incremental disclosures are not required for periods before the Company’s adoption of Topic 842. The Company will elect this transition approach as well as the package of practical expedients permitted under the transition guidance within the new standard, which allows the Company to carry forward the historical lease classification of contracts entered into prior to January 1, 2022. As a result of electing the package of practical expedients described above, existing leases and related initial direct costs will not be reassessed prior to the effective date, and therefore, adoption of the lease standard will not have an impact on the Company’s previously reported consolidated financial statements. The Company will also elect the following practical expedients: (i) combining lease and non-lease components for all asset classes and (ii) leases with an initial term of 12 months or less are not recorded in the consolidated balance sheets, and the associated lease payments are recognized in the consolidated statements of operations on a straight-line basis over the lease term.
The Company expects the adoption of Topic 842 will result in the recognition of material right-of-use assets and lease liabilities. The Company does not expect the adoption of Topic 842 to have a material impact to the condensed consolidated statements of operations, redeemable convertible preferred stock and stockholders’ equity (deficit), or cash flows.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measured at amortized cost to be presented at the net amount expected to be collected. This new standard is effective for the Company in the fiscal yearyears beginning after December 15, 2022, including interim periods within those fiscal years, and will be applied as a cumulative-effect adjustment to retained earnings. The Company adopted ASU 2016-03 as of January 1, 2023 and must be adopted using a modified retrospective approach,, with certain exceptions. The Company is currently evaluating the no impact of this standard on itsour condensed consolidated financial statements.statements or the related disclosures.
3. BUSINESS COMBINATION
On February 2, 2022, Legacy GreenLight consummated a Business Combination with ENVI. The Business Combination, and the PIPE financing which was entered into as of the same date, are further described in Note 1 - Nature of Business and Basis of Presentation.
Upon the closing of the Business Combination, the Company's certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 510,000,000 shares, of which 500,000,000 were designated as common stock and 10,000,000 were designated as preferred stock, both having a par value of $0.0001 per share.
Upon the closing of the Business Combination, holders of Legacy GreenLight common stock and preferred stock received shares of common stock in an amount determined by application of the Exchange Ratio. Legacy GreenLight additionally converted all of theirits convertible notes, including both the GLPRI issued convertible notes and the PIPE prepayment notes, to shares of common stock.
For periods prior to the Business Combination, the reported share and per share amounts have been retroactively converted by applying the Exchange Ratio. The consolidated assets, liabilities, and results of operations prior to the Business Combination are those of Legacy GreenLight.
11
The following table reconciles the elements of the Business Combination to the Condensed Consolidated Statements of Cash Flows and the Condensed Consolidated Statements of Stockholders’ Deficit:
17
| BUSINESS COMBINATION |
| |
Cash - ENVI trust and cash (net of redemptions) | $ | 12,123 |
|
Cash - PIPE Investors, including proceeds from conversion of Convertible notes - PIPE Investors |
| 124,250 |
|
Gross proceeds |
| 136,373 |
|
Less: total transaction costs |
| (26,660 | ) |
Less: cash proceeds from Convertible notes - PIPE Investors |
| (35,250 | ) |
Add: transaction costs paid in 2021 |
| 4,080 |
|
Cash proceeds from Business Combination received in 2022 |
| 78,543 |
|
|
|
| |
Less: transaction costs paid in 2021 |
| (4,080 | ) |
Less: warrant liabilities assumed |
| (1,341 | ) |
Less: net liabilities assumed in the Business Combination |
| (133 | ) |
Reverse merger, net of transactions costs | $ | 72,989 |
|
The number of shares of common stock outstanding immediately following the consummation of the Business Combination was as follows:
Number of Shares | |||
Common stock, outstanding prior to the Business Combination | 20,700,000 | ||
Less: Redemption of ENVI shares | (19,489,626 | ) | |
ENVI Public Shares | 1,210,374 | ||
ENVI Sponsor Shares | 5,175,000 | ||
Shares issued in PIPE financing | 12,425,000 | ||
Business combination and PIPE financing shares | 18,810,374 | ||
Legacy GreenLight shares (1) | 104,011,760 | ||
Total shares of common stock immediately after Business Combination | 122,822,134 | ||
(1) - The number of Legacy GreenLight shares was determined from the shares of Legacy GreenLight outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio. All fractional shares were rounded down.
Public Warrants
The Company concluded that following the close of the transaction the Public Warrants met the criteria for equity classification. As of the Closing Date, the 10,350,000 shares of Public Warrants were classified as equity in accordance with the accounting policyas described within Note 211 - Summary of Significant Accounting PoliciesWarrants and recognized in additional paid-in capital.
Private Placement Warrants
As of the Closing Date, the total value of the liability associated with the Private Placement Warrants was $1.3 million. The Company concluded that the 2,062,500 shares of Private Warrants met the definition of a liability as described in accordance with the accounting policy described within Note 211 - Summary of Significant Accounting PoliciesWarrants and have been classified as such on the balance sheet. At September 30, 2022,March 31, 2023, the fair value of the warrant liability was $0.5 million.an immaterial amount.
4. LICENSE AGREEMENT
Acuitas License Agreement
In August 2020, the Company entered into a Development and Option Agreement (the “Development and Option Agreement”) with Acuitas Therapeutics, Inc. (“Acuitas”). Under the terms of the Development and Option Agreement, the parties agreed to a program for the joint development of certain products combining the Company’s mRNA constructs with Acuitas’ liquid nanoparticle technology (“Acuitas LNP Technology”). Upon entering the Development and Option Agreement, the Company incurred a $0.8 million technology access fee. Under the Development and Option Agreement, the Company may reserve up to three specified targets (“Reserved Targets”) for development of therapeutic products related to such targets, using the Acuitas LNP Technology. In order to reserve a Reserved Target,
12
the Company must provide a target reservation notice to Acuitas and must pay a target reservation and maintenance fee of $0.1 million per target per contract year. For each Reserved Target, the Company may also reserve up to three additional vaccine or antibody targets
18
meant to be included within the same product as the Reserved Target (“Additional Targets”), which incur additional target reservation fees per contract year. Under the Development and Option Agreement, the Company is required to maintain at least one Reserved Target.
Under the Development and Option Agreement, the Company has the right to exercise a license option to develop and commercialize one or more therapeutic products relating to each Reserved Target. In the event that the Company exercises the options, the Company will pay $1.5 million for the first non-exclusive license, approximately $1.8 million for the second non-exclusive license and approximately $2.8 million for the third non-exclusive license. Under the terms of the Development and Option Agreement, the Company is also responsible for the full-time employee funding obligations and reimbursements to Acuitas for certain development and material costs incurred by them, which totaled approximately $0.5 million in 2021. The Company incurred an insignificant amount ofdid not incur any full-time employee funding obligations reimbursable to Acuitas for the three and nine months ended September 30, 2022.March 31, 2023.
In January 2021, the Company exercised the first option under the Development and Option Agreement and entered into a non-exclusive license agreement with Acuitas (the “Acuitas License Agreement”), under which the Company was granted a non-exclusive, worldwide, sublicensable license under the Acuitas LNP Technology to research, develop, manufacture, and commercially exploit vaccine products consisting of certain of the Company’s mRNA constructs and Acuitas' LNP technology. In connection with the option exercise, the Company paid Acuitas an option exercise fee of $1.5 million. Under the Acuitas License Agreement, the Company is required to pay Acuitas an annual license maintenance fee of $1.0 million for the first and second targets and $0.8 million for the third target until the Company achieves a particular development milestone. Acuitas is entitled to receive potential clinical and regulatory milestone payments in the low double-digit millions for this exercised option. With respect to the sale of each licensed product, the Company is also obligated to pay Acuitas percentage royalties in the low single digits on net sales of the licensed products by the Company and its affiliates and sublicensees in a given country until the last to occur, in such country, of (i) the expiration or abandonment of all licensed patent rights covering the licensed product, (ii) expiration of any regulatory exclusivity for the licensed product, or (iii) ten years from the first commercial sale of the licensed product.
The option exercise fee under the Development and Option Agreement was recorded as research and development expense upon the Company’s exercise of the first option. Additionally, the technology access fees, target reservation and maintenance fees, expenses associated with the full-time employee funding obligations and reimbursements for development and material costs incurred by Acuitas are recorded as research and development expense when incurred. The annual maintenance fee will be recorded as an expense on an annual basis based on the stated amount for the applicable year. Upon determination that a milestone payment is probable to occur, the amount of the milestone payment will be recorded as research and development expense. As the triggering of these milestone payments was not considered probable as of September 30, 2022March 31, 2023 and December 31, 2021,2022, no expense has been recorded during these periods. The royalty payment is contingent upon sales of licensed products under the Acuitas License Agreement. As such, when such expenses are considered probable and estimable at the commencement of sales, the Company will accrue royalty expense for the amount the Company is obligated to pay.
The Company recorded an aggregate of $0.4 million and $0.3 million of research and development expenses, consisting of the technology access fees, option exercise fee and technology maintenance fees, of approximately $0.3 million and $0.8 million for the three and nine months ended September 30,March 31, 2023 and 2022, respectively, and an immaterial amount and $2.0 million for the three and nine months ended September 30, 2021, respectively.
5. LICENSE AND COLLABORATION AGREEMENT
Serum License Agreement
InMarch 2022, the Company entered into a License Agreement (the “Agreement”) with Serum Institute of India Private Limited (“SIIPL”), pursuant to which the Company granted SIIPL an exclusive, sub-licensable, royalty-bearing license to use the Company’s proprietary technology platform to develop, manufacture and commercialize up to three mRNA products in all territories other than the United States, the 27 member states of the European Union, the United Kingdom, Australia, Japan, New Zealand, Canada, South Korea, China, Hong Kong, Macau, and Taiwan (the “SIIPL Territory”). The first licensed product target will be a shingles product target, and SIIPL has an option to select the additional two licensed product targets through the end of 2024. Under the terms of the Agreement with SIIPL, the Company will provide research services related to the shingles product target to develop a “proof of concept” and will provide manufacturing technology transfer services. In addition, GreenLight retains the option to purchase research and clinical trial data, developed by SIIPL, for 50% of the cost of the research studies and clinical trials for use in the Company’s own development.
SIIPL is responsible for the development, formulation, filling and finishing, registration and commercialization of the products in the SIIPL Territory, subject to oversight from a joint steering committee composed of representatives of the Company and SIIPL. SIIPL will use commercially reasonable efforts to develop and obtain regulatory approval for the products in the countries in the SIIPL
1913
Territory. The License Agreement includes terms customary in the industry for provisions related to sublicensing, intellectual property, and termination, and customary representations and warranties of GreenLight and SIIPL, along with certain customary covenants, including confidentiality, limitation of liability and indemnity provisions.
Pursuant to the License Agreement, SIIPL will pay the Company an upfront license fee of $5.0 million, as well as payments upon additional target selection and reservation of exclusivity. The Company may receive up to a total of an additional $17.0 million in development, regulatory and commercial (net sales) based milestone payments across all three product targets, as well as manufacturing technology transfer payments up to $10.0 million. SIIPL shall pay royalty payments in the mid-double digits, based on the net sales of products resulting from the licensed technology for the term of the License Agreement. The License Agreement shall terminate on a product-by-product and country-by-country basis on the later of the expiration of the patent rights owned by the Company or the tenth anniversary of the first commercial sale of the applicable product(s) in the applicable country.
The Company has determined that the Agreement falls within the scope of ASC 606, Revenue Recognition, ("ASC 606") as it includes a customer-vendor relationship as defined by ASC 606 and thus represents a contract with a customer. The Company has determined that the license of IP granted is not distinct from the research services, which includes manufacturing technology transfer services, and thus should be combined. The Agreement contains a single performance obligation for the combined License of IP and research services. Revenue from the contract is being recognized over time, using an input-method based on labor costs as a percentage of total expected labor costs. The Company has determined that variable consideration from the development and regulatory payments of up to $17.0 million, as well as the remaining $5.0 million of the manufacturing technology transfer payment, in the Agreement should be fully constrained as of September 30, 2022,March 31, 2023, and commercial milestones and royalties will be recognized in the period the underlying sales occur. For the three and nine months ended September 30, 2022,March 31, 2023, the Company has recorded revenue of $1.73.8 million and $3.4 million, respectively from the Agreement and the remaining amount of billed and unconstrained consideration is recorded as deferred revenue. There was no revenue recorded under the Agreement for the three months ended March 31, 2022. Based on current estimated timelines, the Company expects to recognize the deferred revenue over approximately 12 months and is classified as current in the condensed consolidated balance sheet as of September 30, 2022.March 31, 2023.
6. FAIR VALUE MEASUREMENTS
The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value hierarchy utilized to determine such fair values as of September 30, 2022March 31, 2023 and December 31, 2021:2022:
DESCRIPTION |
| SEPTEMBER 30, 2022 |
|
| QUOTED PRICES |
|
| SIGNIFICANT |
|
| SIGNIFICANT |
|
| MARCH 31, 2023 |
|
| QUOTED PRICES |
|
| SIGNIFICANT |
|
| SIGNIFICANT |
| ||||||||
|
| ($ in thousands) |
|
| ($ in thousands) |
| ||||||||||||||||||||||||||
Asset |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Money market funds |
|
| 98,353 |
|
|
| 98,353 |
|
|
| — |
|
|
| — |
|
| $ | 32,350 |
|
| $ | 32,350 |
|
| $ | — |
|
| $ | — |
|
Total assets measured at fair value |
| $ | 98,353 |
|
| $ | 98,353 |
|
| $ | — |
|
| $ | — |
|
| $ | 32,350 |
|
| $ | 32,350 |
|
| $ | — |
|
| $ | — |
|
Liability |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Warrant liabilities |
|
| 470 |
|
|
| — |
|
|
| — |
|
|
| 470 |
|
| $ | 15 |
|
| $ | — |
|
| $ | — |
|
| $ | 15 |
|
Total liabilities measured at fair value |
| $ | 470 |
|
| $ | — |
|
| $ | — |
|
| $ | 470 |
|
| $ | 15 |
|
| $ | — |
|
| $ | — |
|
| $ | 15 |
|
DESCRIPTION |
| DECEMBER 31, |
|
| QUOTED PRICES |
|
| SIGNIFICANT |
|
| SIGNIFICANT |
| ||||
|
| ($ in thousands) |
| |||||||||||||
Asset |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
| 31,446 |
|
|
| 31,446 |
|
|
| — |
|
|
| — |
|
Total assets measured at fair value |
| $ | 31,446 |
|
| $ | 31,446 |
|
| $ | — |
|
| $ | — |
|
Liability |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Warrant liabilities |
|
| 2,105 |
|
|
| — |
|
|
| — |
|
|
| 2,105 |
|
Total liabilities measured at fair value |
| $ | 2,105 |
|
| $ | — |
|
| $ | — |
|
| $ | 2,105 |
|
2014
DESCRIPTION |
| DECEMBER 31, |
|
| QUOTED PRICES |
|
| SIGNIFICANT |
|
| SIGNIFICANT |
| ||||
|
| ($ in thousands) |
| |||||||||||||
Asset |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Money market funds |
| $ | 68,097 |
|
| $ | 68,097 |
|
| $ | — |
|
| $ | — |
|
Total assets measured at fair value |
| $ | 68,097 |
|
| $ | 68,097 |
|
| $ | — |
|
| $ | — |
|
Liability |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Warrant liabilities |
| $ | 242 |
|
| $ | — |
|
| $ | — |
|
| $ | 242 |
|
Total liabilities measured at fair value |
| $ | 242 |
|
| $ | — |
|
| $ | — |
|
| $ | 242 |
|
Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy.
There have been no transfers between fair value levels during the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, respectively. The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.
The fair value of the common stock warrant liabilities was determined using the Black-Scholes option-pricing model with the assumptions as disclosed in Note 11 - Warrants. These assumptions include significant judgments including the fair value of the underlying common stock and volatility. An increase or decrease in the estimated fair value or changes in volatility will result in increases or decreases in the fair value of the warrant liabilities and such changes could be material.
The carrying value of each of the Horizon term loan and the SVB term loan as of September 30, 2022,March 31, 2023, and December 31, 20212022 approximates their fair value as the interest rate approximates the market rate for loans with similar terms and risk characteristics. The carrying value of the equipment financing does not approximate its fair value because the instrument bears interest at a rate that is not compared to those available to the Company for a similar instrument as of September 30, 2022.March 31, 2023. The Company estimated the fair value of the equipment financing using a discounted cash flow analysis and prevailing market terms as of September 30, 2022.March 31, 2023. The carrying value and fair value of the equipment financing was $6.85.0 million and $6.54.8 million as of September 30, 2022. The Company estimated the fair value of the convertible debt using a discounted cash flow analysis and prevailing market terms as of DecemberMarch 31, 2021. The carrying value and fair value of the convertible debt was $30.2 million and $28.9 million, respectively, as of December 31, 2021. The fair value of the convertible debt was determined using Level 3 inputs.2023. See Note 10 - Debt for further detail of all outstanding debt as of September 30, 2022.March 31, 2023.
The following table presents a roll-forward of the aggregate fair values of the Company’s liabilities for which fair value is determined by Level 3 inputs for the three months ended March 31, 2023 (in thousands):
|
| WARRANT LIABILITY |
| |
Balance—December 31, 2021 |
| $ | 2,105 |
|
Warrants exercised in business combination |
|
| (1,633 | ) |
Warrants reclassified to equity |
|
| (387 | ) |
Change in fair value of warrants |
|
| (956 | ) |
Warrants assumed in business combination |
|
| 1,341 |
|
Balance—September 30, 2022 |
| $ | 470 |
|
|
| WARRANT LIABILITY |
| |
Balance—December 31, 2022 |
| $ | 242 |
|
Change in fair value of warrants |
|
| (227 | ) |
Balance—March 31, 2023 |
| $ | 15 |
|
7. GRANT REVENUE
In July 2020, the Company was approved to receive a grant from the Bill & Melinda Gates Foundation in the amount of approximately $3.3 million. As of December 31, 2021, the Company had received the entire grant award, of which approximately $2.4 million was received during the year ended December 31, 2020, and the remaining approximately $0.9 million was received during the year ended December 31, 2021. The grant funds are to be used for the sole purpose of research for in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and or durable suppression of HIV in developing countries. The Company incurred research and development costs of approximately $38 thousand and $0.3 million associated with this grant for the three and nine months ended September 30, 2022, respectively, and $0.3 million and $1.0 million for the three and nine months ended September 30, 2021, respectively.March 31, 2022. The Company has recognized revenue of approximately $43 thousand and $0.3 million for the three and nine months ended September 30, 2022, respectively,March 31, 2022. The Company did not incur any research and $0.4 milliondevelopment costs and $1.2 millionhas not recognized any revenue for the three and nine months ended September 30, 2021, respectively.March 31, 2023 associated with this grant. As of March 31, 2023, we ceased any ongoing research work under such grant, completed close-out activities and are in the process of returning any remaining unused funds to the Gates Foundation. The unearned balance of approximatelyCompany has recorded $0.8 million and $1.0 million is recorded as deferred revenue in other current liabilities on the condensed consolidated balance sheetssheet as of September 30, 2022March 31, 2023 and December 31, 2021, respectively. The research supported by this grant is expected2022, respectively, as we are required to be completed byreturn all unspent funds to the end of 2023.Gates Foundation.
2115
8. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following as of September 30, 2022March 31, 2023 and December 31, 2021:2022:
|
| SEPTEMBER 30, |
|
| DECEMBER 31, |
|
| MARCH 31, |
|
| DECEMBER 31, |
| ||||
|
| ($ in thousands) |
|
| ($ in thousands) |
| ||||||||||
Leasehold improvements |
| $ | 25,196 |
|
| $ | 25,175 |
| ||||||||
Laboratory equipment |
|
| 25,162 |
|
|
| 24,373 |
| ||||||||
Manufacturing and farm equipment |
|
| 1,495 |
|
|
| 1,450 |
| ||||||||
Computer hardware and software |
| $ | 1,841 |
|
| $ | 732 |
|
|
| 1,394 |
|
|
| 1,338 |
|
Laboratory equipment |
|
| 22,942 |
|
|
| 19,590 |
| ||||||||
Leasehold improvements |
|
| 11,810 |
|
|
| 10,442 |
| ||||||||
Manufacturing equipment |
|
| 1,195 |
|
|
| — |
| ||||||||
Furniture and fixtures |
|
| 702 |
|
|
| 702 |
| ||||||||
Construction in progress |
|
| 11,990 |
|
|
| 1,894 |
|
|
| 1,847 |
|
|
| 1,348 |
|
Total |
|
| 49,778 |
|
|
| 32,658 |
|
|
| 55,796 |
|
|
| 54,386 |
|
Less: Accumulated depreciation and amortization |
|
| (10,824 | ) |
|
| (9,259 | ) |
|
| (15,355 | ) |
|
| (13,021 | ) |
Property and equipment, net |
| $ | 38,954 |
|
| $ | 23,399 |
|
| $ | 40,441 |
|
| $ | 41,365 |
|
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, property and equipment, net included capital lease assets of approximately $2.6 million and $2.52.6 million, respectively, with accumulated amortization of approximately $1.82.1 million and $1.52.0 million, respectively. Depreciation and amortization expense for the three and nine months ended September 30,March 31, 2023 and 2022 was approximately $1.82.3 million and $5.92.1 million, respectively, and $1.3 million and $3.6 million for the three and nine months ended September 30, 2021, respectively.
Included in construction in progress as of September 30, 2022 was approximately $10.2 million of leasehold improvements that have been funded through tenant incentive allowances associated with leases signed in September 2021 related to laboratory, office and greenhouse space.
9. ACCRUED EXPENSES
Accrued expenses as of September 30, 2022March 31, 2023 and December 31, 20212022 consisted of the following:
|
| SEPTEMBER 30, |
|
| DECEMBER 31, |
|
| MARCH 31, |
|
| DECEMBER 31, |
| ||||
|
| ($ in thousands) |
|
| ($ in thousands) |
| ||||||||||
Accrued employee compensation and benefits |
| $ | 5,300 |
|
| $ | 8,492 |
|
| $ | 6,304 |
|
| $ | 5,998 |
|
Accrued research and development |
|
| 1,065 |
|
|
| 4,059 |
|
|
| 1,448 |
|
|
| 3,041 |
|
Accrued professional fees |
|
| 1,143 |
|
|
| 1,888 |
|
|
| 1,281 |
|
|
| 1,152 |
|
Accrued other |
|
| 1,306 |
|
|
| 185 |
|
|
| 2,445 |
|
|
| 3,353 |
|
Total accrued expenses |
| $ | 8,814 |
|
| $ | 14,624 |
|
| $ | 11,478 |
|
| $ | 13,544 |
|
10. DEBT
A summary of the outstanding debt as of September 30, 2022March 31, 2023 is as follows (in thousands):
AS OF SEPTEMBER 30, 2022 |
| |||||||||||||||||||||||||||||||||||||||
AS OF MARCH 31, 2023 | AS OF MARCH 31, 2023 |
| ||||||||||||||||||||||||||||||||||||||
DESCRIPTION |
| ISSUANCE DATE(S) |
| MATURITY DATE(S) |
| INTEREST RATE |
|
| PRINCIPAL BALANCE OUTSTANDING |
|
| UNAMORTIZED DEBT DISCOUNT |
|
| DEBT BALANCE |
|
| ISSUANCE DATE(S) |
| MATURITY DATE(S) |
| INTEREST RATE |
|
| PRINCIPAL BALANCE OUTSTANDING |
|
| UNAMORTIZED DEBT DISCOUNT |
|
| DEBT BALANCE |
| ||||||||
Trinity Equipment Financing |
| March 2021 - August 2021 |
| March 2024 - August 2024 |
| 9.48% - 9.73% |
|
| $ | 6,824 |
|
| $ | (172 | ) |
| $ | 6,652 |
|
| March 2021 - August 2021 |
| March 2024 - August 2024 |
| 9.48% - 9.73% |
|
| $ | 4,963 |
|
| $ | (120 | ) |
| $ | 4,843 |
| ||
Term Loan – Silicon Valley Bank |
| September 2021 |
| September 2024 |
|
| 6.50 | % |
|
| 8,000 |
|
|
| (126 | ) |
|
| 7,874 |
|
| September 2021 |
| September 2024 |
|
| 8.25 | % |
|
| 6,000 |
|
|
| (74 | ) |
|
| 5,926 |
|
Term Loan – Horizon |
| December 2021 |
| May 2025 |
|
| 12.00 | % |
|
| 15,000 |
|
|
| (408 | ) |
|
| 14,592 |
|
| December 2021 |
| July 2025 |
|
| 13.75 | % |
|
| 14,000 |
|
|
| (285 | ) |
|
| 13,715 |
|
Capital lease |
|
|
|
|
|
|
|
|
| 563 |
|
|
| — |
|
|
| 563 |
| |||||||||||||||||||||
Finance Lease |
|
|
|
|
|
|
|
|
| 156 |
|
|
| — |
|
|
| 156 |
| |||||||||||||||||||||
Total Debt |
|
|
|
|
|
|
|
|
| 30,387 |
|
|
| (706 | ) |
|
| 29,681 |
|
|
|
|
|
|
|
|
|
| 25,119 |
|
|
| (479 | ) |
|
| 24,640 |
| ||
Less: Current Portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (12,907 | ) | |||||||||||||||||||||||
Total Long-Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 16,774 |
| |||||||||||||||||||||||
Less: current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13,782 | ) | |||||||||||||||||||||||
Total long-term |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 10,858 |
| |||||||||||||||||||||||
A summary of the outstanding debt as of December 31, 20212022 is as follows (in thousands):
22
16
AS OF DECEMBER 31, 2021 |
| |||||||||||||||||||
DESCRIPTION |
| ISSUANCE DATE(S) |
| MATURITY DATE(S) |
| STATED INTEREST RATE |
|
| PRINCIPAL BALANCE OUTSTANDING |
|
| UNAMORTIZED DEBT DISCOUNT |
|
| DEBT BALANCE |
| ||||
Trinity equipment financing |
| March 2021 - August 2021 |
| March 2024 - August 2024 |
| 9.48% - 9.73% |
|
| $ | 9,454 |
|
| $ | (252 | ) |
| $ | 9,202 |
| |
Term loan - Silicon Valley Bank |
| September 2021 |
| September 2024 |
|
| 3.50 | % |
|
| 10,000 |
|
|
| (225 | ) |
|
| 9,775 |
|
Term loan - Horizon |
| December 2021 |
| May 2025 |
|
| 9.00 | % |
|
| 15,000 |
|
|
| (582 | ) |
|
| 14,418 |
|
Capital lease |
|
|
|
|
|
|
|
|
| 992 |
|
|
| — |
|
|
| 992 |
| |
Total Debt |
|
|
|
|
|
|
|
|
| 35,446 |
|
|
| (1,060 | ) |
|
| 34,386 |
| |
Less: Current Portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (7,234 | ) | |||
Total Long-Term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,152 |
| |||
Convertible notes - PIPE Investors |
| December 2021 |
| December 2022 |
|
| 0.33 | % |
|
| 13,500 |
|
|
| — |
|
|
| 13,500 |
|
Convertible notes (a) |
| April & May 2020 |
| April & May 2020 |
|
| 5.00 | % |
|
| 18,213 |
|
|
| (22 | ) |
|
| 18,191 |
|
|
|
|
|
|
|
|
|
|
| 31,713 |
|
|
| (22 | ) |
|
| 31,691 |
| |
Total debt and convertible notes |
|
|
|
|
|
|
|
| $ | 67,159 |
|
| $ | (1,082 | ) |
| $ | 66,077 |
| |
AS OF DECEMBER 31, 2022 |
| |||||||||||||||||||
DESCRIPTION |
| ISSUANCE DATE(S) |
| MATURITY DATE(S) |
| STATED INTEREST RATE |
|
| PRINCIPAL BALANCE OUTSTANDING |
|
| UNAMORTIZED DEBT DISCOUNT |
|
| DEBT BALANCE |
| ||||
Trinity Equipment Financing |
| March 2021 - August 2021 |
| March 2024 - August 2024 |
| 9.48% - 9.73% |
|
| $ | 5,905 |
|
| $ | (146 | ) |
| $ | 5,759 |
| |
Term Loan - Silicon Valley Bank |
| September 2021 |
| September 2024 |
|
| 7.75 | % |
|
| 7,000 |
|
|
| (98 | ) |
|
| 6,902 |
|
Term Loan - Horizon |
| December 2021 |
| July 2025 |
|
| 13.25 | % |
|
| 15,000 |
|
|
| (343 | ) |
|
| 14,657 |
|
Finance Lease |
|
|
|
|
|
|
|
|
| 237 |
|
|
| — |
|
|
| 237 |
| |
Total Debt |
|
|
|
|
|
|
|
|
| 28,142 |
|
|
| (587 | ) |
|
| 27,555 |
| |
Less: current portion |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (13,229 | ) | |||
Total long-term |
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 14,326 |
| |||
Convertible Instruments -PIPE Investors
In December 2021, certain new and existing investors in GreenLight (the “Prepaying PIPE Investors”) agreed to purchase from GreenLight convertible instruments with an aggregate principal amount of approximately $35.3 million (the “PIPE Instruments”). The Company received $13.5 million in December 2021 and $21.8 million in January of 2022.
In conjunction with entering into the PIPE Instruments, each PIPE Investor entered into a side letter agreement (the “Side Letter”) with GreenLight, which required the PIPE Investor to tender its PIPE Instrument as a corresponding payment for all or a portion of such PIPE Investor’s purchase of shares upon the closing of a business combination.
In February of 2022, in accordance with the Business Combination, $35.3 million of the PIPE Instruments were surrendered, cancelled, and converted into shares of common stock. The Company determined that the cancellation and conversion of the PIPE Instruments represented an extinguishment for accounting purposes.
Term Loan – Horizon
In December 2021, the Company entered into a loan and security agreement with Horizon Technology Finance Corporation and Powerscourt Investments XXV, LP (together, “Horizon”), which provided for a term loan facility in an aggregate principal amount of up to $25.0 million, $15.0 million of which was borrowed at the closing and the remainder of which may be borrowed following the achievement of certain milestones, but not after June 30, 2022. As of June 30, 2022, the Company had not borrowed, and could no longer borrow the remainder of the term loan.
Accrued interest is payable monthly. The principal of each term loan must be repaid in equal monthly installments beginning February 1, 2023 (or August 1, 2023 if any of the remaining $10.0 million is borrowed), with a scheduled final maturity date of July 1, 2025. The Company may prepay the term loans in full, but not in part, without premium or penalty, other than a premium equal to (i) 3% of the principal amount of any prepayment made within 12 months after the applicable funding date, (ii) 2% of the principal amount of any prepayment made between 12 and 24 months after the applicable funding date and (iii) 1% of the principal amount of any prepayment made more than 24 months after the applicable funding date. On the earlier of the scheduled final maturity date and the prepayment in full of the term loans, the Company must pay a final payment fee equal to 3.0% of the original principal amount of the funded term loans. The final payment is being accreted to interest expense over the term of the loan using the effective interest method and is being recorded in other liabilities on the Company's condensed consolidated balance sheets.
The debt was recorded based on proceeds received net of related debt issuance costs of approximately $0.6 million.million, which is being amortized over the term of this financing agreement. The debt issuance costs include the fair value of approximately $0.4 million for the warrants the Company is committed to issue in conjunction with this financing. The warrants were issued on January 19, 2022. See Note 11 - Warrants for further discussion of the warrants.
Term Loan – Silicon Valley Bank
23
In September 2021, the Company entered into a loan and security agreement with Silicon Valley Bank (“SVB”), which provided for a term loan facility in an aggregate principal amount of up to $15.0 million, $10.0 million of which was borrowed at the closing and the remainder of which may be borrowed following the achievement of certain milestones, but not after March 31, 2022. The remaining $5.0 million was no longer available as it was not borrowed asAs of March 31, 2022.2022, the Company had not borrowed, and could no longer borrow the remainder of the term loan. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and SVB was subsequently transferred into a new entity, Silicon Valley Bridge Bank, N.A (“SVB Bridge Bank”).
The loan and security agreement with SVB contains customary affirmative and negative covenants and customary events of default; it does not contain a financial covenant. The loan and security agreement with SVB also includes the obligation for the Company to
17
maintain cash in accounts with SVB in amounts sufficient to repay all loan obligations, which if not met constitutes an event of default under the agreement.
Accrued interest is payable monthly. The principal of each term loan must be repaid in equal monthly installments beginning April 1, 2022, with a scheduled final maturity date of September 1, 2024. On the earlier of the scheduled final maturity date and the prepayment in full of the term loans, the Company must pay a final payment fee equal to 4.0% of the original principal amount of the term loans. The final payment is being accreted to interest expense over the term of the loan using the effective interest method. GreenLight may prepay the term loans in increments of $5.0 million and without premium or penalty, other than a premium equal to (i) with respect to any prepayment made on or before September 22, 2022, 3% of the principal so prepaid, (ii) with respect to any prepayment made after September 22, 2022 and on or before September 22, 2023, 2% of the principal so prepaid and (iii) with respect to any prepayment made after September 22, 2023 and on or before September 1, 2024, 1% of the principal so prepaid. GreenLight granted a first-priority, perfected security interest in substantially all of its present and future personal property and assets, excluding intellectual property, to secure its obligations to SVB.
The debt was recorded based on proceeds received net of related debt issuance costs of approximately $0.3 million. The debt issuance costs include the fair value of approximately $0.2 million for the 51,72434,427 warrants to purchase shares of common warrantsstock the Company previously issued in conjunction with this financing. No additional common warrants were issued in conjunction with this financing. Total debt issuance costs of approximately $0.4 million is being amortized over the term of thethis financing agreement.
Equipment Financing
On March 29, 2021, the Company entered into a master equipment financing agreement with Trinity Capital (Trinity) authorizing equipment financing in the aggregate of approximately $11.3 million with advances to be made as follows: (1) up to $5.0 million at execution of the agreement and (2) the remaining balance to be drawn at the Company’s option but no later than September 1, 2021. The monthly payment factors are determined by Trinity based on the Prime Rate reported in The Wall Street Journal on the first day of the month in which a financing schedule is executed, which as of the effective date of the equipment financing agreement was 3.25%. As of September 30, 2022,March 31, 2023, the Company hashad drawn the entire $11.3 million on multiple advances, which is repayable over a 36-month period that commenced on the advance date. The historical cost of the assets subject to a lien under this financing arrangement is approximately $14.7 million.
The debt was recorded based on proceeds received net of related debt issuance costs of approximately $0.4 million, which are being amortized over the term of thethis financing agreement. The debt issuance costs include the fair value of approximately $0.1 million for the 219,839146,325 warrants to purchase shares of common stock warrants the Company issued in conjunction with this financing.
Convertible Notes
In connection with the Merger (See Note 3 - Business Combination), $16.8 million of the Company’s outstanding convertible notes, which were issued in 2020, and accrued interest of $1.6 million converted into 10.1 million shares of Series D Preferred Stock. Concurrently with the business combination, the Series D Preferred Stock was exchanged for shares of common stock of New GreenLight in February of 2022.
Loan Interest Expense and Amortization
Interest expense for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 consisted of the following:
|
| THREE MONTHS ENDED SEPTEMBER 30, |
|
| NINE MONTHS ENDED SEPTEMBER 30, |
|
| THREE MONTHS ENDED MARCH 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
|
| ($ in thousands) |
|
| ($ in thousands) |
| ||||||||||||||||||
Interest paid or accrued |
| $ | 718 |
|
| $ | 248 |
|
| $ | 2,457 |
|
| $ | 551 |
|
| $ | 898 |
|
| $ | 804 |
|
Non-cash amortization of debt discount and deferred financing cost |
|
| 278 |
|
|
| 316 |
|
|
| 701 |
|
|
| 738 |
|
|
| 109 |
|
|
| 224 |
|
Total |
| $ | 996 |
|
| $ | 564 |
|
| $ | 3,158 |
|
| $ | 1,289 |
|
| $ | 1,007 |
|
| $ | 1,028 |
|
Scheduled future principal payments on total outstanding debt, as of September 30, 2022March 31, 2023 are as follows (in thousands):
24
|
| MARCH 31, 2023 |
| |
Remainder of 2023 |
| $ | 10,591 |
|
2024 |
|
| 11,028 |
|
2025 |
|
| 3,500 |
|
Total |
| $ | 25,119 |
|
18
|
| SEPTEMBER 30, 2022 |
| |
Remainder of 2022 |
| $ | 2,603 |
|
2023 |
|
| 14,261 |
|
2024 |
|
| 11,023 |
|
2025 and thereafter |
|
| 2,500 |
|
Total |
| $ | 30,387 |
|
Common Stock Warrants classified as LiabilityLiabilities
Private Placement Warrants
The Private Placement Warrants may not be redeemed by the Company so long as the Private Placement Warrants are held by the initial purchasers, or such purchasers’ permitted transferees. The Private Placement Warrants have terms and provisions identical to those of the Public Warrants which are discussed below, including as to exercise price, exercisability, and exercise period, except if the Private Placement Warrants are held by someone other than the initial purchasers’ permitted transferees, then the Private Placement Warrants are redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. On the Closing Date and as of September 30, 2022,March 31, 2023, there were 2,062,500 Private Warrants issued and outstanding. These warrants are recognized as liabilities on the condensed consolidated balance sheets and were measured at their inception date fair value and subsequently remeasured at each reporting period with changes recorded as a component of other income (expense) in the Company’s condensed consolidated statements of operations.
Warrant Class |
| Shares |
|
| Inception Date Fair Value (in thousands) |
|
| Initial Recognition Date |
| Exercise Price |
|
| Expiration Date | |||
Private Placement Warrants |
|
| 2,062,500 |
|
| $ | 1,341 |
|
| February 2, 2022 |
| $ | 11.50 |
|
| March 2, 2027 |
The fair value of the Private Placement WarrantWarrants upon initial recognition, as of December 31, 2022 and as of September 30, 2022March 31, 2023 was estimated to be approximately $1.3 million, $0.2 million and $0.515 millionthousand, respectively, and was measured using a Black-Scholes option-pricing model with the following assumptions:
Valuation Assumptions |
| INITIAL RECOGNITION |
|
| AS OF |
|
| AS OF MARCH 31, 2023 |
|
| AS OF DECEMBER 31, 2022 |
|
| INITIAL RECOGNITION |
| |||||
Fair value of common stock |
| $ | 8.82 |
|
| $ | 2.32 |
|
| $ | 0.43 |
|
| $ | 1.18 |
|
| $ | 8.82 |
|
Risk free interest rate |
|
| 1.59 | % |
|
| 4.15 | % |
|
| 3.70 | % |
|
| 4.05 | % |
|
| 1.59 | % |
Volatility |
|
| 15.9 | % |
|
| 53.0 | % |
|
| 69.0 | % |
|
| 69.0 | % |
|
| 15.9 | % |
Expected term (in years) |
|
| 5.00 |
|
|
| 4.42 |
|
|
| 3.75 |
|
|
| 4.17 |
|
|
| 5.00 |
|
Common Stock Warrants classified as Equity
Horizon Debt Warrants
In connection with the Loan Agreement the Company entered into with Horizon in December 2021, the Company issued warrants to Horizon to purchase 85,552 shares of the Company’s common stock at an exercise price per share of $5.26 for the $15.0 million drawn commitment. Upon issuance of these warrants in January 2022, the Company reassessed the classification of the warrants and noted that there was no variability in the number of shares or the exercise price of the warrants. The Company determined that the warrants met the requirements for equity classification and the fair value of $0.4 million was reclassified to equity as of March 31, 2022.
Warrant Class |
| Shares |
|
| Issuance Date |
| Exercise Price per Share |
|
| Expiration Date | ||
Common stock warrant |
|
| 85,552 |
|
| January 19, 2022 |
| $ | 5.26 |
|
| January 19, 2032 |
25
The warrant’swarrants' fair value upon issuance was estimated to be approximately $0.4 million, and was measured using a Black-Scholes option-pricing model with the following assumptions:
Valuation Assumptions |
| AT ISSUANCE (AS OF JANUARY 19, 2022) |
| |
Fair value of common stock |
| $ | 5.89 |
|
Risk free interest rate |
|
| 1.50 | % |
Expected volatility |
|
| 59.60 | % |
Expected term (in years) |
|
| 10.00 |
|
In connection with Loan Agreement the Company entered into with Horizon which provided for a term loan facility in an aggregate principal amount of up to $25.0 million, of which $15.0 million was borrowed at the closing (See Note 10 - Debt). The, the Company issued warrants for both the $15.0 million loan drawn at the closing and the remaining $10.0 million available commitment which had different terms and conditions. In conjunction with the $10.0 million available commitment, the Company made available to Horizon a warrant to purchase up 57,034 shares, of which 28,517 shares of the Company’s common stock were issued at an exercise price per share of $5.26. These warrants were recognized as liabilities and were measured at their inception date fair value and subsequently remeasured at each reporting period with changes recorded as a component of other income in the Company’s condensed consolidated statements of
19
operations. The warrantswarrant issued for the $10.0 million available commitment is summarized below as a liability-classified Common Stock Warrant.
Warrant Class |
| Shares |
|
| Inception Date Fair Value (in thousands) |
|
| Issuance Date |
| Exercise Price |
|
| Expiration Date | |||
Common stock warrant |
|
| 28,517 |
|
| $ | 249 |
|
| January 19, 2022 |
| $ | 5.26 |
|
| The earlier of March 29, 2031 or the date of a qualifying acquisition |
The warrant’s fair value upon issuance and as of June 30, 2022 was estimated to be approximately $0.2 million and $35 thousand, respectively, and was measured using a probability weighted Black-Scholes option-pricing model with the following assumptions:
Valuation Assumptions |
| AT ISSUANCE (AS OF JANUARY 19, 2022) |
|
| AS OF |
| ||
Fair value of common stock |
| $ | 5.89 |
|
| $ | 2.21 |
|
Risk free interest rate |
|
| 1.50 | % |
|
| 2.39 | % |
Expected volatility |
|
| 59.60 | % |
|
| 59.60 | % |
Expected term (in years) |
|
| 10.50 |
|
|
| 10.00 |
|
At June 30, 2022, the Warrants were determined to have met the requirements for equity classification and the fair value of $35 thousand was reclassified to equity.
Public Warrants
Each Public Warrant entitles the holder to the right to purchase one share of common stock at an exercise price of $11.50 per share. No fractional shares will be issued upon exercise of the Public Warrants. The Company may elect to redeem the Public Warrants subject to certain conditions, in whole and not in part, at a price of $0.01 per Public Warrant if (i) 30 days’ prior written notice of redemption is provided to the holders, and (ii) the last reported sale price of the Company’s common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third business day prior to the date on which the Company sends the notice of redemption to the warrant holders. Upon issuance of a redemption notice by the Company, the warrant holders have a period of 30 days to exercise for cash, or on a cashless basis. On the Closing Date, there were 10,350,000 Public Warrants issued and outstanding.
In March 2022, 105,120 of the Public Warrants were exercised into shares of the Company's common stock for a total exercise price of $1.2 million in cash.
The following table presents a roll-forwardsummary of the Company’s warrants activity from December 31, 20212022 to September 30, 2022:March 31, 2023:
COMMON STOCK WARRANTS | ||||
Warrants Outstanding, December 31, 2022 | 12,383,304 | |||
Issued | — | |||
Exercised | — | |||
Warrants Outstanding, March 31, 2023 | 12,383,304 | |||
26
|
| COMMON STOCK WARRANTS |
| PREFERRED STOCK WARRANTS |
| ||
Warrants Outstanding, December 31, 2021 (1) |
|
| 207,376 |
|
| 635,404 |
|
Exercised in the business combination (1) |
|
| (207,376 | ) |
| (635,404 | ) |
Issued (1) |
|
| 75,924 |
|
| — |
|
Assumed in the business combination |
|
| 12,412,500 |
|
| — |
|
Exercised subsequent to the business combination |
|
| (105,120 | ) |
| — |
|
Warrants Outstanding, September 30, 2022 |
|
| 12,383,304 |
|
| — |
|
(1) Number of warrants have been adjusted to reflect the exchange for New GreenLight warrants at an exchange ratio of approximately 0.6656 as a result of the Business Combination. See Note 3 - Business Combination for further information.
Authorized shares
The Company was authorized to issue 500,000,000 shares of $0.0001 par value common stock and 10,000,000 shares of $0.0001 par value preferred stock as of September 30, 2022March 31, 2023 and191,500,000 shares of $0.0001 par value common stock as of December 31, 2021.2022, respectively.
As of September 30,March 31, 2023 and December 31, 2022, there were 151,465,425the total number of shares of common stock issued and outstanding was 151,681,314and151,587,165, respectively. As of each March 31, 2023 and December 31, 2022, there were 12,383,304 warrants to purchase the Company’s common stock outstanding. As of September 30,March 31, 2023 and December 31, 2022, there were no shares of preferred stock issued or outstanding.
Legacy Greenlight Redeemable Convertible Preferred Stock
20
In connection with the Business Combination, Legacy Redeemable Convertible Preferred Stock previously classified as temporary equity was retroactively adjusted, converted into common stock at an exchange ratio of approximately 0.6656, and reclassified to permanent equity as a result of the reverse recapitalization. As of September 30, 2022,March 31, 2023 and December 31, 2022, there was no Legacy Redeemable Convertible Preferred Stock authorized, issued or outstanding. The following table summarizes details of Legacy Redeemable Convertible Preferred Stock authorized, issued, and outstanding, immediately prior to the Business Combination.
27
|
| SEPTEMBER 30, |
|
| DECEMBER 31, |
| ||
Redeemable Convertible Preferred Stock Classes |
| 2022 |
|
| 2021 |
| ||
|
| ($ in thousands) |
| |||||
Series A-1 redeemable convertible preferred stock, $0.001 par value, |
| $ | — |
|
| $ | 4,414 |
|
Series A-2 redeemable convertible preferred stock, $0.001 par value, |
|
| — |
|
|
| 11,438 |
|
Series A-3 redeemable convertible preferred stock, $0.001 par value, |
|
| — |
|
|
| 19,917 |
|
Series B redeemable convertible preferred stock, $0.001 par value, |
|
| — |
|
|
| 18,671 |
|
Series C redeemable convertible preferred stock, $0.001 par value, |
|
| — |
|
|
| 55,851 |
|
Series D redeemable convertible preferred stock, $0.001 par value, |
|
| — |
|
|
| 108,499 |
|
Total |
| $ | — |
|
| $ | 218,790 |
|
The following describes the rights and preferences of the Legacy GreenLight Redeemable Convertible Preferred Stock prior to the conversion in the Business Combination:
Voting Rights
The holders of each share of Preferred Stock (“Preferred Stockholders”) generally had the right to one vote for each share of common stock into which such Preferred Stock could then convert. On matters on which the holders of shares of a particular series of Preferred Stock had the right to vote separately as a single class, such holders had the right to one vote per share of Preferred Stock of that particular series.
Conversion
Each share of Preferred Stock was convertible into common stock at any time at the option of the holder. Each share was converted into such number of shares of common stock as is determined by dividing the applicable original issuance price by the applicable conversion price in effect at the time of the conversion. The conversion price was subject to adjustment upon the happening of specified events, including the issuance or deemed issuance of certain additional shares of common stock, stock splits and combinations, dividends, distributions, mergers, and reorganizations. The original issuances prices of the shares of Series A-1, Series A-2, Series A-3, Series B, Series C and Series D Preferred Stock were $1.53, $1.65, $2.32, $0.86, $1.60 and $1.81 per share, respectively. As of immediately prior to the conversion of the Preferred Stock upon the consummation of the Business combination and as of June 30, 2021, the Series A-1, Series A-2, Series A-3, Series B, Series C, and Series D conversion prices were $1.21, $1.27, $1.63, $0.86, $1.60, and $1.81 per share, respectively. As such, the shares of Preferred Stock converted on a one-for-one basis, except that the shares of Series A-1, Series A-2 and Series A-3 Preferred Stock converted at the rates of approximately 1.26446, 1.29528 and 1.42239 shares of common stock, respectively, per share of Preferred Stock.
28
Conversion was mandatory at the earlier of the closing of a firm commitment underwritten public offering of the Company’s common stock at a price of at least $5.4354 per share and with net proceeds to the Company of at least $75.0 million or at the election of the holders of a majority of the outstanding shares of Series D Preferred Stock.
Dividends
The holders of Series A-1 Preferred Stock were entitled to receive cumulative dividends that accrued at an annual rate of approximately 5%. The holders of Series A-2, Series A-3, Series B, Series C and Series D Preferred Stock were entitled to receive cumulative dividends that accrued at an annual rate of approximately 8%. Dividends were payable only when, as and if declared by the Board of Directors. In the event the Company declared, paid, or set aside any dividends on shares of any class of capital stock of the Company, other than dividends on shares of common stock payable in shares of common stock, the holders of Preferred Stock were entitled to receive, before or at the same time as such dividends, a dividend on each outstanding share of Preferred Stock in the amount of the accruing dividends unpaid as of such date as well as a comparable dividend on an as-converted basis. As of September 30, 2022 and December 31, 2021, no dividends had been declared.
Redemption
The Company’s Preferred Stock could only be redeemed upon a deemed liquidation event as described in the Company’s certificate of incorporation. Upon redemption, holders of shares of Preferred Stock of a particular series were entitled to receive a redemption amount equal to the original issue price of the shares of that series, plus any accrued but unpaid dividends and any declared but unpaid dividends for the shares of that series, subject to the terms summarized in the “Liquidation Preference” section below.
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the Company, the holders of shares of Preferred Stock of a particular series were entitled to receive an amount per share equal to the greater of (i) the original issuance price of the shares of Preferred Stock of that series, plus any accruing dividends that are unpaid, whether or not declared, plus any other dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had such shares of Preferred Stock been converted into common stock. Such liquidating distributions were payable first, to the holders of shares of Series D Preferred Stock, second, to the holders of shares of Series C Preferred Stock and Series B Preferred Stock on a pari passu basis, third, to the holders of shares of Series A Preferred Stock on a pari passu basis, and finally, to the holders of shares of common stock. If insufficient assets and funds were available to permit payment of the full amount of the applicable liquidation preference payable to the holders of any series of Preferred Stock (or group of series payable on a pari passu basis), then all available assets and funds would have been distributed to the holders of such series (or group of series) on a pro rata basis, taking into account the order of priority set forth in the previous sentence.
After payment in full to the Preferred Stockholders, the holders of common stock are entitled to receive the remaining assets of the Company available for distribution on a pro rata basis based on the number of shares held.
13. STOCK-BASED COMPENSATION
2022 Stock Incentive Plan
On February 1, 2022, stockholders approved the New GreenLight 2022 Equity and Incentive Plan, or the “New GreenLight Equity Plan”, or “Equity Plan”, replacing the GreenLight 2012 Equity Plan (the “2012 Plan”), pursuant to which the Company’s Board of Directors may grant stock options, both incentive stock options and nonstatutory stock options, stock appreciation rights, restricted stock, unrestricted stock, restricted stock units, dividend equivalent rights, or cash awards to employees, directors and consultants. In connection with the adoption of the Equity Plan, no further option grants are permitted under the 2012 Plan and any expirations, cancellations, or terminations under the 2012 Plan are available for issuance under the Equity Plan. There are 31,750,000 registered shares of common stock reserved for issuance under the Equity Plan. DuringOn January 1, 2023, the nine months ended September 30, 2022, 6,950,569 stock options were grantednumber of shares reserved and available for issuance under the Equity Plan.Plan increased by 6,063,486 shares of common stock pursuant to a provision in the Equity Plan that provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2023, by 4% of the number of shares of common stock issued and outstanding on the immediately preceding December 31 or such lesser number as determined by the compensation committee of the board of directors. As of March 31, 2023, 14,494,674 shares remain available for future grants under the Equity Plan.
The Plan is administered by the Company’s Board of Directors (the “Board”). The exercise prices, vesting and other restrictions are determined at the discretion of the Board, except that the exercise price per share of incentive stock options may not be less than 100% of the fair market value of the common stock on the date of grant. Stock options awarded under the Plan expire ten years after the grant date unless the Board sets a shorter term. Vesting periods for awards under the plans are determined at the discretion of the Board. Incentive stock options granted to employees and non-statutory options and restricted stock awards granted to employees, officers, members of the Board, advisors, and consultants of the Company typically vest over four or five years.
The fair value of stock option awards is estimated on the grant date using the Black-Scholes option pricing model with the following weighted-average assumptions:
29
|
| NINE MONTHS ENDED SEPTEMBER 30, |
|
| THREE MONTHS ENDED MARCH 31, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Fair value of underlying common stock |
| $ | 3.49 |
|
| $ | 1.33 |
|
| $ | 0.56 |
|
| $ | 9.15 |
|
Weighted average risk-free interest rate |
|
| 3.00 | % |
|
| 1.17 | % |
|
| 3.89 | % |
|
| 2.56 | % |
Expected term (in years) |
|
| 6.04 |
|
|
| 6.07 |
|
|
| 6.07 |
|
|
| 6.00 |
|
Expected volatility |
|
| 65.36 | % |
|
| 67.92 | % |
|
| 56.97 | % |
|
| 56.28 | % |
Expected dividend yield |
|
| 0 | % |
|
| 0 | % |
|
| 0.00 | % |
|
| 0.00 | % |
The following table summarizes the activity of the Company’s stock options under the Plan for the ninethree months ended September 30, 2022:March 31, 2023:
|
|
|
|
|
|
|
| AVERAGE |
|
| AGGREGATE |
| ||||
|
|
|
|
| WEIGHTED- |
|
| REMAINING |
|
| INTRINSIC |
| ||||
|
|
|
|
| AVERAGE |
|
| CONTRACTUAL |
|
| VALUE |
| ||||
|
| SHARES (1) |
|
| EXERCISE PRICE (1) |
|
| TERM (in years) |
|
| (in thousands) |
| ||||
Outstanding at December 31, 2021 |
|
| 18,101,548 |
|
| $ | 1.14 |
|
|
| 8.0 |
|
| $ | 139,505 |
|
Granted |
|
| 6,950,569 |
|
|
| 5.67 |
|
|
| — |
|
|
| — |
|
Exercised |
|
| (921,010 | ) |
|
| 0.48 |
|
|
| — |
|
|
| 1,600 |
|
Cancelled or forfeited |
|
| (729,248 | ) |
|
| 2.63 |
|
|
| — |
|
|
| 2,746 |
|
Outstanding at September 30, 2022 |
|
| 23,401,859 |
|
|
| 2.49 |
|
|
| 7.9 |
|
|
| 23,687 |
|
Vested and expected to vest at September 30, 2022 |
|
| 23,401,859 |
|
|
| 2.49 |
|
|
| 7.9 |
|
|
| 23,687 |
|
Exercisable at September 30, 2022 |
|
| 9,785,355 |
|
| $ | 0.88 |
|
|
| 6.7 |
|
| $ | 15,657 |
|
(1) Number of options and weighted average exercise price has been adjusted to reflect the exchange of Legacy GreenLight's stock options for New GreenLight stock options at an exchange ratio of approximately 0.6656 as a result of the Business Combination. See Note 3 for further information.
|
|
|
|
|
|
|
| AVERAGE |
|
| AGGREGATE |
| ||||
|
|
|
|
| WEIGHTED- |
|
| REMAINING |
|
| INTRINSIC |
| ||||
|
|
|
|
| AVERAGE |
|
| CONTRACTUAL |
|
| VALUE |
| ||||
|
| SHARES |
|
| EXERCISE PRICE |
|
| TERM (in years) |
|
| (in thousands) |
| ||||
Outstanding at December 31, 2022 |
|
| 23,051,188 |
|
| $ | 2.35 |
|
|
| 7.8 |
|
| $ | 7,192 |
|
Granted |
|
| 229,500 |
|
|
| 0.97 |
|
|
| — |
|
|
| — |
|
Exercised |
|
| (94,149 | ) |
|
| 0.37 |
|
|
| — |
|
|
| — |
|
Cancelled or forfeited |
|
| (755,414 | ) |
|
| 3.11 |
|
|
| — |
|
|
| — |
|
Outstanding at March 31, 2023 |
|
| 22,431,125 |
|
|
| 2.25 |
|
|
| 7.6 |
|
|
| 355 |
|
Vested and expected to vest at March 31, 2023 |
|
| 22,431,125 |
|
|
| 2.25 |
|
|
| 7.6 |
|
|
| 355 |
|
Exercisable at March 31, 2023 |
|
| 11,015,527 |
|
| $ | 1.11 |
|
|
| 6.3 |
|
| $ | 333 |
|
The weighted-average grant date fair value of stock options granted during the ninethree months ended September 30,March 31, 2023 and 2022 and 2021 was $3.490.56 per share and $0.815.06 per share, respectively.
21
As of September 30, 2022,March 31, 2023, total unrecognized compensation expense related to stock options totaled approximately $31.620.3 million, which is expected to be recognized over a weighted-average period of 3.3 2.8years.
The aggregate intrinsic value of common stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The intrinsic value of options exercised for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, was approximately $1.69 millionthousand and $1.20.6 million, respectively.
Restricted Stock
The fair value of each restricted common stock award is estimated on the date of grant based on the fair value of the Company’s common stock on that same date.
A summary of the Company’s The Company did not have any restricted stock activity during the ninethree months ended September 30, 2022 is presented below:
|
| SHARES |
|
| WEIGHTED |
| ||
Unvested shares as of December 31, 2021 |
|
| 4,231 |
|
| $ | 0.76 |
|
Vested |
|
| (4,231 | ) |
|
| 0.23 |
|
Unvested shares as of September 30, 2022 |
|
| — |
|
| $ | — |
|
March 31, 2023. The total fair value of restricted stock that vested during the ninethree months ended September 30,March 31, 2022 and 2021 was approximately $925 thousand and $22 thousand, respectively.thousand.
30
Stock-Based Compensation Expense
Stock-based compensation expense recorded as research and development and general and administrative expenses, for employees, directors and non-employees during the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 is as follows:
|
| THREE MONTHS ENDED SEPTEMBER 30, |
|
| NINE MONTHS ENDED SEPTEMBER 30, |
|
| THREE MONTHS ENDED MARCH 31, |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
|
| ($ in thousands) |
|
| ($ in thousands) |
| ||||||||||||||||||
Research and development |
| $ | 1,417 |
|
| $ | 261 |
|
| $ | 2,879 |
|
| $ | 580 |
|
| $ | 1,308 |
|
| $ | 504 |
|
General and administrative |
|
| 1,283 |
|
|
| 276 |
|
|
| 3,642 |
|
|
| 712 |
|
|
| 1,000 |
|
|
| 1,683 |
|
Total stock-based compensation expense |
| $ | 2,700 |
|
| $ | 537 |
|
| $ | 6,521 |
|
| $ | 1,292 |
|
| $ | 2,308 |
|
| $ | 2,187 |
|
The Company recognized additional stock-based compensation expense associated with 292,469292,650 shares subject to GreenLight options that vest based on both a liquidity and a service condition. At the date of grant in 2020, achievement of the conditions in the performance-based award was deemed not probable and, accordingly, the grant date fair value of the award was zero based upon the probable outcome of such conditions. The liquidity condition is satisfied upon the occurrence of certain events, including a merger or acquisition or other business combination transaction involving the Company and a publicly traded special purpose acquisition company or other similar entity and, as a result, the liquidity condition for certain of GreenLight’s options was satisfied upon the completion of the Business Combination. Assuming achievement of the highest level of performance, the performance-based award would have had a grant date fair value of $0.2 million. In December 2021, the Company’s Board of Directors voted to extend the length of time to allow for the performance vesting to occur by March 31, 2022. The fair value of the award, as modified, was $2.22.1 million as of the modification date. Upon closing of the Business Combination, the Company recognized approximately $1.4 million of incremental stock-based compensation expense associated with these options during the three months ended March 31, 2022, and the remainder will beis being recognized over the remaining service period.
14. NET LOSS PER SHARE
The following table summarizes the computation of basic and diluted net loss per share:
(In thousands, except shares and per share data) |
| THREE MONTHS ENDED |
|
| NINE MONTHS ENDED |
|
| THREE MONTHS ENDED |
| |||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Net loss |
| $ | (38,158 | ) |
| $ | (29,181 | ) |
| $ | (128,291 | ) |
| $ | (77,638 | ) |
| $ | (28,469 | ) |
| $ | (38,207 | ) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Weighted-average common stock outstanding |
|
| 139,061,906 |
|
|
| 96,424,182 |
|
|
| 125,385,422 |
|
|
| 96,351,247 |
|
|
| 151,614,008 |
|
|
| 113,558,404 |
|
Net loss per share, basic and diluted |
| $ | (0.27 | ) |
| $ | (0.30 | ) |
| $ | (1.02 | ) |
| $ | (0.81 | ) |
| $ | (0.19 | ) |
| $ | (0.34 | ) |
22
The Company’s potential dilutive securities include unvested restricted stock, common stock options and common stock warrants. The Company excluded the following potential common stock, presented based on amounts outstanding at period end, from the computation of diluted net loss per share because including them would have had an anti-dilutive effect:
|
| AS OF SEPTEMBER, |
|
| AS OF MARCH, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Unvested restricted stock |
|
| - |
|
|
| 41,160 |
|
|
| — |
|
|
| 2,664 |
|
Options to purchase common stock |
|
| 23,401,859 |
|
|
| 17,632,135 |
|
|
| 22,431,125 |
|
|
| 18,505,366 |
|
Common stock warrants |
|
| 12,383,304 |
|
|
| 864,979 |
|
|
| 12,383,304 |
|
|
| 12,383,304 |
|
Total |
|
| 35,785,163 |
|
|
| 18,538,274 |
|
|
| 34,814,429 |
|
|
| 30,891,334 |
|
15. INCOME TAXES
The Company did not record U.S. federal, state or stateforeign income tax expense for the three and nine months ended September 30,March 31, 2023 and 2022 and 2021 due to the Company’s historical net operating losses, forecasted continued net operating losses, and the Company’s recognition of a full valuation allowance.
The Company recorded foreign income tax expense of $1.1 million for the three and nine months ended September 30, 2022 related to foreign withholding tax from the Agreement with SIIPL. The Company did not record income tax expense related to foreign withholding tax for the three and nine months ended September 30, 2021 under this agreement.
31
The Company's effective tax rate differs from the statutory rate, primarily due to the Company’s history of incurring losses, which have not been benefited, other permanent differences, and withholding taxes. Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain.
16. COMMITMENTS AND CONTINGENCIES
Operating LeasesLEASES
The Company’s significantCompany adopted Accounting Standards Codification ("ASC") 842, Leases, during the quarter ended December 31, 2022, with an effective date of January 1, 2022, using the modified retrospective approach and utilizing the effective date as its date of initial application. The Company's condensed consolidated financial statements presented for fiscal year 2022 have been adjusted to reflect the impact of adoption of ASC 842 as of the effective date of January 1, 2022. As a result of implementing this guidance, the Company recorded an operating leases enteredright-of-use asset of $15.2 million and an operating lease liabilities of $15.9 million, respectively, as of January 1, 2022 and also derecognized total deferred rent liabilities and unamortized lease incentives of $0.7 million that existed as of December 31, 2021, are disclosed in Note 18, Commitments and Contingencies – Operating Leases,2021. The adoption of this standard did not have a significant impact on the notes to the audited consolidated financial statements for the year endedCompany’s Consolidated Statements of Operations as of December 31, 2021 as filed with the SEC on2022.
As of March 31, 2022 on Form 8-K/A. Since the dateadoption of those financial statements,ASC 842 resulted in the Company has entered into newrecognition of operating leases or has modified existing operating leases for the nine months ended September 30, 2022, as noted below.
On September 30, 2021, the Company entered into a lease for new laboratory, office and greenhouse space in Durham, North Carolina, which commenced in January 2022. The lease term expires in July 2033, unless extended. The base rent for this lease is approximatelyright-of-use assets of $2.331.7 million per year, subject to a 3% increase each year.
In March 2022, the Company entered into aand current and noncurrent operating lease for new laboratory space in Lexington, Massachusetts, which commenced in May 2022. The lease term expires in July 2033. The base rent for this lease isliabilities of $3.9 million per year, subject to a 3% increase each year.
Total rent expense in the condensed consolidated statements of operations for the operating leases was approximately $10.16.3 million and $3.826.8 million, forrespectively, on the nine months ended September 30, 2022 and 2021, respectively. Total rent expense in theCompany’s condensed consolidated statementsbalance sheet. The adoption of operations for the operating leases was approximately $3.4 million and $1.8 millionASC 842 for the three months ended September 30,March 31, 2022 resulted in an impact to the condensed consolidated statement of cash flows of an increase of $1.6 million in other non-cash operating lease cost, a net change in accrued expenses, lease liabilities and 2021, respectively.other liabilities of $1.4 million and deferred rent of $0.3 million. The adoption of ASC 842 had no material impact to the condensed consolidated statement of operations for the three months ended March 31, 2022.
The Company leases certain laboratory and office spaces under operating leases and certain equipment under financing leases. Determination if an arrangement is a lease occurs at inception. For leases with terms greater than 12 months, the Company records a related right-of-use (“ROU”) asset and lease liability at the present value of lease payments over the term. Many leases include fixed rental escalation clauses, renewal options and/or termination options that are factored into the determination of lease payments when appropriate. The Company’s leases generally do not provide an implicit rate, and thus the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company has elected not to record a ROU asset and lease obligation for short-term leases (with terms less than 12 months) or separate non-lease components from associated lease components for all asset classes. As a result, all contract consideration is allocated to the single lease component.
The Company leases certain of its facilities under non-cancellable operating and financing leases expiring at various dates through 2042. The Company is also responsible for utilities, maintenance, insurance, and property taxes under these leases which are variable payments. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms. We often receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases. Leases are classified as operating or financing at commencement. Certain leases include options to renew or terminate at the Company’s discretion. The lease terms include periods covered by these options if it is reasonably certain the Company will renew or not terminate.
The following table reconciles the right of use operating and finance leases and corresponding liabilities to the balance sheet as of March 31, 2023 and December 31, 2022, respectively (in thousands):
23
| CLASSIFICATION ON THE CONDENSED CONSOLIDATED BALANCE SHEET |
| MARCH 31, 2023 |
|
| DECEMBER 31, 2022 |
| |||
Assets: |
|
|
|
|
|
|
|
| ||
Right of use asset - operating lease |
| Right-of-use assets |
| $ | 32,740 |
|
| $ | 32,766 |
|
Right of use asset - financing lease |
| Property and equipment, net |
|
| 469 |
|
|
| 519 |
|
Total lease assets |
|
|
| $ | 33,209 |
|
| $ | 33,285 |
|
Liabilities: |
|
|
|
|
|
|
|
| ||
Current: |
|
|
|
|
|
|
|
| ||
Operating lease liabilities, current |
| Lease liabilities, current portion |
|
| 4,083 |
|
|
| 3,358 |
|
Finance lease liabilities, current |
| Long-term debt, current portion |
|
| 134 |
|
|
| 210 |
|
Non-current: |
|
|
|
|
|
|
|
| ||
Operating lease liabilities, net of current portion |
| Lease liabilities, net of current portion |
|
| 48,702 |
|
|
| 49,569 |
|
Finance lease liabilities, net of current portion |
| Long-term debt, net of current portion |
|
| 22 |
|
|
| 28 |
|
Total lease liabilities |
|
|
| $ | 52,941 |
|
| $ | 53,165 |
|
The following table provides the components of the Company's lease costs for the three months ended March 31, 2023 and 2022, respectively (in thousands):
| THREE MONTHS ENDED MARCH 31 |
| ||||||
|
| 2023 |
|
| 2022 |
| ||
Operating lease costs |
| $ | 2,498 |
|
| $ | 2,519 |
|
Short-term lease costs |
|
| 8 |
|
|
| 140 |
|
Variable lease costs |
|
| 764 |
|
|
| 86 |
|
Total operating lease costs |
| $ | 3,270 |
|
| $ | 2,745 |
|
|
|
|
|
|
| |||
Finance lease costs: |
|
|
|
|
|
| ||
Amortization of right-of-use assets |
|
| 50 |
|
|
| 47 |
|
Interest on lease liabilities |
|
| 3 |
|
|
| 6 |
|
Total finance lease costs |
| $ | 53 |
|
| $ | 53 |
|
|
|
|
|
|
| |||
Total lease costs |
| $ | 3,323 |
|
| $ | 2,798 |
|
Other information related to leases for the three months ended March 31, 2023 and 2022, respectively were as follows (in thousands):
|
| THREE MONTHS ENDED MARCH 31 |
| |||||
| 2023 |
|
| 2022 |
| |||
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
| ||
Operating cash flows for operating leases |
| $ | 2,470 |
|
| $ | 2,040 |
|
Operating cash flows for finance leases |
|
| 3 |
|
|
| 6 |
|
Finance cash flows for finance leases |
|
| 83 |
|
|
| 160 |
|
|
|
|
|
|
|
| ||
Right-of-use assets obtained in exchange for operating lease liabilities |
| $ | 791 |
|
| $ | 18,100 |
|
|
|
|
|
|
|
| ||
Operating Leases |
|
|
|
|
|
| ||
Weighted average remaining lease term (years) |
|
| 9.33 |
|
|
| 9.08 |
|
Weighted average incremental borrowing rate |
|
| 11.16 | % |
|
| 11.09 | % |
|
|
|
|
|
|
| ||
Finance Leases |
|
|
|
|
|
| ||
Weighted average remaining lease term (years) |
|
| 0.75 |
|
|
| 1.33 |
|
Weighted average incremental borrowing rate |
|
| 7.67 | % |
|
| 5.75 | % |
A summary of the Company’sCompany's future minimum lease payments under noncancelable operating leases excluding tenant improvement payables, as of September 30, 2022,March 31, 2023, is as follows (in thousands):follows:
|
| AS OF SEPTEMBER 30, 2022 |
| |
Remainder of 2022 |
| $ | 2,160 |
|
2023 |
|
| 10,610 |
|
2024 |
|
| 8,426 |
|
2025 |
|
| 7,380 |
|
2026 |
|
| 7,082 |
|
Thereafter |
|
| 46,125 |
|
Total |
| $ | 81,783 |
|
24
|
| MARCH 31, 2023 |
| |||||
| OPERATING LEASES |
|
| FINANCE LEASES |
| |||
|
| ($ in thousands) |
| |||||
Remainder of 2023 |
| $ | 6,828 |
|
| $ | 130 |
|
2024 |
|
| 9,568 |
|
|
| 32 |
|
2025 |
|
| 8,280 |
|
|
| — |
|
2026 |
|
| 8,204 |
|
|
| — |
|
2027 |
|
| 8,185 |
|
|
| — |
|
Thereafter |
|
| 46,183 |
|
|
| — |
|
Total future minimum lease payments |
|
| 87,248 |
|
|
| 162 |
|
Less: imputed interest |
|
| (34,463 | ) |
|
| (6 | ) |
Total |
| $ | 52,785 |
|
| $ | 156 |
|
17. COMMITMENTS AND CONTINGENCIES
Legal proceedings
Legal claims may arise from time to time in the normal course of business. There are no such claims as of September 30, 2022 or December 31, 2021 nor during the respective three and nine months ended September 30,March 31, 2023 and 2022, and 2021, that are expected to have a material effect on the Company’s condensed consolidated financial statements.
Other funding commitments
In December 2020, the Company entered into an assignment and license agreement with Bayer CropScience LLP (“Bayer”) under which the Company may be obligated to make milestone and royalty payments. These payment obligations are contingent upon future events, such as achieving certain development, regulatory, and commercial milestones or generating product sales. The timing of these events is uncertain; accordingly, the Company cannot predict the period during which these payments may become due. The Company has agreed to pay up to $2.0 million in milestone payments under this assignment and license agreement when certain development milestones are met. The Company assessed the milestones for the ninethree months ended September 30, 2022March 31, 2023 and concluded no such milestone payments were deemed probable nor due.
In November 2021, the Company entered into a manufacturing and development contract service agreement with a contract development and manufacturing organization for the Company’s mRNA COVID-19 vaccine. Based on the Company’s minimum purchase commitments, the Company expects to pay the organization a minimum of approximately $11.58.8 million in service fees under the agreement, excluding the cost of raw materials. Based on the current schedule, the Company expects to incur the majority of these expenses in 2022 and the remainder in 2023. For the nine months ended September 30, 2022, theThe Company has incurred approximately $5.75.9 million in costs under this service arrangement for the year ended December 31, 2022, with the remainder in 2023. For the three months ended March 31, 2023, the Company did incur any costs under this service agreement.
32
17. SUBSEQUENT EVENTS18. RELATED PARTY TRANSACTIONS
On October 12, 2022,The Company is party to a Lease Agreement (the “Farmland Lease”) with Mendocino View Farm, LLC, which is a wholly-owned subsidiary of Fall Line Endurance Fund, LP (“Fall Line”). Fall Line is a greater than 5% shareholder of the Company announcedand Eric O’Brien, a restructuring plandirector on the Company’s Board of Directors, is the co-founder and Managing Director of Fall Line. Pursuant to realign operating costs to better focus on near-term value drivers, resulting in a reductionthe terms of the Company’s workforce byFarmland Lease, the Company is leasing approximately 2581.25%. As a result acres of the restructuring plan, the Company expects to incur a pre-tax restructuring charge in the fourth quarter of 2022 within the rangefarmland for research and development purposes at an annual rental rate of $1.50.1 million plus operating expenses. The initial term of the Farmland Lease is ten years, which commenced on January 1, 2023, subject to an option to extend for an additional ten years. Under the Farmland Lease, the Company agreed to pay $2.00.4 million which is expected to consistas additional rent, payable in two installments of employee severance payments and other restructuring related costs and expenses and approximately $3.50.2 million toon each of January 1, 2023 and January 1, 2024. Fall Line provided the Company an allowance of $4.00.1 million towards tenant improvements. Either party under the Farmland Lease may terminate the Farmland Lease subject to a termination fee of incremental non-cash charges resulting from consolidation$0.2 million. Finally, the Company has a right of first offer to purchase the leased farmland in the event Fall Line intends to sell all or any portion of the Company’s lab and office spaces. The reductions in headcount are expected to generate savings of approximately $13.0 million in direct employee costs in 2023 and the Company expects there will be savings from other direct and indirect cost areas.leased farmland.
3325
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of GreenLight Biosciences Holdings
PBC and its consolidated subsidiaries should be read together with the Company’s unaudited condensed consolidated financial statements, together with the related notes thereto, included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and the Company’s audited consolidated financial statements together withand the related notes thereto (the “2021 Consolidated Financial Statements”), included as Exhibit 99.1 to the Company’s Amendment No. 1 to Currentin our Annual Report on Form 8-K filed with10-K for the Securities and Exchange Commission on Marchyear ended December 31, 2022 and the Company’s audited consolidated financial statements, together with the related notes thereto (the “2021 Consolidated Financial Statements”), included as Exhibit 99.1 to Current Report on Form 8-K filed with the Securities and Exchange Commission on September 26, 2022. This discussion contains forward-looking statements that involve numerous risks and uncertainties, including, but not limited to, those described under the heading “Risk Factors” in Item 1A of Part II of this Report and Item IA of Part I of the Company’s Annual Report for the year ended December 31, 2021.2022. See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Report. All references to years, unless otherwise noted, refer to the Company’s fiscal years, which end on December 31. For purposes of this section, all references to “we,” “us,” “our,” “New GreenLight” or the “Company” refer to GreenLight Biosciences Holdings PBC and its consolidated subsidiaries.
Overview
GreenLight Biosciences Holdings, PBC is a pre-commercial stage biotechnology company with a proprietary cell-free ribonucleic acid (RNA) production platform for the discovery, development, and commercialization of high-performing products to promote healthier plants, foods, and people. Our vision is to pave the way for a sustainable planet through widely available and affordable RNA products. We are developing RNA products for plant and life science applications to advance crop management, plant protection, animal health, vaccine development and pandemic preparation. We have a pipeline of product candidates across various stages of development.
Since our inception in 2008, we have devoted substantially all of our efforts and financial resources to conducting research and development activities for our programs, acquiring, in-licensing, and discovering product candidates, securing related intellectual property rights, raising capital, and organizing and staffing our company. We do not have any products approved for sale and have not generated any revenue from product sales. From our founding through September 30, 2022,March 31, 2023, we have funded our operations primarily through proceeds from the sale of our capital stock, the Business Combination (including the related PIPE financing), the Private Placement in August 2022 PIPE Financing (as defined below), debt financings, the issuance of convertible notes and collaboration agreements.
In October 2022, we announced a corporate realignment to focus on key anticipated near-term value drivers and extend the Company's cash runway. With the realignment, the Company is seeking to improve its organizational structure through certain team integrations that are expected to allow the Company to more efficiently support its research, development and commercialization goals.
We have incurred significant operating losses since inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates. Our net losses were $128.3$28.5 million and $77.6$38.2 million for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, respectively. As of September 30, 2022March 31, 2023 and December 31, 20212022 we had an accumulated deficit of $381.9$449.1 million and $253.6$420.6 million, respectively. Notwithstanding our recent corporate realignment, we expect to continue to incur significant expenses and operating losses as we pursue our remaining programs, particularly if and as we:
34
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. We expect to finance our operations through the sale of equity securities, debt financings or other capital sources, which may continue to include collaborations with other companies or other strategic transactions. The fundraising environment for early-stage biotechnology companies like ours is becoming increasinglycontinues to be extremely challenging, and we may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise sufficient capital or enter into such agreements or arrangements as and when needed, we may have to significantly delay, scale back, or discontinue the development and
26
commercialization of one or more of our product candidates and delay or discontinue the pursuit of potential in-license or acquisition opportunities.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to further reduce or terminate our operations. The Company expects that its existing cash and cash equivalents of $98.4$32.4 million as of September 30, 2022March 31, 2023 will last through the second quarter of 2023 but will not be sufficient to fund its operations for twelve months from the date these interim financial statements are issued. We are continuing to evaluate a range of additional opportunities to extend cash runway, including management of program spending, platform licensing collaborations and potential financing activities. In the event the Company is unable to secure additional outside capital to fund our obligations prior to the end of the second quarter of 2023, the Company will be required to seek other strategic alternatives, which may include, among others, scaling back or discontinuing certain or all operations to reduce costs, closure of operations, sale of certain of our assets, a sale of the entire company to strategic or financial investors, and/or seeking protection under the U.S. bankruptcy laws.
Macroeconomic Conditions
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, including in Europe, and record inflation. GreenLight’s business, financial condition and results of operations could be materially and adversely affected by any negative impact on the global economy and capital markets resulting from these global economic conditions, particularly if such conditions are prolonged or worsen.
Economic uncertainty in various global markets, including the U.S. and Europe, caused by political instability and conflict and economic challenges caused by the ongoing COVID-19 pandemic, have led to market disruptions, including significant volatility in commodity prices, credit and capital market instability and supply chain interruptions, which have caused record inflation globally. In responseWhile we recognize that the United States public health emergency for COVID-19 is planned to end in May 2023, the ongoing global COVID-19 pandemic, we established a cross-functional task force and have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our employees and our business. Our operations are considered an essential business and we have been allowed to continue operating under governmental restrictions during this period. We have taken measures to continue our research and development activities, while work in laboratories and facilities has been organized to reduce risk of COVID-19 transmission. The extent of thefull impact of the ongoing COVID-19 pandemic to date and current macroeconomic conditions, including changes in inflation, interest rates and overall economic conditions and uncertainties on our business, operations and product development timelines and plans remains uncertain, and will depend on certain developments, including the duration and spread of the outbreak and its impact on our field trial completion, clinical trial initiation and enrollment, trial sites, contract research organizations (“CROs”), contract manufacturing organizations (“CMOs”), and other third parties with whom we do business, as well as its impact on regulatory authorities and our key scientific and management personnel.
While we are experiencing limited financial and operational impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with these macroeconomic conditions, including potential uncertainty with the stability of banks and other financial institutes in light of the ongoing pandemic,Silicon Valley Bank closure in March 2023, it is impossible to predict the extent to which GreenLight’s operations will be impacted in the short and long term, or the ways in which such instability could impact our business financial condition, and results of operations ultimatelyoperations. The extent and duration of these market disruptions, whether as a result of the military conflict between Russia and Ukraine, geopolitical tensions, record inflation or otherwise, are impossible to predict, but could be materially adversely affected.substantial. Furthermore, the impacts from the COVID-19 pandemic have resulted and will likely continue to result in significant disruptions to the global economy and capital markets around the world. GreenLight cannot predict the future progression or full impact of the outbreak and its effects on GreenLight’s business and operations. We continue to closely monitor the global economic and geopolitical conditions and the ongoing COVID-19 pandemic as we evolve our business continuity plans, clinical development plans and response strategy.
Recent Developments
Human Health ProgramsIndication of Interest from Fall Line
OurOn March 29, 2023, the Company received a non-binding indication of interest from Fall Line Endurance Fund, L.P. (“Fall Line”) to acquire all of the outstanding capital stock of the Company (the “Proposed Transaction”). The terms of any potential agreement between GreenLight and Fall Line would be contingent on certain conditions, including completion of due diligence review and negotiation of definitive transaction documents, as well as certain to be identified Company stockholders agreeing to roll their existing equity in connection with the Proposed Transaction. GreenLight’s Board of Directors through a special committee thereof (the “Special Committee”) is carefully evaluating Fall Line’s indication of interest within the context of the ongoing focus remains on obtaining proofreview of conceptvarious alternatives and in consultation with its retained financial and legal advisors. No assurance can be given that a definitive transaction with respect to Fall Line’s indication of our technology platform with our COVID-19 vaccine program and our shingles vaccine program, each as further described below. Other potential product candidates in our human health pipeline are in early stages of pre-clinical research and development and have yet to reach the candidate selection phase. In order to achieve candidate selection phase for ourinterest or any other potential product candidates in our human health pipeline, we must successfully designtransaction will eventually be consummated. GreenLight does not intend to make further announcements about any of the various alternatives that are being evaluated unless and testuntil GreenLight’s Board of Directors and/or the product candidates in animal models, achieve positive results, select the product candidates to progress to IND-enabling toxicology studies, develop chemistry, manufacturing, and controls protocols and createSpecial Committee has approved a development plan to discuss with applicable regulatory agencies as part of pre-submission consultations, and manufacture, fill and finish the vaccine candidate material.specific transaction or otherwise determines that further disclosure is appropriate or
COVID-19 Vaccine Program
Our COVID-19 vaccine candidate, GLB-COV-2-043, which is based on the original “Wuhan” strain of the SARS-CoV-2 virus, has successfully completed preclinical testing and we are pursuing approval to begin Phase I/II clinical trials. In April of 2022, we submitted a Clinical Trials Application, or CTA, with the South African Health Products Regulatory Authority, or SAHPRA for a phase I/II single-vaccination booster study. That application was rejected with the recommendation that the resubmission include more detail on the
3527
specific benefitsnecessary. As of our testing effortsMarch 31, 2023, Fall Line had a beneficial ownership percentage of 5.9% based on 151,681,314 shares of GreenLight Common Stock issued and a resulting vaccine will bring to South Africa considering the ready availabilityoutstanding as of other COVID-19 vaccines in that country. After further review and discussions with SAHPRA, we have decided not to amend or resubmit our CTA with SAHPRA in favor of identifying other countries in which to begin clinical trials and consider whether to do so in combination with a US-based Investigational New Drug, or IND, application with the FDA. Subject to our ability to identify a viable country and obtain applicable regulatory approvals, we are continuing to work towards initiating a Phase I/II clinical trial by the first half ofMarch 31, 2023. We can offer no assurance that any clinical trial applications will be accepted by regulatory authorities.
Shingles Vaccine Program
Since March 2022, our Shingles vaccine program has progressed from the stage of concept evaluation to the stage of antigen design and pre-clinical evaluation in small animals. In March 2022 we granted Serum Institute of India Private Limited, or SIIPL, an exclusive license to use our proprietary technology platform to develop, manufacture and commercialize an mRNA Shingles product and up to two other mRNA products in all territories other than the United States, the 27 member states of the European Union, the United Kingdom, Australia, Japan, New Zealand, Canada, South Korea, China, Hong Kong, Macau, and Taiwan. Pursuant to our arrangement with SIIPL, we are performing the design and preclinical research work to develop a shingles vaccine candidate. Once a candidate is selected, SIIPL will undertake toxicology testing, clinical and manufacturing development, product registration and commercialization in the licensed regions. We currently anticipate that we will select a candidate in 2023 to enable SIIPL to commence clinical development thereafter.
Plant Health Programs
The success of our plant health product pipeline will depend on us inventing and bringing to market new uses of RNA in agriculture. Since our product candidates are first of a kind, we typically do not project the timing of a product candidate coming to market until Phase 3 of our development process when we draft a Federal Insectiside, Fungicide, and Rodenticide Act ("FIFRA") dossier for internal review. While we believe our projected timelines are reasonable, given that we are introducing new modes of action for pest control, it is difficult to predict when we will be able to obtain the regulatory approvals required for commercial sales and our expected timelines may be subject to change. Our initial experience with bringing RNA-based agricultural products to market were based on the conception, development and testing of Calantha and we continue to grow our development and regulatory experience as we develop RNA solutions to manage a range of target pests.
Colorado Potato Beetle Program
Calantha, our product candidate for the Colorado potato beetle (Leptinotarsa decemlineata), was submitted to the EPA for approval earlier this year. We are aiming to commercially launch Calantha in 2023, assuming we are able to obtain EPA and required state approvals by or before the first half of 2023 ahead of the following growing season.
Varroa Mite Program
We are in the process of preparing a registration for our Varroa mite product for submission to the EPA and are conducting studies necessary for that submission using the EPA’s Guidance on Exposure and Effects Testing for Assessing Risks to Bees. The viscosity of our formulation makes it difficult for us to rely solely on Tier 1 toxicity study under the EPA guidance and we have therefore recently conducted and completed a Tier 2 toxicity study to enable us to better satisfy the data requirements in preparation for submission to the EPA. For the United States registration of our Varroa mite product, we expect to make our submission for approval under the FIFRA
36
regulations in the first half of 2023. In certain foreign jurisdictions, including the European Union, we expect that we will be required to apply for authorization of our Varroa mite product as an animal health product under applicable veterinary medicine regulations.
Diamond Back Moth Program
We continue to adjust the formulation of our Diamond Back Moth candidate based on data from field testing and now target commercialization after 2026, subject to receipt of regulatory approval.
Botrytis Program
We continue to adjust the formulation of our Botrytis candidate based on data from field testing and now target commercialization after 2025, subject to receipt of regulatory approval.
Fusarium Head Blight Program
We are preparing to begin early field testing of our Fusarium product candidates and expect that we will need to complete 2 seasons of field testing given the importance of mycotoxin control for public health and have revised our timeline accordingly.
On August 9, 2021, the Company and Merger Sub entered into the Business Combination Agreement with GreenLight Biosciences, Inc. (the "Business Combination Agreement" and the transactions contemplated by the Business Combination Agreement, the "Business Combination"). On February 2, 2022, the Business Combination was consummated, pursuant to which Merger Sub merged with and into GreenLight Biosciences, Inc., with GreenLight Biosciences, Inc. surviving the Merger as a wholly owned subsidiary of the Company. On February 2, 2022, in connection with the consummation of the Merger, the Company changed its name to GreenLight Biosciences Holdings, PBC and became a public benefit corporation.
Immediately before the closing of the Business Combination, the Company held approximately $207$207.0 million in a trust account for its public stockholders. In connection with the Business Combination, the Company's public stockholders redeemed shares of public common stock for $194.9 million, and the funds remaining after such redemptions became available to finance transaction expenses and the future operations of the Company. In connection with the Business Combination, the Company entered into agreements with new investors and existing investors in GreenLight Biosciences, Inc. to subscribe for and purchase an aggregate of approximately 12.4 million shares of the Company's Class A Common Stock (the “February 2022 PIPE Financing”). The February 2022 PIPE Financing was consummated on February 2, 2022 and resulted in gross proceeds of approximately $136.4 million (of which $35.3 million had been advanced to GreenLight Biosciences, Inc. by the Prepaying PIPE Investors).
The Merger was accounted for as a reverse recapitalization, whereby for accounting and financial reporting purposes, GreenLight Biosciences, Inc. was the acquirer. A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the Company represent the continuation of the consolidated financial statements of GreenLight Biosciences, Inc. in many respects. The shares of the Company remaining after redemptions of shares of the Company's public common stock and the unrestricted net cash and cash equivalents on the date the Business Combination was consummated were accounted for as a capital infusion to GreenLight Biosciences, Inc.
The Company retroactively applied the recapitalization to the Company’s equity structure, including the consolidated statement of stockholders’ (deficit) equity from January 1, 2020 to December 31, 2021, the total stockholders’ (deficit) equity within the Company’s consolidated balance sheet as of December 31, 2021 and 2020, and the weighted average outstanding shares (basic and diluted) for the years ended December 31, 2021 and 2020. The retroactive application reflects the equivalent number of shares of the Company’s common stock, $0.0001 par value per share, issued to GreenLight’s stockholders in connection with the Business Combination at the applicable exchange ratio of .6656 (the “Exchange Ratio”). Additionally, GreenLight’s convertible preferred stock previously classified as temporary equity was retroactively adjusted, converted into common stock and reclassified to permanent equity as a result of the reverse recapitalization.
37
The most significant change in the Company's financial position and results of operations resulting from the consummation of the Business Combination (including the February 2022 PIPE Financing) was an estimated cash inflow (as compared to GreenLight Biosciences, Inc. balance sheet at December 31, 2021) of approximately $136.4 million, prior to payment of the transaction costs. Total direct and incremental transaction costs of $26.7 million were treated as a reduction of the cash proceeds with capital raising costs being deducted from GreenLight Biosciences, Inc.'s additional paid-in capital.
As a consequence of the Business Combination, GreenLight Biosciences, Inc. effectively became the successor to a publicly traded and Nasdaq-listed company, which required it to hire additional personnel and is requiring it to implement procedures and processes to address public company regulatory requirements and customary practices. The Company has incurred and expects to continue to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees.
Financial Overview
Components of Our Results of Operations
Revenue
For the ninethree months ended September 30, 2022,March 31, 2023, we have not recognized any revenue from product sales. If our development efforts for our product candidates are successful and result in regulatory approval, or license agreements with third parties, we may generate revenue in the future from product sales or license agreements. However, there can be no assurance as to when we will generate such revenue, if at all.
License and Collaboration Revenue
CollaborationLicense revenue is related to our collaborationlicense agreement with Serum Institute of India Private Limited (“SIIPL”) which was entered into in March 2022.2022, pursuant to which the Company granted SIIPL an exclusive, sub-licensable, royalty-bearing license to use the Company’s proprietary technology platform to develop, manufacture and commercialize up to three mRNA products. The first licensed product target will be a shingles product target, and SIIPL has an option to select the additional two licensed product targets through the end of 2024. Under the terms of the Agreement with SIIPL, the Company will provide research services related to the shingles product target to develop a “proof of concept” and will provide manufacturing technology transfer services. In addition, GreenLight retains the option to purchase research and clinical trial data, developed by SIIPL, for 50% of the cost of the research studies and clinical trials for use in the Company’s own development.
28
Pursuant to the License Agreement, SIIPL will pay the Company an upfront license fee of $5.0 million, as well as payments upon additional target selection and reservation of exclusivity. The Company may receive up to a total of an additional $17.0 million in development, regulatory and commercial (net sales) based milestone payments across all three product targets, as well as manufacturing technology transfer payments up to $10.0 million. SIIPL shall pay royalty payments in the mid-double digits, based on the net sales of products resulting from the licensed technology for the term of the License Agreement. The License Agreement shall terminate on a product-by-product and country-by-country basis on the later of the expiration of the patent rights owned by the Company or the tenth anniversary of the first commercial sale of the applicable product(s) in the applicable country. For the three and nine months ended September 30, 2022,March 31, 2023, we recognized $1.7$3.8 million and $3.4 million, respectively of revenue primarily related to the delivery of IP and research services, which includes manufacturing technology transfer services. We did not recognize any revenue under this agreement for the three months ended March 31, 2022.
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates Foundation to advance research in in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and/or durable suppression of HIV in developing countries. We were approved to receive a grant of $3.3 million in the aggregate. As of September 30,December 31, 2022, we had received the entire grant amount, of which $0.8 million was recorded as deferred revenue as of that date.amount. The grant agreement provides for payments to reimburse qualifying costs, including general and administrative costs, incurred to perform our obligations under the agreement. Revenue from this grant agreement is recognized as the qualifying costs related to the grant are incurred, and any amounts received in excess of revenue recognized are initially recorded as deferred revenue on our condensed consolidated balance sheets and later recognized as revenue when qualified costs are incurred. The revenue recognized through September 30, 2022As of March 31, 2023, we ceased any ongoing research work under such grant, completed close-out related activities and are in the grant was relatedprocess of returning any remaining unused funds to qualifying research and development expenditures that we incurred. The research supported by this grant is expected to be completed by the end of 2023.Gates Foundation
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts and the development of our product candidates. We expense research and development costs as incurred. These expenses include:
Program expenses
38
Personnel expenses
Facilities and other expenses
Costs for certain activities are recognized based on an evaluation of the progress to completion of specific tasks using data such as information provided to us by our vendors and analyzing the progress of our field trials and preclinical studies or other services performed.
This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual costs. 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. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered.
29
Our direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs and research laboratories in connection with our pre-clinical development, field trials, process development, manufacturing, and clinical development activities. Our direct research and development expenses by program also include fees incurred under license, acquisition, and option agreements. We do not allocate costs associated with our discovery efforts, laboratory supplies, employee costs or facility expenses, including depreciation or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to conduct our research and discovery as well as for managing our pre-clinical development, field trials, process development, manufacturing, and clinical development activities.
General and Administrative Expenses
General and administrative expense consists primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation, and other related costs. General and administrative expense also includes professional services, including legal, accounting and audit services, consulting fees and facility costs not otherwise included in research and development expenses, insurance, and other general administrative expenses.
We anticipate that our general and administrative expenses will increase commensurate with future commercialization of our products and expansion of research collaboration work. We also anticipate that we will incurhave incurred significantly increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.
Other (Expense) Income, Net
Other (expense) income, net consists of interest income, interest expense and any change in the fair value of our warrant liabilities.
Interest Income and Other Income, net
InterestIncome and other income, net primarily consists of income earned in connection with our investments in money market funds.
Interest Expense
Interest expense consists of interest on outstanding borrowings under our loan agreements with Trinity Capital, Silicon Valley Bank and Horizon Technology Finance, our convertible debt and tenant improvement loans payable with our lessors.Finance. Interest expense also includes amortization of debt discount and debt issuance costs.
39
Fair Value of Warrant Liabilities
Change in fair value of warrant liabilities consists of the remeasurement gains or losses associated with changes in the fair value of the warrant liabilities. Until settlement, fluctuations in the fair value of our warrant liabilities are based on the remeasurement at each reporting period.
Provision for Income Taxes
Our income tax provision consists of an estimate for U.S. federal, state and foreign income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities and changes in tax law. The Company has a provision for income taxes for the three and nine months ended September 30, 2022, respectively related to the foreign withholding taxes on payments made by SIIPL, pursuant to the research and collaboration agreement. There is no provision for U.S. federal, state, and stateforeign income taxes for the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, respectively, as we have historically incurred net operating losses, and expect to continue to generate net operating losses. Based on this history of net operating losses, we also maintain a full valuation allowance against our U.S. federal and state deferred tax assets.
30
Results of Operations
Comparison of the Three Months Ended September 30,March 31, 2023 and 2022 and 2021
The following table summarizes our results of operations for the three months ended September 30, 2022March 31, 2023 and 2021:2022:
|
| THREE MONTHS ENDED |
|
| INCREASE / |
|
| THREE MONTHS ENDED |
|
| INCREASE / |
| ||||||||||||
Dollars (in thousands) |
| 2022 |
|
| 2021 |
|
| (DECREASE) |
|
| 2023 |
|
| 2022 |
|
| (DECREASE) |
| ||||||
License and collaboration revenue |
| $ | 1,689 |
|
| $ | — |
|
| $ | 1,689 |
|
| $ | 3,820 |
|
| $ | — |
|
| $ | 3,820 |
|
Grant revenue |
|
| 43 |
|
|
| 362 |
|
|
| (319 | ) |
|
| — |
|
|
| 257 |
|
|
| (257 | ) |
Total revenue |
|
| 1,732 |
|
|
| 362 |
|
|
| 1,370 |
|
|
| 3,820 |
|
|
| 257 |
|
|
| 3,563 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Research and development |
|
| 29,944 |
|
|
| 22,661 |
|
|
| 7,283 |
|
|
| 23,168 |
|
|
| 27,281 |
|
|
| (4,113 | ) |
General and administrative |
|
| 8,025 |
|
|
| 5,112 |
|
|
| 2,913 |
|
|
| 8,944 |
|
|
| 9,755 |
|
|
| (811 | ) |
Total operating expenses |
|
| 37,969 |
|
|
| 27,773 |
|
|
| 10,196 |
|
|
| 32,112 |
|
|
| 37,036 |
|
|
| (4,924 | ) |
Loss from operations |
|
| (36,237 | ) |
|
| (27,411 | ) |
|
| (8,826 | ) |
|
| (28,292 | ) |
|
| (36,779 | ) |
|
| 8,487 |
|
Other expenses: |
|
|
|
|
|
|
|
|
| |||||||||||||||
Interest income |
|
| 240 |
|
|
| 4 |
|
|
| 236 |
| ||||||||||||
Interest and other expense |
|
| (1,069 | ) |
|
| (631 | ) |
|
| (438 | ) | ||||||||||||
Other income (expense): |
|
|
|
|
|
|
|
|
| |||||||||||||||
Interest and other income, net |
|
| 603 |
|
|
| 4 |
|
|
| 599 |
| ||||||||||||
Interest expense |
|
| (1,007 | ) |
|
| (1,073 | ) |
|
| 66 |
| ||||||||||||
Change in fair value of warrant liability |
|
| — |
|
|
| (1,143 | ) |
|
| 1,143 |
|
|
| 227 |
|
|
| (359 | ) |
|
| 586 |
|
Total other income (expense), net |
|
| (829 | ) |
|
| (1,770 | ) |
|
| 941 |
|
|
| (177 | ) |
|
| (1,428 | ) |
|
| 1,251 |
|
Net loss before income tax |
|
| (37,066 | ) |
|
| (29,181 | ) |
|
| (7,885 | ) | ||||||||||||
Income tax expense |
|
| 1,092 |
|
|
| — |
|
|
| 1,092 |
| ||||||||||||
Net loss |
| $ | (38,158 | ) |
| $ | (29,181 | ) |
| $ | (8,977 | ) |
| $ | (28,469 | ) |
| $ | (38,207 | ) |
| $ | 9,738 |
|
License and Collaboration Revenue
For the three months ended September 30, 2022,March 31, 2023, we recognized $1.7$3.8 million of revenue from our license and collaboration agreement with SIIPL primarily related to the delivery of IP and research services, which includes manufacturing technology transfer services. Because the license and collaboration agreement was executed in March 2022, weWe did not recognize any revenue under this agreement for the three months ended September 30, 2021.March 31, 2022.
Grant Revenue
GrantThere was no grant revenue was $43 thousandrecorded for the three months ended September 30, 2022,March 31, 2023, compared to grant revenue of $0.4$0.3 million for the three months ended September 30, 2021.March 31, 2022. All of our grant revenue is derived from a grant made by the Bill & Melinda Gates Foundation in July 2020. The decrease in grant revenue iswas due to a decrease of costs incurredthe fact that we ceased any ongoing research work under this grant.grant as of December 31, 2022.
40
Research and Development Expenses
|
| THREE MONTHS ENDED |
|
| INCREASE / |
|
| THREE MONTHS ENDED |
|
| INCREASE / |
| ||||||||||||
Dollars (in thousands) |
| 2022 |
|
| 2021 |
|
| (DECREASE) |
|
| 2023 |
|
| 2022 |
|
| (DECREASE) |
| ||||||
Program expense |
| $ | 11,043 |
|
| $ | 8,593 |
|
| $ | 2,450 |
|
| $ | 4,399 |
|
| $ | 7,988 |
|
| $ | (3,589 | ) |
Personnel costs |
|
| 11,416 |
|
|
| 9,407 |
|
|
| 2,009 |
|
|
| 11,107 |
|
|
| 12,628 |
|
|
| (1,521 | ) |
Other |
|
| 7,485 |
|
|
| 4,661 |
|
|
| 2,824 |
|
|
| 7,662 |
|
|
| 6,665 |
|
|
| 997 |
|
Total research and development expenses |
| $ | 29,944 |
|
| $ | 22,661 |
|
| $ | 7,283 |
|
| $ | 23,168 |
|
| $ | 27,281 |
|
| $ | (4,113 | ) |
Research and development expense was $29.9$23.2 million for the three months ended September 30, 2022,March 31, 2023, compared to $22.7$27.3 million for the three months ended September 30, 2021.March 31, 2022. The increasedecrease of $7.2$4.1 million resulted primarily from increaseddecreased program costs of $2.5$3.6 million related to R&Dresearch and development materials and service fees supporting the commercial-scale engineering run, pre-clinical trial activities and personnel expenses, as well as facilitiesmanufacturing costs, such as rent and depreciation expenses.
Ourdecreased headcount supporting research and development activities increased, which generated additional personnel-relatedresulted in decreased personnel costs of $2.0 million. Other$1.5 million, offset by an increase in other research and development costs increased byof approximately $2.8$1.0 million, primarily related to a $1.7 millionan increase in rental expense as we expanded our footprints and entered into multiple leases during 2021 and 2022 and an increase of $0.4 million in depreciation expense due to an increase in capitalized expenditures for lab equipment and lab space leasehold improvements.
General and Administrative Expenses
General and administrative expense was $8.0$8.9 million for the three months ended September 30, 2022,March 31, 2023, compared to $5.1$9.8 million for the three months ended September 30, 2021.March 31, 2022. The increasedecrease of $2.9$0.9 million was primarily due to a decrease of $0.7 million of professional fees,
31
decreased personnel costs of $0.4 million; offset by an increase of $0.5 million in personnel-related costs in general and administrative functions, which resulted from increased headcount supporting general and administrative activities; a $1.5 million increase in professional services fees associated with being a publicly traded company; and an increase of $0.9$0.2 million related to facilities and other administrative expenses as we expanded our footprints and entered into multiple leases during 2021 and 2022.
Interest Incomeand other income, net
ForInterest and other income, net was $0.6 million for the three months ended September 30, 2022, interest income increased by $0.2 millionMarch 31, 2023 compared to an insignificant amount for the three months ended September 30, 2021.March 31, 2022. This increase in our interest income was driven by an increase in our cash and cash equivalents due to capital raises in 2022 and an increase in the interest rate yield on our cash and cash equivalents.
Interest and Other Expense
Interest and other expense was $1.0 million for the three months ended March 31, 2023, compared to $1.1 million for the three months ended September 30, 2022, compared to $0.6 million for the three months ended September 30, 2021.March 31, 2022. The increase of $0.5 milliondecrease is primarily related to interest accrued on the various loan agreements we entered into during the second half of 2021 as well as an increase in interest ratesprincipal payments on our variable rate debt.
Change in Fair Value of Warrant Liabilities
There was no change in fair value of warrant liabilities for the three months ended September 30, 2022 compared to an expense of $1.1 million for the three months ended September 30, 2021. The entire decrease of $1.1 million in the fair value of our warrant liabilities was due to the decrease in the fair value of the private placement warrants.
41
Results of Operations
Comparison of the Nine Months Ended September 30, 2022 and 2021
The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021:
|
| NINE MONTHS ENDED |
|
| INCREASE / |
| ||||||
Dollars (in thousands) |
| 2022 |
|
| 2021 |
|
| (DECREASE) |
| |||
License and collaboration revenue |
| $ | 3,437 |
|
| $ | — |
|
| $ | 3,437 |
|
Grant revenue |
|
| 320 |
|
|
| 1,180 |
|
|
| (860 | ) |
Total revenue |
|
| 3,757 |
|
|
| 1,180 |
|
|
| 2,577 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
| |||
Research and development |
|
| 101,376 |
|
|
| 62,081 |
|
|
| 39,295 |
|
General and administrative |
|
| 27,357 |
|
|
| 13,943 |
|
|
| 13,414 |
|
Total operating expenses |
|
| 128,733 |
|
|
| 76,024 |
|
|
| 52,709 |
|
Loss from operations |
|
| (124,976 | ) |
|
| (74,844 | ) |
|
| (50,132 | ) |
Other expenses: |
|
|
|
|
|
|
|
|
| |||
Interest income |
|
| 301 |
|
|
| 20 |
|
|
| 281 |
|
Interest and other expense |
|
| (3,480 | ) |
|
| (1,471 | ) |
|
| (2,009 | ) |
Change in fair value of warrant liability |
|
| 956 |
|
|
| (1,343 | ) |
|
| 2,299 |
|
Total other expense, net |
|
| (2,223 | ) |
|
| (2,794 | ) |
|
| 571 |
|
Net loss before income tax |
|
| (127,199 | ) |
|
| (77,638 | ) |
|
| (49,561 | ) |
Income tax expense |
|
| 1,092 |
|
|
| — |
|
|
| 1,092 |
|
Net loss |
| $ | (128,291 | ) |
| $ | (77,638 | ) |
| $ | (50,653 | ) |
|
|
|
|
|
|
|
|
|
| |||
License and Collaboration Revenue
For the nine months ended September 30, 2022, we recognized $3.4 million of revenue from our license and collaboration agreement with SIIPL primarily related to the delivery of IP and research services, which includes manufacturing technology transfer services. Because the license and collaboration agreement was executed in March 2022, we did not recognize any revenue under this agreement for the nine months ended September 30, 2021.
Grant Revenue
Grant revenue was $0.3 million for the nine months ended September 30, 2022, compared to grant revenue of $1.2 million for the nine months ended September 30, 2021. All of our grant revenue is derived from a grant madedebt offset by the Bill & Melinda Gates Foundation in July 2020. The decrease in grant revenue is due to a decrease of costs incurred under this grant.
Research and Development Expenses
|
| NINE MONTHS ENDED |
|
| INCREASE / |
| ||||||
Dollars (in thousands) |
| 2022 |
|
| 2021 |
|
| (DECREASE) |
| |||
Program expense |
| $ | 42,706 |
|
| $ | 25,671 |
|
| $ | 17,035 |
|
Personnel costs |
|
| 37,543 |
|
|
| 24,924 |
|
|
| 12,619 |
|
Other |
|
| 21,127 |
|
|
| 11,486 |
|
|
| 9,641 |
|
Total research and development expenses |
| $ | 101,376 |
|
| $ | 62,081 |
|
| $ | 39,295 |
|
Research and development expense was $101.4 million for the nine months ended September 30, 2022, compared to $62.1 million for the nine months ended September 30, 2021. The increase of $39.3 million resulted primarily from increased program costs related to commercial-scale engineering run, specifically costs of approximately $15.0 million related to R&D materials and service fees supporting the commercial-scale engineering run, pre-clinical trial activities and personnel expenses, as well as facilities costs such as rent and depreciation expenses.
Our headcount supporting research and development activities increased, which generated additional personnel-related costs of $12.6 million. Other research and development costs increased by approximately $9.6 million, primarily related to a $6.0 million increase
42
in rental expense as we expanded our footprints and entered into multiple leases during 2021 and 2022, and an increase of $2.0 million in depreciation expense due to an increase in capitalized expenditures for lab equipment and lab space leasehold improvements.
General and Administrative Expenses
General and administrative expense was $27.4 million for the nine months ended September 30, 2022, compared to $13.9 million for the nine months ended September 30, 2021. The increase of $13.5 million was primarily due to an increase of $4.6 million in personnel-related costs in general and administrative functions, which resulted from increased headcount supporting general and administrative activities; a $4.6 million increase in professional services fees to support the Business Combination Agreement and costs associated with being a publicly traded company; and an increase of $4.2 million related to facilities and other administrative expenses as we expanded our footprints and entered into multiple leases during 2021 and 2022.
Interest Income
For the nine months ended September 30, 2022, interest income increased by $0.3 million compared to the nine months ended September 30, 2021. This increase in our interest income was driven by an increase in our cash and cash equivalents due to capital raises in 2022 and an increase in the interest rate yield on our cash and cash equivalents.
Interest and Other Expense
Interest and other expense was $3.5 million for the nine months ended September 30, 2022, compared to $1.5 million for the nine months ended September 30, 2021. The increase of $2.0 million is primarily related to interest accrued on the various loan agreements we entered into during the second half of 2021 as well as an increase in interest rates on our variable rate debt.
Change in Fair Value of Warrant Liabilities
Other income attributable to the change in the fair value of warrant liabilities was $1.0as $0.2 million for the ninethree months ended September 30, 2022,March 31, 2023 compared to an expense of $1.3$0.3 million for the ninethree months ended September 30, 2021.March 31, 2022. The entire decrease of $2.3$0.5 million in the fair value of our warrant liabilities was due to the decrease in the fair value of the private placement warrants.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have generated recurring net losses. We do not have any products approved for sale and have not yet commercialized any product. Since our inception, we have funded our operations primarily through proceeds from the issuance of capital stock and to a lesser extent through debt financings, the issuance of convertible notes and collaboration agreements. From our founding through September 30, 2022,March 31, 2023, we have raised proceeds from the sale of our capital stock, the Business Combination (including the related PIPE financing), the August 2022 PIPE Financing, and from the issuance of debt and convertible notes. As of September 30, 2022,March 31, 2023, we had cash and cash equivalents of $98.4$32.4 million.
Private Placement and Securities Subscription Agreement
On August 11, 2022, we entered into Securities Subscription Agreements (the “August 2022 PIPE Subscription Agreements”) with certain institutional accredited investors (collectively, the “August 2022 PIPE Investors”), providing for the sale by us of 27,640,301 shares (the “August 2022 PIPE Shares”) of our Class A common stock (the “Common Stock”) at a purchase price of $3.92 per share, in a private placement (the “August 2022 PIPE Financing”). The August 2022 PIPE Shares were issued (the “Closing”) simultaneously with the execution and delivery of the August 2022 PIPE Subscription Agreements. The aggregate gross proceeds forfrom the Private Placement wereAugust 2022 PIPE Financing was approximately $108.3 million. The gross proceeds do not reflect transaction costs of $2.3 million. We intend to useare using the net proceeds from the August 2022 PIPE Financing to fund ongoing clinical development and commercialization of our existing product pipeline.
Business Combination and PIPE Financing
In February 2022, we consummated the Business Combination with ENVI, which generated gross proceeds to New GreenLight of approximately $136.4 million, including $124.3 million from the February 2022 PIPE Financing and $12.1 million from the trust account (after redemptions). The gross proceeds do not reflect transaction costs of $26.7 million. For more information, see “—Recent Developments—Business Combination and Public Company Costs” above.
43
Horizon Loan Agreement
In December 2021, we entered into a loan and security agreement with Horizon Technology Finance Corporation and Powerscourt Investments XXV, LP (together, “Horizon”), which provided for a term loan facility in an aggregate principal amount of up to $25.0 million, $15.0 million of which was borrowed at the closing and the remainder of which may be borrowed following the achievement of certain milestones, but not after June 30, 2022. As of June 30, 2022, we had not borrowed, and could no longer borrow the remainder of the term loan. Under the agreement, in January 2022 the lenders were granted 10-year warrants to purchase shares of common stock of GreenLight. The warrants are exercisable in the aggregate for a number of shares equal to 3% of the total term loan facility (assuming we borrow the full facility amount of $25.0 million) divided by the exercise price of the warrants. Upon the closing of the Business Combination, the warrants became warrants to purchase shares of New GreenLight Common Stock based on the exchange ratio under the Business Combination Agreement.
32
Accrued interest is payable monthly. Under the terms of our agreement, this loan accrues interest at a floating rate per annum equal to the one-month prime rate as reported in the Wall Street Journal on a date that is 5 business days prior to the funding date of the Loan plus 5.75%. The principal of each term loan must be repaid in equal monthly installments beginning February 1, 2023 (or August 1, 2023 if we borrow any of the remaining $10.0 million), with a scheduled final maturity date of July 1, 2025. We may prepay the term loans in full, but not in part, without premium or penalty, other than a premium equal to (i) 3% of the principal amount of any prepayment made within 12 months after the applicable funding date, (ii) 2% of the principal amount of any prepayment made between 12 and 24 months after the applicable funding date and (iii) 1% of the principal amount of any prepayment made more than 24 months after the applicable funding date. On the earlier of the scheduled final maturity date and the prepayment in full of the term loans, we must pay a final payment fee equal to 3.0% of the original principal amount of the funded term loans.
The agreement contains customary affirmative and negative covenants (including an obligation to maintain certain amounts of cash in accounts subject to springing control in favor of the lenders) and customary events of default; it does not contain a financial covenant. We granted a second-priority, perfected security interest in substantially all of our present and future personal property and assets, excluding intellectual property, to secure our obligations to the lenders, which security interest is subordinated to the security interest granted to Silicon Valley Bank.
In April 2021, we entered into a joinder agreement with Horizon pursuant to which the Company became a party to the Horizon loan agreements as a co-borrower. Under the joinder agreement, the Company also granted Horizon a continuing security interest in its existing and after-acquired personal property and assets, excluding intellectual property.
Silicon Valley Bank Loan Agreement
In September 2021, we entered into a loan and security agreement with Silicon Valley Bank, or SVB, providing for a term loan facility in an aggregate principal amount of up to $15.0 million, $10.0 million of which we borrowed at the closing and the remainder of which we may borrow following the achievement of certain milestones, but not after March 31, 2022. We did not borrow any additional amounts from SVB before March 31, 2022. At the closing, we granted SVB a 10-year warrant to purchase up to 34,427 shares of GreenLight Common Stock (assuming we borrow the entire $15.0 million from SVB and giving effect to the reverse recapitalization). Upon the closing of the Business Combination, the warrants became warrants to purchase shares of New GreenLight Common Stock based on the exchange ratio under the Business Combination Agreement. On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and SVB was subsequently transferred into a new entity, Silicon Valley Bridge Bank, N.A (“SVB Bridge Bank”).
Accrued interest is payable monthly. Under the terms of our agreement, this loan accrues interest at a floating rate per annum equal to the greater of (i) three and one half of one percent (3.50%) and (ii) the prime rate (as stated in the Wall Street Journal) plus the prime rate margin of one quarter of one percent (0.25%). The principal of each term loan must be repaid in equal monthly installments beginning April 1, 2022 (or October 1, 2022, if the Company borrows any of the remaining $5.0 million), with a scheduled final maturity date of September 1, 2024. On the earlier of the scheduled final maturity date and the prepayment in full of the term loans, the Company must pay a final payment fee equal to 4.0% of the original principal amount of the term loans. The Company may prepay the term loans in increments of $5.0 million and without premium or penalty, other than a premium equal to (i) with respect to any prepayment made on or before September 22, 2022, 3% of the principal so prepaid, (ii) with respect to any prepayment made after September 22, 2022 and on or before September 22, 2023, 2% of the principal so prepaid and (iii) with respect to any prepayment made after September 22, 2023 and on or before September 1, 2024, 1% of the principal so prepaid.
The loan and security agreement with SVB contains customary affirmative and negative covenants (including an obligation to maintain cash in accounts at SVB at all times in amounts sufficient to repay all loan obligations)obligations, which if not met constitute an event of default under the agreement) and customary events of default; it does not contain a financial covenant. We granted a first-priority, perfected security interest in substantially all of our present and future personal property and assets, excluding intellectual property, to secure our obligations to SVB.
44
In April 2021, we entered into a joinder agreement and first amendment to loan and security agreement with SVB pursuant to which the Company became a party to the SVB loan agreements as a borrower. Under these agreements, the Company also granted SVB a continuing security interest in its existing and after-acquired personal property and assets, excluding intellectual property. These agreements also amended certain terms of the original SVB loan agreement to, among other things, add representations, affirmative and negative covenants, and events of default regarding the Company’s obligations as a public benefit corporation. Under the amended terms, it is an event of default for there to be any pending or threatened litigation by a shareholder alleging that we or our directors failed to satisfy any obligations under Delaware law regarding our status as a public benefit corporation, if the litigation is likely to result in a final monetary judgment against us in excess of $250,000. In addition, if any action, investigation, or proceeding is pending or known to be threatened in writing against us with respect to such a claim, the bank may not need to make further loans to us.
33
Trinity Capital Equipment Financing Agreement
In March 2021, we entered into a master equipment financing agreement with Trinity Capital (Trinity) authorizing equipment financing with an aggregate borrowing capacity of $11.3 million, with up to $5.0 million available immediately and the remaining principal balance available to be drawn before September 2021. We entered into this loan to finance our capital purchases associated primarily with our research and manufacturing programs. The monthly payment factors for each draw are determined by Trinity based on the Prime Rate reported in the Wall Street Journal on the first day of the month in which an equipment financing schedule for such draw is executed. As of December 31, 2021,2022, the Company had drawn the entire $11.3 million, which is repayable in monthly installments starting April 2021.
Funding Future Operations; Going Concern
The Company estimates that its existing cash and cash equivalents of $98.4$32.4 million as of September 30, 2022March 31, 2023 will last through the second quarter of 2023 but will not be sufficient to fund its operations for twelve months from the date these interim financial statements are issued. As a result, there is substantial doubt about our ability to continue as a going concern for at least one year from the date of issuance of these financial statements, as discussed in Note 1 - Nature of Business and Basis of Presentation of the notes to our condensed consolidated financial statements as of September 30, 2022March 31, 2023 and for the three and nine months ended September 30,March 31, 2023 and 2022, and 2021, included elsewhere herein.
Based on our existing cash and cash equivalents, we are evaluating a range of opportunities to extend cash runway, including management of program spending, platform licensing collaborations and potential financing activities. In the event the Company is unable to secure additional outside capital to fund our obligations when they become due over the next 12 months, the Company will be required to seek other strategic alternatives, which may include, among others, scaling back or discontinuing certain or all operations to reduce costs, closure of operations, sale of certain of our assets, a sale of the entire company to strategic or financial investors, and/or seeking protection under the U.S. bankruptcy laws.
We expect to incur significant expenses and operating losses for the foreseeable future as we advance our product candidates through preclinical and clinical development and field trials, seek regulatory approval, and pursue commercialization of any approved product candidates. We anticipate that our general and administrative expenses will increase commensurate with future commercialization of our products and expansion of research collaboration work. In addition, in light of the completion of the Business Combination, we have and expect to continue to incur continuinghigher costs associated with operating as a public company. Because of the numerous risks and uncertainties associated with research, development, and commercialization of our product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements will depend on many factors, including:
45
34
Until we can generate product revenues to support our cost structure, if any, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, and other similar arrangements. To the extent that we raise additional capital through the sale of equity or convertible securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation, dividend, redemption, and other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures, or declaring dividends. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
|
| NINE MONTHS ENDED |
|
| INCREASE / |
|
| THREE MONTHS ENDED |
|
| INCREASE / |
| ||||||||||||
|
| 2022 |
|
| 2021 |
|
| (DECREASE) |
|
| 2023 |
|
| 2022 |
|
| (DECREASE) |
| ||||||
Net cash (used in) operating activities |
| $ | (112,142 | ) |
| $ | (67,241 | ) |
| $ | (44,901 | ) |
| $ | (31,060 | ) |
| $ | (49,511 | ) |
| $ | 18,451 |
|
Net cash (used in) investing activities |
|
| (22,907 | ) |
|
| (11,362 | ) |
|
| (11,545 | ) |
|
| (1,608 | ) |
|
| (250 | ) |
|
| (1,358 | ) |
Net cash provided by financing activities |
|
| 202,915 |
|
|
| 18,376 |
|
|
| 184,539 |
| ||||||||||||
Net cash provided by (used in) financing activities |
|
| (2,989 | ) |
|
| 102,497 |
|
|
| (105,486 | ) | ||||||||||||
Net increase (decrease) in cash, cash equivalents |
| $ | 67,866 |
|
| $ | (60,227 | ) |
| $ | 128,093 |
|
| $ | (35,657 | ) |
| $ | 52,736 |
|
| $ | (88,393 | ) |
Operating Activities
Cash flows from operating activities represent the cash receipts and disbursements related to all our activities other than investing and financing activities. Operating cash flow is derived by adjusting our net loss for non-cash operating items such as depreciation, amortization, and stock-based compensation as well as changes in operating assets and liabilities, which reflect timing differences between the receipt and payment of cash associated with transactions and when they are recognized in our results of operations.
During the ninethree months ended September 30, 2022,March 31, 2023, operating activities used $112.1$31.1 million of cash, primarily resulting from our net loss of $128.3 million, adjusted for non-cash items and the effect of changes in operating assets and liabilities. Non-cash adjustments primarily include stock-based compensation expense of $6.5 million and depreciation and amortization expense of $5.9 million offset by a change in the fair value of our warrant liabilities of $1.0 million. Net cash used by changes in our operating assets and liabilities consisted primarily of a $4.0 million decrease in accounts payable, an increase of $8.2 million in accrued expenses and other liabilities, a $9.0 million increase in prepaid expenses and other current assets, partially offset by an increase in deferred revenue of $6.4 million. The decrease in accounts payable is related to timing of vendor invoicing and payments. The increase in accrued expenses and prepaid expenses and other assets was due to our increased level of research collaborations and manufacturing development activities related to our product candidates.
During the nine months ended September 30, 2021, net cash used in operating activities was $67.2 million. Net cash used in operating activities consists of net loss of $77.6$28.5 million, adjusted for non-cash items and the effect of changes in operating assets and liabilities. Non-cash adjustments primarily include depreciation and amortization expense of $3.7$2.3 million, stock-based compensation of
46
$1.3 million, non-cash interest expense of $0.7$2.3 million, and amortization of right-of-use assets of $1.0 million; offset by a change in the fair value of our warrant liabilityliabilities of $1.3$0.2 million. Net cash providedused by changes in our operating assets and liabilities consisted primarily consisted of a $4.3decrease in deferred revenue of $3.8 million, increasea decrease of $2.7 million in accounts payableaccrued expenses, lease liabilities and other current liabilities, partially offset by a $0.9$1.8 million increase in prepaid expenses and other current assets. Theassets, and an increase in accounts payable of $0.2 million. The decrease in accrued expenses was due to reduced level of research activities and the increase in prepaid expenses and other assets was due to operating costs to support our operations as a public company, including insurance policies. The decrease in deferred revenue was due to revenue recognized on our license agreement we entered into with SIIPL in 2022.
During the three months ended March 31, 2022, operating activities used $49.5 million of cash, primarily resulting from our net loss of $38.2 million, adjusted for non-cash items and the effect of changes in operating assets and liabilities. Non-cash adjustments primarily include stock-based compensation of $2.2 million, depreciation and amortization expense of $2.1 million and amortization of right-of-use assets of $1.6 million. Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2022 consisted primarily of a $2.0 million decrease in accounts payable, a $9.4 million decrease in accrued expenses, lease liabilities and other liabilities, a $6.3 million increase in prepaid expenses and other current assets, and an increase of $5.0 million in accounts receivable, partially offset by an increase in deferred revenue of $4.7 million. The increase in cash used in accounts payable and accrued expenses related to our increased level of operating activities and timing of vendor invoicing and payments. The increase in cash used for prepaid expenses and other current assets was primarily due to our increased level of research collaborations and manufacturing development activities related to our product candidates. The increase in deferred revenue was due to our license agreement we entered into with SIIPL in March 2022.
35
Investing Activities
During the ninethree months ended September 30,March 31, 2023, investing activities used $1.6 million of cash, consisting primarily of purchases of property and equipment related primarily to purchases of laboratory equipment and facilities improvements.
During the three months ended March 31, 2022, investing activities used $22.9$0.3 million of cash, consisting primarily of purchases of property and equipment, of which a substantial majority related to laboratory and facilities improvements in Durham,Research Triangle Park, North Carolina and Lexington, Massachusetts as well as purchases of laboratory equipment and facilities improvements for our manufacturing facility in Rochester, New York.
During the nine months ended September 30, 2021, investing activities used $11.4 million of cash consisting of purchases of property and equipment, of which a substantial majority related to purchases of laboratory equipment and facilities improvements for our manufacturing facility in Rochester, New York and laboratory construction in our facility in Woburn, Massachusetts.
Financing Activities
During the ninethree months ended September 30,March 31, 2023, financing activities used $3.0 million of cash, which was primarily related to repayments on our debt and finance lease obligations.
During the three months ended March 31, 2022, financing activities provided $202.9$102.5 million of cash, consisting primarily of $106.1 million of net proceeds raised in the August 2022 PIPE financing, $78.5$80.5 million of net proceeds from the Business Combination, net of transaction costs, a $21.8 million in proceeds from issuance of convertible debt from PIPE Investors, and $1.2 million of proceeds from the exercise of public warrants, which were partially offset by $5.4 million of repayments on our secured debt, term loan payable, tenant improvement allowance and capital lease obligations.
During the nine months ended September 30, 2021, financing activities provided $18.4 million of cash, consisting primarily of $10.4 million of net proceeds from a new secured debt agreement, $10.0 million of net proceeds from a term loan and $0.1 million of proceeds from the exercise of options, partially offset by $1.6$0.8 million of repayments on our secured debt and capital lease obligations and $0.5 million of payments related to financing costs incurred on the business combination.term loan payable.
Contractual Obligations and Commitments
Operating Lease Obligations
We have non-cancelable operating lease obligations, consisting primarily of lease payment obligations for our facilities, including our headquarters in Medford, Massachusetts;Lexington, Massachusetts, comprised of office and laboratory space; office, laboratory and greenhouse space in Durham, North Carolina; laboratory and office space in Medford and Woburn, Massachusetts; office and laboratory space in Lexington, Massachusetts, and our manufacturing facilities in Rochester, New York.York; and farm land located in Spain. The leases for these facilities expire on various dates through 2026,2042, unless extended.
In MarchDecember 2022, the Company entered into a lease for new office, laboratory and clean room spacefarm land located in Lexington, Massachusetts,Colusa County, California, which commenced in May 2022.January 2023. The lease term expires in July 2033.December 2032. The base rent for this lease is $3.9approximately $0.1 million per year, subject to a 3% increase each year.
In June 2022, we terminated our lease for manufacturing clean rooms in Burlington, Massachusetts.annual increases based on the consumer price index beginning on January 1, 2024.
See Note 16, Commitments and Contingencies — Operating Leases, of the notes to our condensed consolidated financial statements for the ninethree months ended September 30,March 31, 2023 and 2022, and 2021, for further information on our operating lease obligations.
Purchase Obligations
In the normal course of business, we enter into contracts with third parties for field trials, preclinical studies and research and development supplies. These contracts generally do not contain minimum purchase commitments and provide for termination on notice, and therefore are cancellable contracts.
License Agreement Obligations
In December 2020, we entered into an assignment and license agreement with Bayer CropScience LLP (“Bayer”) under which we may be obligated to make milestone and royalty payments. These payment obligations are contingent upon future events, such as achieving certain development, regulatory, and commercial milestones or generating product sales. The timing of these events is
47
uncertain; accordingly, we cannot predict the period during which these payments may become due. We have agreed to pay up to $2.0 million in milestone payments under this assignment and license agreement when certain development milestones are met. The Company assessed the milestones for the three and nine months ended September 30, 2022March 31, 2023 and concluded no such milestone payments were deemed probable nor due.
In August 2020, we entered into a license agreement with Acuitas Therapeutics, Inc. (“Acuitas”) under which we are obligated to make potential milestone payments, royalty payments, or both. These payment obligations are contingent upon future events, such as achieving certain clinical and regulatory milestones and generating product sales. Such payments are dependent upon the development of products using the intellectual property licensed under the agreements and are contingent upon the occurrence of future events. The potential clinical and regulatory milestone payments that Acuitas is entitled to receive is in the low double-digit millions for the first option exercised. With respect to the sale of each licensed products, the Company is also obligated to pay Acuitas royalties in the low single digit percentages on net sales of the licensed products by the Company and its affiliates and sublicensees in a given country until the last to occur, in such country, of (i) the expiration or abandonment of all licensed patent rights covering the licensed product, (ii) expiration of any regulatory exclusivity for the licensed product, or (iii) ten years from the first commercial sale of the licensed product. For the three and nine months ended September 30, 2022,March 31, 2023, none of these events were deemed probable and hence no expenses were recorded.
36
Debt Obligations
See Note 10, Debt, of the notes to our condensed consolidated financial statements included elsewhere in this filing for further information on our future debt repayment obligations.
Manufacturing Commitments and Obligations
In November 2021, we engaged Samsung Biologics Co., Ltd. (“Samsung”) as a contract development and manufacturing organization for scale up and commercial scale production of our mRNA COVID-19 vaccine pursuant to a Master Services Agreement and a Product Specific Agreement with Samsung (collectively, the “Samsung Agreements”). Pursuant to the Samsung Agreements, we must, among other things, (a) pay Samsung service fees for its pharmaceutical development and manufacturing services, (b) purchase certain minimum quantities of drug products, and (c) pay Samsung, on a minimum take-or-pay basis for each year under the agreement, for our minimum purchase commitments, as determined under the terms of the Samsung Agreements. Based on our minimum purchase commitments, we expect to pay Samsung a minimum of approximately $11.5$8.8 million in service fees under the Samsung Agreements, excluding the cost of raw materials. For the ninethree months ended September 30, 2022,March 31, 2023, the Company hasdid not incur any costs under this service agreement. We incurred approximately $5.7$5.9 million in costs under this service agreement. Based on our current schedule, we expect to incur approximately $0.7 million of these expenses inagreement for the fourth quarter of 2022 and the remainder in 2023.year ended December 31, 2022.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in our 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. Our actual results may differ from these estimates under different assumptions or conditions. On a recurring basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. The effects of material revisions in an estimate, if any, will be reflected in the condensed consolidated financial statements prospectively from the date of the change in the estimate.
We believe thatDuring the followingthree months ended March 31, 2022, there have been no updates to our critical accounting policies areestimates from those most critical to the judgmentsdisclosed in "Management's Discussion and estimates usedAnalysis of Financial Condition" in the preparation of our financial statements.
Revenue Recognition
Contract Revenue
In March 2022, the Company entered into a License Agreement (the “Agreement”) with Serum Institute of India Private Limited (“SIIPL”), pursuant to which the Company granted SIIPL an exclusive, sub-licensable, royalty-bearing license to use the Company’s proprietary technology platform to develop, manufacture and commercialize up to three mRNA products in all territories other than the United States, the 27 member states of the European Union, the United Kingdom, Australia, Japan, New Zealand, Canada, South Korea, China, Hong Kong, Macau, and Taiwan (the “SIIPL Territory”). The first licensed product target will be a shingles product target, and
48
SIIPL has an option to select the additional two licensed product targets through the end of 2024. Under the terms of the Agreement with SIIPL, the Company will provide research search services related to the shingles product target to develop a “proof of concept” and will provide manufacturing technology transfer services. In addition, GreenLight retains the option to purchase research and clinical trial data, developed by SIIPL, for 50% of the cost of the research studies and clinical trials for use in the Company’s own development.
SIIPL is responsibleForm 10-K for the development, formulation, filling and finishing, registration and commercialization of the products in the SIIPL Territory, subject to oversight from a joint steering committee composed of representatives of the Company and SIIPL. SIIPL will use commercially reasonable efforts to develop and obtain regulatory approval for the products in the countries in the SIIPL Territory. The License Agreement includes terms customary in the industry for provisions related to sublicensing, intellectual property, and termination, and customary representations and warranties of GreenLight and SIIPL, along with certain customary covenants, including confidentiality, limitation of liability and indemnity provisions.
Pursuant to the License Agreement, SIIPL will pay the Company an upfront license fee of $5.0 million, as well as payments upon additional target selection and reservation of exclusivity. The Company may receive up to a total of an additional $17.0 million in development, regulatory and commercial (net sales) based milestone payments across all three product targets, as well as manufacturing technology transfer payments up to $10.0 million. SIIPL shall pay royalty payments in the mid-double digits, based on the net sales of products resulting from the licensed technology for the term of the License Agreement. The License Agreement shall terminate on a product-by-product and country-by-country basis on the later of the expiration of the patent rights owned by the Company or the tenth anniversary of the first commercial sale of the applicable product(s) in the applicable country.
The Company has determined that the Agreement falls within the scope of ASC 606, Revenue Recognition, ("ASC 606") as it includes a customer-vendor relationship as defined by ASC 606 and thus represents a contract with a customer. The Company has determined that the license of IP granted is not distinct from the research services, which includes manufacturing technology transfer services, and thus should be combined. The Agreement contains a single performance obligation for the combined License of IP and research services. Revenue from the contract will be recognized over time, using an input-method based on labor costs as a percentage of total expected labor costs. The Company has determined that variable consideration from the development and regulatory payments, as well as the $5.0 million of the manufacturing technology transfer payment, in the Agreement should be fully constrained as of September 30, 2022, and commercial milestones and royalties will be recognized in the period the underlying sales occur. For the three and nine monthsyear ended September 30, 2022, $1.7 million and $3.4 million had been recorded from the Agreement and the remaining amount of billed and unconstrained consideration is recorded as deferred revenue. Based on current estimated timelines, the Company expects to recognize the deferred revenue over approximately 12 months and is classified as current in the condensed consolidated balance sheets as of September 30, 2022.
Grant Revenue
In July 2020, we entered into a grant agreement with the Bill & Melinda Gates Foundation to advance research in in vivo gene therapy for sickle cell disease and to explore new, low-cost capabilities for the in vivo functional cure of sickle cell and/or durable suppression of HIV in developing countries. The grant agreement provides for payments to reimburse qualifying costs, including, general and administrative costs. As we are performing services under the agreement that are consistent with the Company’s ongoing central activities and we have determined that we are the principal in the agreement, we recognize grant revenue as we perform services under this agreement when the funding is committed, which occurs as underlying costs are incurred. Revenues and related expenses are presented gross in the condensed consolidated statement of operations as we have determined that we are the primary obligor under the agreement relative to the research and development services we perform as the lead technical expert.
Stock-Based Compensation
We measure stock-based awards granted to employees, non-employees and directors based on their fair value on the date of the grant using the Black-Scholes option-pricing model for options and the fair value of our common stock for restricted common stock awards. Compensation expense for those awards is recognized over the requisite service period, which is generally the vesting period of the respective award for employees and directors and the period during which services are performed for non-employees. We use the straight-line method to record the expense of awards with service-based vesting conditions. We recognize stock-based compensation for performance awards based on grant date fair value over the service period to the extent achievement of the performance condition is probable.
The fair value of our stock option awards is estimated using a Black-Scholes option-pricing model that uses the following inputs: (1) fair value of our common stock, (2) assumptions we make for the expected volatility of our common stock, (3) the expected term of
49
our stock option awards, (4) the risk-free interest rate for a period that approximates the expected term of our stock option awards, and (5) our expected dividend yield, if any.
Determination of the Fair Value of Common Stock
Since the consummation of the Business Combination, the fair value of our common stock has been based on the quoted market price on the Nasdaq Global Market.
Prior to becoming a public company as there has not been a public market for our common stock, the estimated fair value of our common stock was determined by our board of directors as of the date of grant of each option or restricted stock award, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were prepared using either an option pricing method (“OPM”) or a hybrid method, both of which used market approaches to estimate our enterprise value. The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceed the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock. The hybrid method is a probability-weighted expected return method (“PWERM”) where the equity value in one or more scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock.
Prior to the reverse recapitalization, these independent third-party valuations were performed at various dates, which resulted in estimated valuations of our common stock by our board of directors (without giving effect to the reverse recapitalization) of $0.46 per share as of December 31, 2019, $0.65 per share as of August 1, 2020, $0.82 per share as of December 31, 2020, $1.74 per share as of May 1, 2021, $5.26 per share as of September 30, 2021, and $5.89 per share as of December 31, 2021. In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, including:
The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different. Following the consummation of the Business Combination, the fair value of New GreenLight Common Stock is determined based on the quoted market price on the Nasdaq Global Market.2022.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
50
Recently Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is provided in Note 2 - Summary of Significant Accounting Policies to our condensed consolidated financial statements appearing elsewhere herein.
Effects of Inflation
Inflation generally affects us by increasing our cost of labor and research and development contract costs. We do not believe that inflation currently has had a material effect on our business, financial condition or results of operations. Our operations may be affected by inflation in the future.
Emerging Growth Company and Smaller Reporting Company Status
New GreenLightThe Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding nonbinding stockholder advisory votes on executive compensation and any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective, have not filed and not withdrawn a Securities Act registration statement that has not become effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. New GreenLightThe Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, New GreenLight,the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the
37
new or revised standard. This may make comparison of New GreenLight’sthe Company's financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.
New GreenLightThe Company will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of ENVI’s initial public offering, (b) in which New GreenLightthe Company has total annual gross revenue of at least $1.1$1.235 billion, or (c) in which New GreenLightthe Company is deemed to be a large accelerated filer, which means the market value of its common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which New GreenLightthe Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting Common Stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the most recently completed fiscal year and the market value of our voting and non-voting Common Stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
5138
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to certain 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.
Interest Rate Risk
As of September 30, 2022March 31, 2023 and December 31, 2021,2022, we had cash and cash equivalents which consisted of cash and money market funds. Interest income is sensitive to changes in the general level of interest rates; however, due to the nature of these investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our investment portfolio.
We have exposure to interest rate risk from our variable rate debt. We do not hedge our exposure to changes in interest rates. As of September 30, 2022,March 31, 2023, we had $23.0$20.0 million in variable rate debt outstanding. A 10% change in interest rates would have an immaterial impact on annualized interest expense.
Foreign Currency Exchange Risk
Our reporting and functional currency is the U.S. dollar. We currently do not have significant exposure to foreign currencies as we hold no foreign exchange contracts, option contracts, or other foreign hedging arrangements. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.
Effects of Inflation
Inflation generally affects us by increasing our cost of labor and research and development contract costs. We do not believe that inflation currently has had a material effect on our business, financial condition or results of operations. Our operations may be affected by inflation in the future.
Item 4. Controls and Procedures.
Background and Remediation of Material Weakness
In connection with the preparation and audit of our consolidated financial statements as of and for the years ended December 31, 2021 and 2020, material weaknesses were identified in our internal control over financial reporting. Please see the sections of the Annual Report titled “Risk Factors— Risks Related to our Business and Industry—Our accounting predecessor, GreenLight, has identified material weaknesses in its internal controls of financial reporting. If we are unable to remediate the material weaknesses, or if we identify additional material weaknesses or otherwise fail to maintain effective internal control over financial reporting, this may result in material misstatements or restatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations” and “—During 2021, ENVI identified two material weaknesses in its internal control over financial reporting which may result in material misstatements or restatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations” for more information.
We are focused on designing and implementing effective internal controls measures to improve our evaluation of disclosure controls and procedures, including our internal control over financial reporting, and remediate the material weaknesses. In order to remediate these material weaknesses, we have taken and plan to take the following actions:
|
|
|
|
These actions and planned actions are subject to ongoing evaluation by management and will require testing and validation of design and operating effectiveness of internal controls over financial reporting over future periods. We are committed to the continuous improvement of our internal control over financial reporting and will continue to review the internal controls over financial reporting.
Evaluation of Disclosure Controls and Procedures
Under the supervision andOur management, with the participation of our management, including our principal executive officerthe Chief Executive Officer ("CEO") and principal financial officer, we conducted an evaluation ofChief Financial Officer ("CFO"), evaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2022,March 31, 2023. We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act. Based upon their
52
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) underAct of 1934, as amended, or the Exchange Act) were not effective as of September 30, 2022 to provide reasonable assurance that information required to be disclosed in the reports we file and submit under the Securities and Exchange Act, is recorded, processed, summarized and reported as and when required.
Disclosure controls and procedureswhich are designed to ensure that information required to be disclosed by us in ourthe reports that we file or submit under the Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’sSecurities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officerCEO and principal financial officer or persons performing similar functions,CFO, as appropriate to allow timely decisions regarding required disclosure.
Due to the material weaknesses identified as of December 31, 2021, two of which remain unremediated as of March 31, 2023, which are disclosed in Management's Annual Report on Internal Control Over Financial Reporting, the CEO and the CFO concluded that the disclosure controls were not effective, to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and were not effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.
Previously Reported Material Weaknesses on Internal Control over Financial Reporting
In the Annual Report Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 28, 2023, management concluded that our internal control over financial reporting was not effective as of December 31, 2022. In the evaluation, management determined that we did not maintain effective internal control over financial reporting as of December 31, 2022, due to unremediated material weakness in our internal control over financial reporting which are as follows:
Remediation Plan
39
We are committed and are taking steps necessary to remediate the control deficiencies that constituted the above material weakness by implementing changes to our internal control over financial reporting. During the year ended December 31, 2022, we made the following enhancements to our control environment including the following:
Our remediation activities are continuing in 2023. In addition to the above activities, we expect to engage in additional activities including:
Changes in Internal Control over Financial Reporting
During the quarter ended September 30, 2022, we finalized the implementation of a new Enterprise Resource Planning ("ERP") software system. Accordingly, we have modified certain existing internal control processes relating to the implementation of the new ERP system. Other than the material weakness referenced above, there have been no additional changes in our internal control over financial reporting identified in connection with the evaluation of such internal control required by Rules 13a-15(d) and 15d-15(d) under the Exchange Act that occurred during the quarter ended September 30, 2022March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
5340
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We currently are not a party to any material litigation or other material legal proceedings. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.
Item 1A. Risk Factors
Investing in our securities involves a high degree of risk. Before you decide to invest in any of our securities, you should
consider carefully the risks described in the section of our Annual Report entitled “Item 1A. Risk Factors,”Factors”, as well as the risks described below. If any of these risks actually occur, our business, results of operations and financial condition would likely be materially and adversely affected. In these circumstances, the market price of our securities could decline, and you may lose part or all of your investment. This Report also contains forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, the risks referred to in this paragraph.
Our receipt of a written non-binding indication of interest from a strategic acquiror may or may not result in an actual completed transaction. The uncertainty surrounding the outcome could materially and adversely impact the Company’s business operations, interfere with its ability to attract and retain personnel, result in the incurrence of significant expenses and cause the Company’s stock price to be subject to significant fluctuation or otherwise be adversely impacted depending on the outcome of such transaction process.
On March 29, 2023, the Company received a non-binding indication of interest from Fall Line Endurance Fund, L.P. (“Fall Line”) to acquire all of the outstanding capital stock of the Company (the “Proposed Transaction”). The terms of any potential agreement between GreenLight and Fall Line would be contingent on certain conditions, including completion of due diligence review and negotiation of definitive transaction documents, as well as certain to be identified Company stockholders agreeing to roll their existing equity in connection with the Proposed Transaction.
There can be no assurance that this indication of interest will eventually lead to a binding offer with terms acceptable to all parties. Even if a binding offer is accepted, a transaction may not be completed if pre-closing matters such as regulatory approvals, due diligence and other conditions are not completed satisfactorily or within specified time frames. To the extent the trading price of the Company’s common stock reflects a market assumption that a transaction will be completed, the Company’s stock price could be adversely impacted if a transaction does not take place. Additionally, the Company is subject to a number of other risks during this time associated with the indication of interest by the strategic acquiror. Particularly, the Board’s and management’s attention could be diverted from normal business operations to focus on the potential transaction and the Company could incur significant advisory and legal costs related to evaluating the proposal, all of which could adversely impact financial results. Further, as a result of the potential for a future transaction, the Company may not be able to retain key personnel, who may be uncertain about their future roles. Moreover, the Company may experience difficulty in attracting or retaining personnel across all areas of the business due to the uncertainty related to this matter.
The Company estimates that its existing cash and cash equivalents of $32.4 million as of March 31, 2023 will last through the second quarter of 2023. We will require substantial additional funds to complete our research and development activities, and, if additional funds are not available, we may need to significantly scale back or cease our business.
We have incurred substantial losses since inception and incurred net losses of approximately $28.5 million and $38.2 million for the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, we had an accumulated deficit of approximately $449.1 million and cash and cash equivalents of approximately $32.4 million. Cash used in operating activities totaled approximately $31.1 million and $49.5 million for three months ended March 31, 2023 and 2022, respectively. The Company expects to generate operating losses and negative operating cash flows for the foreseeable future. As of March 31, 2023 and for the three months ended March 31, 2023, we estimate that our existing cash and cash equivalents of approximately $32.4 million as of March 31, 2023 will last through June 30, 2023 but will not be sufficient to fund our operations for twelve months from the date hereof, and we will need to raise additional capital to continue our operations and to implement our business plan, which capital may not be available on acceptable terms or at all.
We have invested and will continue to invest in property, plant and equipment, and human capital and will require substantial funds to bring the current products in our product pipeline to market and to grow our business by researching, developing, and protecting products not currently in our product pipeline. Our current available funds are not sufficient for all of these activities and, as a result, there is substantial doubt about our ability to continue as a going concern.
Based on our history of losses, we do not expect that we will be able to fund our longer-term capital and liquidity needs through our current cash balances and operating cash flow alone. To fund our longer-term capital and liquidity needs, we will need to secure additional capital. The amount of capital we will need will be subject to change depending on, among other things, the success of our efforts to grow revenue and our efforts to continue to effectively manage expenses.
41
Our financing needs may also increase substantially depending on the results of our research, trials and development for products and costs arising from additional regulatory approvals. We may not succeed in raising additional funds in a timely manner. The timing of our need for additional funds will depend on a number of factors, which are difficult to predict or may be outside of our control, including:
If our estimates and predictions relating to any of these factors are incorrect, we may need to modify our business plans.
Our ability to raise funds will depend upon many factors, including conditions in the debt and equity capital markets, as well as investor perception of our creditworthiness and prospects. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. In the event the Company is unable to secure additional outside capital to fund our obligations before the end of the second quarter of 2023, the Company will be required to seek other strategic alternatives, which may include, among others, scaling back or discontinuing certain or all operations to reduce costs, closure of operations, sale of certain of our assets, a sale of the entire company to strategic or financial investors, and/or seeking protection under the U.S. bankruptcy laws. This may seriously harm our business, financial condition and results of operations. If we are not able to continue operations, investors may suffer a complete loss of their investments in our securities.
Investors should not rely on outdated financial projections.
In connection with the Business Combination, we disclosed certain projections of GreenLight’s potential financial performance in future years. As previously disclosed, these projections were prepared solely for GreenLight’s internal use, capital budgeting and other management purposes, were finalized as of June 30, 2021 and were not updated to reflect events after that date. Also, as previously disclosed, the projections were not prepared with a view toward public disclosure or with a view toward complying with U.S. GAAP, the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Readers were cautioned not to rely on the prospective financial information because actual results are likely to differ materially from the prospective financial information. In light of the substantial passage of time since June 30, 2021, the projections have become outdated and do not represent the current views of management. We reiterate our prior caution not to rely on the previously published and now outdated financial projections. We have not undertaken any obligation to publish any financial projections.
We will require substantial additional funds to complete our research and development activities, and, if additional funds are not available, we may need to significantly scale back or cease our business.
From our founding through September 30, 2022, we raised proceeds from the sale of capital stock, the Business Combination (including the PIPE Financing), and the August 2022 PIPE Financing and from our founding through September 30, 2022 we raised proceeds from the issuance of debt and convertible notes, which we have dedicated to the development of our RNA platform, human health product pipelines and plant health product pipelines. As of September 30, 2022, we had approximately $98.4 million in cash and cash equivalents. On February 2, 2022, we consummated the Business Combination and raised gross proceeds of approximately $136.4 million, which included funds held in ENVI’s trust account (after giving effect to redemptions of $194.9 million) and proceeds from the February 2022 PIPE Financing of $124.3 million (inclusive of the PIPE Prepayment), before deducting estimated transaction expenses of $26.7 million. On August 11, 2022, we entered into Securities Subscription Agreements with certain accredited investors, pursuant to which we raised net proceeds of $106.1 million. We have invested and will continue to invest in property, plant and equipment, and human capital and will require substantial funds to bring the current products in our product pipeline to market and to grow our business by researching, developing, and protecting products not currently in our product pipeline. Our current available funds are not sufficient for all of these activities and, as a result, there is substantial doubt about our ability to continue as a going concern.
Based on our history of losses, we do not expect that we will be able to fund our longer-term capital and liquidity needs through our current cash balances and operating cash flow alone. To fund our longer-term capital and liquidity needs, we will need to secure additional capital. The amount of capital we will need will be subject to change depending on, among other things, the success of our efforts to grow revenue and our efforts to continue to effectively manage expenses.
When we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. The fundraising environment for early-stage biotechnology companies like ours is becoming increasingly challenging, and we may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges and opportunities could be significantly impaired, and our business may be adversely affected.
5442
Our financing needs may also increase substantially depending on the results of our research, trials and development for products and costs arising from additional regulatory approvals. We may not succeed in raising additional funds in a timely manner. The timing of our need for additional funds will depend on a number of factors, which are difficult to predict or may be outside of our control, including:
If our estimates and predictions relating to any of these factors are incorrect, we may need to modify our business plans.
Our ability to raise funds will depend upon many factors, including conditions in the debt and equity capital markets, as well as investor perception of our creditworthiness and prospects. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations. If we are not able to continue operations, investors may suffer a complete loss of their investments in our securities.
Our corporate restructuring and the associated headcount reduction may not result in anticipated savings, could result in total costs and expenses that are greater than expected and could disrupt our business.
In October 2022, we undertook an organizational restructuring that reduced our workforce by approximately 25%. We may not realize, in full or in part, the anticipated benefits, savings, and improvements in our cost structure from our restructuring efforts due to unforeseen difficulties, delays or unexpected costs. If we are unable to realize the expected operational efficiencies and cost savings from the restructuring, our operating results and financial condition would be adversely affected. Furthermore, our restructuring plan may be disruptive to our operations. For example, our headcount reductions could yield unanticipated consequences, such as increased difficulties in implementing our business strategy, including retention of our remaining employees. Employee litigation related to the headcount reduction could be costly and prevent management from fully concentrating on the business.
We will need to modify the size of our organization from time to time, and we may experience difficulties in managing these changes, which could disrupt operations.
We will continue to slow our hiring in the near future as we assess capacity, capital needs and the scope of our operations. The skills we seek are typically in high demand and we may have difficulty identifying, hiring, integrating, motivating and retaining additional employees, consultants, and contract personnel, particularly in light of our recent workforce reduction. Also, our management may need to divert a disproportionate amount of their attention away from our day-to-day activities and devote a substantial amount of time to simultaneously manage rightsizing and growth activities. We may not be able to effectively manage changes in the size of our operations, which may result in weaknesses in our infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among remaining employees. Any future growth could require significant capital expenditures and may divert financial resources from other projects, such as the development of product candidates. If our management is unable to effectively manage our rightsizing efforts while scaling the Company, our expenses may increase more than expected, our ability to generate and/or grow revenues could be reduced, and we may not be able to implement our business strategy. Our future financial performance and our ability to commercialize our product candidates and compete effectively will depend, in part, on our ability to effectively manage the size of our organization. Many of the companies that we compete against for qualified personnel and consultants have greater financial and other resources, different risk profiles, more established brands and a longer history in the industry than we do. If we are unable to continue to attract, motivate, and retain high-quality personnel and consultants, the rate and success at which we can discover and develop product candidates and operate our business will be limited.
We will depend on relationships with third parties for revenues, and for the development, regulatory approval, commercialization and marketing of certain of our products and product candidates, which are outside of our full control.
We rely on a number of third-party relationships for our leases, construction of our facilities, and the development, regulatory approval and commercialization of certain of our product candidates. Certain aspects of our regulatory affairs and clinical development relating to our products and product candidates are also outsourced to third parties. Reliance on third parties subjects us to a number of risks, including:
55
Given these risks, there is considerable uncertainty regarding the success of current and future collaborative efforts. If these efforts fail, our product development or commercialization of product candidates could be delayed, revenues from products could decline and/or the anticipated benefits of these arrangements may not be realized.
The time and expense required to obtain regulatory approvals for our preclinical and clinical trials could be significantly greater than for more conventional therapeutic technologies or products. If clinical trials of any product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities, do not otherwise produce positive results or are for other reasons are not satisfactory to those authorities, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of such product candidates.
In the United States, the products that we intend to develop and market are regulated by the FDA under its drug and biologic development and review processes. Before such products can be marketed, we must obtain multiple authorizations and licensures from the FDA, first through submission and authorization of an investigational new drug application, or IND, then through successful completion of human testing under three phases of clinical trials and finally through submission of a biologics license application, or BLA. Even after successful completion of clinical testing, there is a risk that the FDA may refuse to file our BLA submissions, request further information from us, disagree with our findings, undertake a lengthy review of our BLA submissions or deny our application.
The time required to obtain approval or licensure by the FDA and other comparable regulatory authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval and licensure policies, regulations or the type and amount of clinical data necessary to gain approval or licensure may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained marketing approval or licensure for any product candidate, and it is possible that none of our existing product candidates, or any product candidates we may seek to develop in the future, will ever obtain approval for clinical trials, marketing approval or licensure.
Our product candidates could fail to receive regulatory approval for clinical trials, marketing or licensure in the United States or other countries for many reasons, including the following:
56
This lengthy licensure process as well as the unpredictability of future clinical trial regulatory approvals and results may result in our failing to obtain licensure to market any of our product candidates, which would significantly harm our business, results of operations, financial condition and prospects. The FDA and its counterparts in other countries have substantial discretion in approving clinical trials, granting licenses and determining when or whether regulatory licensure will be obtained for any of our product candidates. Even if we believe the data collected from clinical trials of our product candidates are promising, such data may not be sufficient to support licensure.
In addition, even if we were to obtain licensure, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant a license contingent on the performance of costly post marketing clinical trials, or may approve or license a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.
If we decide to market any product that we develop in jurisdictions in addition to the United States, we may incur the same costs or more in satisfying foreign regulatory requirements governing the conduct of preclinical and clinical trials, manufacturing and marketing and commercialization of any product that we develop in the future. Approval or licensure by the FDA by itself does not assure approval by regulatory authorities outside the United States. Each of these foreign regulatory approval processes includes all of the risks associated with the FDA approval or licensing process, as well as risks attributable to having to satisfy local regulations within each of these foreign jurisdictions and the possibility that our management team will be unfamiliar with that country’s regulatory regime. Our inability to obtain regulatory approval outside the United States may also adversely compromise our business prospects.
We may have difficulties convincing the medical community and third-party payors to accept and use any product that we are able to develop in the future even following our receipt of regulatory approval or licensure for commercialization. Key participants in pharmaceutical marketplaces, such as distributors, physicians, third-party payors and consumers, may not accept a product that we develop and we may be unable to compete with multiple-product or portfolio discounts larger competitors may offer. Even if such a product is accepted by these participants, the medical community may not consider effectiveness and safety alone as a sufficient basis for prescribing such a product in lieu of other alternative treatment methods and medications that are available.
All of our products require rigorous, time-consuming and expensive regulatory examination and approval before they can be commercialized and some or all of our products may not receive this approval.
Any products that we are currently developing or may develop in the future will be subject to extensive governmental regulations relating to development, trials, manufacturing and commercialization. Rigorous studies, clinical trials and extensive regulatory licensure and approval processes are required to be successfully completed in the United States and in many foreign jurisdictions, such as Africa, the European Union and Japan, before a new product may be offered and sold in any of these countries or regions. Satisfaction of these and other regulatory requirements is costly, time-consuming, uncertain and subject to unanticipated delays. We have experienced and may continue to experience additional unanticipated delays in our efforts to satisfy regulatory requirements relating to our product candidates. For example, in April 2022, we applied for a Clinical Trials Application, or CTA, with the South African Health Products Regulatory Authority, or SAHPRA, for a phase I/II single-vaccination booster study. That application was rejected on the basis that the application failed to identify specific benefits our testing efforts and a resulting vaccine would bring to South Africa considering the ready availability of other COVID-19 vaccines in that country. After further review and discussion with SAHPRA, we have decided not to amend or resubmit our CTA in South Africa in favor of identifying other countries in which to begin clinical trials and whether to do so in combination with a US-based Investigational New Drug, or IND, application with the FDA. We can offer no assurance that any clinical trial applications we may file will be accepted by regulatory authorities.
57
Studies and trials for regulatory licensure and approval are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Because many products that we develop in the future will be based on new technologies, we expect that they will require extensive research and development and necessitate substantial manufacturing and processing costs. In addition, costs to treat potential side effects that may result from a product we develop may be significant.
If successfully released for sale, our COVID-19 vaccine candidate may fail to gain market acceptance.
Even if our mRNA vaccine for COVID-19 successfully completes clinical trials and is approved for commercial marketing, it may fail to meet the same high level of efficacy demonstrated by competitors and our ability to obtain revenues from the vaccine may be diminished or eliminated altogether. Moreover, the addressable market for our COVID-19 candidate may be limited if competing products have saturated some or all markets, particularly the most profitable markets. Further, any delays in commercialization may result in any approved COVID-19 vaccine becoming obsolete as the COVID-19 virus continues to mutate, which in turn may require us to obtain the production resources for replacement material, redevelop the material and restart the regulatory approval process or cancel the development of that product candidate.
58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The information required by this item has been previously reported.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not Applicable
Item 5. Other Information.
None.
5943
Item 6. Exhibits.
Furnish the exhibits required by Item 601 of Regulation S-K (§ 229.601 of this chapter).
Exhibit Number | Description | |
3.1 | ||
3.2 | ||
4.1 | ||
4.2 | ||
4.3 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 | ||
10.7 | ||
10.8 | ||
10.9 | ||
10.10 | ||
10.11 | ||
31.1* | ||
31.2* | ||
32.1* |
44
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
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.
6045
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.
GreenLight Biosciences Holdings, PBC | |||
Date: | By: | /s/ Andrey J. Zarur | |
Andrey J. Zarur | |||
President and Chief Executive Officer | |||
Date: | By: | /s/ Susan Keefe | |
Susan Keefe | |||
Chief Financial Officer | |||
6146